The Ecobizz Newsletter
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IBS HYDERABAD
THE TEAM
FROM THE EDITOR
Published by Club Ecobizz IBS Hyderabad Editor In Chief Mr. Abhishek Sharma E-mail: abhishek.sharma0404@gmail.com
Chief Advisor Mr. Siddharth Padhiary Vice President, Club Ecobizz Designed and conceived by Mr. Siddharth Padhiary E-mail: sidpadhiary@gmail.com
Editors Message
Proof Read by Team Ecobizz
Editorial team Mr. Abhishek Sharma Mr. Vivek Parekh
Contributions Team Ecobizz
Amidst the eventful schedules and vibrant happenings of IBS Hyderabad, Club Ecobizz is proud to come up with the December 2015 issue of its ever old, yet still young magazine, ‘THE FOCUS’. Read on to find out the cover story on “Digital Footprints”. The story is about how social media is changing the way we communicate and the way we are perceived,both positively and negatively. As always, we are open for feedback and suggestions. We also take the opportunity to thank our readers and cherish their continued association with ‘FOCUS’ . Here’s hoping that you have an augmented reading. Warm Regards The Editorial Team
Copyright Regulation This material has been reproduced and communicated to you by or on behalf of Club Ecobizz, IBS Hyderabad pursuant to part VA of the Copyrights Act 1968 (The Act). The material in this communication may be subject to copyright under the Act. Any further copying or communication of this material by you may be subject of copyright or performer’s protection under the Act.
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December 2015
CONTENT
WHERE ECONOMY MEETS BUSINESS
04 Bank of Baroda “FOREX SCAM” - Aman Aggarwal
08 Gold Monetisation Scheme - Ruchi Agarwal
14 Payment Banks - Pankaj Arora
COVER STORY 20 “Digital Footprints” -Arvind Vishwanathan 26 FDI - a boon or bane - Siddhart dash
32 Indian Insurance Industry - Nikita Tripathi
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December 2015
ILLEGAL FOREX SCAM The Ecobizz Newsletter
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The desire to create is one of the deepest yearnings of the human soul.
BANK 0F BARODA FOREX SCAM
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ast week, Bank OF Baroda found itself in the middle of a Rs 6000 crore illegal foreign exchange transactional scam. With the firing of two senior officials working in the Ashok Vihar branch, Delhi and another HDFC employee suspended and arrested, the scam seems to have developed into a larger black money fraud engulfing other major banks as well.
Aman Agarwal Batch of 2017
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How it was unearthed? Between May 13, 2014 and June 20, 2015, Bank of Baroda (BoB) noticed some unusual transactions from its Ashok Vihar branch in Delhi. The Ashok Vihar branch opened 59 current accounts through which large foreign exchange remittance transactions were undertaken.
Up to August 2015, a total of 5,853 outward foreign remittance transactions worth $546.1 million (Rs 3,500 crore) were made. The huge transaction is believed to be trade-based money laundering as the amount was transferred in garb of payments for non-existent imports like cashew, pulses and rice. The money was transferred primarily to parties based in HongKong and another party based in UaE. The bank initially carried out an internal inquiry after which it reported the matter to the Central Bureau of Investigation, Enforcement Directorate and the Finance Ministry on September 24. Later, it also informed the Reserve Bank of India. December 2015
INF OR MAT I ON , N E WS A N D S U P POR T In the month of October, CBI conducted various raids at over 50 locations involving companies who were involved in the transfer of money. Turns out, many companies had given false addresses and others did not even exist.
Implications of the scam
Lapses on Bank of Baroda’s side •The bank did not file an exception transaction report (ERT) with the RBI. It is supposed to do so in accounts with heavy cash receipts.
•Shares of Bank of Baroda fell as much as 8% after the raids conducted in Delhi.
•With around five transfers made to the same exporter in a day, the bank failed to ask for any documents related to the imports and no details regarding the shipments were obtained. The Ecobizz Newsletter
•Two senior officials including an assistant general manager have been fired from Bank of Baroda, while another employee from HDFC bank is being questioned by the investigators.
•RBI is looking at invoking inter-regulatory provisions at the transacted countries.
Bank of Baroda found itself in the middle of a Rs 6000 crore illegal foreign exchange transactional scam.”
• Central Vigilance Commission has sought a report from the CBI and Bank of Baroda. It also aims to bring in systematic changes in banks to check suspicious transactions aimed at moving black money.
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However, these schemes seem to be lucrative for those who hold gold for an investment purpose. But, the entire purpose of the scheme will be defeated if the people start importing more amount of gold so as to deposit and earn interest on it.
December 2015
GOLD SCHEME
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As of 19 Nov, 2015 with reference to Gold Monetisation Scheme only 400 grams of gold has been deposited in one bank
Once the gold is deposited at designated gold collection centers as notified by the government (BIS-Certified collection and purity testing centers), it would be melted and converted into gold bars, coins etc.
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December 2015
GOLD SCHEME IN FORMATIO N, NE WS AN D S U P P OR T Gold Monetisation scheme enables the individual to earn interest on the metals deposited in the bank.
GOLD MONETISATION SCHEME
Did the governement get it right ??
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ndia is one of the largest importers of gold in the world, next only to China and gold constitutes the second -biggest import bill after oil. Every year India imports around 900-1000 tonnes of gold. This has led to widening of Current Account Deficit. The government has been taking number of measures to reduce the imports of ‘yellow metal’. Some of these measures include hike in import duty, appealing public not to buy gold, asking jewelers for voluntary ban on gold coins and bars etc. All these measures have hardly paid off. Government introduced three Gold Schemes viz., Gold Monetization Scheme, Sovereign Gold Bond Scheme and Gold Coin Scheme on 5th November, 2015. These schemes are mainly aimed at mobilizing the gold held with household and temples which are estimated to be 20,000 tonnes and are lying idle (neither traded nor monetized). If that gold can be tapped and brought into financial system,
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India’s dependence on imports would be reduced to a large extent and also current account deficit can be narrowed. Gold Monetisation scheme enables the individual to earn interest on the metals deposited in the bank. However, there are certain terms and conditions specified by RBI with regard to the scheme. 1)The depositor can deposit minimum of 30 grams of raw metal with 995 fineness gold for short – term (1-3 years), medium-term (5-7 years) or long-term(12-15years). There is no maximum limit. There is a provision for premature withdrawal with minimum lock-in period subject to penalty. The interest rate is notified as 2.25%-2.5%. 2)Once the gold is deposited at designated gold collection centers as notified by the government (BIS-Certified collection and purity testing centers), it would be melted and converted into gold bars, coins etc.,.Bank will issue certificate certificate equivalent to
Ruchi Agarwal Batch of 2017
The government has been taking number of measures to reduce the imports of yellow metal”
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995 fineness of gold and interest will start accruing thereafter. 3)Individual has to clearly specify in the beginning whether he/she wants to redeem the amount in cash or gold. Once notified changes cannot be made at a later stage. The payment of principal will depend on the prevailing price of the gold. 4)At maturity the customer gets cash or gold along with the interest earned, which will be exempted from income, wealth or capital gain taxes. SHORTCOMINGS OF THE SCHEME The Indian households might not find this scheme appealing due to various reasons. 1)Most Indians look at gold linked to tradition and customs, rather than as a mere investment asset. There is sentimental value attached to the jewelry they hold. They preserve jewelry mostly for marriage purposes. 2) At the end of maturity
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depositors are paid in cash or gold, which is not in the same form as deposited but it is in a form of a raw gold bars. This makes the scheme unattractive for women. Likewise, it is difficult to mobilize gold from temples and trusts because the treasures there are linked to faith and religion. Neither the devotees nor the trusts managers are likely to welcome the idea of melting those treasures in return for a certificate. Gold Sovereign Scheme provides an alternative for an individual to buy gold bonds instead of actual gold, the value of the bond will be linked to the price of the gold. 1)RBI will issue the bond certificate on behalf of the government. Public issue price of Rs 2684 has been fixed by the RBI.Minimum of 2 grams and maximum of 500 grams of gold can be bought per fiscal year. 2)Maturity period for the bond is fixed as 8 years with fixed interest rate of 2.75% payable semi-annually. Investor also has an exit option
from the fifth year. On maturity the investor will receive the value of the gold as per the market price. 3)Bonds will also be made available in demat form. These bonds can be used as collateral security against loans. 4) The interest earned on gold shall be taxable as per the provision of Income Tax Act, 1961 and capital gain tax as applicable for physical gold remains same Gold coins were made available in denominations of 5 and 10 grams through MMTC outlets. These coins carry advanced anti-counterfeit features and tamper-proof packaging that aids in easy recycling. PROGRESS SO FAR As of 19 Nov, 2015 with reference to Gold Monetisation Scheme only 400 grams of gold has been deposited in one bank, as no other bank had tripartite agreements with hallmarking centres and gold refiners. In contrast, the response to gold bonds and coins has been
December 2015
much better. A government source said retail investors had applied for Rs 100 crore worth of bonds and 6,000 gold coins had been sold. CONCLUSION However, these schemes seem to be lucrative for those who hold gold for an investment purpose. But, the entire purpose of the scheme will be defeated if the people start importing more amount of gold so as to deposit and earn interest on it. The government has to relax some of its norms, involve more banks and financial institutions for the process and convince households and temple authorities to deposit gold so as to achieve the desired result.
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These schemes seem to be lucrative for those who hold gold for an investment purpose
GOLD SCHEME
The interest earned on gold shall be taxable as per the provisions of Income Tax Act,1961.�
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PAYMENT BANKS
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An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today. The Ecobizz Newsletter
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IBS HYDERABAD IN F ORMAT I ON , N E WS A N D S UPPOR T
2015 A NEW INDIA PAYMENT BANKS The new crop of banking sector
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Pankaj Arora Batch of 2017
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he new crop of payment bank harvested this year by RBI which has changed the landscape of Indian banks by altering the transaction systems. The core change is using the mobile phones for payment banking which means they expected to use mobile phones rather than traditional bank branches. Talking about the origin it started on 23rd November 2013 when committee for comprehensive financial services for small business and low income households led by Nachiket Mor was formed by RBI. Among various recommendations by nachiket committee, they
recommended the formation of payment banks in India. On 27th November 2014 RBI releases its final guidelines for the formation of payment banks. In this new market of banking 41 entities to get the licensing of payment but on 19th august 2015 RBI introduced 11 major players who got ‘in principle’ approval of payment banking some of them are Aditya Birla, Airtel M Commerce Services Ltd, ,Tech Mahindra Ltd, Vodafone m-pesa Ltd, Reliance Industries Ltd etc. This ‘in –principle’ approval granted by RBI has a validity of 18 months, during which the applicants have to fulfill the requirements as well as the other conditions as stated by the RBI.
December 2015
You are determining the future you every day. Will the decisions you make today lead you closer to the person you want to be tomorrow?
Moving on to the functions of payment banks they accept deposits which are restricted to Rs. 1 lakh per customer and they allowed paying customers interest on the money which is being deposited. They can be used both current account as well as savings account. For the companies which have operated as mobile wallets, this is big opportunity for them as it raises the fund limits and making more attractive for users to store their money with the companies like paytm or Vodafone m-paisa’. This new concept of banking can’t loan money to the people or issue any credit cards but they can issue ATM as well as debit cards. Since
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many of the 11 new license holders already operating mobile wallets, the ability to issue an ATM card makes it easier to convert virtual money into cash, and vice versa. Also these banks are restricted to invest the money into government securities. They are known as the game changer of Indian banking industry because it is the first time in history of Indian banking sector that the RBI has provided altered license for a particular activity. RBI is now also expected to come out with a second edition of such licenses for small banks which in running in the final stage. This move is now seen as a major shove in bringing financial addition in the country. As someone could now fill cash into
a m-Commerce bank account from anywhere in India, and a person in a small village who holds the debit card can withdraw money from any ATM smoothly, or even in any rural location. It’s these partners theoretically the small convenience shop in a village that sells mobile recharges could be one of them that will serve the purpose of banks in rural areas, though the payment banks can set up branches if they want. t is a major step to recreate the banking industries in India. The main reason to bring payment banks is to target India’s, lowincome households, laborer migrants and small businesses, offering savings accounts and other remittance services with a low transaction
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This new concept of banking can’t loan money to the people or issue any credit cards but they can issue ATM as well as debit cards.”
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IBS HYDERABAD IN F ORMAT I ON , N E WS A N D S UPPOR T cost. There is a hope that payment banks will enable poorer citizen who were earlier dealing in cash will bring them in formal step of banking. Still according to the traditional banks it is uneconomical to open branches in rural areas but the mobile phone coverage provides low cost platform for quickly taking easy banking service to every rural citizen. This revolution can also build a road for India’s journey towards cashless economy. Indian domestic market is estimated to be nearly 900 billion and still growing. Thus with new system of money transfer through the mobile phones, a big bunch of it, especially that of migrants, can shift to this new platform. This service can also play a vital role in government’s direct benefit transfer scheme, where the
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subsidies on education, healthcare and gas can be paid direct to beneficiaries account. Payment banks can be integrated with your savings bank accounts through IMPS and NEFT transfers. The payment banks ATM or debit cards will also work on all banks’ ATM machines. Payment banks can’t accept NRI deposits, which makes sense considering the goal of financial inclusion. Also, this is the first time since banks were nationalized, that private sector business groups have bagged the RBI’s nod for banking services. Therefore, let’s wait and watch that if this new system brings change the economy of the country or it will be a big blunder. Stay tuned for more updates from club Ecobizz.
There is a hope that payment banks will enable poorer citizen who were earlier dealing in cash will bring them in formal step of banking.”
December 2015
There is a hope that payment banks will enable poorer citizen who were earlier dealing in cash
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December 2015
T S
Y R O
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“DIGITAL” 21 FOOTPRINTS
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DIGITAL FOOTPRINTS
“What goes around comes back around.”
W Arvind Vishwanathan Batch of 2017
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hat are digital footprints? Digital footprints are the records and traces we leave behind as we use the internet. When we log in to an e-commerce website and make a purchase, we are asked to fill in our billing details. When we proceed to make the next purchase from the same website, our data automatically starts flashing up as we commence filling up the blanks. These are nothing but digital footprints. This obviously means, the benefit of not entering the details again and again in the website but at a cost of the individual’s privacy like what websites he / she uses or who is in his / her social circles or any such
thing. Broadly speaking, there are three kinds of footprints: Explicit, implicit and cookies. Explicit footprints: These occur as we actively participate in internet conversations. For instance, when I arrive in Italy and upload a photo citing how awesome the sunset looks there, I am explicitly giving out my details like what am I doing, where am I, what is happening around me. The companies in the background take clue from footprints we leave behind on a broad scale and sum it all up to make up a profile about us that describes our interests. So, even though the photo I upload doesn’t provide the entire picture, it is a clue to the company to form one, about me. December 2015
Broadly speaking there are three kinds of footprints: Explicit,implicit and cookies.
Implicit / Light footprints: When we simply visit websites we reveal information like our geographic location (how many of us check if GPS is ON or not every time), our IP address, web browser type and operating system.
Cookies: This is a word which almost everybody has encountered during the usage of internet. Do all of us know what a cookie (not the one that you eat) actually is? There are times when websites need information on whether a series of actions performed are being performed by the same party or not. IP addresses won’t alone be able to do the job as one IP address can be used by multiple users. For example, when I am buying a product on Flipkart, the website needs to know whether it’s the same person The Ecobizz Newsletter
selecting the product and paying for it. This is where “cookies” come into play. A “cookie” is an arbitrary string of characters (letters / digits) that basically makes the internet more usable, user friendly and persistent. Economic Bargain: Remember, if you are not paying for a product, you are the product! Advertisers pay for most of the “free” content we view on the internet. Targeted Advertisements: This information collected about us is monetized. The footprints that we leave online are visible to organizations that we have no relationship with. These organizations track our activities online thereby getting to know more about individuals so that they can shoot targeted ads to an audience with a certain liking / characteristic feature / an inclination towards a certain type of product. Service providers or other third parties exchange data
about customers piled up at each stage to help identify which product to specifically sell to which customer and at what time. Link-ability: Service providers store information about us like the email address, payment details, purchase history and personal information. A cookie sent to the browser by the website can be used to link all of these well enough to form a complete profile about us, that ‘may’ later be sold by the website to profiling companies that make inferences on our habits, preferences, values, aspirations, intentions and even future behavior to some extent. Pros and Cons of Digital Footprints: Pros: •Help in detecting fraud or legal issues. •Targeted ads may work as cons on the back ground given the fact that they come to us out of our lack of privacy,
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The companies in the background take clue from footprints we leave behind on a broad scale and sum it all up to make up a December 2015 profile about us that describes our interests..
INF ORMAT I ON , N E WS A N D S U P POR T
Overview
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Digital footprints are the records and traces we leave behind as we use the internet.
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Help in detecting fraud or legal issues. •Targeted ads may work as cons on the back ground given the fact that they come to us out of our lack of privacy, but fact that they are customized add value to our use of the internet.
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Purchase behavior data can be used as a basis to reduce credit limits or increase interest rates.
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NSA tracks all sorts of activities that goes upon the internet from something as private as person X sending an email to person Y to something as public as uploading a photo / status for the entire world to see.
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Breach to right to privacy: We have clearly learnt from above that internet usage is and has never been private.
but fact that they are customized add value to our use of the internet. •Companies can more easily offer incentives based on interests and needs (such as coupon codes and discounts), sometimes resulting in cost savings. •Ability to reach new markets without the expense of launching a traditional campaign. Cons: •Breach to right to privacy: We have clearly learnt from above that internet usage is and has never been private. •Purchase behavior data can be used as a basis to reduce credit limits or increase interest rates. For example I use my credit card to pay the restaurant / bar bill and I then use the same to unlock my car, this might paint a wrong picture that I am driving drunk, while I do not. •Threat to life: Let us take the example of Grimsgaard Ofstad, a Norwegian national who has been a very keen follower of pages/groups/ people related to ISIS which is an organization highly active on social media. On his visit to Syria, he was captured by the organization and is still on sale along with another Chinese civilian. How did they get to know about him and his whereabouts?
Digital footprints. •NSA tracks all sorts of activities that goes upon the internet from something as private as person X sending an email to person Y to something as public as uploading a photo / status for the entire world to see. •Other forms of problems include identity theft, credit card theft, cybercrime (read Die Hard 4.0), cyber bullying, cyber forensics, digital stalking and digital surveillances.
We have clearly learnt from the above that internet usage is and has never been private-.”
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Other forms of problems include identity theft, credit card theft, cybercrime (read Die Hard 4.0), cyber bullying, cyber forensics, digital stalking and digital surveillances.
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FDI THE NEW IMPERIALISM 26
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FDI has a major role in modern India’s growing GDP.
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IN FORMATIO N, NE WS AN D S U P P OR T
FDI A BOON OR BANE ?? “A WAY FORWARD TO DEVELOPMENT
F
DI (The Foreign Direct Investment) is the new buzzword now, humming around the world scenario. FDI is the necessary tool to boost an otherwise drowning economy. Instances of the development of the West African nations with the foreign investment speak out heavily in for of the FDI policy. But isn’t it also a fact that African citizens are moving out, of their respective nations in search of jobs and to have secured life, elsewhere? If FDI has truly injected new life in the African economy why are we a witness to such situations? So what do we then adjudge FDI as- A boon or a bane? FDI encourages transfer of management skills, intellectual property and technology where it is most needed alongside capital investment. The policy does promise job creation; helps improve quality of goods and services produced in the economy, thereby boosting export potential. FDI can stimulate the adoption of international production standards and working methods. It also fosters stability within developing economies. FDI has a major role in modern India’s growing GDP. A successful track record suggests that investor countries have clear and modern legal frameworks that facilitate business. So we might say FDI enables developing nations to exploit untapped resources with technical and financial assistance of foreign investors
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.A significant proportion of FDI aims to maximize extraction of resources and its optimum utilization. But all this comes at a price.FDI also involves an investor acquiring a lasting interest in overseas enterprise and market and in doing so FDI allows an investor to gain an “effective voice” in the management of specific indigenous industries and also certain policy making decisions of the nations. Some analysts even suggest FDI as the new tool for “Imperialism “ FDI basically entails the control of the operations of the organisation in the hands of the investor. So doesn’t it imply that the home (i.e. the investors) might be using the operations, resources of the host (the funded) for their own benefits, to reap the rewards later? Having a major chunk of investment in a particular nation does empower the investor with the favourable economic and strategic policies of the host nation. Doesn’t it sound like a superpower nation expanding its territory in other host nations? Maybe I am speculating too much, but the facts of the formation of AFRICOM (US and African command army), French troops is GABON, Chinese army in Mali and Somalia really do create a lot of questions in my mind. China has been even accused of investing in areas, which have been so far neglected by the western superpowers .An effort maybe
Siddharth Dash Batch of 2017
FDI encourages transfer of management skills,intellectual property and technology where it is most needed” 29
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OVERVIEW
FDI can stimulate the adoption of international production standards and working methods.
to create allies. Experts also suggest that FDI proves to be a hindrance for the SME’s and upcoming entrepreneurs. Large capital funds and greater market reach proves to be too much for the smaller industries and the entrepreneurs. Farmers, who are a major part of the Indian labour force, are also losing out due to the new policies of FDI, as suggested in certain reports.
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FDI allows an investor to gain an “effective voice” in the management of specific indigenous industries and also certain policy making decisions of the nations.
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we might say FDI enables developing nations to exploit untapped resources with technical and financial assistance of foreign investors
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FDI basically entails the control of the operations of the organisation in the hands of the investor.
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FDI also involves an investor acquiring a lasting interest in overseas enterprise and market and in doing so FDI allows an investor to gain an “effective voice” in the management of specific indigenous industries and also certain policy making decisions of the nations.
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Experts also suggest that FDI proves to be a hindrance for the SME’s and upcoming entrepreneurs.
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Large capital funds and greater market reach proves to be too much for the smaller industries and the entrepreneurs. Farmers, who are a major part of the Indian labour force, are also losing out due to the new policies of FDI, as suggested in certain reports.
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The main reason being the registered chit funds find the service provided for poor very less attractive due to high operational costs imposed by the regulators.
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INDIAN INSURANCE POLICIES
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Creativity is allowing yourself to make mistakes. Art is knowing whihc ones to keep. The Ecobizz Newsletter
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The country’s insurance market is expected to quadruple in size over the next 10 years.
Building a successful brand isn’t just about ROI, it’s also about building authentic relationships with people.
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IN F ORMAT IO N, NE WS AN D S U P P OR T
INDIAN INSURANCE INDUSTRY “Can Insurance Industry boost economic growth” The Indian insurance industry seems to be in a state of flux. Despite strong improvement in penetration and density in the last 10 years, India largely remains an under-penetrated market. The market today is primarily dependent on push, tax incentives and mandatory buying for sales. There is very little customer pull, which will come from growing financial awareness and increasing savings and disposable income. As of Sep 2015, 52 insurance companies were operating in the country, including 24 in life and 28 in non-life segments. Though the number of insurance companies operating in India has increased significantly, hundreds of millions of people have limited awareness and/or access to insurance and financial services. India as a country still remains grossly under-insured in terms of insurance penetration and density. •Insurance penetration (measured as a percentage of insurance premium to GDP) rose from 2.71% in 2001 to 5.20% in 2009. •It has then declined to 3.9% in 2013-14, indicating the growth in insurance premium is lower than the growth in national GDP. •India’s insurance penetration is far below the world`s average is 6.3%, The Ecobizz Newsletter
largely due to limited financial awareness and literacy among the masses. •Further, while India stands at 3.1% in terms of life insurance penetration against global average of 3.5%, it lags far behind in non-life insurance where its penetration is mere 0.8% compared to the world average of 2.8%. Potential of Insurance sector in India India’s life insurance sector is the biggest in the world with about 360 million policies which are expected to increase at a compound annual growth rate (CAGR) of 12-15 per cent over the next five years. The insurance industry plans to hike penetration levels to five per cent by 2020. The country’s insurance market is expected to quadruple in size over the next 10 years from its current size of US$ 60 billion. During this period, the life insurance market is slated to cross US$ 160 billion. The general insurance business in India is currently at US$ 11.7 billion premium per annum industry and is growing at a healthy rate of 17%. The Indian insurance market is a huge business opportunity waiting to be harnessed. India currently accounts for less than 1.5 % of the
Nikita Tripathi Batch of 2017
India’s life insurance sector is the biggest in the world with about 360 million policies which are expected to increase at a compound annual growth rate of 12-15 percent over the next five years.” 35
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INF OR MAT I ON , N E WS A N D S U P POR T
OVERVIEW
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The Government of India has launched two insurance schemes as announced in Union Budget 201516. The first is Pradhan Mantri Suraksha Bima Yojana (PMSBY), which is a Personal Accident Insurance Scheme. The second is Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), which is the government’s Life Insurance Scheme.
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India’s insurable population is anticipated to touch 750 million in 2020, with life expectancy reaching 74 years.
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The country is the fifteenth largest insurance market in the world in terms of premium volume, and has the potential to grow exponentially in the coming years.
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As of Sep 2015, 52 insurance companies were operating in the country, including 24 in life and 28 in non-life segments
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Demographic factors such as growing middle class, young insurable population and growing awareness of the need for protection and retirement planning will support the growth of Indian life insurance.
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world’s total insurance premiums and about 2% of the world’s life insurance premiums despite being the second most populous nation. The country is the fifteenth largest insurance market in the world in terms of premium volume, and has the potential to grow exponentially in the coming years. Investments In Insurance Sector After the passage of Insurance Bill 2015 by the Indian Government, FDI has increased to 49% from 26% in the Insurance sector. Due the which many mergers have taken place, some of them are as follows : •Bennett Coleman and Co. Ltd (BCCL), the media conglomerate with multiple publications in several languages across India, is set to buy Religare Enterprises Ltd entire 44% stake in life insurance joint venture Aegon Religare Life Insurance Co. Ltd. The foreign partner Aegon is set to increase its stake in the joint venture from 26% to 49%, following government’s reform measure allowing the increase in stake holding by foreign companies in the insurance sector. • State Bank of India has announced that BNP Paribas Cardif is keen to increase its stake in SBI Life Insurance from 26% to 36%. Once the foreign joint venture partner increases its stake to 36 per cent, SBI’s stake in SBI Life will get diluted to 64%. Governments Initiatives Indian government have also started some schemes for financial inclusion, which also include the Insurance industry of India, some of these schemes are as follows: •The Central Government is planning to launch an all-in-one insurance scheme for farmers called the Unified Package Insurance Scheme (Bhartiya Krishi Bima Yojana). The proposed scheme will have various features like crop insurance, health cover, personal accident insurance, live stock insurance, insurance cover for agriculture implements like tractors and pump sets, student
safety insurance and life insurance. • IRDAI has formulated a draft regulation, IRDAI (Obligations of Insures to Rural and Social Sectors) Regulations, 2015, in pursuance of the amendments brought about under section 32 B of the Insurance Laws (Amendment) Act, 2015. These regulations impose obligations on insurers towards providing insurance cover to the rural and economically weaker sections of the population. • The Government of India has launched two insurance schemes as announced in Union Budget 2015-16. The first is Pradhan Mantri Suraksha Bima Yojana (PMSBY), which is a Personal Accident Insurance Scheme. The second is Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), which is the government’s Life Insurance Scheme. Both the schemes offer basic insurance at minimal rates and can be easily availed of through various government agencies and private sector outlets. Futures Prospect of Insurance Industry India’s insurable population is anticipated to touch 750 million in 2020, with life expectancy reaching 74 years. Furthermore, life insurance is projected to comprise 35 per cent of total savings by the end of this decade, as against 26 per cent in 2009-10. The future looks promising for the life insurance industry with several changes in regulatory framework which will lead to further change in the way the industry conducts its business and engages with its customers. Demographic factors such as growing middle class, young insurable population and growing awareness of the need for protection and retirement planning will support the growth of Indian life insurance.
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Dear Readers, We believe you appreciate the transformation of ‘The Focus’. Your praise and encouragement has always been a source of motivation for us. Therefore, in case you have any comments or suggestions for improvement please leave them in the COMMENTS section of our website www.ecobizz.weebly.com. We at EcoBizz will be more than happy to incorporate your suggestions. For keeping in pace with latest developments, discussion forums and online events follow us on Facebook at https://www.facebook.com/eb.focus. Regards, Team Ecobizz
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December 2015