FINLY August 2020

FINLY August 2020

Issue No. 92

Can India tame the dragon without hurting itself?

Eco Section

Green Finance

Sector Analysis

Modern Monetary Theory cure for India’s economy?

Economic RecoveryTaking the Green Route

Insurance Sector Analysis

CONTENTS 01

02

EDITORIAL

TEAM FINLY

03

06

COVER STORY

ECO SECTION

Can India tame the Dragon without hurting itself?

Modern Monetary Theory cure for India’s economy?

10

13

SECTOR ANALYSIS

COMPANY ANALYSIS

Insurance Sector

ICICI Prudential Life Insurance

16

20

INTRIGUING INDEED

GREEN FINANCE

Contract Farming

Economic recovery Taking the Green route

25 CALL FOR ARTICLES - WINNER

28 CALL FOR ARTICLES - RUNNER UP

The Great divide

Neo banks : An alternative to Traditional Banks?

31

34

INTERN DIARIES

ALUMNI SECTION

Harish Nair MMS Finance | 19-21

Shreya Baderia PGDM-FS | 18-20

ISSUE NO. 92, AUGUST 2020

Dear Readers,

Editor's Note

“If money is your hope for independence, you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience and ability.” – Henry Ford.

Going with the times, this quote of a revolutionary industrialist holds. The world is going through a crisis, let’s make and not break ourselves through this pandemic. Let’s revel through the havoc of this unprecedented situation mankind is facing by leveraging the curiosity within us. It’s an opportunity to expand our knowledge by finding new ways to circumvent the circumstances, invest into the most intuitive ideas that come to our mind and surpass this havoc.

As Ben Franklin has rightly said, “An investment in knowledge always pays the best interest”. On this note, we at Finstreet are proud to unveil the first edition of our monthly magazine “Finly” for the academic year 2020-21.

Team FINLY has always been a strong set of focused individuals who put in a lot of efforts and dedication to stitch together this magazine and we can’t thank them enough for their constant support and initiative.

We are proud to unveil the first article of our new section, “ Green Finance” in this issue . The section will focus on the need to sensitize the population towards sustainable development, climate change and understanding the finance of helping the planet and avoiding a climate catastrophe.

We have received an overwhelming response for this month’s “call for article” competition, with some high-quality content from some of the best management colleges of the country. We thank all the participants for their sincere efforts.

We are thankful to Prof. (Dr.) Pankaj Trivedi (Course Coordinator, PGDM Core and Faculty Coordinator, Finstreet) for providing the much required mentoring, support and backing to the Finly team. We would also like to thank all our readers and faculty members for their valuable reviews and feedbacks.

Akshitaa Bahl |Editor-in-Chief| PGDM FS

Nilomee Savla |Editor -Finly| PGDM FS

1

ISSUE NO. 92, AUGUST 2020

TEAM FINLY Faculty in-charge

Editor-in-chief

Editor - FINLY

Dr. (Prof) Pankaj Trivedi

Akshitaa Bahl

Nilomee Savla

Conceptualization & Design

Harsh Dhoka

Manya Mohan

Samarth Kumar

Content Team

Henal Shah

Milind Verma

Swikar Gupta

Saurabh Patel

Mihir Mali

Nihar Shah

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| COVER STORY

CAN INDIA TAME THE DRAGON WITHOUT HURTING ITSELF? Henal Shah|MMS|2019-21 Milind Verma|PGDM(Core)|2019-21 Let's begin with the roots, where it all began! It’s China’s habit to keep pushing on the borders of the neighbouring countries as well as on those who are dependent on China.

An example of this is the Hambantota Port deal in Sri Lanka. Exim Bank of China gave five loans to the Sri Lankan government to build the Hambantota Port and the Sri Lankan government was in no position to pay off these loans, hence, rather showing it as default in payment they came up with a brilliant idea and leased out 70% of stake in the port to China Merchants Port Holding Company Limited (CM Port) for 99 years for $1.12 billion. However, the $1.12 billion was not used to pay off the debt, rather it was used to cover Balance of Payment issues of the country. So, can you gauge from this how Sri Lanka would be able to pay off the debt ? You got it right,by losing control of the port in the future. The same debt-trap diplomacy is being used in the ChinaPakistan Economic Corridor.

These are nothing but tactics to surround India from all sides as they know that neither Sri Lanka nor Pakistan can pay off for such huge projects. Hence, in return, China take control of those places.

Coming to the incursion happening in Ladakh, it's not the first time that China has infiltrated our borders, they have been doing this since 1962, and as India is known to be a peaceful country we never retaliated in full force. If the opposition is to be believed we have lost approximately 43,000 sq. km of land to China in 2020 but the current government denies those claims. Though there is no denying that we have been losing the land in Ladakh which legally belongs to us since the second term of the UPA government.

China has gone to such extents, that in 2006, Arunachal Pradesh was claimed by Beijing to be part of South Tibet Autonomous Region (TAR) and was depicted as part of China on its official maps.

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| COVER STORY Another issue that has been prolonging is data privacy that each country faces due to the various applications generated by companies based out of China.

So, Chinese state firms always had a vital role in the development of the Chinese economy and the Communist Party has always maintained direct control over state firms. In 2017, the Chinese government came out with a New National Intelligence Law, which states that “any organisation and citizen” shall “support and cooperate in national intelligence work”. Hence, in short, the government has access to all data collected by these firms. The most prominent example of this has been Huawei. They were charged on been spying on the US and its allies and sharing intel with the Chinese Government.

The repercussion of it is that Huawei is been banned in the US. Even Australia has cited the new intelligence law as the reason to keep Huawei’s 5G technology out of its future mobile networks.

As the Communist Party runs China, by having control over each and everything whether that be media or companies. They want to have the same control over the rest of the world.

For the first time, the victim countries have had enough and are ready to join forces against China. The COVID-19 which originated from Wuhan has worsened the economic health of almost all the counties in the world and on top of that, these border tensions are not what any country would want.

Measures taken Government

by

the

Indian

The Indian Government has notified changes

in FDI (Foreign Direct Investment) rules which mandate "prior approval" from the Centre for foreign investments from countries "that share border with India".

This means that the earlier automatic rule of FDI in most sectors is now changed for our border sharing countries. The rule now mandates FDI investors from countries like China, Pakistan, Nepal, Bangladesh, Myanmar, Bhutan, and Afghanistan to get prior approval from the Government of India despite the Automatic Rule which allowed them to inform the Indian Government post-investment. This move has been taken to prevent a hostile takeover of Indian Companies whose shares were fluctuating due to the COVID – 19 lockdown and economic downturn.

The rule was announced after China decided to increase its stake in HDFC Bank to over 1%. This does not imply that Chinese Investments in our companies are bad. Well, in-fact China has helped so many of our startups by investing in them.

But in the COVID scenario, our stock prices allow investors to get the companies’ shares at a far lower value than its actual worth. So this action taken by the Indian Government helps protect Indian companies from China’s grasp. However, this isn’t a long-term solution and is a precautionary measure.

The Government has also banned 59 Chinese Apps for violation of privacy guidelines. This ban not only protects us from the Chinese Government having access to our data but also affects the Chinese economy. These apps 4

| COVER STORY having headquartered in China contribute their earnings to the Chinese Economy. India which has the second-largest population in the world constitutes a large chunk of income for these app companies and thus affects the Chinese economy but not by as much as we expect. The story doesn’t just end there, with India taking such steps many other countries are contemplating doing the same which would affect the dragon even more. The data shared by these apps could also endanger us through the Hongkong Security law. Under this law, China can prosecute us on its soil if we have ever said anything against China.

This means if you ever made a video on Tiktok condemning China, you can be put behind the bars or more so. These banned apps, being Chinese have to comply with the Chinese Government and share our data which could, later on, be used to prosecute us.

The Indian Government is also planning to increase the import duty imposed on Chinese imports. But according to us, this would only lead to more problems for Indian businesses.

Most Indian businesses depend on these imports for their livelihood. A sudden increase in import duty will increase the cost of most items in India, making them unaffordable for the poor. Even though the government is trying to reduce India’s dependency on China, the economy needs these imports to push us out of this slowdown. India’s dependency on China cannot change in a month, we need to give our locals some time to be self-reliant.. Look at our pharma industry for instance, we are in constant need of medicines and equipment for battling COVID -19. And most of our pharma companies import APIs and other important components from China.

If these items get expensive to import how will our villages and the poor be able to defeat this virus?

Our 2 cents We believe that banning imports from China is not a solution and would never be one until and unless we become self-sufficient to be able to produce everything in-house. That scenario would never be executable because neither we have the resources nor we have the expertise as of now to make that possible.

For one instance even if we assume that we somehow have both the resources as well as expertise to execute our vision of “Aatma Nirbhar Bharat”,we would need an overhaul in our policies, we currently are ranked 63 among 190 countries in the World Bank’s Ease of Doing Business 2020. It means our policies are still not business-friendly as the rest of some countries, so why would a company invest in our country?

Another aspect we believe is crucial in beating China in its own game is the operation cost which consists of labour as well as electricity cost in India. Countries like Vietnam are coming up as substitutes for China as there is a wave of this insecurity and hatred against China right now that everyone is looking to move out. India can bank on this opportunity but as mentioned above they would have to make various policy changes as well as incentivise businesses to invest in India. We surely don’t want to become the next China, but we surely can become the next manufacturing hub in the near future.

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| ECO SECTION

MODERN MONETARY THEORY CURE FOR INDIA’S ECONOMY? Nilomee Savla PGDM FS (2019- 21) Introduction COVID-19 was declared by the WHO as a public health emergency of international concern in January 2020 and a pandemic in March 2020. Since then, it has evolved and become a global public health and economic crisis causing a severe impact on the $90 trillion global economy beyond anything that the world has ever experienced. According to the estimates of the International Monetary Fund (IMF), the world economy is expected to shrink by over 4.9 per cent in 2020 – the steepest slowdown since the Great Depression of the 1930s.

As the pandemic pushes the global economy into recession, many countries have rolled out fiscal and monetary support programmes to mitigate its impact. The size of fiscal intervention by the countries is varying – but mostly in double-digit percentages (of GDP).

Developed economies like the US, Japan and Germany announced packages in the 10- 20% (of GDP) range. Even an emerging economy like India announced a stimulus package of 20 lakh crores in May 2020 along with previously announced measures that together roughly work out to be 10 percent of its GDP.

Source- Statista News reports

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| ECO SECTION The biggest question however that has gained prominence is the obvious one – how to finance the huge expenditure?

The conventional approach of the government would be to borrow money, which would lead to a fiscal deficit. However, government borrowings have the potential to increase interest rates and as the savings in an economy are fixed, more money lent to the government would result in lesser capital available for the private sector. Higher government deficits, therefore, ‘crowd out’ investments. And this is something that is best avoided in the current scenario.

This is where a heterodox macroeconomic theory that has been gaining traction Modern Monetary Theory or MMT comes into the picture. The theory has been around for a while, but has recently gained prominence through the work of American economist and advisor to Bernie Sanders' 2016 presidential campaign, Stephanie Kelton, whose book “The Deficit Myth” got published in June this year.

So what exactly is Modern Monetary Theory (MMT)?

Modern Monetary Theory (MMT) is a heterodox macroeconomic theory which applies to any economy that imposes obligations (like taxes) and issues obligations (like government debt) largely in its own sovereign currency.

▪

▪ The

primary objective of the economy should be to reach the level of full employment.

As long as there is unemployment, MMT insists on government spending for job creation, and not worry about persistent fiscal deficits.

When the economy achieves the level of full employment, it may experience a rising inflation. The government can impose taxes and increase its borrowing to control the inflation. Under MMT, taxes and government borrowing are tools for tackling inflation, rather than funding government spending.

▪

The application of MMT in the current situation In essence, MMT seems only moderately relevant to developing economies like India. The United States can afford to run persistently large fiscal deficits due to the vast global demand for the USD as a reserve currency. As of 2019, 61% of global forex reserves were denominated in US Dollars, followed by euros at 20.5%. The only developing economy currency which came in the top ten was the Chinese Renminbi, accounting for a marginal share of just 2% of global reserves.

▪ According to the theory, this economy isn’t

subjected to any budgetary limitation because it “cannot ever run out of money”. It can print (or digitally create) money as it is the monopoly issuer of the currency.

Source- IMF

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| ECO SECTION Let us weigh the MMT prescription for India: Suppose the government approaches the RBI to print money and increases the spending to boost employment, without worrying about persistent fiscal deficits. However, this is accompanied by a caveat. The domestic output growth will have to keep pace and meet the aggregate demand fostered by such a large spending. If that doesn’t happen, we would be in a situation where too much of our currency is chasing too few goods. This will lead to a spike in inflation rate, which is one of the major consequences of MMT. In the Indian scenario, it won’t immediately translate into a higher inflation rate due to the current demand slowdown that our economy is experiencing. However, when the economy progresses into the recovery path, increased money supply could proportionately lead to a higher inflation rate.

For June, the inflation rate as measured by the CPI was 6.09 per cent, with the core inflation rate being 4.9 per cent. Presently, fluctuating food prices have been a major contributor to the inflation rate, and when the core inflation moves up, the overall inflation rate would settle at a higher range.

And therefore, it would possibly become a challenge for the RBI to follow the inflation targeting regime of 4 per cent, +/- 2 percent.

Similarly, unlike the US dollar, the Indian rupee is not considered a safe haven currency. Even when the US Federal Reserve prints more currency, there will still be a strong global demand for the US dollar.

However, it will not be the same case for the Indian Rupee. Thus, when there is excess

supply of the Rupee, it could lead to a depreciation of its value, leading to an outflow of foreign investment, which would further have a negative impact on our GDP growth and employment. The world economy is currently facing a demand slump, and the IMF has projected a negative GDP growth rate for the global economy in CY20. Thus, a fall in rupee value would be disadvantageous for the Indian economy.

Under such a scenario, the RBI would be forced to intervene in the forex market to stabilise the falling rupee by selling dollars.

India, currently, has a comfortable foreign exchange reserves of 513.25 billion USD. However, the Central Bank cannot indefinitely intervene in the forex currency market to stabilise the Rupee.

Though RBI participates in indirect monetisation of deficit through its open market operations (OMOs), the consequences of direct monetisation by the application of MMT are much larger. It could weaken the macro fundamentals of India, risking a downgrade by the credit rating agencies. The decision of the rating agency, Moody’s, to downgrade India from Baa2 to Baa3 should already come as a sign of warning. Its current rating is just one notch above the ‘junk’ category.

Conclusion MMT would encourage sustainable large fiscal deficits, the kind that many of us would love to see now. However, there is no free lunch, even under MMT. Unless and unlikely large global demand for Rupees emerges, the increased government expenditure has to be 8

| ECO SECTION matched by a real increase in domestic output and employment.

Even before COVID-19, the economic context of India was not very conducive for achieving job creation and sustainable growth through MMT. So unless India is able to improve its macro fundamentals, it cannot afford the application of MMT in the present scenario.

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| SECTOR ANALYSIS

INSURANCE SECTOR Mihir Mali| PGDM - FS |19-21 Nihar Shah| MMS | 19-21

Overview The insurance sector is one of the critical factors in any country’s economic development. The fundamental role of insurance is to smoothen the fluctuation of cash flows. The history of India’s insurance sector reflects the history of the Indian economy. The insurance industry witnessed significant growth after the introduction of various products after the liberalization period, before which it comprised only of the state insurance players namely Life Insurance Corporation of India and General Insurance Corporation of India.

The Insurance Regulatory and Development Authority of India which was formed in 1999 regulates the insurance industry in India which includes both the public and private sector organizations. The IRDAI is responsible for regulating and protecting the interests of the policyholders and at the same time ensuring orderly growth of the business.

The life insurance sector in India accounts for approximately 75 percent of the overall insurance premium. The Indian non-life

insurance sector apart from being the fourth largest in Asia, is also the 15th largest in the world. It also has a substantial growth potential due to its under penetration and low insurance density compared to other economies in the world. According to CRISIL Research, GDPI for non – life insurers are forecasted to grow at 15-20% CAGR in FY 17-22.

Classification of Insurance Insurance can broadly be classified into two categories namely Life Insurance and General Insurance.

Life Insurance : In this case, the subject matter of insurance is the life of a human being. The basic purpose here is to ensure financial protection to the surviving dependents after the death of an insured. The insurer pays a fixed amount at the time of the death of an individual.

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| SECTOR ANALYSIS General Insurance – This has a diversified range of options like Property insurance, Motor insurance, Fire insurance, Health insurance, Liability insurance, etc, to name a few catering to retail customers, government as well as corporate customers.

By the end of Q1 FY-2019, the industry consisted of a total of 57 insurance players, wherein 24 are Life insurance companies and 33 are general insurance companies. During FY-2018 the non-life insurance premiums have grown by a robust 17%.

PESTLE Analysis Political Environment: Measures like Increasing Foreign Direct Investment limit to 49% from 26% has made it possible to acquire additional funds to fuel the expansion and adopt automation of processes.

Economic Environment: According to the International Monetary Fund estimates India is the 3rd largest economy by PPP GDP of $11.4 trillion in 2019. In 2016 Average Global Non-Life insurance penetration was 2.81% and in India, it was 0.77%. According to the Annual Report by IRDA Life Insurance Penetration was 2.76% in 2017.

It shows that India is an under penetrated market. But on the other hand, it also shows that there is a lot of scope for growth.

According to Swiss Reinsurance Co Ltd. India was among the fastest-growing non-life insurance markets over 2011-16.

Social Environment: India’s large working population, rising

affluence, rapid urbanization, and raising awareness of risk with higher disposable incomes are expected to continue to propel the growth of the life as well as the general insurance industry in India.

Technological Environment: Digital technology has the potential to break traditional barriers of the insurance sector like product awareness level, limited customer touchpoints, access to knowledge, service availability and payments, the business environment is bound to become more dynamic and competitive.

Legal Environment: IRDAI has given liberty to insurers to decide their policy terms and conditions. But insurance products can only be offered if the terms and conditions have been filed with and approved by IRDAI. Also, IRDAI has rules such as Protection of Policyholders’ Interests Regulations 2017 to promote awareness among insured entities.

Environmental Factors: Catastrophic events have also highlighted the importance of insurance in India. With only 10% of economic losses being insured in India, a significant market potential exists for insurance as people seek to obtain protection to reduce the impact of losses in the event of a catastrophe.

Challenges A study conducted in 2018 by Ernst & Young on the Indian insurance sector highlighted that over 56% of life insurers surveyed witnessed an increase of 30% in insurance frauds. The biggest impact- the cost of a fraudulent claim may be paid by other 11

| SECTOR ANALYSIS policyholders; this is due to the pooling of risks in insurance. (Increase in insurance frauds lead to an increase in protection costs.) Fraudulent claims lead to huge damage to the reputation of the insurer, as the ability of the company to manage claims is heavily doubted and customers start losing their faith in the process.

Lack of general awareness of the various insurance jargon has also proven to be a major impediment in the sale of insurance policies, as many people feel perplexed in understanding the clauses of the contracts.

Overall lack of penetration of insurance in the economy due to the lack of knowledge of the benefits of the insurance products has hampered the progress of the sector.

Blockchain :Â Decentralised ledger technology will help in bringing the parties involved on one common platform and simultaneously simplify the quote and claim processes. Blockchain can disrupt the existing business models in the following ways: 1. As it ensures that digital data is safe, it minimizes the chances of identity theft.

2. Reducing administration costs while improving customer experience with the help of automation of prevalent timeconsuming processes.

3. Using smart technology along with efficacious underwriting and risk-trading will cause simplified and quicker claimsprocessing by authenticating transactions, policies, and customers.

Future Prospects The latest emerging technologies that are helping businesses to offer a promising experience are: Internet of Things : The international network of connected devices has the power to completely disrupt the traditional insurance industry. The platform provided by IoT to access customers’ behavioural data is a new phenomenon.

Artificial Intelligence : Insurers are not only utilizing advanced analytics to explore structured data to calculate premiums by making projections of future-risks, AI now makes it possible to analyse unstructured data (e.g. images, videos) to further the right estimation progress.

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| COMPANY ANALYSIS

ICICI PRUDENTIAL LIFE INSURANCE Business Overview ICICI Prudential Life Insurance Company (ICICI Prudential Life) is a joint venture between two big corporates, ICICI Bank Ltd. and Prudential Corporation Holdings Limited. ICICI Prudential Life got approval from the Insurance Regulatory Development Authority of India (IRDAI) in the year 2000 and became the first private sector life insurance company to start its operations. ICICI Prudential Life's capital infused stands at Rs. 48.16 billion with ICICI Bank Ltd. and Prudential holding 74% and 26% stake respectively. For the financial year 2015, the company received a total premium of Rs. 153.07 billion. The company has AUM (assets under management) of Rs. 1001.83 billion. ICICI Prudential Life is amongst the first insurance company to be listed on NSE and BSE. ICICI Prudential Life Insurance company carries on the business of providing life insurance pensions and health insurance to individuals and groups. Riders providing additional benefits are offered under some of these products. The business is conducted in participating non-participating variable and unit-linked lines of businesses.

These products are distributed through individual agents’ corporate agents’ bank brokers and the holding company's proprietary.

Blockbuster IPO ICICI Prudential Life IPO launched a main board IPO of 181,341,058 equity shares of the face value of ₹10 aggregating up to ₹6,056.79 Crores. The issue price of the IPO was ₹300 to ₹334 Per Equity Share. The minimum order quantity is 44 Shares per application and the offer type was Book Built Issue. The IPO opened on 19th September 2016, and closed on 21st September 2016. Karvy Computershare Private Limited was the registrar for the IPO. The shares were proposed to be listed on BSE, NSE.

Corporate Governance From the pie chart, we can observe that a major stake in the ICICI Prudential Life Insurance is held by Promoters of the company and Institutional holding which is 75% and 19% respectively.

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| COMPANY ANALYSIS Share Holding Pattern (in % terms)

Source: Annual Report

Fund Manager Arun Srinivasan is the fund manager at ICICI Prudential Life Insurance. The fund objective is to provide an accumulation of income through investment in various fixed-income securities. The fund aims at providing capital appreciation while also maintaining a suitable balance between return, safety, and liquidity.

It was incepted on 24th November 2009. The total assets invested stands at Rs. 104204.5 million. The total number of funds managed is 44. 28 are debt funds and 16 are balanced funds. NAV stands at Rs. 24.8748.

Two things that pop out in the Statement of Profit and Loss above are the Revenue from operations&Total Expenses. Let’s understand why is there such a drastic change in these sections when compared to last year’s Income Statement.

Revenue from operations There is a massive increase in the Revenue from operations, primarily because of higher income from investments in the form of interest and dividend. The investment book rose in value due to retained surpluses and inflows on account of the issue of share capital.

Total Expenses Total expenses were almost doubled from the previous year. It increased because of continuous investments in areas of competitive advantage. New direct channel and direct lead assignment expenses were included.

Financial Analysis Statement of Profit and Loss

(₹ in Crores)

Source: Annual Report

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| COMPANY ANALYSIS

Current Ratio The current ratio tells investors and analysts how a company can utilize the current assets on its balance sheet to pay its current debt and other payables. We can see a significantly improved Current Ratio 0.91 to 1.15 because of the drastic increase in investments that are maturing within 12 months from the reporting date including the new purchases.

Asset Turnover Ratio Asset Turnover ratio indicates the efficiency with which a company is deploying its assets to produce the revenue. The company’s asset turnover ratio increased to 1.69 from 1.05 in FY2020 indicating the company’s ability to deploy its assets for producing revenue.

Future Outlook ICICI Prudential has been growing ahead of the sector average in the past few years and gained more market share in the process.

Positively, the management expects this trend to continue Going forward, though, the management aims to grow its high-margin protection products over unit-linked ones.

This, with a continued focus on increasing cost efficiencies, will fuel margins for the company and narrow the gap with private peers. Consistent leadership position in the private life insurance space, a diversified multi-channel distribution network (among the best in private sector life insurance players), and a rising focus on digitization are other positives.

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| INTRIGUING INDEED

CONTRACT FARMING Saurabh Patel | PGDM-FS |19-21 What is contract farming?

Contract farming involves agricultural production being carried out based on an agreement between the buyer and farm producer. It involves the buyer specifying the quality required and the price, with the farmer agreeing to deliver at a future date.

Contract outlines conditions to produce farm products the farmer undertakes to supply agreed quantities of a crop or livestock product, based on the quality standards. In return, the buyer, usually a company, agrees to buy the product, often at a price that is established in advance.The company often also agrees to support the farmer through, supplying inputs, assisting with land preparation, providing production advice, and transportation of farm products.

Why on news?

On 5 June, the government notified three ordinances.

The ordinances govern agricultural produce marketing, contract farming, and an amendment to the Essential Commodities Act (ECA).

The ordinance on contract farming is part of the new legal framework for agricultural

markets. It is in addition to the other two ordinances that amend the Essential Commodities Act and reduce the power of APMCs, with the aim of setting up a national market for food Called the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, it provides a framework for farmers to enter into direct contracts with those who wish to buy farm produce. So far a farmer cannot directly sell his produce to consumers or food processing companies; he has to go through a licensed trader.

The new ordinance amends Section 3 of the Essential Commodities Act, which gives power to both state and central government, to regulate these commodities. The ordinance introduces a new sub-section (1), which overrules the general powers of section 3 by limiting when regulations, or stock limits, may be imposed. Consequently, regulations can be imposed only under extraordinary circumstances (like war, famine, extraordinary price rise, and fatal natural calamity)

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| INTRIGUING INDEED The second change is that instead of complete discretion, the regulations can now be imposed based on price rise, for vegetables, the figure is a 100 percent rise, while for lentils and cereals, it must be 50 percent rise.

not used, farmers/traders must have to pay service fees to the APMC. This leads to uncompetitive practices. Traders find it easy to form cartels in these markets and offer low prices to farmers. Farmers are also left to the vagaries of daily price changes.

Even when the conditions are met, stock limits cannot be less than what an intermediary deals in during normal times.

For processors, the limit will be the installed capacity, and for exporters, it will be the demand for export.

The ordinance changes this. From now on, any farmer may enter into a contract with any person or company to sell his produce. The ordinance states that APMC market laws will only apply in the physical space of the market, and will not govern transactions outside the market. No taxes or fees associated with any APMC can be levied on such transactions.

The idea behind the amendments is to: Reduce the unpredictable and frequent interference in foodstuff markets Protect intermediaries from stock limits, which hurt their ability to conduct business.

APMC Laws and its Problems APMC stands for Agricultural produce market committee. (APMC) is a marketing board established by a state government in India to ensure farmers are safeguarded from exploitation by large retailers, as well as ensuring the farm to retail price spread does not reach excessively high levels. The first sale of agriculture produce can occur only at the market yards (mandis) of APMC. State governments have the power to regulate agricultural markets and fairs.

However, most APMC laws stretch this definition by designating ‘market areas’. A market area can range from a block to an entire district, and a farmer in a market area is compelled, by law, to sell his produce in the designated APMC market. He is prohibited from going to even the next APMC in the next district , even when the APMC's services are

The law will allow farmers to contract with processors (or anyone) for quantity, quality and price. It can be a large processor like PepsiCo, or a single restaurant interested in a steady supply of vegetables and organic lentils. Since the ordinance (in addition to other ordinance on the Essential Commodities Act) exempts intermediaries from stock limits for contract farming, it will give comfort to large organizations to participate in contract farming. It may also encourage smaller traders to expand capacity. Attracting larger and more numerous buyers for farm produce will increase competition in favor of farmers.

These steps will be critical to establishing a national market for agricultural commodities.

The three possible short comings of the amendments are: Potential for govt interference While the ordinance is a positive move towards freedom of contracting ,it leaves the 17

| INTRIGUING INDEED potential for government interference in two areas: Executive adjudication and suo motu litigation. These need to re-evaluate when the ordinance is tabled in Parliament to become an act. Instead of using the regular judiciary for dispute resolution between parties, the ordinance delegates dispute resolution to the executive (sub-divisional magistrate), who will not be bound by rules of procedure. This gives the government more powers than the parties in the case. That would not happen if disputes were required to go to the judiciary. The ordinance also creates a window for reintroducing government interference by giving the executive powers to adjudicate disputes through suo motu cases. These are cases where neither of the parties to a farming contract has raised a dispute, but the authority still can enter into the contract and make changes. This violates a fundamental principle of contract law: If the parties to a contract are not complaining, third parties should not interfere in the contractual relationship.

Violating this principle undermines the commercial relationship between the parties. If the government intervenes in contract farming agreements frequently, buyers may back out.

Power of the notification of commodities The central government can notify which commodities can be regulated under section 3 only in the case of “war, famine extraordinary price rise and natural calamity of grave nature” it is still left to the absolute discretion of the state government.

Consider a case where the central government notifies wheat as one of the protected commodities (not subject to

regulation in normal times). A state government can still decide that there has been an extraordinary price rise or shortage or put specific grain under PDS (Public distribution system) and start regulating it.

Too much power with the state government The second provision of the ordinance restricts conditions under which stock limits can be imposed under section 3. However, imposing stock limits is just one of the many powers under section 3. The state government may also impose price controls, ban transportation, force sales at below-market price, make trading in a commodity illegal, demand licenses or bonds before trading, and many more. In June 2014, the West Bengal government instructed traders to sell potatoes at below-market prices using the law.

3 ways the Fintech Industry can Support Farming Easy Loans for Farmers Borrowing money is a common part of any farming operation in many nations, and India is no exception. Unfortunately, the situation was less than favorable until now, as farmers were forced to go through middlemen and jump through various hoops to acquire the funding they needed to operate. That is not the case nowadays though, mostly thanks to the efforts of the fintech sector to make direct loans more available to everyone.

Administration’s inability to send out millions of test kits and protective medical gears that are required to tackle the disease.

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| INTRIGUING INDEED Providing direct platform On that note, farmers now have better opportunities for establishing direct connections with MNC's, big food chains and restaurants that might be important in their operations, as opposed to having to rely on middlemen.

This change alone can potentially have a huge impact on the way things work locally, and hopefully it is a trend that’s going to stabilize even further.

and onions. It makes a commission of around 15% of the price of green vegetables, and 2025% in case of fruits and exotics.

Alternate Payment Model Instead of having to make large upfront payments for equipment and tools, farmers can now make use of various ongoing payment programs that can introduce a lot of stability in their operations compared to before. By only paying for what they are truly using, many people now have the ability to organize their finances in a much more efficient manner, skipping some of the problems commonly encountered when dealing with the traditional model.

CropIn integrates the agricultural sector with Information and Communication Technology (ICT) by putting a network of ERP and BI (Business Intelligence) across rural India. By doing so, the agritech startup collaborates with the different value chain participants along the supply chain to monitor farm produce status closely. Â The agritech startup provides farm businesses a farm management software and mobile app, which enables them to do connected and data-driven farming.

CropIn Â

Some prominent Fintech in the field of logistics in agriculture sector

Crofarm Crofarm is an F2B (Farm to Business) venture.

According to the website, it has over 10,000 farmers in its network and has partnered with Reliance Retail, Grofers, Big Basket, Jubilant Food works, Big Bazar and Metro Foods.

Crofarm generates revenue through commission, starting from nearly 5% of the price in case of less perishables like potatato

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| GREEN FINANCE

ECONOMIC RECOVERY - TAKING THE GREEN ROUTE Akshitaa Bahl | PGDM FS | 2019-21 Swikar Gupta | PGDM FS | 2019-21

Introduction The ongoing Covid-19 pandemic arguably could be in part attributed to climate change.

For decades the world has relied on a common economic indicator which focussed on consumption as a proxy for prosperity; the GDP to measure the growth of a finite planet whose resources are over-exploited.

However, the COVID 19 pandemic has rendered this all-pervasive indicator inefficient and distorting. Many have long argued that economies should focus on development (improving well-being) rather than on growth (increasing economic output), thus finding a new way to pursue growth/development.

Cameron Hepburn, a professor of environmental economics at the University of Oxford says, “I’ve always thought it’s logical that, if you’re going to make an awful lot of investments, then make them in a strategic way like getting the economy sorted on climate.”

The recovery post-COVID 19 doesn't need to take an economic route only, it’s now vital to defy the old norms of deep recessions being followed by spikes in industrial activity that churn out far more greenhouse gas. There shouldn’t be a choice between helping people and helping the planet—it should be about how to do best for both at once.

An Abominable Choice : Privatisation of Coal Mining in India Amidst a global push for sustainable energy and climate deals like the Paris Deal, the Central government of India at the start of 2020, made an important set of changes to India’s coal sector and expanded opportunities for privatised, commercial mining. These shifts have raised many questions about what the government hopes to achieve by commercialising coal in this era of intense competition from renewables in the electricity sector, the rising NPAs of thermal power plants (TPPs) and a massive global withdrawal from fossil fuel for climate and environmental reasons.

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| GREEN FINANCE Since India went into an economic lockdown to manage the spread of the COVID-19 pandemic, the government’s continued coal sector ‘reforms’ have earned criticism even from the private sector with obvious reluctance, as in who would be investing in coal amidst a global crisis. Additionally, in a shocking move, the government has revoked the regulation requiring power plants to use ‘washed’ coal, by terming it an unnecessary cost. Washing of coal is a process to reduce the ash content in coal through a mix of segregation, blending and washing techniques. These technologies are meant to improve the quality and efficiency of low grade, high ash Indian coal. Washed coal was India’s only justification for a cleaner usage of coal despite the degrading climate. Now, since the government has allowed private players to burn low-grade coal, it only portrays its intention to protect its interest of privatization in the sector, keeping the safety of its citizens at the altar.

While the economic reforms at this crucial time should have focused on reducing coal and extractive minerals in the power sector, the government has shown that it continues to support mining and coal use. This points to the salience of the extractive industry in India’s political economy. Fly ash, which is the worst form of waste generated by dirty coal, would inundate large areas with toxic materials that can render farmlands and water bodies polluted on a large scale. The states of Jharkhand, Chhattisgarh and Odisha that have large agglomerations of coal mines and power plants will become more unliveable by the burning of bad coal. While more deaths and disease by air pollution are a distinct possibility, the spread of

unmanaged fly ash will turn these ricegrowing regions into wastelands.

Taking Inspiration from EU's Green Deal During this time of the pandemic, when the world economy is struggling to get back up and bring the industries on track, the European Union unveiled a long-term recovery proposal focussed around sustainable development, setting its motives clear for a better future.

Proposed in March 2020, the ‘New Generation EU’ strategy aims to address the damage caused by the pandemic and invest in green, digital, social and more resilient EU. The proposed instrument would be of 750 billion Euros, which will be added to the multiannual (2021–2027) EU budget. Under the proposal, the Commission would borrow the money on the financial markets using its high credit rating, which should secure low borrowing costs. The funds will be used to reach the EU’s objectives of climate neutrality and digital transformation, to offer social and employment support as well as to reinforce the EU’s role as a global player. The EU Green Deal, which is the roadmap to a resilient and carbon-neutral EU by 2050, forms a major part of the policy framework of the New Generation EU strategy, along with the strengthening of the EU Single Market and adaptation to the digital age, before, creating jobs, increasing its competitiveness, and building a healthy economy that is more resilient to shocks like pandemics and climate change. he five Climate-friendly Elements of Europe’s Proposed Recovery Package are: 21

| GREEN FINANCE Building Efficiency The stimulus package aims to double the annual renovation rate of the existing building stock. Renovating old buildings can rebound the construction sector while also reducing building carbon emissions and saving property owners on their electric bills.

Clean Technology Investment The stimulus package would use several instruments to invest in renewable energy, energy storage, clean hydrogen and batteries.

The EU is also ready to lean into green hydrogen investment, which may be essential to de-carbonize heavy industries like cement and steel.

Low-carbon Vehicles The stimulus package proposes installing 1 million electric vehicle charging points in the EU, compared to less than 200,000 today. It also plans to support cities and companies in turning over their vehicle fleets for lowcarbon options and building sustainable transport infrastructure.

Food, Agriculture and Land The stimulus package will also support the ‘EU Farm to Fork’ strategy that was announced a week before this package and aims for substantial reductions in pesticides, anti-microbials and fertilizer usage, reduction in food waste, and a shift to healthier and experts agree that green coronavirus recovery packages can both boost economic growth and tackle climate change at the same time.

A recent study identified five investments for an economic recovery that can both improve the economy and reduce emissions. The final recommendations were clean infrastructure

investment, building efficiency, education and training, sustainable land use, and clean research and development spending. The EU economic recovery proposal includes investments in all these areas and collectively sets an example for the other economies in the world, to adopt the reforms in the right path.

ADMIRABLE AMBITION: SOLAR PROJECT India has set an ambitious target of achieving 175 gigawatts (GW) of renewable energy capacity by 2022 on the backdrop of the 2015 Paris Agreement to reduce GHG emissions intensity by 33-35% below 2005 levels, and achieving 40% of installed electric power capacity from non-fossil sources by 2030. To move an inch closer to its “green vision”, on 10th July 2020, PM Modi inaugurated India’s first single-site and Asia’s largest MW 750 solar power plant project in Rewa district of Madhya Pradesh.

The Rewa Solar Plant has also been built to exemplify India’s commitment to the idea of “One World, One Sun, One Grid”. The ‘One Sun One World One Grid’ project that seeks to transfer solar power generated in one region to feed the electricity demands of others helps India’ aim of becoming an electricity exporter. The solar plant will become the first renewable energy solar plant to conduct an inter-state sale of solar electricity by catering 24 per cent of the energy to Delhi Metro Rail Corporation.

Indian renewable energy sector is the fourth most attractive renewable energy market in the world. Recent initiatives like the solar power tariffs hitting a record low of Rs2.36 22

| GREEN FINANCE per unit during a bid conducted by state-run Solar Energy Corporation of India Ltd (SECI) and the move to impose basic customs duty (BCD) on imported solar cells, modules, and inverters from 1st August has exhibited India as an attractive investment destination, especially in Asia.

Working with the World - India’s global solar grid plan A recent study by IRADe (Integrated Research for Action and Development) has stated that multilateral energy trade has the potential to bring benefits to all member countries. It said that such trade of electricity among the BBIN countries - Bangladesh, Bhutan, India, and Nepal - would result in the regions gaining in terms of more efficient utilisation of regional energy resources, lower capital investments, and reduced carbon dioxide emissions. India’s global solar grid plan, The International Solar Alliance (ISA) is an alliance of 121 countries initiated by India, most of them being sunshine countries, which lie either completely or partly between the Tropic of Cancer and the Tropic of Capricorn. The primary objective of the alliance is to work towards efficient exploitation of solar energy to reduce dependence on fossil fuels. Globally, all regions have regional power integration in ome way. However, integrating different regions such as from Africa through the Middle East, South Asia to Southeast Asia covers almost half the globe, which this project attempts to pull off.

Promoting innovation : Building Integrated Vertical Solar System (BIPV) BIPV, a niche application is seeing a new spurt of growth recently with the falling of

solar PV prices. BIPV is an integration of solar PV system into a building’s envelope. The solar modules generate clean power and serve as the skin of the building.

In 2019, U-Solar Clean Energy Solutions Pvt. Ltd. installed India’s largest buildingintegrated vertical solar PV system at a data centre in Mumbai. The system, with a capacity of about 1 MW, has been installed by integrating solar panels on all four walls of the facility, covering over 5000 square feet of facade area.

The application is serving as an alternative to the conventional glass used in commercial buildings. It generates power with solar panels, thereby reducing the energy footprint and provide a positive ROI on the additional investment of solar panels. The panels themselves act like thermal insulation by blocking the sun and thus also reducing the power consumption of the air conditioning system.

Learning from peers : The Vietnam Example Vietnam is slowly becoming India’s competitor as an alternative destination to China. Vietnam is becoming an ideal place for investing in the solar sector because the electricity demand is high, and the Vietnamese government is trying to tackle the climate emergency by using green energy.

Vietnam has adopted the Renewable Energy Development Strategy until 2030 with an outlook to 2050. The strategy broadly aims to promote the use of renewable energy sources and environmentally friendly natural resources.

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| GREEN FINANCE Vietnam’s flexible FITs system looks more lucrative when compared to India solar cell manufacturing problem. An article by the financial express stated that India’s capacity for cell manufacture is 3 GW, though our actual workable capacity is around 2. Our cells are more expensive and less efficient.

There is a little upgrade in a rapidly changing world of technology. Our module capacity is around 10 GW. Despite to putting a lot of effort to have only domestic modules projects, 90% of cells and 80% modules are largely imported from China or Chinese companies elsewhere.

Inc., which is now the world’s second-mostvaluable automaker). Investing in a postcarbon economy isn’t just a way to avoid a climate catastrophe. It could also be the most prosperous way forward.

On the other hand, Vietnam’s flexible FIT(feed-in-tariff) system, focus on solar projects with solar-cell efficiency greater than 16 per cent or solar-module efficiency greater than 15 per cent, a FIT will be fixed at 2,086 Vietnamese dong/kWh (equivalent to 9.35 US cents/kWh excluding VAT) for generating electricity at the delivery point.

With such policies, Vietnam is aiming to become the largest solar power installer in ASEAN two years after introducing the FITS system. Besides, Vietnam is also planning to move from a feed-in-tariff (FIT) policy to a competitive bidding scheme for solar projects to reduce the cost of solar generation.

CONCLUSION We find ourselves on the brink of climate catastrophe because of the choices we make during such a crisis. If we choose to fund new coal-fired power plants and oil wells to urge growth, then we will have pivoted to an even darker road towards a defeatist future. The stimulus spending of 2009 helped the rise of emerging cleantech companies such as Tesla 24

| CALL FOR ARTICLES -WINNER

THE GREAT DIVIDE Siddharth Gupta | 19-20 Narsee Monjee Institute of Management Studies, Mumbai The day WHO labelled the coronavirus crisis as a ‘pandemic,’ on March 13th, Indian stock markets touched their lower circuit for the first time in their brief history. Within a fortnight, the Securities and Exchange Board of India (SEBI) had to halt trading again, as the lower circuit was activated once more.

Fast forward three months, which include arguably the strictest 55-day lockdown throughout the world and a rapidly rising number of diagnosed coronavirus cases, the markets have erased nearly 70% of the losses from the year’s high. Even more surprising is the fact that the US stock markets are at their highest level ever. After contracting steeply due to almost zero activity for more than a month, have the economies jumped back up on their feet, or have the investors wished the pandemic away? As it turns out, the great divide between the rich and the poor is fueling another great divide between a humbled economy and bullish markets.

Moreover, historically low interest rates are partly to blame. On the face of it, these events seem to be completely unconnected.

Nevertheless, they are not!

The pandemic took the world by surprise, and most nations took preemptive steps like imposing a lockdown to build capacity and slow down the transmission. While the move ensured a lower number of fatalities due to the virus, it had an unintended impact of slamming the breaks on the wheels of the economy. The economic stress has been so acute that almost every economy has had to rely on the government’s support to get the wheels moving. In India’s case too, the government announced a massive economic stimulus, hugely dependent on the banking sector. The Reserve Bank of India (RBI), for its part, has slashed the policy repo rates by a cumulative 115 bps in two months to encourage lending. The RBI is not the only central bank to have cut the rates by such magnitude, with the central banks all across the globe taking similar measures. The net result has been a steep increase in the central bank assets (in other words, cash) all over the world.

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| CALL FOR ARTICLES -WINNER All this money, and nowhere to invest As the RBI pumped up the liquidity by slashing the interest rates, banks had to cut the returns they offer on their time deposits simultaneously. Seeing the declining gains on such instruments, investors considered it more rewarding to move away from these instruments, choosing instead equity markets for good returns on investment. Data is here to corroborate the hypothesis. Retail participation in the market has seen a steep rise. The monthly average of the number of Demat account openings (which are mandatory for participation in the markets) has doubled in the period from March to June, as compared to their historical average.

According to an Economic Times report, retail participation is at a 15-year high, at 72% (the levels last seen just a couple of years before the Great Recession). The average daily turnover of retail investors is more than five times as much as that of institutional investors.

Moreover, while the data is representative of India, the trends are true for the entire world.

What does one gather from this? Well, pretty much that it is the central banks all across the globe which are primarily fueling the stock market rally.

However, is that all? Are the markets going up just because of central banks’ generosity?

Well, while this explains one side of the story, there is another side to it as well, which is just as pronounced.

The pandemic has exacerbated inequality, at least for most nations. A recent report by The Economist suggested that due to the lockdown induced economic slump, almost everyone had to cut down on their

discretionary expenses. However, the more impoverished people never had high discretionary spending in the first place! As a result, it is only the rich who have saved substantial sums of money by cutting down on costs. For the income too, it is the poor households that are left worse off, with firms laying off semi-skilled workers engaged in mechanical work (which mostly belong to the poor households). White-collar workers (mostly belonging to the wealthier households), on the other hand, have seen little to no lay-offs, with minor pay cuts, leaving the rich primarily unaffected.

As the rich continue to save higher sums of money and accumulate more wealth, they also have more time on their hands, with many offices shifting significant proportions of their workforce to work-from-home mode.

The result of higher availability of both, money and time, has nudged these people to the equity markets, which explains the surge in retail participation. And as more and more investors jump into the markets, the asset prices go up, making these investors richer and hence refueling the entire cycle. The poorer households are still on the same side of the spectrum, only being pushed further towards the extreme.

In no way does this suggest that the current mood of the stock markets is to be attributed to these factors entirely. An expectation of a fast recovery might be one of the primary reasons for the rally. Further, investors might expect some sectors to outperform the entire market, which may be driving the upward movement of the market. However, retail nvestor participation is undoubtedly one of the major factors behind the rally.

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| CALL FOR ARTICLES -WINNER And this investment-frenzy of the retail investors, in turn, is further exacerbated by the ever-increasing economic divide. It is the rich who get to worry about the little returns on their substantial time deposits, and it is the rich who get to accumulate even more of that money. Not for nothing did the outgoing SEBI chief, Ajay Tyagi, expressed concerns over an increased retail activity. “They do not know what they are doing,� he said.

Indeed.

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| CALL FOR ARTICLES -RUNNER UP

HOW NEO BANKS CAN BE AN ALTERNATIVE TO TRADITIONAL BANKS? Pranav Jha Hindu College, University of Delhi The fintech industry has been buzzing with a new trend- neo banks. Technology has revolutionized the financial sector. Banks are the blood and flesh of any economy being the main organ of the credit making mechanism. Credit market has been there from historic ages. Capitalization has been institutionalized for more than a century.

Banks were the unchallenged hegemon in the industry without any plausible alternative.

However, this perception came under threat due to immense technological prowess. The Internet has penetrated rapidly in places.

Traditional banks have been introducing new sets of digital tools as they are running on risk of losing out in the hyper competitive banking industry. The extent of net banking is a barometer to gauge the performance of various banks. In 2014, Atom Bank and Monzo came up in the UK which signaled the disruption of the banking sector. These were no ordinary financial institutions; these were full-fledged online alternatives to traditional banking platforms. These are 100% online banks without any physical presence.

Rise of online consumerism, tight credit markets, ease of digital payments have fueled the rise of neo banking. It can act as an online crowd sourcing platform, a digital pal assisting in budgeting, a payment gateway, an asset manager. Basically, it is an online one stop store for your financial needs. The idea of a 24*7 digital platforms through a tap on which one can manage funds is intriguing many. Due to the conditions created by COVID-19, fully online banks can very well be the future.

These entities have challenged the traditional banking system. They’ve taken on the weak links of the old-fashioned banking system which is constrained by cumbersome regulations, complex administrative structures, long drawn value chains and the intense legal requirements.

Despite the traditional banking accruing online mediums to serve consumer needs, inefficiencies do spring up. It becomes time consuming for even a single transaction; geographical constraints might hinder accessibility. Even opening an account 28

| CALL FOR ARTICLES -RUNNER UP requires a lot of formalities in traditional banks whereas that’s not the case for these neo banks. The reason that these digital banks are giving their brick and mortar counterparts a run for money is their swiftness powered by AI. Inter-bank operations like payment settlements (NEFT) often take around a couple of hours. The popularity of instant digital payments is soaring. Now there are around 3 billion digital transactions every month in India. Digital payment gateways have eased the transactions however; this is not to be seen in the case of digital tools extended by banks.

The biggest advantage of neo banking is its hassle-free credit creation process. The core segment of the customers will be the small industries who prefer a hassle-free credit process to meet their business needs.

Businesses can venture, tap into capital markets, raise capitals and make payments through gateway options. Small businesses often meet hindrances in raising capitals. But big banks often don’t meet the needs of small businesses. Extension of credit comes with a lot of compliances. Neo banks offer instant, straightforward, effective but limited solutions under one platform which has not been the case of traditional banks. We have seen success with innovative credit measures like certain platforms checking creditworthiness in seconds. By bringing lenders and borrowers under one roof and drastically reducing the paperwork, neo banks can serve the credit needs of the second largest startup community of the world as well as the SME enterprise. The seamless pathways and provision of multiple products- budgeting, saving, credit, inbuilt accounting powered by

AI and money management options make them an attractive proposition for SMEs and startups.

Another segment is the tech savvy consumers who are getting a plethora of banking products at their disposal. These banks provide a unique experience for the customers, a perfectly tailored version for banking which can automate budgeting and real time accounting through enhanced interfaces.

They provide personalized experience based on needs. Big data and statistical analysis can help to provide an option of financial planning to customers.

Personal dashboards with a number of offerings make it hugely attractive for millennials.

The low monthly requirements and minimum balance requirement makes it a standard feasible option for those who’ve remained unbanked. Nearly 191 million of people above the age of 15 remain without a bank account in India. The Internet penetration rate is rising and thus these banks can cash on this segment. The customer friendly interface of neo banks over the overarching formalities of traditional banks makes it advantageous.

Neo banks can provide a range of cuttingedge technologies like pausing debit card transactions in a while in order to stop fraudulent activities. Chime, a neo bank allows us to use ATMs without any costs. The use of chatbots to address customer’s needs 24*7 in neo banks is what makes it different from traditional ones. They provide offerings like automated bookkeeping, current account, compliance management, loans, payment gateways, saving and investment products, 29

| CALL FOR ARTICLES -RUNNER UP credit cards and payroll management. Neo banks are aware that they need to focus on security and thus, they have a range of advanced security features.

Another advantage of these platforms is the transparency provided by artificial intelligence devoid of human errors. There has been a loss of public trust in the banking sector post the NPA crisis in India. However, AI driven neo banking can ensure credit worthiness of borrowers with efficacy.

Traditional banks have huge operating costs; something which their digital counterparts can lower. RBI has taken instrumental steps in promoting digital payments but it has to be seen when can we have a full-fledged neo bank. It is to be seen how far these neo banks can capitalize on the shortcomings of traditional systems and emerge as viable alternatives to the well-established and deeply entrenched incumbents.

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| INTERN DIARIES

INTERN DIARIES research for clients to improve their overall institutional performance.

Harish Nair MMS Finance|19-21 Company Overview CRISIL Limited is India’s leading ratings agency, which has a strong presence in sectors such as technology, energy, telecom, healthcare, to name a few.The company, formerly known as Credit Rating Information Services of India Limited, is a subsidiary of American credit rating agency S&P Global, one of the big 3 global credit rating firms.CRISIL has its global presence in countries like Argentina, China, India, Poland, USA, United Kingdom, Singapore and UAE, and is committed in providing high quality

CRISIL’s clients range from small and medium companies to large corporates, and top global financial institutions. The company also works with commercial and investment banks, private equity players and asset management companies. It helps clients in managing and mitigating risks, formulating pricing and valuation decisions, generate more revenue and enhance returns.

Process CRISIL comes to K J Somaiya for recruitment, for its corporate centre in Mumbai. The roles offered by the company areRatings Research Analytics The selection process constituted a shortlisting for the aptitude test and based on the test scores, selection for the GD. 90 students were shortlisted for the aptitude test, of which 27 were further shortlisted for the GD and PI rounds.

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| INTERN DIARIES The group discussion was conducted in batches of 7-8 members. The topic for our group was “The Current Slowdown in the Automobile Industry in India”. We were given 5 minutes to prepare our points for discussion. The panellist asked everyone to participate equally and asked one of us to summarise the group discussion in the end.

The entire GD lasted for about 15-20 minutes, post which we had our personal interview rounds.

My personal interview started off where we had left off in the Group Discussion. The interviewer wanted to discuss more about certain points discussed in the GD and wanted my opinions on it. I was asked questions on the future of Indian automobile market, and the potential for electric car manufacturers in the Indian market. Since I was from a finance background, the interviewer asked the effect the downfall in the automobile industry will have in India’s GDP growth rate.

I was then asked about my past work experience with TCS and some work-related questions in the company. I was then asked why I wanted to join CRISIL, and some questions on the company’s industry presence.

My Experience I worked in the Industry Research and Analytics Division, and was part of the team which released annual client reports of the Indian Agriculture Industry. The different areas covered by the team included Pesticides, Fertilizers, Agricultural equipment, Bio Pesticides, Bio Fertilizers, Horticulture and Farm mowing equipment industry in India. The work involved primary

and secondary market research, calculation of market size and analysing company financials.

My work mainly revolved around sourcing primary data from clients associated with CRISIL, getting in touch with market players to study the current market dynamics and future growth potentials. I also had to study company financials and project the growth of the industry based on current and future market scenario. I also had to evaluate the industry’s current market size and predict future projections.

Unfortunately, during this time, we were going through a global pandemic, and movement outside the house was severely restricted. Due to this, CRISIL was quick to adapt to a Virtual Internship mode, and ensured a seamless onboarding experience for all interns. We got to interact with all the interns through the weekly JAM sessions, which gave me the opportunity to network with my peers, and also a glimpse of “The CRISIL Way”. I could approach my Associate Director without hesitation, who was always warm andopen to queries and suggestions.

The entire Virtual Internship programme was very well structured and ensured the interns could learn a lot despite the challenges faced.

A piece of Advice Since companies usually start coming from the month of August for summer internships, there are a few things you must do to have a good chance at converting your dream company. Firstly, you must be up to date with your CV. You should be ready to answer 32

| INTERN DIARIES questions based on it. One thing to keep in mind is that companies offering internships do not expect you to know all the terminologies of finance. They just want to test your interest in learning new financial concepts and the dedication you show towards work.Secondly, please be up to date with the current Global and National affairs.

Not only do they help you in your GD, but also help immensely during personal interviews. Also, please read the job description thoroughly. Read up some of the latest facts and figures in that sector. This creates an impression in the minds of the panellists. Lastly, don't lose heart if you couldn’t convert your dream company. There will always be plenty of openings waiting for you.

All the very best!

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| ALUMNI INSIGHTS

ALUMNI INSIGHTS Shreya Baderia| PGDM-FS|18-20 I’ve been a part of the Finstreet Finly team during my time in KJ SIMSR and writing for Finly again as alumni gives me happiness and an opportunity to relive those days and revisit the learnings I gained from it.

Presently, I am working with the fund services division of Morgan Stanley Advantage Services. Within fund services I work with the portfolio accounting team.

Here we work closely with our US counterparts to ensure a fair representation of our client’s portfolio. This includes true and fair representation of the portfolio NAV (Net asset value). Our clients are predominantly hedge funds based across the globe.

This gave me an opportunity to understand the practical aspects of the products about which I had only theoretical knowledge while in college as the clients trade in all sorts of products ranging from equity to various kinds of derivatives. Here, I also get to learn about, how a corporate action such as dividend announcement, stock split or merger can

have an effect on the share price of a security as I monitor the portfolio on a day to day basis. How situations as inconsiderate as current POTUS’s brash tweets to as big and serious as coronavirus pandemic can drive the prices of the security is very much evident when you work so closely with a fund’s portfolio.

That was about my job here at Morgan Stanley. Now, let us understand a little about the structure of a basic hedge fund and the industry’s prospects w.r.t the profitability and sustainability given the unprecedented times that we are living in.

STRUCTURE: Hedge funds are portfolios investing in alternative investments and its investors typically include high net worth individuals, endowment funds, pension funds, insurance companies and banks with high risk capacity.

A hedge fund invests in a pool of underlying securities.

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| ALUMNI INSIGHTS The structure of Hedge funds commonly is a general/limited partnership model. The general partner is responsible for running the operations of the fund. The general partners execute the investment strategy and will benefit from any incentive or success fees. The limited partners are usually the investors in the hedge fund.

Some broadly used terms in hedge fund industry: Incentive fees – The fund manager receives a flat percentage of the assets under management as incentive fees. It is paid on the positive performance of the fund. Thus better performance could be achieved if an incentive fee is introduced.

Private Partnership – Hedge funds are limited to a small number of investors generally HNIs. Leverage – Hedge funds work on the concept of leverage (Borrowed funds).

The members to a hedge fund are as follows: Investment manager/Fund manager The investment manager is responsible for formulating the strategies of the hedge fund, managing portfolio risk. He also invests in the fund. He is paid in management fees and incentive fees. The incentive fees is received only when the funds performs positively.

Prime broker Prime brokers provide the services of clearing and settlement of transactions, portfolio analytics, and securities lending service. They also act as a trade intermediary and may act as a -custodian of purchased securities.

Administrator The administrator provides financial and tax reporting to the hedge fund in order to fulfil any tax related or anti-money laundering obligations Fee Structure: Hedge funds charge investors a management fee and incentive fees. It usually follows a ‘2 and 20’ structure where the management fee is 2% of the assets under management and 20% is the incentive fees.

Prospects: Every investor in the market at present is placing their bets on the likely time of arrival of a vaccine or a cure of coronavirus. Markets have taken a serious hit with nifty toppling to an all-time low of 7583 points and Sensex to 25880 points during the month of March. This is lowest since the 2008 crises. As per an article by CNBC at around the same time, US index Dow Jones and NASDAQ experienced a steep fall of approx. 30%. It’s the worst fall for US since the “Black Monday” experienced by them nearly 3 decades ago.

Figure: Stakeholders in the Hedge Fund Sysytem

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| ALUMNI INSIGHTS Industry stalwarts have varying opinions over the future of this sector. Where some big investors are stockpiling cash to prepare for whatever comes next there are some who are aggressively buying the stocks they believe are fundamentally strong with the idea that buying now gives them advantage of the falling prices of the securities which are expected to do good post covid.

Below chart shows Bloomberg’s projected outlook of Indian GDP post covid:

Meanwhile, let us not forget that time is not a static but a dynamic concept and as it passes by lives are expected to get better both at personal and financial front if we learn to adapt and evolve as per situations and accept the reality that world is not the same place anymore. Till then, let us make a constant effort to upskill and update ourselves to match toe to toe with the dynamics of the financial markets.

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