Finly august 2016

ISSUE NO. 53

Digital Transformation in Indian Banking Journey of being

XISable

AUGUST 2016

Capital Infusion into State Owned Banks Who should do it?

Govt or RBI

IWillndianthe phoenix Corporate Lendersrise from the ashes?

Finly | June FINLY| August 2016 2016 | Finstreet | Finstreet | SIMSR | SIMSR

From the Editor’s Desk

SIMSR

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Dear Readers, This month we witnessed the GST Bill being passed unanimously in Lok Sabha which is a great step towards transformation and transparency in the Indian economy. The domestic stock market and overseas institutional investors are likely to give a thumbs up to Urjit Patel's appointment as the new governor of the Reserve Bank of India (RBI). We also observe that the Federal Reserve is getting closer to raising interest rates again which could spark a sell-off in Asian stocks and trigger capital outflows in China.

In this edition, Our Cover Story on GST: Approval and it's implications on India covers the implementation and benefits of the GST Bill. Here the writers have focused on how the GST bill would transform the Indian economy and improve the ease of doing business. Next in line is our economics section which covers the Italian Banking Crisis and describes the two major reasons of the crisis and how a bail in would bring stability to the economy. Our Faculty section brings forth the core factors that are responsible for the digital transformation in the Indian Economy and the benefits of the same to the bank and it's customers. We have introduced a new section “Sector Analysis” from this month wherein we would cover a sector every month and try to provide a thorough analysis to help the investors invest in that particular sector. This time the writer has covered the automobile industry in depth which focuses on the government initiatives, production, sales, export and investments and finally ends with the investor sentiments and word of caution for the investors.

Lastly, I would like to express my deepest gratitude to our Faculty in Charge Prof. (Dr.) Pankaj Trivedi for always guiding and mentoring the FINLY team. I would like to thank our sponsors Finacue Research and Education for their tremendous support. Also, I would like to acknowledge all our readers, faculty members, finstreet team members, our sponsors and seniors for their encouragement and continued support. It gives me immense pleasure to announce Soniya Golechha from KJ SIMSR as the winner and Chetan Palta from NMIMS, Mumbai as the runner up. Congratulations and wish you all the best !!

-Shreya Gupta PGDM-FS 2015-17 KJ SIMSR

Team FINLY

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Shreya Gupta Editor-in-Chief

Prof. (Dr.) Pankaj Trivedi Faculty Incharge

Design Team Aritra Jay Guha Khuthia

Editing Team Aritra Guha

Abhinav Aditya Kulkarni Shetty

Madhur Krishnakant Kirti Saxena Sharma Srivastava Ankita Nandini Reemal Lavande Chaturvedi Prabhod Vipul Varkar

Preyas Jain

Prateek Singh

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Contents

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From the Editor’s Desk

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Faculty Section

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Alumni Section

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Team Finly Cover Story Article of the Month Winner Article of the Month Runners Up Eco Section

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Article by Finacue

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Sector Analysis

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News Buzz

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FIN Tweets

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Trivia

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Cover Story

Good Or Bad For India?

Introduction GST is an abbreviation for goods and services tax. The GST bill is considered to be India's biggest indirect tax reform since independence. The GST bill is the 122nd constitutional amendment bill which was passed unanimously by both the upper and lower houses of the parliament in the recently concluded monsoon session, now it needs to be passed by at least 15 of the 29 state assemblies and then get the president's consent to be accepted. The government is optimistic that it can implement the GST from April 1, 2017 onwards, however the nitty-gritties of the bill are yet to be finalised and a vibrant debate is going on about the GST rate. Let us take a look at what the GST is and how it benefits us?

What is GST and how it benefits India: A goods and services tax is a comprehensive tax system where a single tax will be levied on goods and services at each stage of production instead of applying tax on the already

Madhur Saxena PGDM-B (2016-18) Abhinav Kulkarni PGDM-A (2016-18) KJSIMSR taxed item. Currently various taxes are levied by both the centre and state government at various levels that leads to increase in price and complications in taxation system. A comprehensive GST gets rid of this complication and reduces the prices, thus benefitting both the producers and the consumers. The advantages of GST are explained below: GST removes multiple taxation: First of all GST gets rid of multiple taxation i.e. it avoids taxing the already taxed item. For better understanding let us take a simple example of a product reaching the retail store.

Let us assume that the tax levied at each stage of supply chain is 10%.

So let us see how the current system of taxation leads to rise in price.

A manufacturer buys raw material of Rs 100 which includes a tax of RS 10. He adds a value of Rs 30 to make a product ready to be sold. Now again when he goes to sell the product he has to pay a tax of 10% which makes the cost of product 143 The wholsaler buys the product from the manufacturer and add his margin of Rs 10 now the cost of the product is

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Cover Story

SIMSR is 153 and to this again the wholesaler has to pay tax, so the total cost become 168.30

! !

Now the retailer buys the dress at Rs 168.30 and adds his margin of Rs 10 . Now the product price is 178.30 and with tax levied again it becomes 196.10 Now under GST one can offset the previously taxed item which decreases the price, benefitting the end customer and providing the competitive advantage to the seller.

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! ! ! ! !

A manufacturer buys raw material of Rs 100 which includes a tax of RS 10. He adds a value of Rs 30 to make a product ready to be sold. Now he can offset a tax of Rs 10 which has already been paid so the price is Rs133.

The wholsaler buys the product from the manufacturer and add his margin of Rs 10 now the cost of the product is 143 and to this the wholesaler has to pay a tax of Rs 1.3 only as he can offset the tax of Rs 13 already paid , so the total cost become 144.30 Now the retailer buys the dress at Rs 144.30 and adds his margin of Rs 10 . Now the product price is 154.30 and with tax offsetting again it becomes 155.43 From the above example we can clearly identify that the price of a product which under current circumstance would become 196.10 is only 155.43 when the GST is applied. Thus GST most importantly ends the current system of regressive taxation.

GST will replace 17 direct and indirect taxes. It will replace several taxes collected by states and central government and would bring much needed clarity in the taxation system.

The taxes that get replaced are ! Central Excise duty ! Duties of Excise

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!

! ! ! !

Additional duties of Excise Additional duties of Excise Additional duties of Customs Special additional duty of customs Service Tax Cesses and surcharges in so far as they relate to supply of goods or services State VAT Central Sales Tax Purchase Tax Luxury Tax Entry Tax Entertainment Tax Taxes on advertisement Taxes on lotteries and gambling State cesses and surcharges

Revenue boost: The proposed GST may appear to reduce the final price by reducing taxes and apparently it can be misunderstood that it will reduce tax collected by government but on the contrary it increases the government tax revenue.

Simply, as the tax rate reduces the compliance increases and more and more people readily pay the taxes. Let us understand this by an example: A trader has to pay Excise duty and VAT when he purchases a good but when he sells this good he can only earn VAT. Thus, he purchases the goods without paying excise duty. But when GST comes into action the trader can offset credit at previous stage and can pass on the excise duty to the customer and preclude tax evasion.

A common market: Currently the prices of goods differ from state to state because of the difference in the tax levied at state levels. Thus,

Cover Story

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A common market: Currently the prices of goods differ from state to state because of the difference in the tax levied at state levels. Thus, after GST the whole Indian economy is expected to become a common unified market where inter-state difference in prices of goods and services no longer exists and seamless transfer of goods and services takes place.

Logistics, inventory costs will fall: Indian trucks travel on an average of about 280 KM, below the world average of 400 KM and far less than the USA trucks that travel 700 KM a day.If we take a look at the reason for the less distance travelled, it is surprising that the reason for this is time wasted at Tolls. As per a report by UBS Securities truck drivers of our country spend 60% of their off the roads negotiating at check posts. It is also been noticed that 11 types of taxes on the road transport sector, with GST these taxes and the wastage of time would not be there, improving overall productivity Investment may increase: As the price of the goods drop their consumption is expected to rise which may lead to rise in the investment as well.

Make in India: As the GST removes the cascading of taxes, inter-state taxes, make India a unified market and ease of transportation of goods. It is expected that the domestic manufacturing and make in India will get a much needed impetus.

Less developed states get more taxes: With GST, the less developed states get more money, as the interstate taxes which now goes to the states where goods are produced, will now go the states where the goods are consumed. Thus states with high population will get more taxes for their development. Below graph shows the difference in the tax collected by different state governments during 2010-2015 as observed by thirteenth finance commission.

GDP growth: As per HSBC estimates Indian GDP may rise 0.80 % over 3-5 years due to GST. NCAER (National council of applied economic research) estimates the same at 0.9-1.7%. Overall, we can conclude that GST may prove to be instrumental in growing GDP over next few years.

GST rate: Though Constitution Amendment Bill, 2014 has been cleared by Rajya Sabha, a key task for the proposed GST Council will be of determining the rate of taxation. This GST Council will be comprised of State Finance Ministers and Union Finance Minister, Minister of State (Finance). It is obvious that states would not tend to accept any rate which would lessen their individual tax

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The origination of GST and journey till now:

Cover Story

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(imposition of Excise and VAT) and the resulting burden on consumers, estimated Revenue Neutral Rate (RNR) in between the range of 15% to 15.5%.

Considering a margin of 1.50% over RNR, Committee recommended GST Rate as 17% to 18%.

As of now, GST Rate is still under discussion and MoF is working over various suggestions by States and experts. A group of experts supporting low GST Rate argue that GST Rates beyond 20% would result into Tax Avo i d a n c e , a p ro b l e m l a rg e l y pertaining with current taxation system. However, Finance Minister Mr. Arun Jaitley has hinted that GST Rate is likely to be more than 18%.

Inflationary impact of GST: The single rate implementation of GST implies that some of the present rates of indirect taxes will rise; while some others will fall. Currently services are being taxed at a rate of 15% while goods

are being taxed at a rate between 22 to 25%. If GST Rate is fixed at 18%, then service prices are most likely to rise.

However, rate of tax over goods would fall and so would be the price. Thus, in aggregate, there seems no possibility of sharp rise in inflation. Experts anticipate that CPI would marginally rise by 20-70 bps in short run period.

GST is supposed to eliminate cascading effect associated with indirect taxes.

However, it should be noted that cascading effect pulls the effective rate of taxes than they appear to. Hence, in order to achieve tax collection equivalent to non-GST regime, GST rate will need to be set in upper band, which may trigger inflation. Centre can go with making allowances for short term in order to control inflation and expand the base.

How Indian GST is different from other countries?

Currently, there are 160 countries in the world that have implemented VAT/GST.

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Cover Story

SIMSR In most of the countries, GST implies one tax for all goods and services and it is being applied throughout the country.

Contrary to that, Indian GST doesn't follow ideal GST where all indirect taxes are subsumed in to one. Article 246A (Special provision w.r.t GST) enables Centre and State to concurrently levy GST. As a result, there will be total 31 GST enactments (29 states and the union territories of Pondicherry and Delhi). Apart from GST, states can have power to levy VAT on petrol, diesel and aviation fuel.

Most of the countries have one lower rate of taxation for all commodities. We have opted for multiple rates and they are expected as per the recommendations of Arvind Subramanian committee. The committee has recommended zero rate for essential commodities, 12% for merit items, 18% as the standard rate and 40% for luxury products.

Let us take a look at possible effect of GST on Different Key sectors: Automobile: The effective tax rate for automobile sector lies between 30-40%. Thus GST will be beneficial as the tax rate is expected to be reduced. Also, the logistics will improve, making GST a bliss for automobile sector.

Consumer Durables: The effective tax rate for this sector lies between 7-30%. However, with GST the logistic and operational cost may reduce, increasing profitability. The overall impact on the sector may remain positive or neutral.

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Cement: The effective tax rate for cement sector lies between 27-32% this is expected to come down when GST is implemented.

Thus the overall effect on cement industry is expected to be positive.

Textiles: The current rate for textiles/garments is 6-7%. If a tax rate higher than this rate is levied then this may have negative effect on this sector. However, it is not clear whether a lower tax rate will continue or not.

Media: The effective tax rate for Broadcasters is 14-15% and 20-21% for DTH service providers. GST will levy a blanket tax rate of 18-20% which may have negative impact on broadcasters but positive on DTH service providers.

Pharmaceutical: Pharmaceutical sector enjoys certain location based tax incentives. The effective tax rate is below 6% and it is expected that concessional tax bracket will continue for pharma sector, thus overall impact for this sector remain neutral.

IT & ITes: The effective tax rate for IT industry is 14% with GST it may increase to 18%.

However litigations related to classification of software as goods or history may become history as GST is levied on value added to the product rather product/service. The overall impact on sector may be slightly negative.

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Telecom: The effective tax rate for telecommunication services is 14% and even if a minimum 18% rate is applied, it will be difficult for the service providers to pass on the additional cost to the consumers as telecom is a highly competitive market. Thus, the overall effect on the sector is supposed to be negative.

GST: Few issues to be resolved Centre needs to address issue of distribution of tax shares among Centre itself, State and Local Self-governing Bodies. Issues between Centre and State are almost addressed, but issues between State and Municipal Corporations are comparatively complex and still under discussion. For i n sta n c e , B M C ( B r i h a n m u m b a i Municipal Corporation) earns a whooping Rs 7000 Cr through vehicle entry tax and octroi every year. Under GST Regime, BMC will not be able to collect these taxes as they will be subsumed. Hence, question arises over compensating such a huge loss. Model GST Bill leaves this issue to the states.

Hence, states need to deal with this issue sensitively so as to avoid possible conflict with Local self-governing bodies after GST Implementation.

GST Model law mentions that GST credit will be available only if buyer of goods furnishes a proof that the vendor has paid GST to government. With CGST and IGST, there will be separate credit pools for SGST, CGST and IGST. Hence, there is a possibility of substantial increase in

paperwork and compliance cost.

Possible solution can be i m p l e m e ntat i o n o f c e nt ra l i ze d registration for certain pan-India services and strengthening online infrastructure to overcome complex documentation.

Also the GST to come into effect first has to be passed by more than 50% of the states and then get the presidents consent. Even after that, the parliament will have to pass various bills related to Central GST and Integrated GST whereas, the states will have to pass their own legislations for a State GST. The Government has set up a deadline of April 1, 2017 for all this to complete which looks highly optimistic.

Conclusion: Introduction of GST is a bold reform in post-independence era. Its implementation would significantly contribute in simplification of business processes and integration of market.

However, it should be noted that involvement of 31 other actors (States and Union Territories) makes the structuring and implementation of GST slightly challenging. We expect the Centre and States to overcome the challenges skilfully and let GST become instrumental in the process of 'Making one India'.

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Article of the Month - Winner

Soniya Golechha PGDM-FS (2015-17) KJSIMSR

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Introduction Non Performing Assets (NPAs) are giving sleepless nights to lenders, borrowers, regulators and the Government. In this article, I would try to give a complete picture of this boiling topic of NPA. The focus of this article would be on recent suggestions to get away f ro m t h i s p ro b l e m . T h e suggestion given by finance ministry's to p e co n o m i c a d v i s e r, A r v i n d Subramanian, to Reserve Bank of India (RBI) governor Raghuram Rajan regarding infusion of capital in Public Sector Banks (PSBs) by RBI would be the emphasis of this article. This article will try to connect the dots related to various aspects of NPAs and come out with clearer picture of this issue Data on NPA Before we move towards the solution of the problem on NPAs, I would like to briefly put forward some data from recently released report by RBI on

Financial Stability. Gross NonPerforming Assets (GNPAs) of Scheduled Commercial Banks (SCBs) have risen sharply to 7.6% of gross advances in March 2016 as compared to 5.1% in September 2015 mainly due asset quality review undertaken by RBI. Due to this, profitability of SCBs have gone down considerably with return on assets (RoA) and return on equity (RoE) declining sharply to 0.4 per cent and 4.80 percent, respectively, in March 2016 from 0.80 percent and 9.3 percent in March 2015.

Impacts of high NPAs These high NPAs not only erode the capital of the bank but also reduce their ability to lend. Results from banking industry on credit and deposit growth shows that credit growth of all SCBs has gone down from 9.4 % in March 2015 to 8.8 % in March 2016 and deposit growth in deposit has gone down from 9.9% in March 2015 to 8.1% in March 2016.

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Getting off NPAs from bank's balance sheet will not solve the problem but in turn will add to the problem if banks are not infused with external capital. This is why infusion of capital, has become a prime priority of the government to kick start growth in the economy.

Scheme for Sustainable Structuring of Stressed Assets I would not go into the details of the schemes tried by the RBI to solve the problem of NPAs and which have failed (Strategic Debt Restructuring being one of the latest failure). Instead I would talk a bit about latest attempt launched by RBI named Scheme for Sustainable Structuring of Stressed Assets (S4A). In this new scheme, banks are allowed to convert upto half of their loans into equity or equity-like securities. To simplify this, bank can divide their loan in two parts – One which cannot be serviced and other which can be serviced and then convert that part which cannot be serviced into equity or equity-like securities. Now what this will do is keep managerial control with the company who knows more than the outsider about their own company and giving them an opportunity to revive it.

If we go into nitty-gritty of this scheme, we see that it requires immense work on regulations and law making before it can succeed to control the NPAs.

Rs.70,000 Cr by finance minister in the latest budget to recapitalize the banks, this amount would be infused over a period of three years.

NPAs already written off by SCBs are higher than the capital being infused and hence more capital is needed to be infused. Now the question at hand is who is supposed to infuse more capital – Government or RBI? We will discuss this but before that one must understand what are the sources of income of RBI and what does it mean to infuse money into banks by RBI.

Sources of Income of RBI RBI, is fully owned by the Government and is just like any other company under the Government.

Hence RBI has to pay dividends on the profits it has earned to the Government. Main sources of income for RBI is through interest earned on the loan given to Government and banks, it also earns interest on its foreign exchange reserves which is mainly invested in US treasuries. Apart from this it also earns money on exchange of foreign exchange transactions.

Capital infusion into Public Sector Banks Infusion of capital into public sector banks is of vital importance to revive the banking sector which is bleeding due to high NPAs. As per the allocation of

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Looking at table above, we see that RBI has made a net profit of Rs. 659 billion for the year 2014-15. From this surplus it has transferred 99.99 per cent to the government in the form of dividend. This has increased to almost four times in four years.

Government uses this money to meet its budget expenses. Now the question is if RBI transfers everything it earns what more is Government expecting from RBI? RBI Vs. Government To understand the plan of Government we need to understand RBI's balance sheet. It is divided in two parts –First is assets and liabilities of Banking Department (BD) and second is that of Issuance department (ID). Comparing the balance sheet for two years we can see that RBI has expanded its balance sheet by 10% in year 2014-15. Every note issued by RBI is a liability that RBI has to pay to the note holder and it is hence backed by some kind of asset seen in balance sheet of ID. Now coming to the balance sheet of BD, let us see what other liabilities and provisions consist of in schedule 3. This basically consists of various funds and revaluation accounts and of this Government is targeting Currency and Gold Revaluation Account (CGRA). According to a suggestion by Government, RBI should sell some assets (i.e. bullions and foreign exchange holding) worth the value of this CGRA and realize this money and infuse it in the banks as capital. What this basically means is reduction in assets by selling them and reduction in liability by wiping this CGRA. The consequence of this would be contraction of balance sheet of RBI which would leave RBI with less capacity of dealing with sudden cash squeeze and intervention in foreign exchange markets. Secondly, RBI, if infuses capital in banks, will become owner of these banks which it itself is regulating giving rise to conflict of interest. For this sole reason, Indian Government had agreed to buy 59.7% stake of RBI in State Bank of India (SBI) in 2007. Thirdly, the CGRA is not monetized profits and hence realizing this money may open doors for inflationary risks.

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Finally, doing this would be a compromise with the independence of RBI which Governor is trying to protect.

When we look at this from Government's perspective, this is the best possible option they can have to solve this most urgent problem. Firstly, it would not deteriorate its budget deficit. Secondly, they can use the huge dividend paid by the RBI to meet their fiscal deficit target, which seems to be difficult with commodities prices picking and 7th pay commission implementation. Thirdly, getting banking sector out of crisis would help bank's credit grow which in turn would help economy revive and Government

can capitalize the higher growth numbers in next elections.

Government's argument that reserves in RBI are accumulated for the rainy days would make more sense in context of some crises of currency depreciation or balance of payments. In such crises it is responsibility of RBI to burn down its reserves to help country stabilize. In crisis like that of NPAs, RBI can equip banks with more powers to recover their loans, which it is doing by measures like S4A. It is responsibility of Government to support these banks by infusing capital. RBI is doing whatever it can by transferring the entire surplus to the Government in the form of dividend.

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Government's argument that reserves in RBI are accumulated for the rainy days would make more sense in context of some crises of currency depreciation or balance of payments. In such crises it is responsibility of RBI to burn down its reserves to help country stabilize. In crisis like that of NPAs, RBI can equip banks with more powers to recover their loans, which it is doing by measures like S4A. It is responsibility of Government to support these banks by infusing capital. RBI is doing whatever it can by transferring the entire surplus to the Government in the form of dividend.

India is not the first country that is battling the NPAs problem. The US saving and loan debacle in 1980s, the banking crises in Japan and Nordic region and global financial crises in 2008 all saw the problem of NPAs and in each case it was fiscal authority who infused capital in the banks and not the Central banks. This proposal by government is first of its kind and hence outcome of this in long term cannot be ascertained.

Conclusion To implement this plan by Government, it is very important that any such move has to be jointly initiated by the Government and RBI. Constant opposition by RBI Governor is making things difficult for the Government and most probably it will wait till the term of incumbent Governor gets over in September. Then the stance of new RBI governor will decide the future of this idea on which we cannot comment as of now.

With huge foreign exchange reserves and signs of growth revival, India is in

very safe position as far as RBI is concerned because a situation of cash squeeze is less likely to occur (assuming that China does not play another currency war). If conflict of interest is compromised, this is the best option Government has to help banking system to revive. Finally, it must be understood that, RBI, which extracted this problem of NPAs, is being pressurized to fix the problem at the cost of its own independence.

Whatever may be the result of this suggestion from the Government, it is unique and no other country thought of this before, not even GREECE

Article of the Month - Runner’s Up

Chetan Palta NMIMS, Mumbai Russian economy is in deep trouble and calling for structural reforms!

The cheap oil prices is squeezing the Russian economy. Deficit is expanding, and spurring inflation. What reforms can Putin led government bring in?

What should the reforms be directed at? For that we need to understand the Russian Economy and the underlying 4 problems.

Let's quickly understand the key features of Russian Economy.

Russia has followed an Oil & Gas export led growth. Oil & Gas accounts for 50% of Russian Budget Revenue.

The below graph shows how Russian budget revenue is overly dependent on Oil and Gas tax revenues. Thus leaving them exposed to fluctuation in oil prices. Next feature is that it is a h o u seh o ld co n su mptio n d riven economy. Household consumption forms 53.6% of total GDP. Also the most of the consumer goods are imported either from China or Europe. Thus any depreciation in ruble can severely impact the demand for imported consumer goods. Finally a quick look at the imports composition reveals that Equipment, machinery, and transport

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SIMSR constitute 45% of total import bill. And foodstuffs and agricultural products constitute 15% of total import bill. It shows the Russians' exposure to foreign exchange rate for investment in capital goods as well as for consumption of basic food items.

During the last few years, 'two major' events lead to the present economic problems. First is the falling oil prices (from $110 per barrel to $45) resulting from Shale boom in the U.S and weaker demand worldwide. With fall in oil prices, Russia's export in terms of total value fell. Thus the revenue that the government generates through taxes on oil exports fell significantly. The other major event being Economic Sanctions (Remember Crimea?).

Sanctions were imposed by Europe and the U.S for President Vladimir Putin's actions in Ukraine. They were designed to punish Russia's companies. As a result Russian companies could not export to Europe and the U.S.A. Thus exports fell even further.Thus the re ve n u e t h at t h e go ve r n m e nt generates through taxes on oil exports fell significantly. The other major event being Economic Sanctions (Remember Crimea?). Sanctions were imposed by Europe and the U.S for President Vladimir Putin's actions in Ukraine.

They were designed to punish Russia's companies. As a result Russian companies could not export to Europe and the U.S.A. Thus exports fell even further.

And the 4 problems creeps in‌

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!

People are getting poorer faster than ever before Compare the present situation to the last few crises in the Russian economy, one shall understand that the population is getting poorer much faster this time. Till last year end, the household consumption in Russian decreased by 10 percent.

Whereas during the most serious crisis in modern history of Russia i.e., in 1998 the household consumption fell by only 5 percent, and by 4 percent during the subprime crises of 2009.

Add one more reason as to why the population is running short of money.

Businesses are deliberately reducing wages in for increasing their own profits. Last year, the nominal wages in Russia grew by only 4.6 %, while co m p a ny p ro f i t s i n c re a s e d b y staggering 49 %. Main reason for such an acute problem is the lack of effective trade unions for defending the workers' rights in the country. ! Inflation due to a free-floating exchange rate Russia switched to a free-floating exchange rate in 2014, thus making the Russian currency value marketdetermined. Since then, the ruble has fallen by 60 % against the Euro and the U.S. dollar; in addition to that, the ruble gets affected by the fluctuations in oil prices.

Fearing the impact of lower oil prices on Russian economy, traders and investors started to get their money out of the economy. Leading to fluctuation in exchange rates. As per economists, the fluctuations in ruble provides an annual inflation of 7 percent. Whereas last year

Article of the Month-Runne’rs Up

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Inflation in Russia was measured at 15.5 % In such a situation, interest rates on bank loans, even for the purchase of machines, transport, equipment, cannot be lower than 16-20 percent. As a result businesses just cannot afford make any capital expenditure – which leads us to the next problem. !

Companies are not buying new equipment Which key indicator determines future economic growth? Primarily investments!

And as it turns out due to the high interest rates, businesses just cannot afford to buy new equipment and expand production. Let's look at the actual numbers, Investment in fixed assets reduced by 8 percent, while the import of equipment tanked by mammoth 38 percent. ŸIn Russia's energy sector, roughly one in every five machine is way beyond its expected life span and should be discarded. If Russia's energy resources don't see new investments in the next two years, then the country might experience lengthy reductions in oil production. ! Even Chinese investment are failing to materialize Yes, even the high hopes of luring the Chinese investments to boost the Russian economy are failing. Rather the Chinese investors are also withdrawing funds from Russia.

However, Western capital markets might come to the rescue due to continued negative interest rates which can result in an inflow of funds from a few European countries.

So what should be done? What is the Solution?

Firstly, diversify the economy away from over dependence on export of natural resource. Secondly, produce more of what was previously imported and which can no longer be afforded as export income collapses.

The problems it seems is a blessing in disguise. Look at it this way. A country, like Russia, which survives majorly due to oil and gas exports (the government budget revue), the fall in prices of those exports is a catastrophe. Suddenly budgets have bottomed out and so on.

And what is required is some manner of turning the economy on its head, to make it produce more of what was previously imported and which can no longer be afforded as export income collapses. Well, what achieves that? A fall in the value of the currency achieves exactly that. The imports are more expensive, lowering the quantity imported. Thus making the domestic production more profitable, and boosting the domestic production. On the other hand, exports of other goods also becomes cheaper, thereby boosting non-oil exports. This is exactly what the doctor ordered for that economy. Don't you think it's great that it is happening?

Still note that until the structural changes are brought in the Russian economy will plunge with tanking oil prices!

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The Italian Banking Crisis

ECO Section

Prateek Singh PGDM FS (2015-17) Krishnakant Sharma PGDM A (2016-18) KJ SIMSR

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The world has still not recovered from “Brexit” and its consequences. The pound has already reached a 31 year low against dollar and the downfall has not stopped, yet. A greater threat looms around, which, if unresolved, can shake the very foundation of the European Union. What we are talking about here is the increasing amount of bad loans by the Banks of Italy. Italy is E.U's fourth biggest economy but is also one of the weakest. The bad loans incurred by Italy's banks have reached a staggering amount of €360 billion ($400 billion). This amount is equivalent to the one-fifth of the country's entire GDP. The question arises how Italy reached this grave situation. There are two major reasons that can be cited. ŸBank Mismanagement ŸDismal growth rate of the economy and ultimately spiraling into recession of the course of the last 5 years.

The bank mismanagement is evident from the ailing situation of bank Monte dei Paschi di Siena, the third largest lender of the Italian economy. It is suspected of not following the sound banking practices and it also was involved in the illegal acts (there were evidences of false accounting, showing the earning as high as 88% than the actual). The result of this ultimately was the bad debts consistently increasing with the increase of the loan portfolios for 8 years continuously. The other reason was spiraling of the economy into recession that made the demand side weak and thus the investment funds borrowed couldn't generate the subsistence cash flows for the repayment of the debt.

ECO Section

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Above is the structure of the bad debts that incurred: As can be seen from the pie chart above, the property market (construction + real estate) has played a major role in the accumulation of bad debts. The housing prices have declined year after year from 2010 and have declined by 15% in 2016. There were other sectors like wholesale, retail segment, Basic metals segment which closely followed the same trajectory.

Italy won't be able to have an economic growth until its banking sector doesn't come out of the peril. The concerned Italian Prime Minister Mr. Matteo Renzi sug gested a restructuring and recapitalization of banks to avoid the collapse of ailing banks which might trigger a broader financial crisis. For this public funding is needed. This sort of bail out had been done by the USA and several other countries in the recent past. But, according to EU's banking union, which came into force in January 2016, said that a bank can use public

funds only after, existing stakeholders namely, shareholders, junior creditors and, sometimes, even senior creditors and depositors with deposits in excess of the guaranteed amount of â‚Ź100,000 have taken a loss. Other dominant nations of EU, notably Germany and Netherland, suggest that before using the public fund, the banks should bail in (Regulators making its creditors and depositors take a loss on their holdings) first. The Italian government has already requested for some flexibility and a bail-out instead of bail in.

A bail-in is expected to have major impact on the economic stability as well as it is expected to cause political turbulence. The investors might flee the country if they come to know they would be bound to suffer losses because of the bail in, and this would lead to further decrease in investments in the banks, which the banks need desperately. Moreover, politically this might cause Matteo Renzi to lose power, which will add to the already

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ECO Section

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looming instability not only Italy but also European Union. The referendum of Italy due in October thus would be a significant sight for the future of EU. However the EU is expected to agree with Italy and provide them with bail out option as they can't afford more instability or crisis. But this would only be a short term solution. For getting the problem rectified, the real economy has to recover substantially. And as per the IMF reports, Italy will take two more decades, i.e. till 2025, to get to its precrisis stage. The situation looks grave and so does the future of EU.

Digital

Transformation in Indian Banking

Faculty Section

Dr. Rashmi Soni Associate Professor Department of Finance KJ SIMSR

Indian banking industry is undergoing various structural and regulatory reforms and is experiencing Innovation, Disruption and Competition. Banking has changed the way it was done in earlier days and the present day technological innovations have brought in major transformations in the system.

The digital revolution has already upended a number of industries. The video rental and music industries have been transformed by iTunes and its competitors. The traditional taxi industry is under threat by Uber and Ola, while amazon and Flipkart have massively disrupted retailing. The banking industry will see similar disruption and it will not be long before physical bank branches are a thing of the past.

We can define digital banking as Digital B a n k i n g i s t h e a p p l i cat i o n o f technology to ensure seamless end-toend processing of banking transactions/operations; initiated by

the client, ensuring maximum utility; to the client in terms of availability, usefulness and cost; to the bank in terms of reduced operating costs, zero errors and enhanced services.

Digital banking is a vision to reach out to customers through digital augmentation. It is built specifically to offer the customer the service of their choice through the channel of their choice. Digital banking differs from traditional banking on the following aspectsŸ In digital banking, customer is the center of banking experience and not branches. Ÿ Digital banking renders uniform customer experience irrespective of the channels, whereas in the traditional banking each channel offers different type of services. ŸIn digital banking, digital delivery is the core of product and services, where as in traditional banking digital delivery is layered on top of branch system.

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Faculty Section

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The high Gen Y population in our country added with growing internet and smartphone adaption in recent years, supplemented with peer industry pressure and changes in ecosystem will be significant drivers for digital transformation of banks.

The reality is that the transformation is not as projected, however banks are on the way to digital transformation at various stages with ambitious target of digital excellence.

Benefits to the bank: ! ! ! ! ! !

Lower operating costs through; The elimination of costly back-office processing operations, Fewer errors Smaller branch footprint Concentrating banking/business specialists in a single centre, Operating cost savings of between 20% to 40% could be achieved this way, according to industry experts.

Benefits to the customer: Improved services and product offerings; ! 24/7 bank services and availability through your mobile, pc or kiosk branch, ! ‘Smart banking' applications that allow all transactions to be completed from the device of your choice, ! New useful client services , value added services ! Lower charges ! Banking that meets the client's needs !

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Faculty Section

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In coming years, however, mobile use will become the epicenter of digital banking, as technology improves (3G, LTE) and smartphones and tablets become even more widespread. More than half of mobile devices sold today are smartphones, and more than 80 percent will be by 2020.

Indian banks are backed by a strong core banking system, India's private as well as public sector banks were slow initial movers in the digital banking space compared to other emerging economies in the region. Yet, India's banks, particularly in the private sector, have been quick to play catch up and introduce a plethora of digital banking products and initiatives across mobile and internet banking platforms over the past three years. India has around 150 million smartphone users. Besides products such as USSD (Unstructured Supplementary Service Data) banking and SMS banking can be done by feature phones. The focus of most Indian banks has been on digital transformation in the retail banking space, where the customer base is the largest and business processes are complex.

Websites of the India's private sector banks and a select few public sector banks today boast of convenience banking, which aims to provide a range of services combining dedicated banking expertise and the latest technology. These include internet and mobile banking, mobile wallets, online Tax Payments, Payment Gateways, Prepaid cards, Mobile Banking Apps, SMS Banking, Travel Cards and banking using social media. ICICI Bank, HDFC, IndusInd Bank and Kotak Mahindra

Bank amongst the private sector banks and State Bank of India in the public sector banking space have been at the forefront of digital bank innovation in India.

RBI has been a key enabler in India's digital banking innovation process: In a systematic calibrated approach, the Reserve Bank of India first introduced a new set of e-commerce non-banking entities to the Indian financial industry by allocating prepaid payment instrument licenses in 2012-13. These instruments offered semi-closed prepaid wallets to customers thereby allowing them cash-in facility for purchase of goods and services offered through third party merchants but without a cash-out facility. Late 2014, RBI relaxed norms for pre-paid instruments (PPI) while introducing new categories of PPIs which could be issued by banks.

April 11, 2016 was a monumental day for millions of people living in India. On that Monday, the government launched its Unified Payment Interface (UPI), a digital banking system that allows people to easily transfer money to and from a bank account or to others via a smartphone. While this kind of money transferring was available to people before that date, it wasn't accessible to everyone. Now, with UPI, nearly everyone in the country can open a bank account, save money and make transactions Doing it digital is the buzzword today.

Banking is no exception. We must remember, however, that doing digitally is just another means to better serve their customers. Banks do have a robust digital infrastructure in place;

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Faculty Section

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there is a lot to aspire for. Banks can strengthen their digital capabilities by investing into cyber security, social media, analytics, fully self-service kiosks and expanding capacity of payments processing. Technologies like block-chain, robotic process automation, artificial intelligence and crowd sourcing etc, could help banks reduce the transaction cost, respond to cyber- security threats, optimize capacity utilization, provide frictionless customer experience and ensure meaningful financial inclusion going forward.

In conclusion, achieving growth and profitability in the new digital economy requires harmonizing various tradeoffs.

These classify like- skill development and optimal capital labour ratio, process redevelopment using big data and harmonizing to ensure scalability. The transformation should be systematic and should gradually climb up the maturity ladder to reach digital excellence. We have challenging and exciting future ahead.

Journey of being

Alumni Section

AXISable Firstly I would like to extend my warm greeting to the entire faculty members, my fellow SIMSRITES, members of FINSTREET and the FINLY readers. I know three months in a job is very less time to share the experience but when Rishi asked me to write an article I simply couldn't deny it as I don't want to lose this golden opportunity.

I am currently employed with Axis bank which is the third largest private bank in India. The Bank offers the entire spectrum of financial services to customer segments covering Large and Mid-Corporate, MSME, Agriculture and Retail Businesses. In terms of growth bank has achieved consistent growth and stable asset quality with a 5 year CAGR (2010-11 to 2015-16) of 17% in Total Assets, 14% in Total Deposits, 19% in Total Advances and 19% in Net Profit.

Axis bank visited the campus in the first week of October, and offered two profiles, Affluent RM and BIU (Business Intelligence Unit). Affluent RM is for

Sarang Jain PGDM FS 2014-16

niche segment of the bank's customer and BIU is for analytics role. The selection process comprised an aptitude test which was followed by the interview round which mainly judged the analytical skills of the candidate.

Regarding BIU, it is the core analytics department of the axis bank which is sub-divided into corporate, retail and centralized team. I was appointed in the Fraud Department of Central team specific to AML (Anti Money Laundering) projects. As far as training is concerned they have a fully fledged one week training program dedicated to understanding of different departments in the bank and their interdependability. However, majority of learning is on the job for which the bank provided sufficient time and a conducive environment.

It's not only a core analysis role but the job also involves meeting different clients (other departments within the bank itself) as well understanding their

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Alumni Section

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requirements and then preparing reports accordingly. Excess of data, endless meetings and simultaneous excel workings can be overwhelming but given the right mentorship and a pleasant team, one can cruise through this phase with finesse.

Working as an analyst is an entirely different experience, but all you have to do is keep an open mind and a desire to learn.

As the placement season shall soon dawn upon you, each of you might have a ton of questions. The simple advice I can give is, “It's not about getting placed early, but to get placed right. At the end of the day what matters is, What you made of yourself”. Another important point I cannot stress enough is, “Placement is not the destination or a goal, it is the beginning of a journey of learning and professional growth.”

Do cherish your time at SIMSR and enrich yourselves with all the sweet memories and experiences. I cannot end this without thanking the team at F I N LY a n d F I N T S T R E E T fo r a n opportunity to share my experiences and thoughts. I wish all of you great success on the road ahead.

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Article by Finacue

-Team Finacue

The Indian Banking system is going through a stress on asset quality which is a 16 year high.

Source: RBI, Bank Annual Disclosures Notes: GNPL = Gross Non-Performing Loan Ratio, Total Stress = GNPL + Restructured Loans + Loans under strategic Debt restructuring + Security receipts issued against Asset Sales + 5/25 restructuring

The perilous situation has come to pass on account of multiple factors: ŸExcesses built up during the commodity and Infrastructure boom years of 2006-09 which resulted on unutilized capacities post the Global Financial crisis of 2008

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SIMSR

Article by FInacue

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The easy monetary policy followed post 2009 by the RBI along with allowing Banks to continue extending loans to stress sectors of Roads, Power and Metals in the garb of Restructured Loans !

Policy uncertainty coupled with slow and erratic clearances to Infrastructure Projects (Powers and roads) leading to huge time and cost over-runs ! A global commodity meltdown since 2014 leading to mounting losses in Metals and Iron and Steel sectors along with dumping by Chinese steel companies which in turn was due to massive overcapacities ! Certain promoters acting irresponsibly and in certain cases siphoning out their equity investments through inflating project costs without adequate monitoring

by Banks ! Lack of a proper redress mechanism for the lenders due to delays in court procedures as well as inability to take loan sacrifices (Haircuts) required to keep a part of the loan viable However realizing the gravity of the situation, The Government of India (Finance and Environmental Ministry), The Regulator (Reserve Bank of India) and the Banks have together and worked aggressively over the last 18 months to improve the situation.

Problem asset recognition Empowering Banks ! ! !

Closure of the restructuring window Early stress recognition and resolution through JLF Formation of CRILC – a database for Large Credit which can be the “CIBIL” moment of Corporate Credit and reporting Early warning systems such as SMA1 and SMA 2 Reporting

Infra Financing Landscape !

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Allowing refinancing of Infraprojects thereby aligning repayments to useful life of projects (Popularly known as 5/25 scheme) Allowed Banks to raise Infra Bonds which are free from regulatory charges such as CRR, SLR and Priority sector allocations

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Strategic debt restructuring (SDR) – whereby Banks incentivized to take over management of defaulting cos Bankruptcy Code – Structural reform –to provide more teeth to Lenders and protect their economic interests S4A scheme to take loan sacrifices

Reducing Balance sheet Risks ! Countercyclical Buffer (CCB) to kickin closer to FY19 ! Compliance to Liquidity Coverage Ratio (LCR) to make Bank Balance sheets more liquid ! Higher Capital Requirements to eventually lower cost of Equity (proxy for riskiness) while allowing Banks to use a part of the revaluation reserves for core capital compilations

Article by FInacue

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Apart from these comprehensive and structural changes, a very important development was the formation of Bank Board Bureau (BBB) headed by one of India's foremost Bureaucrat, Mr. Vinod Rai who unearthed the 2G Telecom scam. The Bureau will be responsible to help the Public Sector Banks (70% of Indian Banking) deal with Bad loan issues, reduce Government interference by taking over the recruitment over Directors to Bank Boards as well help improve Human Re s o u rc e C a p a b i l i t i e s t h ro u g h adequate focus on Risk management and Technology cadre recruitments.

(Bangalore Airport) and Essar Steel (which likely to sell the Essar oil stake) to sell assets to stronger groups and deleverage.

Over the next few months, it is likely that not just the pace of flow of bad loans subside, a few large loan accounts which have been classified as stressed will see recoveries as underlying economics of the stress assets improve as well as the economic activity of the country looks up.

Financial Year 2018 can be the year when the Phoenix Rises from the Ashes!

In this backdrop of structural changes, the Government has fast-tracked clearance of multiple Road and Power projects so far stuck in the Environmental ministry under the UPA regime, resolved Coal Block allocation issues (extremely critical for the Power sector) as well as imposed a Minimum Import Price (a comprehensive import duty on Steel Imports) to safeguard the interests of the troubled Steel Sector.

Global Iron Prices have also rebounded very strong from the Feb-16 lows helping the Indian Steel producers further.

Banks in the meantime have pushed promoters of Large leveraged groups such as Suzlon (which sold to Sun Pharma Promoters), Jaypee Group (who sold Power and Road Assets), GVK Finacue offers multiple related projects such as 'Digital disruption of the distribution landscape,' 'Monetisation of video/audio content.'

Team Finacue - Finacue offers role-specific industry projects in Finance, allowing Bschool students to hone their skills in the subject of their choice.

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Auto-Wheels On Fire Sectoral Analysis

Aditya Shetty PGDM FS 2016-18 KJSIMSR

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The population of India is 1.252 billion.

India has more than 50% of its population below the age of 25 and more than 65% below the age of 35. The average age of Indian is 29 years. The young population is driving the demand of luxury goods. The disposable income of young India is quiet substantial. The standard of living has improved.

Automobiles industry has a huge market to cater for.

Production The automotive industry in India is one of the largest in the world. The industry

produced a total 23,960,940 vehicles including passenger vehicles, commercial vehicles, three wheelers, two wheelers and quadric-cycle in AprilMarch 2016 as against 23,358,047 in April-March 2015, recording a marginal growth of 2.58 percent over the same period last year.

First I would like to extend my warm greeting to the entire faculty member, my fellow SIMSRITES, member of FINSTREET and the FINLY readers. I know three months in a job is very less time to

Sectoral Analysis

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ŸThe automobile industry accounts for

7.1 per cent of the country's gross domestic product (GDP). The Two Wheelers segment, with 81 per cent market share, is the leader of the Indian Automobile market, owing to a growing middle class and a young population.

auto industry to enhance the supply and quality of goods. Foreign Direct Investment (FDI) worth US$ 14.32 billion of investment is made from April 2000 to December 2015, according to Department of Industrial Policy and Promotion (DIPP).

Some of the major investments in the automobile sector in India are as follows: !

Moreover, the growing interest of companies in exploring the rural markets further aided the growth of the sector. Monsoon had been not so kind for last two years but this year it's expected to be more than average.

Rural income will be boosted by good monsoon season which will raise the demand for two wheelers and tractors further benefitting the automobile industry. The overall Passenger Vehicle (PV) segment has 12 per cent market share. With increasing salary of middle class people, this number is likely to increase.

Export India is also a prominent auto exporter and has strong export prospect for the near future. In FY 2014-15, automobile exports grew by 15 per cent over the last year. Several initiatives by the Government of India and the major automobile companies in the Indian market are expected to make India a leader in the Two Wheeler (2W) and Four Wheeler (4W) market in the world by 2020.

Investments Huge investments are taking place in

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M V A g u s ta , t h e p re m i u m motorcycle manufacturer, has entered India through an exclusive partnership with Kinetic group.

Sweden-based electric vehicle maker Clean Motion plans to invest US$ 10 million in India in order to expand operations and setting up of an assembly unit for its Zbee threewheelers in the country.

Honda Motorcycle and Scooter India (HMSI) has opened its fourth and world's largest scooter plant in Gujarat, set up to initially produce 6,00,000 scooters per annum to be scaled up to 1.2 million scooters per annum by mid-2016.

Ford has unveiled its iconic Ford Mustang in India and will make its debut in FY2016 within.

Nissan Motor Co. Ltd is in discussion with Government of India to bring electric and hybrid technologies to India.

The world's largest air bag suppliers Autoliv Inc, Takata Corp, TRW Automotive Inc and Toyoda Gosei Co are planning to set up plants and increase capacity in India.

General Motors has a plan to invest US$ 1 billion in India by 2020, mainly

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Sectoral Analysis

SIMSR

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to increase the capacity at the Talegaon plant in Maharashtra from 1,30,000 units a year to 2,20,000 by 2025. !

Government Initiatives The Government of India encouraged foreign investment and allowed 100% FDI to the automobile sector.

Some of the major initiatives taken by the Government of India are: !

Mr Nitin Gadkari, has announced plans to set up independent D e p a r t m e n t f o r Tr a n s p o r t , comprising of experts from the automobile sector to resolve issues related to fuel technology, motor body specifications, fuel emissions and exports. ! In the Union budget of 2015-16, the Government has announced to provide credit of Rs 8,50,000 crore to farmers which is expected to boost the tractors segment and two wheelers sales. ! The Government is promoting CNG based vehicle, hybrid vehicle, and electric vehicle. It has formulated a Scheme for Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India, under the National Electric Mobility Mission 2020. !

The Automobile Mission Plan (AMP) designed by the government is aimed at accelerating and sustaining growth in this sector. !

Implementation of GST will be a huge plus for auto sector. It will improve the efficiency and reduce the tax cascading. Manufacturing cost will come down and have a positive impact on the sector. !

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reduced the maintenance cost of car or bike and it has improved the sales figures of the auto sector.

Investor Sentiments BSE auto index has shown a bull rally since last six months. Investors are betting big on auto sector Graphs shows S&P BSE Auto index rally from 16,238.30 in Feb 2016 to 21,404.80 in Aug 2016. Few reasons behind the trend are Major players in auto index like Tata Motors, Maruti Suzuki and Bajaj Auto stocks are touching new highs.

Tata Motors's JLR sales have been steadily growing in overseas market.

Maruti Suzuki and Bajaj Auto showed a strong quarterly result.

Anticipation of GST bill to be passed. For passenger cars, the total tax is around 28% which will come down to 18% after implementation of GST. Increasing the profit margin of companies.

Word Of Caution For Investors Low fuel price has provided a cushion but it may not last for long.

Rise in fuel price may affect the auto sector's sales adversely. !

Disruptive technology and rise of electric cars will affect the established petrol and diesel car manufacturers. ! High competition in the market leading to low profit margin will fetch low returns for investors. !

News Buzz

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In line with the Make in India initiatives and owing to India's growth over the years, major French companies will be investing about euro 8 billion in the country in next few years. "Leading French companies will invest some 8 billion euros in Indian market over the few years," French Ambassador to India Alexandre Ziegler, who was on a 3 day visit to India said.

French Cos. 8 billion

to invest euros in India `

In his presentation, the ambassador emphasised that France did not look at India as just a market but as a partner and so it participates strongly in 'Make in India' along with innovation.

China and India held their 8th high-level Financial and Economic Dialogue to st re n gt h e n t ra d e a n d e co n o m i c cooperation, with the two fast-developing hold nations underlining the need of building more solidarity to adopt more responsible macroeconomic policies. Secretary Economic Affairs, Shaktikanta Das accompanied by a delegation of officials from the RBI and Finance Ministry Ministry took part in the annual Dialogue along with the Chinese delegation led by Vice Minister for Finance Shi Yaobin. “India is working hard to unify the domestic market, improve infrastructure, speed up manufacturing sector development, encourage more Foreign Direct Investment (FDI),”

India China

Fnanacial Economic dialogue

Non-banking finance companies (NBFCs) will benefit from RBI's decision to herald 'on tap' universal banking licence regime, Moody's Investors Service said. It cautioned however that more bank licences will be "credit negative for existing banks" as it would increase competition. Reserve Bank of India had said that it will permanently keep open the window for applying for universal bank licences,ending its practice of ` allowing licence applications only during specific periods.“This is credit positive for nonbank finance companies (NBFCs) because it makes it easier for them to meet the requirements for a banking licence," Moody's said in a statement.

On-tap bank

licencing 'credit positive' for NBFCs : Moody's

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FIN Tweets

SIMSR

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Trivia

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Faircent provides a platform for or a virtual marketplace to borrowers and lenders to connect directly with the help of digital internet technology. It empowers customers burdened with heavy interest rates to strike a deal with mutual agreement with the lenders. It empowers customers burdened with heavy interest rates to strike a deal with mutual agreement with the lenders. They allow both auction and reverse auction mechanisms.

Historically, September is the month witnessing the most of the market declines on an average.

The leading indicators like Dow Jones, S&P 500 and NASDAQ have seemed to be performing poorly in this month. The main reason for this can be attributed to the fact that the trading volumes decrease in summers as the investors take time off for vacation and as they return to work, they exit the positions build up by them.

¡The first credit card was developed by American Express in 1951 as a plastic replacement to Diners Club cards. Diner card was used for purchasing items on credit, but it was more of a charge card, meaning the bill amount had to be paid in full by the end of each month. The modern credit cards are mainly used for the sake of convenience, their predecessor cards were used mainly to maintain customer loyalty and service as they were accepted only at the business that issued the card.

Bitcoin- the World's first Decentralized currency, also called as mobile currency or crypto currency was developed in 2009 by Satoshi Nakamoto, an individual whose identity is still unknown. This virtual currency enabled quick online payments without the use of banking mechanisms.

The number of Bitcoin ATMs increased from four in January 2014 to 252 by October that year. Most Bitcoin ATMs, as of October 2014, were located in the United States (76) and Canada (62).

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Finly | August 2016 | Finstreet | SIMSR

We Welcome your valuable Feedback Finstreet, Finance Committee of SIMSR finstreet@somaiya.edu

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