The Financial Bulletin- January 2017 edition

JAN 2017

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THE FINANCIAL BULLETIN | JAN 2017|

FROM THE EDITOR

The Financial Bulletin Money Matters Club IBS, Hyderabad Estd.—2005

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THE FINANCIAL BULLETIN | JAN 2017|

Archit Athani Newsletter Coordinator

Demonetization

FB

By Shaina Arora, IBS Hyderabad INTRODUCTION-

credit, leading to lower bond yields especially in

The process of scrapping of old currency units in

the shorter end of the curve.

order to issue new ones by the government.

REVIEW-

This policy was adopted by the GOVERNMENT of

Since most of the Rural Economy is based on cash,

INDIA on November 8,2016 in order to scrap off

it has impacted the Rural Economy Sectors such as

old currency notes of Rs 500 and Rs 1000.

Real Estate, Construction, Jewelry, high-end retail, White Goods and Travel & tourism which have a

REASONS-

sizeable magnitude of cash transactions are



To tackle black money in the economy.

expected to affect adversely. There will be flow of



To discourage cash system and move towards

more money into the banking system that can push

digitalization.

the economy. In the long term, this move will



improve the situation of Fiscal Deficit of the

To combat inflation.

Country and hence reduce the fiscal deficit. The economy will benefit from the reduction of the black money, which will lead to higher tax

IMPACT-

collection, better business environment, less cor-

1. COUNTERFEIT - more than 80% of the money

ruption &transparency.

circulation in the economy was done by 500 and 1000 rupee notes, these notes were into the market making a fake value and loss of around 12 lakh crore in the Indian economy.

OTHER COUNTRIES DEMONETIZEDNigeria-During the government of Muhammadu

2. SPONSORSHIP – there will be a downfall in the financial helps provided by the leaders in form of

Bihari in 1984, Nigeria introduced new

sponsorships to external and internal terrorism.

currency and banned the old notes

3. POLITICAL - the impact on internal terrorism

Ghana-In 1982, Ghana ditched their 50 cedes

from Naxalite will take a hit as they will not be able

note to tackle tax evasion and empty excess

to

receive

any

amounts

for

stopping

the

development in places like Odisha and Chhattisgarh.

4. BOND MARKETS - Surge in deposits will create more demand for government bonds and other high rated bonds in a situation of indifferent demands for

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THE FINANCIAL BULLETIN | JAN 2017|

liquidity.

Pakistan-From December 2016, Pakistan will phase out the old notes as it will bring in new designs

FB Zimbabwe- used to have $100,000,000,000,000 Note.

Australia-became the first country to release polymer (plastic) notes to stop widespread counterfeiting.

Since the purpose was to replace paper with plastic and only the material changed, it did not have any side-effects on the economy.

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AMAZON GO

FB

By Anika Mehra, IBS Hyderabad The e-tail giant Amazon has again upped its game

don’t have to wait in the long ques; they don’t

with Amazon Go, an app which helps people to just

have to interact with store employees and they can

pick whatever they want and leave- a checkout free

rush in and out in seconds. For the store, it means

grocery store. There are no cashiers, no lines, no

less

fumbling for a credit card. According to the experts

service.

Amazon Go could be the future of retail. There’s one Amazon Go location so far, in Amazon’s hometown

of

Seattle,

and

it’s

a

relatively

conservative amount of space: 1800 square feet holding perishable grocery goods like bread, milk, and cheese, as well as pre-made snacks and fresh meals. All one needs to do to enter the store and start shopping with the app. Or rather, that’s what we will need when Amazon decides to open the store up to civilians. Upon leaving the store, the customer’s Amazon account will be charged for the item(s) he has

with him as he walks out the door.

Currently, the beta version of the app Amazon Go is available with its employees and the public launch date is set for early 2017.

overhead, less staff and better customer

For every good there is bad also. People in general are resistant to change especially if it means they have to learn how to use new system. Efficiency has to come with heavy dose of convenience. US retail stores are currently taking advantage of self-checkout lanes. These lanes enable customers to scan, bag, and work the register for their own purchase. This enables a single cashier to monitor 6, 10, or more checkout lanes at a time which means fewer requirements of cashiers. Self-checkout lanes are an alternative that these stores are turning to in order to improve

efficiency.

Employees are often

cross-trained to

assist with any number of tasks when checkout is slow. The challenge of these self-checkout lanes comes in the form of increased occurrence of theft

It is clearly an indication that Amazon sees a big

i.e. scales that weigh produce at the self-checkout

opportunity in revolutionizing the traditions of main

scanner can be tricked by a crafty customer. Sec-

street commerce. If the experiment works out and is

ondly, RFID tracking is a possible solution, but

widely adopted, it could radically transform the

RFID-blocking bags and

nature of work in retail industry. Amazon has taken

very easy to acquire. Just as with most technolo-

the advantage of various emerging technologies like

gies, the more convenient you make them, the less

computer vision, sensor fusion and deep learning to

secure they become. People are crafty, and they

track the customer’s movements throughout the

will find ways around these

store and which item (s) they take off the shelves as they shop.

This has many upsides for the customer as they

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THE FINANCIAL BULLETIN | JAN 2017|

accessories are

systems.

Amazon’s model is intriguing but whether it becomes the future of retail industry or remains a science fiction is to be seen.

FB

THE CLEVER WAY TO TRADE IN FUTURE

By Juhi Tayal, IBS Hyderabad

Algorithmic trading or algo trading is a method of

Whereas, for LFT (Low-Frequency trading), it will

executing a large order (too large to execute all at

attract more individuals to participate. With much

once) using automated pre-programmed trading

easier technology, many more people will join in.

instructions accounting for a variety of variables

This also means that LFT will eventually change

such as time, price, and volume to send smaller

the market behavior. Definitely but not surely,

slices (child orders) out to the market over time. It

more people like me would like to develop their

splits the trade into multiple orders to reduce

own strategy and do trading thyself giving rise to

visibility and market impact, but the decision to take

more competitions.

the main trade may or may not be automated. The trader on the desk might well use trade execution algorithms to finesse the placement of his trade.

“There is a real interest in moving the process of interpreting news from the humans to the machines. More of our customers are finding ways

Algorithmic trading is widely used by investment

to use new content to make money.” Kiristi

banks, pension funds, mutual funds, hedge funds,

Suutani, Global Business Manager of Algorithmic

and other buy-side (investor-driven) institutional

Trading at Reuters.

traders.

“It is over. The trading that existed down the

centuries has died. We have an electronic market today. It is the present. It is the future.”- Robert Greifeld, NASDAQ CEO. Future predictions reveal that options markets are considered to be fairly easily integrated into algorithmic trading, with about 20% of options volume

expected

to

be

computer

generated.

Moreover, Bond markets are moving toward more access to algorithmic traders.

In a few more years, for HFT (High-frequency trading) , it will be dominated by a few players as with more competitors and the profit being shared, it becomes difficult to pay off the infrastructure and engineer costs. So, the market will converge to the one who got the market share and profit to sustain the cost (similar to that of Bitcoin miner path).

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FB

FED RATE HIKE

By Parul Jindal, IBS HYDERABAD

After many false starts, the fed had finally raised its benchmark rate, called the federal funds rate, by a quarter point. This increase was historic as it came after a gap of seven years and was the beginning of the end of quantitative easing. The era of cheap money was ending as the economy was showing signs of recovery. Among the Fed, roles are maximizing employment and moderating inflation.

The continuous improvement in the labour market data and underutilisation of labour resources has diminished appreciably. The US and global economic growth, core inflation and labour force participation are running well below the levels seen in 2004 and 1994 when two previous rate hikes cycle, kicked off and were dependent on the time, leading to the net capital inflows.

interest rates.

However, such hikes are not always good for emerging markets such as India. It included the weakening of rupee due to dollar outflows, holding RBI back from cutting interest rates as that can further lead to currency outflow. With the rise in crude oil prices, a weak rupee will inflate the import bills which ultimately will have pressure on government’s finances. Already, demonetisation has dampened household spending due to the liquidity crunch. This in turn could hurt firms already sitting on vast unused capacities in consumption linked sectors. An increase in US fed rates will be negative for emerging markets. This is because rate hike will improve the yields on US government bonds as these bonds will now offer a

The Indian economy is “very well cushioned” to

better rate of return than before. This will shift the

absorb the impact of the US Fed rate hike. If at all

global money managers to part their investments

there is an impact, it would be for short term. India is

into US government bonds. The pension funds and

much better placed than most of its peers. First, its

insurance companies which used to invest in

external balances have significantly improved since

Indian venture capital and private equities may

mid-2013, with foreign exchange reserves rising by

now shift their part of capital and even their focus

about $65billion to $353billion as of November,

towards US market. This may lead to shutdowns,

2015 and the current account deficit narrowing.

and lowering of valuations of Indian start-ups in

Second, India is less dependent than several of its

upcoming months. A stronger dollar could

peers on commodity exports, and has thus not been

negatively impact gold prices as well. Hence,

negatively affected by the global rout in commodity

financial planners suggest staying away from the

prices. Third, only a small part of India’s sovereign

yellow metal for the time being. Higher U.S. rates

debt is held by foreigners or is denominated in

and bond yields tend to make emerging market

foreign currency. Fourth, India’s favourable

assets relatively less attractive and push up the

economic growth outlook makes India relatively

dollar, inflating the amount of dollar-denominated

attractive for foreign investors. In the past few

debt held by emerging market borrowers. So a

months, improvement in employment data has given

strong dollar induced winter is coming. Most

strength to the Federal Reserve to go ahead and hike

emerging economy currencies will weaken, as will

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THE FINANCIAL BULLETIN | JAN 2017|

FB the euro and yen. And with higher interest rates in America, investment capital will be encouraged across the Atlantic and away from Asia in the hunt for better returns. That could affect Europe as well. On the upside, the stronger dollar which has followed the rise might be good for European and Asian economies as it means exports to America are cheaper.

Since, we have witnessed improvement in the above mentioned economic indicators. Hence, we can expect slight recovery in the US GDP going ahead. According to FOMC document, the committee sees the media forecast of gross domestic product growing 2.1 percent in 2017, 2 per cent in 2018 and 1.9 per cent in 2019.

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Benami Transactions Act, 2016

FB

By Mudit Agarwal, IBS Hyderabad The word “Benami” is derived from a Hindi word

new act are: The recovery of Benami property is

“Benam” which means “without name”. So any

prohibited in the new act. Properties held benami

property which was bought by an individual not

are liable for confiscation by the Government

under his or her name is termed as “Benami

without the payment of compensation. Establishing

Property”.

as

adjudicating authorities and an Appellate Tribunal

below: Any joint property taken with a family

to deal with or hear the cases filed under benami

member or any other relatives but the consideration

transactions. The benamdars will not find any

of that

escape for any type of bogus transaction and the

Benami

property

is

explained

property has been given by some another

person (fictitious name). When a property is

property

transferred to or held by one person but the

government and Change in the earlier penalty of 1

consideration of that property has been given by

year to 3 years and a rigorous penalty from 1 year

some another person. When a property held by

to 7 years for entering into benami transactions.

someone in a fiduciary capacity.

The fine will be 25 per cent of the fair market

The only reason of people to invest their black

will

then

be

impounded

by

the

value of the benami property.

money in buying Benami property is Tax evasion.

The case which is exempted from the definition of

The real owners of these properties are hard to trace

benami transaction is the one when the property is

due to fake names and identities. The person who

held by a member of a Hindu Undivided Family,

finances the Benami Property is the real owner and

and the property is held for his/her benefit or any

the person on whose name the property is financed/

other

purchased is called “Benamdar”. The Benami

consideration of that transaction has been paid out

property includes assets of any kind whether they are

of the known sources of that family.

movable, immovable, tangible, intangible or any other legal document. It also includes Gold and financial security.

family

member’s

benefit,

and

the

The core aim of the act is to curb black money, to route the unaccounted money into the financial system of the country and to seize benami

These illegal transactions are prohibited in Benami

properties and prosecute / punish those who are

Transactions (Prohibition) Act, 1988 and it is

involved in these transactions. Now the real estate

considered as an offence. Since this law had several

industry is going to face long term impacts due this

loopholes

amended bill.

hence

the

Benami

Transactions

(Prohibition) Amendment bill, 2015 was introduced in Lok Sabha on May 13, 2015 and currently the bill has been passed in both the houses of parliament and has

become an act which came into effect on 1st

November, 2016. The five major amendments in the

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This initiative by Modi can bring some better changes in the country. For example: this will increase the practice (among people) of including the correct name in property transactions. This in turn would bring transparency in residential

FB market. More will be the transparency less will be the risk and hence there will be a boost in residential properties transactions. Further the confidence of lenders will boost up. The stringent laws would also bring down the prices of real estate because such transactions are done by cash rich investors to park their unaccounted wealth in real estate.

As the benami investigations are supposed to begin from January, 2017 so there may be a chance that a lot of land may become available for the government. This outcome can be the input of the housing plan which was proposed by the Union Minister of Urban Development, Housing and Urban Poverty Alleviation, Venkaiah Naidu for the poor people.

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Financial Inclusion

FB

By Harshita Sipani , IBS Hyderabad For a developing economy the participation of the

tend to be burdened with the non-availability of

low-income segments is an important factor to show

money. Therefore, the presence of banking

its growth. India being one such country has resorted

services and products will help to improve their

to increase the participation (the inclusions in the

conditions.

financial services) of the low income groups, the households and the working adults who miss out on Increase in capital formation:

using the financial services rendered by the



institutions.

As the habit of savings moves up, the capital

History:

formation will also improve. Instead of parking

With the findings of financial exclusions, it was found that people still lack access to stable financial services whether in the field of credit or in the case of insurance or in the case of savings. This led to an

their funds in land, building, etc. the low income groups can now save their money in banks which in turn will increase the movement of money in the economy resulting in the rise in capital formation.

increase in corruption, the low income groups being spoiled by the rich and the working adults not getting enough funding to start a business of their

own. Nearly 50% of agricultural loans were given with some kind of leakage or corruption. This



Providing a safe avenue for credit:

The disadvantaged people now no more need to ask for help from the rich or their family members

resulted to a decrease in the growth of the economy.

for the credit. They can now access banks to take

After

analysing this problem, the idea of financial

credit. Banks being a transparent and a safe avenue

inclusion emerged. It gained its importance in the

will save the person from being spoiled. Moreover,

early 2000s.

the availability of micro finance will lead to prosperity in the economy as a whole.

Definition: Methods or schemes introduced: Financial Inclusion is the delivery of financial Khan commission:

services at affordable costs to vast section of



disadvantaged and low income groups.

After the set up in 2004, it improved the initiation

Financial inclusion in India:

of the no-frills account. This account provides basic facilities of withdrawals and deposits to

Reasons for opting this method:

account holders by cutting down extra frills that

Increase in the savings:

are of no use to the lower section of the



Low income groups stays under the threat of finance due to their lack in habit of savings. They 11

THE FINANCIAL BULLETIN | JAN 2017|

community making it easy for the people to utilise the services of banks.

FB Introduction of payment banks: It will target India’s migrant labourers, low-income households and small businesses, offering savings accounts and remittance services with a low transaction cost. It will enable poor citizens who transact only in cash to take their first step into formal banking.

Current scenario: There is an 84% jump in loans against a modest 44% increase in the number of clients suggesting that an average loan per customer is on the rise.

The number of branches and employees have grown at 22% and 35% respectively.

The loan portfolio on 31st march 2016 stood at Rs. 53,233 against Rs. 28,940 a year before.

Bad loans piled up, borrowers refused to pay and banks declined to give loans to MFI’s.

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ONE NATION, ONE LAW

FB

By Abhimanyu Sheth, IBS Hyderabad Is it a right question to ask that in a secular county

leaders

like India which is known for its diversity, why is

controversies of beef, saffronization of school and

there a need of a Uniform Civil Code?

college curriculums and how the Shah Bano

Uniform Civil Code is actually an initiative taken by

have

mostly

remained

silent

on

verdict case will be interpreted.

government to avoid personal laws based on customs

The UCC is currently gathering momentum and

of religious committees and to issue a common set of

this is happening in two phases. The first is the

rules to govern all citizens. These laws cover

action against the triple talaq, dominated by men,

marriage,

is to be retained in which All India Muslim Person-

divorce,

inheritance,

adoption

and

maintenance.

al Law Board

Article 44 of the Directive Principles of State Policy says-

The second issue is the matter of polygamy, which

"State shall endeavor to secure for the citizens a

is where the real interest of Hindutva lies. Some

uniform civil code throughout the territory of India."

people feel that polygamy is a tool through which

It should be noted that when India gained independence, leaders and philosophers thought that the

Uniform Civil Code is implicit for a secular nation.

But it’s been almost 69 years, still the idea hasn’t been implemented.

Historically, UCC has received support from women rights’ groups and right-wing parties and organizations. Interestingly, the past BJP government itself opposed giving women the freedom of choosing their own partners and divorce, rights in fathers and husband property, but now the BJP itself is supporting it,

is an irony. But the Congress track record is not good. An act named Muslim Women (Protection of

Muslim are reproducing faster than Hindu and there will be a time when Muslims will be in majority and will try to threaten India as it did in historical times.

If we talk about Parsis, they ostracize a woman if she marries outside their community, while a man doing the same is not ostracized the same way, although he can no longer reside within a Parsi colony.

So we can say that despite being a “sovereign, socialist, secular, democratic and republic”, India

had allowed various practices under different laws which needs to be reformed.

Rights under Divorce) in 1986 by Rajiv Gandhi that

Thus if we want unity in diversity, the most promi-

even reversed Supreme Court judgment for granting

nent alternative is the change from within. Many

maintenance to divorced Muslim women.

social organizations have begun demanding an end

The government needs to answer two questions. One is that what will the UCC structure be and second is that can it really built up confidence because the 13

THE FINANCIAL BULLETIN | JAN 2017|

to practice of triple talaq. The three-century old Aishbagh Eidgah in Lucknow opened its doors to women to offer prayers for the first time in its

FB history. It was a tiny step towards what could be a new beginning.

Thus it can be concluded that it is important to have a single uniform law acceptable throughout the country as it will execute the true meaning of being secular, and if, implemented would ensure that all the diverse communities of India will follow a single set of law, which will unite us into one nation, will give more rights to women and will reject the “vote bank politics�.

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THE FINANCIAL BULLETIN | JAN 2017|

FB

EURO DEBT CRISIS

By Shreya Bagaria, IBS Hyderabad DEFINITION – A sovereign debt crisis is when a countr y is unable to pay its bills. It usually becomes a crisis when the country's leaders ignore the sign when the country finds that it cannot get a low-interest rate from lenders as the investors become concerned that

community was extended to the members under the Single European Act which aimed at a single European market.

In 1993, November 1 – The Maastricht Treaty was signed

the country cannot afford to pay the bonds, and it

The EC was replaced by the EU and

will default.

The euro was created, which was intended to be

As lenders start to worry, they demand higher and

the single currency for the EU.

higher yields to offset their risk. The higher the

In 1999, January 1 - Denmark and the United

yields, the more it costs the country to refinance its sovereign debt. It cannot afford to keep rolling over debt, and it defaults which happened with Greece, Italy, and Spain, leading to the European debt crisis.

HISTORY -

Kingdom negotiated "opt out" provisions from being permitted to retain their own currencies.

The Eurozone debt crisis was the world's greatest threat in 2011, according to the OECD. The crisis started in 2009, when the world first realized

In 1950 -The EU had its beginning in the European

Greece could default on its debt. In three years,

Coal and Steel Community (ECSC) and had just six

it escalated into the potential for sovereign

members namely, Belgium, France, Germany, Italy,

debt defaults from Portugal, Italy, Ireland, and

Luxembourg and the Netherlands.

Spain. The European Union, led by Germany and

In 1957 - It became the European Economic

France, struggled to support these members.

Community (EEC) under the Treaty of Rome, and

They needed the assistance of third-party financial

subsequently became the European Community

institutions such as the European Central Bank

(EC) which focused on the common agricultural

(ECB), the International Monetary Fund (IMF) and

policy (CAP) and the elimination of customs

the European Financial Stability Facility (EFSF) to

barriers.

bail out or repay their debts.

In 1973 -The EC first expanded when Denmark, Ireland, the United Kingdom, Greece and Spain joined.

In 1979 – European Parliament was created.

In 1986 - The principles of foreign policy cooperation were laid and the powers of the 15

THE FINANCIAL BULLETIN | JAN 2017|

CAUSES:the financial crisis of 2007-2008 the Great Recession of 2008-2012 the real estate market crisis

FB property bubbles in several countries a violation of EU policy SOLUTIONSIn May 2012, German Chancellor Angela Merkel developed a six-point plan. It went against newly-elected French President Francois Hollande's proposal to create Eurobonds. He also wanted to cut back on austerity measures, and create more economic stimulus. Merkel's plan would: 1.Launch quick-start programs to facilitate business start-ups.

2.Relax protections against any wrongful dismissal.

3.Introduce "mini-jobs" with lower taxes.

4.Combine apprenticeship with vocational education targeted toward youth unemployment.

5.Create special funds and tax benefits to privatize state-owned businesses.

6.Establish special economic zones, like those in China.

Invest in renewable energy.

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THE FINANCIAL BULLETIN | JAN 2017|

FB

Block Chain-A disruptive solution to cyber security threat

By Shreeya Rawat, IBS Hyderabad

With the cashless wave around the country comes a

and then approve it, a mathematical programme

detrimental threat of cyber attack which is among those

running in the user’s computer does it all. Alt-

whose destructive strength is often underestimated.

hough a crook can modify the programming run-

People often fail to understand that the related threat is

ning in her computer). So, in order to approve a

not big, it is huge. Our country does not have

false transaction more than half of total user must

sophisticated digital infrastructure and security systems

lie at the same time. For instance, if Paytm (total

to ensure a secure web against the crooks.

users more than 17 crores) was based on block

But as always, at our rescue is a recent disruptive technology called block chain. Block chain is the core idea behind the popular peer-to-peer digital currency

chain then in order to make a fake transaction

more than 8.5 crores users would be required to work on it together and that’s highly unlikely.

called bitcoin. Block chain technology was introduced

by Satoshi Nakamoto (anonymous)

Rigorous software development on

in 2008 in a white paper titled

block chain is being done to enable

“Bitcoin: A Peer-to-Peer Electronic

governments,

Cash System”. Although block chain

entrepreneurs make full use of this

can be used in variety fields from

technology. It is only a matter of

trading to social media, this article

time when we will see much of the

focuses on its use in digital payments.

Block chain is a distributed database of encrypted transactions. The technical terms are demystified as

currency, payment ing, file storage and

organizations

and

infrastructure, tradsocial media be-

ing developed on block chain.

follows:

Current scenario:

A transaction is a payment transfer record. Distributed

The banking transactions have become digital

database means the record of all the transactions done

resulting in the shift of migrant labourers and the

by all users since epoch are distributed to all the users.

low income groups to this new platform.

In simpler terms, all the users will have a list of all the transactions ever done by any user. Since the records are distributed, they are encrypted (modified using

Fall in revenue of banks due to restrictions on deployment of deposits made.

special mathematical operations) so that a user cannot

With the increased competition of opening their

read the data of other users.

networks in rural areas many banks are unable to

Transactions on block chain are consensus based i.e. a

cope with the pressure.

transaction is considered valid if more than half of the

The telecommunication industry may reap the

total users approve the transactions (a user does not

most benefits.

have to manually check if a transactions is valid or not

Many banks are willing to give up their license.

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THE FINANCIAL BULLETIN | JAN 2017|

Payment Banks– A Revolution

FB

By Harshita Sipani, IBS Hyderabad Witnessing the rise in the list of defaulters, the increase in the bad debt of the banks and the fall in the deposits in the bank, the idea of payment banks came to the rescue. It is for the first time RBI is giving

overview. 

Low cost platform to operate on.



To make India’s economy as a cashless economy.

differentiated license to conduct specific banking activities. It is a change in the system of how traditional

Services rendered:

banks used to work. A solution to save the economy of 

the country as well as of the banks.

Banks cannot provide loan but can accept

deposits up to Rs. 1lakh and pay interests like

History:

savings bank account does.

In 2013, a committee headed by Nachiket Mor was



formed by RBI. In 2014, the committee suggested the

Transfer and remittances through mobile phone.

formation of new category of bank named as “Payment 

banks”. Its existence can be thanked to RBI’s ensure

bills, purchases in cashless and cheque

continuous push to that

the

banking

Offering services like automatic payment of less transactions through phone

sector

deliver a comprehensive and easy set



of financial services to the poor and

but no credit cards.

the unbanked.



Definition:



Payment banks are the banks that does not provide any credit facility but focuses only on the deposits. It will be having low value but high volume transactions fo-

Rendering forex services at charges lower than other banks.

List of payment banks:

license. The banks having fair financial capability

Goals:

and wide rural network channels won the race.

To increase the involvement of low income segments in the field of financial activities. 

To ease the pain of doing banking



To reduce the risk of defaults made.



To improve capital generation.



To keep the banking transactions under RBI’s direct THE FINANCIAL BULLETIN | JAN 2017|

Issue of forex traveller cards.

41 banks had applied but only 11 could get their

cusing on the low income groups.

18

Issue of debit cards and ATM cards

transactions.



Aditya Birla Nuvo Ltd



Airtel M Commerce Services Ltd



Cholamandalam Distribution Services Ltd



Department of Posts



Fino PayTech Ltd

FB 

National Securities Depository Ltd



Reliance Industries Ltd

-Dilip Shantilal Shanghvi -Vijay Shekhar Sharma -Tech Mahindra Ltd

-Vodafone m-pesa Ltd Current scenario: The banking transactions have become digital resulting in the shift of migrant labourers and the low income groups to this new platform.

Fall in revenue of banks due to restrictions on deployment of deposits made.

With the increased competition of opening their networks in rural areas many banks are unable to cope with the pressure.

The telecommunication industry may reap the most benefits.

Many banks are willing to give up their license.

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THE FINANCIAL BULLETIN | JAN 2017|

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Competition in the Credit Rating Industries

By Megha Sohane, IBS Hyderabad In the recent financial crisis, credit rating agencies were heavily criticized by investors, politicians, and the general public for not putting a red flag on the arising U.S. housing bubble and the subsequent sub-prime crisis.

The investors were still interested in buying these complex financial products because the rating agencies acted as their agents and provided a credit rating for each of the issued tranches, most of which were rated by multiple agencies and still attested unabated credit quality. In an efficient market environment, a rating agency should fulfill the monitoring function on behalf of the investor base.

We investigate whether the multiple ratings benefit investors and analyze how accurately the rating agencies monitored credit quality throughout the financial crisis.

The study conducted by experts tells us the potential reasons for the existence of multiple credit ratings in the securitization market. Based on the complete rating migration for RMBS transactions, and by avoiding a potential selection bias, we analyze potential incentives to obtain multiple ratings, induced by credit agencies' monitoring behavior following the issuance of securitized assets.

The results hold good news for investors: In a competitive situation of multiple r atings outstanding, we find an empirical evidence that the rating effort of each individual rating agency is increasing, leading to

more information being produced.

Issuers on the other hand, benefit fr om mor e favor able tr ansaction str uctur es and incentives to engage in rating shopping activities, both eventually lowering their refinancing cost.

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THE FINANCIAL BULLETIN | JAN 2017|

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THE FINANCIAL BULLETIN | JAN 2017|