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                                                             Financial Inclusion  

The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”

                                                                                                                                 - Franklin D. Roosevelt

“Poverty is the worst form of violence.”

                                                                   - Mahatma Gandhi

“If the misery of the poor be caused not by the laws of nature, but by our institutions, great is our sin.”

                                                                                                                                         - Charles Darwin

Introduction

The Government of India and the Reserve Bank of India have been making concerted efforts to promote financial inclusion as one of the important national objectives of the country.  Some of the major efforts made in the last five decades include - nationalization of banks, building up of robust branch network of scheduled commercial banks, co-operatives and regional rural banks, introduction of mandated priority sector lending targets, lead bank scheme, formation of self-help groups, permitting BCs/BFs to be appointed by banks to provide door step delivery of banking services, zero balance BSBD accounts, etc. The fundamental objective of all these initiatives is to reach the large sections of the hitherto financially excluded Indian population.

Definition

Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost. Financial Inclusion, broadly defined, refers to universal access to a wide range of financial services at a reasonable cost. These include not only banking products but also other financial services such as insurance and equity products Financial inclusion broadens the resource base of the financial system by developing a culture of savings among large segment of rural population and plays its own role in the process of economic development. Financial inclusion also mitigates the exploitation of vulnerable sections by the  money lenders by facilitating easy access to formal credit.

Current status

• Highest number of households (145 million) excluded from
• banking
• 50% of the population does not have bank account
• Only 34% of the population engaged in formal banking
• Only 17% of population has any credit exposure especially in
• remote villages
• Only 30000 villages have commercial bank branch
• Only 10% have life insurance cover
• Just 9.6% have any non-life insurance

Financial Inclusion – RBI Policy Initiatives

• RBI has adopted a bank-led model for achieving financial inclusion (as eqity and insurance products are not in its domain) and removed all regulatory bottle necks in achieving greater financial inclusion in the country. Further, for achieving the targeted goals, RBI has created conducive regulatory environment and provided institutional support for banks in accelerating their financial inclusion efforts. Important steps being taken by RBI are as under.

1)      Introduction of BC/BF model : Banks were allowed to appoint banking correspondants/ Facilitators to provide banking facilities in unbanked areas.

2)      Boost to micro finance institutions and self help group’s linkage

3)      Basic Saving Bank Deposit (BSBD) accounts with minimum common facilities such as no minimum balance, deposit and withdrawal of cash at bank branch and ATMs, receipt/ credit of money through electronic payment channels, facility of providing ATM card.

4)      Relaxed and simplified KYC norms to facilitate easy opening of bank accounts, especially for small accounts with balances not exceeding Rs. 50,000 and aggregate credits in the accounts not exceeding Rs. one lakh a year.

5)      Simplified Branch Authorization Policy, to address the issue of uneven spread bank branches, domestic SCBs are permitted to freely open branches in Tier 2 to Tier 6 centers with population of less than 1 lakh under general permission.

6)      Compulsory Requirement of Opening Branches in Un-banked Villages, banks are directed to allocate at least 25% of the total number of branches to be opened during the year in un-banked (Tier 5 and Tier 6) rural centers.

7)      Public and private sector banks had been advised to submit board approved three year Financial Inclusion Plan (FIP) starting from April 2010.

8)      FLCs and all the rural branches of scheduled commercial banks should scale up financial literacy efforts through conduct of outdoor Financial Literacy Camps at least once a month, to facilitate financial inclusion.

9)      Licensing of New Banks: The present round of licensing new banks is essentially aimed at giving further fillip to financial inclusion efforts in our country.

10)  Discussion Paper on Banking Structure in India – The Way Forward: One of the main issues relates to “Differentiated Banking Licenses”. The subject of licensing ‘small banks and financial inclusion’ has been discussed therein.

11)  SWABHIMAAN  scheme has been successfully implemented wherein banking facilities were made available in a time bound program for all villages having population more than 2000 in general and 1000 in North east .

Financial Literacy Initiatives

• Financial education, financial inclusion and financial stability are three elements of an integral strategy, as shown in the diagram below. While financial inclusion works from supply side of providing access to various financial services, financial education feeds the demand side by promoting awareness among the people regarding the needs and benefits of financial services offered by banks and other institutions. Going forward, these two strategies promote greater financial stability.

Insurance Penetration in the Country

• The total insurance (life and non-life) penetration, in terms of the ratio of insurance premium as a percentage of GDP increased from 2.32 in 2000-01 to 5.10 in 2010-11. The life insurance penetration as a percentage of GDP stood at 4.40 in 2010-11 while the non-life insurance penetration remained at 0.71 during the same period¹². In other words, there is vast untapped potential as regards insurance penetration.

 Equity Penetration in the Country

• The number of investor accounts accounted for a meagre 1.71% of total population of the country¹³.

 12) Electronic Benefit Transfer (EBT): The EBT scheme being an important and integral part of the overall Financial Inclusion with its attendant benefits, banks should promote EBT systems effectively for boosting their financial inclusion plans.

13) Ultra Small Branches¹⁸:

Ultra Small Branches may be set up between the base branch and BCs to provide support to about 8-10 BC units at a reasonable distance

14)  Technology Applications:

·         In an ICT (information and communication technology) enabled environment, technology is the main lever to achieve the eventual goal of financial inclusion at the earliest.

·         ATM-Network: ATM Network in rural areas accounted for only 10.1% of total ATMs in the country as on March 31, 2013¹⁴. Banks should enhance their ATM network in rural and un-banked areas to serve poor villagers. While doing so, adequate care should be taken regarding safety/ security issues, which have come to the fore in recent times.

·         Rupay Network: To reduce the overall transaction costs associated with small ticket transactions in rural areas, domestic RuPay cards may be utilized¹⁵.

·         KCC/GCCs:To enable farmers to withdraw cash from ATMs anywhere in the country, banks need to convert KCCs/GCCs to electronic credit card. Further, banks may explore the possibility of issuing multipurpose cards which could function as debit cards, KCC and GCC as per the requirements in rural areas.

·         Mobile Banking: In rural India, there are 323.27 million¹⁶ mobile subscribers as on March 2012 (TRAI Annual Report, 2012). To examine the options/ alternatives, including the feasibility of using encrypted SMS based funds transfer using an application that can run on any type of handset for expansion of mobile banking in the country, RBI constituted a committee (Chairman: B. Sambamurthy)

·         Technology Service Providers (TSPs): There are a number of issues involving TSPs via-a-vis several banks.

                                                     Financial literacy

Financial literacy is defined as understanding how to manage money effectively. Financial literacy is the knowledge and skills to make informed decisions regarding money matters. Financial literacy helps an individual fulfill personal, family, social and governmental responsibilities.

What does it mean to be financially literate? It means that you know basic money principles. You understand financial principles such as interest rates, risk and return, credit management, guaranty, banking, insurance, time value of money and taxes.

When we talk about financial literacy, we are usually referring to a set of skills that allow people to manage their money wisely along with some understanding of essential financial concepts, not least an appreciation of the trade-off between risk and return. Financial Literacy is not just about markets and investing, but also savings, budgeting, financial planning, basics of banking and most importantly, about being "Financially Smart". To understand financial planning, a person should be financially literate and be able to understand the importance of preparing household budgets, cash-flow management and asset allocation to meet financial goals. Hence, the foundation of financial literacy needs to be laid by inculcating financial prudence  through  education at the school level.


Financial literacy is paramount in today’s market place. Consumers are confronted with complicated financial choices that may have huge implications for them and their families. For example, people must choose whether to rent or buy a home, whether to lease or buy a car, whether to insure property, health, and life and for how much, whether to save for education and retirement - how much and through which vehicles.

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                                                                         Additional information

Features of business correspondent model

Business Correspondent (BC) Model

Eligibility to become a Business Correspondent :

As per the RBI guidelines, the following entities are eligible for appointment of

Business Correspondents (BCs) for banks:

q  NGOs/ MFIs set up under Societies/ Trust Acts,

q  societies registered under Mutually Aided Cooperative Societies Acts or the

Cooperative Societies Acts of States,

q  Section 25 companies that are stand alone entities or in which NBFCs, banks,

telecom companies and other corporate entities or their holding companies did

not have equity holdings in excess of 10 per cent,

q  post offices ,

q  retired bank employees,

q  ex-servicemen ,

q  retired government employees.

q  Individual kirana/medical/fair price shop owners

q  Individual Public Call Office (PCO) operators

q  Agents of Small Savings Schemes of Government of India/Insurance Companies

Individuals who own petrol pumps

q  Retired teachers

q  Authorised functionaries of well run Self Help Groups (SHGs) linked to banks

Non deposit taking NBFCs (non-banking finance companies) in the nature of

loan companies whose micro finance portfolio is not less than 80 per cent of their

loan outstanding in the financially excluded districts as identified by the

Committee on Financial Inclusion

q  RBI has now permitted banks to engage any individual, including those

operating Common Service Centres (CSCs) as BC, subject to banks’ comfort

level and their carrying out suitable due diligence as also instituting additional

safeguards as may be considered appropriate to minimise the agency risks

Scope of Activities to be undertaken by BCs

The scope of activities undertaken by BCs are as under :

·  Creating awareness about savings and other products and education and advice

on managing money and debt counseling.

·  Identification of potential customers

·  Collection and preliminary processing of various forms for deposits including

verification of primary information / data

·  Filling of applications / account opening forms including nomination clause and

submission to the Bank.

·  KYC will also be completed by the BCs.

·  Opening of no frill deposit accounts and other products as permitted from time to

time by leveraging technology.

·  Collection and payment of small value deposits and withdrawals ; Min : nil; Max :

Rs. 2000/- per transaction.

·  Receipt and delivery of small value remittances / other payment instruments, as

per FI Plan of IDBI Bank.

·  In respect of all such transactions, the BC/his agent will be authorized to accept

/ deliver cash either at his place of work or at any convenient location subject to the

ceilings per customer (Rs 2000/- in each case).

·  Furnishing of mini account statements and other account information, for a

period of 3 months.

·  Any other service on behalf of the Bank, duly authorized by the appropriate

authority.

·  The activities undertaken by the Business Correspondents would be within the

normal course of the Bank’s banking business, but conducted through and by the

entities at places other than the Bank’s premises.

·  In respect of all such transactions, the BC/his/her agent will be authorized to

accept / deliver cash either at his place of work or at any convenient location subject

to the ceilings per day / per customer as laid down. The Business Correspondents

will be linked to a nearby branch (base Branch).

·  Cross-selling of other financial products like insurance / mutual fund products /

pension products / any other third party product, as and when they are assigned to

do so.

·  In case duly appointed sub-agents of BCs, BCs to take care of reputational

risks involved

What is Social Media?

Social Media is the future of communication, a countless array of internet based tools and platforms that increase and enhance the sharing of information. This new form of media makes the transfer of text, photos, audio, video, and information in general increasingly fluid among internet users. Social Media has relevance not only for regular internet users, but business as well.
Platforms like twitter, Facebook, and Linkedin have created online communities where people can share as much or as little personal information as they desire with other members. The result is an enormous amount of information that can be easily shared, searched, promoted, disputed, and created.
 The key question now being addressed by an ever growing number of social media “experts” is how to best utilize the unlimited amount of information available from social media sites for business advertising, social good, and who knows what else. One thing is for certain; personal data from social media usage will continue to be tracked and logged for the benefit of any business willing to pay for it, and any company that doesn’t invest in social media now will be playing catch-up in the near future.
 Classification of social media

1. collaborative projects (for example, Wikipedia)
2. blogs and microblogs (for example, Twitter)
3. Social news networking sites (for example, Digg and Leakernet)
4. content communities (for example, YouTube and DailyMotion)
5. social networking sites (for example, Facebook)
6. virtual game-worlds (e.g., World of Warcraft)
7. virtual social worlds (e.g. Second Life)

 

Impact of social media

Social media has changed the world as we know it. Since the dawn of the first internet service in 1969, the power of the internet has grown into what we now call the Social Media Age. The magic of social media has changed the way the world has developed. Since the first email in 1971 to the first bulletin board sites developed on major Universities nation wide, social media has far surpassed expectations all over the globe. The power of social media is so widespread that more controlled nations hold tight constraints on its use. Nations like China and Iran ban certain sites and have massive control over the use of other methods of social networking.. When Mark Zuckerberg developed Facebook in 2004, he had no idea it would go beyond the walls of Harvard where the site was used strictly for networking within the university. In 10 short years, it has completely powered over all of its possible competitors and is used by corporations worldwide. The general thought is social media is a mandatory need in day-to-day business operations. Some consumers refuse to patronize businesses without a social media presence. 

After ‘tech savvy’ it is the ‘social media savvy’ that has become synonymous with today’s generation. About 2/3rd of Indians online spend time on different social networking sites like Facebook, Twitter, YouTube, Pinterest, etc. Even the trend of sending personal emails seems to have become obsolete as compared to social media. But why is this media becoming so popular in India? Interaction, live chat, status updates, image- as well as video-sharing are few of the major aspects that play a role in the popularity of social media. On the other hand, customer’s responses, interaction and brand awareness is why the companies are using social media in India and across the globe. Thereby, multiple roles played by social media beyond its core role of mere communicating information are leading to its popularity.
Some say that social networking has brought better understanding of other cultures and is in some ways the cause of social understanding for everything from human suffering in lower developed societies to the social change we see today. Today the power of social media has been used in both positive and negative ways. We have all heard the horror stories of teens being harassed in school spilling over into their personal life online. But the positive opportunities have far outweighed the negative. Through sites like Facebook and Twitter, families have been reunited and lives have been saved. Utilizing page creation through Facebook, people have developed sites for those who wish to become organ donors.
Many researchers have indicated that social media would be stronger and more persuasive than television in influencing people.

"The social Web and social media have essentially become weapons of mass persuasion. You have large numbers of people interacting with each other, so you see not only spam but political campaigns involved in this. You see evidence of governments and hate groups engaging in this."

But one of the best things about social media is the way it can unite people behind causes and be a force for good. Its immediacy and accessibility has allowed it to contribute to everything from the Arab Spring to animal conservation.

Urban India had 78 million social media users in June 2013. The number rose to 91 million by December 2013, indicating the growing importance of social media.

The Role of Social Media
Indian Politics and Social Media
Social media is not only confined to you and me but to politicians as well. Through different activities politics and politicians in India have brought social media into the limelight.  social media has played  a huge role and influence  on the  recent general elections to a great extent.

In the sweeping victory of the Bharatiya Janata Party (BJP) in the recent Indian elections , social media played an important role, according to analysts who are calling the vote India’s first "social media elections."

By the time he was sworn in as prime minister, Narendra Modi had more than 16 million "likes" on Facebook, the second most for any politician in the world, and he was the sixth most followed world leader on Twitter

In a program called "organize online to assist offline," the BJP used the reach of social media to recruit volunteers, eventually enlisting 2.2 million.

All the recent lectures by Gujarat chief minister Narendra Modi got huge social media attention. He even hosted a political conference on Google+ hangouts and this makes him the third politician across the globe to do this after Obama and Australian PM Julia Gillard.
Shashi Tharoor is very active on Twitter and his tweets are quoted in mainstream media.
Few months back, you must have seen a page on Facebook seeking Dr. Abdul Kalam as president of India.
Then there was Anna Hazare’s Social Media Campaign against corruption in India.
. Social Media and Business
Role of social media in business and consumer market in India cannot be undermined. It is the change in consumers’ behavior that is changing the role of social media in India. With time, use of social media has seen a drastic change from just used for fun to fun plus knowledge and marketing. For business purposes, Facebook is the most important social media platform as there is customers’ engagement, followed by Twitter, YouTube and blogging. Social media is used by brands to build communities for interaction and spreading news.
A recent McKinsey study concludes that social technologies could potentially contribute $900 billion to $1.3 trillion in annual value to business.

So not only individuals but every organization, be it big or small, has an online presence on Facebook, Twitter, Pinterest, YouTube channels and other related social media platforms. 95.7% of organizations in India use social media to build communities, 76.1% for highlighting brand news, platform specific parameters such as number of likes, share, comments, people taking about the company are considered by 81% of the organizations to measure their success. As far as the budget is concerned, most of the organizations set budget below INR 10 million on their social media spending that makes 1-5% of their total marketing budget. Social media interaction provides useful information about the behavior of the customers to the organization on regular basis.
Social Media and Recruitment in India
Social media and recruitment go hand in hand with social media becoming an integral part of recruiting firms. These firms are using LinkedIn, Facebook and Twitter to find new employees and skills. So, gone are the days when for employment recruiters as well as employees used to rely on employment exchange and classified ads in the newspaper. Hiring through traditional media was based on gut feeling whereas through social media, it is based on interaction, communication and direct response. Most of the organizations have well planned strategies for talent acquisition through social media.
Social Media and IPL
Social media is also playing an active role in the Indian Premier League (IPL) by providing up to date and live information on sites like Facebook, Twitter, Google+ and Youtube. Teams are in constant touch with their fans through social media and there is  great interaction. For IPL sponsors and brands, such an interaction and reach of social media is a boon. Thus there is no way to ignore social media for business and entertainment purposes.

 

FIRST BIMONTHLY  MONETARY POLICY REVIEW DATED 1^ST APRIL 2014

HIGHLIGHTS

• No change in policy rates and reserve ratio – Repo rate – 8% -Reverse repo 7% Bank rate and MSF 9%  CRR  4%  SLR  23%.
•  Break up of  REPO eligibility changed 

                                                                 Overnight repo    7/14 days term repo   total under LAF

                                             Before              .50 %                     .50%                        1% of  total deposits

                                             After                 .25                         .75                            SAME .

• Retail inflation measured by the consumer price index (CPI) moderated for the third month in succession in February 2014, driven lower by the sharp disinflation in food prices, although prices of fruits, milk and products have started to firm up. Excluding food and fuel, however, retail inflation remained sticky at around 8 per cent. This suggests that some demand pressures are still at play.
• If inflation continues along the intended glide path, further policy tightening in the near term is not anticipated at this juncture.
• In pursuance of the Dr. Urjit R. Patel Committee’s recommendation to de-emphasise overnight “guaranteed-access” windows for liquidity management and progressively conduct liquidity management through term repos, the Reserve Bank has decided to further reduce access to overnight repos under the LAF while compensating fully with a commensurate expansion of the market’s access to term repos from the Reserve Bank. The primary objective is to improve the transmission of policy impulses across the interest rate spectrum. 
• GDP growth is projected to pick up from a little below 5 per cent in 2013-14 to a range of 5 to 6 per cent in 2014-15 albeit with downside risks to the central estimate of 5.5 per cent.

Some of the recommendations of the Expert Committee to Revise and Strengthen the Monetary Policy Framework (Chairman: Dr. Urjit R. Patel) have been implemented, as mentioned below.

1)     adoption of the new CPI (combined) as the key measure of inflation,

2)     transition to a bi-monthly monetary policy cycle.

3)     progressive reduction in access to overnight liquidity under the LAF at the fixed repo rate and corresponding increase in access to liquidity through term repos, and introduction of longer tenor term repos.

Following industry-wide concerns about asset quality and the consequential impact on the performance/profitability of banks, the Reserve Bank has extended the transitional period for full implementation of Basel III Capital Regulations in India up to March 31, 2019, instead of as on March 31, 2018. This will also align full implementation of Basel III in India closer to the internationally agreed date of January 1, 2019.

Banks should also not take undue advantage of customer difficulty or inattention. Instead of levying penal charges for non-maintenance of minimum balance in ordinary savings bank accounts, banks should limit services available on such accounts to those available to Basic Savings Bank Deposit Accounts and restore the services when the balances improve to the minimum required level. Banks should not levy penal charges for non-maintenance of minimum balances in any inoperative account

SECOND  BIMONTHLY  MONETARY POLICY REVIEW DATED 3^rd June 2014

• No change in Policy rates and CRR -- REPO -8% Reverse REPO -7 % Bank rate and MSF 9%  CRR -4%
• SLR to be reduced by 50 basis point from 23 to 22.5% wer 14^th June 2014 .
• reduce the liquidity provided under the export credit refinance (ECR) facility from 50 per cent of eligible export credit outstanding to 32 per cent with immediate effect; ( As recommended by Dr. Urjit Patel committee’s recommendations)
• introduce a special term repo facility of 0.25 per cent of NDTL to compensate fully for the reduction in access to liquidity under the ECR with immediate effect; and
• continue to provide liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system.
• For the year 2013-14 as a whole, India’s current account deficit (CAD) narrowed sharply to 1.7 per cent of GDP, primarily on account of a decline in gold imports, although other non-oil imports also contracted with the weakening of domestic demand, and there was some pick-up in exports.
• The Reserve Bank remains committed to keeping the economy on a disinflationary course, taking CPI inflation to 8 per cent by January 2015 and 6 per cent by January 2016. If the economy stays on this course, further policy tightening will not be warranted. On the other hand, if disinflation, adjusting for base effects, is faster than currently anticipated, it will provide headroom for an easing of the policy stance.
• As the economy recovers, investment demand and the need for credit will pick up. To the extent that this contributes eventually to supply, it is important that banks have the room to finance it. A reduction in the required SLR will give banks more freedom to expand credit to the non-Government sector. However, the Reserve Bank is also cognisant of the significant on-going financing needs of the Government. Therefore, the SLR is reduced by 0.50 per cent of NDTL, with any further change dependent on the likely path of fiscal consolidation.
• In view of the recent stability in the foreign exchange market, it has been decided to enhance the eligible limit for foreign exchange remittances under the Liberalised Remittance Scheme from US$ 75,000 to US$ 125,000 without end use restrictions except for prohibited foreign exchange transactions such as margin trading, lottery and the like.
• At present, only Indian residents are allowed to take Indian currency notes up to `10,000 out of the country. Non-residents visiting India are not permitted to take out any Indian currency notes while leaving the country. With a view to facilitating travel requirements of non-residents visiting India, it has been decided to allow all residents and non-residents except citizens of Pakistan and Bangladesh to take out Indian currency notes up to `25,000 while leaving the country

What is window dressing

A strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings.

Window dressing may make a fund appear more attractive, but you can't hide poor performance for long.

Window dressing in banks

Before sliding into bankruptcy in 2008, Lehman Brothers Holdings Inc. reduced its reported quarter-end borrowing by classifying repo loans as sales,

Financial institutions have become sensitive about showing high levels of risk on their books, as the financial crisis has led investors and regulators to focus on some firms' levels of borrowing and risk-taking.

Three big banks Bank of America Corp., Deutsche Bank AG and Citigroup Inc are among the most active at temporarily shedding debt just before reporting their finances to the public, a Wall Street Journal analysis shows.

Over the past 10 quarters, the three banks have lowered their net borrowings in the "repurchase," or repo, market by an average of 41% at the ends of the quarters, compared with their average net repo borrowings for the entire quarter, according to an analysis of Federal Reserve data. Once a new quarter begins, they boost those levels.

Raghuram Rajan warns state-run banks against year-end window-dressing

The practice of "window dressing" by state-run banks towards the end of every financial year to meet performance objectives came in for sharp criticism from Governor Raghuram Rajan on Tuesday, who said the Reserve Bank will not "bail out" lenders for their bad policies in future.

What happens towards the end of the year is banks are trying to build a certain kind of balance sheet for a variety of reasons," he said, adding that some lenders reduce their risk-weighted assets to lower their capital requirements, while some state-run banks increase their assets in order to meet performance targets set by the government.

 

What is corporate

Corporate means Pertaining to corporations. Corporations are the most common form of business organization, having  many legal rights as an entity separate from its owners. This form of business is characterized by the limited liability of its owners. The process of becoming a corporation, called incorporation, gives the company separate legal standing from its owners and protects those owners from being personally liable in the event that the company is sued (a condition known as limited liability). Incorporation also provides companies with a more flexible way to manage their ownership structure. In addition, there are different tax implications for corporations, although these can be both advantageous and disadvantageous. In these respects, corporations differ from sole proprietorships and limited partnership.

The Difference Between a Corporation & a Company

 A company is any entity that engages in business and can be a proprietorship, partnership, Limited Liability company or corporation.

A sole proprietorship is a business comprised of one individual and is not considered a formal organization. Legally, this type of business does not exist separately from its owner. The sole proprietor pays taxes on revenue from the business under his or her own name and is solely responsible for the financial operations of the company, including the payment of business debts. If the business is sued, the owner's personal resources will be at risk. 

A general partnership is similar in structure to a sole proprietorship except that this structure involves two or more people. Each partner pays his or her own taxes separately, using his own social security or tax ID number, but the company does not exist as a separate entity. Therefore, the financial resources of the business partners could be at risk in the event of a lawsuit.

A limited liability company is neither a partnership nor a corporation, but it has some characteristics of both. The owners are able to participate in business decisions, as in a partnership, but an LLC offers some protection of the individual assets of its owners. The flexibility of the LLC has made it a popular choice among business owners.

A corporation is a business entity that legally exists separately from its owner(s). The owners of a corporation are shareholders; their percentage of ownership in the business is represented by their corporate stocks or shares. Shareholders can choose a board of directors to manage business operations, or they can create a shareholders' agreement, which will allow them to manage the business directly.

Generally speaking  corporate means a big  company ,  catering to a wider range of  stakeholders in a country or society. A corporation is a type of company, but all companies can not use the word corporation. There are certain rules on the basis of which companies are given corporation status. Mostly public limited (Government owned) companies are formed as corporations .           

Why Public sector banks are not governed by  Companies Act  or  Why they are not treated as companies.

public sector banks are corporations established under the Act of Parliament;(Nationalisation act) they are not companies. And company law is not applicable to them. The entire provisions relating to shareholding, rights of shareholders, voting rights of shareholders, rights of the central government to constitute the board of directors everything is provided by the Bank Nationalisation Act .

What is Governance?

3. What exactly is Governance? Governance, in general terms, means the process of decision making and the process by which decisions are implemented (or not implemented)², involving multiple actors. Good governance is one which is accountable, transparent, responsive, equitable and inclusive, effective and efficient, participatory and which is consensus oriented and which follows the rule of law.

What is Corporate Governance

Corporate governance refers to the set of systems, principles and processes by which a company is governed. They provide the guidelines as to how the company can be directed or controlled such that it can fulfil its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term. Stakeholders in this case would include everyone ranging from the board of directors, management, shareholders to customers, employees and society. The management of the company hence assumes the role of a trustee for all the others.

What are the principles underlying corporate governance?

Corporate governance is based on principles such as conducting the business with all integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions, complying with all the laws of the land, accountability and responsibility towards the stakeholders and commitment to conducting business in an ethical manner. Another point which is highlighted in the SEBI report on corporate governance is the need for those in control to be able to distinguish between what are personal and corporate funds while managing a company.

Why is it important?

Fundamentally, there is a level of confidence that is associated with a company that is known to have good corporate governance. The presence of an active group of independent directors on the board contributes a great deal towards ensuring confidence in the market. Corporate governance is known to be one of the criteria that foreign institutional investors are increasingly depending on when deciding on which companies to invest in. It is also known to have a positive influence on the share price of the company. Having a clean image on the corporate governance front could also make it easier for companies to source capital at more reasonable costs. Unfortunately, corporate governance often becomes the centre of discussion only after the exposure of a large scam.

Why are independent directors important for good corporate governance?

Independent directors are the trustees of good corporate governance. An active and involved board consisting of professional and truly independent directors plays an important role in creating trust between a company and its investors, and is the best guarantor of good corporate governance. Increasingly, institutional investors, both in India and internationally, are closely scrutinising the corporate governance practices and the quality of boards before taking investment decisions. As Indian companies look towards accessing funds from foreign institutional investors and tapping global financial markets, the credentials of their independent directors will become important.

Finally, competent and qualified independent directors play an important role in the stewardship and strategy formulation of companies. Indian corporates that have appointed such directors to their Board have benefited immensely from their guidance and inputs.

Corporate Governance in Banks

While good governance is essential for any entity, it has deeper significance for financial institutions. There are many compelling reasons, some of which are:

a.       Financial institutions are central to economic activity – banks and a large part of the non-banking financial system (the shadow banking system) undertake credit intermediation. Failures of financial institutions would thus impede the economic growth and would cause serious damage to the system. Economies take longer time to rebound from financial crisis than the business cycle recessions.

b.       Financial institutions operate on a higher leverage. Higher leverage makes financial intermediaries more vulnerable to shocks. it is apparent that these financial institutions must be well governed for achieving financial stability.

c.     Financial institutions, especially banks, deal in people’s savings and trust of customers forms the cornerstone of their existence. Good governance ensures customers’ and other stakeholders’ trust in banks and non-banking financial intermediaries.

d.     Among the financial intermediaries, banks occupy a special place due to their centrality in the transmission of monetary policy and the functioning of the payment and settlement systems. Good corporate governance would ensure strong internal controls.

The whole area of corporate governance could be considered as a mix of various segments⁴ namely, regulatory governance, market governance, stake holder governance and internal governance.  Regulatory governance refers to control exercised by regulators over firms through statutes, policies and regulations. Market governance denotes the use of market based controls which discipline the corporate behaviour. While stakeholder governance means  the direct or indirect control by various stakeholder groups having direct or indirect interest in the corporations, internal governance refers to the institutional arrangement of checks and balances within the corporation.

Banking regulation in India shifted from prescriptive mode to prudential mode in 1990s, which implied a shift in balance away from regulation and towards corporate governance. Banks are accorded greater freedom and flexibility to draw up their own business plans and implementation strategies consistent with their comparative advantage. This freedom necessitated tighter governance standards requiring bank boards to assume the primary responsibility and the directors to be more knowledgeable and aware and also exercise informed judgement on various strategies and policy choices. With a view to strengthen corporate governance, over a period of time, various guidelines have been issued in matters relating to the role to be played by the Board, fit and proper criteria for the directors of banks, bifurcation of the post of Chairman and Managing Director (CMD), remuneration etc.

To ensure that ownership and control of banks are well diversified, guidelines on ownership and governance in private sector banks were issued by the Reserve Bank in February 2005. Another important regulatory prescription in this regard is the requirement of Reserve Bank’s prior approval for any acquisition of shares in private sector banks resulting in a shareholding of 5 per cent or more of the total paid up capital of the bank.

The importance of diversified ownership is also underlined in the recent guidelines on new bank licenses wherein it is stipulated that Non-Operative Financial Holding Companies (NOFHC) which set up new banks should, after the initial lock in period of five years, bring down their equity capital of the bank from the minimum 40% while setting up to 15% within 12 years. To ensure ‘Fit and Proper’ status of the groups that would set up new banks, it is also stipulated that entities / groups should have a past record of sound credentials and integrity, be financially sound with a successful track record of 10 years.

Governance, like regulation, is an evolving concept and is continuously fine tuned to suit the dynamic economic and business environment. Global financial crisis has given us an opportunity for strengthening both the regulatory as well as governance frameworks, by highlighting gaps that made the crisis worse. There is an interesting debate over whether and how much regulation can substitute board level governance. While regulation is imposed from outside, corporate governance is internal and is more in the nature of self regulation which ensures that the principles and rules laid down by the regulations are scrupulously adhered to. Prior to the crisis, the emphasis was increasingly on self regulation through robust corporate governance so that the regulation could remain largely principle based and less prescriptive. However, serious lapses observed in governance framework during the crisis, tilted the balance in favour of more rigorous regulation. I am of the view that both regulation and corporate governance have to complement each other. Effective regulation furthers corporate governance and effective corporate governance ensures that the objectives of the regulation are met, with minimal regulatory intervention.

RBI suggests Public sector banks governance reforms to Finance ministry (1^st April 2014)

The Reserve Bank of India (RBI) has recommended the Centre reduce its holdings in public sector banks. This, it says, is essential for robust corporate governance practices, considering these lenders’ deteriorating asset quality and rating downgrades.

The recommendation is part of a detailed blueprint for sweeping reforms in public sector banks, prepared by the central bank. The recommendations are being discussed with the finance ministry and will be taken up with the next government on a priority basis.

Stressing the importance of granting complete autonomy in the day-to-day operations of public sector banks so that these could effectively compete with their private sector peers, RBI said such autonomy was contingent upon the government reducing its stake, especially at a time when the Centre was resorting to borrowing for capital infusion in these banks.

REFORM AREAS

Governance issue: Splitting chairman & managing directors’ post Corporate governance: RBI & govt to dissociate from selection of top management Public sector bank board: RBI & govt should withdraw from boards Auditors: CA director should not be a part of management committee Fixed period: Chief executives should be given 5-year terms Remuneration: Market-based remuneration, accompanied with stringer accountability, including clawback clauses Incentive structure: Incentives/bonuses should be paid over few years and not immediately HR issues: Need to reassess number of EDs/general managers in each bank HR appraisal policy: Performance linked remuneration Holding company: To begin with, such structure could be experimented with slammer PSBs

P J  Nayak Committee on  Governance of Boards of Banks in India (Governance reforms) Report submitted on 12th may 2014

The Committee to Review Governance of Boards of Banks in India (P.J. Nayak Committee) submitted a report recently. Its terms encompass all categories of banks and if its recommendations are implemented, it would fundamentally change the face of state owned banks, while making incremental changes in the governance of private banks.

The present composition of the boards of public sector banks (PSB) could theoretically be termed as a model in corporate governance. The boards represent diversity (except on gender) and multiple public interests. A typical PSB bank has three directors representing minority (non-government) shareholders' interests; three directors who are expected to represent societal interests; a director each representing the union government, workmen, officers, and regulator (RBI). In addition an independent chartered accountant is appointed as a director and the person usually heads the audit committee. The bank also has three or four whole-time directors including the Chairman and Managing Director (CMD).

While the above composition looks good, there is still a huge problem. This problem is about the process of identifying individuals to represent these diverse interests. The Nayak committee rightly identifies it. It terms the boards as "non-independent" except for the shareholder directors. The process of the election of even these so called "independent" directors may also show that they are largely nominees of the government, albeit through a different process. They are elected by shareholders excluding the government. The non-government share-holding in many of the banks are substantially held by institutions indirectly controlled by the government - insurance companies, financial institutions etc. These institutions largely select the "independent" directors as well.  We thus have a situation where the public sector banks end up not having a semblance of good corporate governance.

Following are the key commendations of the panel:

*Given poor asset quality and low productivity, either privatize PSU banks or transform governance structure to make them efficient.

*Reduce government stake in PSU banks to less than 50 percent

*Remove dual structure of both Finance Ministry and RBI regulating PSU banks. Give all regulatory authority to RBI

*Improve quality of PSU bank board discussions; focus on key areas like business strategy, financial reports, risk, and compliance.

*The government should transfer its stake in PSU banks to a holding company termed Bank Investment Company

 *Government should reduce its stake in BIC to under 50 percent and appoint a professional management for BIC

*For better accountability, BIC should be governed by The Companies Act 2013, and not the Bank Nationalisation Acts of 1970 and 1980

*Ownership functions to be transferred by BIC to the bank boards. Appointments of directors, CEO to be the responsibility of bank boards.

*Have uniform bank licensing regime across all broad-based banks, and niche licenses for banks with more narrowly defined businesses

*Allow mutual funds , pension funds, PE funds to hold 20 percent in private sector banks, without having to take RBI approval

*Allow promoter investors to hold up to 25 percent in private sector banks, against the 15 percent ceiling currently

*Ensure a minimum five-year tenure for bank Chairman and a minimum three year tenure for Executive Directors

*Private equity funds, including sovereign wealth funds, be permitted to take a controlling stake of upto      40 per cent in distressed banks

*Allow voting rights in proportion to the stake held

*Bank officers guilty of ever-greening loans (offering new loans to repay old ones) should be penalized financially

Criticism of PJ Nayak committee’s recommendations

• It is too theoretical and biased against public sector banks. Its timing of submission (just a few days before the elections results ) and its open endorsement by RBI governor has not gone down well with its stakeholders.
• It completely overlooks the contribution of bank’s nationalization act and PSBs in the equitable and inclusive growth of  India, post independence. It is based on pure commercial considerations disregarding  society as a  stakeholder in banking services.
• The private bank model  is pro-urban, pro-educated and pro- elite class and was good enough to create a competitive alertness in PSBs, but beyond this it is not suitable to Indian requirements.
• Private banks follow no ethics, rules or precautions to get the  business growth and their operations are more prone to frauds. These banks take more than prudent risks in their investments and policies. It can be seen by comparing impact of recession 2008-09 on public and private sector banks. 
• Financial inclusion will take a big hit , if PSBs are run like private banks.

CAPITAL FUNDING OF BANKS THROUGH CREATING A HOLDING COMPANY.

This week the Banking Secretary said the government cannot give PSU banks too much money from the Budget, instead the government wants to transfer its shares in PSU banks to a holding company and raise money through that company to capitalise public lenders. A holding company idea has been in the works even before the PJ Nayak committee made the same recommendation but with a vastly different purpose, not to raise money but to put some distance between government as shareholder and the bank boards.

PSU banks need around Rs 2.4 lakh crore on a five-year estimate. The Vote on Account (Temporary Budget 2014-14) has set aside only Rs 11,000 crore, which is clearly inadequate. “Proper capital planning itself demands that they (PSU banks) at least need to raise about  Rs. 30000 crore  alone this year.

A  holding company cannot be constituted under the Companies Act as public sector banks are corporations established under the Act of Parliament and are not companies. They need a separate Act with powers which will be more in sync with the Bank Nationalisation Act. We do have a five-year estimate which is closer to about USD 40 billion or Rs 240,000 crores kind of an amount which is required. It is difficult to put in an estimate only for a year because the Basel 3 regulations become more demanding  towards the later years of implementation. So nearly 70 to 80 percent of this Rs 240,000 crores will be required in the last three years of implementation

What is a holding company  

A holding company is a type of investment company that owns other assets and investments.  A holding company itself doesn’t do anything.  It owns things.e.g., Bank of America is actually a bank holding company, owning control of the stock of other private companies including the eponymous bank, insurance businesses, asset management companies, securities underwriters, and more.  That is, when you buy shares of Bank of America on the New York Stock Exchange, the company you are buying doesn’t do anything itself.  It is merely a conduit through which it controls and owns the stock of underlying businesses.

How holding company can work for banks  

The Holding company model for holding of  banks shares had come up many times in the past as well. But the purpose of  Finance ministry is not intended to loose or lessen the control over banks but to solve the problem of raising more capital for banks without stressing government’s regular budget.

A holding company structure will give banks better access to capital ,While the government may hold more than a 51 percent stake in the holding company, there is scope for cutting the holding company’s stake in the banks below 51 percent to raise capital from the market.”

PROBLEMS OF NPA IN BANKS                         

The Indian banking sector accounts for a major portion of financial intermediation and is considered to be the main channel of monetary policy transmission, credit delivery and payment systems. The stability and sound health of the banking system hence is a key pre-requisite for overall economic development and financial stability.

NPAs affect the operational efficiency, which in turn affects profitability, liquidity and solvency position of banks (Michael, et al, 2006). The consequences of NPAs would be reduction in interest income, high level of provisioning, stress on profitability, gradual decline in ability to meet steady increase in cost, increased pressure on net interest margin (NIM) thereby reducing competitiveness, steady erosion of capital resources and increased difficulty in augmenting capital resources .

NPAs generate a vicious cycle of effects on the sustainability and growth of the banking system, and if not managed properly could lead to bank failures. Empirical evidence indicates a relationship between bank failures and higher NPAs worldwide.

The problem of NPAs is related to several internal and external factors confronting the borrowers. The internal factors are diversion of funds for expansion, diversification and modernisation, taking up new projects, helping/ promoting associate concerns, time/cost overruns during the project implementation stage, business (product, marketing, etc.) failure, inefficient management, strained labour relations, inappropriate technology/technical problems, product obsolescence, etc., while external factors are recession, non-payment in other countries, inputs/power shortage, High interest rates, price escalation, accidents and natural calamities. The neglect of proper credit appraisal, lack of follow-up and supervision, recessional pressures in economy, change in government policies, infrastructural bottlenecks, and diversion of funds are the major causes of NPAs.

• credit boom in the pre-crisis period, partly driving the asset quality impairment
• Growth slowdown adding to the stress on asset quality
• Hardening of lending rates contribute partially to growing NPAs
• Non-priority sector contributes substantially to weakening asset quality
• Growing share of agriculture in total NPAs -- Interestingly, share of agriculture (average) in total NPAs remains lower than that of SSIs and other priority sectors. Nevertheless, the share of agriculture and other priority sectors in aggregate NPAs increased, while that of SSIs declined during the post-crisis period.
• Personal loans account for the bulk of retail NPAs
• Infrastructure and power witness escalation in asset quality impairment
• Public sector banks and foreign banks mainly contribute to recent acceleration in NPAs
• Inadequate appraisal and lax monitoring resulting in asset quality impairment

STATUS OF NPA/STRESSED ASSETS IN BANKS

SCB –scheduled commercial banks  GNPA Gross NPA  PSB Public sector banks

OPB  Old Private banks  NPB New Private banks  FB Foreign Banks

Asset quality continues to be a major concern for SCBs. The GNPA ratio of SCBs increased to 4.2 per cent as at end September 2013 from 3.4 per cent of March 2013. The restructured standard advances also increased to 6.0 per cent of total advances as at end September 2013 from 5.8 per cent of March 2013. Overall the stressed advances¹⁹ rose significantly to 10.2 per cent of total advances as at end September 2013 from 9.2 per cent of March 2013 (Chart 2.13).
 Among the bank-groups, the public sector banks continue to have distinctly higher stressed advances at 12.3 per cent of total advances, of which restructured standard advances were around 7.4 per cent (Chart 2.13).

RBI ACTION PLAN ON NPA Management

The Reserve Bank of India, has come out with  a corrective action plan to minimise rising non-performing assets (NPAs). The plan would include incentivising early identification of problem cases, timely restructuring of accounts, which are considered to be viable, and taking prompt steps by banks for recovery or sale of unviable accounts.

RBI would set up a Central Repository of Information on Large Credits (CRILC) to collect, store, and disseminate credit data to lenders.Banks will have to furnish credit information to CRILC on all their borrowers having aggregate fund-based and non-fund based exposure of Rs.5 crore and above.

The RBI said that before a loan account turns into an NPA, banks should identify initial stress in the account by creating a new sub-asset category, ‘Special Mention Accounts’ (SMA). Within the SMA category, there should be three sub-categories: SMA-NF non-financial (NF) signals of incipient stress; SMA-1 principal or interest payment overdue between 31-60 days; SMA-2 principal or interest payment overdue between 61-90 days.

A joint lenders forum JLF would be formed for all distressed corporate borrowers with joint xposure form more than one banks.

A Countercyclical dynamic provisioning is proposed to withstand frequent upturn and downturn of  economic cycle.

The RBI further said that “wilful defaulters will normally not be eligible for restructuring.”

Willful defaulter and NPA recovery   

Wilful defaulters are those borrowers who have defaulted on loan repayment to banks despite having adequate cash flows and a healthy net worth. The ones who have not utilised the funds borrowed for specific purposes and diverted those for other purposes have also been categorised as wilful defaulters by the Reserve Bank of India (RBI).

The then Finance minister  P Chidambaram  said “We cannot have an affluent promoter and a sick company.”

As part of its strategy to contain bad debts, the Finance Ministry has directed all public sector banks to accord top priority to cases of fraud and wilful default, and take legal action against those responsible.
Banks were  asked to recover dues from the top 50 defaulters as the first step. Banks have been asked to furnish the information of the top-50 immediately.

Willfull default should be treated as fraud as both are intentional in nature.

For wilful defaulters future borrowing will become more expensive,

No additional loans facilities to defaulters.

 Banks to bar promoters of defaulting companies from institutional finance for floating new ventures for a period of 5 years.

About a third of NPA reduction is due to comprise while writing off a loan
 Banks to form board level committee to monitor recovery process of willful defaulter

How to reduce NPAs  

·        Ex Deputy Governor went on to say that NPA is nothing but Non Performing Administration, therefore Banks should undertake proper scrutiny  and analysis of  loan proposal , its viability and return generation capacity ,  should factor in the sectoral or market risk of the project. Should properly supervise the loan utilization and keep a vigilant follow up of  business activities .

·        Government should nor interfere in banks lending decisions.

·        More Debt recovery tribunals should be formed and cases should be expedited.

·        Willful defaulters should be dealt with firmly as per RBI and FM directives.

·        Restructuring should be prudent and need based.

·        Securitization act 2002 should be invoked and fully exploited.

·        All required reporting to RBI , Finance ministry, CIBIL etc. should promptly be made.

·        Joint actions by banks should be initiated in case of  default involving more than one bank.

 MINIMUM GOVERNMENT MAXIMUM GOVERNANCE

(Prime minister Narendra modi himself explains his view point about his concept of  Governance )

Speaking at the Think India meet of Network 18, Modi kicked off his speech with a clarification about what he meant when he said ‘minimum Govt, maximum governance'. Modi said he advocated a 'right size of Govt'.

Here are some highlights – 

"None of our government services are rationalized. They are engaged or disengaged based on various pressures until their use is completely lost. So many pressures affect our services that the common man has lost all faith in Govt services." 

"No religious person ever doubts whether the sun will rise every morning, since they believe that is controlled by God. They do not sense any discrimination, since sunlight enters slums as freely as it does mansions. There are no protests that the sun rises earlier in the East than the West, since every one understands that every one gets about 12 hours sunlight equally." 

"Govt services lack this kind of certainty, this sense of equality and this sense of fairness. This is why people lack faith in it. But we must try to make Govt services that fair and assured." 

"In our country, our Government is packed with clerks and unnecessary officers, even when projects require less clerks and more technical people. This unending bureaucracy weighs down all projects."

"Believing in ‘right size’ of Govt, in Gujarat we gave incentives to wards to lower the numbers of their bureaucracy and increase their efficiencies. We told them to meet certain human resource targets and only then will they get certain grants. Things began to change almost immediately." 

"We are increasing the size of the Govt, but not the accountability. There are no advantages to the common man at all. This happens in commissions especially, which are made only to pander certain sections, but do not function as expected."

"There is a mentality that those in Government are the givers, while the common man is a receiver of alms. This is a great crime, I believe. In a democracy how can the elected imagine that he is a giver? This attitude merely increases a bad attitude within the people." 

"We clean our ancient scooters, however broken-down they are. We polish them until they shine. However, when we travel by the bus, we damage the seating and the cushions simply because we are bored. We never feel the pride of ownership for public things. Be it public schools or public hospitals, the public is apathetic about public utilities 

Not only public-private partnerships, India needs public-private -people partnerships. We must involve the people in our decisions. This will increase a sense of ownership. If possible we should try to convince them, take their consent for projects.  This makes them a partner to the process, thereby reducing costs and time taken to implement projects. This also increases pride in public projects. We need to focus on such things. - Modi@ Think India

What is needed to bring change in India? An old Congress minister once said it best - Ministers need to say no, civil officers need to say yes. , commenting on ministers habits of promising many things, but civil officers inability to deliver most things.

The more we use technology in our deliver systems, the better, faster can we improve governance 

The lack of transparency increases mistrust and unhappiness in the public. This is what causes huge gaps between the people and their government. We must fill in these gaps."

"Centralization of power is derailing the entire system" Modi explaining the point of decentralization through an example of how he his fighting with the Centre just to install gas pipelines in Gujarat. (A big dig at Centre-State relations there.)

"We must remove Government from unnecessary areas. In Gujarat for example, we removed the need for government inspectors to go certify boilers in factories. We began accepting private company certificates on the safety of boilers. This removed Government from the scene and increased efficiency", Modi said, stressing his original point that governments must be small and focused on core areas, instead of being large and impractical. 

"Government means rules and Governance means delivery. Government implies authority while governance implies accountability. Government is power while governance is empowerment. Where there is files...that is Government. Where there is life that is governance. We must fill the files with life. Governments can be tangled in files, governance must make life better" 

"Governance is about outcome...All the governments only discuss outley and not the outcome from it," he said, adding that soci-economic impact needed to be measured to ensure funds were being used effectively.

"It isn't enough to put up facilities, it is equally important to improve the people's quality of life," Modi said.

He spoke about Sabarmati river front project and says it gave them carbon credits, improved the water table and reduced diseases in Ahmedabad.

"If we measure socio-economic benefits then it will improve our impact," he said.

                                                Global remittance flow 

India has topped the global chart of remittances with a whopping $71 billion in remittances in 2013, according to a revised World Bank forecast.

Top recipients of officially recorded remittances for 2013 are India (with an estimated $71 billion), China ($60 billion), the Philippines ($26 billion), Mexico ($22 billion), Nigeria ($21 billion), and Egypt ($20 billion), the report issued on Wednesday said.

"These latest estimates show the power of remittances," said Kaushik Basu, senior vice-president and chief economist of the World Bank.

"For a country like Tajikistan they constitute half the GDP. For Bangladesh remittances provide vital protection against poverty. In terms of volume, India, with $71 billion of remittances, tops the global chart.

In India , Kerala topped the state lists in getting foreign remittances.

                                              SAARC

SAARC has gained special importance since Shri Narendra modi invited all saarc leaders on his swearing in ceremony.

The South Asian Association for Regional Cooperation (SAARC) is an economic and geopolitical cooperation among eight member nations that are primarily located in South Asia continent.^[10] Its secretariat is headquartered in Kathmandu, Nepal.

It was founded on 8^th Dec. 1985 with seven members . Afghanistan joined later on .

Afganistan joined  the SAARC as an eighth member state, despite initial reluctance and internal debates as it is geographically a Central asian country and not a  south asian country.   The inclusion of Afghanistan as SAARC member was announced in New Delhi on 4 April 2007 by Indian Prime Minister Manmohan Singh.It has eight permanent members

Current members

•  Afghanistan
•  Bangladesh
•  Bhutan
•  India
•  Maldives
•    Nepal
•  Pakistan
•  Sri Lanka

And nine Observers

•  Australia^[47]
•  China
•  European Union^[48]
•  Japan^[48]
•  Iran
•  Mauritius^[49]
•  Myanmar
•  South Korea
•  United States^[50]

Governance and Leadership of SAARC

Image	Officeholder	Title	State	Party
	Hamid Karzai	President	Afghanistan	Independent
	Sheikh Hasina	Prime Minister	Bangladesh	Awami League
	Tshering Tobgay	Prime Minister	Bhutan	People's Democratic Party
	Narendra Modi	Prime Minister	India	Bharatiya Janta Party
	Abdulla Yameen	President	Maldives	Progressive Party of Maldives
	Sushil Koirala	Prime Minister	Nepal	Nepali Congress
	Nawaz Sharif	Prime Minister	Pakistan	Pakistan Muslim League (N)
	Mahinda Rajapaksa	President	Sri Lanka	Sri Lanka Freedom Party

                                                         Last and next Summit

17th	10–11 November 2011	Maldives	Addu	Mohammed Nasheed
18th	November 2014	Nepal	Kathmandu	Sushil Koirala

OBJECTIVES

The objectives of the ASSOCIATION shall be:

Article I

a) to promote the welfare of the peoples of SOUTH ASIA and to improve their quality of life;

b) to accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realise their full potentials;

c) to promote and strengthen collective self-reliance among the countries of SOUTH ASIA; d) to contribute to mutual trust, understanding and appreciation of one another's problems;

e) to promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields;

f) to strengthen cooperation with other developing countries;

g) to strengthen cooperation among themselves in international forums on matters of common interests; and

h) to cooperate with international and regional organisations with similar aims and purposes.

Gabriel García Márquez  ‘gabo’   

was a Colombian novelist, short-story writer, screenwriter and journalist, known affectionately as Gabo throughout Latin America. He was awarded the 1972 Neustadt International Prize for Literature and the 1982 Nobel Prize in Literature.

·          He was best known for his novels, such as One Hundred Years of Solitude (1967), The Autumn of the Patriarch (1975) and Love in the Time of Cholera (1985). His other famous works are  , The General in His Labyrinth (1989 Of Love and Other Demons, Chronicle of a Death Foretold.

García Márquez was the first Colombian and fourth Latin American to win a Nobel Prize for Literature

Nationality :  COLOMBIAN     Language of his work :  Spanish 

 

 

GIRO based CENTRALISED BILL PAYMENT SYSTEM 

Entymologically  GIRO is derived from the Greek word gyros which means a circle. The Italians borrowed the term and used it in the sense of “circulation of money”. And then the good old Germans came and turned into a fiscal bacronym, that is, they took an existing word and retro-fitted it into an acronym. They called it the Government Internal Revenue Order, or simply GIRO.

In its original form, GIRO is a payment instruction from one bank account to another that is initiated by the payer, and not by the payee (that is, the person who receives the money). But in its expanded form, a GIRO payment system — which the Reserve Bank of India now wants to formalise — will cover any third party payment made through any payment mode: cash, cheque, credit/debit cards, prepaid payment instruments.

Giro system was  prevalent in many countries, even before the introduction of electronic payment systems like RTGS , ECS , INTERNET Banking, mobile banking etc. The current  spread  of payment systems in India managed  by National payment Corporation of India is already providing services similar to GIRO based system, but its coverage is fragmented and is largely confined to country’s techno savy population .

The RBI formed a committee under its executive director G. Padmanabhan to examine the feasibility of implementation of an electronic GIRO payment system in the country.

committee came out with its report that estimates that over 30,800 million bills are generated each year in the top 20 cities in the country. Cash and cheque collections constitute over 90 per cent and electronic payments through ECS continue to be low.

The committee has proposed to create an interoperable, integrated bill payment system in the country that will:

■ offer consumers a single bill payment point, not far from their place of work or residence, which will enable payment of any bill at any place;

■ allow consumers to make payment by cash, cheque, credit/debit cards, prepaid payment instruments at the bill payment points;

■ include any bank branch, post offices, business correspondents, retail agents of aggregators, ATMs, etc

■ facilitate payment of bills through internet banking, mobile banking and IVRS

Based on the recommendations of the earlier Committee (Chairman Shri G. Padmanabhan, Executive Director, RBI) to study the feasibility of implementation of GIRO based payment systems, the present GIRO Advisory Group (GAG) was formed by the RBI under the Chairmanship of Prof. Umesh Bellur, IIT Bombay.

Accordingly, the GAG recommends a tiered structure where the Bharat Bill Payment Services (BBPS) will be the authorised standard setting body (also handling settlement functions) while the Bharat Bill Payment Operating Units (BBPOUs) will be the authorised operational units, working in adherence to the standards set by the BBPS.

Hence, the BBPS will function as a ‘not-for-profit’ organisation (like the NPCI or any other similar entity) which has necessary experience in the payment systems space, while the BBPOUs may be operated on commercial lines by existing entities in the bill payments space as well as new entities interested in this segment. The BBPS will also handle the settlement responsibilities arising out of the transactions in the system.