Different Profiles in Banking

Corporate Banking - Corporate banking represents the wide range of banking and financial services provided to domestic and international operations of large local corporate and local operations of multinational corporations. Services include working capital facilities, domestic and international trade operation and funding, channel financing, overdraft, domestic and international payments, term loans, letter of guarantee,  cash management and other business services custom tailored for corporations.

Knowledge Banking - Specialized, industry specific solutions

Relationship manager -Have significant understanding of the dynamic, financial requirement of large Indian corporate and MNC client

Cash Management System
Effectively managing cash flows ::

1. Payment Solutions - Electronic Clearing Services
2. Collection Solution - Centralized CMS solutions

Treasury Role:
- Cheapest spot and forward prices
- Facilitating buying and selling of Government Securities
- Trade finance, forex services
- International fund transfer through SWIFT, draft cheque
- Interest rate, forex risk management, derivative desk
- Money Market, Management of Asset/Liabilities of bank (CRR ratio, SLR ratio, Treasury bill, commercial paper, Certificate of deposits)

Retail Banking - Saving account, consumer loans, credit cards and other services to individuals.

Finance manager role in organization-

• Take care of the financial needs of the company (arranging sources of funds). 
• Responsible for financial health and stability of the company ( analysis of financial statements). 
• Capital Budgeting (New project viability - NPV, IRR)

Investment Banking - A financial intermediary that performs a variety of services. This includes underwriting, acting as an intermediary between an issuer of securities and the investing public, facilitating mergers and other corporate reorganizations, and also acting as a broker for institutional clients. They also provide ancillary services such as market making, trading of derivatives, fixed income instruments, foreign exchange, commodities, and equity securities. Unlike commercial banks and retail banks, investment banks do not take deposits. From 1933 (Glass–Steagall Act) until 1999 (Gramm–Leach–Bliley Act), the United States maintained a separation between investment banking and commercial banks. Other industrialized countries, including G8 countries, have historically not maintained such a separation.

                              Investment Banking Structure

Bretton Woods System

Nations attempted to revive the gold standard following World War I, but it collapsed entirely during the Great Depression of the 1930s. Some economists said adherence to the gold standard had prevented monetary authorities from expanding the money supply rapidly enough to revive economic activity. In any event, representatives of most of the world's leading nations met at Bretton Woods, New Hampshire, in 1944 to create a new international monetary system. Because the United States at the time accounted for over half of the world's manufacturing capacity and held most of the world's gold, the leaders decided to tie world currencies to the dollar, which, in turn, they agreed should be convertible into gold at $35 per ounce.

Under the Bretton Woods system, central banks of countries other than the United States were given the task of maintaining fixed exchange rates between their currencies and the dollar. They did this by intervening in foreign exchange markets. If a country's currency was too high relative to the dollar, its central bank would sell its currency in exchange for dollars, driving down the value of its currency. Conversely, if the value of a country's money was too low, the country would buy its own currency, thereby driving up the price.

The Bretton Woods system lasted until 1971. By that time, inflation in the United States and a growing American trade deficit were undermining the value of the dollar. Americans urged Germany and Japan, both of which had favorable payments balances, to appreciate their currencies. But those nations were reluctant to take that step, since raising the value of their currencies would increases prices for their goods and hurt their exports. Finally, the United States abandoned the fixed value of the dollar and allowed it to "float" -- that is, to fluctuate against other currencies. The dollar promptly fell. World leaders sought to revive the Bretton Woods system with the so-called Smithsonian Agreement in 1971, but the effort failed. By 1973, the United States and other nations agreed to allow exchange rates to float.

Economists call the resulting system a "managed float regime," meaning that even though exchange rates for most currencies float, central banks still intervene to prevent sharp changes. As in 1971, countries with large trade surpluses often sell their own currencies in an effort to prevent them from appreciating (and thereby hurting exports). By the same token, countries with large deficits often buy their own currencies in order to prevent depreciation , which raises domestic prices. But there are limits to what can be accomplished through intervention, especially for countries with large trade deficits. Eventually, a country that intervenes to support its currency may deplete its international reserves, making it unable to continue buttressing the currency and potentially leaving it unable to meet its international obligations.

Reference : About.com

Guestimates Part - 1

Q1) Number of Hajmola eaten per day ?

Ans) India's population is 120 Crores
        People below poverty line can be safely discarded (30%)
        Remaining = 120 * (1 - 0.30) = 84 Crores  (Approximated to 80 Crores)
        We assume Hajmola is eaten in age groups (5-15) and (15 - 25) and other form an immaterial part of the customer segment

Fact: approx 2.5 Cr Hajmola tablets are eaten per day

Q2) Number of cosco balls in a plane

Ans) Assuming a empty plane (no passengers) but intact with seats and machinery.
ques - Number of rows - 40
ques - which plane make - Boing 747    (6 seats in a row)
Assumption - Seat length - 0.5 mt   Distance between seats - 0.5mt
Length of plane = [3mt cabin + (0.5+0.5 mt) * 40 + 2mt (tail space) ] = 45 mt
Width of plane = [6 seats of 0.5 mt + 0.5 mt aisle] = 3.5 mt (diameter)
radius = (3.5)/2mt
cylindrical shape volume = pi r*r*h = pi * (3.5/2) (3.5/2) 45mt
adjustment = volume of 4 washrooms + volume of luggage space - volume occupied in seats

radius of cosco ball = 3 cm
Volume of cosco ball = 4/3 pi r*r*r = 4/3 pi (3/100) (3/100) (3/100)
Gaps are left between balls. So we assume total volume taken is 10 % higher than cosco balls actual volume

Number of cosco balls =  [pi * (3.5/2) (3.5/2) 45mt + adjustment] / [4/3 pi (3/100) (3/100) (3/100) (1.10)]


Q) Helmets sold every year in India

Ans) Step 1 - How many bikes are there in India
       Helmets are required for people travelling on bikes. We can remove the population in bottom of pyramid
       Lets say 60% of people are above poverty line and can afford a bike. 120Cr * 0.6 = 72 ~ 70 Cr people
       We can remove below 18 years (30%) and above 60year (10%) from the consideration set
       Left consideration set = 70Cr * 60% = 42 Crore (Surds dont need to wear helmet) ~ 40 Cr

                                                                                          = 3.7 Cr

For every bike lets say there are some pillion riders as well. Avg helmets per bike = 1.2
Total helmets - 3.7 Cr * 1.2 = 4.5Cr in India
Lets say people buy a new helmet every 3 years. We have 1.5Cr helmets getting sold every year.

Guestimates Part - 2

Q1. Estimate the number of cars in delhi ?

Ans. Cars can be bought by individuals, taxi owners, institutions

Individuals:  Total population of Delhi is 15 million. Average family size is 5. So about 3 million families.
                   Car purchasing power ( 40% of families). That comes out to be 12 lakh families
                    Let's take average 2 cars per family in delhi, than we have 24 lakh cars individually owned cars.

Taxi owners : Taxi can be of two types : Commuting in delhi  and those used for outstation
                      We assume taxi should be equal to 2% of the population. Number of taxis can be 3 lakh

Institutions:   Institutions can be Govt, Private Institutions, Private businesses
                    Lets assume 1 business entity for 100 citizens. We have 1.5Lakh such entities.
                    Lets assume 2 cars per such entity, we get 3 lakh cars

Total cars : 24lakh + 3lakh + 3 lakh = 30 lakh cars in delhi


Q. Number of Red ties in delhi

Ans. Red ties can be used by students, professional, or they can be as inventory with shopkeepers
Estimate the number of school students (age group 5-15 in 15 million). How many of them may need to wear red ties.
Estimate the number of professions (working in organized sector. 5% of total 25-60 years in 15 million poulation).  Lets say 15 % of them have red ties (Blue, black are much common)
Estimate on the basis of customers, how many get sold every year (lets say 20% of them are bought every year). Lets say shopkeeper keeps 2 month of inventory. So divide the number of base number by 6 to get number of ties in stock.
Ans can be the sum of the 3 categories found above.

Q. Estimate the number of electricity bulbs in London?

Ans. Electricity bulbs can be used at homes, offices and street lights.
Homes -> Population of London -> Number of houses + hostels ->Number of rooms per facility -> number of bulbs in a room
Offices -> Population -> Offices going population -> Number of offices (dividing the working population by avg number of employees per organization) -> Size of a office -> Divide the average volume of an office
luminosity of a bulb
Street lighting -> Ask for the size of Delhi -> Find of a size of road required to traverse from north to south or west to east (Lets say for delhi 20 km north to south and 20 km west to east) -> assume 15 roads running parallet north to south and 15 roads running west to east -> Total 1200 km roads in delhi. -> Lets assume on street lamp every 20 metres -> One can get the number of street lamps by (1200km / .020)
 Ans can be the sum of the 3 categories found above.

Q. Potential of AC market  in India

Ans. ACs can be used in homes, offices, cars
ACs will be used in warm geographies in India. Estimate the total number of Indian population in tropical belt.
ACs in home -> Number of homes in tropical belt -> A fraction of them (5%) can afford an airconditioner -> Multiply the number by the average number ACs per home
ACs in office -> Number of offices, hotels, lodging, hospitals -> Indivisual ACs (1 for each room) and at some places Central cooling (one for entire building, only one per building is required)
Number of cars -> Estimate number of cars in AC -> Majority of cars will have a AC builtin
Total market for ACs is sum of ACs in home, office and vehicles.

Ans can be the sum of the 3 categories found above.

Telecom sector

Total circles in india - 23

Important terms - ARPU  (average revenue per user), MOU (minutes of usage), active user % (how many numbers are in regular use)

Industry average - ARPU - 164Rs  ;  MOU - 423 minutes  ; idea has highest active user % (90%)

Sector Revenue - 38Billion $

FDI in telecom - 37.2Billion $ in FY 10    (telecom sector forms a very important part of fdi inflows)

Government aims at reaching 90% teledensity by 2014.

Target for Broadband coverage to reach 250000 village panchayats.

Current scenerio

Urban teledensity - 137%   ;   Rural teledensity - 28%     ; Total teledensity - 61%

Problem: Low profitability due to falling prices ; pre tax margin is 7-8%

Telecom industry is largest consumer of diesel in India. 6 million litres of diesel per day.

We have 2.4 million towers in India.

Telecom subscribers: http://www.trai.gov.in/WriteReadData/trai/upload/PressReleases/859/Press_Release_Nov-11.pdf

Internet subscribers: 17.9 million

Broadband subscribers: 10.3 million ( target of 100 million broadband connection by 2014)

14 mobile operators in India. Telecom regulators try to have a minimum of 6 operators in a circle to have competitive pricing.

3G spectrum sharing agreements.

Airtel, Vodafone and Idea have a agreement, so that a company not having not having 3G spectrum can still provide the service in that circle. Tata Docomo and aircel have a similar agreement.

TRAI  -  Telecom Regulatory Authority of India  (levying fees, compliance , license, consumer interest)

TDSAT - Telecom Dispute Settlement and Appelate  (settle dispute)

DOT - Department of Telecom ( policy making, licencing, cordination)

Telecom Commission - policy, licensing, Telecom PSU policies, standardization of equipment

IOC - Interconnect charges (money that call maker's service provider pays to receiver service provider (25p)

VAS is the new sweatspot for telecom companies. It will provide a basis for differentiation. It will help companies increase their topline.

VAS - Entertainment VAS (57%), Information VAS (39%), mCommerce (4%)

VAS - SMS, ringtone, CRBT ( caller ringback tune), games, mcommerce, mradio

VAS revenue gets divided between - Content owner (t-series etc 10%), content aggregator (hungama.com etc 15%), technology enabler (onmobile, 197, comviva etc 15%), telecom operator (maximum share 60% )

3G is a enabler of Value Added Services. VAS services like mobile internet, application download gets limited by 2G data speed. 3G can provide new features like video calling, video on demand, location based services, remote access)

3G is expected to reach ::

142 million by 2015 (12% of total subscriber base)

300 million by 2020 (20% of total subscriber base)

3G can provide speed upto 21mbps (speed depends upon the cellular phone's capability)

Few Marketing Laws

Marketing is science of convincing what the company is selling is what customers actually want. In simple words marketing is to make customer believe that your product is the right choice. Some marketing laws are as following :

• Over time a category will divide and become one or more categories.
• Hype is often bad for product success. Hype creates unrealistic expectation with products.
• If competitor actions are predictable, make your plans accordingly. If you do not know about competitors keep marketing strategies flexible.
• Instead of small incremental moves, marketing needs single bold strike.
• If competitors is associated with a certain attribute, pick other (preferable contrasting) attribute.
• Leverage the leader's strength into weakness. Don't try to be better than leader, try to be different.
• It is fruitless to use a word already owned by competitor. Cant capture enough attention by using adjective that are already used widely. Eg. DHL used worldwide for its courier service. FedEx used overnight
• Pressure to stretch use of brand name for a lot of different products can be a mistake. One should create new brands to address new  products
• Marketing is not about products (their features and quality) but about their perception (how people perceive products. 
• It is not important to be first in the market but to be first in the mind of the customer.
• Given that it is hard to gain leadership in a category where competition already exists. It is better to create a new category than trying to attach the existing categories. Categories need not be drastically different.
• Being first in the market is often better than having a better product than the competition.

India Facts

Agriculture - Grain production in India is 200+ million tonnes. China is at 500+ million tonnes. India is nearing china in the population count. India needs to increase productivity, nutritive quality of its agricultural produce. We have been pulled back by protest against GM (Genetically modified seeds) in the name of environment and biodiversity. If we look at the facts BT cotton has converted India from cotton importing nation to and cotton exporting country.

Mining - Court ruling -  Coal miners will have to share 26% of their profits on well being of project affected people. Courts came harshly on illegal mining in Bellary, Karnataka. Illegal mining led to encroachment of forest land, high pollution levels, blood pressure, health issues.

FDI - Total money invested through FDI was 15Billion$ in 1985, 162Billion$ in 2002 and 2Trillion$ in 2011. FDI investments are needed to remain competitive in world markets.

China used foreign money to increase industrialization and employment, skill development. At the same time it used its domestic saving to build infrastructure. Chinese government nurtures and directs economic activity.

While in India entrepreneurs found a way out of minimum facilities, inadequate infrastructure, nascent capital markets. India focused on service sector which needed less capital expenditure. Software, IT services, pharma, knowledge based outsourcing. We still suffer from infrastructure gaps like poor roads, insufficient water, electricity. You need huge capital fro steel plant not for a software company.

Interview Questions

Disclaimer: I have answered these questions to the best of my understanding. Use your discretion in reading and analyzing the answers.

Q. What will be the GDP growth of India 5 years down the line ?

Ans. 

3years back the growth rate was 9% and the inflation was 6%. We were at the peak of boom cycle. Now growth rate is sliding and inflation is soaring. I think next 3 years we will remain in the recessionary cycle. Then in the next 2 years  (ie in the 4^th and 5^th year from now) we will be on the upward slope towards a growth cycle, so we might clock a growth rate of around 8%.

Q. How is inflation linked to growth rate?

Ans.

 Inflation is usually seen in a growing economy. As the prospects for growth seem attractive investments flow in the economy and market. Consumption and demand for goods increases, pushing the price upwards, fueling inflation. This is in short the boom cycle.

On witnessing the high octane growth in the market, investors become overly optimistic and invest aggressively. Result is creation of overcapacity that supersedes demand ( Eg. you can’t open a steel plant of incremental capacity, so you invest in a new plant of full capacity, creating excess capacity). You try to export your products and cut back on production capacity. Investors become vary of the future economic prospects and pull out their money. Consequently prices of real estate also fall down. We might also see some layoff and voila we have the recessionary cycle. Normally in such scenario inflation cools down.

Q. What will you look for before giving loan to a firm?

Ans.  We can follow the 4C approach.

Company :-  Try to know as much about the Economy, Industry and company. How is the economy, growth rate, interest rate, inflation?  These factors decided whether one should be aggressive or cautious. Try to know about the industry and sector in which the company is operating. Is the sector growing or matured. Is the sector facing problems eg. the power sector right now in India. Is the sector sunrise sector eg healthcare , education (in which we might have special focus, priority lending).  Has the bank reached lending limit to the sector (concentration risk). Try to know about the company, business model, profitability, past performance, infrastructure, and management quality. But remember past performance is not measure of future prospects. Rigorously check the management guidance on future performance and if they hold water even without the optimistic scenario. Question things, apply what if.

Covenant – Negative covenants – board cannot give dividends if it does not have enough money for paying back loan and interest. Positive covenants – Company have to go for regular disclosers and inventory / accounts auditing.

Character – Research on the past of the promoters. Have they ever defaulted on the loan.  Are they ethical. Do they have policies in place for corporate governance.

Collateral – What can the company give as collateral for the loan. Do they have fixed assets like land etc. Is the promoter deep pocketed? What is the depreciation rate and resale value of plant and machinery? Collateral is generally the last option bank opts for. Any loan where installment is not being paid for last 3 months becomes Non Performing Asset, and then it becomes bad debt. Bank will also try for restructuring before going for liquidation if at all.

Q. What is the difference in giving a loan to service industry and manufacturing industry.

Ans.

Service Industry – For telecom industry, debt is quite high. They have high capital expenditure cost. We need to see the debt service coverage ratio. Inventory is less, activity turnover ratio might not be that useful. Telecom have higher portion of prepaid cards. So they will have extra cash always and may need less or no working capital.

IT sector is also high capital expenditure. Lot of money goes into R&D and working capital requirement is less. Establish companies like Infy, TCS have zero or minimum debt. High capital cost means, operative leverage (delta EBIT/ delta Sales) is more. So EBIT is highly susceptible to drop is sales. Telecom has high financial leverage ie a lot of debt, so they are very sensitive to change in interest rates.

Manufacturing industry

We have to take care of operating cycle and inventory levels in manufacturing (activity ratios). We have to balance current assets and current liabilities (so current ratio). We need cash to pay bills (cash ratio). We have to check the balance sheet is not stretched beyond capacity (solvency ratio, D/E ratio, interest coverage ratio, debt service coverage ratio etc).

Q. What is the difference in asset and liability products?

Ans.

Assets products are one that are sold to companies and recorded as assets with bank. They include loans – short term working capital loans (Cash Credit), long term working capital ( Working capital demand loan), capital expenditure loans etc.

Liability products are offered to cash rich companies. Banks accept deposits from these companies and recorded them in their books as liability. Eg. Certificate of deposits, salary accounts etc.

Indian economy Growth

Here are some pointers:

Negative points:

1. Industrial growth has slumped (October IIP number -5.1%)
2. Investor confidence has plummeted. Market has been sluggish (Market has dropped back from 20000 to 16000)
3. Government's finances have increased beyond expectation
4. Rupee has depreciated beyond control  (rupee dropped by 17%)
5. Interest rates were increased 13 times. Repo rate is now 8.5. Its is stifling the growth of indian industries.
6. There is lack of political will. New reforms on back burner. Power sector in deep trouble.
7. Indian economy is exposed to global financial troubles.

Positive points

1. Indian consuming middle class is still growing. Domestic consumption is basis of Indian growth.
2. Indian consumption story is still intact. Consumption -> investment -> industrialization -> employment and prosperity
3. Indian economy is resilient. We have faced such difficulties even before and came out of them successfully.
4. Congress view -> focus on poverty alleviation which is just 0.9%. GDP growth of 7% is also good as per  politicians. They dont feel like they or derailing or rolling back growth.

Forecasted growth rate:

RBI - 7.6%          Govt- 7.5%          Independent analysts - 7%

Balance of payments = Current account + capital account + forex reserves

Current account (fully convertible, govt cant deny converting currecy generated through these) -> related to trade in goods and services 
Capital account (not fully convertible, govt permission is required in some cases to convert the indian rupee to foriegn currency generated from these activities) -> related to investment as fdi, fii, bonds, properties etc

Current account deficit is widening. (We need to import oil, machinery from industries etc)
Capital account  inflow (FDI and FII) is same as last year or decreasing
As a result the forex reserve is depeleting with india (dropped below 300 billion $ as per latest news)
If the situation continues we can face balance of payment issues in future.

Euro crisis

Euro pros-
Elimination of exchange rate between individual European countries.
Increased trade between European countries
Increased cross border employment
Simplified billing on cross border trade
Lower transaction cost in trade ( no need to change currency everytime)

Euro cons-
Common currency without common monetary and fiscal prudence is a recipe for failure. They needed to implement converging style of budgeting. Common Euro rested on 3 pillars - no bailouts, no monetization of debt, no crazy budget deficit. Fiscal indiscipline brought euro debt crisis.

In US common govt balances growth inequity in states. Slump facing region will get higher benefits & low tax and vice versa. But in Europe German dont want to loose out hard earned money to salvage PIIGS (portugal, ireland, italy, greece and spains) countries.

Euro crisis vs Lehman
Greek default could be Europes Lehman moment, is dreaded to- as in autumn 2008 send financial shocks waves around the world and trigger another global recession.
Comparison is rather stretched. In 2008 the bad debt was widely distributed across private sector whereas the dodgy public debt in euro is concentrated among a few sovereign borrowers. Much of fear in 2008 because of uncertainty about valuation and exposure, whereas the sovereign losses on banks are well identified. The risk is concentrated in major European bank and it can be controlled in time by proactive Govt fund infusion.

The issues at hand :
The problems are banking (banks are grossly under capitalized), growth (some european countries like greece are seeing negative growth), and fiscal ( european extravagance and trade imbalance).

Solutions thought so far:
Creating a Europe rescue fund (European Financial Stability Fund) with a strength of 440Billion Euros that can be extended to 2 trillion Euros to step up european stability. The quest is rooted in belief that fund of this scale will be instrumental in combating contagian fears.
Other way is to strengthen banks (recapitaliza banks) so that they can sustain greek default.

Matter copied from various news articles:

European union has 27 members but eurozone has 17 members. The 17-nation eurozone agreed Monday to lend 150 billion euros ($195 billion) to IMF to help troubled European banks.

European leaders want to boost the crisis-fighting resources of the International Monetary Fund (IMF) by the provision of up to 200 billion euros ($260 billion), as one of the ways to persuade markets that money invested in euro zone debt is safe.The aim is for euro zone countries to provide 150 billion euros from their central banks and for other European and non-European countries to provide a further 50 billion euros.

The €440 billion lending capacity of the Facility may be combined with loans up to €60 billion from the European Financial Stabilisation Mechanism (reliant on funds raised by the European Commission using the EU budget as collateral) and up to €250 billion from the International Monetary Fund (IMF) to obtain a financial safety net up to €750 billion.

he €110 billion bailout to Greece of 2010 is not part of the EFSF guarantees and not managed by EFSF.  european central bank administers the monetary policy of ECB. Objective price stability within eurozone.  gdp of italy, europe's third largest economy dropped by 0.2%

The European Central Bank will offer three-year funds to banks for the first time on Wednesday, an effort to counter the freeze in interbank lending. France hopes banks will use the money to buy euro zone bonds but with banks under pressure to reduce risk and rebuild capital that may be a vain hope.

Inflation vs Growth

Reasons for Inflation in India

1. monetary expansion
2. demand side pull
3. supply side constraint

Priority will be to  balance growth and inflation. The balance may can be different compared to a developed country. RBI to find the right balance of growth and inflation itself based on various factors. India is in growing  stage and so we cannot sabotage the growth prospects. At the same time high inflation affects poor people badly and it cannot be ignored.

Inflation is a regressive tax that hurts the poor the most as their earning are not protected against rising prices. Though indian inflation cannot be connot be controlled by RBI alone (Govt is spending money like any thing and increasing fiscal deficit), controlling inflation remains to be one of its objective. Inflation of 9% is not acceptable and RBI has to step in to bring it down or stop from increasing further.

Points for reducing interest rates - Growth is necessary condition for poverty reduction. Growth translates into lower unemployment rate. In place of raising inflation fiscal prudence should be brought into place. Funds should be channelized towards developing infrastructure. There is structural inefficiency in India. There are problems in public distribution system (grains rot in warehouses thus reducing the availability in market). Indian food production is saturating, while the population is increasing. We need investment in developing irrigation facilities, building warehouses, cold storages. Govt and RBI need to think long term instead of short term.

Food security bill

India has a population of 1.2billion people with more than 200 million "food unsecure" people. India hosts the highest number of hungry population in the world. It is a very alarming scene.
The 2010 Actnoid report said :

1. 50% of indian children are malnourished
2. 1/5th of the population is hungry

Food bill promises cheap staples - wheat and rice to nearly 2/3rd of Indians.
Current food subsidy program is of Rs 67000Cr which is released through pilferage prone PDS system.
The new food bill aims to reach 75% of rural and 50% of urban population taking the expense of food subsidy to 95000Cr. Proposes giving 7Kg food, @ 3Rs rice, 2Rs wheat, 1 Rs coarse grains.
Food for children, lactating mother, elderly is must. But giving free food handout to 800 million people at a fraction of market price is risk. It is a burden on public finances, fiscal deficit. It might dissuade labor from working hard.

Instead of pumping in money in the food subsidy bill, govt could have invested the much needed 1.1lakh crore to increase farm output. It could have benefited india by improving farm produce and created sustainable gains.
Congress perspective - Experts consider it a another manoever by Congress, in line with its socialist objectives. Govt can arrange the funds by increasing cess on diamond and gold.

FDI in Retail

Growth in Retail Sector is vital for economy, which is likely to result in strong linkage with farm sector and economy as whole. Benefits of multibrand in retail:

1. FDI in multibrand retail could have created upto new 10 milltion jobs in 3 years
2. Curbed wastage of farm products
3. Benefited farmers through better prices for their produce

FDI in retail - main points in bill -

1. Minimum amount of FDI investment is  $100m. 
2. Atleast 30% sourced from small industries. (small scale industries<5Cr capital exp. )
3. Govt will have first right of procuring farm produce
4. 50% of the inflow will be invested in backend

Points to be discussed in GD:
Effect on indian industry (sourcing from small scale industry is 30% as per proposal. It may be increased giving much needed support to SME sector). Effect on small retailers.
Effect on Indian farmers. We have agro based economy. 70% of population dependent on farm sector. FDI in retail will give an support to farm sector ( better pricing, processed food, value added farm products). We are concerned more about the retail sector that is 10% of GDP and employees 4Cr people.
In china organized retail presence is about 10% event after years of FDI in retail. Mom and pop stores can survive easily. They might have to change a bit - keep less stock (varieties and quantities), improve service and change the store layout ( more cleaner and arranged).

Basel III Guidelines

Basel 3 guidelines seek to improve the ability of banks to withstand periods of financial and economic stress by prescribing more stringent capital and liquidity requirement. The main recommendation are:
- Raise minimum core capital stipulation
- Introduces counter cyclical measure
- Capital buffer, loss absorption capacity
- Bring Uniformity in liquidity standards globally ( bringing different countries at par)

Basel III will necessitate Indian banks to raise 6 lakh in 9 years. Raising more equity will dilute ROE for banks.
Basel III mandates 7% as tier1 capital requirement.
          - Minimum core capital requirement of 4.5%    ( compared to previously required 3.6%)
          - Buffer of 2.5% of risk weighted assets
So in total tier 1 capital requirement (7%) is much higher than previously required Tier 1 requirement of 3.6%.

Basel II - Right now total capital adequacy requirement (tier 1 + tier 2) of banks is 9% (RBI requirement) as against  8% (Basel II requirement)

Now RBI requirements are made same as Basel III. So Indian Banks will follow the same requirements as their foreign counterparts. But at the same time they need a lot of capital infusion to meet the capital requirements.

How do companies calculate capital requirements:
CAR ( Capital Adequacy Requirement) or CRAR ( Capital Risk Adjusted Ratio)
= Capital / Risk Weighted Assets

Here capital is equal to Tier 1 (Shareholder equity + capital reserves) + Tier II ( loan loss reserve)

3 Pillars :
Capital adequacy requirement, Supervisory process, Disclosure

Risk the 3 pillars target ( in the same order)
Credit risk, Operational risk, Market risk

Why RBI

RBI offers a distinguished career where I will get to interact with some of the best minds in the government and financial institutions. Through RBI I will get a chance to serve India and contribute in its holistic growth. RBI offers opportunities to diversify one’s skills. I believe through working at RBI I can develop a strong grounding in finance which will set the foundation of a successful and honorable career.