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.