Sunday, April 18, 2010

Retail banking refers to banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth.

* Commercial bank has two meanings:
~Commercial bank is the term used for a normal bank to distinguish it from an investment bank. (After the great depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital markets activities. This separation is no longer mandatory.)

~ Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public (retail banking). It is the most successful department of banking.

* Community development bank are regulated banks that provide financial services and credit to underserved markets or populations.

* Private banks manage the assets of high net worth individuals.
~ Offshore banks are banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.

* Savings banks accept savings deposits.
~ Postal savings banks are savings banks associated with national postal systems.

*An investment bank is a financial institution that assists corporations and governments in raising capital by underwriting and acting as the agent in the issuance of securities. An investment bank also assists companies involved in mergers and acquisitions, divestitures, etc. Further to provide ancillary services such as market making and the trading of derivatives, fixed income instruments, foreign exchange, commodity, and equity securities.

Retail Banking services are also termed as Personal Banking services

Growth of banking :

The banking industry worldwide has been showing steady progress since 2002. Much of the growth in the worldwide banking industry can be attributed to the surge in the retail-banking sector in the Asia Pacific region and the countries of Latin America.

The Banking industry in the economies of Brazil, Russia, India and china has been showing exemplary growth owing to improving economic condition, liberalization, changing consumer demographics and large segment of untapped population. These countries are witnessing steep growth in the uptake of retail loans specially housing, car education, credit cards and other personal loans.

In India total asset size of the retail banking industry grew at a rate of 120% to reach a value of $66 billion in 2005. This growth in retail banking sector has helped in the growth of the overall banking sector. In future the retail banking industry in India is likely to reach a value of $300 billion by 2010.

Key highlights and Scope of "Indian Retail Banking Sector Analysis (2006)" report

--The competitive market landscape in the Indian Retail Banking Industry.

--The importance of technological innovation in the industry.

--Influence of demographic factors, economic conditions and credit quality programs in driving the market.

--The various opportunities and challenges of the industry.
Retail banking in India has fast emerged as one of the major drivers of the overall banking industry and has witnessed enormous growth in the recent past. The Retail Banking Report encompasses extensive study & analysis of this rapidly growing sector. It primarily covers analysis of the present status, current trends, major issues & challenges in the growth of the retail banking sector. This report helps in Banks, financial institutions, MNC Banks, academicians, consultants and researchers to have a better understanding of the booming opportunities in retail banking in India.
MAJOR FINDINGS With recession departing away from away global economy, opportunities are slowly emerging in emerging markets. Since emerging markets, except China, were less depending upon US for growth; are first to come out of recession eclipse. Growth opportunities in banking, especially retail segment is set to witness fast growth due to high consumption. The higher growth of retail lending in emerging economies is attributable to fast growth of personal wealth, favourable demographic profile, rapid development in information technology, the conducive macro-economic environment, financial market reforms, and several micro-level supply side factors. The retail banking strategies of banks are undergoing major transformation, as banks adopt a mix of strategies like organic growth, acquisitions and alliances. This has resulted in a paradigm shift in the marketing strategies of the banks. Public Sector Banks players are adopting aggressive strategies, leveraging their rural branch network and their customer vase to earn a larger share of the retail pie. Banks are also going in for innovative strategies like cross selling, packaged selling of retail products and technology based banking. At the same time, new foreign players are also entering this high growth sector

In the last 10 years the Internet / IP enabling of financial services made virtually everything else possible.

- IP service at the point of sale opened the QSR market to faster-than-cash payments;

- m-commerce wouldn't exist in any meaningful sense without it;

- richer information can flow more quickly between transacting parties;

- significant barriers to commerce such as location and sophistication of the buyer and seller have been flattened;

- IP technology is breaking the stranglehold of paper and major card payments in many industries (e-invoicing, PayPal, consumer-initiated bill payments, BillMeLater, etc);

- financial institutions have new customer accessibility and risk of competition going beyond their original geographic charter / focus;

- IP technology is an amazing equalizer of all parties in the value chain

RDC (Remote Deposit Capture) for home internet banking users is on the horizon for many banks. Isn't it a pain to drive all the way to the bank just to deposit those small rebate checks, dividend checks, etc. Now they can be deposited easily into your bank account while staying in the comfort of your home. Checks can be scanned into your home PC and remotely deposited into your banking account using technology to read/verify the MICR, account and signature data. Fraud controls are integrated into the solution to detect bad checks prior to funds movement.

The biggest innovations are happening at the back office of retail banking which is not visible but is nothing short of a revolution. Do you remember the days when you had to wait for hours to conduct basic transactions like cash withdrawals and cheque deposits. We, in India and many such emerging economies are still used to it. Banking was split in silos with legacy systems and mutiple touchpoints. Innovations in process and technology destroyed the walls and created new products which work seamlessly and efficiently.

Innovations in Retail Banking :

How you pay for your purchases - whether at the neighborhood grocery or at a restaurant for that fancy Saturday evening dinner or even online, buying your favorite pair of jeans - has profound implications on the entire transaction value chain. The ‘consumer payments’ area, which is industry jargon for what I just described, is ripe for change!

What we all know: Over the past decade, cash ceded its preeminent position to credit, particularly for large-ticket transactions – there have been varying adoption rates of credit cards across countries, but they are here to stay; in the past 5 years, debit cards have seized significant turf from credit cards and have penetrated what the industry calls the ‘micro-payments’ segment, which are in the nature of smaller, diurnal transactions we make for ‘convenience’ purchases!

What next? The explosion in eCommerce has triggered newer payment alternatives to credit cards. Paypal, by dint of being the primary payment intermediary for buyers and sellers on e-Bay, has now become the preferred payment provider online for millions of shoppers, worldwide! Paypal is playing the role of a trusted repository of confidential customer information like credit card numbers and other personal details for these shoppers. While that in itself will not eliminate the ultimate channeling of a transaction through a credit or a debit card, what Paypal is doing as a next step is to create ‘stored value’ franchise – i.e., shoppers will top-up their Paypal accounts, much like debit cards linked to Bank Accounts or pre loaded telephone cards and use that value to pay for myriad transactions on the Internet. In essence, Paypal becomes the primary owner of the customer and quite literally, of the customer’s wallet! Google (now, can Google really be far behind on any of these new technology-led developments?!) offers Google- checkout with a similar strategy in mind. The math underlying all these is pretty simple – US online ecommerce sales (including travel websites) has crossed $ 150 bn in 2006 and poised to enter the double digits as a percentage of total US retail sales.

Capital One launched a ‘decoupled debit’ card earlier this month. Essentially, it is an extension of Paypal’s online strategy to offline or ‘brick and mortar’ transactions, by offering current customers the option of a Capital One (and MasterCard co-branded) debit card even if they do not have a bank account with Capital One. Again, a solid illustration of seizing ownership of the customer through disintermediation of her primary bank relationship! To the credit averse customer, it is like paying credit card bills at the end of every transaction automatically, courtesy Capital One, while earning rewards for loyalty; and here is the kicker - the merchant benefits as well, with lower overall transaction costs and hopefully increased transaction volumes! And if you thought this was the coolest thing, soon your neighborhood grocer or gas station will probably start accepting your Drivers’ License as legal tender for purchases, based on a back end connection between your License and your bank account!

Internet banking is gaining ground. Banks increasingly operate websites through which customers are able not only to inquire about account balances and interest and exchange rates but also to conduct a range of transactions. Unfortunately, data on Internet banking are scarce, and differences in definitions make cross-country comparisons difficult. Even so, one finds that Internet banking is particularly widespread in Austria, Korea, the Scandinavian countries, Singapore, Spain, and Switzerland, where more than 75 percent of all banks offer such services (see chart). The Scandinavian countries have the largest number of Internet users, with up to one-third of bank customers in Finland and Sweden taking advantage of E-banking.


ICICI is one of the leading private sector banks in India, which combines financial strength with a reputation for innovation and a universal culture that embraces change. On March 31, 2002 ICICI formally merged with ICICI bank and emerged as India's first Universal Bank. The strategy of ICICI bank after the merger with ICICI Ltd. is that of building a diversified portfolio. The merged entity will continue to be into project finance and the focus will be to tap the potential in retail financing.
ICICI bank offers a wide spectrum of domestic and international banking services to facilitate trade, investment, cross border business, treasury and foreign exchange services). ICICI bank has
been quick to realize that E- banking has changed from a somewhat experimental delivery vehicle into an increasingly mainstream one for delivery of broad spectrum of banking products and services. Basic E- banking services are rapidly changing from competitive differentiator to competitive necessity.
The group has leveraged on a number of tie-ups to come up with its various offering. For its Internet banking offering the ICICI bank uses Infinity from Infosys, for its credit card business its uses Vision Plus from Pay Sys, USA, for WAP services the tie-up with cellular service providers Orange and Airtel helps reach out to these users, while the WAP technology is being implemented by the in-house ICICI Infotech service. To leverage the Net for its marketing initiatives ICICI bank and Satyam Info way have jointly set up a "COM" company to promote banking products on the Net. The bank has also entered into agreements with leading corporate like BPL,, Usha Martin and Tata Communications for B to C solutions in a bid to further strengthen its Internet banking product ffering and services. Also ICICI has joined hands with a consortium led by Compaq to take the lead in offering a solution to the Indian e-commerce community. This consortium offers a B2B and B2C ecommerce payment gateway within India.

The Bank has been offering phone banking free of charge and was first to launch an Internet Banking service in the country named Infinity. Infinity now provides a host of online banking solutions to retail as well as corporate customers. ICICI's constant endeavour in providing more value to the customers has resulted in Infinity being the front-runner amongst online banking offerings in the country. Also, in keeping with the customers need for increased security, Corporate Infinity now provides multiple levels of authentication besides user ID/ password and includes security tokens.

ICICI also strives to be a center for leading research on financial engineering in India, particularly in the area of valuation of securities, risk management and derivatives. By leveraging on the groups resources ICICI provides custom tailored solution that can support even the most complex business strategy.
ICICI is now moving all its operations into the era of 'virtual integration'. Not only has this drastically reduced costs, but it has also increased and improved its services to customers. 1488 Money 2 India offers a unique facility by ICICI of transferring funds to India. Additional modules were added-gifting and reminders to broaden its scope and enhance ICICI's relationship with customers.

The table below gives the SWOT analysis of ICICI.


Electronic banking is the wave of the future. It provides enormous benefits to consumers in terms of the ease and cost of transactions. But it also poses new challenges for country authorities in regulating and supervising the financial system and in designing and implementing macroeconomic policy.
Electronic banking has been around for some time in the form of automatic teller machines and telephone transactions. More recently, it has been transformed by the Internet, a new delivery channel for banking services that benefits both customers and banks. Access is fast, convenient, and available around the clock, whatever the customer's location (see illustration above). Plus, banks can provide services more efficiently and at substantially lower costs. For example, a typical customer transaction costing about $1 in a traditional "brick and mortar" bank branch or $0.60 through a phone call costs only about $0.02 online.
Electronic banking also makes it easier for customers to compare banks' services and products, can increase competition among banks, and allows banks to penetrate new markets and thus expand their geographical reach. Some even see electronic banking as an opportunity for countries with underdeveloped financial systems to leapfrog developmental stages. Customers in such countries can access services more easily from banks abroad and through wireless communication systems, which are developing more rapidly than traditional "wired" communication networks.
The flip side of this technological boom is that electronic banking is not only susceptible to, but may exacerbate, some of the same risks—particularly governance, legal, operational, and reputational—inherent in traditional banking. In addition, it poses new challenges. In response, many national regulators have already modified their regulations to achieve their main objectives: ensuring the safety and soundness of the domestic banking system, promoting market discipline, and protecting customer rights and the public trust in the banking system. Policymakers are also becoming increasingly aware of the greater potential impact of macroeconomic policy on capital movements.
This changing financial landscape brings with it new challenges for bank management and regulatory and supervisory authorities. The major ones stem from increased cross-border transactions resulting from drastically lower transaction costs and the greater ease of banking activities, and from the reliance on technology to provide banking services with the necessary security.
Regulatory Risk: Because the Internet allows services to be provided from anywhere in the world, there is a danger that banks will try to avoid regulation and supervision. What can regulators do? They can require even banks that provide their services from a remote location through the Internet to be licensed. Licensing would be particularly appropriate where supervision is weak and cooperation between a virtual bank and the home supervisor is not adequate. Licensing is the norm, for example, in the United States and most of the countries of the European Union. A virtual bank licensed outside these jurisdictions that wishes to offer electronic banking services and take deposits in these countries must first establish a licensed branch.
Determining when a bank's electronic services trigger the need for a license can be difficult, but indicators showing where banking services originate and where they are provided can help. For example, a virtual bank licensed in country X is not seen as taking deposits in country Y if customers make their deposits by posting checks to an address in country X. If a customer makes a deposit at an automatic teller machine in country Y, however, that transaction would most likely be considered deposit taking in country Y. Regulators need to establish guidelines to clarify the gray areas between these two cases.
Legal Risk: Electronic banking carries heightened legal risks for banks. Banks can potentially expand the geographical scope of their services faster through electronic banking than through traditional banks. In some cases, however, they might not be fully versed in a jurisdiction's local laws and regulations before they begin to offer services there, either with a license or without a license if one is not required. When a license is not required, a virtual bank—lacking contact with its host country supervisor—may find it even more difficult to stay abreast of regulatory changes. As a consequence, virtual banks could unknowingly violate customer protection laws, including on data collection and privacy, and regulations on soliciting. In doing so, they expose themselves to losses through lawsuits or crimes that are not prosecuted because of jurisdictional disputes.
Money laundering is an age-old criminal activity that has been greatly facilitated by electronic banking because of the anonymity it affords. Once a customer opens an account, it is impossible for banks to identify whether the nominal account holder is conducting a transaction or even where the transaction is taking place. To combat money laundering, many countries have issued specific guidelines on identifying customers. They typically comprise recommendations for verifying an individual's identity and address before a customer account is opened and for monitoring online transactions, which requires great vigilance.
In a report issued in 2000, the Organization for Economic Cooperation and Development's Financial Action Task Force raised another concern. With electronic banking crossing national boundaries, whose regulatory authorities will investigate and pursue money laundering violations? The answer, according to the task force, lies in coordinating legislation and regulation internationally to avoid the creation of safe havens for criminal activities.
Operational Risk: The reliance on new technology to provide services makes security and system availability the central operational risk of electronic banking. Security threats can come from inside or outside the system, so banking regulators and supervisors must ensure that banks have appropriate practices in place to guarantee the confidentiality of data, as well as the integrity of the system and the data. Banks' security practices should be regularly tested and reviewed by outside experts to analyze network vulnerabilities and recovery preparedness. Capacity planning to address increasing transaction volumes and new technological developments should take account of the budgetary impact of new investments, the ability to attract staff with the necessary expertise, and potential dependence on external service providers. Managing heightened operational risks needs to become an integral part of banks' overall management of risk, and supervisors need to include operational risks in their safety and soundness evaluations.
Reputational Risk: Breaches of security and disruptions to the system's availability can damage a bank's reputation. The more a bank relies on electronic delivery channels, the greater the potential for reputational risks. If one electronic bank encounters problems that cause customers to lose confidence in electronic delivery channels as a whole or to view bank failures as systemwide supervisory deficiencies, these problems can potentially affect other providers of electronic banking services. In many countries where electronic banking is becoming the trend, bank supervisors have put in place internal guidance notes for examiners, and many have released risk-management guidelines for banks.
Reputational risks also stem from customer misuse of security precautions or ignorance about the need for such precautions. Security risks can be amplified and may result in a loss of confidence in electronic delivery channels. The solution is consumer education—a process in which regulators and supervisors can assist. For example, some bank supervisors provide links on their websites allowing customers to identify online banks with legitimate charters and deposit insurance. They also issue tips on Internet banking, offer consumer help lines, and issue warnings about specific entities that may be conducting unauthorized banking operations in the country.

recent mf securities..


Mumbai, the 29th day of January 2002


S. O. 127 (E). - In exercise of the powers conferred by sub-section (1) of section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to amend the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

In the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Regulations) -
In Regulation 3, in sub-regulation (1), in clause (h), the following provison shall be inserted, namely :-

"Provided that this exemption shall not be applicable if a Government company acquires shares or voting rights or control of a listed Public Sector Undertaking through the competitive bidding process of the Central Government for the purpose of disinvestment."

In Regulation 20, -
In sub-regulation (2), in the Explanation, for the words"(after receiving the cabinet approval) announces the name of successful bidder" the words "opens the financial bid" shall be substituted.

In sub-regulation (3),-

i) in the Explanation (ia), for the words "after receiving the cabinet approval, announces the name of the successful bidder" the words "opens the financial bid" shall be substituted.

After sub-regulation (3), the following sub-regulation shall be inserted, namely:-
"(3A) Notwithstanding anything contained in sub-regulation (3), in case of disinvestment of a Public Sector Undertaking, whose shares are infrequently traded, the minimum offer price shall be the price paid by the successful bidder to the Central Government, arrived at after the process of competitive bidding of the Central Government for the purpose of disinvestment."
d) In sub-regulation (6), in Explanation 1, the words "or cum -dividend" shall be inserted after the word "cum-bonus".
Consolidation of Schemes
For the information of all mutual funds, it is clarified that such consolidations shall be viewed as changes in fundamental attributes of the related schemes and the mutual funds shall comply with the requirements laid down in the SEBI (Mutual Funds) Regulations, 1996, for the purpose.
Further, with a view to ensure that all important disclosures are made to the investors of the concerned schemes and their interests are protected in such cases, the mutual funds shall take the following steps:
Approval by Boards of AMCs and Trustees
The proposal and modalities of the merger or consolidation of schemes shall be approved by the Boards of the AMC and Trustees after their ensuring that the interests of the unitholders of all concerned schemes have been protected.
After approval by the Boards of AMCs and Trustees, the mutual funds shall file such proposals with SEBI, alongwith the draft offer document and requisite fees in case a new scheme emerges after merger or consolidation and the draft letter to the unitholders, in line with the procedural requirements prescribed vide SEBI Circular No. MFD/CIR No. 22/2311/03 dated January 30, 2003.
The letter to the unitholders, giving them option to exit at prevailing NAV without exit load, shall disclose all relevant information enabling them to take well informed decisions, including information on the following aspects:

(i) information on the investment objective, asset allocation and the main features of the new consolidated scheme
(ii) basis of allocation of new units by way of a numerical illustration
(iii) percentage of total NPAs and percentage of total illiquid assets to net assets of the individual schemes as well as in the consolidated scheme
(iv) the tax impact of the consolidation of schemes on the unitholders
(v) any other disclosures as specified by trustees
(vi) any other disclosures as directed by SEBI
Maintenance of Records

The AMCs shall maintain records of dispatch of the letters to the unit holders giving them the option to exit at prevailing NAVs without exit loads and the responses received from them. A report in this regard giving information on total number of unitholders in the schemes and their net assets, number of unit holders who opted to exit and net assets held by them, and number of unit holders and net assets in the consolidated scheme, shall be filed with SEBI.
These clarifications and guidelines are issued in accordance with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996.



Comparing the Economies of India and China is to embark on an old puzzle that has fascinated smart people for centuries. Although it is urgent and important to discuss it because China and India are the world's next major powers. It is also important because the two countries have embraced very different models of development.

Looking at the Similarities between the Economies of India and China, both are conscious of their role in the world economy. Both seek to play a bigger political role on the world stage. China is already doing that as a permanent member of the U.N. Security Council. Now observing the Differences between the Economies of India and China we see that China is taking tangible but slow steps towards embracing private entrepreneurship. India on the other hand is continuing to struggle with making things easier for multinationals. Although the differences are arguably narrowing, but the first-order effect of all this is still “a big difference”.

In general, FDI has been positive to both the Economies of India and China. It has provided goods and services that did not otherwise exist. It has also introduced competition into moribund sectors.

Both countries have clocked up strong economic growth since 1980, China at a spectacular 9 per cent plus and India at nearly 6 per cent. Both countries have opened up to international trade and capital in the past quarter of a century, decisively in China and more hesitantly in India.

China's per capita GDP growth has averaged 8 per cent in the 25 years since 1980, more than double the growth rate of Indian per capita GDP. Somewhere between 1975 and 1985 China's average income is believed to have surpassed India's. Since then it has kept moving ahead. By 2003 China's per capita GNP was at least 70 per cent higher than that of India's and her economy was more than twice as large as India's. Much of China's growth was powered by labor-intensive manufactured exports, which took the share of manufacturing in GDP to nearly 40 per cent, compared to a mere 16 per cent in India.

Other indicators like living standards were just as decisively in China's favor by the turn of the millennium. China's poverty ratio was less than half India's 35 per cent. Female adult literacy was nearly double India's pathetic 45 per cent. Life expectancy in China was a solid 8 years higher than that in India.

Looking at the future, it is easier to forecast a widening of the existing Economic disparities between China and India than a reduction.



An American Depositary Receipt (or ADR) represents ownership in the shares of a non-U.S. company and trades in U.S. financial markets. The stock of many non-US companies trade on US stock exchanges through the use of ADRs. ADRs enable U.S. investors to buy shares in foreign companies without the hazards or inconveniences of cross-border & cross-currency transactions. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies.

Each ADR is issued by a U.S. depositary bank and can represent a fraction of a share, a single share, or multiple shares of the foreign stock. An owner of an ADR has the right to obtain the foreign stock it represents, but US investors usually find it more convenient simply to own the ADR. The price of an ADR often tracks the price of the foreign stock in its home market, adjusted for the ratio of ADRs to foreign company shares. In the case of companies incorporated in the United Kingdom, creation of ADRs attracts a 1.5% stamp duty reserve tax (SDRT) charge by the UK government.

Depositary banks have various responsibilities to an ADR shareholder and to the non-US company the ADR represents. The first ADR was introduced by JPMorgan in 1927, for the British retailer Selfridges&Co. There are currently four major commercial banks that provide depositary bank services - JPMorgan, Citibank, Deutsche Bank and the Bank of New York Mellon.

Individual shares of a foreign corporation represented by an ADR are called American Depositary Shares (ADS).

One can either source new ADRs by depositing the corresponding domestic shares of the company with the depositary bank that administers the ADR program or, instead, one can obtain existing ADRs in the secondary market. The latter can be achieved either by purchasing the ADRs on a US stock exchange or via purchasing the underlying domestic shares of the company on their primary exchange and then swapping them for ADRs; these swaps are called crossbook swaps and on many occasions account for the bulk of ADR secondary trading. This is especially true in the case of trading in ADRs of UK companies where creation of new ADRs attracts a 1.5% stamp duty reserve tax (SDRT) charge by the UK government; sourcing existing ADRs in the secondary market (either via crossbook swaps or on exchange) instead is not subject to SDRT.

Most ADR programs are subject to possible termination. Termination of the ADR agreement will result in cancellation of all the depositary receipts, and a subsequent delisting from all exchanges where they trade. The termination can be at the discretion of the foreign issuer or the depositary bank, but is typically at the request of the issuer. There may be a number of reasons why ADRs terminate, but in most cases the foreign issuer is undergoing some type of reorganization or merger.

Owners of ADRs are typically notified in writing at least thirty days prior to a termination. Once notified, an owner can surrender their ADRs and take delivery of the foreign securities represented by the Receipt, or do nothing. If an ADR holder elects to take possession of the underlying foreign shares, there is no guarantee the shares will trade on any US exchange. The holder of the foreign shares would have to find a broker who has trading authority in the foreign market where those shares trade. If the owner continues to hold the ADR past the effective date of termination, the depositary bank will continue to hold the foreign deposited securities and collect dividends, but will cease distributions to ADR owners.

Usually up to one year after the effective date of the termination, the depositary bank will liquidate and allocate the proceeds to those respective clients. Many US brokerages can continue to hold foreign stock, but may lack the ability to trade it overseas. A Global Depository Receipt or Global Depositary Receipt (GDR) is a certificate issued by a depository bank, which purchases shares of foreign companies and deposits it on the account. GDRs represent ownership of an underlying number of shares.


Global Depository Receipts facilitate trade of shares, and are commonly used to invest in companies from developing or emerging markets.

Prices of GDRs are often close to values of related shares, but they are traded & settled independently of the underlying share.Several international banks issue GDRs, such as JPMorgan Chase, Citigroup, Deutsche Bank, Bank of New York. GDRs are often listed in the Luxembourg Stock Exchange and in the London Stock Exchange, where they are traded on the International Order Book (IOB).

Normally 1 GDR = 10 Shares, but not always.

:L L


Foreign direct investment (FDI) in its classic form is defined as a company from one country making a physical investment into building a factory in another country. It is the establishment of an enterprise by a foreigner. Its definition can be extended to include investments made to acquire lasting interest in enterprises operating outside of the economy of the investor. The FDI relationship consists of a parent enterprise and a foreign affiliate which together form an international business or a multinational corporation (MNC). In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate. The IMF defines control in this case as owning 10% or more of the ordinary shares or voting power of an incorporated firm or its equivalent for an unincorporated firm; lower ownership shares are known as portfolio investment.


A foreign direct investor may be classified in any sector of the economy and could be any one of the following:

* an individual;
* a group of related individuals;
* an incorporated or unincorporated entity;
* a public company or private company;
* a group of related enterprises;
* a government body;
* an estate (law), trust or other societal organisation; or
* any combination of the above.

Methods of Foreign Direct Investments

The foreign direct investor may acquire 10% or more of the voting power of an enterprise in an economy through any of the following methods:

* by incorporating a wholly owned subsidiary or company
* by acquiring shares in an associated enterprise
* through a merger or an acquisition of an unrelated enterprise
* participating in an equity joint venture with another investor or enterprise

Foreign direct investment incentives may take the following forms:

* low corporate tax and income tax rates
* tax holidays
* other types of tax concessions
* preferential tariffs
* special economic zones
* investment financial subsidies
* soft loan or loan guarantees
* free land or land subsidies
* relocation & expatriation subsidies
* job training & employment subsidies
* infrastructure subsidies
* R&D support
* derogation from regulations (usually for very large projects)

:P :P


The following steps are taken by an organisation to work during critical recession times:
* Downgrading/canceling holiday party (35 percent)
* Increasing benefits communication (32 percent)
* Eliminating/reducing seasonal workers (28 percent)
* Organization-wide restructuring (23 percent)
* Raising employee contribution to healthcare premiums (20 percent)
* Increasing pay communication (16 percent)
* Restructuring HR function (14 percent)
* Implementing a salary freeze (13 percent)
* Having a mandatory holiday shutdown (13 percent)
* Reducing/eliminating other employee programs (12 percent)

The percentage of employers that have already implemented salary freezes jumped from 4 percent in October to 13 percent in December. Sixty-one percent of employers reported that they reduced their planned merit increase for next year from 3.8 percent to 2.5 percent.

The HRM Innovation during the recession has to focus on the following topics:

1. Reduce the number of employees in the organization

2. Strategic initiatives to increase the productivity and efficiency of the whole organization

3. Redesign of the compensation scheme

4. Cancellation of several benefit schemes

On the other hand the HRM Function has to find innovative solutions for the following topics:

1. Identifying the real key employees and to keep them in the organization

2. Identifying the real top potentials and to strengthen their development program

The second two topics have to be done with the minimum additional costs and it is a really hard task to accomplish. The HRM Function has to have priorities in mind and the strategic impact of the HRM Innovations in the recession time. The role of the HRM Function is not to cut the costs for the time being, but to make the organization stronger and ready for the future growth.

As a leader and strategic partner in your organization, you have the tools to assist your company in surviving and thriving through these difficult times. First you need to start thinking strategically…

• How can the organization make effective and economical changes that will help through these difficult times?

• What can I do to minimize our organization’s risk for fines, violations and/or unnecessary legal proceedings?

Following area should be looked upon:

* Ensure your organization’s policies and handbooks are up to date. Remember that an annual review of your employee handbook for compliance by an experienced professional is highly recommended. Also, each employee having a copy of the employee handbook is not enough. They have to be able to read and understand the content. Be sure that you provide employees a handbook in a language they can read and understand.

* Layoffs are never easy. Ensure you are familiar with your legal responsibilities in a lay off to minimize your organization's risk. Be sure that you have properly defined the criteria you are using to determine who will be let go.

* Alternative Workweek Schedules and Flexible Scheduling can maximize production and cut-back on overhead costs for organizations

* Cutting Pay may be an option to consider saving on today’s costs. Is this really an option for your organization? How are your pay scales as related to the market? Are you willing to risk losing key employees whose talents may be needed by other organizations, because you chose to reduce their pay at this time? Remember, you should not cut pay without a recovering strategy of how you will re-adjust when the economy has turned.

* Offer Professional Development as a reward or incentive to employees for performance and hitting goals. Professional Development courses are an economical way to reward employees with the gift of education and skills they will use throughout their lifetime.

* Downsizing does require internal document maintenance for your organization. As jobs are modified and responsibilities are increased changes also must be made to your job descriptions.

* Remember that the law is very specific on what positions can be considered Salaried – Exempt and what constitutes an Independent Contractor. Looking at adjusting your staff to fit into one of these two categories is NEVER the answer when trying to save money.


Recommendations while your employer facing negative challenges during recession:
1. Top management should know the contingency plan.
2. Do the brainstorming session with your top management and contribute in their strategic planning.
3. A complete or partial job freeze, however, communicate to the workforce that the company many continue to recruit key individuals even in difficult times
4. Review the employee performance evaluations to determine the key people that company cannot afford to lose.
5. Flow of Communicate should be from top to down that will help in making conducive atmosphere within the organization
6. Make prepare yourself for individual and group concerns therefore there should be a proper counseling session.
7. To maintain a calm atmosphere
8. Review all HR policies, processes and procedures to ensure that they are purposeful and contribute directly to the success of the company.
9. Suppose the company has to lay-off staffs ensure that there are no other opportunities for them in other functions or divisions of the organization.
10. Advise managers to deal the process of managing change.



In economics, a recession is a general slowdown in economic activity over a long period of time, or a business cycle contraction. During recessions, many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes and business profits all fall during recessions.

Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation.A recession has many attributes that can occur simultaneously and includes declines in coincident measures of activity such as employment, investment, and corporate profits.

A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to as an economic depression, although some argue that their causes and cures can be different. As an informal shorthand, economists sometimes refer to different recession shapes, such as V-shaped, U-shaped, L-shaped and W-shaped recessions.

In the US, V-shaped, or short-and-sharp contractions followed by rapid and sustained recovery, occurred in 1954 and 1990-91; U-shaped (prolonged slump) in 1974-75, and W-shaped, or double-dip recessions in 1949 and 1980-82. Japan’s 1993-94 recession was U-shaped and its 8-out-of-9 quarters of contraction in 1997-99 can be described as L-shaped. Korea, Hong Kong and South-east Asia experienced U-shaped recessions in 1997-98, although Thailand’s eight consecutive quarters of decline should be termed L-shaped.

Most mainstream economists believe that recessions are caused by inadequate aggregate demand in the economy, and favor the use of expansionary macroeconomic policy during recessions. Strategies favored for moving an economy out of a recession vary depending on which economic school the policymakers follow. Monetarists would favor the use of expansionary monetary policy, while Keynesian economists may advocate increased government spending to spark economic growth. Supply-side economists may suggest tax cuts to promote business capital investment. Laissez-faire minded economists may simply recommend that the government not interfere with natural market forces. Global recession cannot be solved by governments alone; everyone needs to help: hire, work, buy.


Although there are no completely reliable predictors, the following are regarded to be possible predictors.

* In the US a significant stock market drop has often preceded the beginning of a recession. However about half of the declines of 10% or more since 1946 have not been followed by recessions. In about 50% of the cases a significant stock market decline came only after the recessions had already begun.
* Inverted yield curve, the model developed by economist Jonathan H. Wright, uses yields on 10-year and three-month Treasury securities as well as the Fed's overnight funds rate. Another model developed by Federal Reserve Bank of New York economists uses only the 10-year/three-month spread. It is, however, not a definite indicator; it is sometimes followed by a recession 6 to 18 months later[citation needed.
* The three-month change in the unemployment rate and initial jobless claims.
* Index of Leading (Economic) Indicators (includes some of the above indicators).
* Lowering of Home Prices. Lowering of home prices or value, too much personal debts.


Dating back to 1997-98, the economies of various countries of Asia such as Thailand, Malaysia and Indonesia suffered major economic crisis due to huge investment in real estate. The money for investment came from not very renowned foreign sources and thus it led to crisis due to poor banking practices. Meanwhile Crony Capitalism (where a borrower is backed by the government. For example, a president’s son could open up a bank easily and attract borrowers to involve their money as it would be in safe hands due to official connections behind) came into being. With these crisis in existence, the Asian countries soon realized that there requires a need for Foreign Exchange Reserve also called Forex Reserve. Forex reserve deals with conversion of currencies between the countries and thus allows easy money flow. As a result, Asian countries started to buy a lot of reserves and the U.S. securities to build a good foreign exchange reserve from international banks. Thus, the countries made a tendency of saving as much money as possible and expenditure became much lesser. The global demand crumpled and led to an imbalance in the global economics. According to many illustrious economists, today high Forex has become one of the very important reasons for the current recession. If today recession has taken place, the Asians share the blame too. Let me explain it to you.

After 1997-98 crisis, the Asian economies started to buy the U.S. securities as mentioned above. This led to dispense of dollars into the U.S. The American economy got so flooded with dollars that it needed an outlet. The outlet came in form of a borrowing and spending splurge. The U.S. financial system works that what ever loans or schemes they offer, hides the flaws and risks with such erudition that a borrower is lured to buy them.

The two main reasons that attracted the borrowers were low interests and huge funds that helped easy loans for people. With such attractive promises, people took more and more loans to build houses and invest money. Since there was surplus amount of money in the banks, all the terms were relaxed and the demarcation between the prime and sub prime loans came at par. Banks merely looked for borrowers irrespective of their background, returning capacity and poor credit history. Borrowers were lured with incentives and bonus offers. The interest rates were also kept low initially and were meant to increase after the initial period. Despite of this borrowers continued to buy even those with a poor credit history called NINJA (No Income No Job No Assets). The house prices started to soar due to huge investments. The splurge proved a good time for all. The lenders and borrowers believed that the interest rates that would increase gradually or the soaring house prices will help in recovering of the loans. In case the borrower is unable to pay the interest, the houses could be sold off until the prices are soaring.

Now begun the complication when the overbuilding of houses caused a decline in the prices thereby grasping the returning capacity of the borrowers. The borrowers had no money to repay the loans and meanwhile the interest rates continued to soar. The situation became worst when the loan amounts exceeded the total cost of the house and gave way to the current recession. Recession in economics means a general slowdown in economic activity in a country over a sustained period of time, or a business cycle contraction. During recessions, many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization household incomes and business profits all fall during recessions.

During recession sub prime loans came under immense limelight and turned out to be an excellent option for the banks. Many big investors bought such loans from the original lenders thus helping lenders with fresh funds to raise again. These investors were not only from America but also from the other parts and as a result the phenomenon remained no more confined to the U.S. The limelight of the loans remained until the prices soared. But as soon as there saw a decline, loans became unbeneficial and dicey.

Investors from all over the world who took loans faced major losses. These losses trickled down to other banks that were in chain with the international banks of America who formed the backbone of many banks. As the banks were left with no money, the major industries and companies worldwide that depended on loans from these banks for their activities faced closure. The recession became hazardous for the world market soon.

It’s been close to three quarters when the predominant American economy was stuck by Shocking bankruptcy declaration by Lehman brothers. What followed was the worst, many more big time banks followed the suit and the recession which gripped o America started to cover world under its black cloud. The origin of the current economic slowdown traced to reckless lending practices involving the origination and distribution of mortgage debt in the United States. The so called “Subprime” crisis triggered worldwide collapse of stock markets and sudden erase of wealth to many multi millionaire stock brokers and businessmen. People like Warren Buffet, Lakshmi Mittal, Mukesh Ambani lost staggering amounts stock market meltdown, where as ordinary people under the fear of recession started to spend less compared to what they used to spend in booming economy.

The effects it had on India were:

1) share markets were falling: If our share markets ever touched new heights, it was due to investments from international banks. Now that- due to recession banks- faced shortage of liquidity; they started to withdraw their investments from India.

2) The Indian currency got weakened against dollar: Before recession, banks continued to buy stock from India but now they are selling. The same stock thus converting Rupee into Dollars and weakening our currency.

3) Banks faced huge shortage of funds and soon collapsed: As banks kept giving loans and funds at reasonable terms. At the end of the day, they were left with nothing.

Comparatively, India faced much lesser effects of this hazard. On the other hand, Iceland has become completely bankrupt and a country such as America is under a dreadful shock. World’s greatest banks suffered losses and thousands of people lost their jobs. Statistics say 4000 jobs cut at Motorola, 100 at Google, Louis Vuitton cancelled the idea of setting up a mega store in Tokyo, Chanel have put down 200 staff in Paris and many other huge companies have done the same. Banks are short of money and capacity to run huge stuff has become impossible.

Recession is not something to deal with easily. Major economies and renowned economists are looking forward to solutions.

5mks answer on world bank :O


The term "World Bank" generally refers to the IBRD and IDA, whereas the World Bank Group is used to refer to the institutions collectively.

The World Bank's (i.e. the IBRD and IDA's) activities are focused on developing countries, in fields such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation, rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, electricity), and governance (e.g. anti-corruption, legal institutions development). The IBRD and IDA provide loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the economy. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and the implementation of new regulations to limit pollution.

The activities of the IFC and MIGA include investment in the private sector and providing insurance respectively.

The World Bank Institute is the capacity development branch of the World Bank, providing learning and other capacity-building programs to member countries. Two countries, Venezuela and Ecuador, have recently withdrawn from the World Bank.

The World Bank is a vital source of financial and technical assistance to developing countries around the world. We are not a bank in the common sense. We are made up of two unique development institutions owned by 186 member countries—the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).

creditworthy poor countries, while IDA focuses on the poorest countries in the world. Together we provide low-interest loans, interest-free credits and grants to developing countries for a wide array of purposes that include investments in education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management.



In finance, the exchange rates (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. It is the value of a foreign nation’s currency in terms of the home nation’s currency.[1] For example an exchange rate of 91 Japanese yen (JPY, ¥) to the United States dollar (USD, $) means that JPY 91 is worth the same as USD 1. The foreign exchange market is one of the largest markets in the world. By some estimates, about 3.2 trillion USD worth of currency changes hands every day.

The spot exchange rate refers to the current exchange rate. The forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date.

Nominal and Real exchange rates:

* The nominal exchange rate e is the price in foreign currency of one unit of a domestic currency.

* The real exchange rate (RER) is defined as:

RER = e \left(\frac{P}{P^f}


Pf is the foreign price level and

P the domestic price level.

The RER is based on the GDP deflator measurement of the price level in the domestic and foreign countries (P,Pf), which is arbitrarily set equal to 1 in a given base year. Therefore, the level of the RER is arbitrarily set, depending on which year is chosen as the base year for the GDP deflator of two countries. The changes of the RER are instead informative on the evolution over time of the relative price of a unit of GDP in the foreign country in terms of GDP units of the domestic country. If all goods were freely tradable, and foreign and domestic residents purchased identical baskets of goods, purchasing power parity (PPP) would hold for the GDP deflators of the two countries, and the RER would be constant and equal to one.

Bilateral vs. effective exchange rate:

Bilateral exchange rate involves a currency pair, while effective exchange rate is weighted average of a basket of foreign currencies, and it can be viewed as an overall measure of the country's external competitiveness. A nominal effective exchange rate (NEER) is weighted with the inverse of the asymptotic trade weights. A real effective exchange rate (REER) adjust NEER by appropriate foreign price level and deflates by the home country price level. Compared to NEER, a GDP weighted effective exchange rate might be more appropriate considering the global investment phenomenon.

Fluctuations in exchange rates:

A market based exchange rate will change whenever the values of either of the two component currencies change. A currency will tend to become more valuable whenever demand for it is greater than the available supply. It will become less valuable whenever demand is less than available supply (this does not mean people no longer want money, it just means they prefer holding their wealth in some other form, possibly another currency).

Increased demand for a currency is due to either an increased transaction demand for money, or an increased speculative demand for money. The transaction demand for money is highly correlated to the country's level of business activity, gross domestic product (GDP), and employment levels. The more people there are unemployed, the less the public as a whole will spend on goods and services. Central banks typically have little difficulty adjusting the available money supply to accommodate changes in the demand for money due to business transactions.

The speculative demand for money is much harder for a central bank to accommodate but they try to do this by adjusting interest rates. An investor may choose to buy a currency if the return (that is the interest rate) is high enough. The higher a country's interest rates, the greater the demand for that currency. It has been argued that currency speculation can undermine real economic growth, in particular since large currency speculators may deliberately create downward pressure on a currency in order to force that central bank to sell their currency to keep it stable (once this happens, the speculator can buy the currency back from the bank at a lower price, close out their position, and thereby take a profit).