Friday, February 20, 2009

Foreign Direct Investment (FDI)

Foreign Direct Investment (FDI) is permited as under the following forms of investments.
Through financial collaborations.
Through joint ventures and technical collaborations.
Through capital markets via Euro issues.
Through private placements or preferential allotments.
Forbidden Territories:
FDI is not permitted in the following industrial sectors:
Arms and ammunition.
Atomic Energy.
Railway Transport.
Coal and lignite.
Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper, zinc.
Foreign Investment through GDRs (Euro Issues) :
Foreign Investment through GDRs is treated as Foreign Direct Investment Indian companies are allowed to raise equity capital in the international market through the issue of Global Depository Receipt (GDRs). GDRs are designated in dollars and are not subject to any ceilings on investment. An applicant company seeking Government's approval in this regard should have consistent track record for good performance (financial or otherwise) for a minimum period of 3 years. This condition would be relaxed for infrastructure projects such as power generation, telecommunication, petroleum exploration and refining, ports, airports and roads.
Clearance from FIPB
There is no restriction on the number of Euro-issue to be floated by a company or a group of companies in the financial year . A company engaged in the manufacture of items covered under Annex-III of the New Industrial Policy whose direct foreign investment after a proposed Euro issue is likely to exceed 51% or which is implementing a project not contained in Annex-III, would need to obtain prior FIPB clearance before seeking final approval from Ministry of Finance.
Use of GDRs
The proceeds of the GDRs can be used for financing capital goods imports, capital expenditure including domestic purchase/installation of plant, equipment and building and investment in software development, prepayment or scheduled repayment of earlier external borrowings, and equity investment in JV/WOSs in India.
However, investment in stock markets and real estate will not be permitted. Companies may retain the proceeds abroad or may remit funds into India in anticiption of the use of funds for approved end uses. Any investment from a foreign firm into India requires the prior approval of the Government of India.

Fact file about Indian Banks ( 10 story makers in indian Financial Industry )

1) The first bank in India to be given an ISO Certification
Canara Bank
2) The first bank in Northern India to get ISO 9002 certification for their selected branches
Punjab and Sind Bank
3) The first Indian bank to have been started solely with Indian capital
Punjab National Bank
4) The first among the private sector banks in Kerala to become a scheduled bank in 1946 under the RBI Act
South Indian Bank
5) India's oldest, largest and most successful commercial bank, offering the widest possible range of domestic, international and NRI products and services, through its vast network in India and overseas
State Bank of India
6)India's second largest private sector bank and is now the largest scheduled commercial bank in India
The Federal Bank Limited
7) Bank which started as private shareholders banks, mostly Europeans shareholders
Imperial Bank of India
8) The first Indian bank to open a branch outside India in London in 1946 and the first to open a branch in continental Europe at Paris in 1974
Bank of India, founded in 1906 in Mumbai
9)The oldest Public Sector Bank in India having branches all over India and serving the customers for the last 132 years
Allahabad Bank
10) The first Indian commercial bank which was wholly owned and managed by Indians
Central Bank of India


ALLAHABAD BANk (An Overview)
Allahabad Bank, established in 1865, is the first fully Indian owned bank of India. It is an Oldest Joint Stock Bank of the Country, which was founded on April 24, 1865 by a group of Europeans at Allahabad. At that juncture Organized Industry, Trade and Banking started taking shape in India.
But at present, banks are passing through a very interesting phase; there is a transition from banking to financial services. As this is an age when the world has become a global village and money can move as quickly as information; thus, meeting world requirement has become a huge challenge for international players. So, banks are uniquely poised to broaden their product lines into complete offerings that would go under the rubric of financial services. But underlying this is the need to have sound fundamentals. There is no doubt that only those banks/financial institutions, which are focused on efficiency; productivity and profitability, have a chance to survive in this highly competitive market because now-a-days, banking is not just confined to acceptance of deposit for purpose of lending, it refers to intermediating and managing risk.
Allahabad Bank has been actively and efficiently participating in this present competitive financial market and its success is evident from the following:
October 2002: The Bank came out with Initial Public Offer (IPO), of 10 crores share of face value Rs.10 each, reducing Government shareholding to 71.16%.

April’2005: Follow on Public Offer (FPO) of 10 crores equity shares of face value Rs.10 each with a premium of Rs.72, reducing Government shareholding to 55.23%,

June’2006: The Bank Transcended beyond the National Boundary, opening Representative Office at Shenzen, China.

October’2006: Rolled out first Branch under CBS, now we have 18 CBS branches.

Febury’2007: The Bank opened its first overseas branch at Hong Kong.Dec’2008: Bank's business crossed Rs.250000 crores mark.

Monday, February 9, 2009

What is Corporate Governance

Corporate governance is a reflection of the company’s culture, policies, relationship with stakeholders, commitment to values and ethical business conduct. In the same spirit, timely and accurate disclosure of information regarding the financial situation, performance, ownership and governance of the company is an important part of corporate governance.
Corporate governance is all about “promoting corporate fairness, transparency and accountability.” This chapter provides some definitions of corporate governance and explains how it differs from corporate management.
It also identifies the various issues that must be addressed by corporate governance. It analyzes various corporate governance models that are adopted in various parts of the world and explains how corporate governance has evolved into its present form.
Corporate Governance when used in the context of business organisations is a system of making directors accountable to share holders for effective management of the companies, in the best interest of the company and shareholders along with concern for ethics and values. It is a management of companies by the board of directors. It hinges on complete transparency, integrity and accountability of management that includes executive and non-executive directors. Its genesis can be traced to the internal audit function and its importance was enhanced after the Stock Market Crash of 1987. With the CG reports of Adrian Cadbury in the United Kingdom, Mervyn King in South Africa and Kumarmangallam Birla in India the subject was reduced to controlling shareholder operations and ensure ethical practices in the financial sector. From thence, it has moved into other areas of the organisation but unfortunately restricts itself to the management and control of funds. The ambit of significance of CG lies far beyond this as has been explained at length in Business Ethics and Corporate Governance: Towards Organisational Excellence (2005).

Thursday, February 5, 2009

3 economist... :):):)

Three economists are out deer hunting one day when they see a huge buck in the clearing in front of them. The first economist takes aim with his rifle and fires. The bullet goes flying by the deer, about 20 feet in front of it. The second economist decides to give it a try. He takes aim and shoots. The bullet goes flying by the deer, this time about 20 feet behind the deer. At this point, the third economist starts jumping up and down, overcome with joy, yelling: WE GOT IT!! WE GOT IT!!

note:- the picture shown does not meant to offend any one.


The ICC (International Chambers Of Commerce) in the UCPDC (Uniform Custom Practices for Documentary Credit) defines LC (Letter of Credit) as:
“An arrangement, however named or described, whereby bank (the Issuing Bank) acting at the request and on the instructions of the customer (the applicant) or on its own behalf:
a) is to make a payment to or to the order of a third party(beneficiary) or is to accept bills of exchange(drafts) drawn by the beneficiary), or,
b) Authorizes another bank to effect such payments or to aceept and pay such bills of exchange(drafts), or,
c) Authorizes another bank to negotiate against stipulated documents provided that the terms are compiled with.”
Or in simple words, LC can be characterized as “an arrangement of Making Payment against Documents”. Banks in India normally opens Import LC under following circumstances:
Ø When a resident in India is importing goods into India.
Ø When a resident merchant trader is purchasing goods from one country, for sale to another country, for purpose of merchandising trade.
Ø When an Indian exporter who is executing a contract abroad requires importing goods from a third country to the country where he is executing the contract.
The inter-bank communication and transaction in LCs take place through SWIFT (Society for Worldwide Inter-bank Financial Telecommunication) network. SWIFT is industry owned cooperative supplying secure messaging services and interface software to over 7,000 financial institutions in 196 countries.
SWIFT messages are preset and referred to by category numbers called MT numbers. For example, MT300’s only deal with Forex transactions, MT800’s deal with Traveler’s cheques, etc. Each type of message in each category is preset as well. For instance, there are 89 different messages available under category 0f MT500.

How LC is a “Source of Earning for Bank”
Letters of credit are used nowadays primarily in international trade transactions of significant value, for deals between a supplier in one country and a wholesale customer in another.
From the bank's point of view, the LC they have issued can be called upon at any time (subject to the relevant terms and conditions), and the bank then looks to reclaim this from the applicant.
Banks earn commission from the applicant for making payment on his behalf to his exporter. Commission charged by Bank, on opening of LC or at the amendment is to be realized Upfront and no refund is being allowed. Commission charges concerned with LC(Bank normally) are given as follows:
1. Commitment charges At the time of opening of LC, commission of 0.15% is charged for every quarter and part thereof

2. Usance charges
Name of the Item
Rate of interest
For Bill Upto 10Days sight
For Bills upto 3months
For Bills over 3months
0.30% for first 3months+0.10% per month in excess of 3 months sight



'Post-shipment Credit' means any loan or advance granted or any other
credit provided by an institution to an exporter of goods from India from the date of extending credit after shipment of goods to the date of realization of export proceeds. It also includes any loan or advance granted to an exporter, in consideration of, or on the security of, any Duty Drawback or any receivables from Government Of India. PS Finance can be classified as under:
a. Negotiation/Payment/Acceptance of export documents under LC.
b. Purchase/Discount of export documents under confirmed orders/export contracts etc.
c. Advances against export bills sent on collection basis.
d. Advances against exports on consignment basis.
e. Advances against undrawn balances on exports.
f. Advances against receivables from Government of India.
g. Advances against retention money relating to exports.
h. Advances against approved deemed exports.

PS Credit is generally availed by exporters to get immediate payment against the goods (or services) shipped by them abroad. For availing this facility from Bank, documents are to be submitted within 21 days

How PS is a “Source of Earning for Bank”

Post shipment finance is meant to finance export receivables. In Post-Shipment sought of credit, Bank charges nearly Rs.20000 as commission per sanction.
The rate of interest charged for this facility by the same is as follows:

Name of the Item
Rate of interest
For Bill Upto 10Days sight
For Bills up to 3months
For Bills over 3months
0.30% for first 3months+0.10% per month in excess of 3 months sight

The interest scheme is given as under:

Name of the Item
Rate of Interest
On demand bills for transit period (as specified by FEDAI)
not exceeding 0.75% over LIBOR
(LIBOR is 5.35%)
2.Against usance bills (credit for total period comprising usance period of export bills, transit period as specified by FEDAI +grace period wherever applicable) up to 6 months from the date of shipment
not exceeding 0.75% over LIBOR(that is, not more than 6.10%)
3.Export bills (demand or usance) realized after due date but up to date of crystallization
0.75% + 2.0%points (that is, 8.10%)
Thus, banks earn mainly through commission and rate of interest charged under Post-Shipment Credit granting sort of transaction. Foreign Currency earned may be kept as deposit with the bank, or, it may also use it for trade purposes, so, as to earn exchange profit

Pre-Shipment/Packing Credit(PC)

Pre-Shipment/Packing Credit(PC)

PCFC is a scheme which provides credit to exporter in domestic/foreign currency in order to facilitate the purchase of raw material/components that are required to fulfill the export order. Or, in brief, it is a Working Capital (short-term) finance extended to the exporters, in anticipation of his exporting the goods. The exporter can procure the raw materials/components either from international or from domestic market.
This facility can be availed by exporter in one convertible foreign currency in respect of an export order invoiced in another convertible foreign currency. The risk and cost involved in such cross currency transaction is that of exporter.

Pre-Shipment Credit can be availed in the form of:
a. Packing Credit in Indian Rupees
b. Packing Credit in Foreign Currency
c. Advance against incentives receivable from Government covered by ECGC (Export Credit Guarantee Corporation) Guarantee.
d. Advance against Cheques/Drafts received as Advance Payment.

Bank provides all the forms of PC. It strictly follows the instructions and rules and regulations governing the following:
1. Exchange Control Regulations
2. Trade Control Regulations
3. RBI’s Interest rate directives and other operational guidelines
4. ECGC policies and guarantees
5. Rules of FEDAI(Foreign Exchange Dealers Association of India)

How PC is a “Source of Earning for Bank”
PC is being introduced with the objective of making credit available to exporter at internationally competitive rates.
Bank charges Rs. 20000 per sanction (that is, it charges this amount on every PCFC request by an exporter).
The rate of interest charged for this facility, by Bank, is linked to LIBOR (that is, rate of interest charged to exporter should not exceed 0.75% over 6months on LIBOR, excluding withholding tax.). The interest scheme, followed by Banks, is given as under:

Name of the Item
Rate of Interest
Up to 180 days
not exceeding 0.75% over LIBOR
Beyond 180 days and up to 360
not exceeding 0.75% over LIBOR+2%LIBOR (London International Bank Offer Rate) is presently 5.35%

Tuesday, February 3, 2009

15 important Tips for better life

Tips for Better Life on "2009"

1. Take a 10-30 minutes walk every day. And while you walk, smile.
2. Sit in silence for at least 10 minutes each day.
3. Sleep for 7 hours.
4. Live with the 3 E's -- Energy, Enthusiasm, and Empathy.
5. Play more games.
6. Read more books than you did in 2008.
7. Make time to practice meditation, yoga, and prayer. They provide us with daily fuel for our busy lives.
8. Spend time with people over the age of 70 & under the age of 6.
9. Dream more while you are awake.
10. Eat more foods that grow on trees and plants and eat less food that is manufactured in plants..
11. Drink plenty of water.
12. Try to make at least three people smile each day.
13. Don't waste your precious energy on gossip.
14. Forget issues of the past. Don't remind your partner with his/her mistakes of the past. That will ruin your present happiness.
15. Don't have negative thoughts or things you cannot control. Instead invest your energy in the positive present moment.