Lending Trouble

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Irfan M A, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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The ripples created by Vijay Mallya’s Kingfisher Airlines defaulting their repayments has not yet settled. The arrest of the top brass of IDBI Bank for approving Mallya’s loan has made the banks, especially the public sector to be cautious in dealing with the large non performing accounts.  It seems that the stressed loan accounts may  have to undergo the bankruptcy code and might not get a helping hand like they used to in the past. Previously, the banks used to take certain steps to help the corporate borrowers during stressful times. They often restructure through methods like lowering of the interest rates, increasing the payback period, conversion of debt into equity in which the bank appoint its representative in the director board, all of which actually helped these heavy borrowers to surpass their hurdles.

When the bankruptcy code is invoked as soon as the business is stressed out, without considering the restructuring option in fear of actions from enforcement agencies, the firms which otherwise might have had a huge chance of being revived, will get axed without even being given a second chance. This actually does more harm as once the firm is declared bankrupt, it can never be sold for the market valuation it had. The firms will be taken up for auction by the banks which fetches them only a depressed value or as in many cases, no takers at all. Thus the banks lose out again on a large chunk of its capital. At the end of all this the public funds are at stake due to this. Hence it is high time that the RBI come up with a structured procedure to revive large corporate firms depending upon their potential to rise again. Instead of writing off the large debts , it can actually be realized in most of the cases. The current behavior of the banks might only help the asset reconstruction firms.

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Budget 2017

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Amrutha Bhamidimukkula, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur


The country is fast moving from desktops to handled devices and smartphones are improving in their penetration and ease. This highlights the prominence of mobile banking in our lives. Quick adaption by a large chunk of the population, though sudden and to some extent forced, to mobile banking and e-wallets was one of the saving graces during demonetization. Making smartphones more affordable and promoting cheaper data services will be one of the key expectations. Affordable mobile handset or consumer durable items of a certain price limit may be given concessions on duties.

For the e-commerce market, particularly, major businesses have demanded clarity of FDI in B2C e-commerce through automatic route. Last year, the government allowed FDI into B2C e-commerce but disallowed the marketplaces like Flipkart and Snapdealto offer discounts to consumers thus ending the discount wars. Though consumers enjoyed the discount wars, brick and mortar stores claimed they suffered hugely due to such business tactics.

The government will want to put the country back on the high growth path. So, improving customer confidence and consumer spending will be vital as well.

H-1B visa impact on IT Sector

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Shivani Manchanda, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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Information Technology Sector in India slumped by 4% after the U.S. administration proposed to renovate the H-1B work visa programme. This programme is widely used by all the Indian IT firms to send thousands of their employees to U.S. every year, now all the IT companies may have to change their business strategies as the new policy also include to double the minimum wage to $130,000 of the H-1B visa holder.

The wages are increased and it is being said that it is for the efficient hiring of talented and skilled people but as the Indian IT companies would not be able to pay this higher amount to their employees so this shows the inclination on the Trump’s campaign in one line “American jobs Americans only”. Now most of the Indian employees will be left with the offshore working and the opportunities to work onsite will reduce.

Tech centers established in U.S. are now planning to shift these in other countries as it will be difficult for them to hire people from other countries and they are also aware of the shortage of skilled workforce in U.S. like the shortage of data scientists.

Obviously this is not the best solution if the focus is really on hiring the skillful and capable employees for American companies because it is tumbling international opportunities and directly impacting the Information Technology sector of India.

India’s first international stock exchange

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Nishitha Kasara, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur


IndiaINXIndia International Exchange is country’s first international exchange inaugurated by PM Modi at Gujarat International Finance-Tec(GIFT)  City in Gandhinagar. It provides an electronic trading platform for companies that are willing to go abroad.

A subsidiary of Bombay Stock Exchange, India INX is one of the world’s most advanced technology platforms with a turn-around-time of 4 micro seconds which will operate for 22 hours a day, allowing international investors and NRIs to trade from anywhere across the globe.

INX will trade initially in equity derivatives, currency derivatives, commodity derivatives including index and stocks. It plans to offer depository receipts and bonds later.This has been done with a view of enabling the Indian firms to compete on an equal footing with offshore financial centres

Indian International Exchange ( INX ) will create more Capital Inflow in Indian Economy from Global Investors in coming years. It also helps in increasing liquidity in Indian Share Market.

 

Union Budget 2017 – Income tax relief v/s Corporate tax relaxation

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

 

Ronak R Choksy, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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Perhaps the only other thing in India that gets as much attention as cricket and Bollywood, is the Union budget. There already are a lot of eyes on the budget session that is coming up on the 1st of February. This year’s budget is special due to a number of reasons. Firstly, for the first time, the Union budget and the railway budget are going to be announced together and on February 1 instead of the usual February 28. Secondly, Uttar Pradesh Legislative Assembly elections are due in February. A populist budget has the potential to turn around the UP elections in BJP’s favour. And most importantly, this will be the first budget after Prime Minister Narendra Modi’s bold demonetization move in November.

Demonetization has reduced people’s spending. There are concerns over slower GDP growth of our country as a result of demonetization. IMF has cut India’s growth forecast to 6.6% from 7.6% after demonization. Hence, most people believe that the government might relax the income tax slabs to boost public spending and get the GDP back on track. According to most newspaper speculations, basic tax exemption limit should be increased to from the current Rs. 2.5 lacs. But in my opinion, such a tax relief will not help much in boosting spending because only 1%-2% of the Indians (or roughly 4% of labour force) pay taxes. Instead the budget might focus more on boosting agriculture and rural economy as they were the most hard-hit among all. The government may also consider lowering corporate tax rates to enhance the economic growth. Lower corporate tax will boost corporate investments in research and development and infrastructure and will also create more employment. This will also attract more foreign investment in India. Lower corporate tax may not necessarily mean lower revenue for the government. In fact in the past we have seen an increase in government revenue after lowering corporate taxes. Hence as compared to relaxing income tax, decreasing corporate taxes makes more sense in this situation.

India as a cashless society

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Appan Ghosh, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

The “Digital India” campaign is the flagship program of the Government of India. And as a part of this initiative, payments in the country is one of the key focus of the government today. Recently we saw the government taking a step towards a cashless society by demonetization of 500 and 1000 rupee notes. Explaining the step as a strategy towards a cashless economy , PM Narendra Modi on the show “Mann ki baat” emphasized on mobile banking transactions as a means to achieve this objective. Even the finance minister, Arun Jaitley, spoke of the necessity to reduce the “implicit costs of printed currency”.

Over the past 2 months we have seen different options of cashless transactions being promoted to increase awareness and acceptance of the digital payments. Some of them are:

  • Debit / Credit cards
  • Mobile banking apps like Paytm,BHIM, UPI enabled apps from banks, etc
  • Bank prepaid cards
  • Micro-ATMs
  • Internet banking
  • USSD codes for feature phones

The steps are not only taken by government, but initiatives are also taken by the private players in the payments industry. We saw Paytm and other digital wallets waiving off the processing fees from 4% to 0% up to transactions of Rs. 2000, at the same time when banks were waived off the NEFT transaction charges post demonetization.

All these steps are promising, and our own survey has shown many folded increase in cashless transactions in the retail sector. But there are other factors related to acceptance of a cashless society, which also need to be addressed:

  • Infrastructure – which will include free WiFi or internet made available to do the transactions, better network coverage from telecom providers to avoid transaction failures, better
  • Security – RBI can introduce mandated guidelines for the payments facilitators to follow like: PCIDSS, instant lock features of accounts/transactions to avoid security risks upon lost mobiles/cards.
  • Awareness – People needs to be made more aware of the transactions and needs to trust the digital payments, so awareness programs has to be launched across the country with emphasis for rural India

With all these factors addressed, it will certainly become easier for the Government of India to on-board the citizens on the digital-economy platform and accelerate towards a cashless society.

References:

Trump’s ‘Americans first’ stance to wary off investors, Weaken Rupee

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

 

Debangana Dhar, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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Just after few days of Trump’s swearing in as one of the most powerful position in the world, estimations have started flowing in amongst the apprehensions about the global economic turmoil. Trump’s protectionist move might slow down the bull of stock market and can hit the rupee, sending it down by 3% to the greenback. The Indian currency may take a plunge to hit to a fresh low of 70 against the dollar in the next few months, as estimated by the experts. The expectations are indicating towards the soaring of dollars in next six months, as Trump’s ‘Buy American and hire American’ slogan is showing no sign of being muted.

Events such as Brexit and the US presidential election last year have not taken such a heavy toll on the market, as it is predicted to have now and a weakening rupee might result in foreign investors turning away from Indian market. Same trends have been shown by other emerging economies. Japanese yen was down 0.49%, China renminbi 0.18%, Philippines peso 0.17%, South Korean won 0.14%, Singapore dollar 0.13%, Indonesian rupiah 0.08%, China offshore 0.06%. Amidst these uncertainties, the worried Dalal street is looking forward to the upcoming budget to calm down investor sentiments through Government reforms.

Ever since Trump has won the election, the US business confidence has got a boost on the promise of lower tax rate coupled with the impetus to the US economic growth. The bullish equity market based on US funds is convincing global investors and causing an outflow from the emerging markets and weakening the emerging currencies. In India, the protectionist policies may have a sizable impact on the Nifty earnings as nearly 15% of the total revenues of Nifty companies are derived from the direct exports to the US. India can now pin down its hopes of regaining the vigour to a favourable budget. After the initial clouds of demonetization start clearing the way, the foreign investors might pick up the confidence in a more transparent market. The same downward trend of rupee can be exploited by the forex traders to make the most of the situation. Whether it will be on the down side or it will start going up on the roller-coaster ride- depends on how World and Indian watchdogs react to the upcoming challenges.

Payment banks- The Next step towards digital India

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

VIJENDHAR KADIPIKONDA, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur.


Bharti Airtel one of the eleven companies which were provided the licenses for payment banks has started their nationwide operations last week. Payment banks are the new category of banks conceptualized by the RBI whose main objective is to make financial services available to the rural and low income population who are outside the banking system. The payment banks unlike the existing banks cannot provide loans or credit cards to its customers but can accept savings deposit up to INR 1 lakh and issue debit cards.

The government of India is taking initiatives to digitalize the financial sector and move towards cashless economy. The demonetization of the high valued currency in the last November has promoted online payments and e-payment wallets in the country. Firms like Paytm, Mobikwik has seen a tremendous growth in their businesses in the last couple of months. Payment banks will be the next game changing step towards the digitalization in the current situation. Payment banks and their customers interact mainly through the mobile phones and internet unlike traditional banks. Mobile networks has penetrated to farthest corners of the country and about 25% of the population is using smartphones. Telecom giants Airtel, Aditya Birla group, Vodafone which were granted the license for payment banking with their existing customer base can take the benefits of payment banks and digitalization reach every town and village in the country. In addition the payment banks are offering much higher interest rate for the savings deposits than the traditional banks. Airtel has announced 7.25% interest rate whereas the traditional banks offers 4% rate.

Payment Banking system promises to be a game-changer providing basic banking transactions through mobile phones.

Warburg’s trust invested in PVR

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Sourav Kumar, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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From a mere start as a single screen theater in South Delhi in 1978, PVR has tread a long journey  making its way to the exalting segment of multiplexes. From its humble beginning, to getting a national footprint, PVR has augmented with many acquisitions as well as Greenfield assets.

Witnessing the assurance of a prospering future ahead, Private equity giant Warburg Pincus has acquired around 14% stake in PVR for around Rs 820 crore. The stake acquisition concluded valuing India’s largest film and retail entertainment company at around Rs 6,000 Crore. The stake is being acquired from affiliates of private equity firm Renuka Ramnath Founded Multiples, which will remain as a long term investor with a 14% equity stake. Ahead of which it stands evident that the business will still be driven by current promoters holding the largest chunk of stake with over 25% holding.

The acquiring stint has been greeted with warm welcome, keeping in view the fact that Indian multiplex industry is at a cusp of thriving possibilities, of growth accompanied with driving forces derived from consumer demand and experience, convenience and technology. Also, the firm’s Global Network and experience will be invaluable for it’s way forward.

Of all the seemingly promising factors, it seems that Warburg Pincus counts the most upon the PVR authority’s passion and commitment to the business.

Disruption of banking industry by Blockchain transactions and potential roadblocks faced in the process

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Krishnachaitanya Potturi, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur.


Blockchain is emerging as a potentially disruptive force capable of transforming the financial services industry by making transactions faster, cheaper, more secure and transparent. The Blockchain is a public ledger where transactions are recorded and confirmed anonymously. It’s a record of events that is shared between many parties. More importantly, once information is entered, it cannot be altered. A block is the “current” part of a blockchain which records some or all of the recent transactions, and once completed, goes into the blockchain as permanent database. Each block contains a timestamp and a link to a previous block.

The key attributes of the blockchain include the following:

  1. Security– hacking is impossible given the ledger is distributed across thousands of computers, reducing server maintenance requirements and improving security for banks.
  2. Transparency– the sender and recipient of each transaction are recorded and all transactions are publicly available for inspection.
  3. Privacy– users are anonymous and can move money around instantly and securely. This allows banks to save time and reduces costs on international transactions.
  4. Risk– currently, if a bank’s system goes down, users are unable to perform transactions. Using the blockchain technology, the bank’s system would continue as normal.

Blockchain has a lot of potential and will be disruptive to existing business models. It can provide payments capability at a fraction of the cost of traditional payment methods. Blockchain principles go beyond just currency and can potentially represent an exchange of value of complex bank transactions and other assets like investments and shares. It also offers an inherent level of trust for the user, eliminating the need for the middleman and mitigating the risk of human error. The first levels of disruption seem more likely in the payments space where traditional transactions such as money transfers, credit and debit card payments, remittances, foreign currency and online payments, require an intermediary such as a clearing house or a financial institution. However, the biggest potential impact of a public ledger may extend beyond the payment system. Given that the majority of financial assets such as bonds, equities, derivatives and loans are already electronic it may be possible that someday the entire system is replaced by a decentralized structure.

However, this technology is still very new and unknown to most, trust in its application is nowhere near the trust we give our banks. Powerful incumbents or governments may try to stop this technology as it can create an entire sub-economy that can’t be tracked should the owners of the Blockchain choose not to reveal the underlying transactions. Blockchain is 100% digital, as more and more blocks are added to the chain, more and more data and power will be consumed to support the network. Will this be sustainable for large players using this technology?  Currently, Bit coin can handle 3 to 5 transactions per second and Ethereum 15 to 25. But the interbank Visa system handles 2,500. So if blockchain have a serious future, it must overcome current scalability roadblocks.