Want a Home Loan? Take It Now!

A dream new home is everybody wants or invest to make money, but perception these days that with high interest rates home loans are unaffordable. Well because of increased home loan rates there will be less number of takers of home loans now. But I think if we look at the whole picture then there should be more home loan takers than before. It is absurd to think like that in current situation but removing the curtain of subjectivity will sove this.

Now what is happening, prices of steel, cement, aluminium, iron and almost every commodity are increasing. Due to this the housing sector bears the brunt of increased input costs in developing in houses and townships. Subsequently house developers increased the prices of properties, while the demand from consumers has not subsided yet. But soon people will shy away from buying new homes as when the interst rates on home loan increases. That’s exactly what happened and there is low number of home loan takers, as now people will have to pay more through EMIs.

The boom in the real estate market in last 3 years has seen lakhs of houses being built, development of new townships ans still they are in developing phase, but people are not going for new homes now waiting for interest rates to dip a bit. So, few takers of new houses built by developers has compelled them to reduce some prices to keep selling and attracting people to buy in homes. So now when the demand is reduced, the housing market is seeing a downward trend especially in metros. Bangalore seems to be in the midst of low demand & high supply. This can be attributed to the facts that due to the sudden growth of Bangalore, in the last few years. When demand is low & supply is high prices will come down. In Mumbai developers such as Hiranandani and Kalpataru offered a discount of more than 10% on the quoted price. There is a substancial pressure on Indian residential sector because of abundance of reality projects coupled with high intrest rates and inflation. It has come to the notice of The India Street that there has been a correction of around 15% on an average in the capital market values of land across Delhi and NCR.

There is no rocket science in understanding of above stated concept based on principles of demand and supply. But how it can be god option to take home loan right now? how to eliminate the effect of increased EMIs? Well earlier people took home loans at floating rate thinking that the rate would dip but instead they increased. That was there ill luck. But now it ill be best advised to tale a floating rate of interest because interest rates are at all time high and there in slow down in the growth of economy which the country’s central bank, RBI, sees. RBI increased the CRR (Cash Reserve Ratio) and Repo rates in order to reduce the supply of money in the system through banks so that inflation can be contained which is also at all time high. But then inflation is not directly proportional not growth of the economy and RBI has to keep a fine balance so that economy grows at affordable inflation rate.

As I write this the crude oil, which is main culprit of pushing inflation up, is at 128 $/ barrel down from 145 $/barrel and it reduce soon below 120 $ mark as Saudis are increasing the output, fearing more reduction consumption because of the prices they are charging. Tension between US and Iran which was at its hit few days ago seem to be allayed down as US ageering to start a diplomatic approach instead of going for war over Iran alleged nuclear enrichment program to make nuclear weapons. And also Brazil’s major oil company Petrobras workers have decided to end their strike. All these can be seen as positive global cues and can make crude oil prices to reduce further.

Now with lower prices of crude oil comparatively will lead to the reduction petrol and diesal prices in India too, and steel prices reduce too as Government is planning to ban exports, hence inflation will relax. When inflation will manageable low, RBI at an oppurtune moment will reduce CRR. Banks will then have to park less fund with RBI and inject more funds in the circulation by reducing loan rates.

Therefore bottom line is that the home loan rates will decrease in future and this attributed other kinds of loan rates as well like car, personal etc. Hence people will have to pay low EMIs in future. But property rates are seeing a downward trend only now when demand is less. When interest rates are reduced the prices of property will jump again. So it an opputunity at this moment in time then adversary. Also from an investment point of view. Whatever the condition of the economy, one thing we should not forget is in the long term property (land) is a great investment as it is the only asset class which cannot be produced. Though there might be a 18-20% correction across in the short term ( say 6-8 months) due to the factors mentioned above ,a wait, watch and a definite buy make sense for the long term.

ICICI Bank provides not just the most competitive interest rates & best level of service, but also products designed to cater to the specific needs of consumer. ICICI bank has different interest rate scheme

1. Fixed Rate Home Loan

2. Adjustable Rate Home Loan

or combination of above two types of rates

a. Step Up Repayment Facility (SURF) for young professionals.

b. Flexible Installment Plan (FLIP) for varying tenure of income source.

c. Part Fixed, Part Floating to minimize the impact of changing in the interest rate regimes.

d. SmartFix Home Loans for 3 years lock in period to see the rates movement and then decide.

e. Money Saver Home Loan

All this with free personal accident insurance and of course tax benefits.

Interested people regarding this or for any other banking solution can contact by sending an e-mail at Spetznag5@yahoo.com

“Uncertainty is not a pleasant state of mind but certainty is absurd” – Voltaire

US role on oil prices.

Well the current crude oil prices are at burgeoning level, like never before, though it seems to stabalise a bit hovering between 137-146 $/barrel for a month now. But the drastic effect that high oil prices have left on the economies around the world has taken its toll on the common people. High prices have led to dangerous inflation leading to a slump in economies and putting them in jeopardy. Inflation has breached all time highs in many countries like India where it is inching towards 12% and Russian inflation was 11.9% in 2007. Inflation in Latin America ranged from 3.3% to the high teens in 2007. The Chinese agree to let their currency rise faster than in 2007 to combat inflation. In Singapore, the consumer price index rose by 0.6 per cent in February on rising prices of housing, clothing and food items. In Hong Kong, the composite Consumer Price Index rose at a slower annual pace of 0.8 per cent in February, compared to the 2.0 per cent increase in the prior month. Oil prices have shot up, some say because of hugh demand in emerging countries others say it is due to speculation. Well perhaps both of these.Speculation, surely taken the prices to a new high. Unlike past oil crises, where the spot price of oil (that is, today's price) rose more than forward prices, the oil price for delivery in 2012 is trading at $138 per barrel. The market is sending a clear price signal that our problem is in the future.

Another speculation is about the US’s aggression over Iran, and a possible conflict in the middle east giving the signal that prises could reach 200 $/barrel. And US has given amber signals to Isreal to start preparing for war after Iran test fired 9 long and medium range missiles. The day next to those tests see prices shooting up 6 $/barrel, which clearly shows how, if a war happens, then prices will reach the sky. Iran which is the second largest producer of oil, has clearly stated that if attacked by anyone, it will spill the oil in Strait of Hormuz from where half of the imported oil towards Asia, Africa and Australia come from. In 1973 oil crisis which began on October 17, 1973, when the members of Organization of Arab Petroleum Exporting Countries (OAPEC, consisting of the Arab members of OPEC plus Egypt and Syria) announced, as a result of the ongoing Yom Kippur War, that they would no longer ship oil to nations that had supported Israel in its conflict with Syria and Egypt (the United States, its allies in Western Europe, and Japan). Now it will be US who will be responsible if war starts and oil price reaching unaffordable prices that economies of India, China, which already facing all time high inflation, to see a slump. Infact in India high oil prices have already showing its effects on development and growth.

US has already commited a blunder going for Iraq invasion, and Iran , it will cause hugh effect , and a lot of new emerging countries would perhaps become absolutely stagnated. The decision by president bush to start offshore drilling of oil was welcomed as it would send a signal to monopolised OPEC that more oil is coming. But that decision is overturned recently.

Although Iran president President Mahmoud Ahmadinejad has said that he would have talks to follow rather than war. Weapons of Mass Destruction was the reason for Bush’s earlier adventure into Iraq, and now Iran nuclear enrichment and possible threat to the world in long term. Well long problems are solved slowly it is and with vision and consultation but what about the short problems that the whole world is facing. If he is really desperate to launch a rocket or a fire a bullet, then why not in North-West Frontier Province (NWFP), and Waziristan,  the area near Afganistan-Pakistan border, which houses cream of Taliban. They are the guys more dangerous and definitely posing a problem and that too in short term. Regarding nuclear enrichment program which Iran states it is for peaceful energy production and US says for building nuclear weapon, US doesn’t really have that concreat evidence to say that, but surely it it can’t be ruled out that nuclear weapons are not in making.US can gather more support for pushing more economic sanction. It has got the success in diluting North Korea's nuclear enrichment or atleast Iran can be persuaded to have IAEA inspect its enrichment program. But I think if economies around the world slows down especially in Asia, which houses half of world population then 1 billion will crawl into poverty, unemployment and many other problems. It will be worse than exploding a nuclear bomb at one place.

US is itself so careless in taking care of its nuclear material that in recent news says that US is taking too long to secure the radioactive material that it could get into the hands of terrorist’s.

I support US in a lot of things but i would be really happy for world if it take caution in whatever it tries to do. So all onus on US what it will do, will it be the saviour or the destructor. The whole world depends on IT.

Naxalism: Socio-Economic Dimensions

“Naxalism is the single biggest internal security challenge ever faced by our country. The movement has gained in strength and has now spread to over 160 districts all over the country...the extremists are trying to establish ‘liberation zones’ in core areas where they are dispensing basic state functions of administration, policing and justice,”. These are the words of our Prime Minister Dr. Manmohan Singh in 2006
The roots of naxalism, later termed as Maoism or left Wing Extremism(LWE) has now been labelled as pre date independence. Naxalism is pre-dominantly rural but has also witnessed urban menifestations such as in calcutta during the period 1967 to 1970. The LWE has extended across nearly half of indiacovering the hill-forest belt through middle and peninsular india.
The problem, as seen the socio-ecomic today, arose through zamidari system.In this system a Zamidar was told to cover thousands of acres of land, for which he had to pay so many lakhs to the company or to the state. The Zamidar did not cultivate the land. he had various people as subordinates, farmed them out, and they inturn farmed them out to others, and they in turn to others till to the actual cultivators. this way the actual tiller was sucked to get the money or produce from them to pay the rent to the state or to the company. Zamidar remained a rentier and not a cultivator and several layers of sub-infeudation existed and each one extracted his pound of flesh.
In case of forests, the process of reservation of forests and protected forests for conservation, reduced the tribal inhabitants to intruders and encroachers. these people lived in forest which was their home, their livelihood for generations. The state took away their rights. The symbiotic relationship between the tribals and the forest was scorned, in the name of creation of sanctuaries, tiger protection, nature and biosphere reserves and land acquisition for a hundred different reasons- dams, roads, refugee settlements, expansion of urban areas, expansion of agricultural land, mines, industries and so on. All of these at the cost of forest and tribals.
So they are removed from forest and aquired land with the promise of their resettlement and rehabilitation and payment of compensation. Well promises never materelised. Today when the state or a corporate body promises compensation, people laugh and scorn and say we have heard it before. For example people in orissa displaced due to construction of Hirakund dam are not compensated nor resettled.
Such actions by the state make people believe that the state really can’t think better of them and even suck out their lives as they are the easy to be removed, have no means, have no voice. There are also problem with the administration of remote and isolated areas which are defined underdeveloped and had poor connectivity. The Abujhmarh area in Chhattisgarh is bigger than Manipur state. The area is totally un-surveyed. It doesn’t have roads, schools, hospitals, no basic amenities. With nobody want to go their, the affluent indian doesn’t think of going to that place so why build roads.
Basically there has been a lack political will because the feudal class with vested interest is sitting at the top. Bihar was the worst case perhaps, there were issues like bonded labour and non payment of even basic minimum wages. The feudal class is well entrenched in the government jobs, media, judges, professors and so on. The freight equalisation policy introduced by govt. in 1950s, eliminated the adavantage the the rich mineral states could have. The state paid subsidy to ensure that the price of coal or iron was same be it Kerela or Nathula pass as in area where it is mined. Thus all triggering meachanism for development- connectivity, generation of employment and incomes disappered. And even where the oppputunities were, the tribals not educated and devoid of training.
Cumulative wrongs, deprivation and despair have given rise to naxalism which has grown in the interior. Naxalism came as protectors and Robinhoods. They set up Jan Adalats and dispenced. They were the protectors of common people against exploitation. They beacme bolder. After taking good control they said that every family would contribute on male or female to their squadrons. People came under an iron control. This in turn led to another kind pressure. The govt now is keen to develop the area by constructing roads, railways and so on. The naxalites do not want area development because this will give access to the state administration and threaten them and their power.
Law and order is neccessary to deal with criminal activites of people including extortionists of various kind. Well, one whole concept of law and order stand for the defence of feudalistic and oppressive system. So we need social and economic reform to ensure human dignity, fraternity, social justice, education and equal democratic rights to exercise. The current agitation is about displacement for various acquisations for mining and development projects. Over 50,000 people have been displaced to the Salwa Judum campaign in Chhattisgarh. So what we need is a new paradigm of development in which we have public, private and people’s participation.Development of backward areas is indeed a long-term solution to prevent expansion of naxalism. Naxalite problem requires putting the interest of the Adivasis and Dalits on the highest priority. It cannot be addressed by more displacement,Socio-economic development of the Naxalite affected areas requires a seperate ministry for undertaking development programmes, coordination with various state governments and involvement of the civil society groups for ensuring the right to entitlement of the of tribals.
Prime Minister Dr Manmohan Singh stated that “exploitation, artificially depressed wages, iniquitous socio-political circumstances, inadequate employment opportunities, lack of access to resources,under developed agriculture,geographical isolation, lack of land reforms, all contribute significantly to the growth of the Naxalite movement.”
As the agenda that the Naxals mouth is typically pro-poor and because the ‘development’ in India is not reaching all of the population, the Naxals are having a field day. The government seems to be waking up to the seriousness of the situation however and well, better late than ever.

In conclusion I want to say that the government has proposed a two-pronged strategy to combat Naxalism:
1.Gain confidence of local people by taking up more welfare related activities.
2.Build up infrastructure in naxal-affected areas and generate employment.

We need the deal

The Indo-US nuclear deal is being called the biggest breakthrough in years. Tough negotiations between Indian and American diplomats that took place, and lobbying by NRIs led to draft this deal, even as the deal battled its way through Parliament in Delhi and the US Congress.Many have consistently raised concerns that this make-or-break deal might be bad for India but here is a look at more of the fine prints of the deal that has a life span of 40 years.The 123 agreement is a civil nuclear deal, therefore, it will have no bearing on India's strategic and military programme and India can make a bomb. It is completely out of the ambit of the deal.In the text of the deal there is a clause that says that the agreement will in no way be a hindrance to India's strategic programme. Therefore,India can continue to make a bomb with its own fuel.What is clear from the draft of the 123 agreement is that there is no legal binding commitment on India to never test again. India, if it wants to, can choose to conduct a nuclear test.If India does conduct a nuclear test, it will not be violating any international treaty or agreement because there is no mention of testing or detonation in this bilateral agreement.Essentially, what the controversy has been over is whether if India conducts a test the Americans under their own laws would have the right to take back all the fuel that they give us.

Right of return

The deal interestingly says that the right of return that the Americans have does not automatically comes into effect. It is something the US administration chooses to do. They would have to stop cooperation with India. But whether or not they take back fuel is something they would have to choose to do.Even after the US chooses to do that, there are about seven to eight barriers before the right of return actually comers into play.What the agreement says that that it will take into account the circumstances in which India conducts a nuclear test.These include a ''changed security environment'' or action, which could impact national security.Essentially what it boils down to is that the right of return may not be invoked if Pakistan or China conduct nuclear tests and India responds to that by conducting a test of its own.In a way, this is the first international agreement, which would justify the circumstances in which a nuclear test is conducted. So India is not giving up its right to test and right of return of nuclear fuel does not automatically comes into play. Under Secretary of State Nicholas Burns has told earlier before he retired that India retains the “sovereign right” to explode a nuclear device but hopes that such a situation will not arise. “India retains its sovereign rights, but the U.S. retains its legal rights as well.

These assurances that the US would ensure that there is a lifetime supply of fuel for India's nuclear reactors and that they help India build its strategic fuel reserve.If the US is unable to fulfill this commitment, it will convene a group of countries like Russia, France and the UK to ensure supply.Even if, for some reason, they were to take back nuclear fuel, India retains the right to seek alternate sources of fuel for itself. India will have to build strategic reserve so that it does not go out nuclear fuel.

Highlights of the Deal

* The agreement not to hinder or interfere with India's nuclear programme for military purposes.

* US will help India negotiate with the IAEA for an India-specific fuel supply agreement.

* Washington will support New Delhi develop strategic reserves of nuclear fuel to guard against future disruption of supply.

* In case of disruption, US and India will jointly convene a group of friendly supplier countries to include nations like Russia, France and the UK to pursue such measures to restore fuel supply.

* Both the countries agree to facilitate nuclear trade between themselves in the interest of respective industries and consumers.

* India and the US agree to transfer nuclear material, non-nuclear material, equipment and components.

* Any special fissionable material transferred under the agreement shall be low enriched uranium.

* Low enriched uranium can be transfered for use as fuel in reactor experiments and in reactors for conversion or fabrication.

* The ambit of the deal include research, development, design, construction, operation, maintenance and use of nuclear reactors, reactor experiments and decommissioning.

* The US will have the right to seek return of nuclear fuel and technology but it will compensate for the costs incurred as a consequence of such removal.

* India can develop strategic reserve of nuclear fuel to guard against any disruption of supply over the lifetime of its reactors.

* Agreement provides for consultations on the circumstances, including changed security environment, before termination of the nuclear cooperation.

* Provision for one-year notice period before termination of the agreement.

* The US to engage Nuclear Suppliers Group to help India obtain full access to the international fuel market, including reliable, uninterrupted and continual access to fuel supplies from firms in several nations.

* The US will have the right to seek return of nuclear fuel and technology.

* In case of return, Washington will compensate New Delhi promptly for the "fair market value thereof" and the costs incurred as a consequence of such removal.

* Both the countries to set up a Joint Committee for implementation of the civil nuclear agreement and development of further cooperation in this field.

* The agreement grants prior consent to reprocess spent fuel.

* Sensitive nuclear technology, nuclear facilities and major critical components can be transferred after amendment to the agreement.

* India will establish a new national facility dedicated to reprocessing safeguarded nuclear material under IAEA safeguards.

* Nuclear material and equipment transferred to India by the US would be subject to safeguards in perpetuity.

APPROACH TO RURAL LENDING and APMC

There are basically two types of approaches through which banks lend in rural areas. One is branch based, in which all activities like sourcing, disbursal, post sanction follow up are controlled by the staff working at the branch. Other is non-branch delivery based model in which a more holistic approach is taken. Banks get into partnerships with other financial institutions and franchisees.

Identifying models for rural lending

1. The most basic requirement is to ensure that the actual producer benefits from a higher return for their produce. At present the market is highly disorganized and the producer is therefore unable to take any advantage. In the current market practice a lot of intermediaries are involved, such as Dalals and Arathias, who just take care of their own interest. And the farmer, who is the producer, gets minimal to sustain him, and most of profit is taken by taken by the middle men.

2. There is a very little support for the farmers to store their produce and take the advantage of an anticipated increase in price for their produce as proper and cheap storage facilities are not available. The farmer has no capacity to wait and get better return in the market. The produce gets disposed off at the depressed prices levels, because everybody sells his produce during the post harvest period.

3. The very primitive condition of the roads coupled with the lack of adequate and cheap transportation facilities, makes it impossible for the farmers to transport their produce directly to the consumers and by-pass the middle men. And also the markets are far off the capacity of farmer that better price, they could get.

In recent times, considerable head way has been made for regulating the marketing of the agricultural commodities through a model called Agricultural Produce Market Committee Act (APMC). Through this a lot of malpractices prevailing in the agriculture commodities market are sought to be removed. A notable feature is the encouragement provided for public-private partnership inn developing and managing the agricultural commodity market.

Large integrated cooperative marketing societies exist, which serve the cause of producers in effectively marketing their produce, such as cotton, sugarcane, potato, tobacco and fertilizers.

Advantages of APMC model

1. Storage and grading of commodities are done by APMC.

2. It provides farmers with a better capacity to wait and obtain better prices.

3. Interim finances are made available to farmer’s pending sale of produce thereby enhancing their capacity to wait for better prices.

4. Provides the farmers the ability to move the bulk of their commodity to the market at cheap rate.

5. Helps to even out the imbalances in the market.

6. Farmers are provided with High Yield Variety (HYV) seeds and other agriculture inputs required for increasing the farm production.

CPM (Completely Paralyzing Movement)

Well CPM and left parties have invented a novel method to make the aam aadmi rich, that’s by inventing Bandh, and means closed every activity. So by calling the 12-hour bandh, the CPM brought the city to a standstill. No trade happened; offices closed, schools closed. People couldn’t fly because airport was closed, they couldn’t die ‘cause crematoria were closed, they couldn’t get born ‘cause maternity clinics were closed. What an incredible part on CPM to paralyze the country, thank god they are not in center otherwise I can’t imagine what would be the state of our country. These bandh happened in Bengal, Kerala, Tripura, all ruled by them. Now with bandh applied everything stops, all fuel-guzzling cars, trucks, buses, planes, trains are brought to a halt so there will not be more demand for fuel. So people will stay at their homes and won’t be spending anymore on oil, so there pocket will stay fatter. So by immobilizing ourselves we’ll be rich overnight. But for every non-movement forward (bandh), there is an equal and opposite reaction, it’s called going backwards.

The CPM is master in taking the country backwards, since the start of this UPA government, they are blackmailing, putting enormous pressure on the government in each and every effort to start a social expenditure. Off course, the big nuke deal, they oppose it like they have got there head cut and put in burner. Ronen Sen rightly called them as headless chickens, apart from other politicians. SO what is the fuss ‘bout the nuke deal, its just that this deal is formalized with the USA. so they have to oppose it. It is there 100 year old ideology that they have to oppose everything American. The CPM has been really been mired in their not so applicable ideology. They need to understand that this deal just a win-win deal for India, but the staunch supporters of China will oppose it at all cost. YOU know when India fought against China in 1962, the Left parties supported the Chinese, and today only 2 entities are opposed to this Indo-US deal, they are CPM and China. Now if anybody would call CPM as traitor after reading this, it wouldn’t surprise me. Reiterating that thanks to god, that they are not in power otherwise, I guess India would have been a bankrupt country, in the wake to fulfill the populist measures to falsely lure aam aadmi. Very sooner the next generation will have nothing to proud of our country and ask why CPM, the Chinese agent flourished in India.

URGE TO ROUTE THEM IN THE COMING ELECTION

Financial Institutional Framework in India

Financial institutions play an important role in economic development of a country. These would typically include commercial banks, specialized financial institutions and organized capital markets. Financial needs of a business are both long term and short term. The long term needs are for meeting the capital expenditure, while short term needs are for meeting working capital requirements like for buying raw materials, paying off debtors and so on.

There are different financial institutions which help finance both long term and short term requirements of running a business.

Banking Sector:

Banking framework has been described by me in one of the articles called banking institutional framework in India. But apart from the scheduled commercial banks that I have talked of, there are Regional Rural Banks (RRBs) as well. These were set up in 1975, in order to mobilize rural savings and provide credit and other facilities to small craftsmen, farmers and entrepreneurs.

Insurance Sector:

The insurance companies are major financial intermediaries in the non-banking sector. The life insurance business in India started in 1818. In the year 1956, when the life insurance business was nationalized, there were as many as 245 insurance companies conducting the business. With nationalization of these companies, a single organization was created called Life Insurance Corporation of India (LIC). Today LIC enjoys monopoly situation. In addition, it has been able to mobilize substantial amounts of rural savings.

The business of general insurance was also in the hands of private companies. There were 68 Indian organizations and 45 non-Indian organizations. In November 1972, these organizations were nationalized and General Insurance Corporation (GIC) was created which has four subsidiaries, namely, New India Insurance Assurance Company Ltd., United India Insurance Company Ltd., National Insurance Company Ltd and Oriental Fire and General Insurance Company Ltd.

Myanmar crises created by junta

The situation in Myanmar is much more horrifying than we could actually ever imagine sitting in our living rooms and reading the bottom news scrolls on TV news channels that the supplies like food, medicine, shelter are still in short and thousands of people waiting and the problem is still at large. Any country in the world or the administration of any country would endeavour and will put hardest effort to save the people of their country dying because of shortage of food, clean drinking water because of the tragedy that has hit them but the current military coup in Myanmar is the worst in the history of mankind that those people sitting atop are of same ethnicity, culture and are pouring on subsequent tragedies like blocking the relief aid supplies from other countries, as it is against their ideology, not allowing the proper distribution of relief. The people sitting on top are the army generals of Myanmar who took the country in their hand without much resistance. Now when the citizen of Myanmar badly hit by the level 4 cyclone Nargis, they are made to grovel for their survival, it’s a shame. Even 2 weeks after the cyclone hit lower Myanmar, the generals holding the coup refused to take the aid from international community because the same international community was pushing Myanmar to pitch for democracy. now any country who is in distress because any type of tragedy that has occurred must not just accept but ask for aid supplies of basic things to save their countrymen but here the generals seem to be still in clouded in their in fake uniforms.

Although after stern criticism from all countries they have allowed initially only the UN to just provide aid then other countries but the distribution will be done by the military. So how will they distribute the aid, well military generals are quite innovative. On each box of aid supplies they have written the name of their generals and are publicizing their agendas. Phew. But to their knowledge, those people out there waiting to live for long somehow, desperately seeking some help are not going to see manna in the name of the general written on the box. But they would be thankful only if they survive as long as the supplies reach them on time. At the moment, though supplies are reaching to Myanmar but there are scores and scores of people who still have not got any sort of relief. Military junta must allow foreigners to help distribute aid efficiently to thousands of people and allow them to work full fledge otherwise thousands will die for a petty reason that people ruling Myanmar didn’t allow others to save the life of fellow Burmese.

And even if military junta doesn’t do anything much, I guess there is no harm that US or UN forces take over the notorious junta there and get rid of these rascals from the planet earth where humanity is worshipped.

Banking institutional Framework in India

Borrowing and lending are nearly as old as man himself, though with time and changed circumstances, their form has undergone changes. During the pre-independence period, British banks dominated the financial scene, although there were few Indian banks. The foundations of modern Indian banking were laid during the beginning of the 19^th century when three presidency banks were set up in Calcutta, Bombay and Madras. In 1921, the three presidency banks were amalgamated to form the Imperial Bank of India which started to function more or less like the central bank of the country for a decade. It became the State Bank of India in 1955. It was in 1935 that a proper central bank, namely, the Reserve Bank of India (RBI), was established.

The RBI became state owned after the RBI act in 1949. The commercial and co-operative banks are required to keep and maintain part of their reserves with the RBI from where they can borrow money for their requirements. Vast powers are vested in the RBI and certain decisions can be taken by the banks only in consultation with or after obtaining permission of the RBI. These matters relate to the establishment of new banks, setting up of bank branches, swapping of branches, cash reserve ratio, statutory reserve ratio, etc. The RBI also functions as a promotional organization in some respects. In 1963, the RBI also promoted agriculture re-finance organization known as National Bank for Agriculture and Rural Development (NABARD) to provide long-term finance for agriculture development.

Banking in India has passed through various phases to reach its present level of development. There are different types of commercial banks, namely, scheduled banks, non-scheduled banks, foreign banks and regional rural banks (RRBs). The scheduled banks are those banks which are included in the second schedule of Banking Regulation Act, 1965, and have to satisfy certain requirements regarding capital, etc. The banks which are not included in second scheduled are non-scheduled banks.

State Bank of India is the largest bank of India and also holds the Guinness book of world record having the maximum number of bank branches in the world. ICICI bank is the second largest bank of India.

Stock markets in India

There are in total 22 stock exchanges in India including the Over-the-Counter Exchange of India. The Bombay stock exchange is the oldest one, in fact oldest in Asia. This exchange contributes very largely to India and that is why Bombay is also called as the financial capital of India.

Presently, there are stock exchanges at Ahmedabad, Bombay, Bangalore, Bhubaneshwar, Calcutta, Cochin, Mangalore, Delhi, Patna, Vadodara, Jaipur, Kanpur, Pune, Saurashtra, Meerut, Ludhiana, Madras, Guwahati, Hyderabad, Indore, in addition to the OTCEI. Some of the exchanges are organized as public limited companies while others are set up as voluntary non-profit associations.

Stock market in India actually witnessed a major boom on the eve of the First World War as Europe could not produce any manufacturing articles other than war equipments. The import of manufactured products into India stopped completely which leveraged Indian enterprises and their business increased and they made good profits. After that when the Second World War broke out, India emerged as one of the major supply hub for various products, leading to huge increase in industrial production, which was reflected in the growth of the stock markets after the war.

The stock exchanges in India are categorized by differences in trading hours, settlement procedures and delivery systems, the ultimate result of which is that the investors’ interest are affected. Hence, the government took a decision to form National Stock Exchange (NSE) at Bombay with Industrial Development Bank of India (IDBI) as the lead sponsor. The NSE has a uniform settlement period which is T+2, like anywhere in the world. NSE is efficient and modern stock exchange where trading is fully computerized, with speed and transparency in deals.

The Over-the-Counter Exchange of India

OTCEI is a new concept in India and it has potential to serve as an effective exit route for venture capital investors. This exchange was set up in 1989 to deal in securities of those companies which are smaller and could not be listed on the main stock exchange. The OTCEI has been promoted by several leading financial institutions such as the ICICI and UTI, banks and insurance companies.

Exclusive features of OTCEI

1. Registration of investors: - Every investor has to obtain registration on the OTCEI before he can to trading on the stock exchange. Each investor is issued an INVESTOTC card with an exclusive registration number.

2. Ring less trading: - Trading on the OTCEI is through computers linked to the central OTC computer, which allows nation wide trading. Hence there is no formal ring (floor) for trading in securities.

3. Transparency: - Since all the trading is done through computers, the investors can always check the price of any securities at any time and also the price at which the transactions took place. So there is transparency in the deals that take place in OTCEI.

4. Scrip less trading: - The investors don’t exchange certificates of securities but they trade with an instrument called Counter Receipt (CR).

5. Assured liquidity: - The requirement of listing on OTCEI include compulsory sponsor and an additional market maker who are required to give both ‘buy’ and ‘sell’ quotations.

6. Single-window concept: - all functions such as the transfer of shares, splitting of shares, registration of power of attorney, etc. can be carried out at the counters of the OTCEI. This is one of the biggest advantages of the OTCEI.

REGULATION OF STOCK MARKETS

The first major legislation governing stock exchanges was the Bombay Securities Contracts (control) Act, 1925, which was later replaced by Securities Contracts (Regulation) Act, 1956. The Securities and Exchange Board of India (SEBI) was created in early 1988 as a non-statutory body and given statutory powers in early 1992.

MICROFINANCE

Microfinance is the service offered to low and moderate income household, including the provision of credit, and also in some cases insurance called micro-insurance.

See finance is life and blood of any economy. Finance is more significant than other factors of production and livelihood because it caters to the needs of the rural population, which is 70 % of India’s total population, and which is poverty stricken.

In India, banks provide microfinance through Self Help Group (SHGs) and Non Governmental Organisations (NGOs). Presently, there are more than 2 million SHGs in the world. According to some estimate, there are approximately 3100 Microfinance Institutions (MFIs) worldwide, with over 80 % of its members as women. Because women are considered more credit worthy and benefit more from these institutions. Apart from a bread winner, if woman of a family can also contribute in generating a livelihood, then it greatly helps in raising the standard of living as well as an earning woman can take care of her children better.

Grameen Bank Model

The origin of Grameen Bank can be traced back to 1976 when Professor Muhammad Yunus, Head of the Rural Economics Program at the University of Chittagong, launched an action research project to examine the possibility of designing a credit delivery system to provide banking services targeted at the rural people. He also got the nobel prize for his achievements. At GB, credit is a cost effective weapon to fight poverty and it serves as a catalyst in the over all development of socio-economic conditions of the poor who have been kept outside the banking orbit on the ground that they are poor and hence not bankable. The success of GB is based mutual trust, accountability, participation, and creativity among stakeholders. The model ensures that the needy get the required finance, irrespective of their financial status, based on their potential to generate additional income by putting the money to productive use. GB gives priority to women than men. This can be proved from the fact that around 96 % of its borrowers are women.

Key Features of GB are :-

1. The total interest on a loan never exceeds the loan amount regardless of the duration of non-payment of the loan.

2. If the interest amount equals the principal amount, no interest is charged thereafter.

3. Customers are charged simple interest in GB, unlike in other banks where customers are charged interest.

4. In case of death of a borrower, the borrower’s family is not required to repay the loan to GB. There is a built-in insurance programme that pays off the entire outstanding amount with interest. Therefore no liability is transferred to the deceased’s family.

GB has influenced the growth of the microfinance sector in India.

Organized Sector of Indian Financial System

It comprises capital markets, money market, and foreign exchange market.

Capital market:- The capital market consists of all those connected with issuing and trading in equity shares and medium and long term debt instruments, which are bonds and debentures. The capital market is the most dynamic and the largest segment of the financial system.

Both equity and debt markets have two segments, primary and secondary. Primary market deals with issue of new equity and debt instruments and secondary market deals with subsequent buying and selling of these instruments. Secondary market is very important as it gives exit option to the investor. The capital markets operations are regulated by SEBI (Securities and Exchange Board of India). It regulates all participants in the market issuers, investment bankers who manages the issue, collecting bankers, brokers who facilitate trading of instruments in secondary market, investors and sellers of instruments, stock exchanges, clearing corporations and depositories.

Money market:- In money market short term funds are borrowed and lent. Government, banks, PSUs, private companies and quasi-government body are leading money market institutions. Largest volume of debt instruments are traded by Government of India and then banks. Banks play three important roles in money market. These are:

--- as borrowers of funds

--- as fund raisers

--- as dealers.

Banks borrow to fund their loan portfolio and to satisfy reserve requirements. Banks offer short-term, chiefly overnight loans immediately.

Banks also borrow funds from money market for longer periods by issuing CDs (Certificates of deposits). Its period ranges from 1 to 6 months. Banks raise funds through RPs (Repurchase Agreements). An RP is the sale of securities with the simultaneous agreement by the seller to repurchase them at later date. This agreement is a short-term collateralized loan.

Foreign exchange market: The inward remittances on account of exports and remittances from Indians working abroad result in flow of foreign currency into the country. The foreign funds accumulate in Indian bank’s Nostro accounts with their correspondent foreign banks outside India and also pay out equivalent Indian rupees to the beneficiaries in India.

Inward foreign funds increase money in circulation. Banks, which have surplus foreign currency funds, sell it to other Indian banks in exchange of Indian rupees. Surplus foreign funds with abnks are sold to RBI. Balances in the foreign currency accounts of RBI become the foreign exchange reserve of the country. An increase or decrease in forex impacts the financial system through increase or decrease in money supply.

Foreign entities invest in Indian business entities are called FDI (Foreign Direct Investment), and FII (Foreign Institutional Investors). These flow are large in magnitude and have a great impact on the Indian capital market and exchange rate.

Venture Capital in India

Venture capital in India is very recently originated in around late 1980s. The government took the lead in institutionalisation of venture capital. The government announced the venture capital guidelines in november 1988.
Institutions coming under the guidelines were entitled for tax relief on capital gains under the indian income tax act.
The venture capital was first started in USA and then in other western countries. India influenced by the prospects of venture capital, introduced it in the country. The venture capital guidelines(1988) focussed on a relatively narrow area of venture capital activity, though india has a fairly well developed network of financial institutions. The area included in this was equity oriented finance for commercialisation of relatively new technologies promoted by new enterpreneurs.
Indian venture capital firms are allowed to make investments only in India. So far 61 % of investments have been in start-ups, with seed investment is 9 %, development is 13 %, and mezzanine is 15 %. Both equity and debt instruments have been used in the Indian venture capital industry, including conventional loans and conditional loans as well as various quasi-equity instruments..
The important characteristics of venture capital are;-

1. Venture capital is basically equity finance in relatively new companies, when it is too early to go to the market;
2. It requires patience in the sense that it is a long term investment;
3. There is a substantial degree of active involvement with the promoters of the business, also may be called
as 'hands-on' management;
4. The investment is expected to provide superior returns through capital gains at the time of exit..

There is another important aspect which is that some venture capital investments expect very high returns which should more than compensate for some of the other investments whish may result in very losses. The seeking of such potentially high returns is called as 'vulture capital'.

Although Indian venture capital industry is too young to assess, bnut following points and observations can be made. These are:-

1. There are very few players currently in the field and even the few private venture capital companies have been supported to a significant extent by banks and other financial institutions.

2. The industry has a relatively narrow focus as compared to their counter parts in the developed countries. So far, financing arrangements, such as managements buy-outs, etc. have not been even considered by the Indian industry as appropriate venture investments. However the industry is still in the evolutionary face, so it may broaden up its ares of activities in futures.

3. The financing stuctures in India have initially included a strong component of loan finance,which is more similar to the Japanese and Korean, than USA and UK., models.

Indian Realities

1.Fourth rank in Dollar Billionaires: India in 2007 has the fourth highest number of dollar- billionaires in the planet. India is ahead of all countries in the number of billionaires except the United States, Germany and Russia. Incidentally, our billionaires are richer than those of Germany and Russia in terms of net asset worth.

2.126th in Human Development: India has the second richest billionaires in the world in dollars and has the fourth largest number of billionaires in the planet but is 126th in human development. The same nation that has ranks fourth in billionaires is 126th in human development. What does it mean to be 126th? It means that it is better to be a poor person in Bolivia (the poorest nation in South America) or Guatemala or Gabon. They are ahead of us in the UN’s Human Development Index.

3.836 million live on less than Rs. 20 a day : India is the emerging ‘tiger economy.’ But life expectancy in our nation is lower than it is in Bolivia, Kazakhstan and Mongolia. We have 100,000 dollar millionaires, out of whom 25,000 reside in the city of Mumbai. Yet, 836 million people in our nation exist on less than Rs. 20/- a day according to the Government of India. There is no such thing as Indian reality. There are Indian realities. There is a multiplicity of realities.

4.Slowing down of infant death rate decline: The growth rate of the country is indeed the envy of many. But the rate of decline of infant mortality actually slowed down in this country in the last 15 years. The largest number of infant deaths 2.5 million takes place in this country, followed by China.

5.CEO’s salaries set all time records : Chief Executive Officer ‘packages’ grew like never before in the last ten years. Indeed, the Prime Minister of this country felt constrained to make some remarks about the salaries of CEOs. But while CEOs salaries have gone through the roof, farm incomes have collapsed.

6.Rising hunger at the bottom : India added more newly hungry millions than the rest of the world taken together, according to the report of FAO from 1995-97 to 1999-2001. Hunger grew at a time when it declined in Ethiopia. A new restaurant opens everyday in some city of this country.

7.Two-nation theory passé. Its Two Planets now : Today, for the top 5 per cent of the Indian population, the benchmarks are Western Europe, the USA, Japan and Australia. For the bottom 40 per cent, the benchmarks are the Sub-Saharan Africa (some of whose nations) are ahead of us in literacy.

8.Indebtedness has doubled in the past decade : The NSSO’s 59round tells us that while 26 per cent of farm households were in debt in 1991, that figure went up to over 48 per cent – almost double by 2003.

We really need to understand the framework of inequality. And we are getting further and further into the divide.

Consider these points and ponder -

-over 1 lakh farmer suicides.

-corporatization of farming.

-hugh indebtedness in rural areas, no other profession available

-discriminating SEZ policy

-no farm income, when inputs high

-authority of seed companies