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