Archive for the ‘Indian Economy/Financial Markets’ Category

25 years of private sector mutual funds in India…

July 20, 2018

The Indian Mutual Fund industry was opened to private sector in 1993. 2018 marks the 25th anniversary.

ET has interesting articles:

There is another piece by Arati Krishnan in Business Line on the hits and misses.

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When a jewelery company questions practices and ethics in banking sector…

July 20, 2018

The popular history of banking in the west, suggests that banks actually evolved from goldsmiths. In the earlier years, these Goldsmiths kept reserves of merchants. The former gradually started loaning out part of these deposits leading to gradual development of banking as we know/understand today. The earlier currencies were either gold or backed by gold making this relationship even more complex and intricate than we can imagine.

Infact, even in India, where banking traditions precede those in the west by several centuries, we see the same historically. The gold/jewellery business have deep linkages with banking. The earlier bankers in India were mainly from the precious metals sector. Gradually, the banking became more professional and based on joint stock and these linkages diminished. But then Nirav Modi saga has led to a different type of problem. Earlier people ran away after borrowing from these jeweler bankers. Now we are seeing the opposite.

Thus, it was interesting when a jewelry company recently released an ad which mocked the practices and questioned the ethics in banking sector.

The banking union was obviously not impressed and demanded an apology:

A new TV commercial by Kalyan Jewellers highlighting its “trustworthiness” by Bollywood’s leading superstar and his daughter has got bank employees up in arms for showing them in a “derogatory” manner, and has now made the company tender an unconditional apology and promise to add a disclaimer.

The All India Bank Officers’ Confederation (AIBOC), the largest association of bank officers, has objected to the Hindi version of the new TV advertisement by Kalyan Jewellers starring its brand ambassador Amitabh Bachchan and his daughter Shweta Bachchan Nanda.

“We express our strong resentment against the management of Kalyan Jewellers and Amitabh Bachchan who have manifested a negative and false image of banks in the advertisement for their personal aggrandisement,” said the 3.2 lakh member strong AIBOC.

Seeking an unconditional apology from Kalyan Jewellers and withdrawal of the advertisement, the union had warned that it would otherwise take action, including dharnas and litigation.

“Due to various reasons, banks have already got a bad name. The advertisement has further hurt the sentiments. Customer service is our first priority,” said Soumya Datta, General Secretary, AIBOC, adding that public sector banks have been working for nation-building through schemes such as Jan Dhan Yojana, Mudra loans and Aadhaar enrolment. The union has also complained to the Advertising Standards Council of India.

In a communication to the bank union, Kalyan Jewellers has now promised that a disclaimer will be added within three working days before the advertisement stating: “Characters and situations depicted are fictional. The brand does not intend to disrespect or malign any person or community.” But the union is not happy with the disclaimer. “A letter has been issued by Kalyan Jewellers. But unless they stop airing the ad, it is not acceptable to us,” Datta told BusinessLine.

This is even more ironical as trust has eroded in both banking and jewelry sector..Perhaps some bank should react and show jewelry sector in similar light

A slow-cooked battle over ‘Malabar’ biryani

July 16, 2018

Another fascinating story of how two companies are battling to use the word Malabar to differentiate their Biryanis:

Now, if there’s one perennial, unresolvable, fun and quintessentially Indian debate that comes close to which variety of mango is best, it is about which kind of biryani is tastiest. The people of Malabar have no doubt that their version is the most delectable. So much so that a couple of competing brands have battled in the courts over owner- ship of the word.

The flames were first lit in the Calcutta HC in 2012, when Parakh Vanijya Private Limited alleged that Baroma Agro Products’ use of the mark Malabar Gold for its ‘special biryani rice’ amounted to an infringement. Parakh claimed it was using the word Malabar since 2001, and Baroma’s biryani rice label was identical and deceptively similar to its own mark.

The Calcutta HC found some similarity between the two labels, and restrained Baroma from using the mark for the time being. A Division Bench also agreed.

Baroma kept the fire burning, moving the Calcutta High Court to vacate the 2012 order, alleging that Parakh was relying on ‘fabricated documents’ and that the company could not claim exclusive right over the word Malabar. In 2016, the HC sought to douse the coals and balance the interests of both parties, considering their substantial turnovers; it allowed Baroma to use the label Malabar with an increase in type size of not more than 25% of the rest of the words or letters on the pack.

Now, it was Parakh’s turn to strike back: the company moved the Supreme Court. On July 12, a bench of Justices Ranjan Gogoi and R. Banumathi noted that Amalgamated Bean Coffee Trading Company manufactured Malabar Monsoon, and Tropical Retreats used Malabar Coast for its range of coffee, tea, cocoa, sugar and other products, and that the rules of registration itself were against any company claiming exclusivity over the term Malabar.

Justice Banumathi, who wrote the judgment for the Bench, concluded, “Since there is a disclaimer to the exclusive use of the word ‘Malabar’, the appellant has no right over the exclusive use of the word.’

Judgement copy is here.

Amazing how these battles keep brewing (or boiling in this case of rice) from time to time…

Review of Indian statistical system

July 16, 2018

This is an important paper by R.B. Barman Chairman of National Statistical Commission.

In economics, we pay far more attention on which statistics to use compared to how the data/statistics are collected over the years. This should be part of the course as then it gives students a perspective on both strengths and limitations of whichever economics data they are using. It is appalling to note most students are completely clueless on how and where to get data on key economic variables.

Mr Barman advocates usage of digital technology to strengthen the stats system:

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Forest shrines and sacred groves: Impact of changing economy on the Kodavas

July 12, 2018

Nice paper by Veena Poonacha:

The article delineates the life-affirming values of caring for the earth among the Kodavas in Kodagu district, Karnataka. It argues that the coffee economy under colonial rule depleted the forestland, a trend exacerbated by the post-independence economic and forest policies. The full impact of these policies are apparent from the growing conflict in the area between wild elephants and humans.

This article has argued for the need to rethink development policies since the current model of economy is based on the over-utilisation of natural resources. It recalls the existence of a sustainable world view that conserves biodiversity. The lives of forest people, living in the tropical forests, were not necessarily easy; and yet the idea of the sacredness of the web of life prevailed. The representation of the sacred in Kodava cosmology was both male and female. If the male god Igguthappa presided over agriculture, it was the river goddess, Cauvery, who was the giver of life. Similarly, if the hunter god, Ayyappa, and the protector of animals, Muthappa, were represented in the sacred groves, the mother goddesess Bhagavathi, Bhadrakali, and Chamundi were worshipped in other groves. These mother goddesses are not benign consorts of male gods, they are ferocious and independent, like nature Itself.

The philosophical underpinnings of this sacred cosmology contrasts sharply with the values of domination over the earth, ushered in by colonialism into Kodagu less than 200 years ago. Colonial policies defined forests as “wasteland” and trees assessed for their commercial value rather than intrinsic worth. The continuation of this model of development, after independence, has exacerbated the destructive trend. The introduction of the coffee economy has contributed historically to the destruction of forests. However, it is now seen as eco-friendly and labelled “private forests.” This change in nomenclature serves to statistically conflate the total area under forests. It also provides the rationale for the sale of forestland to other private enterprises.

There is community rancour against these changes. The Coorg Wildlife Society and Save Kodagu, Save Cauvery campaign are struggling to protect the environment. There is political demand to break away from Karnataka in order to protect the land. However, their voices remain muted because of their lack of numerical strength. The way forward is to involve the forest communities in decisions affecting the land use in Kodagu as envisaged in the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act of 2006.

Saving Coorg and its citizens should be one of our top priorities. There are hardly places as beautiful and serene as Coorg…

SBI orders recovery of overtime pay during note ban from staff of associate banks

July 12, 2018

This bit is interesting.

SBI paidits emplyees overtime during noteban. Apparently the money as paid to the Associate Banks as well who merged with SBI on April 1, 2017. SBI says overtime pay is not their responsibility and asking to recover the money paid to Associate staff:

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Japanese Occupation of Nicobar Islands: Slavery, Espionage and Executions

July 9, 2018

Superb paper by Ajay Saini of TISS:

Primarily based on archival research, especially an unpublished diary of Nicobarese stalwart leader John Richardson, this article gives a glimpse of the sufferings that the Nicobarese endured under the Japanese colonial regime during World War II. The regime exposed the indigenes to war, slavery, torture, and executions. At the same time it engendered leadership in the Nicobar Islands which consolidated these historically isolated people into a community and ended their prolonged economic and sexual exploitation.

There is discussion on barter system in the islands as well.

Chhattisgarh: A Numismatic History, a unique film on story of coins

July 6, 2018

Nice to read about this movie titled Chattisgarh which documents coin history in the State.

The film titled Chhattisgarh

Movies make us laugh, cry, jump with joy and grab the nearest pillow in fear. But some movies teach us a lot about life, history and philosophy. One such documentary feature film on The Coins of Chhattisgarh from the collection of Dr. Bhanu Pratap Singh was shot in the month of June.

Think about the history you’re holding in your hand. It could be a coin issued in the memory of win over the western gang king by Kalchuri King Jajalladeva by portraying himself as a lion attacking and defeating such an elephant like enemy or may be a silver punch-marked coin counter struck with Malhar symbol to show a clear sovereignty of the state. Coin collectors are stewards of these treasures and a wise collector can also turn them into an investment.

The collection was beautifully displayed at an exhibition and a film with a story about the kings and the coins issued by them was shot around it.

Would be great to see this movie. The history of coinage in India is such an understudied subject…

Indore municipal corporation raises money via bonds and lists them too!

July 6, 2018

This is an interesting development in Indian bond markets.

Indore municipal corp has raised Rs 140 cr via bonds and listed the bonds on NSE:

Following the listing of Indore Municipal Corporation’s bonds on the NSE on Thursday, the Madhya Pradesh Government is expecting at least three more issuances of such bonds in the next three to four months. These are by the municipal corporations of Bhopal, Jabalpur and Gwalior

Indore Municipal Corporation (IMC) received subscriptions amounting to 214.9 crore for the 10-year bonds against the original issue size of 100 crore plus a green shoe option of 70 crore. It accepted 139.9 crore at 9.25 per cent, the NSE said in a statement. The Swachh Survekshan had declared Indore as the cleanest city in the country in 2018.

Shivraj Singh Chouhan, Chief Minister, Madhya Pradesh, said, “We have plans to tap the bond market for the development of infrastructure in the State… We are expecting at least three more issuances of Municipal Corporation Bonds from Bhopal, Jabalpur and Gwalior in the next three to four months.”

NSE said the municipal bonds of the IMC have earned the distinction of being the first-ever municipal bonds to list on the debt market platform of the exchange. “IMC will be the third in the country to issue municipal bonds for implementing Central government scheme — AMRUT (Atal Mission for Rejuvenation and Urban Transformation) and Swacch Bharat Mission,” the statement said.

Ahmedabad was the first municipal corp to raise money via bonds but I think they were not listed. There is a lot of talk on the need for India to move from a bank driven model to a bond drive one. Nice to see city governments taking this step..

Designs of bank notes issued by the Reserve Bank of India since 1967

July 3, 2018

RBI released its Master Circular on Detection and Impounding of Counterfeit Notes.

The Annexure VII of the Circular has a list of design of banknotes by RBI since 1967.  These design changes were done mainly to check counterfeiting notes.

  1. Rs 10 notes: 11 design changes
  2. Rs 20: 6 changes
  3. Rs 50: 8 changes
  4. Rs 100: 8 changes
  5. Rs 200: new denomination
  6. Rs 500 (new series): skips discussion on old series of Rs 500 notes.
  7. Rs 2000: new denomination

The notice also excludes Rs 1000 note as it was declared that it is no more legal tender and a new series was not issued as seen in case of Rs 500. It is also interesting to see that RBI barely made any changes to any of the available denominations (Rs 10, 20, 50 and 100) in 1980s barring Rs 50.

 

From Indradhanush to Sashakt and several in between: Bank resolution plans keep coming

July 3, 2018

When good friend Tana sent me this link early morning, I just thought it is another news item. Least did I realise that there is another bank resolution plan named Sashakt (means strengthen) to address banking problems in India. There have been so many resolution plans that one has lost count now. There was much talk when Indradhanush was announced which was a seven pronged strategy. Even before and after Indradhanush, there were several measures announced by RBI as well.

Project Sashakt has 5 prongs:

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Face reading to spot the next big loan defaulter?

July 2, 2018

Not sure how this will work:

With banks at their wits ends over high profile customers defrauding them of thousands of crores, some have turned to face-reading to spot the next Vijay Mallya or Nirav Modi. Private banks in Gujarat have approached the Forensic Science University to prepare a facial micro-expressions manual, to train its employees in recognising doubtful high net-worth customers like fugitive liquor baron Vijay Mallya demanding loans.

Pablo Picasso was one of the most eminent proponents of cubism, a 20th-century modern art movement wherein objects are analysed, broken up and reassembled in an abstract form, instead of depicting them from a single viewpoint. Taking the proverbial leaf out of cubism’s book, the banks are looking to deconstruct.

The year 2018 marks the 100 years of Osmania Sicca Rupee

June 27, 2018

This post is a result of fascinating twitter exchange yours truly had with one of the keen observers of Indian monetary history (Bodhisatva).

The discussions led to paper currencies issued by Princely States of Hyderabad and Jammu and Kashmir. Yes, as per records these were the only two Princely States which issued their own paper currency though some others issued their coins as well. On checking the details of Hyderabad currency, one was delighted to read it started in 1918, making 2018 its 100th anniversary.

Thus, this post to commemorate the 100th anniversary of the currency. The post was written by picking several sparse resources available on the web and RBI history. It will be great to add on to this post and correct me as well.

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RBI should build a dialogue around its financial stability report and make it more interactive..

June 27, 2018

It could not have been a better coincidence that my Mint article on need for a financial policy committee was released on the same day when RBI released Financial Stability Review for June -2018.

There were couple of comments/suggestions on the Mint article. One of them was that we need to hold authorities accountable for financial stability. It should not be the case that these reports and publications are released with all highlighting “all is well” to suddenly saying “all is unwell”. With so much at stake and pushing people towards financialisation, the authorities should tell us what went from well to unwell stage. We should not have the situation that the RBI Governor tells us that RBI cannot regulate public sector banks when things go bad for these banks. These risks have to be identified and more importantly communicated to people through these publications.

RBI clearly can make tremendous progress on both accountability and communications front.

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Axis Bank opens a branch in Kargil: Old strategy to restore faith in banking

June 26, 2018

I had written this Mint piece: What’s in a name? Ask banks.

I document this history of bank names in India over a 200 year period. The bankers choose names pretty wisely looking at broad sentiments and economic trends. So the names are based on founder family names, locations, nationalistic sentiments, catering to religious sentiments and so on. You see a particular pattern when certain names are chosen by most new banks during that time. And these sentiments keep coming back. Read the piece for more details.

Thus, it was interesting to read that Axis Bank is opening a branch in Kargil.

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Does India need a financial policy committee?

June 26, 2018

New Mint piece by Yours Truly.

The idea comes from this interesting speech from Prof Anil Kashyap of University of Chicago. He is also a member of Bank of England’s Financial Markets Committee and shares his views on how FPC came into being and its utility in the broader scheme of macroeconomic policy.

 

The Sindhi Merchants of Gibraltar..

June 25, 2018

Nice story by Madras Courier.

It tells us about how Sindhis sensed business opportunities in Gibraltar.

How Treasury Head of Bank of Baroda made profits in Indian bond markets when most others made losses..

June 25, 2018

Nice story by Anto Antony and Kartik Goyal of Bloomberg Quint. The financial media rarely profiles fund managers in bond markets and even rarer to see the fund manager from a public sector bank.

Recently fund managers in Indian bond markets went through a tough ride as yields of government bonds rose significantly. There was one fund manager Kamal Mahajan of Bank of Baroda who did well. Why?

The answer is simple: He went contrarian. When all others were buying as RBI was cutting rates, Mr Mahajan started selling as he though rate easing cycle was about to end.

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Indian Monetary Policy in the Time of Inflation Targeting and Demonetisation

June 22, 2018

Rakesh Mohan (Former Deputy Governor RBI) and Partha Ray (Prof at IIM Calcutta) review India’s Inflation targeting framework:

This paper provides a narrative of Indian monetary policy since the North Atlantic Financial Crisis (NAFC) in the mid-2008 till the current period. The period 2009- 13 was dominated by the joint monetary and fiscal stimuli of the Indian authorities prompted by the NAFC. These, along with some structural shocks and a hands-off attitude in forex market intervention, could have had their role in rising inflation and external account instability (leading up to the taper tantrum episode). In this backdrop, after considerable discussion during 2013-2014, a Monetary Policy Framework Agreement (MPFA) was signed between the Government of India and the Reserve Bank of India (RBI) on February 20, 2015, which formally adopted flexible inflation targeting (IT) in India. Under the new statutory IT framework, a six-member Monetary Policy Committee (MPC) met for the first time on October 3 and 4, 2016.

While the IT regime so far has coincided with significant reduction in inflation in India, the atmosphere has been benign. Now that fuel prices have started moving in the north-east direction, a revised framework for the Minimum Support Price (MSP) in the Union Budget for 2018-19 has been proposed by the government and fiscal slippages have started happening, it remains to be seen whether IT can withstand more rough weather in the days to come. Finally, in recent years, Indian monetary policy has been dominated by two significant events: the emergence of significant deterioration of Indian public sector balance sheets, and the demonetisation episode in November 2016. Monetary policy in both of these periods wrestled with fashioning an appropriate strategy for managing the impossible trinity.

 

Bhutan warns its citizens of holding Indian Rupees..

June 21, 2018

A strong notice from Royal Monetary Authority of Bhutan (HT: TCA Sharad Raghavan’s piece):

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