{X B§{S>¶Z ~¢H$a

Volume II Issue 2 Mumbai, September 2014, Pages: 68 ` 60

Finance and Opportunity in India

 EDITOR’S NOTE
Indian Banks’ Association
Head Office:
Blocks 2 & 3, Stadium House, 6th Floor, 81-83
Veer Nariman Road, Mumbai 400 020, India.
Tel + 91-22-22824846
Editor’s Note
Editorial Office:
As a nation, we have grown 67 years old.
World Trade Centre, Centre 1, 6th Floor, Undoubtedly, many of the hopes that hinged on
Cuffe Parade, Mumbai 400 005, India. independence have materialized and we have
developed into a significant world economy in
Tel : + 91-22-22174019 this period. For all these years, emphasis has
Fax: +91 -22-22184222
been on inclusive growth by making available
Website: iba.org.in, theindianbanker.co.in organised financial services to larger sections of
e-mail: sangeeta@iba.org.in, shroff@iba.org.in the population. In a recent speech which we
publish in this issue as the cover story, Dr Raghuram Rajan, Governor, RBI spells out
five P’s of financial inclusion viz Product, Place, Price, Protection, and Profit. Simple
Chief Executive & Editor and reliable products that address their needs at low transaction cost delivered at
Mohan Vasant Tanksale their doorstep using technology and banking correspondents coupled with consumer
protection and financial literacy will make financial inclusion a reality, he says. To be
sustainable, financial inclusion needs to be profitable for banks and other financial
IBA Secretariat services providers.
Rema K Menon
Officer on Special Duty IBA held its 67th Annual General Meeting on 20th August 2014. As the Chief
Sangeeta Shenwai Executive of IBA, this was my first AGM. As a true voice of the Banking Industry,
Vice President IBA has been able to offer very firm and meaningful comments on various Draft
Suresh Shroff policy documents of Reserve Bank of India as well as give opinions to Department
Manager
of Financial Services and other related Ministries of Government of India. This has
been possible only because of the support and involvement of the member banks
and the rich and fruitful deliberations that take place in the IBA.
Advertising:
Finsight Media, In his address to bankers at the IBA AGM chief guest Dr G S Sandhu, Secretary -
hari@finsight-media.com Financial Services provided details of the final push towards universal financial
inclusion- the Pradhan Mantri JanDhan Yojana, a comprehensive scheme which
Subscriptions: packs together a basic banking account, Rupay debit card with inbuilt micro-
Subscription Rates 1 Year 3 years
insurance, credit facility, government disbursals and financial literacy. The scheme
targets all households which do not have access to financial services, both rural and
Bank Employees &
Students* ` 400 ` 1,000
urban. Implementation strategy for such an ambitious project holds the key for its
success. With simultaneous launch in national and state capitals, all districts and
Other Individuals &
Institutions ` 600 ` 1,500 camps at each bank branch on the launch date itself, the scheme is sure to get
tremendous momentum at the launch itself.
Overseas subscriptions US$150 -
* A certificate from the appropriate authority confirming the
status should be enclosed.
Dr Sandhu also informed the bankers about the proposed amendments in
SARFAESI and DRT Acts to expedite legal decisions and enabling legal provisions
Printed and published by Mohan Vasant Tanksale on
to make change of management in corporate borrowers possible to strengthen
behalf of Indian Banks’ Association, printed at
Printrade Issue (India) Pvt. Ltd., Unit No. 10 Pragati
banks’ efforts in recovering NPAs, meeting capital requirements under Basel III,
Industrial Estate, 316, N. M. Joshi Marg, Lower Parel, proposed venture capital fund for financial requirements of start-ups and micro-
Mumbai-400 011 and published at Indian Banks’ industries, and instruments for raising long-term funds. We carry his speech in this
Association, Stadium House, Block 3, 6th Floor, Veer issue with supplementing articles on ‘capital concerns in Indian banking’,
Nariman Road, Mumbai 400 020.
‘crowdfunding as funding option for SMEs and start-ups’ and ‘forensic audit’.
Editor: Mohan Vasant Tanksale

The views expressed in The Indian Banker are not necessarily

the views of the Indian Banks’ Association or the
bank/institution to which the author belongs.

Design, Content and Marketing Support by

Finsight Media Pvt Ltd

Mohan Vasant Tanksale

Vol II No. 2 - September 2014 The Indian Banker 3

 Vision
To work proactively for the growth of a
healthy, professional and forward looking,
banking and financial services industry, in a
manner consistent with public good.

Office Bearers
Chairman
COVER STORY
T M Bhasin

Deputy Chairmen COVER STORY

Arun Kaul S L Bansal Chanda Kochhar

Honorary Secretary Finance and 14

Arundhati Bhattacharya
Opportunity
Members
K R Kamath V G Kannan
in India
- Dr Raghuram Rajan
V R Iyer Sharad Sharma
Ashwani Kumar Aditya Puri
R K Dubey Shikha Sharma IBA NEWS

67th Annual General

M S Raghavan Shyam Srinivasan
S K Jain N Kamakodi 18
Rajeev Rishi
S R Bansal
Pramit Jhaveri
Sunil Kaushal
Meeting of IBA
Sushil Muhnot Stuart Milne
C V R Rajendran Ravneetsingh Gill
Arun Tiwari Shrinivas D Joshi
Jatinderbir Singh Satish Utekar
V Kannan S K Banerji

4 The Indian Banker Vol II No. 2 - September 2014

 Contents
NEWSROOM 8

ARTICLE
Innovation in Agriculture 24
A Panacea for Low Productivity
- Dr Rakesh Gupta

INSIGHT
Crowdfunding 36
Funding Option for SMEs and Start Ups
- Dr Jagdish Joshipura

ARTICLE
Regional Rural Banks 42
Amalgamation Improves Business and Financial Viability
- Dr Amrit Patel

ARTICLE
Capital Concerns in Indian Banking 48
- Dr Suresh Chandra Bihari

ARTICLE
Forensic Audit 55
- V Krishna Moorthy

boI
~‹S>o ~¢H$, ~‹S>r {Oå‘oXmar 60
-Or-{g~ (G-SIB) go S>r-{g~ (D-SIB) VH$
- S>m°. O`ÝVr àgmX Zm¡{Q>`mb

boI
AmYw{ZH$ ~¢{H§$J àUmcr Am¡a J«mhH$ godm 63
- à~rZ Hw$‘ma e‘m©

Vol II No. 2 - September 2014 The Indian Banker 5

 EDITORIAL COMMITTEE

Dr K Srinivasa Rao B V Upadhye Arun Srivastava

General Manager General Manager Deputy General Manager
Bank of Baroda Bank of India Union Bank of India

Dr Sunil Kumar Lahoti Ravi Taneja Devendra Singh Rawat

General Manager Deputy General Manager Chief Manager,
IDBI Bank Oriental Bank of Commerce Dena Bank

Dr V Eswaran M K Gupta Hari Misra

General Manager Deputy General Manager Managing Director
State Bank of India Bank of India Finsight Media

GUIDELINES FOR AUTHORS

Articles should be submitted using only Arial font in MS Word. Text of the article should be in font size 12, with
headings in font size 14 in bold. Subheadings should be made italic and bold in font size 12.

Authors sending their articles for publication in ‘The Indian Banker’ should submit a certificate in the following format
along with the material for publication. They should also send their brief biodata, scanned photo and email address.

The editorial committee has decided to consider only those articles which are following the above standard and are
accompanied by the prescribed certificate.

The Editor
‘The Indian Banker’
I/We hereby declare that the article titled __________________________ submitted by me/us is the original article to
the best of my/our knowledge. I/we also declare that this article has neither been published elsewhere nor has it been
submitted to any other publication, and that I/we have not reproduced material from any published source except as
permitted by the Copyright Act.

I/We undertake to indemnify IBA against any action for any violation of Copyright Act resulting from publication of this
article in ‘The Indian Banker’.

Signature(s) __________ ____________ _________________

Name(s) ____________ ____________ _________________

6 The Indian Banker Vol II No. 2 - September 2014

 DASHBOARD

Dashboard
1. Banking and Money: All Scheduled Commercial Banks (INR Billion)
Outstanding on % Variation Over
July 25, July 26, Last Last End March
2014 2013 Month Year 29.03.2014
Aggregate Deposit 79858.0 70868.5 0.42 12.68 18.28
1. Demand 7210.7 6650.5 -8.24 8.42 8.94
2. Time 72647.3 64217.9 1.37 13.13 19.30
Bank Credit 61125.1 54052.5 -0.16 13.08 16.14
1. Food 1124.7 1011.5 -1.70 11.19 16.65
2. Non-food 60000.4 53041.0 -0.13 13.12 16.14
Cash in Hand 486.6 421.7 -3.57 15.39 20.12
Balance with RBI 3371.3 3151.0 -0.40 6.99 19.44
Investment 23233.1 21838.0 1.27 6.39 15.82
Money Supply 25.07.2014 26.07.2013
M3 (a+b+c+d) 98432.4 87390.1 0.38 12.64 17.75
a. Currency with Public 12928.7 11581.8 -0.68 11.63 13.27
b. Dem.Dep.with Banks 8128.1 7492.3 -7.41 8.49 9.19
c. Time Dep with Banks 77261.6 68254.1 1.33 13.20 19.38
d. Other Dep with RBI 114.0 62.0 665.10 83.87 720.14
2. Price % Variation Over
2014 2013 Month Year
WPI:2004-05=100 (July 2014) 184.6 175.5 1.10 5.19
CPI (IW): 2001=100 (June 2014) 246.0 231.0 0.82 6.49
3. Major Stock Market Indices (as on 31.07.2014)
Close Net Change
Asia Pacific 1540.70 -1.94
Australia 5622.90 34.50
China 2181.24 -1.95
Hong Kong 24732.21 91.68
India 26087.42 96.19
Indonesia 5088.80 -
Japan 15646.23 28.16
Malaysia 1878.34 1.00
Singapore 3353.65 -2.43
4. Forex Reserves As on A year ago
(Including Gold & SDR) 25.07.2014 26.07.2013
INR Billion 19353.4 16522.3
US$ Million 320564 280162.9
5. Bank Rate Percent Effective
i. Bank Rate 9.00 28.01.2014
ii. Base Rate* 10.00/10.25 25.07.2014
* relates to 5 major banks since July 1, 2010
6. Deposit Rates
A. TERM DEPOSITS
7 days and above deregulated w.e.f 01.11.2004
B. SAVING deregulated w.e.f. 25.10.2011 Source: Economic Survey
7. Lending Rates per annum w.e.f. 29-04-1998
Amount Percent
i. Upto INR 2,00,000 Banks to fix
ii. Over INR 2,00,000 Banks to fix
8. Ratios Percent
1. CRR 4.00 w.e.f.09.02.2013
2. SLR 22.00 w.e.f. 09.08.2014
3. Repo Rate 8.00 w.e.f.28.01.2014
4. Reverse Repo Rate 7.00 w.e.f. 28.01.2014
5. Marginal Standing Facility (MSF) Rate 9.00 w.e.f.28.01.2014
6. Cash Dep Ratio 4.83 as on 25.07.2014
7. Investment Dep Ratio 29.09 as on 25.07.2014
8. Credit Dep.Ratio 76.54 as on 25.07.2014
9. World Markets - Interest Rates (as on 31.07.2014) (Gov 10 yr)
US UK Germany Japan
Price 100.33 97.60 103.47 100.70
Yield 2.46 2.55 1.12 0.53
10. Capital Markets (INR Billion)
Apr -14 May -14 June -14 July -14
Capital Issue 121.2 132.1 246.2 173.2
Public Issue 8.5 5.4 7.6 24.9
Rights Issue 6.0 1.3 - 4.1
Private Placements 106.7 125.4 238.6 144.2
Call Money rates as on 23.07.2014 - 6.50 - 9.05%
11. Prime Lending Rates as on 31.07.2014 (% p.a)
US CANADA ECB JAPAN SWISS BRITAIN HONG KONG
3.25 3.00 0.15 1.475 0.50 0.50 5.00

(As lending practices vary widely by location, these rates are not comparable)

Sources: 1,2,4,8 - RBI Weekly Supplement. 5,6 - RBI, 10 - CMIE, Mumbai 10 - CMIE 3 & 11- The Asian Wall Street Journal 9 - Financial Times

Vol II No. 2 - September 2014 The Indian Banker 7

 NEWSROOM
Newsroom
Fed blow to banks over ‘living
wills’
Global banks can no longer assume
continuing access to the Federal
Reserve’s discount lending window as
an element of their living wills. US
regulators set out the specific guidance
in confidential letters detailing why
they recently rejected the living wills of
the world’s largest banks. Hundreds of
banks took advantage of the discount
lending window on multiple occasions
during the 2008 credit crunch. Critics
observed that instead of creating an
environment for an orderly resolution
that would avoid the kind of panic that
ensued after the failure of Lehman
Brothers, regulators are creating more
risk by making a bank’s failure
theoretically inevitable. They added
that the prohibition defeats the
purpose of the discount window and
the role of the Fed as the lender of
last resort.
But the Fed and the Federal Deposit
Insurance Corporation (FDIC), which
are under pressure to avoid
government bailouts in any future
crisis, want to force the banks to come
up with emergency plans that do not
involve any government aid, even
when it comes to the discount window,
8 The Indian Banker
which is available only to banks that
are in trouble rather than failing. For
the 2013 living wills, 11 banks ranging
from Citigroup to Barclays were told
that they made unrealistic assumptions
about how customers, counterparties
and investors would behave in a crisis.
In addition, they were informed that
they failed to make or identify the
kinds of structural changes that would
be needed to ensure an orderly
resolution. The banks, however, did
not receive any warning or guidance
that they could no longer assume
access to the discount window in the
event of trouble in their 2013 plans.
Officials are of the view that the living
wills are a learning process, and more
leeway was given to banks for the 2012
process. But now regulators want
banks to become more disciplined and
uniform in their assumptions and
justifications. Having already submitted
living wills for this year before
receiving the response to their 2013
plans, banks have to show
improvements in their 2015 plans or
risk facing financial penalties.
The Fed and the FDIC were split on
their response to the living wills earlier
this month. The FDIC took the more
severe stance of deeming the plans
‘not credible’, which paves the way for
potentially punitive action. The Fed
stopped short of that, saying instead
that the banks had to immediately
rectify the ‘shortcomings’. Both
regulators must agree in order to be
able to trigger various punishments
such as more stringent capital or
liquidity requirements, or forced
divestitures.
Chinese banks shore up to
guard against bad loans
China’s second and third-largest banks
sold a combined Rmb50bn ($8bn) in
subordinated bonds recently, the
latest in a wave of capital issuance by
Chinese lenders under pressure to
fortify their balance sheets against an
expected rise in bad loans. China,
whose banks had Rmb127tn in assets
at end of June, did not participate in
the first two Basel bank capital
adequacy regimes but is aggressively
implementing Basel III as part of a
broader effort to prepare for rising bad
debts as the economy slows. Analysts
expect many loans granted during
China’s massive, credit-fuelled stimulus
of 2008 and 2009 to turn sour.
China Construction Bank and
Agricultural Bank of China sold
Rmb20bn and Rmb30bn respectively
of ‘Basel bonds’, so called because the
funds qualify as regulatory capital
under the global Basel III capital
adequacy rules. Industrial and
Commercial Bank of China, the
country’s biggest lender, became the
first of the top five banks to sell Basel
bonds when it raised Rmb20bn this
month. Bank of Communications, the
fifth-largest lender, plans its own
Rmb20bn sale soon.
Chinese lenders have long issued
subordinated debt but the new Basel-
compliant structures are riskier because
they contain ‘bail-in’ provisions that
impose write-downs on investors if
national regulators judge that a bank
Vol II No. 2 - September 2014

would otherwise be non-viable. The
Basel committee’s ‘bail-in’ requirement
imposing losses on investors is
intended to avert the need for taxpayer
bailouts like those used during the
2008 financial crisis.
Basel bonds count as tier two capital
under the rules. But unlike in the US
and Europe, where new laws explicitly
define non-viability, China and other
Asian governments have so far left
things in vague. China’s non-
performing loans rose to Rmb694bn
by the end of June, according to
government data, although most
observers believe the true figure is
higher. On official numbers the NPL
ratio is just 1.08 percent. While many
analysts expect the government will
eventually have to use taxpayer funds
to clean up the banking sector, forcing
banks to raise capital now could reduce
the eventual cost of such a move. The
Basel requirements are being phased in
gradually until the end of 2018.
Chinese banks reported a weighted
average core capital adequacy ratio of
10.1 percent at the end of June, up
slightly from 10 percent at the end of
March, according to the country’s top
banking regulator. Mainland banks
have announced plans to raise a total
of more than $64bn through Basel
bonds both on the mainland and
offshore by the end of 2015. Analysts
estimate China’s lenders are likely to
raise an additional $55bn through
preferred shares, another form of
Basel-approved hybrid security
similar to the contingent convertible,
or coco, bonds that are popular in
Europe.
Yet the flood of paper expected over
the next two years raises the prospect
that lenders will need to offer hefty
yields to attract sufficient demand,
cutting into their profitability and
forcing them to scale back new lending
in order to maintain their capital ratios
above the Basel minimums.
Vol II No. 2 - September 2014
Eurozone banks set to borrow
€250bn in cheap money from
ECB
Eurozone banks are set to take
advantage of a new flood of central
bank liquidity in a bid to boost lending
to the region’s credit-starved
businesses. Faced with a stagnating
economy, Eurozone banks are
expected to borrow about €250bn in
cheap four-year money from the
European Central Bank in September
and December, according to
projections by Morgan Stanley, under
the ECB’s ‘Targeted Long-Term
Refinancing Operations (TLTRO)’.
Periphery banks are expected to
account for the heaviest borrowing.
There is huge interest in TLTRO.
Analysts believe that the peripheral
banks will take almost all of their loan
allocation as it would lower their cost
of funding significantly and, hopefully,
be passed on to the real economy in
the form of lower interest rates. Mario
Draghi, the ECB president, recently
said that lending could eventually rise
to as much as €850bn inclusive of
TLTRO monies available periodically
after the opening loan splurge this year.
In June, Draghi announced radical
measures to galvanise flagging lending
to the real economy and keep
borrowing costs low, particularly in the
eurozone periphery. The new loans
would come on top of the more than
€1tn in cheap finance the ECB
pumped into the financial system
between late 2011 and 2012 to avert a
financial crisis.
In spite of buoyant liquidity many of
Europe’s businesses have yet to feel a
significant uplift. Overall eurozone
banks have decreased lending to the
region’s businesses by €561bn since
2009 according to research by Royal
Bank of Scotland, as they seek to raise
capital and cut bloated balance sheets.
Small and medium enterprises, which
provide the bulk of eurozone
NEWSROOM
employment, have seen some of the
sharpest falls in credit.
Earlier this year, there were concerns
that banks’ repayments of the original
LTRO loans was draining liquidity
from eurozone markets, putting
upward pressure on the euro and
raising consumer borrowing costs.
There remains €389bn outstanding in
LTRO funds, or a little over a third of
the total, according to the ECB. The
loans come amid increasingly gloomy
data for Europe’s economic outlook.
Recent figures show a slowdown in
Germany, France stagnating and Italy
in recession.
Bank of America settles for
record $ 17 billion
Bank of America’s financial-crisis
hangover may finally be fading. The
bank agreed to pay $16.65 billion to
settle the government's accusations it
sold flawed mortgage securities in the
run up to the 2008 crisis, the largest
settlement ever reached between the
US and a single company. For the US
government, the deal is a chance to put
an exclamation point on a string of
crisis-era enforcement actions and
lawsuits that have cost big US banks
tens of billions of dollars.
The Charlotte, NC lender will have to
pay $9.65 billion in cash to the Justice
Department, six states and other
government agencies. The bank also
will provide $7 billion in consumer aid
by modifying mortgages for borrowers
who owe more than their homes are
worth, demolishing derelict properties
or other relief. The Justice
Department’s case against Bank of
America provides perhaps the clearest
window yet into the behavior that
fueled the 2008 financial crisis: Lenders
knowingly providing credit to
borrowers who could not afford the
loans and selling those mortgages to
unwitting investors. Borrowers
ultimately defaulted, sending them into
The Indian Banker 9
 NEWSROOM
foreclosure and saddling investors with
hefty losses. Many of the mortgage
securities in question were made by
Countrywide and Merrill Lynch. But
the government found problems with
Bank of America's own mortgage
securities as well, including efforts to
circumvent underwriting standards by
changing applicants' financial
information. In at least one instance,
an underwriter at Bank of America
made more than 40 attempts to win an
‘accept’ rating from an internal
Countrywide system—known as
CLUES—that would allow Bank of
America to make a loan, according to a
statement of facts signed by the US
and Bank of America.
The ramifications of originating weak
loans was predicted by former
Countrywide CEO Angelo Mozilo,
who warned in an email to other
executives that real-estate developers
were anticipating a condo-market
collapse in areas like South Florida and
Las Vegas, and said the firm should
avoid putting certain loans on its own
balance sheet. Mozilo was worried the
large increase in monthly payments
required by many of the Countrywide-
issued mortgages ultimately would
cause borrowers to default. The simple
reason is that when the loan resets in
five years there will be enormous
payment shock and the borrower is not
sufficiently sophisticated to truly
understand the consequences then the
bank will be dealing with foreclosure in
potentially a deflated real estate market.
This will create problem in the market.
The settlement caps months of tense
negotiations, during which the bank's
lawyers argued repeatedly - and
unsuccessfully - the firm was being
unfairly punished for misdeeds of
Countrywide and Merrill, according to
people familiar with the talks.
Prosecutors were similarly unmoved by
the bank's argument it already had paid
mightily for crisis-era sins, shelling out
some $60 billion before the final
settlement.
10 The Indian Banker
Japan's economy shrinks in Q2
from higher sales tax effect,
stokes deflation fears
Japan’s economy shrank at a rate of 6.8
percent in the quarter ended June 30,
compared to the same quarter last year.
This is its biggest contraction since the
2011 earthquake and tsunami. Caused
largely by a sharp hike in the
consumption tax, or sales tax, in April,
Japan’s domestic private consumption,
which constitutes 60 percent of its
economic activity, fell by 5 percent
against the previous quarter. A drop in
economic output was expected after
the nation's consumption tax was
increased in April to 8 percent from 5
percent.
This was the first time Japan raised the
consumption tax in 17 years and is an
attempt by the Shinzo Abe-led
government to rein in public debt by
increasing government revenue.
However, the steep fall in growth
compared to the previous quarter --
when the economy grew at an
annualised rate of 6.1 percent was
beyond the expectations of the
analysts.
The next focal point is how much the
economy will rebound in the July-
September period. If the upward
pressure is weak, it will likely increase
the chance that Prime Minister Abe
decides in December to delay the next
sales-tax hike. Abe had earlier said that
he would raise the consumption tax
further to 10 percent in October 2015.
However, Akira Amari, Japan’s minister
of state for economic and fiscal policy,
reportedly expressed confidence that
the economy would pick up later in the
year. In a statement released last week,
the Bank of Japan had announced that
it would keep its monetary policy
unchanged, and would continue to
increase the country’s monetary base
by 70 trillion yen, or $687 billion,
annually, underscoring the central
bank's conviction that no fresh near-
term stimulus was needed to shake
off the effects of a consumption tax
hike.
Highlights of the RBI Annual
Report 2014
RBI released the Annual Report for
the year 2013-14 on 21st August, 2014.
Highlights of the Annual Report are
given as under:
Economic Growth outlook for
2014-15
• Economy expected to grow in the
range of 5.0- 6.0 percent in 2014-
15. This is broadly in line with the
projections made by the RBI at the
start of 2014-15.
• This growth is aided by a) revival in
industrial and construction
activities b) political stability and c)
supportive policy framework
leading to turnaround in
investment.
• Though monsoon deficiency could
pose some down side risks, growth
prospect is better than the previous
two years.
• Going forward, sustainable growth
requires macro-economic stability
and micro policies to improve the
supply side factors.
Assessment of 2013-14
• The year 2013-14 was marked by
a) slow growth
b) modest gains in containing
inflation
c) reduction in fiscal deficits
d) bridging the current account
deficits and
Vol II No. 2 - September 2014

e) further deterioration in the
quality of assets of the banks.
• Low business confidence due to
uncertainty in the legal and
regulatory framework in key areas
like environment, land acquisition,
mining and natural resources.
• Macro instability diminished owing
to reduced threat from fiscal and
current account deficits.
• Inflation was a threat which
dominated throughout 2013-14.
• Fiscal Deficit was checked by
cutting down on government
expenditure, higher non-tax
revenues due to higher dividends
paid by the Public Sector
Enterprises and Public Sector
Banks. But this practice is not
healthy because it could hamper
their investments in the future.
• External sector achievement was
impressive.
• Current Account Deficits ( CAD)
went up to 4.9 percent of the GDP
during Q1 of the fiscal 2013-14, it
was brought down to 1.7 percent of
GDP for the full year with various
innovative policies of the RBI.
• Monetary policy is providing a
more stable environment in terms
of interest rates, liquidity and credit
conditions with tangible efforts to
improve resource flow to
productive sectors.
Inflation outlook 2014-15
• There are no significant departures
in the inflation outlook from the
baseline inflation trajectory
indicated by the RBI at the start of
2014-15.
• RBI in its Third bi-monthly policy
statement 2014-15 in August 2014
Vol II No. 2 - September 2014
indicated that inflation at 8.0
percent in early 2015 seeks likely.
• Several risks factors influence the
prices and the timing and extent of
further revisions in administered
prices.
• Aim is to achieve 6.0 percent
inflation target by January, 2016.
Major challenges to the economy in
the Medium Term
• Lowering high food inflation
through supply-side management:
For medium term management of
food inflation measures needed are:
1) Need to relook at the way
Minimum Support Price is fixed
2) Increase in the wage is one of
the reasons for increase in cost
of production in agriculture in
recent years. Hence wage
increases under rural
employment programmes to be
non-inflationary, they cannot
exceed the enhancements in
labour productivity
3) Augmenting supply side
responses such as increasing
storage and warehousing
facilities, cold storage facilities
for perishable food and more
competitive marketing
structures etc are needed.
4) Reorientation of Agricultural
Produce Marketing
Committee(APMC)
• Strengthening the monetary policy
framework and transmission
• Fiscal adjustment through revenue
augmentation
• Strengthening infrastructure by
improving contractual
arrangements for private sector.
NEWSROOM
• Removing obstacles and improving
access to finance
• Managing the NPA cycle to
improve soundness of the banking
system
New Body to replace the
Planning Commission
Prime Minister Narendra Modi
indicated in his Independence Day
speech that he would scrap the 64-
year-old Planning Commission and
replace it with a new institution to
address India's economic needs and
strengthen its federal structure. The
new body would have eight members -
three from industry and the rest
comprising former or existing chief
ministers and Cabinet ministers. Likely
to be called the National Development
Reforms Commission; it might be
housed in Yojana Bhawan, office of
the Planning Commission. This might
also pave the way for shifting the
allocation of Plan funds to the finance
ministry.
The Planning Commission was set up
in March 1950 by Jawaharlal Nehru,
India's first prime minister, to promote
a rapid rise in the standard of living by
efficiently exploiting resources,
increasing production and offering
employment opportunities to all. Its
abolition and replacement with a new
body does not require legislative
changes, as the Planning Commission
was set up by an executive order. The
commission's demise follows two
decades of India's pro-market reforms,
after turning away from a socialist
command economy. Calling it a control
commission, the Independent
Evaluation Office said that the Plan
panel exceeded its authority,
particularly in the allocation of funds
to state governments. It suggested this
role be handed over to the Finance
Commission, while the finance
ministry could allocate resources
among central ministries.
The Indian Banker 11
 NEWSROOM
RBI tightens norms for NBFC
lending against shares
Non-Banking Financial Companies
(NBFC) with asset size of INR 100
crore and above have been forbidden
to give more than 50 percent of the
value of shares pledged with them
(capping the loan to value ratio at 50
percent). This would be applicable only
to loans of INR 5 lac and above. This
has been done to minimise volatility in
the market. NBFCs usually lend by way
of pledge of shares in their favour,
transfer of shares or by obtaining a
power of attorney on the demat
accounts of borrowers.
Every broker in India provides loans
against shares either through its own
NBFC arm or by tying up with another
NBFC. RBI said that NBFCs would
accept only Group I securities. Stocks
which have traded at least 80 percent
of the days for the previous six
months and have a maximum impact
cost of one percent constitute Group I
securities.
The impact cost is the percentage price
movement caused by an order size of
INR 1 lac from the average of the best
bid and offer price in the order book
snapshot. The impact cost is calculated
for both, the buy and the sell side in
each order book snapshot.
A margin call occurs when the value of
the securities fall. Brokers may then sell
the shares to recover money or ask
clients to bring in additional securities
to keep the loan to value ratio at 50
percent.
Sensex earnings growth on fast
track
India Inc’s earnings seem to have
gathered momentum with a surge in
the BSE Sensex over the past two
quarters. In view of improved
profitability during these quarters,
Bloomberg’s consensus Earnings Per
12 The Indian Banker
Share (EPS) estimates for the Sensex
for 2015-16 have been raised 4.2
percent to INR 1,873 from INR 1,791
at the end of the June quarter. There
had been an upgrade in EPS estimates
in the June quarter as well — of a little
less than one percent over mid-May
(the end of the January-March earnings
season).
Between 2013-14 and 2015-16, the
EPS is expected to increase at a
compound annual growth rate (CAGR)
of 17.2 percent —nearly double the
8.7 percent between 2011-12 and 2013-
14. This implies strong earnings
growth will continue and should reflect
on the market as well. A large part of
the earnings growth is expected to be
driven by domestic cyclical sectors, still
trading at a discount to their historical
average price-to-book value.
As private investment picks up and
given that the rupee has stabilised,
cyclicals are likely to see improvement
in earnings. Even as defensives stand
to benefit from improved
fundamentals, such as a pick-up in
domestic demand (fast-moving
consumer goods) and global deals
environment (information technology
and pharmaceuticals), most analysts
believe their earnings estimates might
not see significant upgrades from here;
they will continue to grow at the
healthy rates seen in recent past.
For 2014-15, Bloomberg’s consensus
EPS estimates for the Sensex stand at
INR 1,565, an increase of 16.6 percent
over the previous financial year. Most
experts, however, say the current fiscal
earnings have little significance, as the
market has already factored these in.
Also, the impact of policy measures
taken by the new government will kick
in only from 2015. Earning upgrades
have been followed by upward
revisions in the Sensex target, as well
as valuations. With rising earnings
growth, valuations also tend to
increase.
At present, the Sensex is trading at
18.8 times the estimated earnings for
2014-15 and 14.1 times the estimates
for 2015-16. These are lower than the
20 times one-year forward price-
earnings multiples seen by the Sensex
in earlier periods of robust economic
growth, indicating headroom for a
further upside to valuations. Factors
like a stable government at the Centre,
improving macroeconomic indicators
and better outlook on earnings are
going to be key positives for the
market. The key risks are the policy
initiatives and the pace of their
implementation.
The June quarter saw quite a few
positive signs. For instance, earning
growth in non-export companies
improved to 12 percent, against low
single-digit growth rates in the
preceding 10 quarters. Barring capital
goods, most sectors posted double-
digit revenue growth rates in the
quarter.
Going forward, a pick-up in the
economy and consumption demand
will act as enablers for higher revenue
growth. Both revenue and earnings
growth are likely to be more broad-
based from here on, as cyclical sectors
see a recovery. In the June quarter,
state-run bank, energy, automobile,
cement and metal stocks saw a high
number of upward ons in 2015-16
earnings estimates.
Another positive factor was that the
number of companies that saw
upgrades in consensus EPS estimates
in the June quarter was higher than
those in the previous quarter. Of the
312 top stocks by market capitalisation,
122 witnessed upgrades in 2014-15
estimated earnings, compared with 98
in the March quarter.
Jayasree Menon
Senior Vice President
Department of Research & Statistics
Indian Banks’ Association
Vol II No. 2 - September 2014
Vol II No. 2 - September 2014 The Indian Banker 13
 Finance and Opportunity in India
Dr Raghuram Rajan
(This is a lightly abridged version of the address by Dr Raghuram Rajan, Governor, Reserve Bank of India
at the Twentieth Lalit Doshi Memorial Lecture last month at Mumbai, published with the permission of the
RBI -Ed.)
We are approaching the 67th anniversary of our
Independence. Sixty seven years is a long time in the life of
man – indeed, it is about the average Indian’s life
expectancy today. Since life expectancy was shorter at the
time of Independence, it is safe to say that most Indians
born just after independence are now no more. It is useful
to take stock at such a time. Did we achieve the dreams of
our founding fathers for freedom’s first children? Or have
we fallen woefully short? What more do we need to do?
Clearly, our founding fathers wanted political freedom for
the people of India – freedom to determine who we would
be governed by, as well as freedom of thought, expression,
belief, faith, and worship. They wanted justice and equality,
of status and opportunity. And they wanted us to be free
from poverty.
We have made substantial progress in achieving political
freedom. Our democracy has matured, with people
confidently choosing to vote out governments that lose
touch with their needs. Our institutions protecting the
freedom to vote have grown stronger, with the Election
Commission and the forces of law and order ensuring free
and largely fair elections throughout the country. Political
14 The Indian Banker
parties, NGOs, the press, and individuals exert checks and
balances on public policy. And the judiciary has taken
important steps to protect individual freedom.
Our economy is also far richer than it was at the time of
independence and poverty has come down substantially. Of
course, some countries like South Korea that were in a
similar situation then are far better off today but many
others have done far worse. Indeed, one of the advantages
of a vibrant democracy is that it gives people an eject
button which prevents governance from getting too bad.
Democracy has probably ensured more stable and equitable
economic growth than an authoritarian regime might have.
Yet a dispassionate view of both our democracy and our
economy would suggest some concerns. Even as our
democracy and our economy have become more vibrant,
an important issue in the recent election was whether we
had substituted the crony socialism of the past with crony
capitalism, where the rich and the influential are alleged to
have received land, natural resources and spectrum in
return for payoffs to venal politicians. By killing
transparency and competition, crony capitalism is harmful
to free enterprise, opportunity, and economic growth. And
Vol II No. 2 - September 2014
 COVER STORY

by substituting special interests for the public interest, it is

harmful to democratic expression. If there is some truth to
these perceptions of crony capitalism, a natural question is
why people tolerate it. Why do they vote for the venal
politician who perpetuates it?

A hypothesis on the persistence of crony

capitalism

One widely held hypothesis is that our country suffers

from want of a ‘few good men’ in politics. This view is
unfair to the many upstanding people in politics. But even
assuming it is true, every so often we see the emergence of
a group, usually upper middle class professionals, who want
to clean up politics. But when these ‘good’ people stand for
election, they tend to lose their deposits. Does the
electorate really not want squeaky clean government?

Apart from the conceit that high morals lie only with the
upper middle class, the error in this hypothesis may be in
believing that problems stem from individual ethics rather
than the system we have. In 2008, I had argued that the
tolerance for the venal politician is because he is the crutch
that helps the poor and underprivileged navigate a system
that gives them so little access. This may be why he
survives.

Let me explain. Our provision of public goods is

unfortunately biased against access by the poor. In a
number of states, ration shops do not supply what is due,
even if one has a ration card – and too many amongst the
poor do not have a ration card or a BPL card; teachers do
not show up at schools to teach; the police do not register
crimes, or encroachments, especially if committed by the
rich and powerful; public hospitals are not adequately
staffed and ostensibly free medicines are not available at
the dispensary; …I can go on, but you know the all-too-
familiar picture. This is where the crooked but savvy
politician fits in. While the poor do not have the money to
‘purchase’ public services that are their rights, they have a
vote that the politician wants. The politician does a little bit
to make life a little more tolerable for his poor constituents
– a government job here, an FIR registered there, a land
right honoured somewhere else. For this, he gets the
gratitude of his voters, and more important, their vote.
Of course, there are many politicians who are honest and
genuinely want to improve the lot of their voters. But
perhaps the system tolerates corruption because the street
smart politician is better at making the wheels of the
bureaucracy creak, however slowly, in favour of his
constituents. And such a system is self-sustaining. An
idealist who is unwilling to ‘work’ the system can promise
to reform it, but the voters know there is little one person
can do. Moreover, who will provide the patronage while the
idealist is fighting the system? So why not stay with the fixer
you know even if it means the reformist loses his deposit?
So the circle is complete. The poor and the under-privileged
need the politician to help them get jobs and public
services. The crooked politician needs the businessman to
provide the funds that allow him to supply patronage to the
poor and fight elections. The corrupt businessman needs
the crooked politician to get public resources and contracts
cheaply. And the politician needs the votes of the poor and
the underprivileged. Every constituency is tied to the other
in a cycle of dependence, which ensures that the status quo
prevails.
Well-meaning political leaders and governments have tried,
and are trying, to break this vicious cycle. How do we get
more politicians to move from ‘fixing’ the system to
reforming the system? The obvious answer is to either
improve the quality of public services or reduce the public’s
dependence on them. Both approaches are necessary.
But then how does one improve the quality of public
services? The typical answer has been to increase the
resources devoted to the service, and to change how it is
managed. A number of worthwhile efforts are underway to
improve the quality of public education and healthcare. But
if resources leak or public servants are not motivated,

Vol II No. 2 - September 2014 The Indian Banker 15

 COVER STORY
which is likely in the worst governed states, these
interventions are not very effective.
Some have argued that making a public service a right can
change delivery. It is hard to imagine that simply legislating
rights and creating a public expectation of delivery will, in
fact, ensure delivery. After all, is there not an expectation
that a ration card holder will get decent grain from the fair
price shop, yet all too frequently grain is not available or is
of poor quality.
Information decentralisation can help. Knowing how many
medicines the local public dispensary received, or how
much money the local school is getting for mid-day meals,
can help the public monitor delivery and alert higher-ups
when the benefits are not delivered. But the public delivery
system is usually most apathetic where the public is poorly
educated, of low social status, and disorganised, so
monitoring by the poor is also unlikely to be effective.
Some argue that this is why the middle class should enjoy
public benefits along with the poor, so that the former can
protest against poor delivery, which will ensure high quality
for all. But making benefits universal is costly, and may still
lead to indifferent delivery for the poor. The middle class
may live in different areas from the poor. Indeed, even
when located in the same area, the poor may not even
patronise facilities frequented by the middle class because
they feel out of place. And even when all patronise the
same, facility providers may be able to discriminate between
the voluble middle class and the uncomplaining poor.
So if more resources or better management are inadequate
answers, what might work? The answer may partly lie in
reducing the public’s dependence on government-provided
jobs or public services. A good private sector job, for
example, may give a household the money to get private
healthcare, education, and supplies, and reduce their need
for public services. Income could increase an individual’s
status and increase the respect they are accorded by the
teacher, the policeman or the bureaucrat.
But how does a poor man get a good job if he has not
benefited from good healthcare and education in the first
place? In this modern world where good skills are critical
to a good job, the unskilled have little recourse but to take
a poorly-paying job or to look for the patronage that will
get them a good job. So do we not arrive at a contradiction:
the good delivery of public services is essential to escape
the dependence on bad public services?
Money liberates and empowers
We need to go back to the drawing board. There is a way
out of this contradiction, developing the idea that money
16 The Indian Banker
liberates. Could we not give poor households cash instead
of promising them public services? A poor household with
cash can patronise whomsoever it wants, and not just the
monopolistic government provider. Because the poor can
pay for their medicines or their food, they will command
respect from the private provider. Not only will a corrupt
fair price shop owner not be able to divert the grain he gets
since he has to sell at market price, but because he has to
compete with the shop across the street, he cannot afford
to be surly or lazy. The government can add to the effects
of empowering the poor by instilling a genuine cost to
being uncompetitive – by shutting down parts of the public
delivery systems that do not generate enough custom.
Much of what we need to do is already possible. The
government intends to announce a scheme for full financial
inclusion on Independence Day. It includes identifying the
poor, creating unique biometric identifiers for them,
opening linked bank accounts, and making government
transfers into those accounts. When fully rolled out, I
believe it will give the poor the choice and respect as well
as the services they had to beg for in the past. It can break
a link between poor public service, patronage, and
corruption that is growing more worrisome over time.
Undoubtedly, cash transfers will not resolve every problem,
nor are they uncontroversial. A constant refrain from
paternalistic social workers is that the poor will simply
drink away any transfers. In fact, studies by NGOs like
SEWA indicate this is not true. Moreover, one could
experiment with sending transfers to women, who may be
better spenders. Some argue that attaching conditions to
cash transfers – for example, they will be made provided
the recipient’s children attend school regularly – may
improve the usage of the cash. The danger of attaching
conditionality is that if the monitor is corrupt or
inefficient, the whole process of direct benefits transfers
can be vitiated. Nevertheless, it will be useful to monitor
usage carefully where automation is possible, and
automatically attach further benefits to responsible usage.
A related concern is whether cash transfers will become
addictive – whether they become millstones keeping the
poor in poverty rather than stepping stones out of it. This
is an important concern. Cash transfers work best when
they build capabilities through education and healthcare,
thus expanding opportunity, rather than when they are used
solely for inessential consumption. The vast majority
amongst the poor will seize opportunities, especially for
their children, with both hands. Nevertheless, if there is
evidence that cash transfers are being misspent – and we
should let data rather than pre-conceived notions drive
policy -- some portion could be given in the form of
electronic coupons that can be spent by the specified
recipient only on food, education or healthcare.
Vol II No. 2 - September 2014

Another set of concerns has to do with whether private
providers will bother to provide services in remote areas.
Clearly, if people in remote areas have the cash to buy,
private providers will find their way there. Indeed, a
particularly desirable outcome will be if some of the poor
find work providing services that hitherto used to be
provided by public servants. Moreover, implementing cash
transfers does not mean dismantling the system of public
delivery wherever it is effective – it only means that the
poor will pay when they use the public service.
The broader takeaway is that financial inclusion and direct
benefits transfer can be a way of liberating the poor from
dependency on indifferently delivered public services, and
thus indirectly from the venal but effective politician. It is
not a cure-all but will help the poor out of poverty and
towards true political independence. But financial inclusion
can do more; by liberating the poor and the marginalised
from the clutches of the moneylender, by providing credit
and advice to the entrepreneurial amongst the poor, and by
giving household the ability to save and insure against
accidents, it can set them on the road to economic
independence, thus strengthening the political freedom that
good public services will bring. This is why financial
inclusion is so important.
Five Ps of Financial Inclusion
Financial inclusion in my view is about getting five things
right: Product, Place, Price, Protection, and Profit.
If we are to draw in the poor, we need products that
address their needs; a safe place to save, a reliable way to
send and receive money, a quick way to borrow in times of
need or to escape the clutches of the moneylender, easy-to-
understand accident, life and health insurance, and an
avenue to engage in saving for old age. Simplicity and
reliability are keys – what one thinks one is paying for is
what one should get, without hidden clauses or opt-outs to
trip one up. The RBI is going to nudge banks to offer a
basic suite of Products to address financial needs.
Two other attributes of products are very important. They
should be easy to access at low transactions cost. In the
past, this meant that the Place of delivery, that is the bank
branch, had to be close to the customer. So a key element
of the inclusion program was to expand bank branching in
unbanked areas. Today, with various other means of
reaching the customer such as the mobile phone or the
business correspondent, we can be more agnostic about the
means by which the customer is reached. In other words,
‘Place’ today need not mean physical proximity; it can mean
electronic proximity, or proximity via correspondents.
Towards this end, we have liberalised the regulations on
bank business correspondents, encouraged banks and
Vol II No. 2 - September 2014
COVER STORY
mobile companies to form alliances, and started the
process of licensing payment banks. The transaction costs
of obtaining the product, including the price and the
intermediary charges, should be low. Since every unbanked
individual likely consumes low volumes of financial
services to begin with, the provider should automate
transactions as far as possible to reduce costs, and use
employees that are local and are commensurately paid.
Furthermore, any regulatory burden should be minimal.
With these objectives in mind, the RBI has started the
process of licensing small local banks, and is re-examining
KYC norms with a view to simplifying them. Last month,
we removed a major hurdle in the way of migrant workers
and people living in makeshift structures obtaining a bank
account, that of providing proof of current address.
New and inexperienced customers will require Protection.
The RBI is beefing up the Consumer Protection Code,
emphasising the need for suitable products that are simple
and easy to understand. We are also working with the
government on expanding financial literacy. Teaching the
poor the intricacies of finance has to move beyond literacy
camps and into schools. Banks that lend to the
entrepreneurial poor should find ways to advise them on
business management too, or find ways to engage NGOs
and organisations like NABARD in the process. We are
also strengthening the customer grievance redressal
mechanism, while looking to expand supervision, market
intelligence, and coordination with law and order to reduce
the proliferation of fly-by-night operators.
Finally, while mandated targets are useful in indicating
ambition (and allowing banks to anticipate a large enough
scale so as to make investments) financial inclusion cannot
be achieved without it being Profitable. So the last ‘P’ is
that there should be profits at the bottom of the pyramid.
For instance, the government should be willing to pay
reasonable commissions punctually for benefit transfers,
and bankers should be able to charge reasonable and
transparent fees or interest rates for offering services to the
poor.
Conclusion
One of the greatest dangers to the growth of developing
countries is the middle income trap, where crony capitalism
creates oligarchies that slow down growth. If the debate
during the elections is any pointer, this is a very real
concern of the public in India today. To avoid this trap,
and to strengthen the independent democracy our leaders
won for us sixty seven years ago, we have to improve
public services, especially those targeted at the poor. A key
mechanism to improve these services is through financial
inclusion, which is going to be an important part of the
government and the RBI’s plans in the coming years.
The Indian Banker 17
Dr G S Sandhu, Secretary, Financial Services, Government of India inaugurating the AGM by lighting the lamp.
67th Annual General Meeting of IBA
The 67th Annual General Meeting (AGM) of IBA was held on 20th August 2014 at Hotel Taj Vivanta,
Mumbai. Dr G S Sandhu, Secretary, Financial Services, Government of India was the chief guest.
K R Kamath
I have a great pleasure in welcoming all of you to the
Valedictory Session of the 67th Annual General Meeting
(AGM) of Indian Banks’ Association (IBA). In its long
journey of 67 years, the Association has undergone a lot of
changes and adapted itself to the changing needs of the
banking industry. It has metamorphosed from a platform
to discuss the common operational problems of the banks
into an organisation to raise the concerns of the Banking
Industry to the appropriate authorities, to find logical
solutions to the concerns of the banking sector. As a result,
today, IBA is considered as the Voice of the Indian
Banking Industry. I am happy to see representatives from
all segments of the Banking Industry to participate in this
Annual Function of IBA.
We are indeed privileged to have in our midst today Dr G S
Sandhu, Secretary, Financial Services as chief guest of this
function. Ever since he took over as Secretary, Financial
Services in April this year he has been regularly interacting
with bankers under the aegis of IBA on various issues
affecting the banking sector. Despite his tight schedule, he
has gladly agreed to be with us to grace this function. He
has been taking interest in understanding the concerns of
18 The Indian Banker
the banking industry and possesses a knack of dealing with
any issues in an inimitable style. Sir, we are grateful to you
for sparing your valuable time for the AGM of IBA which
is a special occasion not only to the Association but also to
the Banking Industry.
As you all know, over the last few years, Indian economy
was going through a challenging phase. The economy
witnessed sub-5.0 percent growth in 2013 and 2014. While
persistent uncertainty in the global outlook, owing to the
crisis in the Euro area and general slowdown in the global
economy, has contributed to the low growth of the
economy, domestic structural constraints and inflationary
pressures also played a significant part in the slowdown.
Along with growth slowdown, high price level also was a
major area of concern during the last couple of years. In
March, 2014, the retail inflation stood at 8.31 percent
which was higher than the comfort level of the regulators.
However, the recent retail inflation for the month of July,
2014 came down to 7.96 percent, thus showing some
degree of moderation in the prices. Similarly, wholesale
inflation also moderated from 6.0 percent in March, 2014
to 5.2 percent in July, 2014. Though the prices are showing
signs of moderation at this juncture, going forward, the
spread of monsoon and the geo-political risks could
Vol II No. 2 - September 2014

influence the price situation in the country. In the external
front, trade is witnessing a turnaround and Current
Account Deficits have come down to 1.7 percent of the
GDP in 2013-14. With the Government’s firm
commitment to maintain the Fiscal Deficit at 4.1 percent,
the problem of twin deficit is also gradually fading away. In
the current financial year, along with positive sentiments,
there are some modest indications that growth is quite
likely to move above 5.0 percent. With the stable
government at the centre, the expectations on India within
and across the world have gone up a notch higher. With
appropriate policy measures, I am sure; the economy could
come back to a sustained higher growth trajectory in future.
In the midst of this challenging environment, banks had a
tough time to maintain business growth and profitability.
On an average the overall business growth of the banking
sector was 15.0 percent and the profitability was under
stress. Due to slowdown in industrial growth, credit growth
was quite low. High cost of funds, deterioration in the asset
quality and pressure on margins were some of the major
challenges faced by the banking sector during 2013-14.
Though credit growth has not picked up much during the
first quarter of the current fiscal, the pace of deterioration
in asset quality is showing signs of moderation. Further,
banks are making sincere efforts to reduce the level of
stressed assets in the system.
Being the voice of the Indian Banking Industry, IBA works
very closely with the government and the regulator on
various matters pertaining to banking sector. Our core
areas of work relate to relationship building, promoting
and protecting the interest of the industry, creating
awareness and providing information and guidance from
time to time. Our role as a facilitator for various initiatives
of the government and RBI was more pronounced during
the year 2013-14.
Besides this, various issues cropped up during the course of
the year which needed a platform for deliberations and
discussions and sensitizing the regulators for policy
intervention and logical conclusion of those issues. Ladies
and gentlemen, I have great pleasure to present before this
august audience, an overview of activities of IBA during
2013-14.
Considering the importance of keeping ourselves updated
with the global developments in the banking space and to
expand our horizon and enhance our vision on key issues,
which are universally applicable across the globe for the
financial sector, we interact with delegations from different
countries across the world. Our associate membership with
International Banking Federation (IBFed) helps us
immensely in this effort. Due to this membership, we are
often required to participate in their meetings to discuss
Vol II No. 2 - September 2014
IBA NEWS
and take unified views on issues such as Cross Border
regulations, Basel III, Accounting Standards, Consumer
Affairs, Corporate Governance, Financial Crime, Financial
Inclusion and Financial Literacy and Financial Markets.
Needless to say, these meetings provided international
perspectives on these issues which are relevant to us also.
As you are aware, IBA had been taking delegation to
SWIFT International Banking Operations Seminar (SIBOS)
and keeping an India Pavilion since the year 2007.
Encouraged by the overwhelming response received for
this initiative from our members, we have been continuing
this practice over the last few years. India Pavilion at
SIBOS 2013 at Dubai on the theme ‘India: Global Banking
Redefined’ received encouraging response from the
participants. I may add here that SIBOS is a prominent
international forum where more than 8000 delegates across
the globe meet annually. In my capacity as Chairman, IBA,
I was a member of the panel discussion on ‘Financial
Inclusion: Is Payments the Answer’ at SIBOS. Similarly,
IBA had taken delegation to Annual Meetings of Asian
Development Bank and IMF & World Bank in 2013-14.
We also had quite a few international delegations visiting us
for interactions and exchange of views on areas of
common interest. I am glad to inform you that all these
have helped to enhance our reputation internationally.
It has been our practice to focus on some key functional
areas based on the relevance and significance of this to our
members. We had constituted standing committees to
provide guidance to the association in each of these
focused areas. We had discussions and deliberations on
Basel III, capital raising issues of banks, risk management,
International Financial Reporting Standards (IFRS),
agriculture, education loan schemes, MSMEs, financial
inclusion, payment systems, customer service, money
laundering, legal matters affecting the banks and human
resources and industrial relations of the public sector
banks. Since these areas are important to our members,
IBA worked tirelessly with the banks to resolve some of
their pertinent issues. We could achieve success in some of
The Indian Banker 19
 IBA NEWS
our endeavours like getting extension of interest
subvention on agriculture term loans to private sector
banks, obtaining Government approval for setting up of
Credit Guarantee Fund for Education Loans, Skill
Development and Credit Guarantee Trust Company
(NCGTC), obtaining regulatory forbearance in the
utilisation of floating provisions by banks etc. All these
successes have no doubt enhanced the image of the
Association. I am thankful to the regulators for considering
the issues raised by IBA in favour of the banks.
Besides this, whenever, industry’s views were sought by the
regulator on various discussion papers affecting the
banking sector, IBA had provided comprehensive feedback
to the regulator, after taking the views of our members and
discussing with working groups formed for these purposes.
Another core area, where IBA had spent sufficient time in
2013-14 was on International Financial Reporting
Standards (IFRS). Considering the fact that banks need
some handholding while implementing IFRS, during the
year, we had organised 4 one-day workshops on IFRS
along with KPMG for the benefit of the bank officials.
Further, we had also brought out IBA-IFRS Newsletters
for disseminating information to our members.
Financial Inclusion is another key area where IBA was
involved right from its official launch in 2011. Presently,
Business Correspondent (BC) model is considered as the
most preferred route through which banks are offering
formal financial services to the hitherto financially excluded
people. During 2013-14, a lot of deliberations took place at
IBA on the removal of impediments in scaling up the BC
model. We are also closely working with the Government
in the area of Direct Benefit Transfer (DBT) Scheme and
helped banks in meeting targets set by the Government
under Phase I and supervising the achievements of the
targets under Phase II. Let me also add here that, hon’ble
Prime Minister in his Independence Day speech announced
'Pradhanmantri Jan-Dhan Yojana' which envisages the
integration of the poorest of the poor with a bank account
and a Rupay debit card with an accident insurance cover of
INR 1 lac. Formal launch of this scheme is scheduled for
28th of this month. The State Level Bankers’ Committees
(SLBC) would be spearheading the ground level activities. I
urge the banks to actively participate to make it a success.
Efficient Payment System reflects the efficiency of the
institutions and stability of the nation. In India, RBI which
has got the mandate to supervise the Payment Systems is in
the process of improvising its standards. Substantial efforts
were put in by the Association in Payment and Settlement
arena. Our views were offered on the implementation of
GIRO based Payment System in India, we have revisited
the security features of CTS – 2010 standards, offered our
20 The Indian Banker
views on levy of charges by banks for sending SMS alerts
to customers, examined the issues on DBT and de-linking
Aadhar from core banking platforms of banks and
suggested measures to enhance the security of customers at
ATMs.
Customer Service no doubt deserves utmost attention from
the banks. Definitely, banks are taking a lot of efforts to
improve their customer service practices and IBA is
involved in this by providing broader contours in this
aspect. During the year eight workshops were conducted
with CIBIL to sensitise the bank officials on enhancing the
usage of credit score reports of the customers to enable
the banks to take informed decisions and at the same time
the customers are benefited from the reduction in the
processing time of their loan applications. We have also
supported a training and sensitisation programme to
Visually Challenged along with Xavier’s Resource Centre
for the Visually Challenged (XRCVC), a body established
by St Xavier’s College, Mumbai which works for the
empowerment of visually impaired persons. Besides, IBA
also actively participate in the Annual Banking
Ombudsman Conference organised by RBI. Efforts are on
at our level to implement some of the action points arising
out of the conference held in 2013-14, such as a) media
campaign for improving financial literacy b) look into
various charges levied by banks on pre-payment of floating
rate loans c) to issue operational guidelines to banks on
reasonableness of charges on credit card overdues and d)
formulate policies on zero liability of customer on
electronic banking transactions.
In the areas of Human Resource Management and
Industrial Relations, negotiations with the unions for the
Xth bipartite settlement are in full swing. We had spent a
considerable amount of time for negotiations during the
year. We will definitely be looking forward for an early
settlement in the current year.
Information dissemination is one of the key roles of IBA
which is done through our conferences, publications,
guidance notes, workshops, model policies etc. Our
important events like BANCON, FICCI-IBA conference
and IBA Technology Conference were well received by our
members. We are also focusing on image building and
enhancing the visibility of IBA within and outside the
country.
Let me take this opportunity to appreciate the relentless
efforts of the IBA team under the guidance of Mr
Tanksale for undertaking and implementing the various
initiatives for the benefit of the banking industry. Able
leadership under Dr K Ramakrishnan also deserves special
mention on this occasion. Support and encouragement
received from our members in all our endeavors motivated
Vol II No. 2 - September 2014
 IBA NEWS

us to deliver results and add further value to our services. towards this objective. This is one of those budgets where
Guidance and support received from regulators have played banking sector has been mentioned in a very extensive
a significant role in making IBA what it is today. manner. If the economy has to grow, it is the banking
sector which has to provide the finance. Looking at the
I have the honour to welcome our Chief Guest Dr G S growth of the economy so far you can take pride in the
Sandhu to deliver his address on this occasion. Dr Sandhu fact that most of this growth has happened because of the
is well balanced and widely consulted official in the contribution of the banking system. Banking system has
financial world. I am sure that his address today will set the not shied away from shouldering these responsibilities
agenda for the course of action to be followed by the particularly in the infrastructure sector. It is the most
economy in general and banking sector in particular. difficult sector whether it is a power sector, road sector, or
capital goods sector etc. Here also the banking sector has
Dr G S Sandhu come forward and fulfilled its
THE IBA PLATFORM HAS responsibilities.
First of all I would like to thank IBA
and in particular Shri Kamath for BEEN USED BY THE GoI AND Unfortunately, because of the low
having invited me to this Annual rate of growth of the economy the
General Meeting (AGM) of IBA. I am RBI FOR UNDERSTANDING banking sector is experiencing a lot of
very happy to be here and this has stress. NPAs have gone up in the last
given me an opportunity to talk to THE COMMON CONCERNS OF 3-4 years. Today, banking sector is at
you and interact with you. This is the crossroads since on one side it has to
67th AGM of the IBA and during the BANKING INDUSTRY AND meet the credit needs of the
course of last 67 years they have economy and on the other side it has
rendered good service to the banking ALSO FOR EXECUTING to keep in mind the security of the
industry. It is the most important and money lent-- the money should come
the most influential organisation VARIOUS INITIATIVES OF back to the banks.
representing the banking sector in
India. Its efforts over the years in GOVERNMENT, WHERE The budget also mentioned that
advocating banking issues are recapitalisation of Public Sector
acknowledged by both Government BANKS ARE INVOLVED. SOME Banks (PSBs) will be required in a big
of India (GoI) and the Reserve Bank way. But ultimately both private
of India (RBI) and it works very OF THE IMPORTANT sector and PSBs will have to manage
closely with both of them. The IBA their capital requirements by
platform has been used by the GoI SCHEMES IN AGRICULTURE, generating their own revenues.
and RBI for understanding the Government cannot endlessly keep
common concerns of banking EDUCATION, FINANCIAL on providing the capital requirements.
industry and also for executing various For the time being, because we have
initiatives of Government, where INCLUSION PROGRAMS ETC to meet Basel III requirements the
banks are involved. Some of the government has come out with an
important schemes in agriculture, HAVE BEEN SPEARHEADED announcement as a part of the
education, financial inclusion budget that it will be raising capital in
programs etc have been spearheaded THROUGH THE IBA. the next 4 years for the PSBs. Apart
through the IBA. And I must from the equity, money has to come
acknowledge here that we have always received unstinted from bonds and other instruments. We are preparing a
support from IBA whenever they were called to come blueprint so that PSBs remain strong enough to provide for
forward. They have very proactively taken up the issues the growth of the economy. I am sure that we will be able
referred to them. to raise the required money and if there is any shortfall the
money can come from the budget as it has happened in the
This is a very challenging time for Indian economy. As you past. But we want to depend on the budget as little as
all know our economy is presently at a very low growth possible because of the other pressures on the budget.
rate-around 5 percent. The last budget has focused itself
on the growth of the economy. The basic theme of the On the NPA front it is certainly a cause of worry. Banks
budget was: How do we uplift the economy to a higher have to gear up their recovery mechanisms. We have taken
growth trajectory of plus 5 percent, 6 percent and then 7 up an exercise to amend both the SARFAESI Act as well as
percent in the course of next 3 to 4 years. Large number of the DRT Act. There are several lacunae in these Acts which
initiatives announced in the budget mainly target areas we need to address because due to these lacunae the

Vol II No. 2 - September 2014 The Indian Banker 21

 IBA NEWS
borrowers resort to long drawn litigation and the money
doesn’t come back to the banks. The other area is making
change in management easier. Change of management in
India today is very difficult. The tendency of the promoters
here is to retain management control, no matter what
happens. Even when they cannot provide additional
funding, they cannot run the unit, they have no capacity to
do it they will not move out of that. So we have to provide
a legal provision to force them to move out of it and bring
in somebody else who can provide for additional capital,
initial equity and run the unit and pay the money back to
the bank also. This provision is the most prominent thing
that will strengthen your hands. We are also trying to
improve the quality of the Board of directors, the
independent directors and also to ensure long term tenure
for the CMDs or MDs.
Then there is issue of long-term funding. This is one
budget where this long-felt need has been addressed. So
far, banks had problems in providing long-term funds
because of the asset liability mismatch. There had been
various suggestions. In this budget two different
instruments had been announced. One is the asset lifecycle
financing. Banks can provide long-term loan for 25 years,
which can be refinanced every 5 years by either the same
bank or any other bank which would opt to step in. Second
facilitates the banks to raise long-term funds through
infrastructure bonds. Banks were earlier allowed to raise
funds through these bonds but there was no incentive for
such issuances. Now there is an incentive because the
stipulation relating to CRR, SLR have been drastically
reduced for such bonds. So now banks can opt to raise
issues through these bonds, lend the money for long-term
projects and contribute more to the growth of the
economy.
Another initiative which has been announced both in the
budget and in the Independence Day speech of honorable
22 The Indian Banker
Prime Minister is on the financial inclusion. It is called
Pradhan Mantri Jan-Dhan Yojana. Efforts for financial
inclusion have been continuing for many years but this time
there is a much greater thrust and the approach differs
from the past approach. The past approach was that we
have to cover villages; we have to take the Banking
Correspondents to 74000 villages having above 2000
population. So what we did was that we extended the
banking facility upto the village level. In the new approach
what we are saying is that we will go to the households and
not only to this 2000 plus population villages but all the
villages, all the households. All households will be provided
with at least one bank account and if possible two
accounts. Husband and wife can have either one joint
account or two separate accounts. That is one major
difference and the second is that earlier we had left out the
urban areas. This time we are covering the urban areas also.
The third difference is that we are going to issue a debit
card, the Rupay debit card which is our own domestic debit
card which we have introduced recently. Most of you are
aware that India is the third country which has come out
with its own debit card system. USA has always been
dominant with 7-8 card systems and then it happened in
China when they came out with their card called UnionPay.
The Rupay card has some unique features that its
transaction cost is very low--hardly 45p or 50p per
transaction compared to a much larger transaction cost in
the case of the other cards which are available here.
Every account holder in this campaign will be provided
Rupay debit card. In this debit card there is an inbuilt one
lac accident insurance cover for which no extra premium is
to be paid by the account holder. This premium is being
paid by NPCI, out of the transaction fee collected by it. It
is a group insurance which has been taken by NPCI and
any debit card holder will be automatically covered by it.
All government disbursals- subsidies, pensions, wages
under MNREGA etc- will be routed through these
accounts. In the past we opened about 18 crore financial
inclusion accounts out of which 50 percent accounts are
dormant because there is no money flowing into those
accounts. People for whom these accounts were opened did
not have spare money to put into these accounts. Based on
the saving habits of the individual we will provide each of
them with an overdraft facility of upto INR 5000. That will
come later on.
Micro-insurance policies will also be a part of the financial
inclusion. A Micro-insurance policy is a policy with a cover
of INR 50,000 such as Aam Aadmi Bima Yojana and
Rashtriya Swasthya Bima Yojana. We have linked all the
insurance companies in this campaign. Their agents, their
micro offices in the field will also be joining this major
program of financial inclusion. We are looping in all the
Vol II No. 2 - September 2014

state governments. I am very happy to say that I have
written two letters to the chief secretaries of states in one
month and we have got very positive response from them.
We have written to all the banks’ CMDs also and I am very
happy to say that all the SLBC conveners have met the
chief secretaries; they have met the finance secretaries. First
meetings have been held on financial inclusion and
everyone is ready to march forward.
The launch function is scheduled on 28th August.
Honorable PM will formally launch the program.
Simultaneously we will be having launch programs in every
state capital and in every district. We have written to all
bank CMDs that every branch should have at least one
camp. We expect that there should be about one lac camps
in the whole country. Through this effort we can rope in as
many people as possible from those who don’t have
accounts. We have also decided that we will start the
preparatory phase of these camps from 25th August since it
is not possible to open so many accounts in a single day. It
has to be done over 3 days to reach at a good number. We
have requested the banks that they should start the
preparatory phase from 25th onwards culminating on 28th
August. In these preparatory camps there will also be a lot
of financial literacy programs.
This program basically does three things. First is that we
are moving from cash to cashless with the help of debit
card. Second is that we provide for the economic activity
and livelihoods. As the money will flow into these accounts
credit will become available. That credit has to be used in
some kind of economic activity providing for the
livelihood in the villages. Third is the social security. By
providing all kinds of insurance schemes we are going to
provide some kind of social security to the extent possible.
These three aims are to be achieved with the help of this
program. We estimate that more than 10 crore accounts
will be opened in the course of one year.
Today we have 13.5 crore farmers in the country who are
land holding farmers. Out of these about 11 crore farmers
have been issued Kisan Credit Cards (KCC) which are
nothing but a passbook. Out of these 11 crore farmers,
only 10 percent have the Rupay Card. From 10percent we
have to go to 100 percent and then we have to cover the
gap of 2.5 crore who don’t have anything- neither the KCC
nor the Rupay card.
In this budget INR 10000 crores have been set apart for a
venture capital fund for providing financial support to
start-up companies, micro-industries and small scale sector.
This will act as a fund of funds and will catalyse about 30-
40 thousand crores. In this also banks will have to play a
very important role. There are many other programs where
banks come forward and play an important role.
Vol II No. 2 - September 2014
IBA NEWS
T M Bhasin
The AGM of IBA is an occasion of get together of the
banking sector. It is also an occasion to share our
achievements and concerns. On behalf of IBA, I take this
opportunity to express my sincere gratitude to our chief
guest, Dr G S Sandhu, Secretary, Financial Services for
making himself available to grace this occasion. It is indeed
a pleasure to listen to his address, which highlights some of
the contemporary issues of the banking sector.
My sincere appreciation also goes to Dr Raghuram Rajan,
Governor, RBI and all other Deputy Governors, senior
officials of the RBI, for extending their co-operation and
support to us while interacting with them on various
occasions. On behalf of IBA, I express my sincere
gratitude to the hon’ble Finance Minister Arun Jaitley for
immediate interactions with the bankers, after he took over
the portfolio, with a view to have a better understanding of
the concerns of the industry.
During 2013-14, IBA had re-constituted nine Standing
Committees to provide guidance to the Association on
issues of relevance such as Basel III & Risk Management,
Accounting Standards and Taxation, Agro-Business and
MSME, Working Group on Financial Inclusion, Retail
Banking, Payments & Settlement Systems and Banking
Technology, Legal and Banking Operations, Committee on
Human Resources and Finance Committee.
Besides this, Sectoral Committees to address sector -
specific issues were also re-constituted. On behalf of the
Association, I wish to place on record our appreciation to
the efforts put in by the Chairmen and members of the
Standing Committees and Sectoral Committees who had
chalked the course of action in each of these relevant areas
during the year.
The Indian Banker 23
 ARTICLE
Global human population has been accelerating rapidly
over the past two centuries and is on track to continue
increasing throughout 21st century. Population growth has
forced more than 20 countries with scarce water and / or
too little agricultural land to import grain, making them
vulnerable to volatile food prices in the international
market. To meet the future demands of a growing
population, we must double world food supplies by 2050,
possibly sooner, while reducing our impact on the
environment.
In a world where most of the poorest are farmers,
investments in agriculture are the best weapons against
hunger and poverty. To help the poorest seize agriculture’s
potential; we need to unleash as much innovation as
possible.
The growing shortage of agricultural labour and rising
wage rates are not the only reasons for the accelerated
mechanisation of farm operations. Factors such as time
saving, efficient input application, transportation of farm
inputs and produce, and reducing drudgery also stimulate
demand for farm machines. The development and mass
production of multi utility mechanised devices to suit the
requirements of different categories of farmers are the
need of the hour.
Agricultural technology refers to new inputs, methods, new
process or new innovation to increase the production and
productivity in agriculture. When we use agricultural inputs
like land, labor and capital to produce agricultural products
like vegetables, food grains etc, the transformation process
is guided by technology. Thus, the level of agricultural
production or productivity is guided by the technology we
are using in farming. We can categorise agricultural
technology from subsistence technology to green
24 The Indian Banker
Innovation
in Agriculture
A Panacea for Low Productivity
Dr Rakesh Gupta
revolution technology to gene revolution technology. This is
the evolution of technology in agriculture over a period of
time. The basic intention is to increase productivity.
When we talk about productivity, it means to increase the
factor ‘productivity’ like increase of labor productivity,
increase of land productivity. So, we can divide agriculture
technology into two categories - one that helps increase
land productivity and other that helps to increase labor
productivity. In this sense, agriculture technology is
different for different purposes.
Impacts of agriculture technology
(i) Increasing labour productivity: For increasing
labour productivity, the mechanical technology like
advanced tractors, power weeders, multi featured
combine harvesters, threshers, laser levellers, rice
transplanters, seedlers, mulchers etc are main
contributors. Software Technology like tractors on
autopilot, swath control and variable rate technology,
irrigation via smart phone,field documentation has
also facilitated in increasing labour productivity.
(ii) Increasing land productivity: For increasing land
productivity hybrid seeds, transgenic seeds, new
methods of crop practices, irrigation, leveling and
method of using fertiliser and chemicals are
new innovations that help in increasing land
productivity.
Now the question arises is which technology to develop?
Largely it depends on the resource endowment, situation of
particular country, whether the country is relatively land
abundant or labor abundant, which guides the new
agricultural technology development and use.
Vol II No. 2 - September 2014
 ARTICLE

Example of technology being used by US farmers embracing the rise of machines

(excerpts from article published in Business Line)

A Soyabean farmer in the Midwestern US wakes up before sunrise to prepare for large-scale planting of
the crop. He grabs a coffee and powers up his laptop to farm. May be he doesn’t even have a laptop, and
he has a touch screen on one of his walls which he uses to adjust for irrigation levels, fertiliser
application, verifying soil analysis and planting soyabeans. The farm has a sensor that can send him
data on soil, moisture, soil aeration, etc.

All his farming machines are awaiting his instructions to change any inputs he may wish to make from
his home. The one thing he might have to still count on is good weather for planting, which, of course,
he can monitor from anywhere he is. He has more leisure and can even login from his vacation home in
Florida to get in touch with his farm in Illinois.

Agri and cloud

A larger commercial firm which runs soyabean crushing plants globally will be looking to source
soyabeans and sell soyameal to chicken producers and soya oil to French fries manufacturers.

They will be getting the data from the cloud, make predictive decisions on buying beans and selling meal
and oil. Crush margins will be optimised efficiently. Bids to farmers and offers for meal and oil will go to
their respective computers. This flow of information will help in real time decision making for trucking or
barging.

Sensors will beam data on river drafts, barge traffic, load times, etc, leading to predictive decision
analytics. Goods will reach sea ports where data on the contract of sale will be already uploaded in the
machines. The cranes should be able to load soyameal of correct quality and quantity without any
human intervention. Data on goods loaded will be beamed to the cloud and can be picked up by an end-
consumer in Thailand.

Based on the exact quality and arrival time, the customer can start making predictive decisions on
different feed mixes for the business. Financing, sales, and inventories will be bettered predicted and
optimised. This is what we would call Internet of things as applied to agri-business.

The point is that agribusiness will become more and more facilitated and influenced by machines –
machines that enable human beings working in the sector to focus their judgment, time and resources
on more and higher order decisions. Fewer real-time, human decisions in areas where machine learning
can incorporate prior data and outcomes mean reduced volatility due to idiosyncrasy and error.

The entire value chain’s efficiency will be dependent on the symbiotic working relationship between men
and machines.

Advantage cloud

What does this all mean?

• First, decisions will be standardised. This will lead to very little variability within a single time horizon.
There will be inter-generational variability but given the predictive power of computing, this variability
will be more an expected change than a sudden shock.

• Second, cost structure will go down substantially. Standardisation will bring about economies of scale,
and improve total factor productivity.

• Third, there will be a great boom in information security and labour demand will dwindle.

Vol II No. 2 - September 2014 The Indian Banker 25

 ARTICLE

• Fourth, the competitive advantage will move towards firms having smart machines, great data, and
phenomenal analytics. Lastly, firms will need to retrain or hire people who can adapt to the new
environment of machines and cloud.

Improving value chain

Today, only a fraction of agribusiness firms globally are incorporating this new reality into their value
chain strategies. They will inevitably be joined by many more, as competitive dynamics necessitate a
technological revolution in the sector.

Firms at the leading edge of this transformation are making long-term investments that are focused on
the highest impact areas of real performance improvement. Instead of fearing the rise of the machines,
they are embracing the opportunities presented.

A farmer’s decision to adopt a new technology is largely
based on balancing the economic costs against the
economic benefits. The technology will be adopted if it
yields an expected profit that is high enough to compensate
for any higher risk due to current technology. In particular,
when there is an irreversible cost of adopting, there is an
option value to waiting to adopt. This option value means
adoption may not occur until the expected benefits are
substantially larger than the costs. The socially desirable
adoption rate occurs when each farmer adopts.
seeds, the stem rust morbidity rate went down by 68
percent. Magnetic treatment is necessary for both strong
and weak seeds to improve their germination rate and
enhance the growth during vegetation period. A single seed
magnetiser can be shared by the entire village as the time
needed to magnetise 1 kg of seeds is less than 5 minutes.
Here seeds are simply made to pass through a hollow
magnetic funnel. This also reduced the quantity of seeds
used by as much as 30 percent..Hence capital costs can be
realised within a few days of using seed magnetisers.

Advanced agriculture technology
1. Magnetic technology in agriculture
Agri-sectors support 55 percent population of India and
holds 13.7 percent share in GDP. These facts show how
important agriculture is for Indian Economic growth.
Magnetic technology has immense potential to increase the
agricultural productivity multifold. ‘Magnetic technologies’
company came up with a method of magneto-hydro
dynamical activation of natural waters and devices used for
this method. This method is an essential part in the whole
complex of using magnetic fields in agriculture. It includes
physical-chemical changes of natural water parameters,
resulting in improvement of filtration properties and in an
increase of dissolving properties of water. These changes
result in an increased ability of soil to get rid of salts and
results in a better assimilation of nutrients and fertiliser in
plants during the vegetation period.
1.1 Effects on seeds: Seeds are the resting system of a
future plant. The quality of the plant depends upon the
quality of seeds used. Experiments have shown that pre-
sowing seed magnetisation of carrots, cabbage, radish,
cotton, sugar beets and others crops has resulted in 30
percent harvest growth with significant reduction of
vegetative period and quality improvement. The water
consumption also went down significantly. In sorghum
1.2 Soil desalination: Soil salinity is one of the most
serious agricultural problems. Salt accumulation causes
blockage of soil capillary reducing the field. Magnetic
system makes it possible to efficiently use salty water that is
traditionally unsuitable for irrigation of different
agricultural crops. Magnetically treated water is 3-4 times
more effective than non magnetised water, to wash the salts
out of the soil. At the same time, the oxygen concentration
goes up. Following the magnetic cleanout, there is a
significant rise in available soil nutrients. Farmers can utilise
this technology to grow sensitive and remunerative crops in
such hostile conditions. Under the influence of magnetic
fields, the physical structure of hardness causing slats is
altered. Hence no cohesion occurs between them and these
mineral salts exist independently and therefore get leached
below the root zone. Thus, soil pore space improves
leading to increase in oxygen percent, nutrient mobility and
nutrient uptake at roots.
1.3 Boosting horticulture crops: The vital processes of
absorption and diffusion are affected when water has
relatively high surface tension and viscosity. The molecules
remain in clusters due to intermolecular forces which
hinder the flow of nutrients. Thus, plant cells are
constantly starved of valuable nutrients limiting its true
potential. But this natural handicap can be addressed when
intra-hydrogen bonding between water molecules is broken.
In this formation,100 percent absorption of nutrients takes

26 The Indian Banker Vol II No. 2 - September 2014


place as each and every water molecule dissolves added
nutrients and are easily carried through cell membranes, as
the specialised protein carrying water channels in the cell
membranes ‘Aquaporins’ will facilitate nutrient transfer
when nutrients are transported in such waters.
1.4 Irrigation hardships during Rabi season: Water used
for irrigation during rabi season is much harder as it is
sourced mainly from tube wells. After irrigation with hard
water, surface accumulates these hardness and salts
deposited on the soil surface steadily leached down and
chock the roots of the plants. As a result, kharif crop is
adversely affected due to unavailability of nutrients and
major losses occur in productivity. These stressful
conditions can be easily overcome with magnetised water as
required and applied nutrients are dissolved and absorbed
even in lesser quantity of water. This technology is available in
India for the very first time by the initiatives of ‘Farm Solutions’ a
unit of CACL (Concept Agrotech Consultants Limited).
2. Postharvest technology
UV Light application on fresh produce: The use of
Ultra-Violet light (UV) is well established for water
treatment, air disinfection, and surface decontamination,
nevertheless its use is still limited in food treatment, and in
particular on fresh produce as postharvest technology. The
ability of UV light to sanitise and delay microbial growth
on the fresh-cut produce surface without altering its quality
Some examples on the antimicrobial and
hormetic effects of UV radiation treatment on
fresh produce.
Vol II No. 2 - September 2014
ARTICLE
has been demonstrated. UV light may be more effective in
reducing microbial growth than chlorine, hydrogen
peroxide, or ozone. Recent studies have demonstrated that
the UV light treatment may be an effective tool to extend
the shelf-life of fresh produce. Generally, UV light
wavelength ranges from 100 to 400 nm.
3. LASER guided land leveling: Resource conservation
through Laser leveling
As per studies, a significant (20-25%) amount of irrigation
water is lost during its application at the farm due to poor
farm designing and unevenness of the fields. This problem
is more pronounced in the case of rice fields. Fields that
are not levelled and have uneven crop stands, increased
weed burden and uneven maturing of crops. All these
factors lead to reduced yield & poor grain quality.
Laser land leveling is leveling the field within certain degree
of desired slope using a guided laser beam throughout the
field. Unevenness of the soil surface has a significant
impact on the germination, stand and yield of crops.
Farmers also recognise this and therefore devote
considerable time resources in leveling their fields properly.
However, traditional methods of leveling land are
cumbersome, time consuming as well as expensive.
4. Grain life: A machine that kills grain killers
Food grain output in India touched an all time high of
259.29 million tons in 2013-2014. But the country wastes
about 20 million tons of just wheat each year, due to
inadequate storage infrastructure. To reduce these wastages,
a farmer and founder of Dharani organic, himself came up
with a solution, which he calls ‘GRAINLIFE’. It is a
machine that currently runs on electricity; pass grains
through it at a particular temperature, and without using
any chemicals, it destroys pests in the foodgrain, while
maintaining the quality of grains.
5. An intelligent sprayer
Researchers with USDA-ARS and the Ohio State
University (OSU) College of Food, Agriculture and
Environmental Sciences have developed a new ‘intelligent’
The Indian Banker 27
 ARTICLE
sprayer system that uses a combination of lasers and
computer algorithms to monitor specific field conditions
and apply only the amount of chemical needed for each
plant in the field. Right now, the system is optimised for
orchards, but subsequent research is focusing on how it can
be adapted to other machines and crops, according to OSU
Ag engineer and sprayer technology expert Erdal Ozkan.
‘This is the only sprayer of its kind in the world,’ Ozkan
says in a university report. ‘It works by discharging
pesticide sprays only when there is a target tree in sight and
it matches the pesticide spray rate to the target tree
characteristics, including its height and leaf density, in real-
time.’
A laser monitors the sprayer's surroundings and can
visually record when the unit is adjacent to a tree to spray.
And, the laser can record its size, which is plugged into a
computer program, or algorithm, that uses a database to
determine how much chemical to apply based on that size.
So, the exact amount of chemical is applied in exactly the
places where it's needed, nowhere else.
‘Conventional orchard sprayers waste a considerable
amount of pesticide because they keep a constant
application rate throughout the growing season. They don’t
take into account the amount of foliage present at different
growth stages. But the intelligent sprayer does, by using a
laser scanner mounted on the sprayer,’ Ozkan says. This
new technology will significantly reduce the amount and
cost of pesticides for growers by accurately targeting spray
applications.
5.1 Other benefits of the system include:
• Less chance of overspraying pesticides.
• Appropriate amount of spray use depending on varying
growth stages.
• More consistent spray deposition uniformity inside
canopies at different growth stages.
• Better spray trajectory control.
• A 40 percent to 87 percent reduction in spray loss
beyond tree canopies.
• Up to 87 percent less airborne drift.
• A 47 percent to 73 percent reduction of spray
consumption.
• A 68 percent to 93 percent reduction in spray loss on
the ground.
28 The Indian Banker
There's an environmental component to smarter
application of pesticides, but the main thrust behind the
development of OSU and USDA's ‘intelligent’ sprayer is its
cost savings to the industry; reports indicate farmers spend
more than $4 billion on pesticides each year. Streamlining
this cost component of raising a crop -- be it an orchard
fruit or grain or oilseed crop like corn and soybeans - could
have huge implications for farmers if the technology, or
something similar, can be adopted on a wide scale.
6. Tractors on autopilot
Thanks to GPS tractors, combines, sprayers and more can
accurately drive themselves through the field. After the user
has told the onboard computer system how wide a path a
given piece of equipment will cover he will drive a short
distance setting A & B points to make a line. Then the
GPS system will have a track to follow and it extrapolates
that line into parallel lines set apart by the width of the tool
in use.
These systems are capable of tracking curved lines as well.
The tracking system is tied to the tractor’s steering,
automatically keeping it on track freeing the operator from
driving. This allows the operator to keep a closer eye on
other things. Guidance is great for tillage because it
removes human error from overlap, saving fuel and
equipment hours.
7. Irrigation via smartphone
Mobile tech is playing a big role in monitoring and
controlling crop irrigation systems. With the right
equipment a farmer can control his irrigation systems from
a phone or computer instead of driving to each field.
Moisture sensors in the ground are able to communicate
information about the level of moisture present at certain
depths in the soil. This increased flexibility allows for more
precise control of water and other inputs like fertiliser that
are applied by irrigation pivots. Farmers can also combine
this with other tech like VRT mentioned earlier to control
Vol II No. 2 - September 2014
 ARTICLE

the rate of water applied. It’s all about more effective and A practical way to implement AWD is to monitor the depth
efficient use of resources. of ponded water on the field using a ‘field water tube’.
After irrigation, the depth of ponded water will gradually
8. Swath control and Variable Rate Technology (VRT) decrease. When the ponded water has dropped to 15 cm
below the surface of the soil, irrigation should be applied
Building on GPS technology are swath control and VRT. to re-flood the field with 5 cm of ponded water. From one
This is where guidance really begins to show a return on week before to one week after flowering, ponded water
investment. Swath control is just what it sounds like. The should always be kept at 5 cm depth. After flowering,
farmer is controlling the size of the swath a given piece of during grain filling and ripening, the water level can drop
equipment takes through the field. The savings come from again to 15 cm below the surface before reirrigation. AWD
using less input like seed, fertiliser, can be started a few days after
herbicides, etc. Since the size and transplanting (or with a 10-cm tall
shapes of fields are irregular you are ALTERNATE WETTING AND crop in direct seeding). When many
bound to overlap to some extent in weeds are present, AWD can be
every application. Thanks to GPS DRYING (AWD) IS A WATER- postponed for 2-3 weeks until weeds
mapping the equipment in the field have been suppressed by the ponded
already knows where it has been. SAVING TECHNOLOGY THAT water. Local fertiliser
Swath control shuts off sections of recommendations as for flooded rice
the applicator as it enters the overlap LOWLAND (PADDY) RICE can be used. Apply fertiliser (N)
area, saving the farmer from applying preferably on dry soil just before
twice the inputs on the same piece of FARMERS CAN APPLY TO irrigation.
ground.
REDUCE THEIR WATER USE 10. Aerobic rice
VRT works in a similar fashion.
Based on production history and soil IN IRRIGATED FIELDS. IN This practice explains where and how
tests a farmer can build a prescription to manage ‘aerobic rice’. Aerobic rice
GPS map for an input. By knowing AWD, IRRIGATION WATER IS is a production system in which rice is
what areas of a field are most and grown under non-flooded, non-
least productive the application rate APPLIED TO FLOOD THE puddled, and non-saturated soil
of an input like fertiliser can be conditions. Because aerobic rice needs
tailored to increase or decrease FIELD A CERTAIN NUMBER less water at the field level than
automatically at the appropriate time. conventional lowland rice, the system
OF DAYS AFTER THE is targeted at relatively water-short
This is a big benefit for farms. irrigated or rainfed lowland
Instead of applying a set rate of DISAPPEARANCE OF PONDED environments. Irrigation can be
fertiliser over the entire field (many applied through flash-flooding,
times a high rate to help those low WATER. HENCE, THE FIELD IS furrow irrigation (or raised beds), or
producing areas) an operator can now sprinklers. Site-Specific Nutrient
apply a rate most effective for a ALTERNATELY FLOODED Management (SSNM;
particular section of ground. www.irri.org/irrc/ssnm) can be used
AND NON-FLOODED. to determine the optimal management
9. Alternate Wetting Drying of fertilisers. This growing system
(AWD) technology experiences more weed growth and more species of weeds,
therefore there is a need to control weeds. Soil-borne pests
Worldwide, water for agriculture is getting increasingly and diseases such as nematodes, root aphids, and fungi are
scarce. By 2025, 15-20 million hectares of irrigated rice known to occur more in aerobic rice than in flooded rice,
may suffer water scarcity. Alternate Wetting and Drying especially in the tropics. It is recommended to grow aerobic
(AWD) is a water-saving technology that lowland (paddy) rice in rotation with upland crops suitable in the area.
rice farmers can apply to reduce their water use in irrigated
fields. In AWD, irrigation water is applied to flood the field 10.1 Aerobic rice can be found, or can be a suitable
a certain number of days after the disappearance of technology, in the following areas:
ponded water. Hence, the field is alternately flooded and
non-flooded. The number of days of non-flooded soil in 10.1.1 ‘Favorable uplands’: Areas where the land is flat, where
AWD between irrigations can vary from 1 day to more rainfall with or without supplemental irrigation is sufficient
than 10 days. to frequently bring the soil water content close to field

Vol II No. 2 - September 2014 The Indian Banker 29

 ARTICLE
capacity, and where farmers have access to external inputs
such as fertilisers.
10.1.2 Fields on upper slopes or terraces in undulating, rained
lowlands: Quite often, soils in these areas are relatively
coarse-textured and well-drained, so that ponding of
water occurs only briefly or not at all during the growing
season.
10.1.3 Water-short irrigated lowlands: Areas where farmers do
not have access to sufficient water anymore to keep rice
fields flooded for a substantial period of time.
11. Hydroponics
The process of growing plants in media such as coco coir,
rock wool, gravel, or liquid, with added nutrients but
without soil. It is a subset of hydroculture and is a method
of growing plants using mineral nutrient solutions, in
water, without soil. Terrestrial plants may be grown with
their roots in the mineral nutrient solution only or in an
inert medium, such as perlite, gravel, biochar, mineral wool,
expanded clay pebbles or coconut husk.
11.1 Six Types of Hydroponic Growing Systems
There are six different types of hydroponic growing
systems, they are: Aeroponic, Drip, Ebb and Flow, Nutrient
Film Technique(NFT), Water Culture and Wick.
11.1.1 Aeroponic System
• One of the most high tech growing systems.
• The growing medium is primarily air.
• The roots hang in the air and are misted with nutrients
every few minutes.
• A timer must be used to control the nutrient pump to
ensure the plants are properly misted with the nutrients.
11.1.2 Hydroponic Drip Growing System
• The most widely used type of hydroponic systems.
• A timer controls a submersed pump that releases a
nutrient solution onto the base of each plant.
• In a Recovery Drip System, the excess nutrient solution
is collected and reused.
• The Recovery Drip System is more sustainable,
however the pH and nutrient strength levels may vary
because the nutrient solution is reused.
30 The Indian Banker
• In a Non-Recovery Drip System, it does not collect the
excess solution.
• The Non-Recovery Drip System must have a precise
timer to ensure that the least amount of nutrient
solution is wasted.
11.1.3 Ebb and Flow Growing System
• This system works by temporarily flooding the grow
tray with nutrient solution and then draining the
solution back into the reservoir, which is controlled by
a submeresed pump on a timer.
• Several times a day, the timer comes on and allows the
pump to release the nutrient solution into the grow
tray.
• When the timer shuts off the nutrient solution is
collected back into the reservoir.
• This system can be modified in many ways such as
filling the grow tray with grow rocks or gravel.
• One main disadvantage of this system is the possibility
of a power outage and / or pump timer failures, due to
the growing medium that is used.
11.1.4 NFT Growing System
• The most commonly thought of hydroponic system.
• NFT systems have a constant flow of nutrients,
therefore no timer is needed for the submersed pump.
• The nutrient solution is pumped into the grow tray
over the plant roots and is then drained into the
reservoir.
• The only growth medium that is used is air.
• The plants are supported in small plastic baskets, with
the roots dangling into the nutrient solution.
Vol II No. 2 - September 2014

• This system faces the possibility of power outages and
pump failures.
11.1.5 Water Culture Growing System
• A very simple to use hydroponic system.
• A styrofoam platform typically holds the plants and
floats on the nutrient soltuion.
• An air pump is used to supply air to a bubbling stone
that releases the nutrient solution and supplies oxygen
to the plant roots.
• Leaf lettuce is the predominant plant grown in this type
of system, very few other plants grow well in the Water
Culture System.
11.1.6 Wick Growing System
• The simplest of all hydroponic systems.
• It is a passing system, meaning it has no moving parts.
• The nutrient solution is released into the grow tray
through a wick.
• There are several different growing mediums that can
be used in this hydroponic system.
11.2 Advantages
Some of the reasons why hydroponics is being adapted
around the world for food production are the
following:
• No soil is needed for hydroponics.
• The water stays in the system and can be reused - thus,
a lower water requirement.
• It is possible to control the nutrition levels in their
entirety - thus, lower nutrition requirements.
• No nutrition pollution is released into the environment
because of the controlled system.
• Stable and high yields.
• Pests and diseases are easier to get rid of than in soil
because of the container's mobility.
• Ease of harvesting.
• No pesticide damage.
Vol II No. 2 - September 2014
ARTICLE
• Plants grow healthier.
• It is better for consumption.
11.3 Disadvantages
Without soil as a buffer, any failure to the hydroponic
system leads to rapid plant death. Other disadvantages
include pathogen attacks such as damp-off due to
Verticillium wilt caused by the high moisture levels
associated with hydroponics and over watering of soil
based plants. Also, many hydroponic plants require
different fertilisers and containment systems.
12. Green house technology
The concept of commercial greenhouse cultivation is
rather new to India (300ha). Green House cultivation
provides precise control over factors required for the
photosynthetic activity resulting in maximising the
production of floriculture, certain high value crops and for
nursery. It offers huge business opportunity for banks, as
high financial investment is required for construction itself
and to equip it with proper devices for environmental
control.
12.1 Polyhouses
In temperate countries, it is impossible to grow crops in the
winter season, unless of course, you grow them in
glasshouses. But these glasshouses require more time and
money to erect and maintain them. Their durability is also
less in comparison to poly-houses. The invention of poly-
houses has revolutionised the production of local off-
season vegetables, fruits, flowers etc during the last 5-6
years. This has promoted the trade of plastic as well.
A poly- house is generally made of transparent, tight, cheap
and flexible polythene. In these houses vegetables and
other crops can be grown in any season of the year
depending upon their requirement, because temperature
and humidity can easily be controlled in poly-houses.
Polythene conserves the thermal radiation, which increases
the temperature and provides enough energy for the
process of photosynthesis. For the production of
vegetables, fruits and flowers, availability of suitable
temperature and relative humidity is a must. These
conditions are created in a poly- house especially for the
production of off- season vegetables and fruits in sufficient
quantity. The importance of polyhouse is further enhanced
due to the possibility of production of creeper vegetables.
During daytime, the solar energy helps in increasing the
temperature of the poly- house. Little energy is lost from
the different parts of the poly-house. Heating is required in
the winter season. Generally solar energy is sufficient to
The Indian Banker 31
 ARTICLE
maintain inner temperature of poly-house but sometimes a
micro temperature is to be supplied to some crops.
13. Crop sensors
This is taking variable rate technology to the next level.
Crop sensors tell application equipment how much to apply
in real time. Optical sensors are able to see how much
fertiliser a plant may need based on the amount of light
reflected back to the sensor. It’s fairly new and pretty
expensive, but we see huge potential here. Crop sensors are
going to help farmers apply fertiliser in a very effective
manner, maximising uptake and reducing potential leaching
and runoff into ground water.
14. Field documentation
Because of onboard monitors and GPS the ability to
document yields, application rates, and tillage practices is
becoming easier and more precise every year. In fact
farmers are getting to the point where they have so much
good data on hand that it can be overwhelming to figure
out what to do with all of it. And of course, every farmer’s
favorite form of documentation is the yield map. It sums
up a year’s worth of planning and hard work on a piece of
colorful paper. As harvesting equipment rolls through the
field, it calculates yield and moisture as it goes tying it in
with GPS coordinates. When finished, a map of the field is
printed. These maps are often called heat maps. Each color
on the map relates to a certain yield range. Now the farmer
can see what varieties had the best, worst, or most
consistent yield over varying conditions. Maps like these
can tell a farmer how well a field’s drainage system is
working. All this data allows for better agronomic decisions
in the future.
15. Biotechnology
Biotech or Genetic Engineering (GE) isn’t new tech, but it
is a very important tool with much more potential yet to be
unleashed. The form of GE most people have probably
heard of is herbicide resistance. The other would likely be
insect resistant traits. Crops can be made to express toxins
that control particular pests. Many employ Bt toxin that is
the same toxin found in some organic pesticides. That
means a farmer won’t have to make a pass through his
fields to apply pesticide, which not only saves on pesticide,
but fuel, labor, and wear on equipment too.
New biotech coming online right now is things like drought
resistant traits and nitrogen use efficiency. What does that
mean? In short it means that crops are going to be able to
protect more potential yield in drought conditions. Another
way to look at it would be that farmers who irrigate their
crops can cut back on water use and not see yields suffer.
32 The Indian Banker
Nitrogen use efficiency is a lot like that except you’re doing
it with fertiliser instead of water. A single crop variety can
be made to express one, two, three or potentially even all of
these traits in a single plant.
16. Tissue culture
Quality seed is the key input for getting optimum
agricultural production. Farmers in India have been
experiencing problems in obtaining good planting material
especially in horticulture, floriculture and plantation crops
which have tremendous potential not only for consumption
but also for export considerations. Tissue culture technique
can profitably be employed to produce elite clones and
disease free propagules of desired plant type and a new era
of green revolution in horticulture can be achieved. The
present consumption level of tissue cultured plants in our
country is negligible but the anticipated demand is expected
to be high with the commercialisation of agriculture.
17. Hybrid seeds
Eighty percent of landholders of our country are small
farmers having less than five acres of land. They cannot
afford modern farming techniques and high cost of inputs.
So they can recover lost productivity, estimated at 50
percent of total production, with the help of large-scale
planting of hybrid seeds.
18. Krishidoot
Krishidoot is a unique, innovative and easy to use ICT
based program for Farmer Producer Organisations (FPOs).
This program has been launched jointly by Small Farmers
Agri-Business Consortium (SFAC) and RML Information
Services Pvt Ltd (RML). The program is focused around
building an ecosystem which connects large numbers of
farmers on one side and a universe of buyers and sellers on
the other. This will offer economies of scale and ease of
procurement, thereby promoting healthy growth in the
agri-sector.
This program is designed to enable enterprises to:
- Easily procure large volumes directly from farmers at
competitive prices
- Reach out to more customers and sell more with ease
- Improve efficiency by optimising cost and transaction
time through availability of aggregated demand /
supply.
- Ease of business as interaction is limited to farmer
group heads
Vol II No. 2 - September 2014

19. E-Brush
Grooming is of considerable biological and social
importance of cows. Brushing the skin removes dirt and
improves circulation. For the farmer this results in calm
and happy cows and increased milk yield. The brushes are
powered by an electric motor and rotate when the cow
rubs up against them. Made from strong wear-resistant
nylon bristles, the brushes have a robust structure that can
withstand the forces yielded by cows, and since they
provide some resistance, the cows are able to apply
pressure without pushing the brushes out of their reach.
The horizontal E-Brush has a compact pendulum style
enabling it to fit into most livestock buildings.
20. Mobile technology that predicts farm disasters can
help save Indian agriculture
Mobile technology is seen as having a particularly positive
impact in this area, fostering networks of farmers and
agribusiness, so that they can support each other.
Specialised applications are being developed to further
extend this impact, including Sustaination (‘a LinkedIn for
local food and farmers’) in the United Kingdom.
References state that the greatest increase to farmers’
incomes will come from mobile: mobile payment systems
that provide farmers with the ability to exchange capital,
mobile information services that give access to critical,
targeted information on commodity prices, weather, disease
outbreaks, etc, and helpline services providing key tips and
real-time advice.
ICT (Information and Communications technology) has
allowed innovations that bring financial services, including
mobile money, to smallholder farmers. Another audio-
focused ICT innovation is the Talking Book, a ‘low cost
audio computer’. It is being used by Literacy Bridge in
agricultural projects to address both literacy and gender
gaps by providing women and illiterate farmers, as well as
others, with access to information on agricultural
technologies on demand.
Vol II No. 2 - September 2014
ARTICLE
A service that allows the authentication of agricultural
inputs is being piloted by CropLife in Uganda. Using
scratch labels and SMS, farmers can confirm that an input
is genuine at the point of purchase. The scratch label
system works like an airtime refill, following a process that
is already widely known in agriculture communities.
The system also provides a link to the Ministry of
Agriculture, which has a mandate to stop counterfeit
products, and can follow up on any problem.
21. M-Krishi
Farming in India is a brutal business. M-Krishi makes it a
little easier, by giving farmers predictive data about how to
save their farms--and their lives.
A farmer commits suicide every 30 minutes in India. Low
yields, extremely reduced profits, and mounting debt make
leading an agricultural life incredibly difficult. When a
disaster--like an infestation or drought--strikes, it can be the
last straw. But a new technology platform that connects
farmers to agricultural experts hopes to give farmers
enough information to keep surviving.
mKrishi, a system has been designed to make farming
easier and less draining. By offering timely customised
information on everything from diseases that might
endanger their crops to advice on when to spray pesticides
and where to sell their crops, farmers’ lives can get a little
easier.
The mKrishi works by giving farmers access to experts,
and experts’ access to information about the farms. The
experts are pulled from various agriculture related
universities and companies that have partnered with
mKrishi. The farmers are given mobile phones with built-in
cameras and specialised software to send photos of their
crops and queries to experts. Sensor networks and a
weather station in the village provide relevant data that’s
sent to a database. Experts can access farmer’s queries
through a web application, factoring in the weather and
sensor data and send replies through the expert console
software, which the farmer receives as either a text or voice
message.
The system also employs innovative predictive crop disease
forecasting. Data from the sensors powers disease
prediction models; if the risk index exceeds a certain
threshold, it triggers the farmer’s phone automatically,
warning them to take preventative measures.
Currently, mKrishi has been installed in four villages in the
western state of Maharashtra to help cotton, grape, potato,
and soybean farmers. The initial results seem promising.
The Indian Banker 33
 ARTICLE
Farmers were able to practice precision farming. ‘Income
increased due to increase in yield and reduction of
pesticide usage.’
22. Web portals to help farmers with weather forecast
Certain State Governments have launched the web portals
which would help farmers with the latest weather forecast
and agro advisories. The web portal directed concerned
officials to get maximum number of farmers to get
registered on the web portal so that they could be
benefitted with this service. The web portal has been
conceptualised at Hisar’s agricultural university with the
technology support of the National Informatics Centre in
Haryana.
It would provide weather forecast and agro advisories using
Web and SMS-based alerts through NIC’s SMS gateway
thereby providing more time to farmer to minimise losses
due to abnormal weather condition. Besides, the portal
would also help in increasing productivity with efficient
management of day-to-day farm operations. Farmers can
register themselves on the web portal either through
internert or through Krishi Vigyan Kendras and local
Agriculture officers by submitting required details.
The role of Government in agricultural innovation
The scientists in ICAR Institutes, State Agriculture
Universities, Krishi Vigyan Kendras have been playing key
role in motivating farmers through appropriate
programmes on training, skill development and capacity
building. A multi disciplinary group of scientists
comprising extension, agronomy, soil science, plant
pathology and entomology and agriculture engineers in the
institutes and KVKs are contributing to the success of
farmers in their endeavor to develop devices. This has the
potential to enthuse farmers to develop / adopt low cost,
location specific technologies to enhance their farm
income.
There are some premier institutes like National Institute of
Rural Development (NIRD) which focus primarily on
farmer friendly, affordable and cost effective practices and
technologies primarily in the field of agriculture, handicraft,
cottage industries, etc.
Also, NABARD houses Farm Innovation and Promotion
Fund (FIPF) and Farmers' Technology Transfer Fund
(FTTF). These funds support any farm innovation and
support adoption of appropriate technologies by farmers
respectively.
The Union and State Governments run several schemes
under which cheaper finance and even subsidies are offered
34 The Indian Banker
for the purchase of agricultural equipment. Madhya
Pradesh’s ‘Yantradoot Yojana’ under which agricultural
implements are made available for farm work on rent, can
serve as a model for other states. This scheme has resulted
in 40 percent spurt in the output of wheat and 25 percent
in gram. The rural youth, notably the educated ones, who
are not interested in manual farm work, can run such
custom hiring ventures or work in them.
For individual ownership, suitable machines and
equipments are being developed by various farm
engineering research institutions and agricultural
universities. Most of these are designed to improve the
efficiency of farm operations, reduce costs and minimise
toil. Their promotion, too, would require financial support
from the government since many resources starved small
and marginal farmers cannot afford them.
In some perspectives, technology is not considered an
actual challenge, but a tool that evolves over time based on
market forces and public policies. With much of the
discussion focused on mobile technology, there were
constant reminders that even in developed countries,
Internet and/or cellular coverage are not present in many
rural areas. In other instances, where there is coverage, the
cost of these services remains a barrier regardless of the
innovations available.
Suggestions
1. The Government should ensure availability of power
supply to agriculturists for increasing farm
productivity.
2. Large tractors, giant high work-output machines such
as harvester-combines and multi-purpose seed
planters continue to have a place in modern
agriculture. The Government should encourage
custom hiring service centers with certain interest
subvention and investment subsidy for making
available advanced farm machineries / equipments
within the reach of poor farming community at
reasonable cost and rental basis.
3. Impart skill-oriented training on agricultural
mechanisation to the various groups of beneficiaries
in terms of Human Resource Development, Test and
performance evaluation of agricultural machinery to
assess their functional stability.
4. Subsidising private sector and farm activities through
fiscal measures.
5. Mini-VSAT should be popularised and provided free
of cost at most remote areas.
Vol II No. 2 - September 2014

6. Due priority to popularise gender friendly agricultural
equipment for women farmers needs to be focused.
7. Emphasis on promotion of resource / residue
management equipment, water and energy
conservation equipment etc.
8. The Governments should build a platform to
promote dialogue and cooperation among relevant
institutions and programmes in all sectors with the
aim of developing an extension and information
services network.
9. Encouragement of context specific and farmers’
specific partnerships facilitated by Extension agency.
10. National grid of Agriculture marketing: By adoption
of appropriate marketing strategy, minimum action
plan including:
• Freeing of movement restrictions on agri produce
across the country, including through the introduction
of a uniform GST.
• Recognition to professionally managed agri logistics
hubs as alternate choices for farmers.
• Reforms to the APMC Acts to permit pan-India trades,
electronic auctions and trading in warehousing receipts.
• Integration of spot and futures markets within a well-
regulated system.
• Licensed warehouses / cold storages need to be
established at all the places to reduce physical damage
and quality deterioration.
• Multi-chambered cold storage and refrigerated transport
like reefer van for perishable produce needs to be
provided for controlling and minimising the loss in
horticulture produce.
11. Private entities need to be encouraged for bringing
useful innovations and resources to the field.
‘Good science needs pragmatic support from sensible
policies to promote sustainable growth in agriculture’
References
1. http://irri.org/
2. http://nopr.niscair.res.in/
3. http://en.wikipedia.org/wiki/hydroponics
Vol II No. 2 - September 2014
ARTICLE
4. http://www.fao.org/
5. Business Standard New delhi,Tuesday, 5 August 2014
6. Business line, 06.08.2014
7. Web portals to help farmers with weather forecast published in Agriculture
Today, January 2014, Page No. 18
8. Magnetic technology in Agriculture published in Agriculture Today,January 2014,
Page No.34
9. A machine that kills grain killers published in Agriculture Today, February
10. 2014, Page No.18
11. Heat resistant mustard debuts in Southern India published in Agriculture Today,
February 2014, Page No. 18
12. Pedal This Cycle To Get Oil Worth The Toil published in Agriculture Today,
October 2012,Page No.14
13. NABARD-Rural India’s Well-Wishers published in Agriculture Today,March
2014, Page No.32
14. Farmers-The Innovators published in Agriculture Today, March 2014,
Page No.48
About the Author
Dr Rakesh Gupta, is presently working as
General Manager Priority Sector & Lead
Bank Division in the corporate office
Punjab National Bank.
He has done doctorate in management
with post graduate diploma in Micro
Finance Institutions (MFI) and Insurance
Management besides CAIIB of Indian Institute of Banking and
Finance and Certificate from Indian Instute of Management,
Ahmedabad in PPP in Rural Infrastructure.
Joining the Bank as an agriculture officer in 1983, he held
important assignmnets of LDM, and Circle Head of Sri
Ganganagar and Muzaffarnagar circles. He was a Director of
Himachal Pradesh Gramin Bank, Mandi. He is member of
National Advisory Council of Ministry of Rural Development,
Government of India on Rural Self Employment Training
institute (RSETIs). He is member Director of Everest Bank of
Nepal, Kathmandu and National Multi Commodity Exchange
(NMCE), Ahmedabad. He is also member of CII National
Committee on Dairy Development.
He can be contacted at rakeshgupta2@pnb.co.in.
The Indian Banker 35
 INSIGHT
Introduction
Crowdfunding is the practice of
collecting small amounts of money
from a large group of investors
typically done on the Internet. The use
of small amount of capital from a
large number of individuals to finance
a new business venture is called
crowdfunding.
It makes use of easy accessibility of
vast network of friends, family and
colleagues through social media
websites like Facebook, Twitter,
Linkedin, etc to get the word out
about a new business and attract
investors.
Crowdfunding is an innovative way to
raise additional money that may spur
entrepreneurship and ultimately assist
in boosting the growth of the real
economy. It has the potential to
increase entrepreneurship by
expanding the pool of investors from
whom funds can be raised beyond the
traditional circle of owners, relatives
and venture capitalists.
Some of the success stories include
the funds raised by ‘Double fine’. The
adventurous computer game ‘Double
fine’ stands out as incredible. This
project was 100 percent funded in just
over eight hours. It raised $3.3 million
from 87141 investors.
36 The Indian Banker
Crowdfunding
Funding Option for SMEs and Start Ups
Dr Jagdish Joshipura
Crowdfunding has grown rapidly over
the last couple of years, both in terms
of size of the overall market and the
applications of the model. It however
required application of quantitative
methods to analyse the dynamics of
crowdfunding.
In the United States, crowdfunding is
restricted by regulation on who is
allowed to fund a new business and
how much they are allowed to
contribute. Similar to the restrictions
on hedge fund investing, these
regulations are supposed to protect
unsophisticated and / or not so
wealthy investors from putting too
much of their savings at risk. Because
so many new businesses fail, their
investors face a high risk of losing
their principal.
What type of projects can tap
this source?
The first case study which can be
highlighted belongs to healthcare
sector. This company Biosense
Technologies has developed a device
that would help rural patients undergo
instant blood tests without the use of
syringes. It has developed anaemia
testing device that costs under INR 5
per test and has a lifespan of 10,000
tests. Initial funding to these two
technocrats has been received in the
form of seed capital from IIM,
Ahmedabad. Eventually, this would be
the most appropriate project to raise
funds through crowdfunding.
The second case which can be quoted
is of Origami India, now an INR 100
Crore company that has taken less
than a decade to make its mark in the
INR 280 million Indian organised
tissue paper market. Until recently
Indians used more of water and not
paper for cleaning up. Now more are
switching to paper and with it, this
business is also picking up. This would
be a mature candidate for this type of
funding.
The third example can be given of
Farms n Farmers (FNF) in Bihar
which helps small farmers to improve
their crops and income. FNF
encouraged farmers to cultivate a high
yield variety of seeds used for
extracting oil and making crystals that
find use in many consumer products.
Moreover, FNF’s delivery officers
advise on crop selection and soil
analysis.
Benefits of Crowdfunding
Following are the visible benefits of
crowdfunding:
i. Crowdfunding provides a much
needed new mode of financing
for start-ups and SME (Small and
Vol II No. 2 - September 2014

Medium Enterprise) sector and
increases flows of credit to
SMEs and other users in the real
economy.
ii. Financial crisis (2008) resulted in
failure of number of banks and,
consequently the Basel III
Capital adequacy norms have
been made applicable to banks.
As a result, banks have become
increasingly constrained in their
ability to lend money to the
ventures or start-ups which may
have high risk element.
iii. SMEs are able to raise funds at
lower cost of capital without
undergoing through rigorous
procedures in this mode.
iv. Crowdfunding provides new
investment avenue and provides a
new product for portfolio
diversification of investors.
v. It increases competition in a
space traditionally dominated by
a few providers (providing
finance to Start-ups and SMEs).
vi. The operators of a crowdfunding
platform may engage in vetting
or due diligence of projects to be
included on their website, to
maintain the reputation of the
website.
vii. Financial leverage is better
managed.
Risks of Crowdfunding
Crowdfunding is not riskfree. It has
the following types of risk:
1. Substitution of institutional
risk by retail risk
1.1. Presently, the risk in financing
Start-ups is borne by the Venture
Capital Funds (VCFs) and Private
Equity (PE) Investors. In
Vol II No. 2 - September 2014
crowdfunding, these entities
solicit investments in smaller
sums from large number of
investors. Hence, the risk taking
by VCF / PE (informed
investors) is substituted with
retail investors, whose risk
tolerance level may be very low.
Retail investors may not be able
to understand the risk in these
investments and will be unable to
bear the loss of investments.
1.2 This may be more dangerous,
considering the fact that
investments in SMEs and Start-
ups may involve high risk and
low liquidity and are generally
treated as aggressive and long
term investments. VCF / PE
Investors will be able to negotiate
a better pricing and some
influence on management, which
would be absent in the
Crowdfunding Route, where
smaller contributions are sought
from multiple investors.
Uninformed and unsophisticated
investors (retail investors) may
act with a ‘herd mentality’.
2. Risk of default
2.1 There is no or less recourse to
the investors against the issuer, in
case of default or fraud. Funds
are not directly solicited by the
issuer. The issuer also does not
come out with any offer
document. Funds are solicited by
the platform and such platform
may or may not conduct proper
due diligence of the issuer. If a
platform is being temporarily
shut down, or closed
permanently, no recourse is
available to the investors.
2.2 There is no collateral (even in
case of peer-to-peer lending), as
in case of Corporate Bonds.
Further, in peer-to-peer lending,
there are no investor protection
INSIGHT
by way of a compensation
scheme to cover defaults like
deposit guarantee schemes for
bank deposits.
2.3 Public funding is sought on the
basis of future possibilities as
against the clear evidence of a
viable existing business model,
which is needed under the
existing regulations. Investments
in companies without viable
business model increase the risk
of failure and loss to equity
investors.
2.4 The risk of failure is further
increased by the fact that the
funding is potentially by
participants who do not have the
skills and experience needed to
assess the risk before
investing/lending, as compared
to the VCF / PE Investors,
banks or other financial
institutions who provide funds
under the traditional business
model.
3. Risk of fraud
There is a possibility of genuine
websites being used by fraudsters
claiming to be promoters of
projects or of false websites
being established, simply to
defraud the investors or to entice
individuals to provide credit card
details etc. Thus, there is a risk of
misuse as well as cyber-security
and / or identity theft.
4. Central role of the Internet
4.1 Crowdfunding platform is an
internet based market place for
issuers to sell their own securities
to raise capital. Thus the central
role of the Internet and its wide
reach would increase the number
of persons potentially affected,
which can be significantly greater
than the traditional means of
The Indian Banker 37
 INSIGHT
fund raising. Younger investors
may get influenced simply
because of its link to social
media and the Internet.
4.2 Funds could be raised from
investors residing at various
countries without complying with
requirement of local laws of
various jurisdictions.
5. Systemic risk
a) Due to the ‘individual’ nature of
crowdfunding, there is a possibility
that investors may not practice
good diversification principles.
b) There may be no secondary market
in which investors can sell their
investments and exit and hence,
there is a risk of illiquidity.
c) There is also a possibility of
Money laundering.
d) These platforms could expose
other financial sectors to the risk
of default, as occurred during the
subprime mortgage crisis. If the
rapid growth rate in peer-to-peer
lending continues, these risks could
become systemic.
e) There are Cross-border
implications, if the funds are
solicited through internet, as there
are disparities in Contract Act or
Securities law application in
different jurisdictions.
6. Information asymmetry
a) There is a high chance of
information asymmetry associated
with these platforms, where one
party invests / trades based on
some information which is
unknown to other set of investors.
Since there is lack of hard
information, there is too much
reliance on soft information based
on the social networking platforms
38 The Indian Banker
in this model, which increases the
risks.
b) There is no monitoring of these
platforms, as to which account the
money goes.
c) There is a lack of transparency and
reporting obligations on issuers
including with respect to the use of
funds raised.
d) There is a possibility of omission
of information and misinformation
providing distorted view of the
issuer or the actual investment,
which may result in over estimation
of the actual return. This may
induce the investors to invest in a
product that would not align with
their risk tolerance.
7. Indian legal framework
The provisions in the existing legal
framework for raising funds by
companies are regulated under
Companies’ Act 2013 and Securities
Act ie SESI Act, 1992, Securities
Contracts (Regulation) Act, 1956,
Depositories Act, 1996. Raising of
pooled/managed investment funds by
various entities such as Alternative
Investment Fund (AIF), Mutual Fund
(MF) etc is regulated under Securities
Laws.
In India, during the last few years, the
IPO market has not been very active.
Though, SEBI (Securities and
Exchange Board of India), has been at
the forefront in facilitating fund raising
by SMEs through measures like SME
segment in Stock Exchanges, Category
1- SME funds under AIF, Institutional
Trading Platform, etc still there is need
to encourage innovative way of fund
raising to provide an impetus to
genuine SMEs / Start-ups and to
explore other alternative models of
fund raising with appropriate
framework in consonance with retail
investor protection.
Since the ‘Crowdfunding’
phenomenon is gaining its popularity,
its importance cannot be ignored. To
regulate crowdfunding, it is very
important to take note that while it is
necessary to ensure that Start-ups /
SMEs could raise funds at ease, it is
equally important to ensure that no
systemic risks are created wherein
retail investors are lured by some
unscrupulous players by substituting
the existing framework, which has
been developed over a period of time
through experience and observation.
Hence, there is a necessity to strike a
proper balance between investor
protection and the role equity markets
can play in supporting economic
development and growth.
Crowdfunding is intended to facilitate
fund raising of modest amount by
startups and SMEs for early stage
funding and it is not necessary or
appropriate to allow certain complex
or hybrid products. Under the Security
Based Crowdfunding, the possible
routes which are being explored are as
follows:
1. Equity based Crowdfunding (EbC)
2. Debt based Crowdfunding (DbC)
3. Fund based Crowdfunding (FbC)
In all the approaches, the
Crowdfunding platform plays a central
role where investors can meet
promising start up companies. The
web based crowdfunding platform will
facilitate capital raising through its
Vol II No. 2 - September 2014

website from investors who have
access to such platform. The first 2
routes are primarily based on the
Private Placement route as defined
under Section 42, Companies Act
2013. The FbC route is primarily
modeled on SEBI (AIF) Regulations,
2012.
Before dealing with these routes it is
important that the following are
established:
• Investors who are allowed to invest
through the crowdfunding
platforms,
• Types of entities which are allowed
to raise funds through this channel
and the disclosure requirements,
• Types of entities which are allowed
to set up internet based
Crowdfunding platforms to enable
online solicitation from such
investors, and the different
associated aspects.
Crowdfunding can provide an
alternative source of capital for
startups and SMEs that either have
limited access to capital or have
exhausted other available sources of
capital. It is, therefore, proposed that
the additional channel of
crowdfunding platform to raise
modest amount of funds is allowed to
be accessed by early stage startup or
SME which is an unlisted public
company incorporated in India, under
EbC or DbC routes.
SEBI’s proposed regulations
The SEBI is planning to provide fresh
avenues for startups and SMEs to raise
early stage funding through internet-
based platforms. The regulator is
proposing new guidelines for
crowdfunding in an attempt to provide
more efficient and cost-effective fund
raising platform than public issue or
private placement offerings.
Vol II No. 2 - September 2014
• A company intending to raise
capital not exceeding INR 10
crores in a period of 12 months.
Companies which intend to make
issue more than size of INR 10
crores may raise funds by
complying with the provisions of
SEBI (ICOR) Regulations and list
them on a SME platform or main
board of a recognised stock
exchange,
• A company which is not promoted,
sponsored or related to an
industrial group which has a
turnover in excess of INR 25
crores or has an established
business,
• A company which is not listed on
any exchange,
• A company which is not more than
48 months old,
• A company which proposes to
engage in non-financing ventures,
ie, funds raised through the
crowdfunding platform will not be
further used for providing loans or
investments in other entities, and
• A company which is not engaged
in real estate and activities which
are not permitted under industrial
policy of Government of India.
Further, to ensure only genuine
entities raise funds through this mode.
• The issuing company, its directors,
promoters or associates have not
been prohibited from accessing or
operating in the capital markets or
restrained from buying, selling or
dealing in securities under any
order or direction passed by the
SEBI.
• The issuing company, its directors,
promoters or associates are not
mentioned as a ‘defaulter’ or a
‘wilful defaulter’ by RBI or CIBIL.
INSIGHT
• The director(s) or promoter(s) are
not disqualified to be appointed as
director(s) under the Companies
Act 2013.
• The issuing company, its directors,
promoters or associates are ‘fit and
proper’ persons as specified under
the Schedule II of the SEBI
(Intermediaries) Regulations, 2008.
In addition to above, the issuers must
also comply with the following:
• In a given period of 12 months,
issuers shall not use multiple
crowdfunding platforms to raise
funds.
• Issuers shall not directly or
indirectly advertise their offering to
public in general or solicit
investments from the public.
• Issuer shall compulsorily route all
crowdfunding issues through a
SEBI recognised crowdfunding
platform.
• Issuers shall not directly or
indirectly incentivise or
compensate any person to promote
its offering.
• Issuers shall provide provisions for
oversubscription. This may include
maximum oversubscription amount
to be retained, which should not
exceed 25 percent of the actual
issue size; intended usage of the
oversubscribed amount. The total
amount retained including the
actual issue size and over
subscription, shall not exceed the
limit of INR 10 crores.
Disclosure requirements on
issuer
It is proposed that crowdfunding
follow a disclosure based regime. It is
very important that the companies
seeking to raise funds through
The Indian Banker 39
 INSIGHT
crowdfunding disclose true and critical
information to facilitate investors in an
informed decision making. The
disclosures are required--
(i) when an issuer approaches the
crowdfunding platform with the
intention of raising funds from the
accredited investors registered with
the platform, and
(ii) at regular intervals on an ongoing
basis.
Equity based Crowdfunding
(EbC)
This route, as the name suggests,
enables the issuers to raise upto INR
10 crores online by issuing equity
shares through a recognised
crowdfunding platform and offering
equity stake in their business to the
accredited investors who are registered
with the platform. A company
desirous of raising funds by EbC
route through a crowdfunding
platform may do so after it duly
satisfies the due diligence and
screening criteria set by the platform.
These issues shall be further subject to
the following conditions:
• No single investor shall hold more
than 25 percent stake in a
company.
• The promoter(s) shall be required
to maintain a minimum of 5
percent equity stake in the
company for at least 3 years.
The investors who invest in equity
issues through EbC shall have rights as
of an equity shareholder as given in
the Companies Act.
Debt based Crowdfunding (DbC)
This route, as the name suggests,
enables the issuers to raise upto INR
10 crores online by issuing debentures
40 The Indian Banker
or debt securities through a recognised
crowdfunding platform to the
accredited investors who are registered
with the platform. A company
desirous of issuing debt securities by
DbC route through a crowdfunding
platform may do so after it duly
satisfies the due diligence and
screening criteria set by the platform.
These issues shall be further subject to
the following conditions:
• The debt securities issued should
comply with requirements specified
under Companies Act or rules
made thereunder applicable to
debentures or bonds.
• The issuer shall appoint a
debenture trustee to hold the assets
on behalf of the investors.
• The issuer shall need to create a
Debenture Redemption Reserve
(ORR) of 25 percent of the value
of the debentures.
The Private Placement Offer Letter in
DbC shall contain, inter alia, the
disclosures and a summarised term
sheet as specified in the SEBI (Issue
and Listing of Debt Securities)
Regulations, 2008. The debenture
holders shall have rights as given under
the Companies Act.
Fund based Crowdfunding (FbC)
Under this route, the funds of the
accredited investors registered with a
recognised platform will be collected
online through the platform and
pooled under the AIF to invest in
shares or debt securities in crowd
funded ventures which are displayed
on a recognised crowdfunding
platform.
Conclusion
When the country is aiming to increase
its growth rate from its current lower
rate, it needs resources to fuel capital
expenditure. Development of SME
sector not only boosts the growth, it
would also add to employment
generation, innovations and many
other tangible benefits.
Crowdfunding would be the best
source of funding for startups, SMEs
and other entrepreneurs engaged in
innovative products. From investor’s
point of view, it will provide an
alternative platform for parking the
savings. For SMEs, it would be a better
option compared to private equity.
With SEBI’s regulations in place, these
kind of projects would receive positive
response from the market. A specific
but innovative rating process as well as
expanding the role of merchant
banker would go a long way to
encourage such SMEs and start-ups to
tap through crowdfunding platform
with ease and confidence.
References
1. Discussion Paper by SEBI on Crowdfunding
2. IOSCO Staff working paper
3. Regulations from the USA and Germany
4. Business Outlook
About the Author
Dr Jagdish
Joshipura is a
Chartered
Accountant and
Doctorate in
Finance.
Currently, he is the
Director of Som Lalit Institute of
Management, Ahmedabad. Prior to this,
he was General Manager, GSFC,
Gandhinagar.
He can be reached at
jpjoshipura@yahoo.com
Vol II No. 2 - September 2014
Vol II No. 2 - September 2014 The Indian Banker 41
 ARTICLE
Regional Rural Banks (RRBs) would complete four decades
of their operations next year. It is now time to introspect
and learn lessons to put in place the best possible financial
institution to cater to all the rural households their multi-
dimensional needs of financial services. This article
examines the unique role of RRBs and their financial
viability concern, business and financial performance of
RRBs before and after amalgamation (2005-13), and briefly
suggests the focused areas that all stake-holders need to
address during the remaining three years of the 12th Five
Year Plan (2012-17) for sustaining business performance
and financial viability.
With the establishment of the first RRB on October 2,
1975 there were as many as 196 RRBs as on end-March
2005. Since September 2005 the Government of India
initiated the process of structural consolidation of RRBs
by amalgamating RRBs sponsored by the same bank within
a state.
The amalgamated RRBs are expected to provide need
based and efficient customer services due to improved
banking infrastructure, technology, common publicity /
marketing efforts, mechanisation and computerisation of
branches, optimum utilisation of available trained and
experienced work force, among others, and also derive
benefits of a large area of operation (economy of scale),
enhanced mobilisation of financial resources and
deployment of credit and provision of more diverse
banking activities.
As a result of amalgamation process, the number of RRBs
in the country has been reduced from 196 as on end-March
2005 to 64 as on 31st March 2013 with a network of
17,856 branches covering 635 districts in 26 States and the
Union Territory of Puducherry.
42 The Indian Banker
Regional Rural Banks
Amalgamation Improves Business
and Financial Viability
Dr Amrit Patel
Unique role
Viability of rural financial institutions is a sine qua non.
However, a balanced view is necessary in the context of
immense contribution made by RRBs as a group as well as
loss making RRBs individually in the area of their
operation, most of which have extremely difficult and
hostile socio-economic and political environment.
RRB as an entity has indeed carved out its unique place in
the rural financial system in India. Among all commercial
banks operating in rural area, it has a fairly reasonable share
in terms of branches, deposits and depositors, advances and
borrowers and credit-deposit ratio. Besides, it has provided
the much needed banking infrastructure reaching to rural
masses, contributed significantly in respect of mobilisation
of small amount from a very large number of rural
household depositors, deployed small amount of credit
among quite a large number of rural households for their
social and economic emancipation and helped them eke out
reasonable standard of living rather than leading a life of
destitute.
RRBs have, in particular, contributed quite significantly in
tribal areas as all the predominantly tribal districts identified
by the Planning Commission were covered by RRBs. For
example, as on end-March 2001 when RRBs completed 25
years, RRBs in these districts mobilised deposits of INR
123,700 million and deployed credit of INR 50,420 million
that constituted about one-third of total deposits and credit
of all 196 RRBs. Fresh disbursements by RRBs in tribal
districts was as high as 49 percent of the total
disbursements of all RRBs. The share of disbursements by
RRBs vis-à-vis commercial and cooperative banks in tribal
districts during the year end-March 2000 was 11 percent as
compared to 8 percent on all-India average.
Vol II No. 2 - September 2014
 ARTICLE

Viability concern RRBs to enable them to become viable and achieve the
desired objectives. Cleansing of balance sheets and
Since early nineties viability of RRBs has been a serious recapitalisation marked the first major step and was
concern of the shareholders. The concept of financial followed by a series of initiatives that sought to allow them
viability for RRBs had not been considered such a serious to function in a free and deregulated environment. When,
issue when six RRBs were established in 1975. Their through early 1990s, the reform process was initiated in the
number, however, increased to 196 in just 12 years ended banking sector, Government of India in consultation with
1987, due to several reasons despite the fact that the RBI and National Bank for Agriculture & Rural
Working Group on Rural Banks recommended to set up Development (NABARD) started the reform process
initially only five on a pilot basis and learn lessons for through a comprehensive package for RRBs including
future. The inherent structural cleansing their balance sheets and
weaknesses such as limited area of THROUGH EARLY 1990S, THE recapitalising them. Extant lending
operation, restricted clientele, small restrictions were removed and space
and un-remunerative size of loans, REFORM PROCESS WAS and variety available for investment of
directed lending, regulated interest their surplus funds was expanded.
rates, absence of cross subsidisation, INITIATED IN THE BANKING Simultaneously, a number of human
etc, combined with certain internal resource development and
factors- specific to individual RRB, SECTOR, GOVERNMENT OF Organisational Development
eventually resulted into many RRBs Initiatives (ODI) were taken up by
accumulating huge losses. INDIA IN CONSULTATION NABARD with funding support of
the Swiss Development Corporation
Despite the fact that the Working WITH RBI AND NATIONAL and with emphasis on training and
Group had emphasised ‘the role of the exposure visits, technology support,
new institutions would be to supplement and BANK FOR AGRICULTURE & computerization and use of IT,
not to supplant the other institutional system development etc, for business
agencies in the field,’ unhealthy RURAL DEVELOPMENT development and productivity
competition among the operating improvement.
financial institutions including (NABARD) STARTED THE
sponsor banks, inadequate support Improvement
from their sponsor banks and high REFORM PROCESS THROUGH
expectations of State Governments By end of March 2000, when RRBs
added to the problems of business A COMPREHENSIVE PACKAGE completed 25 years of operations a
and financial viability. The financial good number of RRBs showed a
burden on the RRBs increased FOR RRBS INCLUDING remarkable improvement in their
substantially from September1987, business operations and financial
with the implementation of National CLEANSING THEIR BALANCE performance as compared to the
Industrial Tribunal Award providing position in 1994-95. As on end-March
remuneration package to staff of SHEETS AND 2001, 196 RRBs with an extensive
RRBs on par with the staff of network of 14,499 branches covered
commercial banks. The fragile state of RECAPITALISING THEM. 488 districts and had 59.7 million
the RRBs became evident from the clients. As many as 172 RRBs had
fact that most of them became non-viable as their posted profit of INR 6,810 million as against 162 Banks
accumulated losses eroded the equity base of as many as reporting profit of INR 5,440 million and loss making
165 RRBs as on end-March 1994. Banks incurring loss of INR 720 million as compared to
loss of INR 1,140 million in the previous year. Recovery
Reform process performance had improved from 64 percent to 69 percent
and non-performing assets had declined from 23 percent to
By 1994-95 many RRBs experienced problems of human 18 percent. Accumulated loss came down to INR 28,030
resource management, conflict of interest among million from INR 29,790 million. This, therefore,
stakeholders more importantly between State Governments confirmed that committed efforts of all stakeholders of
and Sponsor banks, low recovery, building non-performing RRBs can make RRBs financially sustainable. These RRBs
assets, incurring financial loss, even erosion of capital can, also, make profit after compensating the loss being
directly affecting their operational viability, leave alone incurred by other RRBs, which do justify their existence in
financial sustainability. This necessitated concerted North- East and most backward regions and terrain of the
institutional development efforts aimed at strengthening of country.

Vol II No. 2 - September 2014 The Indian Banker 43

 ARTICLE
Comparative performance
As on end-March 2005 (at the commencement of
amalgamation process), RRBs showed better performance
as compared with other scheduled commercial banks in
respect of performance indicators, such as percentage
share of rural branches, employees, deposits, credit, credit-
deposit ratio.
In rural areas, RRBs accounted for a substantial 37 percent
of total branches, 69 percent of employees, 31 percent of
deposit accounts, 19 percent of deposits, 38 percent of
credit accounts and 21 percent of credit outstanding of all
Table 1: Financial Performance of RRBs As on end-March 2005-13
** After amalgamation # Recovery data refer to end-June of previous year
44 The Indian Banker
scheduled commercial banks. Credit: Deposit ration also
stood at 56.20 percent as against 50.51 percent of
commercial banks.
Amalgamation process
In view of the serious concern for accelerating business,
improving operational viability and financial sustainability
of RRBs as also reaffirming their objective of being rural
commercial and professionally managed banks several
options were discussed, out of which amalgamation of all
RRBs sponsored by the same bank within a state as
recommended by the Vyas Committee in 2004 was
(INR Million)
Vol II No. 2 - September 2014

considered appropriate and legally feasible. Accordingly, the
process of amalgamation of these 196 RRBs commenced
from September 2005. Following the amalgamation of
RRBs, the number of RRBs has been reduced from 196 as
on end-March 2005 to 64 (including one set up in
Puducherry UT in 2007-08) with a network of 17,856
branches covering 635 districts in 26 states as on end-
March 2013.
The performance of amalgamated RRBs after
amalgamation process has progressively improved. As on
end-March 2013, at aggregate level the performance of 64
RRBs has significantly improved as compared with 196
RRBs as on end-March 2005 in respect of following
performance indicators as shown in Table 1.
• Number of profit earning RRBs increased from 84.7
percent to 98.44 percent,
• Number of banks with accumulated losses declined
from 42 percent to 17 percent,
• Amount of profit increased to 264 percent and loss
amount declined to 1.3 percent.
Table 2: Region-wise Working Results of RRBs as on end-March 2013
Figures in parentheses indicate amount per RRB.
Vol II No. 2 - September 2014
ARTICLE
• Net profit increased to 308.5 percent and accumulated
loss declined to 37.3 percent.
• Reserves and networth improved to 343.8 percent and
527.7 percent respectively
• NPA percentage of outstanding loans declined from
8.53 to 5.65.
• In terms of business, number of branches increased to
123 percent, deposits to 340 percent, borrowings to
692.7 percent, investments to 301 percent, loans &
advances outstanding to 425.4 percent, and loans issued
to 487.6 percent
• While all 16 RRBs in Central, 14 in Southern, 11 in
Northern, 10 in Eastern, and five in Western
earned profit, only one out of eight in NER incurred
loss.
• The number of sustainably viable RRBs ie, RRBs
making net current profit and having zero
accumulated losses stood at 53 out of 64 RRBs as on
end-2013.
(INR Million)
The Indian Banker 45
 ARTICLE
Table 3: Frequency Distribution of States According to Levels of Recovery of RRBs
• Business & Financial Performanceprogressively
improved in terms of business per branch and per
employee; salary as well as accumulated loss as
percentage to assets; financial return, cost and net
margin; risk, operational and other cost, among
others.
Recapitalisation
Accepting the recommendations of the Committee for
recapitalisation of 40 RRBs out of 82 in 2010 for
strengthening their CRAR to the level of 9 percent as on
March 2012, the Government of India along with other
shareholders released INR 20158.6 million to 37 RRBs in
20 states as on end-March 2013. The recapitalisation is
complete in respect of 35 RRBs, viz five each in Odisha
and Rajasthan, three each in Madhya Pradesh and West
Bengal, two each in Uttarakhand, Jharkhand, Chhattisgarh,
Bihar and Maharashtra and one each in Assam, Arunachal
Pradesh, Nagaland, Tripura, Jammu and Kashmir,
Karnataka, Tamil Nadu, Gujarat and UT of Puducherry.
Out of 35 fully recapitalised RRBs, three RRBs viz, Central
Madhya Pradesh Gramin Bank, Manipur Rural Bank and
Mizoram Gramin Bank have not achieved CRAR of 9
percent as on 31 March 2013.
Region-wise performance
Southern region among six regions had the best
performance in respect of all parameters per RRB barring
gross NPA amount followed by Central region at least in
respect of amount of profit, net profit and accumulated
loss whereas Northern and Western regions had modest
performance and Eastern and North-East regions had
46 The Indian Banker
(As on 30 June, 2012)
relatively high level of accumulated loss and gross NPA
amount.
Recovery performance
As on end-June 2012, at aggregate level the recovery
performance of 82 RRBs was 83 percent. Out of 82 RRBs,
31 had loan recovery rate more than national average of 83
percent. This included 13/15 RRBs in Northern, 10/16 in
Southern, 4/23 RRBs in central region, 2/6 in Western,
1/14 in Eastern and 1/8 in North-Eastern region.
Forty one RRBs in the country had achieved a recovery
percentage of above 80 while six RRBs had a poor
recovery percentage of less than 60 percent.
Need for focused attention
Since the process of structural consolidation of RRBs by
amalgamating RRBs sponsored by the same bank within a
State has yielded rich dividends within a span of eight years
(2005-2013) following areas need focused attention.
• Each bank should have its Mission Statement, Vision
document for next 15 years and a Strategic Action Plan
to accomplish them.
• Accredited professional institutes, viz NIBM, CAB of
RBI, Indian Institute of Banking and Finance, among
others, can undertake detailed case studies of the
successful RRBs in each region / State and share
among other RRBs the policies, methods / system /
procedure, interventions, programs, strategies,
organisational structure, human resources development
Vol II No. 2 - September 2014

and training attributes / factors etc that have
significantly contributed to the success of the RRBs in
terms of outreach / penetration into under-served rural
areas, operational efficiency, financial sustainability and
impact on the livelihood of rural households.
• The best use of technology, Financial Inclusion Fund,
Financial Inclusion Technology Fund and establishing
Financial Literacy and Credit Counseling Centers
should facilitate hitherto unserved, unreached &
financially excluded rural households easy access to
financial services at affordable cost & hassle-free.
• Each RRB should formulate action plan to achieve self-
set targets by end-March 2017 viz (i) opening new
branches fully equipped with technology and CBS(ii)
attaining Gross NPA level of less than 3 percent (iii)
achieving 100 percent Financial Inclusionand adopting
at least five villages per branch for financing indebted
farmers to swap the debt taken from moneylenders. (iv)
bringing all branches under CBS(v) wiping out
accumulated losses and (vi) improving CRAR to reach 9
percent.
• RRBs, In order to play a significant role as intermediary
for financial inclusion in rural areas, need to intensify
financing under General Credit Card (GCC) and
opening ‘No Frills’ deposit accounts, besides financing
Self-Help-Groups (SHGs) under micro-finance
program and issuing Kisan Credit Card (KCC).
• RRBs, in 256 districts identified by the Committee on
Financial Inclusion as ‘most excluded’ need to deploy
ICT based solutions, through use of smart cards, Point
of Service (PoS) devices and mobile technology to
reach hitherto unreached households in different
regions and client groups in the country.
• Planning and implementing strategy to attain financial
viability without depending upon the sponsor banks for
financial assistance, training, back office support etc.
Vol II No. 2 - September 2014
ARTICLE
• The amalgamation process and provision of CBS in all
RRBs need to be pursued and completed by end of the
12th Five Year Plan.
• To improve business performance and financial
sustainability on a continuing basis there is need for
capacity building training of the staff, designing savings
and credit products with emphasis on providing
remittance and insurance services and developinga
client-specific marketing strategy.
• Members of the Bank’s Board can help put in place
effective MIS and build competence to operate and
manage bank on sound principles of business &
finance.
• State Governments should have serious concern and
commitment to develop the bank on a sound
foundation of operational viability and financial
sustainability through effective coordination &
consultative approach and monitoring and reviewing
measurable performance indicators.
• On lines of North East region, RBI can consider
extending the Special Dispensation Scheme to RRBs to
open branches at unviable centers in tribal, hilly, desert
and drought prone areas and State Governments should
provide basic infrastructure, viz security, roads and
digital connectivity that can accelerate expansion of
banking network in these regions.
About the Author
Dr Amrit Patel retired as deputy general
manager from Bank of Baroda. He served
Bank of Baroda for 25 years in various
areas of banking and credit. Prior to
joining the bank, he has to his credit 12
years of experience in agricultural
research, administration and teaching in
Gujarat Agricultural University. Dr Patel
worked for over 10 years as rural credit and microcredit expert
and as a consultant for projects funded by World Bank, Asian
Development Bank and International Fund for Agricultural
Development of the United Nations in Tajikistan, Azerbaijan,
Bangladesh, Uganda, Kenya and India.
He also has experience of over 10 years as a guest faculty of
College of Agricultural Banking of Reserve Bank of India, Pune
and several other national level institutions in India and
abroad. He has to his credit 3 books published for agricultural
universities. Dr Patel holds doctoral qualifications in rural
studies.
He can be contacted at dramritpatel@yahoo.com
The Indian Banker 47
 ARTICLE
Introduction
In his budget speech on 10th July 2014, Union Finance
Minister Arun Jaitley estimated that Public Sector Banks
(PSBs) will need INR 2.4 trillion of capital by 2018 to
comply with Basel III norms. ‘To meet this huge capital
requirement we need to raise additional resources to fulfil
this obligation’, he said and added that ‘while preserving
the public ownership, the capital of these banks will be
raised by increasing the shareholding of the people in a
phased manner through the sale of shares largely through
retail to common citizens of this country’. The
government will also consider giving greater autonomy to
PSBs, which constitute roughly 70 percent of the Indian
banking industry’s assets.
A number of measures are being discussed by the banking
fraternity on how to go about raising such a huge amount
of capital, projected at INR 2.4 lac crore. Also, considering
the huge amount of non-performing assets that banks are
dealing with, the provisioning required for these bad loans
adds up to the bank’s capital requirements. Thus the
combined effect of Basel III and the declining asset quality
in the banking sector have led to significant capital
concerns for Indian Banks.
Capital requirements in banks
The main international effort to establish rules around
capital requirements has been the Basel Accords, published
by the Basel Committee on Banking Supervision (BCBS).
In 1988, the BCBS had introduced a capital measurement
system commonly referred to as Basel I. In June 2004 this
framework was replaced by a significantly more complex
capital adequacy framework commonly known as Basel II.
Following the financial crisis of 2007–08, Basel II was
48 The Indian Banker
Capital Concerns in
Indian Banking
Dr Suresh Chandra Bihari
replaced by Basel III, which is gradually being phased in
since 2013 and is estimated to be completely enforced by
2019.
Basel III
The BCBS is raising the resilience of the banking sector by
strengthening the regulatory capital framework. The
reforms raise both the quality and quantity of the
regulatory capital base and enhance the risk coverage of the
capital framework. They are underpinned by a leverage ratio
that serves as a backstop to the risk-based capital measures,
is intended to constrain excess leverage in the banking
system and provide an extra layer of protection against
model risk and measurement error. Finally, the BCBS is
introducing a number of macro prudential elements into
the capital framework to help contain systemic risks arising
from pro-cyclicality and from the interconnectedness of
financial institutions.
Raising the quality, consistency and
transparency of the capital base
It is critical that banks’ risk exposures are backed by a high
quality capital base. The 2008-09 sub-prime crisis
demonstrated that credit losses and write downs come out
of retained earnings, which is part of banks’ tangible
common equity base. It also revealed the inconsistency in
the definition of capital across jurisdictions and the lack of
disclosure that would have enabled the market to fully
assess and compare the quality of capital between
institutions.
To this end, the predominant form of Tier-1 capital must
be common shares and retained earnings. This standard is
reinforced through a set of principles that also can be
Vol II No. 2 - September 2014

tailored to the context of non-joint stock companies to
ensure they hold comparable levels of high quality Tier-1
capital. Deductions from capital and prudential filters have
been harmonised internationally and generally applied at
the level of common equity or its equivalent in the case of
non-joint stock companies.
The remainder of the Tier-1 capital base must be
comprised of instruments that are subordinated, have fully
discretionary noncumulative dividends or coupons and
have neither a maturity date nor an incentive to redeem.
Innovative hybrid capital instruments with an incentive to
redeem through features such as step-up clauses, currently
limited to 15 percent of the Tier-1 capital base, will be
phased out.
In addition, Tier-2 capital instruments will be harmonised
and so-called Tier-3 capital instruments, which were only
available to cover market risks, eliminated. Finally, to
improve market discipline, the transparency of the capital
base will be improved, with all elements of capital required
to be disclosed along with a detailed reconciliation to the
reported accounts.
The Committee is introducing these changes in a manner
that minimises the disruption to capital instruments that
are currently outstanding. It also continues to review the
role that contingent capital should play in the regulatory
capital framework.
Capital conservation
The Committee is introducing a framework to promote the
conservation of capital and the build-up of adequate
buffers above the minimum that can be drawn down in
periods of stress. At the onset of the financial crisis, a
number of banks continued to make large distributions in
the form of dividends, share buy backs and generous
compensation payments even though their individual
financial condition and the outlook for the sector were
deteriorating.
Much of this activity was driven by a collective action
problem, where reductions in distributions were perceived
as sending a signal of weakness. However, these actions
made individual banks and the sector as a whole less
resilient. Many banks soon returned to profitability but did
not do enough to rebuild their capital buffers to support
new lending activity. Taken together, this has increased the
pro-cyclicality of the system. To address this, the
Committee is introducing a framework that will give
supervisors stronger tools to promote capital conservation
in the banking sector. Implementation of the framework
through internationally agreed capital conservation
standards will help increase sector resilience going into a
Vol II No. 2 - September 2014
ARTICLE
downturn and will provide the mechanism for rebuilding
capital during the economic recovery.
Major proposals of Basel III
(a) Better capital quality: One of the key elements of
Basel III is the introduction of much stricter definition
of capital. Better quality capital means the higher loss-
absorbing capacity. This in turn will mean that banks
will be stronger, allowing them to better withstand
periods of stress.
(b) Capital conservation buffer: Another key feature of
Basel III is that now banks will be required to hold a
capital conservation buffer of 2.5 percent. The aim of
the conservation buffer is to ensure that banks maintain
a cushion of capital that can be used to absorb losses
during periods of financial and economic stress.
(c) Countercyclical buffer: This is also one of the key
elements of Basel III. The countercyclical buffer has
been introduced with the objective to increase capital
requirements in good times and decrease the same in
bad times. The buffer will slow banking activity when it
overheats and will encourage lending when times are
tough ie in bad times. The buffer will range from 0
percent to 2.5 percent, consisting of common equity or
other fully loss-absorbing capital.
(d) Minimum common equity and Tier 1 capital
requirements: The minimum requirement for common
equity, the highest form of loss-absorbing capital, has
been raised under Basel III from 2 percent to 4.5
percent of total risk-weighted assets. The overall Tier 1
capital requirement, consisting of not only common
equity but also other qualifying financial instruments,
will also increase from the current minimum of 4
percent to 6 percent. Although the minimum total
capital requirement will remain at the current 8 percent
level, yet the required total capital will increase to 10.5
percent when combined with the conservation buffer.
(e) Leverage ratio: A review of the financial crisis of 2008
has indicted that the value of many assets fell quicker
than assumed from historical experience. Thus, now
Basel III rules include a leverage ratio to serve as a
safety net. A leverage ratio is the relative amount of
capital to total assets (not risk-weighted). This aims to
put a cap on swelling of leverage in the banking sector
on a global basis. 3 percent leverage ratio of Tier 1 will
be tested before a mandatory leverage ratio is
introduced in January 2018.
(f) Liquidity ratios: Under Basel III, a framework for
liquidity risk management will be created. A new
The Indian Banker 49
 ARTICLE
Liquidity Coverage Ratio (LCR) and Net Stable Funding
Ratio (NSFR) are to be introduced in 2015 and 2018,
respectively.
(g) Systemically Important Financial Institutions
(SIFIs): As part of the macro-prudential framework,
systemically important banks will be expected to have
loss-absorbing capability beyond the Basel III
requirements. Options for implementation include
capital surcharges, contingent capital and bail-in-debt.
New capital requirements in a nutshell
As per existing norms, the total minimum capital ratio is 9
percent, comprising Tier-I and Tier-II capital. Basel-III
regulatory capital matrix is percentage to Risk Weighted
Assets (RWAs):
i) Minimum common equity Tier-I ratio: 5.5 percent
ii) Capital conservation buffer (comprising common
equity): 2.5 percent
iii) Minimum common equity Tier-I ratio plus capital
conservation buffer [(i) + (ii)]: 8 percent
iv) Additional Tier-I capital: 1.5 percent
v) Minimum Tier-I capital ratio [(i) + (iv)]: 7 percent
vi) Tier-II capital: 2 percent
vii) Minimum total capital ratio (MTC) [(v) + (vi)]:
9 percent
viii) Minimum total capital ratio plus capital conservation
buffer [(vii) + (ii)]: 11.5 percent
Impact of Basel III on Indian banks
Reserve Bank of India (RBI) notified the new Basel-III
norms in May 2012, which will be effective from January
2013 in a phased manner and fully implemented by March
2018. Basel III has introduced many elements of capital,
such as a clearly defined common capital that measures
core equity capital in relation to its total risk-weighted
assets and hence, assesses the bank's financial strength and
capital conservation buffers at various levels. Besides, risk-
based capital ratios will have to be supplemented with
leverage ratio during a parallel run.
As per the research report of Credit Suisse, the new norms
will push up the capital needs of Indian banks by $20
billion to $30 billion (1 lac crore to 1.5 lac crore). Since
banks will now need additional capital for doing the same
50 The Indian Banker
level of business, they may see a sharp drop in their
Returns On Assets (ROA). Further, the incremental equity
requirement in theIndian banking system may go to as high
as INR 3.2 to 4 trillion over the next six years. According
to ratings firm ICRA, the government's share in this could
be INR 1.2 to 1.7 trillion. When banks with low core Tier-I
shore up their capital to around 9 percent (required 8
percent and 1 percent cushion), their Return On Equity
(ROE) could drop by 1 percent to 4 percent, which they
could seek to compensate by raising their lending yields,
increasing fee income, or rationalising costs. As per Credit
Suisse research report, about $15 billion was needed for
Indian banks to support 18 percent growth, of which
around $11-12 billion was needed by the PSUs (Public
Sector Undertakings) banks. After these norms requiring
re-capitalisation, banks may need another $5 billion in the
next 1 year, in addition to $3 billion needed by private
banks. Further, the transition to Basel III is likely to result
in a moderation in the return on equity of banks by 200-
300 basis points for PSU banks and around 100 basis
points for private banks. Additionally, banks would be
required to maintain liquidity coverage ratio and net stable
funding ratio of above 100 percent.
The Basel-III norms come at a time when banks are under
pressure to set aside funds for a potential increase in bad
loans. For every 1 percent increase in gross NPAs (Non
Performing Assets), the banking system may require
additional INR 25000 crore.
Regulatory Capital = Core Capital + Capital
conservation buffer + Counter cyclical buffer (when
activated)
Actual Regulatory Core capital:
• 9 percent in 'Normal Scenario'
• 9 percent in 'High Credit Growth Scenario'-
Introduction of countercyclical buffer (1%)-No
restriction on earning distribution
• 9.5 percent in 'Higher Credit Growth Scenario'- Higher
level of countercyclical buffer (2.5%)-Restriction on
earning distribution kicks in
• 9 percent in 'Stress Situation, Higher credit Growth
Continues Scenario'- Part release of countercyclical
buffer (1.5%) - Restriction on earning distribution
becomes lower
• 7 percent in 'Stress Situation, Normal Credit Growth
Scenario'- Complete release of countercyclical buffer,
(0%) - Restriction on earning distribution become
higher
Vol II No. 2 - September 2014
 ARTICLE

Difficulties arising for banks from Basel-III required. As per estimates, about INR 60000-75000 crore
norms demands for capital from banks could be there in the next
six years. Again, it may not be easy for the government,
There are worries among certain bankers that the considering its fiscal deficit.
implementation of Basel-III proposals will have an adverse
impact on the ROE and financial ratios. There are concerns The simultaneous implementation of Basel-III and the so-
that PSBs may not be able to grow their loans since called 'dynamic provisioning' requirements (2.4 to 3 percent
government-dependent lenders would not have adequate of loans in balance-sheet) may enlarge the difficulties that
capital. Critics of Basel-III norms feel banks could face amid the approx.
that just because banks would have THE DIFFICULTY IN INR 2 lac crores of loans that would
more capital, it does not mean that a have to be restructured by this fiscal
bank will not get into trouble. The INCREASING THE CAPITAL OF end. Banks with high credit costs may
crises may at best be postponed. find it tough to meet the additional
Walter Bagehot, the former editor of PSBS IS NOT BECAUSE OF burden.
'The Economist', had famously said,
‘No capital is required for a well-run THEIR INABILITY TO Government action
bank and no amount of capital can
save a badly-run bank!’ ATTRACT INVESTORS. IF The government infused a capital of
up to INR 11,200 crore in PSBs in its
A taskforce of leading bankers INVESTORS ARE GIVEN interim budget in March, 2014
warned in June 2012 that the Basel III announced by the then Finance
rules were too focused on problems CONFIDENCE, BANKS WOULD Minister, P Chidambaram, to expand
that occurred in Europe and the US. their capital base. Also, the
They argued that the standards BE ABLE TO RAISE government infused INR 14,000 crore
unfairly penalise trade finance and in PSBs during the financial year
project finance, two forms of credit SUFFICIENT CAPITAL. BUT ending March 31, 2014. Of this, State
that are particularly important in Bank of India got INR 2,000 crore,
developing nations. This school of THE GOVERNMENT WOULD while Indian Overseas Bank (IOB)
thought believes that the Indian received INR 1,200 crore. In view of
banking system has proved robust HAVE TO DILUTE ITS the Basel III, or global prudential
due to constant monitoring by the banking norms, all banks have been
RBI. As per past instance, Indian HOLDING IN THE PSBS. IT planning to shore up their Tier-1
banks had carried a huge negative capital. According to the Reserve
net-worth for three years without any SEEMS DIFFICULT BECAUSE Bank, Indian lenders will require
problem. As per this argument, PSBs additional capital of INR 5 lac crore
do not need more capital. THE GOVERNMENT MAY BE to meet the new global banking
norms, Basel III.
Since Basel-III is an international UNWILLING TO LET GO ITS
norm, therefore, Indian banks, Expert opinions
including PSBs (Public Sector Banks) MAJORITY STAKE IN THESE
with international presence, would Global rating agency Moody’s
find it an obstacle if they are non- BANKS. Investors Services has warned that
compliant. One of the solutions Indian banks will require more capital
proposed by policymakers is to go slow on imposing new than what the government had allocated in its budget,
capital adequacy norms for PSBs as all of them do not especially in the context of higher capital requirements
have a foreign presence. under the Basel III norms and increasing bad loans that
would require banks to set aside more money to cover such
However, the difficulty in increasing the capital of PSBs is loans. Moody’s said that the allocation is credit negative for
not because of their inability to attract investors. If PSBs because it is much smaller than the INR 25,000 -
investors are given confidence, banks would be able to raise 36,000 crore ($4.1-$5.8 billion) that they estimated that the
sufficient capital. But the government would have to dilute banks needed to meet a minimum tier 1 ratio of 8 percent
its holding in the PSBs. It seems difficult because the in the fiscal year ending March 2015. Without sufficient
government may be unwilling to let go its majority stake in government capital infusions, PSBs will be challenged to
these banks. If fresh equity is to be raised without diluting maintain minimum tier 1 ratios of 8 percent. In addition, a
the government's share, huge budget allocations are sharp rise in the bad loans of Indian banks also requires

Vol II No. 2 - September 2014 The Indian Banker 51

 ARTICLE
banks to have higher amount of capital, Moody’s said.
Under the current norms, banks need to set aside more
money to cover loans if they become bad, which affects
their profitability. ‘Our estimates assume the banks make
adequate provisions to meet a minimum 70 percent
coverage ratio under a range of potential asset-quality
outcomes,’ Moody’s said. The agency expects that bad loans
will continue to rise at Indian banks in fiscal year ending
2015. ‘Indian PSBs’ need for significant external
capital is a result of an increase in Non-Performing
Loans (NPLs) owing to the country’s slowing economy
and infrastructure bottlenecks, and profitability that is
insufficient for internal capital generation to fund loan
growth,’ Moody’s said. As of December 2013, rated PSBs
reported an average gross NPL ratio of 4.3 percent (of
total loans), up from 3.4 percent in March 2013. These are
expected to continue rising in fiscal year 2015. Gross NPAs
of Indian banks rose to INR 2.4 trillion at the end of
December, about 36 percent up compared with the same
period last year.
According to a Standard & Poor's Ratings Services report,
higher capital requirement under Basel-III would increase
the pressure on Indian banks to raise capital. The report
said banks may need INR 2.6 lac crore of additional capital
by 2018 as they strive to meet Basel-III requirements.
‘Banks face a constant need to replenish capital at regular
intervals to support their high growth. Starting April 1,
2013, Indian banks will begin to implement the new Basel-
III capital requirement, which will increase their capital
requirement in phases,’ the report said.
The rating agency estimates that Indian banks will require
minimum additional capital of about INR 69,100 crore to
meet the Reserve Bank of India’s 8 percent requirement for
the common equity tier-1 and capital conservation buffer
ratio. The additional capital requirement could rise to INR
2.6 lac crore, given the tendency for banks to hold higher-
than-minimum capital and the limited market for hybrid
instruments in India, it said.
52 The Indian Banker
‘The biggest challenge for the Indian banking sector is the
state of Indian public finances,’ said Deepali Seth, Standard
& Poor’s credit analyst. ‘The Government’s large fiscal
deficit will limit its ability to inject capital into
Government-owned banks, which currently have less
capital adequacy than the private and foreign banks
operating in India.’
‘While some smaller banks may face difficulties, for some
weakly capitalised banks, the capital requirement could go
up to two to three times their current market capitalisation’,
she added.
‘Indian banks will be required to raise INR 3 lac crore in
external capital in the next four years. Expansion of capital
to this extent will affect the returns on the equity of these
banks, especially PSBs,’ said a bank official at a seminar. ‘It
will be difficult for the government to find such a large
amount to capitalise the PSBs. The situation of the private
sector banks will not be much different, leading to merger
and consolidation of the banks,’ he opined. ‘RBI’s directive
to implement the Basel III norms by 2018 March was also
a big challenge,’ he said.
The requirement for Basel III Additional Tier I (AT1)
capital for banks would be as high as INR 54,400 crore in
FY15 and FY16, ratings agency India Ratings & Research
said in a statement. The agency expects about 97 percent of
this requirement to come from PSBs.
Banks in action
Bank of India issued bonds worth INR 1, 250 crore as a
modest and slow beginning to the significant need for such
capital. The state-owned bank has the option of raising an
additional INR 1, 250 crore.
Two PSBs also stated that they will raise money from the
government, or issue shares to Life Insurance Corp. of
India (LIC) to get additional capital this fiscal year. While
Mumbai-based Central Bank of India said its board
approved raising additional capital by issuing 71 million
shares to LIC on a preferential basis, Chennai-based IOB
said it will issue shares to the government to raise INR
3,500 crore. Both the banks made these announcements
through notifications on the exchanges.
As the cash-strapped government struggles to infuse capital
to the banks it owns, LIC has time and again come to the
rescue of state-owned banks, subscribing to their share
issuances. In February, LIC picked up 41.3 percent of State
Bank of India’s INR 8,000 crore share-sale to institutions.
Going by Central Bank’s share outstanding figure, LIC will
be picking up a 5 percent stake in the bank. It already holds
5.44 percent in Central Bank of India. As on 31st March,
Vol II No. 2 - September 2014
 ARTICLE

the government held 88.63 percent in Central Bank. IOB
said it has requested the government to infuse capital worth
INR 3,500 crore to raise its core capital to adhere to the
latest international accounting norms. On 31st March,
IOB’s core capital adequacy ratio was 7.47 percent, against
the Basel III requirement of 8 percent. Bank of India has
also sought shareholders’ approval to raise about INR 4000
crore by way of rights issue or from qualified institutional
investors and raise another INR 5745 crore as bonds, while
IOB has sought government approval to raise INR 3500
crore.
The fresh capital will enable these banks to meet the new
Basel norms - the global regulatory standard on bank
capital adequacy ratio - that will be effective from March
2018. Several PSU banks have sought approval from their
shareholders to raise capital from the equities market so
that they have adequate capital to expand their loan books.
Bankers expected demand for loan, which dried last year, to
revive with the change in investment sentiments led by the
formation of a stable government.
Among others, IDBI Bank has said that it intends to raise
INR 4000 crore either through QIP or a follow-on equity
issue. Similarly, Union Bank of India, Syndicate Bank and
United Bank of India which have sought shareholders
approval to raise equity from qualified institutional
investors. Syndicate Bank plans to raise INR 1500 crore
this year while Mumbai based Union Bank has said that it
would raise INR 1386 crore and United Bank has proposed
to raise INR 1300 crore.
The need to raise equity comes as banks gear to meet the
new Basel III norms. The RBI has estimated that private
and public sector banks will require capital to the tune of
INR 4.75-5 lac crore. Of this, PSU banks will require INR
1.4 - 1.5 lac crore in form of common equity and INR 2.65
to 2.75 lac crore in form of non-equity capital.
Looking forward
India's PSBs continue to face several challenges in raising
capital and meeting the higher Basel III requirements. This
includes insufficient market appetite to fill the regulatory
requirement, which has raised the dependence on the state-
owned LIC for private placement of PSBs' Basel III-
compliant capital instruments.
Indian banks have to become fully compliant by March
2018. But the weakening profitability of the PSBs, in
particular, is constraining their retained earnings and raising
their overall capital requirement. This need will increase
even further if loan growth in the system were to resume
close to 20 percent year-on-year from the current 14
percent - 15 percent rate.
Many local wholesale investors are restricted from investing
in new-style instruments that can be classified as capital
under the new rules. As such, a number of recent
unsuccessful attempts by several PSBs to issue Basel III-
compliant debt highlight their struggle to replace their
existing Tier I and Tier 2 Basel II debt. It has heightened
their recourse to LIC as an immediate measure for making
headway with the burgeoning regulatory requirements. A
local panel has been set up by government to ‘look into’
this problem. But a credit-supportive outcome could take
some time, on account of two important reasons.
First, the lack of clarity on the exact Point-Of-Non-
Viability (PONV) for Tier 2 debt instruments has raised

Corrigendum
Author details of the article ‘Bank Credit to LLPs and One-Person Companies Guarantees of Directors’
on page 52 in our August 2014 issue should have been as under:

Madhukar R Umarji is currently Partner, Alliance Corporate Lawyers, Mumbai.

Umarji was Chief Advisor, Legal of the Indian Banks’ Association for the last twelve
years and has rich experience in banking and other financial sector related laws. A
post-graduate in Law from Bombay University, Mr. Umarji represents a unique
combination of experience as Legal Adviser of Banks (Bank of Baroda and Dena
Bank), operational banker (Dena Bank and Corporation Bank) and a Central Banker
as Executive Director, Department of Non-Banking Supervision, Reserve Bank of
India. He has been actively involved in the process of financial and banking sector reforms
in India undertaken by the Ministry of Finance and has represented the banking industry on
various Committees and Working Groups set up by the Government and RBI, including Dr. J J Irani
Committee on Reforms in Company Law. He was involved with the United Nations Commission on
International Trade Law in preparation of Legislative Guide on Model Law for Secured Transactions,
as a delegate from India.

Vol II No. 2 - September 2014 The Indian Banker 53

 ARTICLE
investor uncertainty. This has been compounded by the
limited risk premium that has been provided, thus far, to
compensate for the ‘loss-absorbing’ nature of these
instruments. These issues were also highlighted in Fitch's
APAC investor survey. Amid these conditions, it is difficult
to foresee a pick-up in investor interest even if the
regulator were to allow more local institutional investors,
such as insurers, to invest in Basel III debt securities.
The second reason is that equity market access has proven
tough despite steady capital injection from government.
PSBs need to source approximately INR 1.16trn (USD
19bn) from the equity market by 2018, according to recent
official estimates. But, in contrast to their private-sector
counterparts, they have proven far less successful in raising
equity market capital - even with deeply discounted market
valuations. Constrained market access highlights their
worsening credit fundamentals, in particular the continuing
pressures on asset quality and earnings.
The RBI has not so far required a counter-cyclical capital
buffer or set higher requirements for systematically
important domestic banks. It is estimated that the inclusion
of both could raise the overall capital requirements of
local banks by an additional 20 percent over existing
estimates.
As India's economy takes longer to recover, a cyclical pick-
up in credit will also take more time. This could potentially
limit the growth of the PSBs risk-weighted assets. But
dependence on government-arranged capital-raising
backstops could remain high - due to their weakened credit
fundamentals, narrow investor base, limited tolerance for
market-based pricing of debt, and weak equity market
valuations.
State-owned banks are likely to hit the capital markets in
November in a bid to meet Basel III capital adequacy
norms, for which the requirement has been estimated at
INR 2.4 lac crore over a 5-year period. Thus, the road map
laid by the Government of India on capital concerns of
Indian banks seems quite clear, however, there is continued
ambiguity as to whether this will work or not since dilution
of government holding in itself cannot positively raise a
capital of INR 2.4 lac crore.
54 The Indian Banker
References
1. Union Budget 2014-15
2. http://economictimes.indiatimes.com/articleshow/ 38230359.cms?utm_
source=contentofinterest &utm_medium= text&utm_campaign=cppst
3. Live Mint-12 July 2014
4. http://www.moneycontrol.com /news/market-edge/ budget -2014-psu-banks-to-hurt-
infra-lenders- to-gain-morgan-stanley_ 1124211.html?utm_source=ref_article
5. The Hindu Business Line-E-Paper-July 10, 2014
6. The Deccan Chronicle-July 11,2014
7. Basel-iii-Accord-Basel-3-Norms at www.allbankingsolutions.com/Banking-Tutor
8. A critical review of Basel-III norms for Indian PSU banks – Mr. Mukul Jain
9. RBI master circular- Basel III regulations
10. Capital Requirements and Bank Behaviour: the Impact of Basel Accord by
Patricia Jackson, et al.
11. Moody’s warns of capital concerns for Indian Banks at www.livemint.com
12. PSU Banks to get additional capital infusion at www.businesstoday.intoday.in
About the Author
Dr S C Bihari has experience of 28 years
in Allahabad Bank which includes 3 years
as a trainer. Presently, he is a Professor in
banking & finance at IBS, Hyderabad.
He has over 100 publications to his credit
that includes 11 text books, 6 study
materials for MBA students of a reputed
University, 8 edited books and 7 case studies, included in the
European Case Clearing House and published over 50
research papers in reputed and referred international and
national journals.
He has also presented research papers in 30 conferences at
Northern State University, USA, IIM, Calcutta, MDI, Gurgaon,
IMT, Ghaziabad and Nagpur, among others. He won Macro
Research Award 2009-10; Micro Research Award 2011-12 and
was one of the prize winners of Micro Research Award 2010-
11 of IIBF. Since October, 2012, he is the CONSULTING EDITOR
of The IUP Journal of Bank Management, ICFAI University
Press.
He can be contacted at scbihari@gmail.com or
scbihari@yahoo.co.in.
Vol II No. 2 - September 2014

Introduction
In the wake of several corporate scandals coming to light
both globally (Enron for example) and locally, the efficacy
of financial audit is currently being doubted as never
before. Yet, there has been an explosion of a variety of
audits in many different fields: Banking, Education,
Environment, Health Services, Intellectual Property,
Natural Resources exploitation, to name just a few.
Auditing is linked to the ideals of organisational
transparency and accountability. Besides, auditing has a
peculiar form of alchemy that it produces regulatory
comfort with regard to adherence to set out rules and
procedure and its compliance. In spite of concerns about
the growing costs in undertaking audits of different kind,
audit as an instrument of regulation / control has
remained a powerful tool and continues to be a significant
principle of social organisation. Therefore, audit remains,
till a better alternative is found, an all purpose solution to
the ever growing problems of administrative control.
The term Fraud, in an organisational context refers to an
intentional act by one or more individuals amongst the
management, those charged with governance, employees,
or third parties, involving the use of deception to obtain an
unjust or illegal advantage. Fraudulent financial reporting in
organisations involves intentional misstatements, in any one
or more ways as under:
• Any action undertaken to conceal facts, deceive, injure
the interests of the company or its stakeholders, or to
gain undue advantage also constitute fraud;
• Deception such as manipulation, falsification or
alteration of accounting records or supporting
documents;
Vol II No. 2 - September 2014
ARTICLE
Forensic Audit
V Krishna Moorthy
• Misrepresentation in, or intentional omission from the
financial statements, significant events, transactions or
other information;
• Intentional, mis-application of accounting principles
relating to measurement, recognition, classification,
presentation, or disclosure of material transactions.
Financial accounts can be falsified to conceal:
a. Absolute theft of money or money’s worth.
b. True results of provisions or financial position of the
entity with a view to prevent timely detection of
corporate frauds;
With the new age white-collar crimes on the increase of
late, auditing needs to be embellished with forensic
techniques to bring the gentleman-criminal to book.
In a recent survey conducted by global consultancy firm
Grant Thornton in association with Assocham, it was
found that instances of corporate fraud like corruption,
money laundering and bribery in India have risen
substantially in the last few years. The report further
observes that the lurking risk of frauds has been dissuading
global companies from investing in India. Specific types of
frauds including corruption and bribery, siphoning-off
funds, information theft, theft of physical assets and
internal financial fraud have increased dramatically in India,
the survey pointed out. The survey further found that
companies in the real estate and infrastructure sectors are
the most vulnerable to such frauds.
In view of the above, global companies are increasingly
realising that corruption is the biggest threat to do business
The Indian Banker 55
 ARTICLE
in India. As a result, they are investing in building up
controls and processes that address the direct and indirect
risks of corruption and bribery in India. In the
circumstances, establishing robust internal controls,
appointing compliance personnel and quick response to
warning signals by corporates in India were some of the
measures advocated by the survey to mitigate and prevent
fraud.
The scenario
While corruption and frauds have been a common feature
in Indian defence purchases over the decades which has led
to national debate in the media and Parliament, Bofors
being the most talked about, here are a few instances, both
local and global, where corruption and vested interests have
led to scams of a very high order resulting in loss to the
country or the concerned organisations.
• Britain’s biggest drug-maker GlaxoSmithKline is facing
a criminal investigation in Poland for allegedly bribing
doctors to promote its lung drug Seretide, adding to
problems for a company already accused of corruption
in China and Iraq. Thirteen people have been charged
in connection with the investigation launched by Polish
prosecutors.
• Associated Free Press recently reported under New
York dateline (April, 8, 2014) that the CITI Group has
reached an agreement (which releases Citi from an
obligation to repurchase mortgages sold into 68
mortgage trusts—the 68 trusts issued $59.4 billion in
residential mortgage securities during 2005-2008) with a
group of 18 institutional investors to pay $1.125 billion
to settle claims on some mortgage backed securities
sold ahead of the financial crisis.
• On 6th June 2014 Reuters reported that Bank of
America Corp. could pay more than $12 billion to
settle probes by the US Justice Department and a
number of states into the bank’s alleged handling of
shoddy mortgages (BoA sold Fannie Mae and Freddie
Mac faulty mortgage bonds), thus hoping to end one of
the largest legal headaches the bank faced from the US
financial crisis.
World Bank has recently banned two Indian entities for
violating its fraud and corruption guidelines making them
ineligible to participate in any projects funded by the global
lender for a certain period. These sanctions have been
imposed on the two entities under the Bank’s ‘fraud and
corruption policy as set forth in the Procurement
Guidelines or the Consultant Guidelines.’ It is in this
context, we need to know what Forensic Audit is and what
it can do to bring down frauds in organisations.
56 The Indian Banker
What is Forensic Audit?
A forensic audit involves an examination and investigation
into the financial affairs of an individual or of a business
entity in the context of an alleged fraud. The purpose is to
find out whether an alleged fraud has actually happened.
Once it is known that there have been irregularities, the
audit gets down to finding the details such as the monetary
value of the fraud, the period over which the fraud was
committed and those involved etc. Gathering evidence in
support of the findings is a crucial part of the forensic
audit. A forensic audit may be conducted on an entity
following orders from a government or regulatory body in
order to solve a case of fraud. A company itself may also
get such an audit done in order to unearth any wrongdoing.
Though there is no single standard procedure that a
forensic audit follows, it typically involves gathering
evidence which is analysed and the findings are presented
in a report. What is crucial is that the evidence so collected
must be admissible in a court of law. Besides, members
from the audit team may be needed to be present during
the court proceedings. While fact-finding involves scrutiny
of the company’s financial statements, it also extends to
non-financial information including e-mails, online
transaction (banking) records and physical searches.
Information is also collected through interviews with the
management and employees. In forensic audit, the search
for truth has to go beyond company financials. These may
relate to cash and other transactions, inventory of goods,
receivables etc.
Companies (Auditors’ Report) Order 2003, requires
auditors of a public limited company to report amongst
others, ‘whether any fraud on or by the company has been
noticed or reported during the year. In case, the answer is
positive, the nature and amount involved are to be
indicated.’ It is in this background that the concept of
Forensic Auditing has gained in importance.
Definition
Thus, Forensic Audit is an examination and evaluation of
a firm’s or individual’s financial information for use as
evidence in a court. A forensic audit can be conducted in
order to prosecute a party for fraud, embezzlement or
other financial claims. In addition, an audit may be
conducted to determine negligence or even to determine
how much spousal or child support an individual has to
pay.
Forensic Auditing is a specialisation within the field of
auditing. To put it simply, Forensic Auditing can be defined
as the application of auditing skills to situations that have
legal consequences. Forensic auditors often provide expert
Vol II No. 2 - September 2014

testimony during trial proceedings in the courts. Forensic
auditing also refers to investigation of a fraud or
presumptive fraud with a view to gathering evidence that
could be presented in a court of law. Most large audit and
accounting firms have a forensic department.
Forensic Auditing can be used either by a corporate
management or by statutory or other auditors to carry out
general reviews of activities to highlight risks arising either
out of fraud or from any other source with the purpose of
initiating focused reviews of particular areas, targeting
specific threats to the organisation. It can also be used to
address complaints, allegations or information coming out
of anonymous tips from employees or whistleblower in the
organisation and thus leading to initiation of detailed
investigation.
The objective of the forensic audit is to find whether or
not a fraud has taken place in the financial affairs of an
organisation. It involves examination of voluminous
records and witnesses as permitted by law. Proper
documentation is vital in substantiating the findings. The
outcome shall focus on the following in case of frauds:
• Proving the loss and the quantum of loss;
• Proving the responsibility for the loss;
• Proving the method / motive;
• Establishing guilt of person / persons;
• Identifying other beneficiaries.
As incidents of cyber crimes and frauds detection are on
the rise in recent years, demand for certified forensic
accounting and auditing professionals is growing in our
country.
Demand for and training Forensic Audit
professionals
The enactment of the new Companies Act 2013 has a
significant impact on fighting and preventing frauds. The
new Companies Act directs companies and Independent
Directors (IDs) to increase safeguards against fraud. Under
Sec.177 of the Companies Act, 2013, the Audit Committee
will have the authority to investigate and the power to
obtain professional advice from external sources and have
full access to information in the records of companies. In
view of this there will be a growing number of references
to the certified forensic accounting professionals which will
increase the need for building a robust body of such
professionals. The Act has already directed the central
government for the creation of a Serious Frauds
Vol II No. 2 - September 2014
ARTICLE
Investigation Office (SFIO) to investigate frauds relating to
a company. The SFIO is to be headed by a director and
consist of such number of experts from the fields like
banking, taxation and forensic audit among others.
Arising out of the provisions in the new Companies Act,
several professionals in this area have expressed their views.
The head of forensic practices wing at Ernst & Young
Global (Arpinder Singh) has observed recently that ‘with
these provisions, every company would have to have pro-
active fraud risk management policies.’ He further advises
that IDs, also seen as having a whistle-blower role, to
document all that they don’t find in order, and to document
all the objections they raise. Similarly, the partner heading
the forensic practices wing (PiyushVora) at BDO India says
that we might be seeing an increase in forensic audits
because more and more banks would order these on the
books of companies that had approached them for
corporate debt restructuring. The reason being, bankers
would need to check if the losses are because of genuine
commercial reasons or because promoters have played
around with company funds. Yet another specialist in this
area, Dolphy Dsouza, partner in a member firm of E&Y
recently observed: The auditors’ role is also coming under
the scrutiny because they will now be regulated by the new
National Financial Reporting Authority (NFRA) and heavy
penalties have been prescribed for auditors if they fail in
their duties. All these developments would mean that IDs
will tilt towards getting forensic audits of the accounts and
auditors shall have to be vigilant.
Under Sec.245 (lg) of the Act, depositors and members of
a company can claim damages from auditors, management
and other consultants for the wrongdoings by the company
and its management. Further, under Sec.140 of the Act,
the auditors and their firm / s would be jointly liable for
any frauds in the books of accounts. Besides, under
Sec.149 (12), independent directors would be held liable
for the frauds in their knowledge.
In the online training arena, acquiring a designation of
CFAP certification awarded by India Forensic Centre of
Studies and moderated by the Forensic Accounting
Research Foundation is getting significant response. The
Indiaforensic.com offers onlineprogrammeof courses for
certified forensic accounting professionals (CFAP). A
CFAP holder is a person who has undergone training to
become an expert in the field of forensic accounting,
forensic auditing, litigation support and investigative
accounting.
In the past, acquiring qualifications in Chartered
Accountancy and Cost and Management Accountancy were
the options to become auditors to look into company’s
books of account from the financial and cost angles. With
The Indian Banker 57
 ARTICLE
growing incidents of cyber crimes and frauds in the
corporate world, the demand for certified forensic
accounting professionals has also been growing in India.
Professional institutes like Institute of Chartered
Accountants of India (ICAI) and Association of Chartered
Certified Accountants (ACCA) etc are providing training
and experience in forensic auditing to cater to the forensic
accounting and auditing segments. The ACCA offers a
Certificate Course in Forensic Accounting based the
curriculum of which is based on global standards, and
therefore, it ensures that their accounting professionals
would be ready for all areas of accounting and finance
audits.
Forensic Audit in banks
A forensic auditor is a specialist who is supposed to have
significant expertise, training, and exposure to a host of
relevant disciplines like accounting, auditing, fraud
examination, law, computer technologies, besides
investigative skills to collect, analyse, evaluate records,
witnesses and other evidences and interpret the same and
communicate the findings in the form of a report that will
withstand court’s scrutiny.
Reserve Bank of India, as the Banking Regulator has been
issuing on a regular basis guidelines on frauds and related
aspects. One such recent instruction has been on the
subject of Fraud Risk Management System in Banks—Role of
Chairmen and Chief Executive Officers issued on September 16,
2009. It requires banks to take certain measures to ensure
effective and quick investigation, monitoring and follow up
of frauds. The need for forensic skills was also stressed as
part of the instructions in this particular circular. In terms
of the same, banks were required to set up dedicated and
well organised ‘Special Surveillance and Investigation
Function’ which would, on a continuous basis, exercise
surveillance over potentially fraud prone areas and
investigate into large value frauds with the help of skilled
manpower for initiating internal punitive action against the
staff involved and external legal prosecution of the
fraudsters and the abettors.
While investigating a suspected fraud to arrive at the exact
nature of the problem, the nature of fraud, the persons
involved, and the amount of financial loss in question, the
following aspects need to be carefully looked into and
properly documented:
• Authorisation and control of the audit investigation;
• Documentation required and safeguarding all prime
records pertaining to the case;
• Rules of evidence governing admissibility of records;
58 The Indian Banker
• Maintaining confidentiality;
• Evaluation of the evidence to assess whether the case is
sustainable with the evidence available on investigation
of the case;
• Legal advice where appropriate;
• Reporting the findings in a manner that meets legal
requirements; etc
Conclusion
In the backdrop of an ever increasing number of frauds
coming to light in organisations covering different sectors
of the economy in the country, including the government
sectors where the CAG has come out with scathing reports
on the working of institutions in its jurisdiction there is an
urgent need for giving special attention to this area by the
audit and accounting firms to identify, train and develop
sufficient number of professionals with suitable skills in
this domain.
The provisions in the new Companies Act 2013 give
enough elbow room to the independent directors of
corporate India to exercise their authority judiciously to
weed out opportunities for fraud in the organisations they
represent as Independent Directors.
About the Author
V Krishna Moorthy is chief executive
officer of Parivartan, Mysore and former
deputy general manager of State Bank of
Mysore (SBM). He is currently a consultant
and trainer.
A post-graduate in commerce, he has over
30 years experience in commercial banking. He was head of
HRD function as well as apex training establishment of SBM.
He was chairman of Kalpatharu Grameena Bank, Tumkur. He
represented associate banks of the SBI at the 42nd
International Banking Summer School, at Dublin, Ireland in
1989. Immediately after voluntary retirement in 2001, he was
visiting professor of finance in the post-graduate department of
commerce of University of Mysore.
Krishna Moorthy was editor and publisher of a monthly journal.
He has to his credit a book published on financial institutions
and markets and he is a regular contributor of papers on
contemporary issues in banking, finance and management to
several business dailies and journals.
He can be reached at moorthy_vk@rediffmail.com.
Vol II No. 2 - September 2014
 {hÝXr
I§S>

Vol II No. 2 - {gVå~a 2014 {X B§{S>¶Z ~¢H$a 59

 boI
{dÎm OJV ‘| "Or-{g~' Am¡a "S>r-{g~' ZB© g§H$ënZmE± h¢. AV… BZ eãXm|
H$m AW© OmZZm Amdí`H$ h¡ Š`m|{H$ `o eãX ^r ZE h¢. AV… gd© àW‘ h‘
BZ eãXm| H$m n[aM` AnZo nmR>H$m| H$mo Xo aho h¢. "Or-{g~' H$m AW©
Global Systemically Important Bank (G-SIB) hmoVm h¡. Bgr àH$ma
"S>r-{g~' H$m AW© Domestic Systemically Important Bank (D-SIB)
hmoVm h¡. BÝh| {hÝXr ‘| Bg àH$ma H$hm Om gH$Vm h¡:
"Or-{g~' = d¡{œH$ gdmªJr ‘hËdnyU© ~¢H$ VWm
"S>r-{g~' = Kaoby `m Xoer` gdmª§Jr ‘hËdnyU© ~¢H$.
"Or-{g~' Am¡a "S>r-{g~' g§H$ënZm :
"Or-{g~' Am¡a "S>r-{g~' g§H$ënZm ~‹S>o ~¢H$m| H$s ~‹S>r {Oå‘oXm[a`m| go
g§~§{YV g§H$ënZm h¡. dñVwV… 2008 ‘| AmE {dÎmr` g§H$Q> Ho$ ‘yb ‘| ~‹S>o
~¢H$m| H$m ’o$b hmoZm Wm. BZ ~‹S>o ~¢H$m| Ho$ ’o$b hmoZo go AmE g§H$Q> Ho$ {ZXmZ
hoVw {dœ Ho$ AW©em{ó`m| Zo J§^raVm go gmoMZm ewê$ {H$`m VWm Bg na J§^ra
{M§VZ-‘ZZ Ed§ AÜ``Z {H$`m VWm Eogr àUmbr {dH${gV H$aZo Ho$ {bE
à`mg ewê$ H$a {XE Vm{H$ ^{dî` ‘| Eogr KQ>ZmAm| H$s nwZamd¥{Îm Z hmo. Too
Big To Fail (TBTF) ~¢H$m| Ho$ {bE ~¢{H§$J gwna{dµOZ na J{R>V ~hþXoer`
~ogb g{‘{V Ho$ gXñ` Xoem| Zo ~‹S>o ~¢H$m| Ho$ {bE Eogr ì`dñWm H$s Vm{H$ do
^{dî` ‘| ’o$b Z hm|. Eogm H$aZm Bg{bE µOê$ar hmo J`m h¡ Š`m|{H$ ~‹S>o ~¢H$m|
Ho$ ’o$b hmo OmZo go Cg Xoe H$s AW©ì`dñWm g§H$Q> ‘| n‹S> OmVr h¡ {Og Xoe
Ho$ ~‹S>o ~¢H$ ’o$b hmoVo h¢. AV… Eogo ~‹S>o ~¢H$m| H$mo A{YH$ {Oå‘oXma ~ZmE
aIZo Ho$ {bE CZH$s gwÑ‹T> ny§Or g§~§Yr AnojmAm| Ho$ gmW-gmW AÝ` joÌm| ‘|
^r gwÑ‹T>Vm gw{Z{üV H$aZo Ho$ {bE {dÎmr` ñWm{`Ëd ~moS©> (Financial
Stability Board) Zo g^r gXñ` Xoem| go AZwamoY {H$`m Wm {H$ do ^r
AnZo-AnZo Xoe ‘| Eogo ~‹S>o ~¢H$m| d {dÎmr` g§ñWmAm| Ho$ {bE Zr{VJV
’«o$‘dH©$ V¡`ma H$a| Vm{H$ ^mdr {dÎmr` OmopI‘m| go ~Mm Om gHo$.
"Or-{g~' ~¢H$ {H$go ‘mZm OmE?
A~ àý `h CR>Vm h¡ {H$ "Or-{g~', AWm©V d¡{œH$ gdmª§Jr ‘hËdnyU© ~¢H$
{H$go ‘mZm OmE?
60 {X B§{S>¶Z ~¢H$a
~‹S>o ~¢H$, ~‹S>r {Oå‘oXmar
Or-{g~ (G-SIB) go S>r-{g~ (D-SIB) VH$
S>m°. O`ÝVr àgmX Zm¡{Q>`mb
"Or-{g~' {ZYm©aU Ho$ {bE Hw$N> ‘mZX§S> {ZYm©[aV {H$E JE h¢. BZ ‘mZX§S>m|
na Iao CVaZo dmbo ~¢H$m| H$mo "Or-{g~' ~¢H$ ‘mZm OmVm h¡. "Or-{g~' ~¢H$
Ho$ ê$n ‘| dJr©H¥$V hmoZo Ho$ {bE {H$gr ~¢H$ H$mo {ZåZ{bpIV à‘wI ‘mZX§S>m|
na Iam CVaZm hmoJm:
(I) AmH$ma: ~¢H$ H$m AmH$ma AWm©V VwbZ-nÌ H$s ‘Xm| d VwbZ-nÌ
go ~mha H$s ‘Xm| g{hV `h ~¢H$ ~‹S>r ‘mÌm ‘| ì`mnma H$aZo dmbm
~¢H$ hmo.
(II) {H«$`m H$bmn: Bg ~¢H$ Ho$ {H«$`m H$bmn AZoH$ Xoem| d AZoH$
àH¥${V`m| dmbo hm|. AWm©V H$m`©H$bmnm| ‘| {d{dYVm, ì`mnH$Vm Ed§
{damQ>Vm hmo.
(III) H$m`m] H$s O{Q>bVm: BgHo$ H$m`© BVZo ì`mnH$ d O{Q>b hm| {H$
{OÝh| Xygao N>moQ>o ~¢H$ H$a nmZo ‘| Ag‘W© hm| O¡go A{V {d{eï>
ny§Or ~mµOma Ho$ H$m`© d AÝ` Eogo H$m`© {OZ‘| ì`dYmZ AmZo go
AW©ì`dñWm grYo hr à^m{dV hmoVr hmo.
(IV) nmañn[aH$ AÝVag§~§Y: `h ~¢H$ AÝ` ~¢H$m| Ho$ nmañn[aH$ H$m`m|© go
Eogo Ow‹S>m hmo. AWm©V CgHo$ H$m`© Z H$aZo na `m ’o$b hmo OmZo na
AÝ` AZoH$ ~¢H$m| Ho$ à^m{dV hmoZo H$s g§^mdZm hmo. CXmhaU Ho$
{bE g^r ~¢H$m| H$s Amoa go g‘memoYZ H$aZm `m {dàofU Am{X
H$m H$m`© H$aZo dmbo à‘wI ~¢H$ O¡go Xm{`Ëdm| H$m {Zdm©h H$aZo
dmbm ~¢H$ hmo.
(V) {dH$ën H$m A^md: Eogm ~¢H$ {OgH$m VËH$mb {dH$ën CnbãY Z
H$am`m Om gHo$. BgH$m AW© `h h¡ {H$ dh Eogm ~¢H$ hmo {OgH$m
gãñQ>rQ>çyQ> CnbãY H$amZm gwJ‘ Z hmo.
Cnad{U©V {deofVmE± ~‹S>o ~¢H$m| ‘| nmB© OmVr h¢. AV… ~‹S>o ~¢H$m| H$mo ’o$b hmoZo
go amoH$Zo Ho$ {bE Eogr {d{Z`mË‘H$ Zr{V`m± V¡`ma H$s OmE± Vm{H$ `o ~‹S>o ~¢H$
’o$b hr Z hm|. Bggo ^mdr {dÎmr` g§H$Q> go ~Mm Om gH$Vm h¡.
Vol II No. 2 - {gVå~a 2014

{dœ Ho$ "Or-{g~' ~¢H$
{dÎmr` ñWm{`Ëd ~moS©> Zo Zdå~a 2013 ‘| {dœ Ho$ 28 ~¢H$m| H$mo "Or-{g~'
~¢H$m| H$s loUr ‘| aIm. BgH$m grYm gm AW© h¡ {H$ {dœ ‘| {’$bhmb 28 ~¢H$
Eogo h¢ {OÝh| "Or-{g~' loUr ‘| dJr©H¥$V {H$`m J`m h¡.
^maV ‘| "S>r-{g~' H$m ew^ma§^
d¡{œH$ gdmªJr ~¢H$m| H$s VO© na hr ^maV ‘| ^r "Or-{g~' Ho$ ñWmZ na
"S>r-{g~' AWm©V Kaoby gdmªJr ‘hËdnyU© ~¢H$m| Ho$ A{^{ZYm©aU H$s à{H«$`m
ewé hmo JB© h¡. ^maV ‘| ^maVr` [aµOd© ~¢H$ Zo "S>r-{g~' ~¢H$ Ho$ {bE AmH$ma
g§~§Yr ‘mZX§S> {ZYm©[aV H$a {XE h¢. ^maV ‘| CZ ~¢H$m| H$mo "S>r-{g~' loUr ‘|
dJr©H$aU hoVw nmÌ ‘mZm OmEJm {OZH$m AmH$ma h‘mao gH$b Kaoby
CËnmX(GDP) Ho$ 2 à{VeV go A{YH$ hmo. Bggo ñnï> h¡ {H$ ^maV ‘| ~¢H$
Ho$ AmH$ma H$mo A{YH$ ‘hËd {X`m J`m h¡. AJñV 2015 go Eogo "S>r-{g~'
~¢H$m| H$s KmofUm ^maVr` [aµOd© ~¢H$ Ûmam H$s OmEJr VWm ny±Or H$s CƒVa
AnojmAm| H$s ny{V© Eogo "S>r-{g~' ~¢H$m| H$mo nhbr Aà¡b 2016 go H$aZr
hmoJr. `h nhbr Aà¡b 2019 go nyar Vah à^mdr hmo OmEJm.
"S>r-{g~' ~¢H$m| Ho$ g§X^© ‘| `h ^r EH$ ‘hËdnyU© {~§Xw hmoJm {H$ CZ‘| hm{Z
H$mo dhZ H$aZo H$s j‘Vm A{YH$ hmo. AV… Bg {~§Xw Ho$ ‘mnZ hoVw ^maV ‘|
{d{Z`m‘H$ àm{YH$mar C{MV ‘yë`m±H$Z nÕ{V {dH${gV H$a|Jo.
^maVr` ~¢{H§$J V§Ì Am¡a "S>r-{g~'
^maVr` ~¢{H§$J ì`dñWm H$s g~go ~‹S>r {deofVm `h h¡ {H$ ^maVr` ~¢{H§$J
ì`dñWm gaH$mar joÌ ‘| H$m`©aV h¡. g‘ñV ~¢{H§$J ì`dgm` H$m Xmo {VhmB©
^mJ gmd©O{ZH$ joÌ Ho$ ~¢H$m| Ûmam {H$`m OmVm h¡. AV… ^maVr` OZ-‘mZg
~¢H$m| Ho$ ’o$b hmoZo go S>aVm Zht h¡. hmb hr ‘| `yZmBQ>oS> H$‘{e©`b ~¢H$ Ho$
~mao ‘| O¡gm ‘r{S>`m ‘| {XIm`m J`m Cgo XoIVo hþE ^r Cg ~¢H$ Ho$ J«mhH$m|
‘| A’$am-V’$ar Zht ‘Mr. `{X `h KQ>Zm {ZOr joÌ Ho$ ~¢H$m| ‘| hþB© hmoVr Vmo
OZVm ì`J« hmo CR>Vr.
^maVr` [aµOd© ~¢H$ d ^maVr` ~¢H$ g§K H$s ^y{‘H$m
^maV ‘| ^maV gaH$ma, {dÎm ‘§Ìmb` Ho$ {Z`§ÌU Ho$ gmW-gmW ^maV Ho$ ~¢H$m|
Ho$ gwna{dµOZ ‘| ^maVr` [aµOd© ~¢H$ ~hþV hr C„oIZr` ^y{‘H$m AXm H$a ahm
h¡. Bg{bE ^maVr` ~¢{H§$J ì`dñWm g§H$Q> go nao h¡.
^maVr` ~¢H$m| H$m `h gm¡^m½` h¡ {H$ Cgo ^maVr` ~¢H$ g§K Ho$ ê$n ‘| ~hþV
hr C„oIZr` gmWr {‘bm hþAm h¡. `h gmWr ghr AWm|© ‘| ’«¢$S>, {’$bm°g’$a
Am¡a JmBS> H$s ^y{‘H$m {Z^m ahm h¡. ~¢H$m| H$m `h gmWr ^maVr` ~¢H$ g§K
~¢{H§$J OJV ‘| C„oIZr` ^y{‘H$m {Z^m ahm h¡. ~¢H$m| H$mo O~ ^r H$moB©
H${R>ZmB© ‘hgyg hmoVr h¡ Vmo `h g§K CZH$s ‘XX Ho$ {bE gX¡d AmJo AmVm
h¡. ~¢H$m| H$mo ‘mJ©Xe©Z XoZo, ^{dî` H$s {Xem {ZYm©[aV H$aZo ‘| ^maVr` ~¢H$
g§K H$s ^y{‘H$m ñdUm©jam| ‘| {bIo OmZo `mo½` h¡. ‘¢ Bgo AnZm gm¡^m½`
Vol II No. 2 - {gVå~a 2014
boI
g‘PVm hÿ± {H$ ‘wPo {hÝXr g{‘{V d AÝ` g{‘{V`m| Ho$ gXñ` Ho$ ê$n ‘|
bJmVma 15 df© VH$ g§K H$mo AnZr godmE± XoZo Am¡a Bgo ~hþV H$ar~ go XoIZo
H$m Adga {‘bm.
"S>r-{g~' H$s ^maVr` ~¢H$m| Ho$ g§X^© ‘| àmg§{JH$Vm
"S>r-{g~' g§H$ënZm `Ú{n ~hþV hr àmg§{JH$ h¡ naÝVw ^maV Ho$ g§X^© ‘| Bg‘|
Hw$N> hQ> H$a n[adV©Z H$aZo H$s Amdí`H$Vm h¡. h‘mao Xoe ‘| A{YH$m§e ~¢H$
Omo "S>r-{g~' H$s loUr ‘| Am gH$Vo h¢ do g^r gaH$mar joÌ Ho$ ~¢H$ h¢. AV…
gaH$ma H$s N>Ì-N>m`m ahVo hþE BZ ~¢H$m| Ho$ ’o$b hmoZo Ho$ H$Jma na nhþ±MVo hr
`m nhþ±MZo Ho$ ~mX ^r gaH$ma BÝh| ’o$b Zht hmoZo XoJr Am¡a A{V[aº$ ny±Or
CnbãY H$adm H$a BÝh| g§H$Q> go C~ma boJr. Eogm nhbo ^r hmo MwH$m h¡ d
AmJo ^r hmoZo H$s g§^mdZm h¡.
^maV ‘| "S>r- {g~' ~¢H$m| hoVw {^Þ ‘mZX§S>
^maVr` ~¢H$m| Ho$ g§X^© ‘| "S>r-{g~' g§H$ënZm go Ow‹S>o Hw$N> AÝ` ‘wÔo ^r h¢
{OZ na g‘` ahVo hr {M§VZ H$aZm Oê$ar h¡ {H$ "S>r-{g~' ~¢H$m| H$mo
A{V[aº$ gm‘mÝ` gm‘{`H$ ny±Or (ES>reZb H$m°‘Z B{¹$Q>r H¡${nQ>b) H$s
AbJ go ì`dñWm H$aZr hmoJr. `h am{e g§~§{YV ~¢H$m| Ho$ OmopI‘ àmo’$mBb
na {Z^©a hmoJr. ~¢H$m| ‘| ny±Or n`m©áVm H$s ‘mÌm ~‹T>mZo go ~¢H$m| na AZmdí`H$
X~md ~T>oJm. Bggo ~¢H$m| Ho$ F$U XoZo H$s j‘Vm H$‘ hmoJr. ^maV O¡go Xoe
‘| Ohm± F$U H$s µOê$aV gX¡d ~Zr ahVr h¡ d ^maVr` ~¢{H§$J V§Ì Bgo nyam
H$a nmZo ‘| g‘W© Zht h¡ dhm± ny±Or AdéÕ H$aZm KmQ>o H$m gm¡Xm hr {gÕ
hmoJm. Bggo Am{W©H$ {dH$mg na {Z{üV ê$n go ’$H©$ n‹S>oJm. AV… ny±Or
n`m©áVm `m A{V[aº$ ny±Or H$m àmdYmZ H$aZm ^maVr` g§X^© ‘| g‘rMrZ
àVrV Zht hmoVm h¡. BgHo$ {bE {^Þ ‘mZX§S> AnZmE OmZo H$s Amdí`H$Vm
h¡.
^maVr` ~¢H$m| ‘| "S>r-{g~' H$s A{Zdm`© Anojm
^maVr` ~¢H$ AÝ` {H$gr ^r n[aMmbZ go ’o$b Zht hmo gH$Vo h¢ Š`m|{H$
^maV ‘| ~¢H$m| H$m Am§V[aH$ Ed§ ~mø {Z`§ÌU V§Ì ~hþV hr ‘µO~yV h¡. bo{H$Z
^maVr` ~¢H$ `{X ’o$b hmo gH$Vo h¢ Vmo {g’©$ EH$ hr OmopI‘ go ’o$b hmo
gH$Vo h¢ Am¡a `h OmopI‘ h¡ J¡a {ZînmXZ AmpñV`m| AWm©V EZ. nr. E.
(NPA) H$m.
^maV ‘| {d{^Þ H$maUm| go ~‹S>o-~‹S>o F$U EZ. nr. E. hmo JE h¢. BZHo$ H$maU
~¢H$m| H$s bm^àXVm KQ>Vr Om ahr h¡ d ~¢H$ KmQ>o ‘| Am JE h¢. `{X Eogm hr
dmVmdaU ahm d EZ. nr. E. Bgr J{V go ~‹T>Vo aho Vmo dh {XZ Xya Zht O~
^maVr` ~¢H$ Kmoa g§H$Q>J«ñV hmo OmE±Jo.
A{V[aº$ ny±Or àmdYmZ Zht dgybr V§Ì H$s Amdí`H$Vm
^maVr` ~¢H$m| ‘| "S>r-{g~' loUr ‘| dJr©H$aU H$aZo H$m à‘wI ‘mZX§S> gwÑ‹T>
dgybr V§Ì H$mo aIm OmE. BZ ~¢H$m| ‘| {H$gr ^r pñW{V ‘| d {H$gr ^r g‘`
{X B§{S>¶Z ~¢H$a 61
 boI
gH$b EZ. nr. E. H$m à{VeV 1 à{VeV go ZrMo `m BgHo$ Amg-nmg aho.
BZ ~¢H$m| ‘| {H$íV H$s Xo` {V{W go 30 {XZ Ho$ A§Xa {H$íV Z MwH$mE OmZo
dmbo F$Um| H$mo AË`§V emoMZr` loUr ‘| dJr©H¥$V {Ho$E OmZo H$m àmdYmZ hmo
Vm{H$ AmJo Ho$ 60 {XZm| Ho$ A§Xa BZH$s dgybr gw{ZüV H$s Om gHo$. Bg
àH$ma EZ. nr. E. H$mo {Z`§{ÌV {H$`m OmE. A{V[aº$ ny±Or àmdYmZ H$s
Anojm ‘µO~yV dgybr V§Ì Ed§ {H$íVm| H$s AXm`Jr ‘| EH$ ‘mh Ho$ {dbå~ d
F$Um| H$s dgybr H$mo VËH$mb gwYmaZo Ho$ àmdYmZm| H$mo Am¡a A{YH$ H$R>moa
~Zm`m OmE Vmo ~ohVa hmoJm.
"S>r-{g~' ~¢H$m| hoVw EH$ A{^Zd à`moJ
"S>r-{g~' ~¢H$m| Ho$ g‘ñV F$U g§{d^mJ (bmoZ nmoQ>©’$mo{b`mo) H$m ~r‘m H$aZm
EH$ ~ohVa {dH$ën hmo gH$Vm h¡. `Ú{n ~‹S>o ~¢H$m| Ho$ ~‹S>o F$U g§{d^mJm| H$m
~r‘m H$aZo H$s {hå‘V g§^dV… H$moB© EH$ ~r‘m H§$nZr Z H$a nmE, BgHo$ {bE
AmgmZ {dH$ën `h hmo gH$Vm h¡ {H$ {Og àH$ma H$B© ~¢H$ {‘b H$a ~‹S>o F$Um|
H$mo H$Ýgmo{e©`‘ AmYma na XoVo h¢ Cgr àH$ma "S>r-{g~' ~¢H$m| Ho$ F$U
g§{d^mJ AWm©V {XE JE g‘ñV F$Um| Ed§ A{J«‘m| H$m ~r‘m VrZ-Mma ~r‘m
H§$n{Z`m± {‘b H$a gH$Vr h¢. Bg àH$ma Ho$ ~r‘m ‘| `h àmdYmZ hmo {H$ F$U
Ho$ EZ. nr. E. hmoVo hr Bg F$U H$s g‘ñV am{e ~r‘m H§$n{Z`m§, ~¢H$m| H$mo
EH$ ‘mh Ho$ A§Xa MwH$m X|. BZ EZ. nr. E. F$Um| H$m ñdm{‘Ëd ~r‘m H§$n{Z`m|
H$mo Xo {X`m OmE. AmJo H$s dgybr ~r‘m H§$n{Z`m± ñd`§ H$a|.
`h EH$ A{^Zd à`moJ hmoJm VWm ~r‘m joÌ H$mo ^r ~‹S>o ì`mnma H$m Adga
{‘boJm. ~r‘m H§$n{Z`m| Ho$ {bE `h Bg{bE ^r Am¡{MË`nyU© hmoJm Š`m|{H$
~r‘m ì`dgm` XrK©H$mbrZ {gÕmVm| na H$m`© H$aVm h¡ Am¡a ~¢{H§$J ì`dgm`
X¡{ZH$ AmYma na H$m`© H$aVo h¢. ~¢H$m| ‘| EZ. nr. E. hmoZo na ~¢H$m| ‘| Ohm±
EH$ Amoa AmJo F$U XoZo na amoH$ gr bJ OmVr h¡ dhr Xygar Amoa
àmdYmZrH$aU Ho$ H$maU ~¢H$m| H$s bm^àXVm ~war Vah à^m{dV hmoVr h¡.
F$U g§{d^mJ H$m ~r‘m Am¡a amï´> {hV
"S>r-{g~' ~¢H$ hr Zht ~pëH$ g^r ~¢H$m| ‘| F$U g§{d^mJ H$m ~r‘m H$amZm
amï´> {hV ‘| h¡. AmOH$b ~¢H$mí`ya¢g Ho$ ‘mÜ`‘ go n[ag§n{Îm`m| H$m ~r‘m Am¡a
F$U MwH$m¡Vr Z hmoZo na N>moQ>o-‘moQ>o F$Um| H$m g‘yh ~r‘m O¡gm ì`dgm` Mb
ahm h¡, naÝVw `h ~hþV H$‘ h¡ VWm BgH$s ì`m{á gr{‘V h¡. Bg{bE g‘ñV
F$U ì`m{á hoVw `h An`m©á h¡. Bgo ì`mnH$ ñVa na hmoZm Mm{hE. BgHo$
62 {X B§{S>¶Z ~¢H$a
{bE gaH$ma `m ~r‘m H§$n{Z`m± EH$ AbJ ~r‘m H§$nZr Imob gH$Vr h¢ Omo
{g’©$ ~¢{H§$J V§Ì Ho$ F$U g§{d^mJm| H$m ~r‘m H$aoJr d F$U Ho$ EZ. nr. E.
hmoVo hr F$U H$s g‘ñV am{e H$m ^wJVmZ ~¢H$m| H$mo EH$ ‘mh Ho$ A§Xa H$a
XoJr. AmJo H$s F$U dgybr H$m Xm{`Ëd Bg ~r‘m H§$nZr H$m hmoJm VWm ~¢H$
Bg‘| ~r‘m H§$nZr H$mo gh`moJ X|Jo. Bg ì`dñWm go amï´> H$s aº$dm{hZr
Y‘{Z`m± AWm©V ~¢H$ ñdñW ah|Jo d h‘mar AW© ì`dñWm ^r ñdñW ahoJr.
~¢H$m| H$mo EZ. nr. E. go ‘w{º$ {‘bZo Ho$ H$maU ~¢H$ A{YH$ F$U X|Jo d Bggo
AW©ì`dñWm ‘| Mhþ±‘wIr {dH$mg hmoJm.
O‘m ~r‘m Jma§Q>r {ZJ‘ O¡gr g§ñWm Ho$ AZwê$n F$U ~r‘m g§ñWm H$m ^r JR>Z
{H$`m Om gH$Vm h¡ Bggo amoOJma Ho$ H$B© Adga CnbãY hm|Jo d AW©ì`dñWm
‘| {dH$mg Ho$ gmW-gmW OZ ~b Ho$ g‘w{MV Cn`moJ go ~oamoOJmar H$s
g‘ñ`m Ho$ g‘mYmZ ‘| ^r Eogm ~r‘m g§JR>Z ‘hËdnyU© ^y{‘H$m AXm H$aoJm.
AV… Eogo g§ñWmZ H$m erK« JR>Z amï´> {hV ‘| h¡. AV… Bgo amï´>r` ‘hËd H$m
H$m`© g‘P H$a Eogo ~r‘m g§JR>Z /H§$nZr/{ZH$m` Ho$ JR>Z na {OVZr OëXr
H$m`© hmoJm CVZr OëXr h‘ amï´> H$m Am¡a AW©ì`dñWm H$m {dH$mg H$a nmE±Jo.
boIH$$ n[aM¶
S>m° O`ÝVr àgmX Zm¡{Q>`mb H$mnmo©aoeZ ~¢H$ ‘| ghm`H$
‘hmà~§YH$ Ho$ nX na H$m¶©aV h¢.
e¡{jH$ `mo½`Vm:
9 {S>J«r/{S>ßbmo‘m BZ‘| E‘.E. {h§Xr (ñdU©nXH$),
E‘.E.(A§J«oOr), nr.EM.S>r.(^mfm {dkmZ), S>r.{bQ.>,
Eb.Eb.~r. Am{X em{‘b h¢.
ì`mdgm{`H$ `mo½`Vm:
E‘.~r.E.(~¢{H§$J Ed§ {dÎm), gr.E.AmB.AmB.~r., S>r.~r.E‘., gr.nr.S>r. B˶m{X.
28 {d^mJm|/g§JR>Zm| ‘| 33 nXm| na godm {OZ‘| nÌH$ma, {MÌH$ma, gånmXH$,
arS>a Am{X go boH$a amï´>r`H¥$V ~¢H$ ‘| ghm`H$ ‘hmà~§YH$ nX na godm em{‘b
h¢.
50 àH$ma Ho$ {d{eï> Xm{`Ëdm| H$m {Zdm©h {OZ‘| emoY {ZXo©eH$, ~moS©> Am°’$
ñQ>S>rµO Ho$ gXñ`, {ejm gbmhH$ma, ~¢{H§$J eãXmdbr {deofk, narjm
àemgH$, M`Z ~moS©> Ho$ gXñ` O¡go H$m`© em{‘b h¢.
43 nwñVH|$ àH$m{eV VWm 93 nwñVH$m| / à{H«$`mË‘H$ gm{hË` H$m AZwdmX /
g§`wº$ AZwdmX, 13 amï´>r` Ed§ amÁ` ñVa H$s n{ÌH$mAm| H$m gånmXZ, 76
amï´>r`/amÁ` ñVar` g§Jmo{ð>`m| ‘| emoY nÌ / AmboI àñVwV VWm 1124 boI
{d{^Þ n{ÌH$mAm| ‘| àH$m{eV 55 {h§Xr ^mfm Ho$ àMma-àgma Ho$ {bE 3
AÝVam©ï´>r` 42 amï´>r` VWm 10 amÁ` ñVar` nwañH$ma / gå‘mZ àmá.
B©‘ob: jpn@corpbank.co.in
Vol II No. 2 - {gVå~a 2014

dV©‘mZ ~¢{H§$J àUmcr H$B© ~‹S>o n[adV©Zm| H$s n[aU{V h¡. AmYw{ZH$ ~¢{H§$J
OJV ‘| gVV n[adV©Z A^r ^r Omar h¡. ~¢{H§$J CÚmoJ, Am{W©H$ g‘¥{Õ H$s
aŠVdm{h{Z`m| ‘| aŠV H$s ^m§{V hr na‘ Amdí`H$ h¡. ~¢{H§$J CÚmoJ dmñVd
‘| J«mhH$-H|${ÐV godm joÌ h¡ Omo {~Zm J«mhH$-godm Ho$ ‘hËdhrZ VWm
Ag’$c hmo OmVm h¡. AmO ~¢H$m| Ûmam A§Va©amîQ´r` ñVa na J«mhH$-godm àXmZ
H$s Om ahr h¡. ñ‘aU ah| {H$ J«mhH$-godm ghO Zhr§ h¡. H$maU - ã`mO Xam|
H$m {dH|$X«rH$aU VWm J«mhH$m| H$mo CncãY {d{dY {dH$ënm| Zo {d{^ÝZ àH$ma Ho$
~¢H$m| Ho$ ‘Ü` EH$ {demc à{V`mo{JVm H$m g¥OZ {H$`m h¡. A~, EH$ hr
J«mhH$ na {d{^ÝZ ~¢H$m| H$s nhþ±M hmoVr h¡ Am¡a Bgr dOh go dhr ~¢H$ J«mhH$
nm gH$Vm h¡ Omo J«mhH$ godm Am¡a J«mhH$ g§VwpîQ> àXmZ H$aZo ‘| gj‘ hmo.
~¢{H§$J CÚmoJ AnZo {d{^ÝZ CËnmXm| VWm godmAm| go J«mhH$m| H$mo AnZo go
Omo‹S>o aIVm h¡. J«mhH$m| H$m {dídmg VWm g§VwpîQ> ~¢H$m| VWm ~¢H$am| Hoo$ {cE
A{V Amdí`H$ h¡. `hr H$maU h¡ {H$ h‘ J«mhH$ g§~§Y à~§YZ H$mo ‘hËVm XoVo
h¡.
J«mhH$ H$m¡Z ?
J«mhH$ H$s n[a^mfm ~¢{H§$J godmAm| Ho$ à`moJH$Îmm© `m g§^mì` à`moŠVm Ho$ ê$n
‘| Xr OmVr h¡¡. Bg àH$ma, J«mhH$ Ho$ A§VJ©V {ZåZm§{H$V g‘mdo{eV {H$`o Om
gH$Vo h§¡-
• dh ì`pŠV `m g§ñWm `m BH$mB© Omo ~¢H$ Ho$ gmW ImVm ~Zm`o aIVm h¡
Am¡a / `m ì`dgm{`H$ g§~§Y ñWm{nV H$aVm h¡.
• dh {OZHo$ à{V{Z{Y Ho$ ê$n ‘| ImVm ì`dhma H$aVm h¡ AWm©V Omo
{hVm{YH$mar ñdm‘r hmoVm h¡.
• eo`a Xcmcm|, gZXr coImH$mam| Am{X ì`dgm{`H$ ‘Ü`ñWm| Ûmam coZ-XoZ
`m g§ì`dhma Ho$ cm^mpÝdV hmoZodmco `m {hVm{YH$mar VWm
• dh ì`pŠV `m g§ñWm Omo Am{W©H$ coZ-XoZ go ~¢H$ go OwSo> h¢ Am¡a Omo
~¢H$ Ho$ {cE à{VîR>m g§~§Yr OmopI‘ àñVwV H$aZo ‘| gj‘ hmoVo h¡.
Vol II No. 2 - {gVå~a 2014
boI
AmYw{ZH$ ~¢{H§$J àUmcr
Am¡a J«mhH$ godm
à~rZ Hw$‘ma e‘m©
godm Š`m h¡ ?
godm H$m AW© h¡ - Eogm H$m`© Omo EH$ ì`pŠV {H$gr AÝ` Ho$ {cE H$aVm h¡.
Xÿgao eãXm| ‘|, godmE§ CZ Am{W©H$ J{V{d{Y`m| H$mo H$hm OmVm h¡ {OZgo ‘yë`m|
H$m g¥OZ hmoVm h¡ Am¡a Omo J«mhH$m§o H$mo EH$ {ZpíMV g‘` VWm ñWmZ na
cm^ àXmZ H$aVm h¡ {OgHo$ n[aUm‘ñdê$n Cn^moŠVmAm| ‘| dm§{N>V n[aUm‘
cm`o OmVo h§¡. àm`: J«mhH$ CncãY godmAm| H$s JwUdËVm H$m AmH$cZ
godmAm| H$mo àXmZ H$aZodmco H${‘©`m| Ho$ AmYma na H$aVo h¢. `hr dOh h¡ {H$
g’$c g§ñWmZ AnZo H$‘©Mm[a`m| H$mo {deofH$a J«mhH$m| go àË`j g§~§Y aIZo
dmco H$‘©Mm[a`m| H$mo gVV J«mhH$-godmAm| Ho$ {cE à{e{jV H$aVo ahVo h¢.
J«mhH$ godm Š`m| ?
J«mhH$ h‘mao H$m`© H$m cú` h¡. dh h‘| ì`dgm` àXmZ H$aVm h¡. h‘cmoJ
AnZo Or{dH$m Ho$ {cE Cg na {Z^©a h¢. CgH$s {ZîR>m VWm g§VwpîQ> h‘mao
ì`dgm` ‘| ghm`H$ h¡. ‘hmË‘m Jm±YrOr Ho$ eãXm| ‘|, "H$moB© ^r J«mhH$ h‘mao
n[aga ‘| g~go ‘hËdnyU© AmJ§VwH$ hmoVm h¡. dh h‘ na {Z^©a Zhr§ h¡, h‘
Cg na {Z^©a h¢. dh h‘mao H$m`© ‘| ~mYm Zhr§ ~pëH$ CgH$m à`moOZ h¡. dh
h‘mao ì`dgm` ‘| ~mhar ì`pŠV Zhr§ h¡, dh CgH$m EH$ {hñgm h¡. CgH$s
godm H$a h‘ Cg na H$moB© H¥$nm Zhr§ H$aVo h¢, h‘| Eogm H$aZo H$m Adga XoH$a
dh h‘ na H¥$nm H$aVm h¡.'
{X B§{S>¶Z ~¢H$a 63
 boI
{d{^ÝZ ~¢{H§$J CËnmXm| VWm godmAm| Ho$ H$maU J«mhH$-~¢H$a g§~§Ym| ‘|
{d{dYVm Am`r h¡. CXmhaU Ho$ {cE, Eogo J«mhH$ {OÝhm|Zo§ B©-~¢{H§$J `m
‘mo~mBc ~¢{H§$J godm co aIr h¢ CZH$m ~¢H$m| go g§~§Y CZ J«mhH$m| go {^ÝZ
hmoVm h¡ Omo na§namJV ~¢{H§$J àUmcr H$mo AnZm`o hþE h¢ Am¡a àË`oH$ H$m`© Ho$
{cE ~¢H$ emImAm| ‘| AmVo h¢. nhco loUr Ho$ J«mhH$ {H$gr ^r ñWmZ VWm
{H$gr ^r g‘` AnZo H§$ß`yQ>a `m ‘mo~mB©c H$s ghm`Vm go ~¢{H§$J godmAm| H$m
cm^ àmá H$a gH$Vo h¢. Cgr àH$ma, EQ>rE‘ H$s gw{dYm go {H$gr ^r ~¢H$ Ho$
J«mhH$ {H$gr ^r ~¢H$ Ho$ EQ>rE‘ go godm àmá H$a gH$Vm h¡. dV©‘mZ g‘` ‘|
H$^r ^r J«mhH$-godm ~m{YV hmoZo na J«mhH$ AmgmZr go B©-‘oc AWdm Xya^mf
Ho$ à`moJ Ûmam 24 K§Q>o J«mhH$ godm H|$Ð go godm àmá H$a gH$Vo h¢.
J«mhH$ godm g§~§{YV g{‘{V`m±
g‘`-g‘` na J«mhH$ godm H$s JwUdËVm ‘| d¥{Õ VWm J«mhH$ godm ‘| gwYma
Ho$ {cE H$B© g{‘{V`m| H$m JR>Z {H$`m J¶m. `Wm Vcdma g{‘{V (1975),
JmoB©nmo[a`m g{‘{V (1990), Vmamnmoao g{‘{V (2004), EZ gXmdoeZ g{‘{V
(2006), Xm‘moXaZ g{‘{V (2010) Am{X. BZ g{‘{V`m| H$m ‘yc CÔoí`
‘hËV‘ J«mhH$ godm Am¡a J«mhH$ g§VwpîQ> àXmZ H$aZm h¡. Hw$N> à‘wI g{‘{V`m|
H$s g§{já MMm© {ZåZdV h¢:
1. Vcdma g{‘{V (1975)
gZ² 1975 Ho$ Xm¡amZ Eg Ho$ Vcdma H$s AÜ`jVm ‘| "~¢H$m| ‘| J«mhH$ godm na
H$m`©H$mar g{‘{V' H$m JR>Z {H$`m J`m Omo Vcdma g{‘{V Ho$ Zm‘ go OmZr
OmVr h¡. Bg g{‘{V Ho$ H$m`©H$mar g‘yh Zo ‘mM© 1977 ‘| AnZr [anmoQ>©
àñVwV H$s Am¡a 176 gwPmd {X`o {Og‘| go ^maVr` [aOd© ~¢H$ Zo 120
gwPmdm| VWm {g’$m[aem| H$mo ñdrH¥$V àXmZ H$s. Vcdma g{‘{V H$s Hw$N> à‘wI
gwPmd {ZåZm§{H$V h¢:
• ~¢H$ emImAm| ‘| "‘o AmB© hoën `y' H$mC§Q>a H$m {Z‘m©U H$aZm.
• MoH$m| H$m Ëd[aV H«o${S>Q> H$aZm.
• àË`oH$ ‘mh Ho$ 15 VmarI H$mo J«mhH$ {Xdg Ho$ ê$n ‘| ‘ZmZm.
• àË`oH$ ~¢H$ emIm ‘| {fH$m`V VWm gwPmd noQ>r H$s ì`dñWm H$aZm.
• MoH$ Ho$ {~c§~ dgycr na XÊS>ñdê$n ã`mO H$m ^yJVmZ H$aZm.
• ‘mh Ho$ A§{V‘ {XZ na n|fZ H$mo O‘m H$aZm Am{X.
2 JmoB©nmo[a`m g{‘{V (1990)
gZ² 1990 Ho$ Xm¡amZ, ^maVr` ñQ>oQ> ~¢H$ Ho$ VmËH$m{cH$ Mo`a‘oZ lr E‘ EZ
JmoB©nmo[a`m H$s AÜ`jVm ‘| ^maVr` [aOd© ~¢H$ Zo 14 gXñ`m| dmcr EH$
g{‘{V ~ZmB© Omo JmoB©nmo[a`m g{‘{V H$hcmVr h¡. Bg g{‘{V Ûmam 5 {Xg§~a
64 {X B§{S>¶Z ~¢H$a
1991 ‘| ^maVr` [aOd© ~¢H$ Ho$ g‘j EH$ [anmoQ>© àñVwV H$s J`r {Og‘| Hw$c
97 gwPmd {X`o J`o Am¡a ^maVr` [aOd© ~¢H$ Zo CZ g^r gwPmdm| H$mo Hw$N>
g§emo{YV H$a ñdrH$ma H$a {c`m h¡. JmoB©nmo[a`m g{‘{V Ûmam {X`o J`o Hw$N>
à‘wI gwPmd {ZåZm§{H$V h¢:
• ~¢H$ H$‘©Mm[a`m| H$mo {ZYm©[aV H$m`©-Ad{Y go 15 {‘ZQ> nyd© H$m`m©c`
Am OmZm Mm{h`o.
• ~¢H$m| Ho$ {ZYm©[aV ~§Xr g‘` ‘| EH$ K§Q>| H$m {dñVma hmoZm Mm{h`o {Og‘|
à{V{XZ J«mhH$ J¡a-ZH$Xr H$m`© H$mo g§nÝZ H$a gHo$.
• CZ g^r J«mhH$m| H$mo godm Amdí`H$ ê$n go {‘cZr Mm{h`o Omo ~¢{H§$J
H$m`m©d{Y ‘| ~¢H$ n[aga ‘| àdoe H$aVo h¢.
• {d{^ÝZ coZXoZ Ho$ {cE EH$ gw{ZpíMV g‘` gr‘m H$m {ZYm©aU hmoZm
Mm{h`o.
• {OZ emImAm| ‘| 30 `m 30 go A{YH$ H$‘©Mmar hmo CZ emImAm| ‘| "‘o
AmB© hoën `y' H$mC§Q>a H$s ì`dñWm H$aZr Mm{h`o.
• J«mhH$m| H$mo Xr OmZo dmcr ZmoQ> n¡Ho$Q> nona grëS> hmoZr Mm{h`o.
• AZmXm[aV MoH$m| H$mo 24 K§Q>m| Ho$ A§Xa J«mhH$m| H$mo cm¡Q>mZo H$s ì`dñWm
hmoZr Mm{h`o.
• g^r ~¢H$ H$‘©Mm[a`m| H$mo AnZm nhMmZ H$mS©> nhZZm Mm{h`o.
• àË`oH$ ~¢H$ emImAm| ‘| 4 à{V`m| dmcr EH$ {eH$m`V nwpñVH$m hmoZr
Mm{h`o.
• Q>oca 5000 ê$n¶o VH$ H$s ZH$X am{e AXm H$a| Am¡a 10000 ên¶o VH$
Ho$ J¡a-ZH$Xr coZXoZ H$a|.
• Zm‘m§H$Z gw{dYm CncãY H$amB© OmE.
• AmCQ>ñQ>oeZ MoH$m| H$s CJmhr ‘| {~c§~ H$s j{Vny{V© Ho$ {cE J«mhH$m| H$mo
~MV Xa go 2 à{VeV A{YH$ Xa na ã`mO AXm {H$¶m OmE.
• 10 `m Cggo A{YH$ ~¢H$m| dmco H|$X«m| ‘| g‘memoYZ J¥h àma§^ {H$E OmE|.
• J«mhH$ godm Ho$ {cE àm¡Úmo{JH$s CÝZ`Z na {deof ~c {X`m OmE.
3 Vmamnmoao g{‘{V (2004)
gZ² 2004 Ho$ Xm¡amZ ^maVr` [aOd© ~¢H$ Ûmam EH$ g{‘{V ~ZmB© JB© {Ogo
H${‘Q>r Am°Z àmo{gOa EÊS> na’$moa‘|gog Amo{S>Q> Am°Z npãcH$ g{d©gog
Vol II No. 2 - {gVå~a 2014
 boI

(grnrnrEnrEg) H$hm OmVm h¡. Bg g{‘{V H$s AÜ`jVm S>m°. Eg Eg
Vmamnmoao Zo H$s Wr Am¡a `h g{‘{V Vmamnmoao g{‘{V ^r H$hcmVr h¡. Bg
g{‘{V Zo {ZåZm§{H$V à‘wI gwPmd {X`o:
• ~¢H$ Ûmam MoH$ S´mn gw{dYm Ho$ gmW-gmW H$mC§Q>a na MoH$ ñdrH$maZo H$s
ì`dñWm hmoZr Mm{h`o.
• ‘mo~mBc ~¢{H§$J ‘| AmZodmcr g‘ñ`mAm| H$mo ~¢H$ ñd`§ Xya H$a|.
• ~¢H$ AnZr do~gmBQ> na Am°ZcmBZ {eH$m`V XO© {H$E OmZo H$s ì`dñWm
H$a|.
• J«mhH$ Ho$ ‘m§JZo na B©‘oc Ûmam ImVm {ddaU H$s gw{dYm XoZr Mm{h`o.

• J«mhH$m| Ûmam AmJ«h H$aZo na MoH$ nwpñVH$m H$mC§Q>a na àXmZ H$aZr
Mm{h`o. MoH$ nwpñVH$m H$mo Ho$dc Hy$[a`a `m S>mH$ Ûmam hr ^oOm Om`oJm
Eogm H$hH$a J«mhH$m| H$mo {dde Zhr§ H$aZm Mm{h`o.
• ~¢H$ Ho$ J«mhH$m| Ho$ {cE "{g{Q>OZ MmQ>©a' V¡`ma {H$`m OmE.
• "AnZo J«mhH$m| H$mo OmZ|' (Ho$dmB©gr) Ho$ ‘mÜ`‘ go àmá OmZH$mar H$m
Xwê$n`moJ Z hmo.
J«mhH$ {eH$m`Vm| Ho$ H$maU
^maVr` [aOd© ~¢H$ (Ama~rAmB©) Ho$ ~¢{H§$J cmoH$nmc 2006 H$s dm{f©H$ [anmoQ>©
2012-13 Ho$ AZwgma, J«mhH$ {eH$m`Vm| H$m gm‘mÝ` VWm à‘wI H$maU ~¢H$m|
Ûmam C{MV ì`dhma g§{hVm H$m AZwnmcZ ‘| Ag’$cVm h¡. CŠV [anmoQ>© Ho$
AZwgma, ~¢H$m| Ho$ {déÕ Hw$c 70541 J«mhH$ {eH$m`V| Wr. ~¢{H§$J cmoH$nmc ‘|,
`{X loUrdma àmá {eH$m`Vm| H$m {ddaU na Jm¡a {H$`m OmE Vmo ñnîQ> hmoJm
{H$ J«mhH$m| H$s {eH$m`Vmo Ho$ Š`m H$maU h¡§?

• J«mhH$m| go dgyco OmZo dmco {d{^ÝZ à^mam| H$s nyd© gyMZm J«mhH$m| H$mo Xr
OmZr Mm{hE.

• cm°H$am| Ho$ n[aMmcZ Ho$ g§~§Y ‘| g^r ~¢H$m| Ûmam EH$g‘mZ {Xem{ZX}e
Omar {H$E OmEo§.

4. Xm‘moXaZ g{‘{V (2010)

^maVr` [aOd© ~¢H$ Zo 26 ‘B© 2010 ‘| go~r Ho$ ^yVnyd© AÜ`j E‘ Xm‘moXaZ
H$s AÜ`jVm ‘| EH$ g{‘{V J{R>V H$s {Ogo Xm‘moXaZ g{‘{V Ho$ Zm‘ go
OmZm OmVm h¡. Bg g{‘{V Zo àm¡Úmo{JH$s VWm CXmarH$aU Am{X Ho$ H$maU J«mhH$ {eH$m`Vm| H$mo g‘PZo Ho$ {cE {eH$m`Vm| H$m joÌmZwgma `moJXmZ H$m
J«mhH$ godm na à^mdm| H$m AÜ``Z {H$`m VWm ~ohVa J«mhH$ godm Ho$ {cE AÜ``Z ^r A{Zdm`© h¡ Omo {ZåZdV h¡:-
Hw$c 232 {g’$m[aem| H$mo àñVwV {H$`m. Bg g{‘{V H$s Hw$c {g’$m[aem| ‘| go
155 {g’$m[aem| H$m {H«$`mÝd`Z hmo MwH$m h¡& Bg g{‘{V H$s à‘wI {g’$m[ae|
Bg àH$ma h¢:

• J«mhH$m| Ho$ {cE ImVm g§»`m nmoQ>}{~{cQ>r H$s gw{dYm CncãY H$am`r
OmE Vm{H$ J«mhH$ ghOVm go AnZm ImVm {H$gr ~¢H$ H$s EH$ emIm go
Xygar emIm ‘| A§V[aV H$a gHo$. gmW hr ImVm g§»`m nyd©dV hr aho.

• EH$ hr ~¢H$ ‘| EH$ go A{YH$ ImVo ImocZo na Ho$dmB©gr ‘mZX§S>m| ‘| Ny>Q>
Xr OmZr Mm{h`o.
• J«mhH$m| H$mo ‘r`mXr O‘m Ho$ ZdrH$aU H$s gyMZm ^oOr OmE Am¡a g§^d
hmo Vmo `h gyMZm BcooŠQ´m°{ZH$ ‘mÜ`‘ go Xr OmZr Mm{h`o.
~¢{H§$J cmoH$nmc H$s dm{f©H$ [anmoQ>© 2011-12 ‘| `h ^r Ü`mZ {X`m J`m h¡
{H$ J«mhH$m| Zo AnZo {eH$m`Vm| H$mo XO© H$aZo Ho$ {cE {H$Z-{H$Z ‘mÜ`‘m| H$m
Cn`moJ {H$`m h¡?

• ~¢H$ CYmaH$Vm©Am| H$mo {Z`V A§Vamc na G$U H$m {ddaU Omar H$a|o.

• ~¢H$m| Ho$ g^r emImAm| na n|eZ^mo{J`m| VWm d[aîR> ZmJ[aH$m| H$mo$ {deof
à~§YZ VWm àmW{‘H$Vm XoZr Mm{hE.

Vol II No. 2 - {gVå~a 2014 {X B§{S>¶Z ~¢H$a 65

 boI
CnamoŠV [anmoQ>© go ñnîQ> h¡ {H$ J«mhH$ {eH$m`Vm| ‘| {d{dYVm h¡. gmW hr
g^r joÌm| VWm CncãY g^r ‘mÜ`‘m| Ûmam {eH$m`V| àmá hmo ahr h¢.
AVEd, J«mhH$ {eH$m`Vm| H$m Ëd[aV {ZdmaU Ed§ {eH$m`V H$s pñW{V CËnÝZ
Z hmo BgH$m ha g§^d Cnm` H$aZm g‘` H$s ‘m§J h¡.
J«mhH$ godm {H$gr ^r g§ñWm H$s à{VîR>m VWm àJ{V H$m àVrH$ h¡. g^r
àH$ma Ho$ {eH$m`Vm| Ho$ {ZnQ>mao Ho$ {cE J«mhH$m| Ho$ gmW EH$ {dídgZr` g§~§Y
H$s ñWmnZm H$s Amdí`H$Vm h¡.
J«mhH$ g§~§Y
~¢H$m| Ho$ H$‘©Mm[a`m| H$mo J«mhH$m| Ho$ gmW EH$ ‘O~yV, ñWm`r VWm g§VmofàX
g§~§Y ~ZmZo H$m à`mg H$aZr Mm{hE. àË`oH$ J«mhH$ H$mo Bg àH$ma gå‘mZ
{X¶m OmZm Mm{hE {Oggo CÝh| ‘hgyg hmo {H$ ~¢H$a CZHo$ {hV¡fr h¢. J«mhH$
g§~§Y H$s àJmT>Vm Ho$ {cE A{Zdm`© h¡ {H$ h‘ J«mhH$m| H$mo Omo ^r AmídmgZ
XoVo h¢ do nyU© hmoZo Mm{hE. H$moB© ^r PyR>m AmídmgZ J«mhH$ g§~§Y H$mo ZmOwH$
~Zm gH$Vm h¡. J«mhH$m| H$s godm Amdí`H$VmAm| H$mo Ü`mZ ‘| aIH$a Cgr
AZwê$n `Wmg§^d Ëd[aV Ed§ Cn`wŠV godm àXmZ H$aZr Mm{hE. Bggo ~¢qH$J
godmAm| Ho$ à{V J«mhH$m| Ho$ {dídmg ‘| d¥{Õ hmoJr. V^r h‘mao nwamZo J«mhH$
h‘mar godmAm| Ho$ {cE h‘g| Ow‹S>o ah|Jo Am¡a Z`o J«mhH$m| Ho$ gmW ^r
{MaH$mcrZ g§~§Y H$m`‘ H$aZo ‘| g’$cVm {‘c|Jr. J«mhH$m| H$s g§VwpîQ>,
àgÝZVm VWm {dídmg A§VV: h‘mar hr g’$cVm Am¡a g§VwpîQ> H$m H$maU
~ZoJm.
J«mhH$-g§~§Y H$mo g’$cVmnyd©H$ ‘O~yV H$aZo Ho$ {cE {ZåZm§{H$V N>moQ>r {H§$Vw
‘hËdnyU© ~mVm| H$m Ü`mZ aIZm Amdí`H$ h¡:
• J«mhH$m| H$mo gX¡d ‘wñHw$amVo hþE godm àXmZ H$aZm Mm{h`o.
• ha g§^d à`mg H$aZm Mm{h`o {H$ J«mhH$m| H$mo CZHo$ Zm‘ go g§~mo{YV
{H$`m Om`o. Eogm ‘mZm OmVm h¡ {H$ {H$gr ^r ì`pŠV Ho$ {cE CgH$m
Zm‘ {à` hmoVm h¡.
• J«mhH$m| H$mo {d{^ÝZ godmAm| VWm ~¢{H§$J CËnmXm| H$s OmZH$mar XoZr
Mm{h`o VWm CÝh| CZHo$ AZwê$n Cn`wŠV godmAm| Ho$ M`Z ‘| gh`moJ
H$aZm Mm{h`o.
66 {X B§{S>¶Z ~¢H$a
• J«mhH$m| H$s g‘ñ`mAm| Am¡a Amdí`H$VmAm| H$mo Ü`mZnyd©H$ Am¡a Y¡`©nyd©H$
gwZZm Mm{h`o.
• J«mhH$m| Ho$ gmW {‘ÌdV ì`dhma H$aZr Mm{h`o.
• J«mhH$m| go H$^r ^r VH©$-{dVH©$ Zhr§ H$aZm Mm{h`o.
• `h gw{ZpíMV H$a| {H$ ~¢H$m| Ho$ H$m`© àma§^ hmoVo hr J«mhH$m| H$mo godm
{‘cZr ^r ewê$ hmo Om`o.
• H$m`©-Ad{Y Ho$ Xm¡amZ {H$gr ^r H$mC§Q>a na J«mhH$ H$mo godm {‘cZr
Mm{h`o VWm H$‘©Mmar AnZo {ZYm©[aV ñWmZ na Adí`‘od CncãY hmoZm
Mm{h`o.
• ~¢H$m| Ûmam godm ewëH$, ã`mO Xam| Am{X go g§~§{YV gyMZmAm| H$mo ñnîQ>
ê$n go àX{f©V H$aZm Mm{h`o.
• J«mhH$m| H$mo CZHo$ A{YH$mam| VWm H$Îm©ì`m| H$m kmZ àXmZ H$amZm Mm{h`o.
Cng§hma
Ag§VwîQ> J«mhH$ h‘mao ~¢H$ H$s à{VîR>m H$s d¥hV j{V H$aVo h¢¡. EH$ Ag§VwîQ>
J«mhH$ AnZo H$Qw> AZw^dm| H$mo Xygao J«mhH$m| Ho$ gmW MMm© H$a Hw$àMma H$aVo
h¡o. ’$cV: h‘mao {cE ~mOma Ho$ gmW-gmW à{VîR>m OmopI‘ CËnÝZ hmo OmVr
h¡§. h‘ H$h gH$Vo h¢ {H$ AmYw{ZH$ ~¢{H§$J Xm¡a ‘| J«mhH$ godm VWm J«mhH$
g§~§Y H$m ~hþV ‘hËd h¡. {H$gr ^r ~¢{H§$J g§ñWmZ H$s nhMmZ, J«mhH$ godm
VWm J«mhH$ g§VwpîQ> na {Z^©a H$aVr h¡. Xygao eãXm| ‘| J«mhH$ godm ‘| hr
~¢{H§$J g’$cVm A§V{Z©{hV h¡. ~¢H$m| H$s ì`dgm{`H$ g’$cVm Ho$ {cE
Amdí`H$ h¡ {H$ h‘mam Ü`o` hmo - g§VwîQ> J«mhH$ godm, g‘w{MV J«mhH$-
ì`dhma, ^mdmZmË‘H$ VWm amJmË‘H$ J«mhH$ g§~§Y. h‘| `mX aIZm Mm{hE {H$
J«mhH$ h‘| gXm naIVo ahVo h¢ Am¡a J«mhH$ ^r B§gmZ hmoVo h¢.
boIH$ n[aM¶
à~rZ Hw$‘ma e‘m© `yH$mo ~¢H$ ‘| à~§YH$ Ho$ nX
na 3 ’$adar 2012 go H$m`©aV. Bggo nyd© {ejU
H$m`© ‘| g§c½Z.
e¡j{UH$ `mo½`Vm- àm{U{dkmZ ‘| ñZmËH$moËVa
VWm Oo.E.AmB©.AmB©.~r. Ed§ gr.E.AmB©.AmB©.~r.
CncpãY`m±- H$B© nÌ-n{ÌH$mAm| ‘| aMZmE§ àH$m{eV.
B©‘oc- prabinkr.s@gmail.com
Vol II No. 2 - {gVå~a 2014
 Kind Attention

Contributors

Please send all your

contributions and related
mails to
ibaindianbanker@gmail.com

Vol II No. 2 - {gVå~a 2014 {X B§{S `Z ~¢H a 67

  






 


 
 
   
 
   
  
  
 
 
 !
 
   "#$%
   "#$%
& 
& 
    
    
 '() *
 '() *


++')*,&
')*,&   
  
(   
(   
   
    
 

 
  
 
  
 
  



 
  


"
)%

)% 
  
"
)%  

  
 


 

  


 









    

 










    

 

   

    
!
!
  

    "  

!
!"   #

 #

$

 $  
! 
"
%

%













%!


#



$

 $ 
! 
"
%



%!


#




 

 &
 

     


 

 &
 

     
#
#
'((

 

 &
 

     
#
'((
 

 
 
 


 


 


 
 


 


 



4 , 0+ 

 
   
  

   

  
  

  
  

 !"#!"$"%&$"#%%'(
 !"#!"$"%&$"#%%' ( !"$)&"%
*+ ,-+. /
0 1,+2'
 3 !"#%"
,-+. /
0 1,+2'
3