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Short Note on M.R.T.

P Commission

Under the MRTP Act, a Commission has been established, the Chairman of which is
always a person who is or has been qualified to be a judge of the Supreme Court or of
High Court ( of a state). The members of the Commission are persons of ability,
integrity and standing who have adequate knowledge or experience of or have shown
capacity in dealing with problems relating to economics, law, commerce etc. The
commission is assisted by the Director General of Investigation and Registration
(DG) for carrying out investigation, or maintaining a register of agreements and for
undertaking carriage of proceedings during the enquiry before the MRTP
Commission. The powers of the Commission include the powers vested in a Civil
Court and include the following further powers :

1. To direct an errant undertaking to discontinue a trade practice and not to repeat

the same

2. To pass a cease and desist order

3. To grant temporary injunction, restraining an errant undertaking from

continuing an alleged trade practice

4. To award compensation for loss suffered or injury sustained on account of RTP,


5. To direct parties to agreements containing restrictive clauses to modify the


6. To direct parties to issue corrective advertisements

7. To recommend to the Central Government division of undertakings or

severance of interconnection between undertakings if their working is
prejudicial to public interest or has led to or is leading to MTP or RTP
Define values. What are the values required for a professional
organisation ?

A personal and/or cultural value is an absolute or relative ethical value, the

assumption of which can be the basis for ethical action. A value system is a set of
consistent values and measures. A principle value is a foundation upon which other
values and measures of integrity are based. Those values which are not
physiologically determined and normally considered objective, such as a desire to
avoid physical pain, seek pleasure, etc., are considered subjective, vary across
individuals and cultures and are in many ways aligned with belief and belief systems.
Types of values include ethical/moral values, doctrinal/ideological (religious,
political) values, social values, and aesthetic values. Values have typically been
studied in sociology; anthropology; social psychology; moral philosophy and
business ethics. Values tend to influence attitudes and behaviour.

In order to develop a strong professional organisation one needs values which are
spelt for an organisation through the following :

 Vision: Whenever an organisation is set up there should be a very clear vision

of how it it going to contribute to the immediate community without harming
the physical environment. The first task thus is to develop a realistic vision for
the business, which would present a picture of the business in 3 to 5 years time
in terms of its physical appearance, size and activities. It also defines the
company's markets, customers, processes, location staffing etc.

 Mission Statement: The nature of a business is often expressed in terms of its

mission statement. The mission statement indicates the purpose of a business.
For example: The mission statement of ICICI Bank, 'To be preferred provider
of comprehensive and world class investment and banking solutions to the
Financial Institution Group (FIG) clients.

 Code of Conduct: These are the Do's and Dont's or the work culture in an
organisation. The code of conduct defines the rights and duties of all
stakeholders starting from the CEO or Managing Director, the Board of
Directors, the Managers, Employees, Suppliers and Distributors and the
Customers and the Shareholders. The code of conduct is necessary for the
following :

1. For inspiration and Guidance: The code of expresses a collective commitment

of the organisation for the public good and thus guides and inspires all the
stakeholders to maintain it.

2. It Disciplines and Discourages Unethical Business Practices: The code serves

as a basis for investigating any unethical action on part of the company

3. Education and Mutual Understanding: The code serves as a benchmark for

developing a shared understanding by employees, professionals, regulatory
bodies like IRDA and SEBI.

4. Creates a Good Public Image: The code presents a positive image of a

committed professional and the brand image in the minds of the customers and
general public.

5. Quality Standards: Quality Standards are set which give us specifications

regarding the quality, safety and appropriate pricing of the product.
What are the principles of good Corporate Governance ?

 Effective Leadership: The CEO's role in governance is fundamental; an

indication of leadership effectiveness us the way in which the organisation as a
whole works together under the CEO's leadership. The executive also has a
collective responsibility to provide leadership, communicating coherent
governance principles throughout the agency and ensuring the operation of
checks and balances which effective governance demands.

1. Executive Leadership Group has collaborative responsibility for key leadership

roles including: strategic direction, performance management, conformance
oversight and development of a comprehensive and formal frame work for
reporting on agency performance and conformance.

2. Embracing better/more comprehensive performance management and agreeing

performance measures with agency managers, ensuring continual alignment of
the competency profile of the agency to changing business needs.

3. Monitoring policies directed to ensuring that the agency complies with relevant
legislation and conforms with the highest standards of clinical/professional,
financial and ethical behaviour.

4. Management Information System is in place. It is able to maintain essential

knowledge of business disciplines and has a proper control environment in
place together with appropriate monitoring of compliance activities, assuring
that satisfactory arrangements are in place for auditing the agency's financial
affairs and setting out the relationship and responsibilities of internal and
external audit and the audit committee.

5. Reviewing its own processes and effectiveness, and adjusting the plans,
processes, as well as the balance of skills and experience required to obtain
continuous improvement.

 Capable Management: Capable management includes setting in place the

broad principles under which the agency operates, including setting clear
objectives and an appropriate ethical framework operating in the public
interest; establishing due processes; defining the duty of care to the agency's
client group; providing for transparency and clear lines of responsibility and
accountability; implementing sound business planning; integrating sound
business planning; integrating business risk management throughout the
agency; having the right people and the right skills for the job; having sound
communication, both internal and external; establishing clear boundaries for
acceptable behaviour; evaluating performance; and recognizing individual and
group contributions.

 Diligent Monitoring: Diligent monitoring of risks and the effectiveness of

mitigation strategies should include processes to assess the delivery of outputs
and quality of control systems over time enabling the identification of
corrective actions for continuous improvement. Systems operating in a
changing environment require close monitoring. Quality assurance, bench-
marking and other continuous improvement tools are to be used as part of the
monitoring process, which is more effective occurring in the course of normal
operations, rather than focusing on detection of problems after they have

 Responsible Risk Management: Responsible risk management establishes

processes for identifying, analyzing, mitigating risks that could prevent the
agency from achieving its business objectives. It includes: clarifying the links
between risks/returns and resources priorities; monitoring and controlling
activities; and specific risk management plans covering all services to clients
as well as organisational and administrative support systems.

 Clear Accountability and Responsibility: Clear accountability and

responsibility is primarily through the CEO to the responsible Managers and
the Executive Directors. To improve accountability agencies should enhance
transparency and endeavour to reduce or eliminate: unclear lines of authority
or too many layers of authority; too many or too complex reporting
mechanisms; multiple/conflicting objectives, including policy or legal
requirements with no direct connection to program objectives; the tension
between central control and evolution; lack of clear-cut concepts of success or
failure; and constraints on applying positive or negative.

What is the code of best practices for banks with respect to Guidelines
of RBI ?

The Reserve Bank of India (RBI) has issued guidelines for the formulation of Best
Practices Code (BPC) by banks to prevent frauds. The norms have been issued to
bring about a certain minimum level of uniformity with regards to the content and
coverage of the code.

The BPC modelled by select banks lacked uniformity in their content and coverage
and was not prepared envisaged by the Mitra Committee ( on legal aspects of bank
frauds ), prompting RBI to issue these norms, As per the norms, the BPC should be a
comprehensive and homogeneous document and take into account the instructions
relating to the common fraud prone areas and their prevention issued to banks by the
RBI from time to time, the notification said.

The Code should also highlight the recommendations of the Ghosh Panel and the
Mitra Committee. It should take into account the relevant recommendations of
Narang Committee's study of large value frauds, Narsimham Panel on banking sector
reforms and recommendations of the estimate committee on prevention of frauds in

The Code should cover all the functional areas like cash, safe custody of other
valuables, deposit accounts, investment portfolio, credit portfolio, foreign exchange
transactions and treasury operations. The BPC may also incorporate practices that
would help prevention of losses to its customers and include suitable guidance to
such customers.

The banking sector is not necessarily totally corporate. Some part of it is, of course
but a segment of banks is mostly government owned as statutory corporations or run
as cooperatives. Banking as a sector has been unique and the interests of other stake
holders appear more important to it than in the case of non-finance organisations. In
the case of traditional manufacturing corporations, the issue has been that of
safeguarding and maximising the shareholder's value. In the case of banking, the risk
involved for depositors and the possibility of contagion assumes greater importance
than that of consumers of manufactured products. Further, the involvement of
government is discernibly higher in banks due to importance of stability of financial
system and the larger interests of the public. Since the market control is not sufficient
to ensure proper governance in banks, the government does see reason in regulating
and controlling the nature of activities, the structure of bonds, the ownership pattern,
capital adequacy norms, liquidity ratios, etc.

Explain the general recommendations to build up effective Corporate

Governance in the Banking sector ?

1. Since banks are important players in the Indian financial system, special focus
on the Corporate Governance in the banking sector becomes critical.

2. The Reserve Bank of India, as a regulator has the responsibility on the nature
of Corporate Governance in the banking sector.

3. To the extent that banks have systematic implications, Corporate Governance

in the banks is of critical importance.

4. Given the dominance of public ownership in the banking system in India,

corporate practices in the banking sector would also set the standards for
Corporate Governance in the private sector.

5. With a view to reducing the possible fiscal burden of recapitalising the Public
sector Banks attention towards Corporate Governance in the banking sector
assumes added importance prerequisites for Good Governance.

6. A proper system consisting of clearly defined and adequate structure of roles,

authority and responsibility.

7. Vision, principles and norms which indicate development path, normative

considerations and guidelines and norms for performance.

8. A proper system for guiding, monitoring, reporting and control.

Short note on money laundering

It is a process by which large amounts of illegally obtained money ( from trafficking
terrorist activity or some other crime ) and is shown as originating from legitimate

As per the estimates of the IMF, the aggregate size of money laundering in the world
could be somewhere between 2-5% of the world's GDP. This is estimated between
US$ 1-2 trillion each year.


1. Placement: In this first stage, the launderer inserts the dirty money, into the
banks in the form of cash bank deposits.

2. Layering: This involves sending the money through banks to change its form
and make it difficult to follow. It would consist of bank to bank transfer, wire
transfer from one account to another; transfer to different to accounts in
different countries. Making deposits and withdrawals continuously and
purchasing high value items like cars, diamonds, etc.

3. Integration: The money re-enters the main stream economy in legitimate

looking form. This would be in the form of final bank transfer by the
'launderer' for investing in a business.

How to Curb Money Laundering:

1. Customer Identification: KYC norms to be followed.

2. Rules and regulations pertaining to financial transactions are performed in

different banking related status.

3. Co-operation with the law enforcement agencies.

4. Implement anti-money laundering operations. Non-compliance will result in