Priority Sector Lending MeaningPriority sector plays an important role in the economic development of the country. Therefore, the Central (Federal) Government of any country gives this sector priority (first preference) in obtaining loans from banks at a low rate of interest. This is known as a ‘Priority Sector Lending’.
Functions of Development BanksThe role or functions of development banks in India are depicted below.
Meaning of Development BanksDevelopment banks are specialized financial institutions. They provide medium and long-term finance to the industrial and agricultural sector. They provide finance to both private and public sector. Development banks are multipurpose financial institutions. They do term lending, investment in securities and other activities. They even promote saving and investment habit in the public.
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Changing Role of Banks in IndiaThe role of banks in India has changed a lot since economic reforms of 1991. These changes came due to LPG, i.e. liberalization, privatization and globalization policy being followed by GOI. Since then most traditional and outdated concepts, practices, procedures and methods of banking have changed significantly. Today, banks in India have become more customer-focused and service-oriented than they were before 1991. They now also give a lot of importance to their rural customers. They are even willing ready to help them and serve regularly the banking needs of country-side India.
The changing role of banks in India can be glanced in points depicted below.
The following points briefly highlight the changing role of banks in India.
Challenges Before Indian EntrepreneursThe challenges which Indian entrepreneurs have to face are depicted below.
The Indian entrepreneurs have to face following challenges:
Measures to Solve Problems of NPAThe problems of NPA have been receiving greater attention since 1991 in India. The Narasimham Committee recommended a number of steps to reduce NPA. In the 1990's the Government of India (GOI) introduced a number of reforms to deals with the problems of NPA.
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Major steps taken to solve the problems of Non-Performing Assets in India :-
Narasimham Committee Report I (1991) recommended the setting up of Special Tribunals to reduce the time required for settling cases. Accepting the recommendations, Debt Recovery Tribunals (DRTs) were established. There are 22 DRTs and 5 Debt Recovery Appellate Tribunals. This is insufficient to solve the problem all over the country (India).
Non-Performing Assets (NPA) - MeaningNon-Performing Assets are popularly known as NPA. Commercial Banks assets are of various types.
All those assets which generate periodical income are called as Performing Assets (PA).
While all those assets which do not generate periodical income are called as Non-Performing Assets (NPA).
If the customers do not repay principal amount and interest for a certain period of time then such loans become non-performing assets (NPA). Thus non-performing assets are basically non-performing loans.
In India, the time frame given for classifying the asset as NPA is 180 days as compared to 45 days to 90 days of international norms.
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Introduction to Direction of India's Foreign Trade ↓By direction of trade we mean the countries with which India keeps international trade relations. It also helps us to understand the diplomatic relations maintained by India with other countries in direction of trade.
For the purpose of direction of trade, the countries to which India exports are broadly divided into following five groups.
The group of countries to which India Exports are :-
Introduction to India's Foreign Trade ↓Foreign Trade is one of the significant macro fundamental variable of an economy. India till recently was predominantly a primary goods exporting and mainly an industrial goods importing country.
In 1950s, India's share in the world trade was 1.78% which was decline to 0.59% in 1990 and continues to remain around 0.60% till now. India's share in world exports was 0.8% in 2006.
A. Composition of India's Exports ↓Britishers strongly believed that India was a country well suited to supply raw materials and other primary goods and a good market place for British manufacturers. So at the time of our independence our exports were predominantly of primary goods and imports were of manufacturers. At the time of independence agricultural commodities and light manufactured consumer goods dominated India's export basket. During the post independence period India's composition of exports changed.
Now exports of India's are broadly classified into following four categories.
Step 1. Receipt of an orderThe exporter has to get himself registered with various authorities like RBI, income tax authorities, etc. In addition, he has to appoint agents or distributors for collection of orders from foreign countries. Exporter receives an order from importer directly or through Indent House.
Step 2. Obtaining License and QuotaAfter obtaining order, exporter has to secure export license from the government. For this, he has to apply to the Export Trade Control Authority and obtain the valid license. Quota is the total quantity of goods that is permitted for exports.
Step 3. Letter of CreditExporter demands letter of credit from importer or sometimes importer may send it himself along with the order.
Procedure of importing goods means the orderly steps to be taken for importing goods from aboard. This import procedure is quite lengthy and time consuming as various formalities are required to be completed.
Step 1. Obtaining import license and quotaIn all countries there are many government regulations to be followed. Sanction of government is necessary. Importer has to apply to the controller of imports for getting necessary permission.
Importer has to attach the following documents to his application form :-
The importer also has to obtain import quota certificate from the concerned authority. It mentions the maximum quantity of goods which can be imported.
Yesterday evening, I was too bored and annoyed to follow my daily monotonous chores. I felt my body was demanding some spiritual recreation that I kept it deprived for many long days. It urgently needed a serene calmness to get fully energized and feel fresh once again. After thinking about the options I had, I finally decided to plan and enjoy an evening ride by visiting some previously unexplored locations outside Kalyan city.
I usually don't wander alone and always prefer keeping a good friendly company of adventurous people. Now the evening tour plan was ready to implement and without wasting more time I quickly contacted my buddy Sameer Akrani. To my luck, Sameer too was free, and he willingly accepted my proposal to join me for an adventurous evening journey.
Later Sameer picked me at my residence and we soon hit the national highway to enjoy our Road Trip. I was excited and even little curious figuring out how I can make this evening the most memorable day of my life. While speedily driving his Bajaj Pulsar bike, Sameer was simultaneously trying to communicate his special plans by shouting loudly, as the fast rushing wind was cutting his voice. After driving for almost an hour, we finally freed ourselves (at least temporarily) from the cacophony and congestion of Kalyan city. Soon we were in the woods and Sameer was thrilled to drive his 150 cc motorcycle on long empty Kacchha (raw) road in a countryside India.
While enjoying my ride, I was deeply mesmerized by the scenic natural beauty of wide open lush green farms. I was extremely satisfied by inhaling the fresh aroma of divine atmosphere and was emotionally elevated by seeing a flock of birds flying high up in the fluorescent orange sky.
Balance of Payments of a Country - Introduction ↓The balance of payments of a country is a systematic record of all transactions between the residents of a country and the rest of the world carried out in a specific period of time.
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India's balance of payment worsened in the early 1990's but now the situation is under control. In fact, India has a good foreign exchange reserves mainly due to capital inflows from foreign financial institutions or the stock exchange.
1. Bombay Stock Exchange BSEBSE is the leading and the oldest stock exchange in India as well as in Asia. It was established in 1887 with the formation of "The Native Share and Stock Brokers' Association". BSE is a very active stock exchange with highest number of listed securities in India. Nearly 70% to 80% of all transactions in the India are done alone in BSE. Companies traded on BSE were 3,049 by March, 2006. BSE is now a national stock exchange as the BSE has started allowing its members to set-up computer terminals outside the city of Mumbai (former Bombay). It is the only stock exchange in India which is given permanent recognition by the government. At present, (Since 1980) BSE is located in the "Phiroze Jeejeebhoy Towers" (28 storey building) located at Dalal Street, Fort, Mumbai. Pin code - 400021.
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In 2005, BSE was given the status of a full fledged public limited company along with a new name as "Bombay Stock Exchange Limited". The BSE has computerized its trading system by introducing BOLT (Bombay On Line Trading) since March 1995. BSE is operating BOLT at 275 cities with 5 lakh (0.5 million) traders a day. Average daily turnover of BSE is near Rs. 200 crores.
List of Terms relating to Indian Stock Exchange ↓List of the important terms relating to indian stock exchange transactions.
1. Group A SharesThese are the listed equity shares of large and well established companies having broad investor base. These shares are actively traded and for these shares the facility for carrying forward a transaction from one accounting period to another is available. Naturally, these shares attract a lot of speculative multiples. These facilities are not available for group B shares. However, shares can be moved from Group B to Group A and vice versa depending on criteria for shifting. For instance the Bombay Stock Exchange has laid down several criteria for shifting shares from Group B to Group A; such as, an equity base of Rs. 10 crores, a market capitalization of Rs. 25-30 crores, a public holding of 35 to 40 percent, a shareholding population of 15,000 to 20,000, good dividend paying status, etc.
2. Group B SharesThese are those listed shares which do not follow the criteria prescribed for Group A shares. Group B shares are again divided into B1 and B shares on BSE. B1 shares represent well traded scrips among B group and they have weekly settlements.
Powers of SEBIThe important powers of SEBI (Securities and Exchange Board of India) are:-
Figure 1. Image or picture of SEBI's official logo.
SEBI has wide powers regarding the stock exchanges and intermediaries dealing in securities. It can ask information from the stock exchanges and intermediaries regarding their business transactions for inspection or scrutiny and other purpose.
Role of Stock Exchanges In Capital Market of IndiaStock Exchanges play a crucial role in the consolidation of a national economy in general and in the development of industrial sector in particular. It is the most dynamic and organised component of capital market. Especially, in developing countries like India, the stock exchanges play a cardinal role in promoting the level of capital formation through effective mobilization of savings and ensuring investment safety.
Let's study the role of stock exchanges in capital market of India.
1. Effective Mobilisation of savingsStock exchanges provide organised market for an individual as well as institutional investors. They regulate the trading transactions with proper rules and regulations in order to ensure investor's protection. This helps to consolidate the confidence of investors and small savers. Thus, stock exchanges attract small savings especially of large number of investors in the capital market.
What is Stock Exchange? MeaningStock Exchange (also called Stock Market or Share Market) is one important constituent of capital market. Stock Exchange is an organized market for the purchase and sale of industrial and financial security. It is convenient place where trading in securities is conducted in systematic manner i.e. as per certain rules and regulations.
It performs various functions and offers useful services to investors and borrowing companies. It is an investment intermediary and facilitates economic and industrial development of a country.
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Stock exchange is an organized market for buying and selling corporate and other securities. Here, securities are purchased and sold out as per certain well-defined rules and regulations. It provides a convenient and secured mechanism or platform for transactions in different securities. Such securities include shares and debentures issued by public companies which are duly listed at the stock exchange, and bonds and debentures issued by government, public corporations and municipal and port trust bodies.
I completely disagree with this statement. Man may be poor materialistically but spiritually and mentally he is not poor. Poverty depends on one's own thinking. There are many examples in public life which would support my view. Lal Bahadur Shastri, Abraham Lincoln, Dr. A.P.J. Abdul Kalam each belonged to a poor family. These persons touched the height of success. They encountered challenges of life lion-heartedly. They accepted the challenges, faced the difficulties and swam against the current of time, as a result of which they were mentally prepared for every circumstance of their lives. Poverty forced them to be strong, tough and bold.
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Those who blame poverty for their failures are just making petty excuses. In fact, they have laid down their weapons against circumstances. They should have prepared themselves mentally and intellectually to face the challenges of life. Gold 'glitters with more radiance when it is burned in fire.
Need for Documentary Letter of Credit LCNormally, in international trade, the exporter may not be ready to take the risk of selling his abroad unless he is sure of getting his payment. Likewise, the buyer may not buy goods in international market from an unknown party due to risk of not meeting his requirements. Both these risks are quiet high, which may sometime result into major financial loss. This perception is not congenial to development of international trade.
The seller, therefore, needs an assurance of payment on behalf of the buyer; similarly, a buyer would want somebody to ensure due performance by the seller as per the contract.
Both the parties can feel satisfied, if a professional intermediator like bank lends his support by issuing Documentary Credit on behalf of the buyer (importer) in favour of the seller (exporter).
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