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COVER
STORY
Japanese
Banks : The Turnaround Story
-- Katuri Nageswara Rao
Japan,
the second largest economy, had a very weak banking sector
whose problems of Non-Performing Assets (NPAs) and mounting
losses had assumed crisis proportions. Its economy was in
a deflationary spiral, not the best opportunity for banks
to radically reform. The banks' excessive exposure to sensitive
sectors, major corporates and profligate construction companies
had landed them in a big mess of mounting non-performing loans.
The steep fall of stock market prices and real estate prices
accentuated the crisis. The reform process included stricter
rules of NPA classification, accelerated write-off of bad
debts, sale of bad debts to `Resolution and Collection Corporation',
besides corporate Debt Restructuring.
© 2007 IUP . All Rights Reserved
STRATEGY
Financial
Inclusion : Banks Alone Cannot Fulfill the Dream
-- Reena Ray
Financial
inclusion is required for the establishment of equality within
the society. However, this mission needs the involvement of
not only banks but also others like the postal department,
voluntary organizations, etc.
© 2007 IUP . All Rights Reserved
STRATEGY
Bank
Holding Companies : The Raging Debate
-- Gangineni Dhananjhay
The
issue of holding structures for financial conglomerates undertaking
various activities like insurance, asset management, merchant
banking, investment banking and broking is being hotly debated.
The Reserve Bank of India (RBI) has indicated that it is not
comfortable with Intermediate Holding Company (IHC) structures
which do not fall under the RBI's regulation and this may
result in regulatory arbitrage. The regulator favors simpler
BHC/FHC structures, minimum cross-holdings and adequate legal
framework. Advantages like better risk control and ability
to undertake riskier activities like commodity broking resulting
from BHC/FHC structures make this an appropriate time for
redesigning holding company structures in accordance with
international standards.
© 2007 IUP . All Rights Reserved
MICROFINANCE
Microfinance
Through Self-Help Groups : Status and Emerging Challenges
-- K C Sharma
Microfinance
has multiple challenges. The criticality of roles played by
financial institutions and SHGs cause these challenges. Group
dynamics, sustainability of groups and the viability of these
linkages with banks need to be addressed.
© 2007 IUP . All Rights Reserved
TECHNOLOGY
Internet
Banking : A Regulatory Challenge
-- T R Nagesh
Advancement
in technology has resulted in the rise of multiple channels
of banking. Internet banking has evolved as an effective delivery
channel. The article throws light on the risks involved in
banking on the net and the issues of concerns for the regulators.
© 2007 IUP . All Rights Reserved
TECHNOLOGY
Aligning
to Techno-Banking
-- T V Balakrishnan
Technology has a dominant role to play in the banking
sector and, in fact, many of the business models are based
on and driven by technology. However, implementation of technology
poses many challenges. Customers, today need services with
interconnected features. The IT roadmap should focus on the
cross-selling and upselling of different products by banks
as a one-stop financial mall for the customers.
© 2007 IUP . All Rights Reserved
REGULATION
UCP
600 and its Implications in Letter of Credit Transactions
-- M Ravindran
Uniform
Customs and Practices for Documentary Credits (UCP) have undergone
a revision recently. These changes relate to the expiry date
for presentation, certification by the advising bank, examination
of the documents, etc.
© 2007 IUP . All Rights Reserved
RISK
MANAGEMENT
Stress
Testing for Interest Rate Risk Management
-- Ashish Srivastava
Stress testing is an appealing risk-management tool because
it provides the risk managers with additional information
on possible portfolio losses arising from extreme, yet plausible
events. In addition, stress scenarios can often become an
effective communication tool within the bank and to the outside
parties like the supervisor and depositors. It has assumed
added significance in view of the ensuing implementation of
BASEL II norms.
© 2007 IUP . All Rights Reserved
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