The present issue comprises four research papers. The first paper, “Volatility Contagion Between India and Selected Stock Markets”, by Karam Pal Narwal, Ved Pal Sheera and Ruhee Mittal, attempts to explore the dynamic implied volatility linkages between the emerging (Indian) and developed economies (Japan, America, Germany, France, Switzerland and Eurozone markets) using their respective implied volatility indices. These linkages are examined with the bivariate VAR(p) system and BEKK-GARCH model. The results show that there is bidirectional volatility transmission between US and Indian stock markets. Further, the volatility of the Indian markets is Granger-caused by the volatility changes in France, Switzerland and Eurozone countries. In contrast to the above-mentioned observations, Japanese market is Granger-caused by the changes in the volatility index of India. The impulse response analysis suggests that volatility in Indian market responds strongly to the unit shock applied to its own innovations, which continues for about six days, with effects dying afterwards and vice versa. At individual level, it is found that there are bidirectional cross market volatility spillover effects between India-US, India-Germany, India-Switzerland and India-Eurozone markets and bidirectional volatility linkages between India and France and Eurozone. The authors claim that an understanding of the volatility transmission across the markets provides valuable input for developing better portfolio diversification strategies for the investors and fund managers.
The second paper, “Covered Interest Rate Parity and Efficiency of Foreign Exchange Market in India: An Econometric Investigation”, by Suman Sikdar and C K Mukhopadhyay, examines the ‘efficiency’ of Indian foreign exchange (rupee/dollar) market and the relevance of Covered Interest Rate Arbitrage Parity (CIRAP) doctrine therein. ARIMA (4, 1, 0) stochastic structure of monthly spot rate (st) has been used to generate one-period ahead forecast (set + 1) series. These forecasts are Minimum Mean Square Error (MMSE) forecasts and ‘Rational’ by nature. Forward rates (tFt + 1) served as the ‘unbiased predictor’ of the spot rate (st + 1) implying that CIRAP did hold well in the market. Again absence of ‘risk premium’ testifies to the ‘efficiency’ of the Indian foreign exchange (rupee/dollar) market over the period of study.
The third paper, “Applicability of Black-Scholes and Black’s Option Pricing Models in Indian Derivatives Market”, by Felcy R Coelho and Y V Reddy, explores the relevance of Black-Scholes (BS) model and Black’s model in the Indian derivative market with specific reference to the banking stock options from the Nifty bank index. The paired t-test result reveals that there is significant difference between the calculated model prices and market prices computed via BS model. However, it is observed that there is no significant difference between the calculated model prices and market prices of options under Black’s model. Thus, the authors claim that Black’s model produces better alternatives than Black and Scholes formula for pricing the banking stock call options. In most of the cases, it is seen that both the models have underestimated bank stock call options premium.
The last paper, “Carbon Risk and Impact Assessment from the Perspective of an Institutional Investor”, by Tirthank Shah, attempts to understand the dynamics of escalating carbon emission and climate change tension which attracts much-needed attention and action. In the light of the Portfolio Decarbonization Coalition (PDC) initiative and changing investment regulatory framework, the author tries to understand the need for constructing the carbon risk concept by identifying the carbon risk factors and its impact assessment at a company or asset level and at an institutional investor level. The paper majorly focuses on how identified key non-physical carbon risk factors impact the financial performance drivers of the firm, which in turn affect the valuation of the firm for investment decision-making process. Eventually, the endeavor is to contribute by building the platform upon which the theoretical framework for the same can be constructed.
Automated Teller Machines (ATMs): The Changing Face of Banking in India
Bank Management
Information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. This paper analyzes the development of this self-service banking in India based on the secondary data.
The Information and Communication Technology (ICT) is playing a very important role in the progress and advancement in almost all walks of life. The deregulated environment has provided an opportunity to restructure the means and methods of delivery of services in many areas, including the banking sector. The ICT has been a focused issue in the past two decades in Indian banking. In fact, ICTs are enabling the banks to change the way in which they are functioning. Improved customer service has become very important for the very survival and growth of banking sector in the reforms era. The technological advancements, deregulations, and intense competition due to the entry of private sector and foreign banks have altered the face of banking from one of mere intermediation to one of provider of quick, efficient and customer-friendly services. With the introduction and adoption of ICT in the banking sector, the customers are fast moving away from the traditional branch banking system to the convenient and comfort of virtual banking. The most important virtual banking services are phone banking, mobile banking, Internet banking and ATM banking. These electronic channels have enhanced the delivery of banking services accurately and efficiently to the customers. The ATMs are an important part of a bank’s alternative channel to reach the customers, to showcase products and services and to create brand awareness. This is reflected in the increase in the number of ATMs all over the world. ATM is one of the most widely used remote banking services all over the world, including India. This paper analyzes the growth of ATMs of different bank groups in India.
International Scenario
If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase as customers will be able to access their bank accounts from any geographic location. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a bank network to a customer will be determined in part by the final network size of the banking system. The statistical information on the growth of branches and ATM network in select countries.
Indian Scenario
The financial services industry in India has witnessed a phenomenal growth, diversification and specialization since the initiation of financial sector reforms in 1991. Greater customer orientation is the only way to retain customer loyalty and withstand competition in the liberalized world. In a market-driven strategy of development, customer preference is of paramount importance in any economy. Gone are the days when customers used to come to the doorsteps of banks. Now the banks are required to chase the customers; only those banks which are customercentric and extremely focused on the needs of their clients can succeed in their business today.
