THE GLOBAL ANALYST September 2015

1The Global AnAlyst | SEPTEMBER 2015 |

A N E X C L U S I V E M O N T H L Y O N B U S I N E S S & F I N A N C E

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September 2015

Volume 4 Issue 9

GLOBAL CURRENCIES

100

RBIHas a Larger Role!

IPO MARKETAction at Last

P28

SAVING PSBsNeeded Action...

P12

SPOTLIGHTThe Odds On Rupee

P36P16

The Battle Begins

The Global AnAlyst | SEPTEMBER 20152 |


September 2015 Vol. 4 | No.9managing editor - N Janardhan Raoeditorial director - Amit SinghreSearcH teamSurya Prakashini (Proof Reader), Anjaneya Naga Sai Prashanth, Vijaya Lakshmi, Narasimhanan, Karthikeyan, Nagaswara Rao & MSV Subba Rao

adViSorY BoardDr. Paritosh Basu, Former Group Controller, Essar GroupN Harinath Reddy, Advocate & Sr. Partner, H&B Law Offices (Hyd)

Sanjay Banka, CFO, Landmark Group, Saudi ArabiaPrashant Gupta, IIT-K, IIM-L, CEO - Edunirvana Dr David Wyss, Former Chief Economist, S&P & Visiting Fellow, Watson Institute at Brown University. NY, USDean Baker, Economist and Co-founder, Center for Economic and Policy, Washington, USWilliam Gamble, President, Emerging Market Strategies, US Andrew K P Leung, International and Independent China, Specialist at Andrew Leung, International Consultants, Hong Kong

M G Warrier, Former GM, RBIDr. Ivo Pezzuto, Global Markets Analyst, Management Consultant, Economics and Management Professor, ISTUD Business School & Catholic University of the Sacred Heart. Milan, Italy

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These are tense times for market pundits, punters, and policymakers alike, globally.

While the weakness in China economy (amid sliding exports) was not completely unknown to the rest of the world, not many would have expected the situation to worsen

A WORD From EDITOR

to this extent so fast – which has unnerved investors, shocked economists, and is posing significant challenges for global central banks as well as policymakers.

The trouble began with the sudden announcement by the People’s Bank of China to devalue Yuan by two per cent on August 11th. The news spread like a wild fire, rattling the global currency markets, with many of the emerging markets currencies feeling the heat. Several currencies from Indian rupee to Brazilian real to Vietnamese dong faced the bearish onslaught. The rupee, which depreciated by 2.4 per cent in a week since August 11, was hovering at 66.13 a dollar mark in the spot market, as on August 28, 2015.

In fact, other key emerging market currencies like Brazilian real, Turkish lira and South African Rand, which also form part of what Morgan Stanley calls the ‘Fragile Five’, have suffered higher erosions vis-à-vis the US dollar; the real is the biggest loser this year with a loss of nearly 30 per cent. In fact, even the equity markets and the commodities markets have been at the receiving end as jittery investors have resorted to panic selling.

While there seems to be some kind of calm now in global equities markets, courtesy some encouraging US data and the decision by the China’s central bank to cut its key lending rate, the situation seems to be far from normal.

Many experts fear that as China tries to resort to desperate measures to lift its economy out of the quagmire, it could put further pressure on the global currency markets as pressure on China’s competitors - to either improve their export competitiveness or else lose out to China - increases. “Its (China’s) devaluation of the yuan risks a new round of competitive easing that may send currencies from Brazil’s real to Indonesia’s rupiah tumbling by an average 30 percent to 50 percent in the next nine months,” warns Stephen Jen, investor and former International Monetary Fund economist. “As bad as things are for emerging-market currencies, China is about to make them a whole lot worse,” he was quoted as saying by the Bloomberg. Is it the beginning of the global currency war? - Editorial Director


BANKING SECTOR

P16 SAVING PSBs - Needed Action...And Nothing Else

To save the PSBs from the present tough situation, there is a need to look into the issues (affecting the banks) radically in an objective manner so as to arrive at a permanent solution, which could pave the way for qualitative real economic growth in the days, months and years to come.

P28 Not just a Rate cutter, RBI has a larger role!We must ensure that replacements are better than what is available now. The content of (Draft) IFC, unfortunately, does not give any assurance of the kind. GOI should tread slowly, if it does not want India to follow Greece, too soon!

P32 PAYMENTS BANKS - New Kids on Banking Block

Payments banks are expected to be operational extensively on technology platform to provide the desired services with most cost effective way. Their target customers will be existing clientele of SBs and Private sector banks as well as untapped, unbanked and under-banked population. Welcome tothe new kids on the banking block.

INSURANCE

P27 LIC is No.1 in BahrainLife Insurance Corporation of India (LIC) is the undisputed leader with a market share of over 70 per cent of India’s insurance industry, serving over 25 crore policyholders. The company also operates in several overseas markets through its various subsidiaries and joint ventures. It adds another feather to its cap as it emerges as the new numero uno in Bahrain.

COVER STORY P22 Global Currencies The Battle BeginsThe sudden devaluation of its currency by China has not only raised concerns that the world’s second largest economy could fall short of reaching its goal of economic growth of 7 per cent this year, but it has also created jitters across financial markets besides raising fears of an impending currency war.

P25 CHINAOf Devaluation, Currency War, and Growth Conundrum!China’s Renminbi bombshell devaluation by nearly 4 per cent in two consecutive days has aroused across the globe a flurry of speculation and panic of doom and gloom. Some $300 billion has moved out of China since the end of 2014. Is China coming off her wheels? What is the endgame?

P25 THE ODDS ON RUPEERupee has posted significant losses in the last few weeks bringing back memories of 2013, when it had depreciated 24% to 68/$ in a matter of four months.

REGULARSP06 Decoding DATAP10 Business DigestP45 DIGITAL ANALYST

CONTENTS

HEALTHCAREP46 Healthcare With A Human TouchThe Hyderabad-based BBR Hospital, a super specialty hospital founded by the doctor couple of Dr. B Keshava Rao, a gold medalist in pediatrics, and his wife Dr. B Nirmala, is redefining healthcare landscape in the City, offering affordable and effective healthcare with a human touch.

P51Cancer - Fighting the Killer Disease A sponsored feature by Nightingales Home Health Services

According to the WHO’s prediction, annual cancer cases will rise from 14 millions in 2012 to 22 millions within the next 2 decades. Against this backdrop, it is imperative to know this enemy well, its causes & consequences and how to fight it.

INTERNATIONAL

P48 Federal Reserve’s Rate Rise – Coming Soon?In spite of the solid improvement of the US economy fundamentals, it is still unlikely that a rate rise will occur in September 2015 (unless the Fed aims to make a just minor symbolic hike), the first one in more than nine years, since it might not be fully consistent with the current inflation expectations and the latest turbulent international developments.

START-UP XPRESS

P42 JUNOTele

In a tête-à-tête with The Global ANALYST, the founders talk about the changing landscape of mobile payments technologies, what has helped JunoTele differentiate itself from competition, their key offerings, and their plans for the future.

September 2015 Vol. 4 | No. 9

STOCK MARKETP12 IPO Marekt - Action at LastThe primary market is finally showing some signs of revival as more than two dozen IPO aspirants have filed their applications with the market regulator.

P13 Stock Market - ViewpointCORPORATE WORLDP14 Nestlé India - The Maggi MessMaggi mess leads to first quarterly loss for Nestlé India in 17 years. It’s going to be a long road ahead for the Indian unit of the Swiss food giant to reclaim the top spot in the instant noodles, its mainstay, market, and recreate the same magic which made Maggi a household name.

CFO CORNERP39 Deepak Narayanan, Founder-Director & Head Business Development, MyCFOIn an exclusive interview with The Global ANALYST, Deepak Narayanan, Founder-Director & Head of Business Development, MyCFO discusses about his firm’s offerings, its business model, benefits it offers to enterprises seeking CFO services, and his outlook on the market.


Decoding DATA / EconomyIndia’s Top 10 Trading Partner Nations ($mn)

Rank Country Export Import Total Trade

Trade Bal-ance

1 China 1,626.29 9,682.23 11,308.52 -8,055.95

2 USA 7,115.30 3,301.37 10,416.66 3,813.93

3 UAE 5,112.09 3,449.19 8,561.28 1,662.90

4 Saudi Arab 937.57 4,148.17 5,085.73 -3,210.60

5 Switzerland 130.33 3,260.34 3,390.67 -3,130.01

6 Indonesia 525.72 2,700.96 3,226.68 -2,175.24

7 Germany 1,154.26 2,034.11 3,188.36 -879.85

8 Korea RP 577.11 2,211.93 2,789.04 -1,634.81

9 Singapore 1,396.77 1,316.03 2,712.80 80.74

10 Hong Kong 1,750.98 852.49 2,603.47 898.50

Top 10 Commodities Exported by India

Sl.No. Commodities (Values in Rs. crores) % change

JULY'14 JULY'15 JULY'15

1 Tea 344.57 450.86 30.85

2 Coffee 415.30 406.63 -2.09

3 Rice 3380.07 3153.56 -6.70

4 Other cereals 535.36 152.26 -71.56

5 Tobacco 431.20 416.50 -3.41

6 Spices 1396.16 1361.28 -2.50

7 Cashew 450.76 467.14 3.63

8 Oil Meals 413.90 232.58 -43.81

9 Oil seeds 779.68 538.16 -30.98

10 Fruits & Vegetables 1181.17 1046.81 -11.38

Figures for the period Year: 2015-2016 (Apr-May) Source: Ministry of Commerce, Govt. of India

Source: Ministry of Commerce, Govt. of India

Top 10 Countries with Low Inflation (CPI) Rate Country Period Monthly basis Yearly basis

Greece Jul-15 -1.32% -2.23% Switzerland Jul-15 -0.61% -1.28% Poland Jun-15 0.00% -0.72% Slovenia Jun-15 -0.07% -0.70% Estonia Jul-15 -0.36% -0.36% Israel Jun-15 0.30% -0.36% Finland Jul-15 -0.22% -0.23%Ireland Jul-15 -0.29% -0.20% Great Britain Jun-15 0.00% -0.08% Sweden Jul-15 0.03% -0.08%

Decoding DATA / InternationalTop 10 Countries with High Inflation (CPI) Rate Country Period Monthly basis Yearly basis

Norway Jul-15 -0.07% 1.82%Iceland Jul-15 0.17% 1.86%Mexico Jun-15 0.15% 2.74%South Africa Jun-15 0.53% 4.55%Chile Jul-15 0.42% 4.62%India Jun-15 1.16% 6.10%Turkey Jul-15 -0.51% 7.20%Indonesia Jul-15 0.93% 7.26%Brazil Jun-15 0.79% 8.89%Russia Jul-15 0.20% 15.27%

Source: Inflation.eu CPI refers to Consumer Price Index (CPI)

Forget the ‘Fragile Five’, enter the ‘Troubled Ten’ or that is how media reports are trying to expand the list which one of the world’s leading investment banks Morgan Stanley had coined in 2013. Owing to the sudden devaluation of Yuan, experts at MS, and elsewhere, now identify currencies of 10 economies which they say are vulnerable.

According to Hans Redeker, London-based global head of foreign-exchange strategy at MS, “It’s all about vulnerability ... Major victims of the policy change this time are currencies of countries with high export exposure and export competitiveness with China.” Bloomberg comments, “Morgan Stanley was right about the Fragile Five. Those currencies include four of the developing world’s eight worst performers since the phrase was coined in 2013. The real, together with Turkey’s lira, South Africa’s rand, the Indian rupee and Indonesian rupiah, have suffered as rising global interest rates make it more difficult for the countries to finance their current-account deficits.”

For most of the countries whose currencies form part of the Troubled Ten list China is the top export destination, Bloomberg data suggests. For instance, the world’s second largest economy accounted for 37 per cent of South Africa’s exports and 30 per cent of South Korea’s in 2014.

China emerged as India’s largest trading partner with a share of 10 per cent in the latter’s total trade during April-May of 2015-16, as per latest official statistics.

Morgan Stanley’s Fragile Five swells to ‘Troubled Ten’


The Indian rupee has come under pressure post the devaluation of Yuan announced by Beijing. The rupee has depreciated by 2.4 per cent in a week since August 11; it was trading at 65.48 a dollar on August 20th. The INR had lost only 0.5 per cent since January 1, 2015, reports NDTV Profit. Anindya Banerjee of Kotak Securities cautions that a fall beyond 67 per dollar may create panic among investors. “Beyond 67 or so it will start hitting unhedged players in the bond market, and it can become a self-fulfilling trade. The more it will depreciate the more stop-losses will get triggered and it will fall further,” Banerjee told in an interview to the broadcaster. Rupee has outperformed other emerging market currencies, thanks to India’s better current account position and higher real interest rates (nominal interest rate minus inflation) which are helping the rupee weather global turbulence, he said. However, a breach of 67 per dollar may lead to capital outflows from domestic stock and debt markets. Foreign institutional investors who have unhedged positions in the bond market will first start liquidating their position and the outflow of dollar will happen triggering further fall in rupee, he further noted. During 2008, India had a comfortable current position and the inflation was also low, still rupee depreciated by about 33 per cent in 15 months because of capital outflow from equity market, he opined.

Currency market experts also attribute rupee’s comparative strength (vis-à-vis other emerging market currencies) to factors from a stable environment to low inflation to falling commodity prices especially oil and gold which account for a large chunk of the country’s import bill. Further, wholesale Price Index (WPI)-based inflation rate fell to a record low of minus 4.05 per cent in July from minus 2.4 per cent a month ago, led by 1.16 per cent drop in food prices and 1.47% fall in prices of manufactured items. Retail inflation too had dropped sharply to 3.78 per cent in the same month over 5.4% recorded in June. According to Garima Kapoor, Economist, Yes Bank, “The WPI reading suggests that prices continue to be influenced by a deflationary trend in global commodity cycle along with the government’s continued efforts at managing the food economy and persistence of softer demand conditions.” Declining commodity prices have helped reduce India’s current account deficit from 4.7 to 0.2 per cent of GDP, thereby taking the pressure off the rupee. Besides, the government’s continued focus on reforms and initiatives like Make in India besides the attractiveness of Indian equities would help the country remain a favorite destination for foreign investors. However, possibility of a rate hike by the US Fed and concerns over Greece bailout, besides geo-political tensions in Europe & Middle East would weigh on EM currencies including rupee.

Rupee – Pressure mounts!

TGA


BUSINESS DIGEST

Investors were a hapless lot as they stood witness to what can easily be termed the worst and the big-

gest meltdown in equities in recent few years as panic sell off – from Asia to Europe to USA – on August 24th brought back memories of similar bloodbath in equities when global financial crisis of 2008 began to unfold. An across the globe sell-off in equities was trigged by growing global concerns over persistent weakness in China economy, which for long acted as an engine of global growth, particularly, in its manu-facturing, and, also to a major extent in the financial sector, which is bad news for commodities markets. An over 8.5 per cent fall in Chinese equities, their worst slide in many years (the Shanghai Composite index registered its biggest one-day percentage loss since 2007) added fuel to fire that en-gulfed the entire global financial markets on August 24, which proved to be yet an-other manic Monday.

Panic selling on Wall Street saw S&P 500 crash nearly 4 per cent, its biggest slump since 2011, as nervous investors pulled down equities to their biggest slump seen since 2011, while the Dow Jones Industrial Average (DJIA) lost more than 1,000 points in intra-day trading for the first time ever before closing the day with a loss of 588 points, or 3.57 per cent, at 15,871.35. It was Monday Mayhem for Dalal Street as well as both Sensex and Nifty lost heavily. The Sensex crashed by more than 1,624 points or nearly 6 per cent, the biggest loss in sev-en years and the third biggest drop since 2008, the year in which Sensex recorded a loss of over 1,000 points on four occasions including its all-time highest loss of 2,273 points on Jan.22, 2008 (the other three oc-casions when it fell by over 1,000 points were – decline of 2,062 points on Jan.21, 2008, 1,205 points on Oct.24, 2008 and 1,008.6 points on Oct.10, 2008).

Nifty Fifty too dropped by an identical 6 per cent, or 490.95 points, to close at 7,809, a level seen for the first time since October 17, 2014 amid deepening concerns over troubles in China, impact of yuan devalua-tion on rupee and on domestic exporters, devaluation of Vietnamese currency Dong by 1 per cent by the State Bank of Vietnam to 21,890 dong a dollar (it was the third time

in 2015 that Vietnam had resorted to such move so as to make its exports more competitive, a move triggered by the on-going tension in the emerging markets currency markets), fears of a rate hike by the US Fed, high do-mestic food inflation, not-so-encouraging June quarter corpo-rate earnings and diminishing hopes of rate cut by the RBI. The worldwide rout in equities has sent shock waves across other markets includ-ing currency and commodity markets as well.

The Indian rupee, which fell to 66.65 a dollar on August 24, has lost a little over 5 per cent till date, is among the seven most affected emerg-ing market curren-cies. Brazilian real is the worst hit among all the EM currencies with a depreciation of

Monday Mayhem: Sensex Posts Its Biggest Single Day Loss on August 24

32.7 per cent, as on August 24. It is followed by Malaysian ringgit with a drop of 21.1 per cent, while INR is ranked 6th with a loss of 5.2 per cent. Chinese yuan is at number 7 with a year-to-date decline of 3.1 per cent. According to experts, thanks to comfort-able forex reserves (in excess of $354bn) and international oil and commodity prices, the impact (of a yuan devaluation and FII sell-offs) has not been so severe. However, the challenges for Indian equities and ru-pee remain as global business environment becomes even more challenging.

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Moody’s cuts India’s 2015-16 growth forecast to

around 7 per cent

Global credit rating agency, Moody’s Investors Service has lowered its forecast for India’s

economic growth to around 7 per cent for 2015-16, from 7.5 per cent earlier, owing to “a drier than average monsoon” besides

slow pace of industrial recovery, though it expects the economy to grow at 7.5 per-cent in the next fiscal. “We’ve looked high frequency data and what we see is that industrial recovery is proceeding but very slowly,” Atsi Sheth, Sr. VP, Moody’s Investor Service, told CNBC-TV18.

Despite a forecast of a lower growth, Indian economy is still among the most promis-ing ones globally. “I should emphasise that even at 7 per cent, India is among the fastest-growing among emerging mar-ket countries,” reckons Sheth. She also felt the inflation to remain in the RBI’s comfort zone. “Our expectation is that inflation will be well within the Reserve Bank of India (RBI’s) own target for next year, that is, 6 per cent or probably slightly below that. On the question of rupee, in the wake of a volatile external environment, she told, “Compared to 2013 and now, the factors driving the ru-pee down in the years even preceding 2013 were largely domestic. They were domestic policy, current account deficit, etc.


Now, it is really the external environment. So, what you saw happen last week was the effect of capital flows in and out of coun-try that were driven not by India specific factors but by global factors.” She added, “Those global factors are likely to be on the side of the depreciation in the near-term given what we are expecting with the po-tential for US federal reserve rate hike, fur-ther uncertainty about global growth. We think that might put little bit more pressure but from a fundamental perspective we do believe that India’s external accounts are relatively well positioned to absorb a little bit of volatility on the exchange rate.”

Google’s ‘Internet Saathi’ for women in rural India

Online search giant Google’s India unit has launched an ambitious program called,

‘Internet Saathi’. The initiative, which has been launched in collaboration with the Tata Trusts, aims to educate rural women on the benefits of using the Internet. The program aims to reach out to 4,500 villages and 500,000 women by the end of 2016. The initiative will use “Internet cycle carts” (bicycles, basically) to reach rural villages and educate women on the basic benefits of using the internet in their daily lives. Tata Trusts chairman Ratan Tata said, “When I was in school, there was no access to even a telephone, and today every rickshaw puller and paan wala has access to a cell-phone. Some of them have also graduated to smartphones. In addition to access, In-ternet has brought dignity and self respect to these people. Google as a company has digitized the world and it’s a privilege to work with them towards bringing women online.”

By October, Google India is looking to bring 50 million women online. “India has 300 million users and 6-7 million users are be-ing added each month. While 50 per cent women in urban India use the Internet, this

India’s largest lender, State Bank of India (SBI), has launched a new payment service called State Bank

‘Buddy’, a mobile wallet (it’s akin to a savings bank account that can be accessed through a mobile phone). The launch signifies SBI’s ongoing effort to capitalize on the oppor-tunities thrown by rapid advancements in payments technologies and promote pa-perless transactions. State Bank ‘Buddy’ is a mobile app – launched in 13 languages, including Hindi and English, on the Google Play Store - that lets you send money to anyone, pay bills, recharge mobile/ DTH, book movie/ flight/bus tickets 24x7 on the move. In other words, this pre-paid cashless service allows you to load money into your e-wallet, transfer money with your contacts on phonebook or Facebook, recharge your mobile/DTH, pay utility bills, shop online and book movies, flights and hotels, and transfer money instantly to your bank ac-count.

number is very low for rural women,” said Rajan Anandan, managing director, south-east Asia and India, Google. According to him, only 12 per cent of rural internet users are women. While new male internet users grow at a pace of 57 per cent, females lag behind at 27 per cent. The most interesting thing about these growth rates, he says, is that the next 100 million Internet users will not be fluent in English. He added that the fastest growing websites on the internet to-day are in local languages. The programme will be launched in Gujarat, Rajasthan and Jharkhand where Internet carts will be avail-able in villages for a minimum of two days every week for 4-6 months. Information will be provided on farming techniques, pay-ment of school fees, bills, etc.

Meet State Bank ‘Buddy’, SBI’s mobile wallet

Arundhati Bhattacharya, Chairperson, State Bank of India, said, “This is one more step in our ambition of becoming the provider-of-choice for customers’ everyday needs: Financial and Non-Financial.” She added, “Mobile is going to be at the centre of this transformation and State Bank Buddy will help us strengthen our proposition through this medium.”

The State Bank Buddy has been launched in collaboration with Accenture and Master-Card. With rising Smartphone and Internet penetration, the number of people doing online transactions is on a rise in India. According to a report in the ET, paperless transactions through the internet, ATM, cards and mobile devices have surpassed paper-based ones in the year leading to March 15, reiterating the fact that Indians are moving towards virtual payment. Citing RBI data, it reports that while paper-based transactions cleared through cheques amounted to Rs 85 lakh crore in FY15, pa-perless transactions, including retail elec-tronic transactions such as ECS (electronic clearing system) debits and credits, elec-tronic fund transfer, card transactions, mo-bile transactions and prepaid instruments were to the tune of Rs 92 lakh crore in the same period.

At SBI about 69 per cent of daily transac-tions happen through alternative channels, including internet, ATM and mobile bank-ing. SBI, with a 20 per cent market share, and a customer base of 28.6 crore, of which 2.3 crore are net banking customers while 1.6 crore are mobile banking ones, will compete directly with ICICI Bank’s Pocket, HDFC Bank’s PayZapp and Paytm Wallet, says India Infoline, India’s leading broker-age house.

Here are some of the key features of State Bank Buddy App.

Ask Money – from other State Bank Buddy users

Send Money – to any contact in phone book or Facebook. Beneficiary need not be a user of State Bank Buddy.

Add Money – to their wallet a/c using debit cards/net banking/IMPS credentials of their account with any Bank.

Recharge and Pay Bills – recharge prepaid mobile/DTH and pay utility bills using the wallet application

Market Place – Shopping, Movies, Flights, Hotels etc

Transfer to a/c – Users can transfer funds from their wallet a/c to any bank a/c using IMPS-MMID or IMPS-IFSC modes. TGA


The primary market is finally showing some signs of revival as more than two dozen IPO aspirants have filed their applications with the market regulator.

India’s IPO market seems fi-nally set for some action as over two dozen companies are readying up their plans to hit the markets soon. Accord-

ing to data from the market regula-tor SEBI, more than 30 companies have filed applications to raise capi-tal from the primary market. These include some high-profile names including Coffee Day Enterprises that owns and operates the hugely popular Café Coffee Day, which is also India’s largest coffee chain, In-terglobe Aviation, the owner of In-dia’s number one airline company IndiGo, Matrix Cellular Interna-tional Services, etc.

The list of IPO aspirants also in-cludes e-tailing firm Infibeam, which runs the popular e-com-merce portal Infibeam.com. Also in the hunt to hit the primary mar-ket are two private sector banks – Catholic Syrian Bank and RBL Bank (formerly known as Ratnakar Bank Ltd). The Kerala-based CSB is planning to raise up to Rs.400 crore, while the mid-sized lender RBL Bank is looking at raising up to Rs.1,100 crore to augment their tier-I capital and meet Basel III norms. Besides, these companies like Al-

kem Laboratories, Amar Ujala Pub-lications, Numero Uno Clothing and Matrimony.com (which also owns portals like BharatMatrimo-ny.com and CommunityMatrimo-ny.com) too have entered the fray to tap the domestic primary market.

The sudden increase in activity in the IPO market can be attributed to a slew of fresh measures announced by SEBI. In a major revamp of IPO norms, SEBI in June halved the list-ing time – from 12 days to 6 days. Presently, the IPO timeline is T+12 (T refers to the last day of the is-sue), which will be halved to T+6. The new rule, which would come into force from January 1, 2016, is also expected to lower the costs as-sociated with the public offering, besides it will also help in increas-ing the reach of retail investors. The regulator said that the six-month window for making ASBA compul-sory is to “help intermediaries and banks modify their existing systems and train their staff”. The move is also aimed at making investments in IPO market completely cheque-free. Almost 99.5 per cent of appli-cations in public issues are now re-ceived by way of ASBA, as per SEBI.

Last year, SEBI had also announced

IPO MARKET Action at Last

TALKING STOCK

certain measures to boost the pri-mary market. In one significant initiative, the regulator relaxed the minimum dilution criteria to al-low companies to sell a minimum stake of 25 per cent or Rs 400 crore, whichever is lower in order to en-courage more mid-sized companies to tap the IPO market. Further, the regulator has also expanded the “fast-track” route for follow on of-fers (FPOs) and rights issue to al-low more companies to participate in fund-raising through the market by reducing the qualification crite-ria. As a result, the minimum pub-lic float for fast-track IPOs stands reduced from Rs 3,000 crore to Rs 1,000 crore. Meanwhile, companies with public shareholding worth at least Rs 250 crore will be able to come out with rights issue under the fast track route, under which the approval process is less stringent al-lowing companies quick access to the market. The market watchdog has also made changes in the offer for sale (OFS) framework.

According to the new norm, the announcement for share sale can be made two days from banking days and not trading days; the T+2 (T is the day of the OFS) timeframe


TGA

Stock Market / ViewPoint

SUDIP BANDYOPADHYAYCMD, Destimoney Securities

GLObal markets have been going through an extremely challenging phase and the headwinds from the global markets are affecting Indian markets also.

Unfortunately, even the domestic cues are nothing very encouraging. Sub optimal monsoon, stalling of reform process, large amount of inferior assets with financial institutions and inability of investment cycle to kick off, doesn’t augur well for Indian corporates in the first quarter of second half of current fiscal.

The recent depreciation in Indian currency vis-à-vis USD will provide fillip to the earnings of IT and Pharmaceutical companies. We believe that Indian IT companies, particularly the large cap ones, are well positioned at this juncture.

The Q1 results of Indian corporate were on expected lines and were subdued. A clutch of factors continues to effect demand and investment.

Unfortunately, the turnaround in corporate results is extremely unlikely in both Q2 and Q3 of current fiscal. Recovery if any, may be visible in Q4 only.

Collapse of global commodity prices including crude oil has reduced the input cost of Indian corporates. However, the reduction in demand both rural and urban has affected sales growth. Deficit in monsoon and its uneven spread has affected rural demand. Significant depreciation of Chinese currency and the economic turmoil there, has added pressure on Indian corporates through flood of cheap Chinese substitutes.

IPO market had shown lot of promise in the initial period of current year. However, with the present turmoil in the markets, even the primary market will pick up slowly and investors will invest cautiously and selectively.

However, we continue to believe that IPOs from good companies with right valuations will continue to attract good investor response.

The global cues are definitely negative. The problems in China are real and reaching a stage of significant concern. Issues in Europe still haven’t been resolved. While US growth is real, the economy is still not robust. US Fed rate increase may trigger mild turmoil.

We believe that during the current fiscal the global cues will remain negative.India should continue to outperform the global markets and may become an island of growth in a volatile and slowing global economy. Appropriate government policies including kick start of investment cycle through public spending may resurrect corporate results and performance.

We believe that India will continue to grow at around 7% over the next couple of years. We prefer large cap IT and midcap Pharma stocks at this juncture. Domestic reform process will be the key trigger for the local equity market. We believe that Indian economy will continue to outperform all major global economies over the next couple of years. The Sensex and Nifty may trade with a gain at around 10-15% by the end of current fiscal year.

remains unchanged for announc-ing the share sale. As a result of the changed norm, an issuer can announce an OFS on Friday and conduct the share sale on Monday as Saturday is a banking day. In another major move, the regulator has asked exchanges to allow retail investors to place bids at “cut off price” as a default option in addi-tion to placing price bids. SEBI has also made announced framework for reclassification of promoters and as non-promoters. SEBI has said an outgoing promoter will have to step down from any key management position in the company within three years. Also, the outgoing pro-moter will not be allowed to hold more than 10 per cent shares of the company. The regulator has said ex-isting promoters will be allowed to be re-classified as public in case the company becomes professionally managed and does not have any identifiable promoter. For a compa-ny to be categorized as “identifiable promoter” company, it shouldn’t have a person or a group holding shares of more than one per cent. To ease fundraising for start-ups and new-age companies, the regulator also finalized the guidelines. Ac-cording to the new rules, only quali-fied institutional buyers (QIBs) and non-institutional investors (NIIs) will be allowed to invest in such companies through an institutional trading platform (ITF).

So far, in 2015, 27 companies have hit the primary market, which in-clude names like Majestic Research (up more than 220% post-listing, as on August 26, 2015), Raghuvansh Agro (post-listing gain of over 270%, as on August 26, 2015), and Adlabs Entertainment (down 31% post-listing, as on August 26, 2015) and Syngene International (up 27% since listing, as on August 26, 2015). However, recent volatility in global financial markets post significant challenges to both the prospective issuers as well as market partici-pants.

“India should continue to outperform the global markets and may become an island of growth in a volatile and

slowing global economy.”


Maggi mess leads to first quarterly loss for Nestlé India in 17 years. It’s going to be a long road ahead for the Indian unit of the Swiss food giant to reclaim the top spot in the instant noodles, its mainstay, market, and recreate the same magic which made Maggi a household name.

Nestle India, well known for its huge-ly popular brands such as Maggi instant noodles,

Milkmaid, Kitkat, Everyday Dairy Whitener, Nescafe coffee, etc., re-ported its first quarterly loss in 17 years even as the adulteration row involving its top selling brand Maggi refuses to die down. Nestle India, a subsidiary of Swiss food giant Nestle and one of the world’s largest food companies, faced reg-ulatory ire after the Food Safety and Standards Authority of India (FSSAI) alleged that lab tests of the samples, it sent for testing, showed the popular 2-minute instant noo-dles contained MSG, besides they also had higher than permissible levels of lead. A nationwide recall that followed after the regulatory

ban came into force led the compa-ny incur its first quarterly loss in 17 years. The company posted stand-alone net loss of Rs 64.4 crore in the second quarter ended June 30, 2015 (it follows January-December financial year) as the recall and ban of Maggi on June 5 forced the com-pany to take a one-time charge of Rs 451.26 crore.

The trouble began after reports surfaced that samples collected in some parts of Uttar Pradesh were found containing added monoso-dium glutamate (MSG) and lead in excess of the permissible limit. A report dated May 16, 2015 which appeared in The Times of India said that the Lucknow Food Safety and Drug Administration initiated an enquiry and wrote to the Food Safety and Standards Authority of

Nestlé IndiaINSIGHT / CORPORATE WORLD

India (FSSAI) in New Delhi seeking to cancel the license for Maggi. The state regulator also asked FSSAI to order sampling of the product from across the country to check quality, the report quoted an official as say-ing. The Lucknow Food Safety and Drug Administration has initiated inquiry and written to the Food Safety and Standards Authority of India (FSSAI) in New Delhi seeking to cancel the licence for Maggi. “We have tested Maggi samples at Kol-kata’s referral laboratory.

The test results show that there are added monosodium glutamate and excess of lead. We have ordered further sampling,” FSDA Assistant Commissioner Vijay Bahadur Ya-dav told TOI. Nestle, on its part, re-sponded by saying that it maintains that it does not add monosodium

The Maggi Mess


glutamate to the product, whereas presence of excess lead is “surpris-ing” for the company. “We do not add MSG to MAGGI Noodles and glutamate, if present, may come from naturally occurring sources. Food regulators in India also do not specify any limit for the presence of MSG / Glutamate,” TOI quoted a Nestle spokesperson as saying. He added, “We are surprised with the lead content supposedly found in the sample. We monitor the lead content regularly as part of regula-tory requirements, and tests at our own accredited laboratories as well as those by independent external accredited laboratories have con-sistently shown the results to be well within the permissible limit.”

In a June 5thaddress to the media, Paul Bulcke, Global Chief Execu-tive, Nestlé, announced the compa-ny’s decision to take the popular in-stant noodles brand off the shelves, saying, “The trust of our consum-ers and the safety and quality of our products is our foremost prior-ity everywhere in the world. Un-fortunately, recent developments and growing concerns about the product have led to confusion for the consumer to such an extent that we have decided to take the prod-uct temporarily off the shelves, in spite the product being safe”. On July 24th the company in a major reshuffle at the top announced ap-pointment of Suresh Narayanan as the Managing Director of Nestlé India Ltd with effect from 1st Au-gust 2015 in place of Etienne Benet, Managing Director, who has been relocated to Nestlé Group Head Office in Switzerland.

The company received a major boost after the honorable Bombay High Court in its order on Au-gust 13 overruled the ban, but or-dered fresh tests in three separate labs to ascertain that the noodles complied with the country’s food safety norms. “Nestlé India re-spects the decision made on 13th

August by the honourable Bombay High Court to revoke the ban order passed by Food Safety and Stan-dards Authority of India (FSSAI) and the Food and Drug Adminis-tration, Maharashtra on MAGGI Noodles and will comply with the order to undertake fresh tests,” a press release from the company said. The FMCG major posted a net loss of Rs 64.4 crore for the April-June quarter, as against prof-it after tax of Rs 287.9 crore in the same quarter a year ago, mainly on account of the recall exercise of Maggi that cost it Rs 451.26 crore (exceptional items), including de-stroying over 30,000 tonnes of the instant noodles since June when it was banned because of alleged ex-cessive lead content, according to a report.

It was for the first time in the 17 years that Nestle India reported a quarterly loss. Net Sales too were affected, falling substantially to Rs

1,934 crore from Rs 2,419 crore in the review period. These are no doubt challenging times for the Indian unit of the Swiss food gi-ant and it would need to pull out all the stops – including an effec-tive communication strategy - so as to revive the brand, recreate the same magic, and above all restore consumer trust, the ingredients that literally made Maggi a house-hold name. Maybe it can take a leaf out of cola giants Pepsi’s and Coca Cola’s books for their effec-tive handling of the pesticides-in-cola controversy of 2003. To restore consumer trust, PespiCo decided to stamp a quality assurance seal which reads: ‘One Quality World-wide’ across all its product labels, a first for a soft drink giant anywhere in the world. For now, on a lighter note, we would say, ‘Have a break, have a KitKat’ until Maggi returns to the retailers’ shelves. TGA

The Maggi Mess

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BANKING

SAVING PSBs Needed Action...And Nothing Else

The present bad debt crisis affecting the PSBs, in particular, can be traced to one event - folding up of Development Financial Institutions (DFIs), which paved way for banks handling normally short term fund operations, indulge in huge long term loans. It’s now proving to be very costly for both the banks as well as the economy. To save the PSBs from the present tough situation, there is a need to look into the issues (affecting the banks) radically in an objective manner so as to arrive at a permanent solution, which could pave the way for qualitative real economic growth in the days, months and years to come.

CA R S RAGHAVANBanking and Financial Analyst,

& Author of the book, “RISK, the Business Driver in Banks”[email protected]


In another three to four years’ time, in case the economy picks up speed very well, perhaps quantum (Rs. 70,000 crore) of capital infusion may be found short, as capital coupled with competition from new banks would be a limiting factor for

business growth in PSU banks. But government can always dilute their stake in percentage terms, within the benchmark for having controlling stake. This again varies from bank to bank, as with reference to position as of March 2015, Government of India stakes in PSU banks vary widely from the minimum of 59.13 per cent in Oriental Bank of Commerce to the highest in United Bank of India at 82.00 per cent. To my mind, as a retired bank executive, lateral thinking is needed. I would advocate for prudently introducing Leverage Ratio - leverage such as Asset Capital Multiple rather than Capital Adequacy Ratio, as tampering with capital in relation to asset built up is like looking to cut the leg according to the shoe.

Asset Creation Multiple - A New Math for Managing Old Nemesis! Normally in banks, asset creation is an activity that is subsequent to the Capital formation and Deposit mobi-lization. Therefore, the proposition should be for a given capital, how much asset can be created without exposing to high risk? Hence, in ideal situation and taking a radi-cal view, stipulation of Asset Creation Multiple (ACM), in place of Capital Adequacy Ratio (CAR), would be more appropriate and rational. That is to say, instead of Minimum Capital Adequacy Ratio of 12 per cent, implying holding of Rs 12 by way of Capital for every Rs 100 Risk Weighted Assets (RWA), stipulation of Maximum Asset Creation Multiple of 8.5 times (100 divided by 12), implying that asset can be cre-ated only to the maximum extent of 12.5 times of Capital, would be meaningful. While CAR is a business enabling ratio, in which as the business grows, bring in more cap-ital on a continuous basis, ACM is a risk limiting ratio, wherein you grow only to the extent your Capital permits to stick to Basel Norms, which is an ideal friend of risk management and control mechanism.However, as assets have already been created when the Capital Adequacy Norms were introduced, Capital Ad-equacy Ratio, instead of Asset Creation Multiples, is ad-opted. Moreover, now-a-days in the post economic lib-eralization era, financial institutions, particularly banks and more specifically private sector banks, first identify big ticket loan and then scout for proper funding avenues, instead of the other way round that was the practice ear-lier. Now that most of the banks have built up Capital Ad-equacy for the existing Risk Weighted Assets, except IOB, why should not we think of introducing Asset Creation Multiple? It is a futile exercise to go on increasing capi-tal year after year, followed by asset growth, increasing Stressed Assets and finally ‘writing off’ after struggling to recover. It may however be noted that at least, in respect of the new banks staring from Zero, Asset Creation Multiple

Public Sector Banks

(ACM) could have been seriously considered. At least with regard to granting licenses for new banks on con-tinuous basis through pipeline approach, stipulation of Asset Creation Multiple can be thought of. Nevertheless, as the banks graduate from financial intermediary into risk intermediary, liability management also assumes equal importance, if not more, than asset management.

Why & how of recapitalizationThe additional capital infusion primarily serves two ob-jectives, viz., first is growth and next is to move towards the moving target of Basel Norms, in its third version now. That being the case, it is neither too late nor too little. Both are inevitable, unless some banks are allowed to adopt Narrow Banking approach, keeping in mind the likely consolidation of banks, talked about by very many Finance Ministers and the Governors of Reserve Bank of India.Beginning with a sum of Rs. 20,000 crore in one month time, say latest by half year end of Sept, 2015, in different tranches, the estimated total capital infusion is around Rs 70,000 crore, by March 2019, provided there is no modification in the set target date for entire compliance of Basel III Norms. Perhaps it may not be surprising if Basel IV norms are deliberated, before the banks reach Basel III main and sub targets or norms. It may be a food for thought as to whether such quantum of good money should chase the bad money being shoved to drainage, visible in the form of exponential growth of Stressed Assets, having potentiality to become bad at any future date.Out of the Rs 20,000 crore, obviously State Bank of India alone with an amount of Rs 5,531 crore, has more than 25 per cent share and Allahabad Bank, the top bank when alphabetically arranged, would get a share of Rs 283 crore, the least among the lot. There are handful of banks that do not get recapitalization for this year.As far as Capital Adequacy Ratio of banks are concerned, while Indian Overseas Bank has merely 8.33 per cent coupled with net NPA level of 6.63 per cent, the former is the lowest and latter the highest among PSBs, Punjab National Bank with CAR of 12.89 per cent is the most comfortable one among the PSBs. In these two Parameters, IOB appears to be the worst among the PSBs. Only a handful of PSBs such as State Bank of India and State Bank of Patiala in SBI group and Indian Bank, Punjab National Bank and UCO Bank in other PSB category are well capitalized with Capital Adequacy Ratio of 12 or above.

Tapping the market - Is the time right?Though the Sensex oscillates around 28,000 at present, in the medium to long term, the Capital Market is perceived to be bullish and it just awaits passage of two key bills, on Land and GST, that would act as a trigger point and it is only a question of time before the sensex moves to 30,000 plus bracket. There is a popular belief that market expectations and also valuations have run ahead of fun-damentals. It is believed that the road ahead for Indian


economy and the corporates would be even better. Though the government decided to accord permission for Capital infu-sion / tapping Capital Market only for certain banks meeting / exceeding certain benchmark in performance. But it appears from the recent devel-opment indicated through “Indrad-hanush” that the government has gone back on this score. The under performers need to be given some time frame for bettering their perfor-mance failing which ithey should be marked and identified for consolida-tion.

Fund Infusion - Can DVRs be the right choice?No one can probably decide about tim-ing of tapping the Capital Market, as the job of Capital Market is to be both fluctuating and volatile. Hence, ideal situation does not exist, as it is a subjec-tive perception measured relatively.Unlike the equity share holders, pref-erence shareholders do not carry any Voting Rights, which issue is relevant to the subject matter. There is also an exception to this rule in the case of matters that directly affect the rights of preference shareholders, which ex-ist in certain banks. In the above cited situation, the Voting Rights get eco-nomic value as such, a situation al-lows small investors to acquire shares at a lower price in return for surren-dering their Voting Rights. This also helps the Government, the dominant owner of PSBs to dilute its equity in number of shares, without actually diluting the Voting Rights. That is the dilution of promoters’ stake in equity and normally, the equity share, has an extent of stake coupled with Vot-ing Right, going hand in hand. Pro-moter of a Bank (PSB) may have eq-uity stake of less than 50 per cent (say 41 per cent) and still have a voting right of more than 50 per cent (say 59 per cent), through the concept of DVR and this is the essence of DVR. It is a common knowledge that in general, compared to the number of shareholders in a company, very few attend the General Meeting and exer-cise the Voting Rights as most of the shareholders are passive investors. This is the current practice, as the

concept of e- voting gain popularity. Plough back of Dividend received by GOI from PSBs into the Capital would reduce the burden of fiscal support. The govternment, can think of treating PSU units shareholding in PSBs as deemed Government holding to form part of 51 per cent sharehold-ing. Nonetheless, with most of the banks, if not all, maintaining comfortable Capital Adequacy Ratio, as covered elsewhere, in case the government misses the time frame for dilution, there may not be any serious prob-lem. Basel norms adherence is a long drawn process to accommodate such hiccups. Also, that undesirable situ-ation may provide an opportunity for banks to set their houses in order, as unchecked growth would lead to more problems to handle than the probable solution it may throw.

Taming the NPA monsterRisk profile of banks is a dynamic phenomenon, as it changes every second, thanks to the technological advancement and multiple accessibil-ity. As the business grows, depend-ing on the qualitative aspects of the growth figures, improvement in the Risk Profile is a difficult proposition to achieve. If the volume of business and reining of NPAs have helped in improving risk profie, why should there be a higher and stricter norms of Basel II and Basel III stipulations.As a retired executive of a PSB, I strongly feel that the main culprit of present NPA woes of Public Sec-tor Banks can be traced to the Long Term Project loans, extended by them to reach volume in business, thereby creating growth in Stressed Assets that are slowly going out of control, right under their nose. This needs to be comprehended well both by the government and the regulator. This recapitalization is in a bid to fuel growth in volume and also meet the moving target of Basel norms, pres-ently on Basel III mode. When Capital Adequacy Ratio (CAR) is the result of two parameters viz., Capital and Asset, it appears that more attention is given to Capital, so as to align with international norms, by squarely ignoring the quality of

Asset (Risk Weighted) build up. This is the crux of the problem, as only nu-merator (Capital) is repeatedly fund-ed unmindful of what is happening to the denominator (Asset). Banks are regularly writing off big ticket loans, compelled lending on unviable prior-ity sector mode and also long term project (Corporate ) Loans, that are not their domain area of expertise. Folding up of Development Finan-cial Institutions (DFIs) such as ICICI, IDBI, etc., paved way for banks han-dling normally short term fund op-erations, indulge in huge long term loans. This was totally an unwarrant-ed and a wrong move and the present increase in Non-Performing Assets in PSU banks can be traced to this ill-advised move. This move is proving very costly for the banks and also the economy. This resulted in paying the price for the same. Further, the Stressed Asset portfolio in banks has drastically gone up only after banks started lending to Project and long tenure Term Loans, which were the forte of Development Finan-cial Institutions.Writing off of Bad loans, after a brief halt as Debt Restructuring, on a reg-ular basis and then recapitalizing banks with additional capital to meet business growth and Basel norms, is not an ideal route and risk manage-ment mechanism. Temporary relief just to facilitate economic growth, without addressing the basic and mounting problem in a permanent manner is not going to take us any-where but to see that good money chased bad money..Instead of coming out with a separate approach for Infrastructure Loans, it is not too late to bring back Devel-opment Financial Institutions with the kind of Capital proposed to be brought in by way of recapitalisation, so as to take care of economic growth through Capital Asset formation in the Infrastructure and also manufac-turing sectors, the Working Capital for which alone, but not the Long Term Loan, should be taken care of by commercial banks

Create the level playing field - For a better futureProblem with PSBs is the perceived

Public Sector Banks


lack of level playing field and em-powerment, back seat driving, remote controlled management, inappropri-ate selection / promotion process. Bonafide error of judgment is pun-ished, particularly at the lower level even in respect of higher level sanca-tions and higher level canvassed ac-counts. This damocles sword should not hang around. Instead of tinkering with the system, better to strengthen the same.The solution to the problem of rais-ing Capital for the PSU banks, being presently faced by the Government, can be to a certain extent addressed if the banks take the route of DVR, with suitable modification to suit the man-date of the Government. The defini-tion of Capital Fund for the Banks to arrive at the Capital Adequacy Ratio should be tweaked to accommodate Shares with DVR. This would fa-cilitate smooth transition to Basel III compliance by banks as far as Capital Adequacy is concerned. It is not for nothing a few Banks like UCO Bank, Central Bank of India, Vijaya Bank, United Bank of India, Bank of Maha-rashtra, Indian Bank, etc., have, in the past, raised Capital Funds through the Preference Shares route to help in meeting the Capital Adequacy Ratio norms of Basel, particularly the stipu-lation under Tier I Capital.

Job of the owner is to select right management and leave that manage-ment to run the organization. As far as management is concerned, regidi-ties and controls are happening be-cause of the 51 per cent stake by Gov-ernment. Hence, reduction should not be the last good step, but a first mandatory step to move forward in a better manner. At the conclusion, It is fervently hoped that the Indian Banks Association and Reserve Bank of India officials in authority, if not the ruling party politicians, look into the issues radically in an objective manner to view things in proper per-spective with the appreciation of the rationale behind, to arrive at a perma-nent solution to eradicate the illness, instead of prescribing ad hoc tablets to bring down the fever / illness for the time being. Only permanent solu-tion would pave way for qualitative real economic growth in the days, months and years to come.

Public Sector Banks

TGA

It may be worth mentioning that the Basel III norms facilitate banks to is-sue non-equity instruments such as Perpetual Non-Cumulative Prefer-ence Shares (PNCPS) and Innovative Perpetual Debt Instruments (IPDI), complying to certain specifications for the purpose of inclusion in the ad-ditional Tier I Capital. The ultimate success of Basel norms implementa-tion directly depends on the quality of Corporate Governance of Top Man-agement, as Corporate Governance in place would take care of the aspects concerning risk management.Takeout Financing is not taking off. Better to popularize the same through some incentives so as to find out a meaningful way for long term financ-ing of Project Loans and also manage Liquidity Risk Management issues.Systematically speaking, PSBs ac-count for nearly 75 per cent of the total banking business and in case, this level is gradually brought down to around 60 per cent, which is pos-sible given the likely new banking licences under consideration through Narrow Banking method, without significant expansion of small / weak banks volume of business, depen-dence on GOI for capital requirement can be reduced to a large extent, be-sides paving way for consolidation and merger.


COVER STORY

GLOBAL CURRENCIESThe Battle Begins

The sudden devaluation of its currency by China has not only raised concerns that the world’s second largest economy could fall short of reaching its goal of economic growth of 7 per cent this year, but it has also created jitters across financial markets besides raising fears of an impending currency war.

Reeling under pressure to lift its economic growth, which has turned sloppy over the last few quarters, after years or perhaps several decades of double or near-double digit growth, and choppy stock markets,

China has resorted to devalue its currency Renminbi (means people’s currency, a name that was adopted by China’s Communist Party shortly before coming to power in 1949), also referred to as yuan. On August 11, the country’s banking sector regulator, People’s Bank of China sent shock waves across global financial mar-kets as it announced a near-two per cent devaluation of the Renminbi. The world’s second largest economy manages its exchange rate through an official midpoint, from which it can vary 2 per cent each day, but in recent

months, volatility has vanished, a Reuters report said. The midpoint for the yuan was set at 6.2298 to $1 on Tuesday, from 6.1162 yuan on August 10. The banking regulator manages the rate through the official midpoint, from which trade can rise or fall two per cent on any given day. Subsequent to the latest move, the exchange rate is intended to be more market-driven. However, it’s going to be very challenging for the banking regulator, which has over guarded the currency movement despite opting for a managed float (as compared to the pegged exchange system) in 2005, as the currency would be exposed to international developments. “The central bank engineered what looked like a win-win when it ceded more control of its currency to markets earlier this week, in a step toward liberalization that


Devalued Yuan : The Indian ImpactThe immediate impact is likely to be capital inflows, if continuing volatility in China’s markets lead to a deeper emerging markets risk-off. Selloff in Indian bonds, in the absence of any significant buying interest, typically results in enhanced price volatility of Indian bonds and a commensurate move in the rupee. But the impacts go beyond markets into the real economy. China’s role in the global economy has increased rapidly and disproportionately in trade. Its share of world gross domestic product was over 10 per cent in 2014.

In exports, its share is over 15 per cent and in imports—although a bit lower than in 2014—is over 11 per cent. China accounts for close to half of the global consumption of copper, aluminum and steel, and more than 10 per cent of crude oil. The first, and an overwhelmingly positive, impact therefore of a slowdown in China’s commodities demand on India is through lower commodity prices. India imported $139 billion worth crude and petroleum products in the 2015 fiscal, and as a rough rule of thumb, every $1 drop in crude prices results in a $1 billion drop in the country’s oil import bill. India also imports $3 billion of copper and copper products.

However, there is a flip side to falling commodities prices—the effects on companies in India operating in the minerals space, including steel, mining, selected chemicals, and some trading companies. Many large companies in the production space are quite leveraged, with debt-funded production capacities built up in the high-growth years. Stress on debt servicing ability is already high, and a further drop in commodities prices and a slowdown in exports will add to this.

In addition, it might be reasonable to expect that the renminbi depreciation will lead to a further drop in prices of commodities China exports to India. Indian manufacturers have already complained of non-market prices—maybe even dumping below cost—of China’s exports to India, and a further drop in China’s capacity utilisation in segments like iron and steel, bulk drugs and chemicals will lead to a further drop in prices.

Besides imports, India’s exporters will also lose out on currency competitiveness to China in segments it competes directly with China—particularly textiles and apparels—as well as chemicals and project exports. India’s trade deficit with China has almost doubled from $25 billion in 2008-09 to $50 billion in 2014-15. And China’s share of India’s total trade deficit is up from just under 20 per cent in 2009-10 to 35 per cent in 2014-15.

There are indirect consequences as well.

China holds about $1.5 trillion of its reserves in US securities. Another half a trillion is held by Russia and OPEC countries, whose resources too will be under stress with falling crude prices. This has implications for US sovereign yields, already on the way up with expectations of a rate hike by the Federal Reserve in 2015. A move up in developed market rates will have consequences, via reduced capital flows on emerging market yields as well and the ability of central banks of these countries to cut rates significantly, despite slowing growth. Courtesy: qz.com

also gives Chinese exporters an edge. But now it also has to manage market expectations to keep the yuan from entering a free fall—a challenge for central banks world-wide but one that China has avoided by tightly controlling the value of its currency,” commented a report in the Wall Street Journal.Justifying the move, the PBOC in a statement said, “As China is maintaining a relatively large trade surplus, RMB’s real effective exchange rate (REER) is relatively strong, which is not entirely consistent with market expectation. Therefore, it is a good time to improve quotation of the RMB central parity to make it more consistent with the needs of market development.” The REER has risen by 13.5 per cent in a year (between July’14 and June’15), thereby causing discomfort among the nation’s policymakers. The latest move by the PBOC has led Renminbi to depreciate to touch its lowest rate vis-à-vis the dollar in nearly three years. China’s worry stems from sluggish exports, particularly to Japan and the Europe. July exports were down by 8.3 per cent, the biggest fall in four months, and were also well below market forecasts; analysts had expected exports to dip by a per cent, while the trade surplus data did not give any confidence either. Exports to Europe fell 12.3 per cent, whereas that to Japan was lower by 13 per cent; the exports to the US,

Renminbi Devaluation

China’s biggest market, were down by 1.3 per cent. July imports were also lower by 8.1 per cent, while trade surplus at $43bn was much below forecasts of $53.25bn. Experts blame a strong yuan for the slowdown in Chinese exports. The government was under pressure to revive domestic demand to deal with sliding exports and stem any further fall in economic growth. A report in Reuters citing analysts suggests that China has been keeping its yuan strong to wean its economy off low-end export manufacturing. A strong yuan policy also supports domestic buying power, helps Chinese firms to borrow and invest abroad, and encourages foreign firms and governments to increase their use of the currency. “These factors suggest that China’s exports will continue to face strong headwinds,” Reuters cited Liu Ligang and Louis Lam, authors of an ANZ Research note, as saying. However, the move is also fraught with risk as it raises fears of raising geo-political tensions and similar moves from China’s competitors in exports markets as other emerging markets who could lose their export competitiveness. India too faces significant pressure in the wake of the China’s move to weaken its currency against dollar to boost its exports, its economy’s mainstay and key to its


era of ‘super-growth’ of decades. Already, the rupee responded by dropping sharply on August 12, a day after China announced its devaluation measure. The rupee fell to 64.78 a dollar, its lowest level against the greenback since 2013. There is also concern that China may resort to dumping its goods in India, as imports from former turn cheaper. However, India could explore options like imposing higher anti-dumping duties on such goods so as to make them unattractive to importers. But a study by the SBI (Ecowrap), reckons that the devaluation of the yuan will not have a significant impact on Chinese

Nevertheless, the risk to rupee rises as China is expected to mull more actions to support its exports and boost its economy. “For those who have borrowed in yuan, we need to see how the bilateral exchange rate behaves. If the rupee depreciates by more than the yuan, then there will be no issue. However, a sharper fall in yuan will once again pressurize the borrowers,” reckons D R Dogra, CEO and MD of Care Ratings. But those companies which have high exports earnings won’t be hit that hard as compared to small and mid-sized ones with no or low forex earnings. Besides, those corporates who have taken yuan loans could face the heat. But does the latest move by Beijing means a currency war is inevitable? “It does look, however modest, like an attempt to recoup just a small amount of competitive edge lost in international markets,” said Simon Derrick, head of currency research at BNY Mellon in London, adding, “What happens over the next few days matters. If we have a currency that moves much more freely, fine. If, however, we go back and it’s just re-pegged ... that is currency war.” It would be interesting to watch what would be the next step of PBOC. Let’s wait and watch.


IMF sets timeline for Chinese yuan as a world reserve currencyThe International Monetary Fund signalled that China’s yuan won’t be added to its basket of reserve currencies for at least a year. China’s botched devaluation of the yuan is widely regarded as a step toward floating the currency, which is also known as the renminbi (or “people’s currency”), and a precursor to it being included in Special Drawing Rights (SDR).

The IMF reviews its basket every five years and has decided to extend this for a year until September 30, 2016, to consider entry by the yuan. IMF managing director Christine Lagarde has indicated support for the yuan in SDR but has left the timing open. The US dollar is the dominant currency in SDR along with the yen, pound and euro. The IMF uses SDRs as substitute for a world reserve currency in loans made to governments.

The IMF’s board will make a decision by the end of the year whether the yuan meets its criteria. One of these is that reserve currencies must be “freely usable,” meaning it must be able to be bought and sold under any market conditions. The sudden devaluation of the yuan on August 11 was its biggest one-day movement in two decades. Officials in Beijing said the move was part of a plan to allow the market a greater role in exchange rates.

China is the world’s biggest exporting economy and getting the yuan labelled a reserve currency would enable more countries to use it in trade deals as well as allow central banks to spread their risks. China has strict controls on the movement of capital and on the amount its currency can move against the dollar. Though estimates of whether it is over- or under-valued vary, the IMF has said the yuan is near its fair value since the devaluation. However, most observers also agree that admission to SDR will increase demand and cause the yuan to appreciate over time. Courtesy: nbr.co.nz

exports, as the currency is still highly overvalued. In addition, the Indian rupee also lost some value against the US dollar following the decline in yuan, thereby supporting a modest short-term impact on India. “Yuan devaluation is a challenge obviously because it makes our exporters a little uncompetitive. As it is they have to deal with higher interest rate. Devaluation means Chinese exports become that much cheaper,” said Arundhati Bhattacharya, Chairperson of State Bank of India, the country’s top lender. India exports items like yarn and iron ore to China.Trying to allay fears over impact on rupee, Chief Economic Adviser Arvind Subramanian said that given “adequate” foreign exchange reserves, the impact of the devaluation of the Chinese yuan on the rupee will only be “temporary”. Further, as per the SBI study, in terms of the real effective exchange rate, valuation of the yuan is the highest among 60 countries, in contrast, the Indian rupee is valued at 78.06 on a nominal basis and 89.02 on a real basis. Hence, it notes, a four per cent devaluation achieves nothing in terms of improving the long term prospects of exports, which will continue to decelerate.

TGA


Andrew K P LeungInternational and Independent China, Specialist, Andrew

Leung, International Consultants, Hong Kong

COVER STORY

Of Devaluation, Currency War, and Growth Conundrum! CHINA

China’s Renminbi bombshell devaluation by nearly 4 per cent in two consecutive days has aroused across the globe a flurry of speculation and panic of doom and gloom. Some $300 billion has moved out of China since the end of 2014. Is China coming off her wheels? What is the endgame?

The Renminbi (RMB) has appreciated by some 30 per cent against the dollar since 2005 and against a trade-weighted basket of curren-cies by the same percentage since 2008. As the RMB unofficially tracks the dollar, the latter’s

growing strength has made the RMB the second most over-valued currency in the world. Even after the deval-uation, the RMB is still up around 20 per cent against the Euro, 15 per cent against the Yen and 10 per cent against the South Korean Won, compared to 18 months ago. This has been causing a perilous drop in China’s exports and continues to erode the country’s competitiveness. China is struggling to maintain a growth target of 7 per cent as the nation transits to a more balanced and sustainable economy. So the RMB’s massive over-valuation must be corrected if the economic foundation for the “China Dream” is not to be shattered. China has made known her desire for the RMB to be included by the International Monetary Fund (IMF) as one of the world’s reserve currencies, alongside with the dollar, the euro, the British Pound and the Japanese yen. One of the pre-conditions for this recognition is the

market’s role in determining the RMB’s exchange rate. In recent years, China has been relaxing the currency’s guidance daily trading band, doubling to 2 per cent of the band’s mid-point in March 2014. The bold devalu-ation is touted to be part of a strategy of “stress tests” of dramatic movement in the rigid trading band. At the same time, China’s central bank, the People’s Bank of China (PBoC), has decided to link the guidance rate to the previous day’s spot close. This market-oriented pos-ture augurs well for greater currency flexibility and was welcomed by the IMF.Ever since China widened the RMB’s daily trading band, there has been a great deal of hot money flowing into China (in various disguised forms), speculating on RMB appreciation. But, of late, following slower growth and perceived problems of the Chinese economy, there has been a growing money outflow. These two-way flows are to be expected should the RMB become fully convertible as an international reserve currency. Now, after two con-secutive days of devaluations, the RMB was deliberately strengthened by 0.05 per cent. This symbolic move was a shot across the bow that the RMB is not a one-way bet on


its road to full convertibility. On its part, the PBoC has emphasized that there is no basis for continued deval-uation and that the central bank has the power and resources to maintain RMB’s stability. As the RMB still re-mains grossly over-valued in relation to other currencies, many observers take PBoC’s assurance with a pinch of salt. However, it must be remem-bered that as China is expanding her consumer economy, a stronger RMB would be a key driver to put more purchasing power in the hands of the nation’s burgeoning middle-class.

Impact on the global economySo, what are the implications for the world economy? The bad news is that such massive devaluation by China is likely to set off a global “currency war” of com-petitive devaluations. More curren-cies now move in tandem with the RMB than with the dollar (Subra-manian, 2011). This in turn would translate into greater resort to the money-printing press, creating more bubbles in investment assets across the globe, especially stock markets and properties. If this happens, China cannot escape unscathed as the world’s largest trader at the central hub of a global supply and production chain. In ad-dition, as China is the world’s largest commodities customer, a continuing weakening of the RMB may dampen global aggregate demand for com-modities, risking further price drops in already-depressed commodities markets.This is likely to send trem-ors to the financial world. In the case of India, a cheaper RMB is likely to make Chinese imports even more competitive, worsening India’s bilateral trade deficit. However, such deficit is less important than India’ overall trade deficit, of which 70 per

cent is due to oil and gas rather than Chinese imports. The good news is that lower commodity prices driven by weaker Chinese demand will ben-efit commodity-dependent sectors of the rest of the world, including India. Can it be a game changer? At the end of the day, China is un-likely to allow her currency depreci-ate by any sizeable amount, let alone rapidly, as this would retard or even reverse her strategy of re-balancing the economy towards consump-tion, industrial upgrading and in-novation. All these changes require a stronger rather than a weaker RMB. Nirvana would be reached if, and, that is a big if, armed with a stronger and internationally convertible RMB, China succeeds in transforming her economy and in synergizing other partnering economies to grow by capitalizing on her global economic connectivity. If that becomes reality, the world would see a phenomenal


TGA

Chinese growth forecasts have been systematically downgraded

Source: Consensus Economics

tum leaps in two-way trade and investment supported by trans-regional transport links. If so, un-precedented business opportuni-ties would be opened up for many countries, India included, lifting the world economy up from doldrums to new heights. All these may sound like pipedream. However, China is doubling down her bets. Her epic, pan-continental initiative of the One Belt, One Road infrastructure-cum-investment strat-egy, backed by a new Asia Infrastruc-ture Investment Bank (AIIB) and a $40 billion Silk Road Fund, speaks volumes. To realize her ambitions, however, China needs, amongst other things, the RMB to become fully convertible sooner rather than later, possibly by 2020. For that to happen, China will have to reform, open up and strengthen her financial sector through exposing the RMB to rigors of global market forces while hammering out a more sophisticated regulatory system. When all is said and done, China’s abrupt and massive devaluations seem both an urgent attempt to nip a looming economic crisis in the bud as well as a step forward to open-ing one of the last bottlenecks of the world’s second largest economy.

trajectory of China’s con-sumer market into possibly history’s larg-est. This out-come may well be achieved through quan-


Life Insurance Corporation of India (LIC) adds another feather to its cap as it emerges as the new numero uno in Bahrain.

India’s top insurance company is now also the largest player in the Bahrain’s insurance in-dustry. According to latest data, LIC has beaten compe-

tition from nearly 60 global insur-ance firms to emerge as the number one insurance company in the Gulf nation. Bahrain’s is also the Indian insurer’s largest international op-eration. Besides, the Indian insurer’s overseas entity has also emerged as the third largest player in the United Arab Emirates. LIC is the undisputed leader with a market share of over 70 per cent of India’s insurance industry, serv-ing over 25 crore policyholders. The company also operates in several overseas markets through its vari-ous subsidiaries and joint ventures. It currently is present in five GCC (Gulf Cooperation Council) countries namely, Bahrain, Kuwait, Oman, Qatar, and UAE. The state-owned insurance major earns 80 per cent of its total international business from Bahrain alone. According to Rajesh Kandwal, CEO & Managing Direc-tor, LIC International, Bahrain, “LIC has 43 per cent market share in pre-mium income and 89 per cent in poli-cies in Bahrain. “The customer base in the countries we are operating in the region mainly comprises of non-resident Indians, though we do sell to the local nationals wherever we are licensed to sell.” He attributed the company’s success to its ability to connect with a growing Indian di-aspora, the company’s strong brand identity, and its innovative products. “Despite the intense competition, we are the market leader in Bahrain. Brand LIC has a very strong connect with the NRIs and quite accepted in the region thereby making NRI seg-ment as a ‘niche’ market for us. There

INSURANCE

are around 60 insurance companies operating in the GCC countries,” he told Indian Express, India’s leading English daily. Some of the other key international mar-kets where LIC has a significant presence in-clude United Kingdom, Singapore, Mauritius, and Kenya. And it seems all set to better its previous year’s good perfor-mance this year in terms of new businesses (pre-mium income) by the end of the current fiscal year. According to the head of the company’s Bahrain business, “We have already achieved total first premium in-come target of $200 million as at June 2015 and we shall surpass our target in first pre-

LIC is No.1 in Bahrain

TGA

order to deepen our bancassurance relationship, co-branded credit card with our bancassurance partner First Gulf Bank (FGB) was launched,” he noted.LIC recently received permission from Bangladesh to start its operation in the country during PM Narendra Modi’s recent tour. India’s insurance major has improved its performance significantly during this financial year, after underperforming in 2014-15. The state-owned insurance firm collected Rs 7,044 crore premium in June 2015 compared with Rs 6,259 crore in June 2014 and sold 16,91,597 policies in June 2015 as against 12,26,272 in the same month a year ago, data from Life Insurance Coun-cil, showed.

mium income by a good margin at the end of the year.” Kandwal also observed, “The year so far has been quite encouraging. In terms of num-ber of policies, we are growing at the rate of over 12 per cent and in non single premium, the growth rate is over 36 per cent which is satisfactory. He also attributed the role played by the company’s bancassurance part-ners in selling to the other nationals, particularly locals. “We distribute our products through tied chan-nels, banks, brokers and corporate agents. BBK and SBI (in Bahrain), FGB, Emirates NBD, ADCB and RAK Bank (UAE) and Doha Bank (Qatar) are our major bancassurance partners. We signed an agreement with prominent a broker recently. In


We must ensure that replacements are better than what is available now. The content of (Draft) IFC, unfortunately, does not give any assurance of the kind. GOI should tread slowly, if it does not want India to follow Greece, too soon!

Not just a Rate-cutter,

RBI has a larger

role!

Every monetary policy review by Reserve Bank of India (RBI) is preceded by speculations about changes in policy repo rate and suc-ceeded by different views on what is stated in the RBI Governor’s announcement through

the monetary policy statement. The third Bi-monthly Monetary Policy Statement, 2015-16 was no exception. Monetary and Liquidity Measures announced by RBI Governor Dr Raghuram Rajan said, “On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to: • keep the policy repo rate under the liquidity adjust-

ment facility (LAF) unchanged at 7.25 per cent;• keep the cash reserve ratio (CRR) of scheduled banks

unchanged at 4.0 per cent of net demand and time liability (NDTL);

• continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo

BANKING

rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and continue with daily variable rate repos and reverse repos to smooth liquidity.

Consequently, the reverse repo rate under the LAF will remain unchanged at 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.25 per cent.”The assessment that followed explained the background in which these decisions were taken. Governor, after ex-plaining the global scenario, mentioned that in India, the economic recovery is still work in progress. Dr. Rajan noted that headline consumer price index (CPI) inflation rose for the second successive month in June 2015 to a nine-month high on the back of a broad based increase in upside pressures, belying consensus expectations. The sharp month-on-month increase in food and non-

M G Warrier*Ex-General Manager, Reserve Bank of India

*Author of 2014 book, “Banking, Reforms & Corruption: Development Issues in 21st Century India”


lative changes, it may take years to materialize, is a studied one. While the main text of the (Draft) IFC (now in circulation) has 94 chapters in over 200 pages, the major public con-troversy and debate surrounds only the composition of Monetary Policy Committee. People have started for-getting a more damaging proposal to rush through procedures to trans-fer the responsibility of Public Debt Management from RBI by setting up another body called Public Debt Management Agency (PDMA) di-rectly under Ministry of Finance.Minister of State (Finance) in another context mentioned that MPC issue forms only 3% of IFC (perhaps by word count!). He is right. IFC is an aggregation of duties and respon-sibilities of several agencies which have statutory functions in the fi-nancial sector. Now, the only way to handle it with responsibility would be to disaggregate it into manage-able pieces covering different areas hitherto covered by different legis-lations. That is, the areas covered by Reserve Bank of India Act, 1934 could be taken up first. The other ‘political’ option would be to rush through some procedures and pass a wholesale legislation without much deliberation, on a convenient day. But that would be perilous for the country’s financial sector and the In-dian economy.Having said that one takes note of the elegance with which Dr. Rajan and Minister of State (Finance) Jayant Sinha fielded questions on the con-troversies arising from the proposals contained in the Draft Indian Finan-

food items overwhelmed the sizable ‘base effect’ in that month. Food in-flation rose 60 basis points over the preceding month, driven by a spike in prices of vegetables, protein items - especially pulses, meat and milk - and spices.According to RBI assessment, liquid-ity conditions have been very easy in June and July. A seasonal reduc-tion in demand for currency and increased spending by Government coupled with structural factors such as low credit deployment relative to the volume of deposit mobilization contributed to surplus conditions in the money markets. This resulted in a significantly lower average daily net liquidity injection under the fixed rate repos under LAF, and variable rate term repo/reverse repo and MSF at 477 billion in June, down from 1031 billion in May. In July there was net absorption of 120 billion through these facilities. In response to the reduction in the policy repo rate in June the weighted average call rate eased from 7.47 per cent in May to 7.11 per cent in June.Those who are making a plea for more ‘cuts’ may try and understand the following observation in the poli-cy statement: “Since the first rate cut in January, the median base lending rates of banks has fallen by around 30 basis points, a fraction of the 75 basis points in rate cut so far. As loan demand picks up in Q3 of 2015-16, banks will see more gains from cut-ting rates.”

Redefining RBI’s role – Why the hurry?Having accepted an inflation target with an upper limit of 6%, RBI Gov-ernor’s expression of intention to consider measures, that according to his perception, may have an ad-verse impact on inflation, only when he is sure about inflation remaining within manageable level(s), should not surprise anyone. This season, media and analysts are going round and round on ‘rate cut’ and a couple of proposals in the (Draft) Indian Financial Code (IFC) circulated by GOI. In this context, RBI Governor’s observation that as these need legis-

Reserve Bank of India

cial Code circulated by Finance Min-istry about composition of Monetary Policy Committee (MPC) during the first week of August 2015. Perhaps this expression of mutual trust and patience to listen to a different view other than the one’s own is worth emulating by the political leadership in Delhi on umpteen other disputes coming up every other day.Both did not make any new revela-tions, but emphasized the need for mutual trust. While Sinha tried to differentiate between proposals and conclusions, Dr Rajan fielded the question on MPC arguing that if veto power is retained, it doesn’t change status quo. But Governor did not for-get to acknowledge the respect with which GOI treated RBI all along. By asserting that RBI has always enjoyed de facto independence in policy formulation, he has also in-dicated, where the buck stops, in re-gard to monetary policy. Referring to the efforts of GOI to ‘cage’ RBI’s role, columnist T C A Srinivasa-Raghavan mentioned that RBI was a ‘fly in the bottle’. In reality, RBI happens to be the “Curd in the Pot”, if at all an analogy was needed to explain RBI’s position. There has been unending disputes about whether curd is dependent on the pot for its existence or whether the pot gets value addition because it contains curd (Thakrasyaadhaaram Ghatam vaa Ghatasyaadhaaram Thakram?). Government and people of India, like the pot, are dependent on the central bank for retaining the strength of the economy.Y V Reddy’s oft-quoted observation

• RBI is currently a self governing institute which fixes it’s targets and works under its rules. It is free from external control of government. So far, Central Government can only suggest RBI but RBI has the freedom to implement their suggestions.

• Losing autonomy is like having a parent who has decided engineering for you before you are born and forces the thought onto you.

How is RBI Autonomous?


that the contours of RBI’s autonomy is decided by government cannot be disputed. But stifling a statutory organization’s functional autonomy within the pre-decided mandates, by back-seat-driving by any forces, brings down the reputation of both the institution and the owner, in this case GOI. RBI’s autonomy or independence of monetary authority within the con-tours of government policy is not an issue just affecting those at the helm of the central bank. The political lead-ership’s selfish interest to have birds of passage at the helm of all limbs of governance, which will parrot the view of the day’s government, which finds expression through measures like ensuring government-nominee domination on boards and commit-tees, is a disturbing phenomenon, and needs to be curbed.Mythili Bhusnurmath writing in Economic Times ( “Hard Times Got Harder”, August 3) mentioned that sometimes monetary policy state-ments do not get the attention they deserve. One has to concede that not much is talked about the implications of various moves by RBI to manage monetary environment, beyond in-terest rates. Even the Financial Sector Legislative Reforms Commission( FSLRC) report and its off-shoot, the (Draft) Indian Financial Code are being micro-analysed only around RBI’s role in deciding base interest rates, whereas the code attempts to reinvent every financial regulator! Former RBI Deputy Governor Usha Thorat in her recent article in the In-dian Express has brilliantly argued the case for not rushing through the IFC at this stage. Economist and for-mer Deputy Governor S S Tarapore has consistently argued the need to preserve the present strength and capabilities of RBI in policy formula-tion unscathed.

A unique institution with strong leadership RBI cannot be compared with central banks in other countries with limited central banking functions. GOI has been dependent on RBI on several occasions in the past for coming out

of tricky situations. It is not acciden-tal that GOI, irrespective of politi-cal colour, has been ensuring strong leadership for RBI. The present talk in a section of the media about Dr Ra-jan’s term coming to an end in 2016, is again aimed at demoralising the RBI Governor and his team. It will be in the national interest for GOI to seriously persuade him to accept an-other term, this time preferably full five years, till 2021.Back on IFC, let us trust both the min-isters, Jaitley and Sinha, when they say they are open on IFC. FSLRC report needs to be revisited, giving a second reading together with the notes of dissent and the relevance of the recommendations in the present Indian context. Especially because, dissent within the Commission was handled roughly by the Chairman and even the brief dissenting notes recorded by members of the Com-mission did not get the attention they deserved. There is a need for fresh debate for which this article and the observations made by the two for-mer Deputy Governors mentioned earlier can form the basis.RBI’s autonomy or independence of monetary authority within the con-tours of government policy is not an issue just affecting those at the helm of the central bank. The stability of India’s financial sector and the coun-try’s image outside are dependent on that. At the risk of repetition, one has to remind that while writing FSL-RC report, dissent within was sup-pressed and even the brief dissenting notes recorded by members of the Commission did not get the attention they deserved.Pradeep S Mehta writing in the Hin-du Business Line (August 7) depend-ing on an observation by 20th Centu-ry common law judge Lord Denning who preferred dwelling into the un-known to status quo argued strongly

for going ahead with formalizing the (Draft) IFC circulated by finance ministry. Mehta concluded that ‘no power on earth must be allowed to stop reforms in India’, the view which no power in India can dispute!But I beg to differ on Mehta’s view that the Code (the Indian Financial Code in the form now in circulation) must be urgently adopted. India was inspired when Prime Minister Modi, speaking from the ramparts of Red Fort on August 15, 2014, said that Planning Commission was a house in disrepair and he proposed to re-build it instead of wasting resources on repair and maintenance. He could put in place NITI Aayog without dismantling Planning Commission. Indian judiciary, India’s legislations including those covered by Financial Sector Legislative Reforms Commis-sion (FSLRC) report and, perhaps, the entire architecture now in place for governance are awaiting compre-hensive overhaul.

Reform with cautionThe office of Indian President, the Election Commission, CAG, RBI and the Supreme Court are some of the limbs which have withstood the test of time during the last 68 years since independence. In their case, the assertion by Lord Denning that ‘the law will stand still’ does not hold good, as these institutions had fairly good leadership all along, ca-pable of application of mind, which helped them grow to meet the chal-lenges they faced from time to time. Any initiative to reform them should take into account the evolution of their role so far. We must ensure that replacements are better than what is available now. The content of (Draft) IFC, unfortunately, does not give any assurance of the kind. GOI should hurry slowly, if it does not want In-dia to follow Greece, too soon! (The views are personal) TGA

“Overall, we believe that tampering with the central bank’s independence would make it difficult to anchor inflation expectations. This would weigh on India’s economic prospects, particularly financial market stability.” Moody’s Analytic

Reserve Bank of India


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New Kids on Banking BlockPAYMENTS BANKS

BANKING

Payments banks are expected to be operational extensively on technology platform to provide the desired services with most cost effective way. Their target customers will be existing clientele of PSBs and Private sector banks as well as untapped, unbanked and under-banked population. Welcome to the new kids on the banking block.

N S N ReddyAsst. General Manager, Andhra Bank, Zonal Office, Vijayawada

“The future lies with those companies who see the poor as their customers.” - Prof. CK Prahalad


The objective of setting up of Payments Banks is to take the financial inclu-sion initiatives to the next level by providing small

savings accounts and payments/re-mittance services to migrant labour workforce, low income households, small businesses, other unorganized sector entities and other users in a secured technology driven environ-ment. Though the Payments Banks are termed as banking entity, in real-ity they can be looked at as Differen-tiated Banks as they are allowed to undertake only restricted activities such as:

• Acceptance of demand deposits (current and savings bank de-posits) with a cap of Rs.1,00,000/- per customer. However, the Pay-ments Banks cannot undertake lending activities.

• These Banks are allowed to is-sue Debit Cards to access funds and also can be leveraged to market non-risk simple finan-cial products like micro mutual, insurance and pension funds. However, these banks are not al-lowed to issue credit cards.

• Workers living in cities and away from their rural homes would be able to send money directly to Payments Banks located in their village accessible by their im-mediate family members almost instantly. The Payments Banks will provide service to the cus-tomers/public through various channels like Branch network, Kiosks, BCs, ATMs and Micro ATMs.

• Payments Banks can facilitate per-to-peer transactions through Mobile applications. It allows transferring funds from mobile to mobile and mobile to account to make small payments such as Taxi or plumber or electrician, grocery shop or any other utility payments.

• A Payments Banks may choose to become a BC of another bank for credit and other services which it cannot offer.

RBI has mandated that these banks are required to invest a minimum of 75 per cent deposits collected from the public in government securities up to one year maturity. They are allowed to hold a maximum of 25% in current / fixed deposits with other scheduled commercial banks for op-erational and liquidity management purposes. These banks are required to maintain CRR/SLR as applicable to the existing commercial banks and the minimum capital adequacy ra-tio stipulated 15 per cent of its risk weighted assets (RWA) on a continu-ous basis.

Payments banks space - Action unlimited!As per the extant guidelines, the eli-gible promoters will include existing non-bank Prepaid Payment Issuers, Non Banking Financial Companies, Telcom companies, Corporate Busi-ness Correspondents, Mobile Net-work Operators (MNO) and Retail Super Market chains. A promoter / promoter group can have a joint ven-ture with an existing scheduled com-mercial bank to set up a Payments Banks. It is reported in the press that around 40 companies intend to en-

ter the Payments Banks landscape and are awaiting the approval of RBI. Broadly, the major aspirants are grouped as under:

Telcom Companies - These have strong synergies with services al-ready being provided by telecom op-erators and their existing distribution and technology infrastructure can be further leveraged upon. The op-erators will be able to increase touch points with their customers and pro-vide a range of banking services to them. Consequently, over a period of time, they would be able to en-hance customer retention and obtain a greater share of the customers’ wal-let. At present these companies are paying commission to the banks on cash-out transactions which can be saved on becoming Payments Banks. Further, it opens another window for additional income by way of interest spread on the deposits collected from public. It is reported that Kotak Ma-hindra Bank with Bharti Airtel and State Bank of India with Reliance In-dustries & Idea Cellular with Future Group are likely to join hands to set up Payments Banks.

Mobile Companies - Till recent

Payments Banks - Major Aspirants Telcom Cos.

Mobile Payment Cos.

Software Cos.

Financial Services

Others

Airtel Citrus Payment Concept Tech

Cholaman-dalam

India Post

Voda-fone

FINO PayTech GI Tech Eko India Reliance Ind.

Idea ItsCash Card Novopay Calibre Future Group

My Mobile Pay-ments

Smart Payment Solutions

Instant Global

Aditya Birla Nuvo

Oxigen Suvidha Info NSDL Kalpataru

Pay point Tech Mahin-dra

Muthoot KKM Mangt

One Mobikwik Resource Square Solution

Weizman Forex

Videocon D2H

Youfirst Money Express

Renuka Society

A Little World Vakrangee

FX Mart

Payments Banks


years, mobile phone used to be a sta-tus symbol or lifestyle product, and now it has become a necessity and inseparable with day-to-day life of the individuals irrespective of age, education and financial background. India accounts for about 1/4th of world’s mobile market with 965 mil-lion and making inroads in to remote rural areas. The share of rural sub-scribers is around 35% speaks grow-ing potential of this segment and its usage by the common man has be-come order of the day.

The swift growth in number of Mo-bile users and wider coverage of mobile phone networks has made this channel an important platform for extending banking services to customers. The evolving ecosystem for payment applications is on a fast track with customer payments to taxi, e-commerce, mobile, travel and entertainment companies shift-ing from cash to e-wallets. Many of the mobile companies are already providing e-wallet services to their customers which are close substitute to basic banking services.

E-wallets have been around for quite some time and their popularity is on the rise at an exponential rate. Going by the present trend, it is ex-pected that the number of e-wallets may cross 100 million by next year. Though, e-wallets are very conve-nient to undertake purchases with-out carrying cash and credit/debit cards, the absence of wallet-to-wallet transfer facility is one of the concern and the funds parked in the wallet is

not earning any interest. The recent RBI guidelines are truly enabling the e-wallet space to set up Payments Banks which obviate the above stat-ed constraints and improve the prof-itability of these companies.

A new game planBanking on Gen-U (Unbanked): The game plan of the new players is clear that they are targeting the untapped rural hinterland and the contributing triggers are:

Rural financial services are the fast-est growing segment on account of spurt in middle class segment and it is expected to grow at accelerated pace in the ensuing years with dis-tinct features viz., Educated, Em-ployable and Bankable. The declin-ing dependency ratio and increased non-farm income source are the trig-gers for the increased flow of savings to the banking system and a demand for retail banking services.

As per NSSO data, the incremental consumption expenditure in rural has outpaced urban in the recent years. Noticeable shift in expendi-ture pattern is observed from tradi-tional food items to non-food items i.e. Education, Housing, Cosmetics, and Entertainment etc. According to MART, rural India buys 46% of soft drinks sold, 49% of motorcycles and 59% of cigarettes. Further, Rural markets account for 56% of the total domestic Fast Moving Consumer Goods (FMCG) demand and 60% of India’s annual consumption of gold/jewelry is from rural India.

• As per census 2011, the litera-cy growth rate in rural area is higher (15.99%) compared to ur-ban areas (5.73%), which clearly indicates that the rural popu-lation is keen to educate their children despite hardships. The increased literacy rate is provid-ing employment opportunities and supplementing their family income.

• Multiple occupations in rural household are a common feature on account of integration be-tween Rural and Urban area re-

sulting mobility of labour, capi-tal, products and credit. As per NCAER report around 25% of rural households solely depend on non-agriculture income.

• Government schemes like Na-tional Rural Employment Guar-antee Scheme, which guarantees 100 days of employment to one member of every rural house-hold, has provided employment opportunities and enabled the rural people to improve their in-come level.

• Considerable improvement is seen in agricultural productivity over the years due to adoption of better farm techniques coupled with improved irrigation facili-ties and reasonable rise in pro-curement prices.

The development of infrastructure connecting the rural hinterland to the rest of the country is another pos-itive factor which is eventually blur-ring the rural and urban divide to a greater extent and paving the way to a quiet revolution in rural India.

Bank on Gen-Y (Young): The demo-graphic profile indicates that 68% of population is under below 35 years age and this segment is likely to grow with increased pace and emerge as youngest country of the globe. Gen-Y has the ability to connect the exter-nal world swiftly using Information and Communication technology.

Impact on Commercial BanksThe evolution of commercial banks in India clearly depicts the fact that majority of these banks started oper-ations confining to a particular state or region and later expanded across the country. But the fact remains that lion share of the business of the banks is from rural/semi-urban areas. Majority of existing players enjoy the huge spread on low cost deposits (CASA) since the average interest paid on these deposits is be-low 4%.

As per Basic Statistical Return 2014 published by RBI, out of Rs.7.87 lakh crore deposits of rural branches

Wallet Merchant Establishments

Oxigen Bookmyshow, Domino’s, IRCTC, eBay, Zapak, Godaddy

Mobik-wik

RedBus, Myntra, Bata, Jabong

Paytm Makemytrip, Book-myshow, Fabfurnish, Homeshop18, Ubercab

Airtel Airtelmoney

Voda-fone

m-pesa

Payments Banks


TGA

across the country, the CASA depos-its stood at Rs.4.26 lakh crore (54%) which speaks the potential of the market and also the major trigger to evince interest by new players to en-ter into this segment.

As of now, the foremost strength of commercial banks is its stable small value account base with relative higher low cost deposits. However, once the Payments Banks commence operations, the strength will be turn-ing into weakness as the new play-ers are likely to poach the strong low cost deposit segment of commercial banks especially PSBs. This may lead to slim down Net Interest Margins which no bank can afford at present.

The new set of banks is expected to be operational extensively on technology platform to provide the desired services with most cost ef-fective way. These banks are not only eying Gen-U but also Gen-Y segment since this group is closely intertwined with the technology em-bedded products. Thus, target cus-tomers will be existing clientele of PSBs and Private sector banks as well as untapped, unbanked and under-banked population.

Though, the financial sector is buzz-ing with lot of activities with the growing rush among corporates to set up Payments Banks, PSBs have not initiated any proactive steps so far to meet the competitive threat. Further, the PSBs seem to be strug-gling with basic issues like stressed assets and lack of capital infusion by the government.

On the other hand, the new gen-eration banks like ICICI and HDFC banks are in a blur of action and launched Mobile Payment applica-tions such as e-wallet, SmartBuy, PayZapp, etc., to remain competitive in the fierce competitive environ-ment. If the PSBs do not act quickly, atleast now, they tend to lose busi-ness across the segments which may impact the bottom-line of the banks adversely.

The schemes (PMJDY, PMSBY, PM-JBY, APY) which are launched re-

cently for the benefit of common man are definitely be money spin-ners to the banks. Further, the Direct Benefit Transfers (DBT) amounts are expected around Rs.3 lakh crore ev-ery year and these amounts will be routed through bank accounts only hereafter. Thus, the banks which are in forefront in serving the un-banked and under-banked through the above schemes will be the ben-eficiaries as they enjoy substantial float funds as well as other income by way of commission on enrollment of social security schemes and DBT payments.

More is less!When it comes to Indian banking, more is less! Indeed, there is a strong business case for new set of banks as sizeable portion of the country’s population remains outside the am-bit of formal banking. Potential aspi-rants would hope to capitalize on the synergies leveraging its distribution network, client base and their brand image in the market place. To keep the costs low, the new banks can ef-fectively operate on mobile/internet platform with few physical branches with more focus on virtual banking. The biggest advantage of these banks is to provide the last-mile connectiv-ity, which the formal players are un-able to do on account of operational and structural constraints. With phenomenal boom being ob-served in the e-commerce space, banks can use these channels as a means to reach out to new custom-ers, including those in smaller cities and villages. Apart from exploring regular advertising strategies on

these websites, joint product of-ferings could be an innovative op-portunity. Tie-up with e-commerce websites and aggregators is another strategy for customer acquisition. Wallet providers are likely to enter agreements with banks for opera-tional convenience and viability.

The views of Mr.Bill Gates, founder of Microsoft “Banking is necessary but Banks are not” is truly relevant across the globe including our coun-try. The entry of Payments Banks is going to make the statement a reality shortly. To remain competitive, stra-tegic partnerships with companies having vast retail outlets and agent network is a prerequisite for both ex-isting Commercial Banks as well as new players.

The proposed niche banks are ideal vehicles to achieve the desired finan-cial inclusion objective by covering all households with basic savings bank products and micro insurance, pension and mutual funds.

However, the players need to adopt appropriate cost effective, innovative and viable business models with a concept “High Volume & Low Mar-gin” leveraging technology to re-main competitive in the market. Also it is the time for Commercial Banks to introspect and revisit their busi-ness models to stay in the market.

With this, the 2020 decade is going to be an icon for Bank on Unbanked with new set of players which defi-nitely paves the way to achieve the long cherished dream of Inclusive Growth.

Deposit Mix (CASA Vs Term) as on 31.03.2014 (Rs. in lakh crore)

Category CASA Term Total % CASA to total

Rural 4.26 3.61 7.87 54.13

Semi-Urban 5.73 5.68 11.41 50.22

Urban 6.75 10.39 17.14 39.38

Metro 11.45 31.69 43.14 26.54

Total 28.19 51.37 79.56 35.43

Payments Banks


SPOTLIGHT

Rupee has posted significant losses in the last few weeks bringing back memories of 2013, when it had depreciated 24% to 68/$ in a matter of four months. The rupee has dropped by as much as 3.7% in only a few days since the Yuan devaluation on August 11.However, the current scenario is different than what we saw in 2013. While our external vulnerability has declined, the frequency of global shocks has increased, says CRISIL Research.

The odds on Rupee

Two-third chance of the rupee touching 64/$ by March-end,

2016; one-third chance of 67/$

• Rising frequency of external turbulence keeps rupee under pressure

• Commodity prices decline con-tinues to benefit imports despite the depreciation of the rupee

• Rate hike by the US Federal Re-serve to be next big temblor

Moderating VulnerabilitiesFirst point to note is that this is not 2013. Back then, India’s external vul-nerability was high (high current account deficit, or CAD) and mac-roeconomic parameters weak (ris-ing inflation, high fiscal deficit and low growth). India’s macros have improved considerably since then – CAD is in safe zone, inflation is low, fiscal situation is better and growth is


grinding up. Indeed, India’s external vulnerability has not only declined over time, but also vis-àvis peers. Forecast at 1.5% of GDP for fiscal 2016, India’s CAD, for one, is one of the lowest among major emerging countries, helped by lower commod-ity prices – especially oil. Commod-ity exporting countries such as Brazil and South Africa, on the other hand, continue to see high levels of CAD. In addition, short-term external debt as a percentage of total external debt remains benign in India (at 19% in 2014).

On other macroeconomic indicators, compared with 2012, the growth in-flation mix in India has turned forthe positive – with inflation climbing down and growth picking up. In con-trast, in other emerging economies, such as Brazil, growth is expected to decline further in 2016 while infla-tion is estimated to pick up.All this is reflected in relatively lower depreciation of India’s currency, this year, compared to peers. The rupee has depreciated 9% year-on-year (as of August 25, 2015), while the Brazil-ian real has fallen 58%, Malaysian ringgit 32.6%, and the South African Rand 23%.

Then why has rupee depreciated?The current situation is best captured in a simple equation:Stress = f (shock, vulnerability)The 2013 depreciation was a case of high vulnerability but a single shock (the so-called taper tantrum led by U.S Federal Reserve announcement of QE withdrawal). Since then, while

India’s macroeconomic fundamen-tals have improved and external vul-nerability reduced, the shocks have become more frequent. The 2015 de-preciation (current) episode is a case of reduced vulnerability but frequent shocks. In June 2015, the uncertainty surrounding the Greek debt crisis loomed, which brought down the ru-pee to 64/$ from 62.6/$ at March-end 2015. In July, the Chinese stock mar-ket crashed, with the Shanghai Com-posite index falling 8.5% in a single day – the worst one day drop since February 2007. So, even as fears over a Greek exit abated, the volatility in the Chinese stock market kept the ru-pee under pressure in July.More recently in August, China de-valued its currency (by 4%), announc-ing a change to the daily fixing rate against the US dollar. The fragility of the Chinese economy, with weak de-mand and continued depreciation of the Yuan has depressed commodity prices and created jitters in currency and stock markets across the world.The ripple effects are being felt in In-dia, too – with a decline in the rupee

The Odds on Rupee

to 66.13/$ (as of 25th August 2015).The rupee has depreciated 3.7% since the announcement of the Chinese de-valuation. The rate cut by the Peo-ple’s Bank of China on August 25 has lifted sentiment and provided some boost to the markets and emerging market currencies, albeit the relief is only marginal.Overall, the frequency of shocks have increased in recent months and though India is better placed than other emerging economies, the rupee has also started losing ground. Net inflows from foreign institutional in-vestors between April and July were a paltry $0.8 billion compared with $17 billion in the same period last year. In-deed, May and June had seen net out-flows of $2.2 billion and $0.2 billion, respectively, and so far even August has seen a net outflow of $1.4 billion.Is the depreciating rupee offsetting the gain from falling commodity prices: What is the net impact on imports?Imports in India have contracted over the last eight months. Cumula-tively this fiscal, the dollar value of imports between April and July was down 12% year -on-year. In rupee terms, however, the decline was a more measured 6.7%, indicating the decline in global commodity prices has in part been offset by weaken-ing of the rupee. The local currency has depreciated 6.1% on-year during April-July. However, overall, the de-cline in commodity prices remains larger than the depreciation in the rupee. The currency has declined 10% since June 2014, much less than the sharp decline in commodity pric-es seen since June 2014 (Table 2). The result: a lower import bill. The ben-

Currency volatility versus the U.S dollar : 2013 and 2015


efit is the most for oil imports.The decline in imports has been driven by falling commodity prices, especially crude oil imports, which fell 40% y-o-y in dollar terms be-tween April and July’15. However, in rupee terms, the decline in oil im-ports has been lesser – at 36% for the same period. In volume terms, crude oil imports have actually risen 9.8% over the same period. We continue to benefit from lower oil prices, despite the rupee depreciation.Crude oil and petroleum products account for 26% of India’s imports. Crude oil prices started declining from June 2014 and have seen a 60% fall since then. A major part of this decline has come through since April 2015.After the Yuan devaluation, crude oil prices have fallen 11%. In ad-dition, other commodities such as steel, aluminium and copper have also recorded a decline of 10%, 18% and 19%, respectively, since April 2015. This has helped lower the value of imports and hence benefitted the current account deficit.

Outlook: Rupee at 64 by March 2016• Two-third chance of rupee at 64/$• One-third chance of rupee at 67/$CRISIL Research, in the base case scenario, expects the rupee to appre-ciate from the current levels (Rs 66.1per dollar as of August 25), to settle at around 64 per dollar by March 31, 2016. We assign a two-in-three chance to this event. On the domestic

front, the key underlying assump-tion is that the gradual improvement in India’s macroeconomic indicators (a low CAD, falling inflation, lower fiscal deficit) will continue. And this would be account deficit, inflation and fiscal situation under control In an alternative scenario, CRISIL Research expects the rupee to settle at around 67/$ and assigns a one-in-three chance to this event. This sce-nario assumes a status quo in domes-tic policy setting and ongoing globalturbulence continuing. Although the pressure on current account will ease to some extent, due to lower globalcrude oil prices and declining gold imports, there could be an outflow of foreign capital if Fed surprises themarket with a rate hike that will put pressure on the rupee.We, however, regard the possibil-ity of a situation akin to the taper tantrum of 2013, wherein there are significant capital outflows, as a tail

Rupee/USD - weathering global shocks

event.

Facing the next shock: Fed inter-est rate hikeGiven the ample foreign exchange reserves to combat the volatility in the rupee – the Reserve Bank of Indiahad close to $354 billion in foreign exchange reserves as of 14 August 2015 – the rupee will be range bound.While Standard & Poor’s believes the first rate hike by U.S Federal Reserve could happen as early as September, the odds of it being postponed to De-cember are now rising on fears that the US labour market could throw up weak data going ahead. The expecta-tion that the rate hike will be post-poned to December is also reflected in softer 10-year government bond yields in the US – down 2.06% as of August 25 compared with 2.45% at the beginning of July.The normalisation of interest rates and the recent strength of the dollar will have an impact on capital flows and the exchange rate in emerging economies. As for India, improving growth-inflation mix and a low cur-rent account deficit puts it in a bet-ter position to deal with financial market volatility and outflows in the event of an interest rate hike by the Fed. In addition, an increase in foreign exchange reserves to nearly $354 billion (25 August 2015) com-pared with $270 billion during the ‘taper tantrum’ of July-August 2013 improves the ability to defend the currency. However, a stronger dollar might adversely impact businesses with foreign currency debt exposure.

Commodity prices versus rupee depreciation

The Odds on Rupee

Courtesy: CRISIL Research TGA


The business model is quite different - our team is full-time on our rolls (we are about 130 people and growing), we take

ownership for results (no time and material) and are not a ‘temp’/ body shop outfit, the

service is delivered onsite and not virtual. In our view, we don’t

think there is anyone today in India who is similar to the way

we operate.

Deepak Narayanan, Founder-Director & Head Business Development, MyCFO

CFO CORNER

The role of a CFO has undergone a sea change in the last couple of decades or so, especially in the aftermath of a series of accounting scandals and scams in the early 2000 which rocked the west. The role is highly demanding to say the least. And he is no longer playing second fiddle to the company CEO. Indeed, with the role of a CFO extending beyond the traditional role of book-keeping to encompass strategy formulation and setting the direction for future growth of the company, his significance and contribution in the company’s long-term future is all the more critical now. However, given the dearth of quality CFOs and given high hiring and retention costs, not every company can afford to hire one to helm its finance function. But thanks to companies like MyCFO, a Finance implementation service organization (different from a typical outsourcing firm), it is possible for companies to tap into services of quality CFOs and at reasonable costs. In an exclusive interview with The Global ANALYST, Deepak Narayanan, Founder-Director & Head of Business Development, MyCFO discusses about his firm’s offerings, its business model, benefits it offers to enterprises seeking CFO services, and his outlook on the market. Edited excerpts: Read on.

IN CONVERSATION

The Global AnAlyst | SEPTEMBER 2015 39 |


• What was the idea behind launching MyCFO?

When we started, we assisted overseas companies looking to set up their India presence, which we still continue to do and operate this as a separate business line called ‘Inbound’. We were working with big names before founding our own company. The gap that we saw was in the mid-sized overseas companies, which were finding it tough to find their feet in India and the opportunity, in 2006-07, we felt was massive. We took the plunge. While working with some of these companies, we met a number of mid–sized Indian companies on behalf of the overseas companies, particularly to help them assess whether their product had a market in India or to help them identify local Indian counterparts for a joint venture, potential acquisition or in distributor appointments, and realized that while Indian companies had grown over a period of time largely on the energy of its founders/promoters, there were significant gaps when it came to them having built mid/senior management teams, and Finance and IT systems invariably never kept pace with the growth of the firm. This was the opportunity that we decided to explore. This gave birth to an idea called ‘MyCFO’ though at that point in time the thought process was restricted to Indian family managed businesses only.

• What were the major driving forces?

The key driver was the Indian business ecosystem – predominantly, family-run and managed businesses. They had reached a certain size and scale and yet lacked mid managerial talent, finance and IT systems never kept up pace with the growth in the business, second/ third generation was entering the business, etc. We also saw the entire VC/PE ecosystem where investors were funding some exciting businesses, multinationals were setting up subsidiaries in India, and we felt that given that almost every company required finance implementation services whether in the form of CFO or improving finance effectiveness, the MyCFO value proposition started to make sense.

• How does MyCFO differentiate itself from its competitors?

The business model is quite different - our team is full-time on our rolls (we are about 130 people and growing), we take ownership for results (no time and material) and are not a ‘temp’/ body shop outfit, the service is delivered onsite and not virtual. In our view, we don’t think there is anyone today in India who is similar to the way we operate.

MyCFO

How does the model work?

MyCFO is a leading implementation services company which provides CFO Finance effectiveness services to clients across industry verticals and size. MyCFO works with companies to plug the wide gap that exists between the ‘demand’ for high quality finance services felt by growing companies and the inadequate ‘supply’ of such services at the right levels of ownership, quality, timelines and more importantly that aligns with the company’s vision/plans. We work with companies in an ‘Interim/Ongoing CFO/Controller role’ or to improve the effectiveness of the Finance function for large companies to address specific pain areas (in cases where there is a good quality CFO already in place).

The model is Onsite and focused on ‘Getting it done’ rather than just giving advice. We ‘roll up our sleeves’ and fix issues rather than only identifying the problem. We agree KPIs/KRAs with the companies and deliver this through our team on the ground. We operate on ‘delivering results/ outcomes’ rather than on ‘time and material’ or body shopping.

• Tell us about your team. How big it is?

MyCFO has a team of more than 130 full time people. We are also in the process of recruiting another 50 people in the next 30 days.

• Which are your target markets?

MyCFO works with companies ranging from Family Owned, Private Equity/ Venture Capital backed, Listed, Indian subsidiary of a Multinational to large Indian and Multinationals (as part of finance effectiveness).

• How big is the opportunity, given the significant presence of SMEs in the country?

We estimate that the market size is close to INR 6,000 crores. Our target segment is not just the SMEs, but we work across companies of different sizes.

• How do you view the competitive pressure in your segment? Is the market for such services still in a nascent stage in the country?

We see ourselves as category creators; as a company that is setting the standards and the pace for such services. We along with some of the others have managed to evangelize the service and feel that more players entering this space will be good for companies that avail this service. The quality of the service, the levels of delivery will only improve over a period of time with more competition coming in.


MyCFO

TGA

• Given the conservative nature of the SME segment in the country, how difficult it has been for your firm to convince them to opt for an important activity like finance function? How does the client stand to gain?

We were very clear from the beginning that our services are useful not just to the smaller companies but also to companies that are not able to attract the right quality of talent into their company which could be independent of the size of the company. We also believe that concerns on ‘information confidentiality’ should remain irrespective of whether the function is manned by an internal employee(s) or by an external company such as ours. There is no guarantee that the employee shall not trade the information, in fact in a majority of cases we have seen that employee contracts don’t even have a clause relating to confidentiality! An external company has a reputation to protect given that businesses like ours only survive on trust and word of mouth. The client gains ‘on tap’ access to multiple skill sets as compared to the skills available with an ‘individual’ that they may employ making the services scalable. The chances of something going wrong is minimized as KPIs are agreed with the client in advance, review mechanisms are put in place to review progress to make sure that the company gets what it signed up for. • How has been your experience so far?

The journey has been wonderful. To evengalize the concept, to getting our first set of clients to getting

people to see what we are doing to co-create and grow the brand to being the first company in this space to get funded, it’s been a ride which has made us laugh, cry, share our triumphs and frustrations together. The three odd years from a five men team to a 130 plus men team has been great.• Which are the cities/markets you’re currently

present in?

MyCFO currently services clients pan India through teams present in 7 Indian cities Mumbai, Delhi, Bangalore, Hyderabad, Pune, Chennai and Coimbatore.• Do you also have any plans to expand further?

Getting deeper into each of the 7 cities mentioned above, expanding into international geographies, building ‘solutions’ that address market gaps whether it is through an existing set of ‘products’ or developing something that is completely new. • What is your outlook on the growth of CFO

outsourcing services market in India?

We look at ourselves as Finance implementation services brand. A CFO service is one of the areas that we assist companies with; this is also the service that has got us to where we are today. We see CFO services + Finance effectiveness (we don’t do outsourcing; outsourcing is about supplying people while our service is about client solutions irrespective of the number of people and the time it takes to deliver a set of agreed deliverables) being an INR 6,000 crore market in India. We are only scratching the surface!

ICFAI Business School (IBS) announces launch of IBSAT 2015 for admission into MBA Program ICFAI Business School (IBS), Hyderabad a top ranked Business School in India announced the launch of IBSAT-2015 aptitude test conducted for students seeking admissions into MBA Program 2016-2018. IBSAT 2015: IBSAT is an online aptitude test conducted by The ICFAI Foundation for Higher Education (a deemed to be University under Section 3 of the UGC act 1956), for students seeking admission to the MBA Program.

Prospectus Kit: Prospectus kit contains Application Voucher for IBSAT 2015, which is the gateway for admissions into the MBA Program at three IBS Campuses of Hyderabad, Jaipur, Dehradun and PGPM Program offered by the 6 IBS Campuses at Ahmedabad, Bengaluru, Gurgaon, Kolkata, Mumbai and Pune.

IBSAT 2015 test dates: The test will be conducted between December 15, 2015 and December 30, 2015 across India on a computer-based test format which is of 2 hours duration and is conducted in 4-5 sessions per day.

Vouchers: IBSAT 2015 Vouchers can be purchased either online at www.ibsindia.org/ibsat 2015 or at any one of the 47 IBS Marketing offices by paying Rs.1600/-. The last date for submission of application form is December 05, 2015.

Important Dates: The IBSAT 2015 results will be announced on January 19, 2016 and the selection briefings will be held from January 30th to 9th February 2016 in 40 cities across the country. Shortlisted candidates will be called for participation in the selection process that will be held from 18th to 26th of February 2016 at IBS Campus, Hyderabad. Regular classes will commence from June 01, 2016 onwards.

Admission Procedure: The final selection is based on performance in Group Discussion, Personal Interview and the past academic performance (performance in X, XII and graduation). Graduates in any discipline with 50% and above marks with medium of instruction as English are eligible to take the IBSAT 2015. Applicants in their final year bachelor’s degree course are also eligible to apply, provided they complete their graduation requirements before May 31, 2016.

Fee and Bank Loans: The fee for the two year MBA Program at IBS, Hyderabad is Rs. 6.25 lakhs per annum. Several Banks including State Bank of India, Punjab National Bank, Central Bank of India, Oriental Bank of Commerce, Bank of Baroda, Bank of India, Canara Bank, Syndicate Bank, Vijaya Bank, IDBI Bank, HDFC Bank, Credila Financial Services, Avanse Financial Services provide educational loans to the candidates selected for the programs conducted by IBS, Hyderabad.

Contact details at Hyderabad: Interested candidates can contact IBS Admissions Office at Plot No: 65, Nagarjuna Hills, Punjagutta, Hyderabad or e-mail: [email protected] or call Candidate Care on 040-23440963 or Toll Free No: 1800 425 55 66 77.

About ICFAI Business School: The ICFAI Foundation for Higher Education (IFHE) is declared as deemed-to-be university under section 3 of the UGC Act 1956. IBS (Faculty of Management) is a constituent of IFHE. Within a short span of time since it was established in 1995, IBS Hyderabad has grown impressively and achieved widespread recognition from industry, academic circles and professional bodies in the last 20 years. It is a premier business school that has been consistently ranked by independent rating agencies as one of the top 10 B – Schools of India. It is one of the first business schools in South Asia to receive the prestigious SAQS accreditation. NAAC, an autonomous institute of University Grants Commission has also accredited The ICFAI Foundation for Higher Education (Deemed to be University) with ‘A’ Grade with an impressive score (institutional CGPA) of 3.43 out of 4.


STARTUP XPRESS - JUNOTele

JunoTele is a fast-growing, innovation-driven startup in the mobile technologies, particularly mobile payments space.

Founded by Sekhar Rao, a technology industry veteran with over two decades of experience, along with two other partners, Jana Jana Balasubramaniam and Krishna Tammireddy, JunoTele began its journey in 2012 with the vision to redefine the mobile payments system worked. Thanks to the founding team’s unstinted focus on innovation, JunoTele, which is headquartered in Singapore and operates out of Bangalore, has not only emerged as a major player in the mobile payments arena, it also boasts of some unique offerings with absolutely no competition. For example, it has developed the world’s first & patented WAP billing over Wi-Fi. According to the founders, “JunoTele’s real time charging transforms mobile payment experience for all, and lays the foundation for building eco-systems.” Further, JunoTele’s patented solution provides Seamless One-Click Authentication & Payment Experience for every Mobile user for a wide range of payment mechanisms in any possible condition – when user is on 2G/3G/4G, Wi-Fi or even WHEN OFFLINE FROM DATA. The company claims that no other

“We have some unique solutions in the prototype stage, which we have not announced yet. Once commercialized, these will change the payment landscape in the digital streaming economy. By that time, our target is to give billing capability to at least two billion mobile customers around the world.”

- B Sekhar Rao, Founder & CEO, JunoTele

solution in the World gives a One-Click authentication & payment mechanism when mobile user is offline from Data! In a tête-à-tête with The Global ANALYST, the founders talk about the changing landscape of mobile payments technologies, what has helped JunoTele differentiate itself from competition, their key offerings, and their plans for the future. Edited excerpts:


• What led to the genesis of JunoTele?

With over 20 years of rich global Telco & IT experi-ence, Founder Sekhar Rao hit upon the idea of creat-ing a global platform for a real-time micropayment so-lution encompassing merchants, payment gateways, Telcos & importantly every mobile user in the world. He realized the only product/service in the hands of every potential customer is the Mobile phone. After a stint as COO of MACH, Luxembourg, he quit in 2008 and began R & D for suitable solutions & processes to create the vision he had. After investing resources in R&D for three years, Sekhar joined forces with angel investors & formed JunoTele. After another two years of field-testing his prototypes, he took JunoTele commercial in 2013. Sekhar & his first Co-Founder Jana Jana Balasubramaniam started the company together in 2012. The second Co-Found-er Krishna Tammireddy joined forces in 2014 to start the commercials for JunoTele by bringing in Mobile Digital ecosystem to the JunoTele platform.Can you tell us about your company’s business model?

In today’s world any payment transaction depends on the availability of a data connection (Mobile or Wi-Fi) between the user (Mobile phone or POS) and any pay-ment gateway. JunoTele’s patented mechanism allows for an authenticated payment transaction over a regu-lar voice network without the need for a data connec-tion, in a seamless & secure manner. JunoTele, through its patented integration with mobile operators also gives carrier-billing options to 100% of the mobile user base – over data, Wi-Fi or even when OFFLINE FROM DATA. This can lead to an explosion of new payment models across developed markets as well as emerging economies. JunoTele works on a revenue share model, with NO CAPEX for telcos or merchants.• How does the model differentiate from the compe-

tition?

JunoTele’s patented solution provides Seamless One-Click Authentication & Payment Experience for every Mobile user for a wide range of payment mechanisms in any possible condition – when user is on 2G/3G/4G, Wi-Fi or even WHEN OFFLINE FROM DATA.No other solution in the World gives a One-Click au-thentication & payment mechanism when mobile user is offline from Data.• Want do you think is the key to success in your tar-

get market?

The world is switching towards personal hand held devices (smartphones) for their entire daily needs, re-placing their needs to use desktops or laptops. Many e-commerce sites now support only mobile versions. Even today 90% of the revenue generated for the con-tent developers is from only 2 monetizing models –

Subscription packs (8-10% of customers pay for) and selling space for ad network communities. The first model is good for long term, steady consumption and revenue. But the reach is limited and acquisition costs are high. The latter is good as long as the target audi-ence scale is large enough. There is no effective way to monetize based on actual consumption by user. The PUSH model is still en-forced literally telling the consumer “My way or the Highway”. The FMCG sector in emerging economies has proved that the PULL model is better suited for effective consumption resulting in higher sales in the long run. A pack of Re 1 shampoo turned the tide for the FMCG sector by giving the “Power of Purchase” to the end customer. The digital economy also will benefit when the con-sumer has the power to buy what he wants, when he wants & ‘IN THE QUANTITY HE WANTS’. Mi-cropayments are the key for that to happen. The plat-form to power the massive scale of micropayments, cutting across ecosystems like mobile wallets / pay-ment gateways with easy access by every single mo-bile user under all conditions is the key for success.• Could you elaborate upon your various services/

offerings?

As part of our long term strategy we have identified different phases in our ramp up to a global hub. As part of the first phase, we are providing new revenue streams for both the digital merchant ecosystem & the Telco carriers. App stores, Mobile Games, Media streaming services are our primary focus areas that are in dire need of new revenue models apart from the existing subscription models. We are the only player in the world with the ability to bill through apps or mobile browsers in the OFFLINE mode or Wi-Fi mode in a seamless, one-click manner. This has created a huge interest for merchants in both the worlds – de-veloped markets require our Wi-Fi billing solution, emerging markets require both the Wi-Fi & the offline billing solution. • Which markets/segments you are currently cater-

ing to? Also, which international markets you’re currently having a presence in?

Telecom operators, e-commerce players, payment gateways, digital merchants (OTT players, app devel-opers etc. are our target group). JunoTele currently is present in India, United Kingdom, Sri Lanka, UAE, Thailand and Philippines). In late 2015 the footprint will grow into Malaysia, Indonesia, Germany, South Africa, Oman, Bangladesh, Saudi Arabia and Spain.• What were the major hurdles you faced during the

initial days of your startup?

For any startups there are numerous ongoing chal-

JUNO Tele


JUNO Tele

lenges. Two of them which we faced were: 1. We started a B2B payments company when the

startup ecosystem in India was favoring the B2C e-commerce startups. Between 2008 and 2012 most carrier billing companies out of India had hit stagnant revenue levels due to lack of techno-logical advancements. So investors had lost their confidence in Telco dependent startups. This put a huge dampener on JunoTele, when we tried to raise funds last year. But thanks to technological breakthroughs by JunoTele, we were able to ex-tend our products & solutions beyond just carrier billing, delivering huge revenue potential to both Telcos & merchants. This has put confidence back with our various stakeholders.

2. Talent acquisitions: JunoTele’s technological plat-form brings the best of the mobile telco world to the Internet economy. Our development & de-ployment teams need some unique talents from the niche telco industry & the mobile VAS indus-try. Acquiring new team members has always been so difficult due to the limited availability of the talent pool within India. That is why our HR is always on the lookout for good talent.

• How has been the performance of JunoTele so far?

JunoTele has grown from a 2-member team to over 40 in strength. We have got our core patent awarded in 2014, giving us undisputed strength in our platform across the world. We are now a global company with our client present in UK, Thailand, Philippines, Sri Lanka and UAE, apart from India. Over 700 million mobile subscribers have access to our mobile authen-tication & billing platform. Recently we have set up a sales team out of Europe. We have achieved all of the above by following a Minimum Viable Product model. The investors we have been approaching in re-cent months are finding it very difficult to understand how we were able to gear up so much in such a boot-strapped model. We are unable to reveal how much we have spent so far to come to this stage, but it has been the lowest in the industry.• How the competitive scenario in JunoTele’s key

markets?

We face competition in the carrier billing space from - Fortumo, Bango and Boku. They have their presence in India through local partnerships. However, Juno-Tele has unique solutions, which no one else has the technology to address. In fact, some of our solutions in prototype stage do not have any competition as of now in the global arena. We have applied for patents for those and will commercialize those solutions also by next year.JunoTele has opened up blue ocean verticals in the telecom and mobile ecosystem as we are the only

company with the patented solution to solve the be-low problems -1. Billing when mobile user is offline from Data – No

payment gateway in the world (Credit cards, wal-lets, PayPal, carrier billing, etc) has the ability to authenticate the validity of the mobile user or the transaction without the availability of an active data connection. JunoTele has the ability to do that as long as the voice network of the Mobile user is enabled. This opens up significant possibilities for any payment mechanism in the world to complete a transaction even in remote areas or data offline areas.

2. Carrier Billing over Wi-Fi – Content developers & Telecom carriers around the world are losing a significant amount of potential revenue because of the inability to bill a customer while they are on Wi-Fi. During that time, the mobile number of the user is not captured seamlessly by the Telecom carrier & hence unable to do carrier billing. Juno-Tele has the means to overcome that issue smooth-ly and complete carrier billing.

• How do you plan to ramp your operations, going forward?

In the near future, we plan to ramp up rapidly since the mobile payment ecosystem is evolving at break neck speed. We have the technical advantage from our competitors and we need to make it into a business advantage as well through speed of implementation. We have some unique solutions in the prototype stage, which we have not announced yet. Once commercial-ized, these will change the payment landscape in the digital streaming economy. By that time, our target is to give billing capability to at least two billion mobile customers around the world.• Where do you foresee the company five years from

now?

As mentioned before, JunoTele will be a global pay-ments company acting as a hub between Mobile users, Telcos, Merchants & other payment gateways to bring a larger market place for all stakeholders by bringing new business models.• With entrepreneurial culture slowly but steadily

gaining momentum in the country, what would be your advice to the budding entrepreneurs?

Ideas don’t make a successful startup. People and their vision do. Ideas and innovations are actually dime a dozen. The will and passion to convert ideas into a successful business model decide the fate of the startup. A successful entrepreneur will find infinite ways of getting his/ her core idea operationalized. So the message is “Don’t be too stubborn on the prod-uct or the service. Be stubborn on the vision”.

TGA


If you’re the one who always looks out for a reason or two to replace your existing Smartphone with a new one which comes loaded with more features and looks great too, you need not worry. For, the action it seems never stops in the mobile phone arena, or better say, Smartphone market. The Digital ANALYST brings to you a few new handsets which have been launched recently.

Samsung Galaxy A8

Samsung is one Smartphone maker which never fails to surprise its fans, launching new models with new features at regular intervals. Continuing this trend, it has now launched the Galaxy A8, which it is projecting as the slimmest (5.9mm) Smartphone it has launched to date.

The Galaxy A8 has a full metal body, runs

DIGITAL ANALYSTThe World of Smartphones, Smart TVs and More

on Android 5.1.1 Lollipop and is powered by Octa-Core (1.8GHz Quad Core + 1.3GHz Quad Core) Exynos 5430 processor with 2GB RAM. It features 32GB of internal memory that is expandable up to 128GB via microSD. The phone has a 5.7-inch (1920 x 1080 pixels) Full HD Super AMOLED display, a 16MP rear shooter with LED flash and a 5MP front-facing camera with wide-angle lens. An interesting feature of this phone, which weighs only 151 gram, is its fingerprint scanner that also doubles as a home button. The Galaxy A8 has connectivity options such as 4G LTE / 3G, Wi-Fi 802.11 a/b/g/n/ac (2.4 +

5GHz), Bluetooth 4.1, GPS/ GLONASS and is backed by a 3050mAh battery. The phone is priced at Rs.32,500.

Say Hello to ZOPO: Enters India with Speed 7 Smartphone

ZOPO joins the list of Chinese vendors including Oppo, Lenovo and Xiaomi, which have a presence in India. Zopo has chosen Speed 7 as its launch vehicle to enter India’s red-hot Smartphone market. Speed 7 is priced at Rs 12,999. The phone will be exclusively available via Snapdeal from the first week of September. The Speed 7 boasts of a 5-inch HD display with a a 13.2MP rear camera. The phone is powered by a 64-bit octa-core MT6753 SoC clocked at 1.5GHz along with 3GB RAM. ZOPO Speed 7 runs Android 5.1 Lollipop with the Z UI on top. It is equipped with and is backed by a 2500 mAh battery. The phone also comes loaded with several other features including 4G LTE, Dual SIM and Face Beauty 4.0. According to Kevin Xu, CEO, ZOPO Mobile, “ZOPO has been building a steady and reliable reputation as one of the best Chinese phone producers in the last few years.” He added, “The goal has always been clear in the path towards globalization; to expand our market reach. India is a logical and imperative step in this journey to success. Chinese Smartphone brands have been enjoying a 97% YOY share of the market (second quarter CY 2015) and we wish to tap this ripe consumer base with the best of our products.” TGA


HEALTHCARE

How do you react when you hear names like PICU, NICU and CICU? These interesting

names can easily conjure up images of tiny tots and their very mention can even tickle your funny bones, thus bringing a big smile on your face. While these are not the names of any toddlers or tiny tots, but by thus naming their various facilities, a Hyderabad-based hospital which is striving hard, 24X7, 365 days a year, to do exactly that - putting smiles on the faces of its patients and their fam-ilies. It is BBR Hospital – a super spe-cialty hospital. Tucked in the western

BBR Hospital

Healthcare With A Human Touch

part of the City’s busiest residential and commercial hub, Balanagar, near the fast growing suburb of Ku-katpally, this 29-year old hospital has carved a niche for itself amongst Hy-derabad’s ever expanding healthcare landscape.

A dream turned into a realityNearly 30 years ago, during the 80s, the bright young doctor couple of Dr. B Keshava Rao, a gold medalist in pediatrics, and his wife Dr. B Nir-mala dreamed of setting up a hos-pital which could offer affordable and reliable service to the people of and near the industrial area of Bala-nagar. Thanks to their passion, per-

severance and determination, they successfully laid the foundation of their dream healthcare project - BBR Hospital - in the year 1986. Thanks to the founding family’s unstinted focus and dedication, from a humble begin-ning to becoming one of the signifi-cant healthcare destinations for the City’s denizens, BBR Hospital has indeed come a long way.

Today, BBR Hospital boasts of sev-eral world class healthcare facilities which comprise PICU (the abbre-viation for Paediatric Intensive Care Unit) & NICU (Neonatal Intensive Care Unit) – little ones are given big-ger attention in this 10 + 24 bedded

The Hyderabad-based BBR Hospital, a super specialty hospital founded by the doctor couple of Dr. B Keshava Rao, a gold medalist in pediatrics, and his wife Dr. B Nirmala, is redefining healthcare landscape in the City, offering affordable and effective healthcare with a human touch.

Dr B Janaki Obstetrician & Gynaecologist

Daughter-in-law

Dr B NiveditaPaediatrician & Neonatologist

Daughter-in-law

Dr J IndusreePathologistDaughter

Dr B SandeepGeneral Physician

Younger SonDr B VipinOrthopaedic Surgen

Elder Son

Dr B Keshava Rao Dr B Nirmala

Dr J Chandrashekar RaoRadiologistSon-in-lw

Dr. Rao`s passion towards dedicated medical services has made him to direct his decendants & Family members also to carry forward the legacy into this medical profession in this same hospital in different specialities.


units with Warmers, Photo Therapy units, Monitors, Paediatric Ventila-tors under the supervision of Neona-tologists, Paediatricians & Registrars, round-the-clock; MICU (Medical In-tensive Care Unit) & ICU (Intensive Care Unit) - this is a well organized 10 bedded unit equipped with latest monitors, ventilators and supported by medical registrars, experienced duty doctors & skilled nursing staff to handle all the critically ill patients; and SICU (surgical intensive care unit) - an Ultra-Modern, 9 bedded unit attached to High-Tech Ortho and Neuro Operation Theatres – A real innovation for management of Poly trauma cases backed by Senior Surgeons. In SICU, to prevent cross infections, according to the hospital management, only one bed is allot-ted per cubicle.

It also has Radiology department, fully equipped with latest 1.5 Tesla high configuration MRI Scan, 16 Slices Latest CT Scan, Digital X-Ray, Static & Portable latest Ultrasound Scan machines, Mammography & Doppler Scans under top most Radi-ologists.

The Hospital has added another feather in its cap with the launch of CICU – a 24-hour total compre-hensive cardiac intensive care unit. CICU is an ultra-modern, 8 bedded cardiac unit - fully loaded with lat-est equipments under supervision of cardiac consultants and registrars, round-the-clock. It has excellent team of doctors performing suc-cessful Cardiothoracic surgeries like CABG, Valve replacements, surger-ies on beating heart, cardiac tumours excision & congenital cardiac defect surgeries.

All interventional Cardiac proce-dures like Coronary Angiogram (CAG), Primary PTCA & Stenting, Aortic Stenting etc., are performed through this state-of-the-art Cathlab (Phillips Allura FD10 – Digital Flat Panel, ceiling mounted version-3 stent booster). Along with these, in-terventional radiology life saving procedures like vascular emboli-

sations for various conditions are performed by the hospital’s Inter-ventional Radiologists. Then there is AMC - 18 bedded, economic unit with intensive care facilities sup-ported by all necessary medical and paramedical personnel at afford-able charges. BBR also has its own blood bank offering services to all, in house and outside patients with high quality blood and blood products / components thoroughly screened through its sophisticated & ultra modern equipments at an affordable price.

Patients also do not need to go any-where else for availing diagnos-tics services as the hospital has an independent unit with Pathology, Biochemistry, Microbiology, Histo-pathology, and Serological investi-gations backed by highly efficient qualified staff and Pathologists. Fast Accurate results are generated to be conveyed immediately to Critical Care Units. There is also Aarogyasri Ward which has an exclusive well ventilated ward with separate male & female sections for Aarogyasri non-emergency cases.

These apart, the hospital also has five Operation Theaters which are fully equipped with C-Arm, Operat-ing Microscope (Zeis) and Laminar Air Flow & with modern equipment for Cardiothoracic, Neuro, Plastic / Cosmetic surgeries, etc. Overall,

this super specialty hospital offers comprehensive healthcare services, leveraging on its huge infrastructure and resources comprising 175 beds with 50 consultants, 50 duty medi-cal officers/ registrars and 400 Para medical staff with 24 hours medical, surgical, Cardiac and obstetric emer-gency services, which are on par with any corporate Hospital in the twin cities. The hospital’s motto is based on a powerful Sanskrit inspira-tion, “Sarvetra Sukhina:Santu, Sarve Santu Niramaya:” which means “Let all be blissful, Let all stay healthy”. The hospital has focused its opera-tion on providing quality care with a human touch; which truly reflects the essence of its motto “More than Healthcare, Human Care”.

Aiming for more milestones

The team at BBR Hospital is not rely-ing on the past laurels, and is rather aiming for many more milestones to reach. To conclude, in the true spirit of what Robbert Frost says in his in-spiring poem, Stopping by Woods on a Snowy Evening: “And miles to go before I sleep”, BBR Hospital aims to step up its efforts to leverage on technology and advancements in medical sciences to bring and offer best and affordable medical care, and to ensure that it reaches out to more number of people and help them live a disease-free and healthy life.

BBR Hospital

TGA


INTERNATIONAL

In these late summer days of 2015 a peak of volatility is spreading in the global mar-kets triggered mainly by a combination of catalysts.

These factors notably include - the potential decision by the Federal Reserve (Federal Open Market Com-mittee), at their Sept. 16-17 meeting, to undertake either in 2015 or in early 2016 the first rate lift-off since 2006 (monetary tightening); the Chinese economy slowdown, its highly lever-aged stock-market bubble and free-fall (Shanghai Composite Index in June 2015 was over 5,000 points from approximately 3000 points in De-

FEDERAL RESERVE’S RATE RISE Coming Soon?

cember 2014 and now it is back at the same level it was in December 2014, that is the index fell by 43 per cent); and, the impact of the sharp stock market correction, currency devalua-tion and massive capital flight (with potential liquidity risks or currency wars), the interest-rate cuts and re-serve ratio cuts, and the below target GDP growth on the global financial markets and real economy (i.e., com-modities, equities, foreign exchange, credit, financial markets, etc). Additional catalysts to the current level of volatility include the sharp oil prices decline (below $40 a bar-rel), geopolitical and economic risks

affecting the emerging markets; the uncertainty about the unravelling of the Greek crisis (third bail-out in five years and a new election on the way), and the ability of China to effective-ly implement structural reforms to liberalize its economy and to rebal-ance its economic model from an export-led growth (driven by a long-held investment-and-infrastructure growth strategy) to a consumption-led growth. Lastly, other catalysts are the inves-tors’ concerns over falling inflation expectations, and the health of the global economy (risk of global slow-down or recession).

In spite of the solid improvement of the US economy fundamentals, it is still unlikely that a rate rise will occur in September 2015 (unless the Fed aims to make just a minor symbolic hike), the first one in more than nine years, since it might not be fully consistent with the current inflation expectations and the latest turbulent international developments.

- Dr. IVO PEZZUTOGlobal Markets Analyst, Management Consultant, Economics and

Management ProfessorAuthor of the Book “Predictable and Avoidable” ISTUD Business School and

Catholic University of the Sacred Heart. Milan, Italy


Challenges remainIn spite of the above facts, the Fed, like other central banks, should re-main independent from political influence and global externalities, and it should be mainly focused on the health of the US economy when setting its monetary policy, there is no doubt that in today’s complex, high interconnected, and globalized world, it would be difficult for any central bank not to consider in their global economic outlook and data dependent analyses economic and financial shocks of leading global economies. The collapsing Chinese stock markets, the plunging com-modity prices, and the global slow-down, geopolitical risks, and the intensifying currency war will in-evitably affect, directly or indirectly, all central banks policies and global economic growth expectations. The stock market and credit bubbles in China, the strength of the dol-lar relative to th`e emerging market currencies, (i.e. since 2008 dollar denominated corporate bonds have sharply increased in the emerging markets fueled by massive QEs and a weak dollar), and the commodity rout could all affect global earnings growth. Given the current scenario, it would be impossible to imagine a complete decoupling of the Chinese crisis on the US economy.

The US economy, sooner or later, would not be able to avoid the de-flationary forces sparked by the Chi-nese bubble. In spite of the improving fundamentals (i.e., economic growth) in the US economy, the emerging glob-al risks (i.e., Chinese crisis) are likely to pose significant challenges to the economic recovery, sooner or later, even in the United States, due also to the strengthening of the dollar against other currencies which start-ed in January 2014, when the Fed signalled that it would raise interest rates. Moody’s forecast is that the US growth will be at 2.4% in 2015, before rising to 2.8% in 2016. Robust job cre-ation, high corporate profits, favour-able financing conditions and pent-up demand all point to higher GDP growth. (Moody’s, 2015).

The Fed’s recent statement suggests it expects to raise interest rates some-time soon and that their monetary policy tightening will be extremely gradual. The level of uncertainty about the Fed’s policy decisions is contributing to increased volatility in the markets even though many sophisticated institutional inves-tors reported that they have already priced in the impact of a potential rate hike (monetary policy normal-ization) by the end of 2015 or in early 2016. Futures markets indicate that there is now just a 24 per cent chance of a rate increase in September 2015. Since the market currently attach a 24 per cent probability of a rate hike in September 2015, it is quite likely that an unexpected decision to start the first rate lift-off next month might generate some additional turmoil in the markets.

Rate rise & its repercussionsHigher rates would raise borrowing costs for consumers and companies, possibly hurting spending and eco-nomic growth. Nevertheless, cur-rently a large number of economists expect the Federal Open Market Committee (FOMC) to raise its target for the federal funds rate before the end of 2015. The minutes from the Fed’s July meeting indicated that the conditions necessary for an increase in the federal funds rate “were ap-proaching” but had not yet been achieved. A rebound in headline in-flation and continued solid employ-ment and overall economic data, suggest that the Fed might opt for a first rate hike before end of 2015.

The appreciation of the dollar, the devaluation of the Chinese currency, and the further decline of oil prices are complicating factors in predict-ing the pace of growth and Fed’s rate hike decision. The underlying trends in falling oil prices and falling com-modity prices have affected infla-tion rates leading to lower headline rate of inflation low, while core rate of inflation (which does not include food and energy) remains higher. Household wealth is increasing thus economists expect that in the coming

months they should choose to spend instead of saving. In the US economy, currently, the combination of a low and on target unemployment rate and low and below target inflation rate seem to be related to the par-ticular national and global economic cycle highly influenced by falling oil and other commodity prices, lower salaries, some structural changes in the labor market, higher savings rates, and probably even tightened lending market conditions.

In light of the most recent interna-tional developments and increased volatility on financial markets, many investors and analysts believe that it is unlikely that the Federal Reserve will pursue a rate hike plan in Sep-tember 2015. Volatility (measured by the CBOE’s Vix) in the past few days has surged as high as 53 in intraday trading (the last time the Vix was above 20), the highest since February 2009, indicating rising tension across markets. The S&P 500 nearly dropped 10 per cent. Economists at Barclays Capital have recently predicted that rate hike will occur March 2016, stat-ing that “it is unlikely to begin a hik-ing cycle in this environment for fear that such a move may further desta-bilize markets.” However, given the fact that FOMC seem to have posed significant attention on financial sta-bility considerations, it might still be possible to effect a first rate hike ei-ther in September or December 2015 in order to signal confidence to the markets in reaching the Fed inflation target in the medium term and the strength of the recovery.

What the fundaments suggest Recent data on the US unemployment rate (at 5.3 per cent) suggests a poten-tial fall below 5 per cent this year and a likely need for tighter monetary policy. Reports show that consumer confidence rose to its second-highest level in eight years while new home sales climbed 5.4 percent, the most in 2015. Good news also came from the US durable goods orders report. The New orders for U.S. manufactured durable goods climbed 2 per cent in July after jumping by an upwardly

Federal Reserve


revised 4.1 percent in June. Orders for transportation equipment led the increase once again, surging up by 4.7 in July after soaring by 10.7 percent in June. The orders for mo-tor vehicles and parts jumped by 4.0 percent, while orders for aircraft and parts gave back ground after spiking higher in the previous month. Or-ders for non-defense capital goods excluding aircraft, a closely watched indicator of capital spending, surged up by 2.2 percent in July after climb-ing by 1.4 percent in June. Shipments in the same category rose by 0.6 per-cent in July following a 0.9 percent increase in the previous month.Crude inventories fell 5.5 million barrels in the week to Aug. 21, the biggest one-week decline since early June, according to government data that countered analysts’ expectations for an increase of 1 million barrels. Treasuries prices rose after a top Federal Reserve official scaled back his view of a rate increase in Septem-ber in the wake of market turbulence stemming from worries about Chi-na’s economy. The Fed seems not to be in a hurry to raise rates even though it wants to get off to zero-bound rates. With the latest international developments (the turmoil and volatility spreading from China to global financial mar-kets), apparently, the window of opportunity is rapidly closing for a Fed’s tightening decision in Septem-ber 2015. According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 14, 2015, mortgage applications increased 3.6 percent from one week earlier. Re-cent financial market turmoil and lower price of commodities includ-ing energy has made it tougher for US central bankers to go ahead with a rate hike in immediate policy meeting scheduled for September 16th/17th.While survey based inflation expec-tation has remained stable, market bases measure has dropped to low-est level not seen since August 2010, when financial market was on its recovery from 2008/09 slump. Infla-

tion expectations as measured by 5 year- 5 year (5y/5y) forward inflation expectation calculated using swap dropped to 1.87%, a level not seen in 5 years.Markit Economics recently released its preliminary manufacturing pur-chasing managers’ index (PMI) for the U.S. The U.S. preliminary manu-facturing purchasing managers’ in-dex (PMI) declined to 52.9 in August from 53.8 in July, missing expecta-tions for an increase to 54.0. It was the lowest level since October 2013. According to survey respondents, the strong dollar continued to put pressure on export sales and com-petitiveness, while heightened glob-al economic uncertainty appeared to have dampened client spending both at home and abroad. Alongside this, manufacturers of investment goods widely cited growth headwinds from the slump in capital spend-ing across the energy sector. Rise in global volatility has pushed inves-tors to the safety of treasuries, which has pushed expectations of inflation down.Fed policymakers are still concerned about the weakness of the global economy, but they are also more con-fident about US growth prospects. Developments in the world economy and commodity markets have in-creased the downside risk in achiev-ing the sustainable inflation path to-wards 2 percent, thus an immediate

monetary policy tightening by the Fed might probably affect markets across the world and might cause more pain for emerging market as-sets, already being hit by China’s woes. If US tighten their monetary in such timing, a correction in the stock market probably can’t be avoided.

Rate rise can waitTo conclude, in spite of the solid im-provement of the US economy fun-damentals, it is still unlikely that a rate rise will occur in September 2015 (unless the Fed aims to make just a minor symbolic hike), the first one in more than nine years, since it might not be fully consistent with the lat-est turbulent international develop-ments. It is more likely, instead, that it will occur at the end of 2015 or in 2016 if the emergency phase of the Chinese crisis will soon resume and if the US economy will not have an unexpected overheating in the com-ing quarters.

Naturally, the S&P 500 index would be highly energized, at least in the short-term, by a decision of the Fed-eral Reserve to delay the Fed’s inter-est rates lift-off in September 2015 and by a firm commitment and a coordinated effort of central banks to continue to flood the markets with further monetary stimulus (i.e. stir-ring markets’ QE addiction) in order to avoid deflationary trends and fur-ther global economic slowdown.

Federal Reserve

TGA


CANCER

HEALTHCARE / A sponsored feature by Nightingales Home Health Services

Fighting the Killer Disease

The WHO study suggests that more than 60 per cent of world’s total new annual cases occur in Africa, Asia and Central and South America – which account for 70 per cent of the world’s cancer deaths. According to the WHO’s prediction, annual cancer cases will rise from 14 millions in 2012 to 22 millions within the next 2 decades. Against this backdrop, it is imperative to know this enemy well, its causes & consequences and how to fight it.

According to a study in The Lancset, a re-vered journal, report, India stares at a serious health threat – Cancer. Although incidence of cancer is low in India compared with high-income countries, mortality is high, warns a

research paper which appeared in the journal dated April 11, 2014. It projects the deadly disease to affect a whopping 1.7 million individuals in 2035—this is a serious health is-sue which cannot be ignored, the report’s findings suggest. Collectively, according to the paper, China, India, and Rus-sia account for around 40 per cent of the world’s popula-tion, experience 46 per cent of all new cancers worldwide, and account for 52 per cent of cancer deaths globally! How-ever, their response to fight this dangerous enemy leaves a lot to be desired. As per the research paper, a sizeable gap exists between disease burden and the ability of these countries to afford effective control measures, and considerable socio-politi-cal, cultural, and environmental factors further complicate the situation. The World Health Organization says that cancers figure among the leading causes of morbidity and mortality worldwide, with approximately 14 million new cases and 8.2 million cancer related deaths in 2012. It fore-casts the number of new cases to rise by about 70 per cent over the next two decades. In India cancer, a non-commu-nicable disease, accounted for 7 per cent of total deaths of 98,16,000 in 2012; NCDs accounted for 60 per cent of total deaths (98.16 lakhs) in India in 2012 (WHO data).

Key Facts about Cancer

• Amongmen,the5mostcommonsitesofcancerdiag-nosed in 2012 were lung, prostate, colorectum, stomach, and liver cancer.• Among women the 5 most common sites diagnosedwere breast, colorectum, lung, cervix, and stomach cancer.• Aroundonethirdofcancerdeathsareduetothe5lead-ing behavioural and dietary risks: high body mass index, low fruit and vegetable intake, lack of physical activity, to-

bacco use, alcohol use.• Tobaccouseisthemostimportantriskfactorforcan-cer causing around 20 per cent of global cancer deaths and around 70 per cent of global lung cancer deaths.• CancercausingviralinfectionssuchasHBV/HCVandHPV are responsible for up to 20 per cent of cancer deaths in low- and middle-income countries. Source: WHO

What is Cancer?Cancer is the general name for a group of more than 100 diseases. Although there are many kinds of cancer, un-treated cancers can cause serious illness and death.Cancer is a disease of the cells in the body. There are many different types of cell in the body, and many different types of cancer which arise from different types of cell. All cancers start because abnormal cells grow out of control. However, there are often great differences between differ-ent types of cancer. For example:• Somegrowandspreadmorequicklythanothers.• Someareeasiertotreatthanothers,particularlyifdiag-nosed at an early stage.• Somerespondmuchbetterthanotherstochemothera-py, radiotherapy or other treatments.• Somehaveabetteroutlook(prognosis)thanothers.Forsome types of cancer there is a very good chance of being cured. For some types of cancer, the outlook is poor.So, cancer is not just one condition. In each case it is impor-tant to know exactly what type of cancer has developed, how large it has become, whether it has spread, and how well the particular type of cancer responds to various treat-ments. This will enable you to get reliable information on treatment options and outlook.

What are cells?• Normal body cells - The body is made up from millions of tiny cells. Different parts of the body, such as organs, bones, muscles, skin, and blood, are made up from differ-

The Global AnAlyst | SEPTEMBER 2015 51 |


Advertorial / Nightingales Home Health Services

ent specialised cells. All cells have a centre called a nucleus. The nucleus in each cell contains thousands of genes which are made up from a chemical called DNA.The genes are like codes which control the functions of the cell. For example, different genes control how the cell makes proteins, or how and when to make hormones or other chemicals. Certain genes control when the cell should divide and multiply, and certain genes even control when the cell should die.Most types of cell in the body divide and multiply from time to time. As old cells wear out or become damaged, new cells are formed to replace them. Some cells normally multiply quickly. For example, you make millions of red blood cells each day as old ones become worn out and are broken down. Some cells do not multiply at all once they are mature - for example, brain cells.Normally, your body only makes the right number of cells that are needed.• Abnormal cells - Sometimes a cell becomes abnormal. This occurs because one or more of the genes in the cell has become damaged or altered. The abnormal cell may then divide into two, then four, then eight, and so on. Lots of ab-normal cells may then develop from the original abnormal cell. These cells do not know when to stop multiplying. A group of abnormal cells may then form. If this group of cells gets bigger, it becomes a large clump of abnormal cells called a tumour.What are tumours?A tumour is a lump or growth of tissue made up from ab-normal cells. Tumours are divided into two types - benign and malignant.Non-cancerous (benign) tumoursThese may form in various parts of the body. Benign tu-mours grow slowly, and do not spread or invade other tissues. They are not cancerous and are not usually life-threatening. They often do no harm if they are left alone. However, some benign tumours can cause problems. For example, some grow quite large and may cause local pres-sure symptoms, or look unsightly. Also, some benign tu-mours that arise from cells in hormone glands can make

too much hormone which can cause unwanted effects.Cancerous (malignant) tumoursMalignant tumours tend to grow quite quickly, and invade into nearby tissues and organs, which can cause damage. The original site where a tumour first develops is called a primary tumour. Malignant tumours may also spread to other parts of the body to form secondary tumours (metas-tases). These secondary tumours may then grow, invade and damage nearby tissues, and spread again. Note: not all cancers form solid tumours. For example, in cancer of the blood cells (leukaemia) many abnormal blood cells are made in the bone marrow and circulate in the bloodstream.Local growth and damage to nearby tissuesMalignant cells multiply quickly. However, to get larger, a tumour has to develop a blood supply to obtain oxygen and nourishment for the new and dividing cells. In fact, a tumour would not grow bigger than the size of a pinhead if it did not also develop a blood supply. Cancer cells make chemicals that stimulate tiny blood vessels to grow around them which branch off from the existing blood vessels. This ability for cancer cells to stimulate blood vessels to grow is called angiogenesis. Malignant cells have the abil-ity to push through or between normal cells. So, as they divide and multiply, malignant cells invade and damage the local surrounding tissue.Spread to lymph channels and lymph nodesSome malignant cells may get into local lymph channels. (The body contains a network of lymph channels which drains the fluid called lymph which bathes and surrounds the body’s cells.) The lymph channels drain lymph into lymph glands (called lymph nodes). There are many lymph nodes all over the body. A malignant cell may be carried to

52 The Global AnAlyst | SEPTEMBER 2015|

a lymph node and there it may become trapped. However, it may multiply and develop into a tumour. This is why lymph nodes that are near to a tumour may enlarge and contain cancerous cells.Spread to other areas of the bodySome malignant cells may get into a local small blood vessel (capillary). They may then get car-ried in the bloodstream to other parts of the body. The cells may then multiply to form sec-ondary tumours (metastases) in one or more parts of the body. These secondary tumours may then grow, invade and damage nearby tis-sues, and spread again.What Causes Cancer?Cancer is a complex group of diseases with many possible causes. In this section you can learn more about the known causes of cancer, including genetic factors; lifestyle factors such as tobacco use, diet, and physical activity; cer-tain types of infections; and environmental ex-


posures to different types of chemicals and radiation.What are the symptoms of cancer?Cancer symptoms are quite varied and depend on where the cancer is located, where it has spread, and how big the tumor is. Some cancers can be felt or seen through the skin - a lump on the breast or testicle can be an indicator of cancer in those locations. Skin cancer (melanoma) is often noted by a change in a wart or mole on the skin. Some oral cancers present white patches inside the mouth or white spots on the tongue.Other cancers have symptoms that are less physically ap-parent. Some brain tumors tend to present symptoms early in the disease as they affect important cognitive functions. Pancreas cancers are usually too small to cause symptoms until they cause pain by pushing against nearby nerves or interfere with liver function to cause a yellowing of the skin and eyes called jaundice. Symptoms also can be created as a tumor grows and pushes against organs and blood ves-sels. For example, colon cancers lead to symptoms such as constipation, diarrhea, and changes in stool size. Bladder or prostate cancers cause changes in bladder function such as more frequent or infrequent urination.As cancer cells use the body’s energy and interfere with normal hormone function, it is possible to present symp-toms such as fever, fatigue, excessive sweating, anemia, and unexplained weight loss. However, these symptoms are common in several other maladies as well. For exam-ple, coughing and hoarseness can point to lung or throat cancer as well as several other conditions.When cancer spreads, or metastasizes, additional symp-toms can present themselves in the newly affected area. Swollen or enlarged lymph nodes are common and likely to be present early. If cancer spreads to the brain, patients may experience vertigo, headaches, or seizures. Spreading to the lungs may cause coughing and shortness of breath. In addition, the liver may become enlarged and cause jaun-dice and bones can become painful, brittle, and break eas-ily. Symptoms of metastasis ultimately depend on the loca-tion to which the cancer has spread.

How Is Cancer Diagnosed and Staging?The earlier cancer is diagnosed and treated, the better the chance of its being cured. Some types of cancer -- such as those of the skin, breast, mouth, testicles, prostate, and rectum -- may be detected by routine self-exam or other screening measures before the symptoms become serious.

Most cases of cancer are detected and diagnosed after a tu-mor can be felt or when other symptoms develop. In a few cases, cancer is diagnosed incidentally as a result of evalu-ating or treating other medical conditions.• Cancer diagnosis begins with a thorough physical

exam and a complete medical history. • Laboratory studies of blood, urine, and stool can detect

abnormalities that may indicate cancer. • When a tumor is suspected, imaging tests such as 1. X-rays2. Computed tomography (CT)3. Magnetic resonance imaging (MRI)4. Ultrasound5. Positron emission tomography (PET) scan• To confirm the diagnosis of most cancers, microscope

test like:1. FNAC - Fine-needle aspiration cytology2. Biopsy After a diagnosis is made, doctors find out how far the can-cer has spread and determine the stage of the cancer. The stage determines which choices will be available for treat-ment and informs prognoses. The most common cancer staging method is called the TNM system. • T (1-4) indicates the size and direct extent of the pri-

mary tumor• N (0-3) indicates the degree to which the cancer has

spread to nearby lymph nodes• M (0-1) indicates whether the cancer has metastasized

to other organs in the bodyA small tumor that has not spread to lymph nodes or dis-tant organs may be staged as (T1, N0, M0), for example.TNM descriptions then lead to a simpler categorization of stages, from 0 to 4, where lower numbers indicate that the cancer has spread less. While most Stage 1 tumors are cur-able, most Stage 4 tumors are inoperable or untreatable.“The term ‘stage of cancer’ means the stage the cancer was at when it was first diagnosed. Being sure about the stage is very important because it is a critical factor in deciding the best way to treat the cancer.“Stage is also very important to prognosis - prediction of the cancer’s effect on the person who has it. On average,




the higher the stage, the worse the cancer’s effect on the person who has it. The hope of cancer treatment is that it will improve the prognosis, both in prediction and in real-ity.Stage 0 ‘in situ’“A cell that becomes a cancer cell usually does so in the company of other similar cells. Often, but not always, it can produce a tumour right there in that tissue, in a way

caught in a lymph node, one of the powerhouses of the body’s immune system. There it might provoke an im-mune response against it, which can go on to destroy it and the other cancer cells.“Sometimes, though, it divides and forms a lump in the lymph node. This stage is often referred to as regional spread. That is, the cancer has spread within the general region in which it first began but not to other parts of the body.”Stage 4: distant spread“The next step can be quite varied. Cells from the lump in the lymph node may spread further through lymph vessels to more distant lymph nodes or on into the blood stream. Or cells from the original lump may invade a capillary and enter the blood stream that way.“Either way, once in the blood stream, the cancer cells can go just about anywhere in the body, form new colonies and spread further. This is the stage of distant spread.”How is cancer classified?There are five broad groups that are used to classify cancer.1. Carcinomas are characterized by cells that cover inter-nal and external parts of the body such as lung, breast, and colon cancer2. Sarcomas are characterized by cells that are located in bone, cartilage, fat, connective tissue, muscle, and other supportive tissues.3. Lymphomas are cancers that begin in the lymph nodes and immune system tissues.4. Leukaemias are cancers that begin in the bone marrow and often accumulate in the bloodstream.5. Adenomas are cancers that arise in the thyroid, the pi-tuitary gland, the adrenal gland, and other glandular tis-sues.How is cancer treated?Cancer treatment depends on the type of cancer, the stage of the cancer (how much it has spread), age, health status, and additional personal characteristics. There is no single treatment for cancer, and patients often receive a combi-nation of therapies and palliative care. Treatments usually fall into one of the following categories: surgery, radiation,


that poses little or no threat to life. This is called in situ cancer; that is, cancer in the position where it started. It is probable that some cancers never go beyond this early stage.” “At the next stage, the cancer cells gain

the ability to pass through the ‘basement membrane’, that is the thin, fibrous boundary to the tissue in which the can-cer began, and to invade neighbouring tissue. This inva-sion is a serious step, because it indicates that the growing cancer cells may threaten life.“While the cancer remains a single lump, partly in the tis-sue where it began and partly in a neighbouring tissue, it is said to be in the localised stage.”

Stages 2 and 3: regional spread“Once a cancer cell has invaded, a common next step is for one of its daughter cells to invade through a lymph ves-sel (a vessel like a blood vessel that carries the clear fluid called lymph, which is all the time exuding into tissue from our blood capillaries (the smallest blood vessels), back to the blood stream).“On the way to the blood stream, the cancer cell can get

chemotherapy, immunothera-py, hormone therapy, or gene therapy.SurgerySurgery is the oldest known treatment for cancer. If a cancer has not metastasized, it is pos-sible to completely cure a pa-

The Global AnAlyst | SEPTEMBER 2015 55|



tient by surgically removing the cancer from the body. This is often seen in the removal of the prostate or a breast or testicle. After the disease has spread, however, it is nearly impossible to remove all of the cancer cells. Surgery may also be instrumental in helping to control symptoms such as bowel obstruction or spinal cord compression.Innovations continue to be developed to aid the surgical process, such as the Knife that “sniffs” out cancer. Cur-rently, when a tumor is removed surgeons also take out a “margin” of healthy tissue to make sure no malignant cells are left behind. This usually means keeping the patients under general anaesthetic for an extra 30 minutes while tissue samples are tested in the lab for “clear margins”. If there are no clear margins, the surgeon has to go back in and remove more tissue (if possible). RadiationRadiation treatment, also known as radiotherapy, de-stroys cancer by focusing high-energy rays on the cancer cells. This causes damage to the molecules that make up the cancer cells and leads them to commit suicide. Radio-therapy utilizes high-energy gamma-rays that are emitted from metals such as radium or high-energy x-rays that are created in a special machine. Early radiation treatments caused severe side-effects because the energy beams would damage normal, healthy tissue, but technologies have im-proved so that beams can be more accurately targeted. Ra-diotherapy is used as a standalone treatment to shrink a tumor or destroy cancer cells (including those associated with leukemia and lymphoma), and it is also used in com-bination with other cancer treatments.Chemotherapy : Chemotherapy utilizes chemicals that in-terfere with the cell division process - damaging proteins or DNA - so that cancer cells will commit suicide. These treatments target any rapidly dividing cells (not necessar-ily just cancer cells), but normal cells usually can recover from any chemical-induced damage while cancer cells can-not. Chemotherapy is generally used to treat cancer that has spread or metastasized because the medicines travel throughout the entire body. It is a necessary treatment for some forms of leukemia and lymphoma. Chemotherapy treatment occurs in cycles so the body has time to heal be-tween doses. Combination therapies often include multiple types of chemotherapy or chemotherapy combined with other treatment options.Immunotherapy : Immunotherapy aims to get the body’s immune system to fight the tumor. Local immunotherapy injects a treatment into an affected area, for example, to cause inflammation that causes a tumor to shrink. Systemic immunotherapy treats the whole body by administering an agent such as the protein interferon alpha that can shrink tumors. Immunotherapy can also be considered non-spe-cific if it improves cancer-fighting abilities by stimulating the entire immune system, and it can be considered target-ed if the treatment specifically tells the immune system to destroy cancer cells. These therapies are relatively young, but researchers have had success with treatments that in-troduce antibodies to the body that inhibit the growth of breast cancer cells. Bone marrow transplantation (hemato-poetic stem cell transplantation) can also be considered im-munotherapy because the donor’s immune cells will often attack the tumor or cancer cells that are present in the host.Hormone therapy: Several cancers have been linked to some types of hormones, most notably breast and prostate

cancer. Hormone therapy is designed to alter hormone production in the body so that cancer cells stop growing or are killed completely. Breast cancer hormone therapies of-ten focus on reducing estrogen levels (a common drug for this is tamoxifen) and prostate cancer hormone therapies often focus on reducing testosterone levels. In addition, some leukemia and lymphoma cases can be treated with the hormone cortisone.What are the side effects of the treatment?SurgeryCancer surgery, like all cancer treatments, has its benefits, risks, and side effects. The types and intensity of side ef-fects vary from person to person based on the type and lo-cation of the cancer, the type of surgery, and the person’s overall health.Common side effects of cancer surgeryPain, Fatigue, Appetite loss, Swelling around the site of surgery, Bleeding. Infection, Lymphedema, Drainage from the site of surgery, Bruising around the site of surgery and Organ dysfunction. Chemotherapy: Chemotherapy is the use of drugs to kill cancer cells. These powerful medications circulate in the bloodstream and directly damage the cells that are actively growing. It can also harm healthy cells, which causes side effects.Side effects in chemotherapy : Anemia, Appetite Loss, Con-stipation, Diarrhea, Fatigue, Hair Loss, Infections, Mouth and Throat Problems, Nausea and Vomiting, Nerve Prob-lems (Peripheral Neuropathy), Pain, Skin and Nail Chang-es, Sleep Problems.Radiation Therapy : The radiation therapy side effects vary from person to person and with the type and location of cancer, the treatment dose, and the person’s health.Side effects of Radiation therapy : Skin problems such as dryness, itching, blistering, or peelingTiredness and weakness. Loss of hair in the treatment area, Fatigue, Difficulty swallowing, Stiffness, Nausea, Vomit-ingDiarrhea, Rectal bleeding, Incontinence.How home care service with be helpful?• Cancer patients often feel more comfortable and secure be-

ing cared for at home.• As the patients will be prone to infections, they don’t need

to travel often to the hospital.• Home care can be rewarding for the caregiver, especially it

saves their time.• Access to medical equipment, visit from doctors, nurses,

physiotherapist, psychologist, dentist and bedside at-tenders at your home.

• This will help the oncologist to less burdened, because symptomatic care management will be focused by home care service.

(Disclaimer – This article is provided for information purpose only and is not a substitute for professional medical care by a qualified doctor or other healthcare professional. The readers are requested to seek a medical practitioner’s or a doctor’s advice in case they need any medical guidance/counselling/treatment, etc. The Global ANALYST does not take responsibility for any factual error, nor does it guarantee the authenticity of the information/facts provided in this article. The Global ANALYST will not be liable for any costs, damage and interest that may arise as a direct or indirect result of the information provided in this article.)


57The Global AnAlyst | SEPTEMBER 2015 |The Global AnAlyst | SEPTEMBER 2015

What are the services Nightingales Home Health Services is providing for cancer patients?

Nursing home services for cancer patients

Sl No

List of Services

1 Injection

2 IV infusion

3 Ryles tube

4 Blood draw

5 Enema

6 Nebulization

7 Oxygen administration

8 Wound management

9 Catheterization

10 Drain management

11 GJ feeding management

12 Tracheostomy stoma management

13 Epidural catheter

14 Stoma care

15 Urinary fistula management

16 Chemo port flushing

Physiotherapy home services for cancer patients

Sl No

List of Services

1 Pulmonary Rehabilitation

2 Pain Management

3 Mobility Rehab

4 Musculoskeletal Rehab

5 Post-Surgery Rehab

6 Neuropathy Rehab

7 Speech therapy

8 Lymphedema Rehabilitation

Bedside attenders home services for cancer patients

Sl No

List of Services

1 Dusting / Unit cleaning

2 Medical Hand Washing

3 Bed Making

4 Bath (Bed Bath & Personal Bath)

5 Diaper Change

6 Mouth Care / Denture Care

7 Perinatal Care

8 Bedpan / Urinal

9 Feeding-Prevention of aspiration10 Ryles tube feeding11 Hair Care / Hair Wash12 Nail Care / Feet Care13 Comfort devices14 Positions of Nursing15 Prevention/Identification of Bed sore16 Active & Passive exercise17 Prevention of falls & reporting18 TPR-BP19 Transfer techniques20 Initiative to work & confidence21 Good Health & Endurance22 Observation skills & reporting23 Attitude & Emotional stability24 Ethical behaviour with patients,

colleagues & superiors25 Bio waste management

Dental home services for cancer patients

Sl No

List of Services

1 Tooth extraction

2 Fillings

3 Root canal

4 Xerostomia(dry mouth)

5 Gums investigation/Treat-ment

6 Prosthesis Rehabilitation

Psycho-Oncology counselling home services for cancer patients

Sl No

List of Services

1 Psychoeducation therapy

2 Supportive psychotherapy

3 Relaxation technique

4 Guided imagery technique

5 Cognitive behavior therapy

6 Existential therapy

7 Grief therapy

8 Child counseling

Medical equipment for hire

Sl No

List of Services

1 Oxygen Concentrator

2 Non – Invasive Ventilator

3 Oxygen Cylinder

4 Wheel Chairs

5 Surgical Cots

6 Alpha Bed

7 Walkers

Patients should call Hospital Emergency Immediately for

help if:

Sl No

List of Services

1 High temperature

2 Uncontrollable bleeding

3 Chest pain

4 Unconscious

5 Severe breathlessness

6 Uncontrollable pain

7 Confusion or change in behaviour

8 Uncontrollable vomiting

Patient Flow

57 |

Communication & Feedback Channel


TGA

In his address to the nation on the 69th Independence Day, Prime Minister Narendra Modi talked about the idea of “Start up India, Stand up India”. While to some it may sound like just another slogan, but it is not.

In fact, as the successes of recently launched programmes like the Pradhan Mantri Jan Dhan Yojana, Pradhan Mantri Suraksha Bima Yojana (accident insurance) and Pradhan Mantri Jeevan Jyoti Yojana (life insurance) suggest, this idea too has the potential to be a game changer, if implemented well.

Creating suitable employment and jobs for its people is one of the major challenges before any nation, and it’s more so in a developing nation like India. According to rough esti-

mates, about 1.5 million students pass out of India’s engineering colleges every year, however, a majority of them run the risk of being unemployed. About 75 per cent of technical graduates and more than 85 per cent of general graduates are unemployable by India’s high-growth global industries, including information technology and call centers, says the Wall Street Journal, citing NASSCOM data. The situation is not better, when it comes to college graduates, either. While lack of employability skills among young gradu-ates is certainly a major issue before the institutions of higher education, as they grapple with outdated course curriculum, on the one hand, and lack of an effective mechanism to promote interaction with and engage industry on the other, there is a lack of enough jobs as well. Take for example the case of engineering graduates. IT and Manufacturing are the two industries which account for majority of jobs, however, they are hiring fewer numbers of people now, due to primarily slowing consumer de-mand in both domestic as well as overseas markets. India is a young nation with 430 million in the age group of 15-34 years (an advantage which also makes India’s world envy!), and if urgent measures are not taken to train these young people and make career- and not just job-ready, the country could risk frittering away the opportunity to effectively harness this de-mographic dividend and take the economic growth to the next level. However, with the growing thrust on skill development, the government has made its intent clear – it is more determined

than ever to achieve the goal of skilling India. The PM has sug-gested public sector banks to work towards ensuring that each of their branches selects at least one potential dalit or tribal entre-preneur for providing financial assistance. “There are 1.25 lakh bank branches. This year is the 125th anniversary of Ambedkar. Will each of 1.25 lakh bank branches make a commitment to pro-vide loans to at least one tribal or Dalit?,” the PM Modi said, adding if every bank branch funds at least one start-up, this will result in 1.25 lakh start ups by Dalits and tribals who will give employment to many others. He also added that banks should also encourage at least one woman entrepreneur. “There is a need to encourage them to be entrepreneurs. There should be a start up in every village,” the PM said. He added that he wanted start-ups to come up in all parts of the country and that India should be number 1 in start-ups. In fact, we would suggest that even private sector banks and for that matter corporates can also join hands to promote this idea. There are a number of corporates which also run foundations for doing works in the areas of social/rural development, educa-tion for poor, healthcare, etc. Further, these can also be joined by the private equity players, seed funds, venture capital compa-nies, etc., as they bring valuable expertise in the area of start-up businesses. If all these entities join hands with banks/financial institutions, this could greatly enhance the chances of realizing the dream of making India a numero uno start-up nation. Lets us all come together and help build and strengthen a robust start-up ecosystem and make India a number destination for start-ups, which creates millions of jobs, ensuring that no start-up idea is nipped in the bud due to lack of financial or technical support or expert guidance.

PERSPECTIVEIt’s time to ‘Start up India’!


RNI No. APENG/2012/47303 - Postal Regn. No. HD/1175/2013-15. Posting date on 1st & 2nd of every month, September 2015.

Date of Publication - 30th of every previous month. P60

THE GLOBAL ANALYST September 2015

Economy & Finance

Transcript of THE GLOBAL ANALYST September 2015