On this unfateful day,Sensex closed at 1,624 points down.Nifty ended at 7,809 level.The rupee went down to as low as 66.69 per dollar (the lowest since September,2013).The investors had to bear huge amount of losses.What were the reasons for this sudden fall of Indian market?Following maybe a few reasons for this dark day-

1)A weakened Chinese Economy-The Chinese market went down by 9% in trade marking its lowest since March.This happened because sentiments could not be lift even after legally allowing pension funds to invest in stock market.China had allowed its world’s largest pension fund to be invested in the volatile market.There was a move by the central bank which further resulted in lack of liquidity and therefore market disappontment.China’s shocking devaluation of Yuan further sparked fears that the world’s second largest economy may not be as strong as it seems.The chinese index also dropped over 4%.

2)The drop at Wall Street-US markets recorded their steepest drop on 21^st August,2015 since 2011.The reason was basically weakening of chinese stock market.Investors are afraid of paying high prices for stocks at a time when growth in earnings is very less,energy prices are tumbling and the US Federal Reserve may hike the rates.Increase in interest rates in US banks means that investors will pull out their funds from a developing country like ours and invest in US.

3)Oil prices at 6 year low-US crude oil and Brent futures  hit their fresh 6 year lows as investors were still worried about weak demand and surplus supply due to a weak Chinese economy.

4)Selling by foreign investors-While there were concerns over Chinese economy  and erosion in value of rupee,the foreign investors pulled out nearly Rs.2,000 Crore from the Indian stock market since August beginning.There was an estimated net outflow of Rs.1,864 crore.Investors are also worried  that GST bill will get delayed as it was not passed in monsoon session of parliament.

5)The Greek crisis-The Greek prime minister,Alexis Tsipras resigned and there was a call for new elections.This further added to the uncertainty of the investors.The opposition has decided to form a new party to contest elections in Greece.

6)Some other reasons- The continuous decline in exports can be one of the reasons because it will increase the country’s trade deficit.Below average monsoon can also be  a reason less rain hampers agricultural production which leads to increase in prices and inflation.

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IIT’S & IIM’S-the dream of millions of students in India.The govt. is trying its best to improve these premier institutes with as much funding as possible.Because of this ,the primary education sector is unable to get its share of funds and is therefore losing its value.But just give it a thought-You have not received  proper primary education.Can you still expect to enter into IIM or IIT without proper basic knowledge?So where should the funds of Govt. be invested?Our premier institutes or our foundational ones?
IN OUR PRIMARY EDUCATION SECTOR-
1)Primary education is like a compulsion for all of us to have because it forms the base of our knowledge and builds our personality.But not many in India are able to receive it because our country is still under developed.Also its very important for the growth and development of the nation.
2)IIT’S & IIM’S form a very small fraction of our population.But the primary edu. Sector nearly covers half of the country.So its better that govt. focuses more on making people literate first.
3)Brain drain-Yes most of the people after graduating from IIM’S & IIT’S migrate to other countries so that they can have a better lifestyle.So what good are they actually doing for their own country?It leaves a sour taste in everyone’s mind.
4)Poverty is at such a vast level in our country that most of the people are not able to pay even the fees for primary education let alone IIT’S & IIM’S.So govt. should invest more funds in primary edu. Sector.
5)Yes I said that people are unable to pay the expense of IIM’S & IIT’S also.So from this point of view ,you may assume that govt. should invest more in these institutes.But consider this fact-After going to such institutes,the student comes out as shining star.He is able to pay all the expense for these institutes.So not much need of funding.
IN IIT’S & IIM’S-
1)We are in urgent need of these institues because as a developing nation,we need our young talents to perform well globally.
2)Students migrating from these institutes also helps in globalisation of our economy.
3)IIT’S & IIM’S develop brilliant minds .These minds then can restructuring and reshaping our country and make it a better democracy.
4)Students from abroad also come to India to study in these premier institutes.So these are income generating source for the country.
5)Its practically the students from these premier institues who help in creating employment opportunities in the country.Thus solving the ever increasing problem of unemployment.

CONCLUSION-
The point is IIT’S & IIM’S are already in possession of huge amount of funds.Their fees is so high.They constitue a very small fraction of our population.They can be self financed and students can meet the expenses because of their capabilities.But primary education makes the people literate from the grass root level.It cant be ignored at any cost.So govt. should invest more in them.Govt. can always invest little in IIM’S & IIT’S also but not at the cost of primary education.

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Devaluation means to reduce the value of currency in a fixed exchange rate mechanism.It simply implies that value of currency in terms of foreign currency will fall.

China recently announced the devaluation of its local currency Yuan.Its distressed the financial markets all around the world by doing so.This was done to ensure that its exchange rate mechanism is in terms with market oriented approach.On 11^th August 2015,Yuan’s value dropeed 1.9% followed by a further 1.6% decline on 12^th August.This was the biggest decline in a day.But was it a good move?Let’s check out the pros and cons of the same for Chinese as well as other economies-

PROS

1) China’s foreign exchange reserves are in a very good position.So,this devaluation will help in stabilizing the economy and may not even result in capital outflows on a large scale.

2)At this point of time,the commodity market faces a tough price environment.So for giving a boost to economic growth,higher aggregate demand and exports are needed by China which is possible through devaluation.
3)When a currency devalues,the exports beacome cheaper.Being cheaper,they become more competitive in the foreign market.Domestic demand increases.As a result more jobs are created in the export market solving the problem of unemployment.
4) If a country faces a huge current account deficit because of its lack of competitiveness,then devaluation helps in reducing this deficit.
CONS

1) China’s debt denominated in the US dollar will not gain from devaluation.It would in turn make it expensive to repay the huge debt of $1.1 trillion that has been owed by the firms in China.

2)This sudden shift in fixed mechanism at the People’s Bank of China gives a hint of market based fixing system.

3)How this fix is going to be estimated?Well this is a question full of uncertainty and because of this,the markets all over the worls are anxious and distressed.
4)When imports become more expensive due to devaluation,the aggregate demand leads to demand pull inflation.
5)Devaluation for a long term can reduce the purchasing power of residents abroad.Moreover,it may also reduce productivity in the long run due to fall in incentives.

CONCLUSION

As long as this decline in the value of Yuan is moderate,the merits are greater than the demerits.But is should not be a spiky decline.It is possible that in the furture,yuan will internationalize due to a better two way floating exchange rate.This devaluation may also prove beneficial for world economy as it can reduce the downward pressure on Chinese economy.

DID YOU KNOW?

Renminbi is the official currency.It was introduced by People’s Republic of China when it was founded in 1949.Yuan is just the name of a unit of Renminbi currency.However,usage of both is perfectly fine.

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On 19^th August 2015,Airtel,Reliance Industries and other 9 entities were given the ‘in principle’ approval for payment banks by RBI.

I can understand the many questions that are popping up in your mind when you just read this news.No worries!Here are a few points that will  keep you well informed on payment banks.Just have a look.

1)MEANING-

Use your mobiles and not the traditional bank branches –yes this is what your new stripped down type of banks i.e. payment banks are all about.

2)THEIR CANS AND CANT’S-

-No loan offering.Can raise deposits of upto Rs. 1 lakh and have to pay interest on the balances.

-Remittances and transfers are all allowed through mobiles.

-Services like cashless purchases,automatic bill payments,chequeless transactions allowed through mobiles.

-ATM cards and Debit cards can be issued by them.

-Direct money transfer to banks allowed nearly cost free.

-Forex cards that are reusable as debit or ATM cards all over India can be provided to travellers.Forex services will also be provided at lower charges (compared to banks).

-Card acceptance mechanisms like ‘APPLE PAY’ to third parties can also be provided.

3) COMPANIES GIVEN THIS APPROVAL-

-Aditya Birla Nuvo Ltd

-Airtel M Commerce Services Ltd

-Cholamandalam Distribution Services Ltd

-Department of Posts

-Fino PayTech Ltd

-National Securities Depository Ltd

-Reliance Industries Ltd

-Dilip Shantilal Shanghvi

-Vijay Shekhar Sharma

-Tech Mahindra Ltd

-Vodafone m-pesa Ltd

4) WHY WILL THEY WIN?-This is the first time that private sector has been given a green signal by RBI for banking services. RBI hopes that payment banks will target the labourers,low income groups,small businesses e.t.c. and offer basic banking services at a low transaction cost.The poor citizens who use only cash will enter the world of formal banking.Moreover it’s not feasible to have the branches of traditional banks in every nook and corner of the country.So here we have the mobiles that will provide a wide coverage at low cost making rural banking easy.A journey into a cashless economy is about to begin through this project.These banks will also help in implementing government’s direct benefit transfer scheme.Under these schemes,subsidies (related to health,gas and education) are directly paid to beneficiaries’ accounts.

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By the time we enter our teens,most of us are prepared,willing and excited to be economically independent and have a bank account solely in our names.But we often end up opening wrong accounts  and we may regret it later.So why not be cautious from the very beginning.Here are a few tips on how to check a bank account whether it is really worth it or not.

1.NO PAYMENT OF MONTHLY FEE-

You should get an account where you don’t have to pay a monthly fee or where you can avoid it An example of this can be direct deposit.Some banks provide incentive to maintain both your savings and retirement account with them.But its recommended that savings and checking account should be kept separate so that you can control your urge to use savings for daily expense.

2. NO REQUIREMENT FOR MINIMUM BALANCE-

A good bank account shold not have any minimum balance requirement.Money should be kept safe earning pretty much no interest.

3. NO LIMITATIONS ON THE METHOD AND NUMBER OF TRANSACTION-

You should be able to deposit,withdraw or tranfer money any number of times as you like and in any manner you like without thinking of incurring charges.

4. FREE ACCESS TO ATM-

Its always preferable that your bank has large network of ATMs or it reimburses fees imposed by other banks.

5. USING LATEST TECHNOLOGY-

You should be able to perform banking operations like paying bills,checking account e.t.c. online and through your mobiles also.After all,this is the era of mobila and online banking.Banks can also have their personalised apps so that users don’t have to go to the bank branch at all.

6.COMPETITIVE INTEREST RATES-

Your bank should have competitive interest rates or we can say interest rates should be competitive in relation to inflation.

I hope next time you will keep all these simple points in mind while opening your very own bank account.

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Toshiba,a 140 year old pillar of Japan’s economy is involved in the biggest accounting scandal Japan has ever witnessed since 2011 (Olympus Corp was involved in a scandal in 2011).There was an investigation which revealed that the company inflated earnings by at least 1.2 billion dollars during 2009-2014.After this revelation,Hisao Tanaka,Toshiba Corp president along with two other predecessors decided to quit.

Toshiba is one of those companies which adopted the corporate governance initiatives in Japan very early.However,even after having a good corporate government structure,it did not have a good corporate governance.According to the investigation committee,the corporate audit division which should be in charge of auditing the corporate divisions ,companies,branch companies e.t.c. was mostly providing consulation services for the management being carried out  at each of the companies.It rarely checked whether accounting treatment used in the company was appropriate or not.

This observation shows that the internal audit in Toshiba should have focussed on assurance service rather than consultation service.But it doesn’t means that it should solely focus on assurance service.It has to deal with both with more attention on the latter.Moreover,there was immense pressure on the employees  in Toshiba because of the unachievable target set by the top managers and the compensation of executive officers included both base compensation and role compensation based on work.So this task of achieving the unachievable and performance based pay should have been an enough indication for the internal audit to have a key focus on accounting audit.

Internal Audit works best when it is capable,autonomous and effective and the internal auditor prepares and submits reports to the audit committee.But,in Toshiba,the audit committee was neither autonomous nor capable.Moreover,3 external members had no financial or accounting knowledge.Only an ex-CFO (who was the cfo at the time when the scandal was taking place) was a whole time member of the audit committee.

Apart form these facts,the organistaion culture at Toshiba was a corporate one where employees had to act strictly according to whims and fancies of their superiors.In such an environment ,its not possible for an upright internal auditor to survive.

It’s a case where the internal audit failure lead to corporate governance failure.

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There is so much going on in our economy presently.We hardly have time and resources to know it all.But there is no need to worry.Here we will look at what the most important person in our economy has to say regarding a variety of financial and economic issues.Well,this person is none other than the governor of RBI,Mr.Raghuram Rajan.(ps-the excerpts have been edited).

1)POLICY RATIONALE-As the RBI is waiting for further data on monsoon(whether it will be normal or not) and the recent increase in inflation,the policy rate is being held constant at 7.25%.There maybe further fall in oil prices also which will benefit the country.

2)INFLATION TRAJECTORY-They are changing considerably specially in items like food,milk e.t.c. and so it is a matter of concern.

3)INCREASE IN FOREIGN PORTFOLIO INVESTMENT LIMIT-A framework will be set that will include-a)target of how much bond market will be constituted in the medium term by FPIs.  b)announcing the changes in limits every six months . c)limits to be specified in rupees

4)PAYMENTS AND SMALL FINANCE BANKS-There have been recommendations received by RBI from external advisory committes on payment and small finance banks.RBI board will consider all the applications and prepare a list of successful applicants and will announce at least one set of bank licenses towards August end.

5)MONETARY POLICY COMMITTEE(MPC)-RBI is a supporter of a committee because-a)a committee would have a variety of opinions which will lead to better decision making as compared to those made by an individual.  b)when decision making power will spread,the burden on an individual will decrease and c)committee will ensure broad monetary policy continuity even if any member or governor changes.

6)VETO POWER OF CHAIRMAN-Governor has veto currently-his is the only decision.

7)RBI AUTONOMY-The RBI Act  contains a clause according to which the GOI has the right to give directions to it.This right has not been used till now in history.So a distinction has to be made between de jure and de facto.De facto,RBI is independent.

8)INDIAN FINANCIAL CODE-The new version of the code is under examination.Until then,no comments to be made on it.But this code is in the right direction.

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Finance is so very important for the profitable survival of our small industries which is why the Indian banking sector is coming forward to meet the fund requirements of MSMEs.We all know that the role of of micro,small and medium enterprises in social and economic progress of the country is immense.This sector contributes 8% of the country’s GDP,provides employment to 60 million people and it even has more even geographical distribution.They are important to achieve an equitable and inclusive growth ,that is,growth for all.

Banks have always been a support to MSME.Through the policies of government and RBI,banks have made loan availability to this sector easy in many ways-shorter time in providing loans,easy and user friendly loan applications,adherence to fair practise code,competitive interest rates,single window finance for loans e.t.c. Banks also provide specialised services to MSMEs like a quick grievance redressal mechanism for all branches and offices to completely satisfy all the customers.Some banks worth mentioning in this regard are Laxmi Vilas Bank and TMB.

Apart from this,it has been advised to the public sector banks that they should open atleast one specialized branch having 60% or more of their advances to MSMEs.These banks will be responsible to provide better services to this sector.

According to the 2010 report on MSMEs by the Prime Minister’s Task Force,banks will have to increase their credit providing capacity to MSMEs by 20% every year,the micro enterprises accounts with them by 10% annually and allocate 60% of MSE advances to this sector.RBI and GOI will constantly monitor whether these requirements are being fulfilled by the banks or not.Moreover,GOI has started Credit Guarantee Fund Scheme for MSMEs to provide them with collateral free credit.RBI has also issued mandatory guidelines in this regard for a loan upto Rs. 10 lakhs by this sector.

These are only a few ways in which the banks are helping the MSMEs.It is envisioned there will be a phenomenal growth in this sector with a large number of enterprises.

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India’s largest microfinance firm ,Bandhan,will finally become a bank on 23^rd August.Some of its members like Ashoka will deposit Rs.1000 while others like Sankari will deposit Rs.10.One of the wealthy in the group-Keya Chakraborty who runs a wholesale medicine business will deposit as much as Rs.5000 at first.

Have you ever heard of Bandhan?Well it needs little introduction-

Bandhan born in 2001 under the guidance of Mr.Chandra Shekhar Ghosh works with socially disadvantaged and economically exploited women.It works for their upliftment and economic liberation.To achieve its goal ,Bandhan provides microfinance services to the poor women.It carries its microfinance activities under Bandhan Financial Services Limited formed under companies act ,1956.It is also registered with RBI as a Non Banking Financial Company.

Now as Bandhan is becoming a bank,there are many perks for banking with this newly born.Do you know that Sankari will get an ATM card with her name on it even with a deposit of Rs.10.Moreover,all the facilities would be available to MFI account holders as those provided to standard savings account holder apart from the new facility of doorstep banking which only Bandhan will provide.Bandhan’s microfinance business worth nearly Rs.10,000 crore.The integration of its microfinance business with its banking business is being planned very carefully and is being executed in a very orderly manner.In Bandhan’s MFI operations,the lowest strata will comprise of credit officers who don’t need to have much professional qualification except a class 12^th certificate.Their experience will what get them promotion.The credit officer will report to a brach manager who will have under him 5-6 of credit officers.These branch managers will report to a regional manager who again will have 5-6 branch managers under him.The regional manager reports to divisional head who will have 8 regional managers under him and finally the divisional head will report to one of the four zonal heads placed in kolkata.

As of now,Bandhan has 2022 branches in the country.The functioning of this hub and spoke model is yet to be finalised.It is expected that a person will be able to do upto Rs.50,000 transactions in the small branches.

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It was unbelievable for him.The number of hours he had put in on the range,the two back surgeries he had to suffer to prove it.He knew it had come later for him than most of the guys but then it was true.A dream that came true on the Sunday morning,July 26,2015.

This was what the triumphant 51 year old Golf star Marco Dawson who made a dramatic victory in the senior British Open after he sank 18ft birdie putt on the last hole for a round of 64 felt.He clearly defeated the legends Bernhard Langer and Colin Montgomerie.This was a narrow victory though because Langer also closed with a 64 and Montogomerie was two more shots back..It was a stunning comeback for this Golf player.

The Open Championship at Royal Troon,which is the golf’s oldest Major has opened its gates for the first time for Dawson after this wonderful victory.

You know a surprising fact??-This American has participated in 413 events of the U.S. regular PGA Tour.Amazing,right?But he has never ever won one. Until now,Dawson’s best finish was a runner up in Greater Milwaukee Open held in 1995 in which he occupied the second place behind Scott Hoch.

This victory is even more interesting because the rivals Dawson had to face were Langer who is two times U.S. Masters champion and has the first title in his 4^th European senior and Montgomerie who won the last year’s senior U.S. Open and two times the senior U.S. PGA title.

Lets take a glance at the leading final round scores of these 3 stars-

264 M Dawson (USA) 65 67 68 64,
265 B Langer (Ger) 65 68 68 64,
267 C Montgomerie (Sco) 67 67 66 67

Apart from the awesome game he played.Marco is one of the most liked golf players-both by fans and by fellow players.All credits to him!!

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