The QUALIFIED GURU

BANKING BACKGROUND AND ITS GROWTH For having a healthy economy there has to be a sound and effective banking system. The banking system of India should be able to meet new challenges posed by the technology and any other internal and external factors. For the past three decades several significant achievements have been observed in Indian banking system especially towards credit facilities. In fact, Indian banking system has reached gradually to remote places of the country also. The government’s regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks in India. The first bank in India (although conservative/rigid) was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct stages. Stage-I:  Early phase from 1786 to 1969 of Indian Banks. Stage-II: Nationalization of Indian Banks and unto 1991 prior to Indian banking sector reforms. Stage-III:   New ...

.1  Personnel management is a traditional approach of managing people in the organization. Human resource management is a modern approach of managing people and their strengths in the organization. 2 . Personnel management focuses on personnel administration, employee welfare and  labor relation . Human resource management focuses on acquisition, development, motivation and maintenance of human resources in the organisation. 3.  Personnel management assumes people as a input for achieving desired output. Human resource management assumes people as an important and valuable resource for achieving desired output. 4.  Under personnel management, personnel function is undertaken for employee's satisfaction. Under human resource management, administrative function is undertaken for goal achievement.                                    5.  Under person...

1 . Effective Utilisation Of Resources Human resource management ensures the effective utilisation of resources. HRM teaches how to utilise human and non-human resources so that the goals can be achieved. Organisation aiming to utilise their resources efficiently invites the HR department to formulate required objectives and policies. 2. Organisational Structure Organisational structure defines the working relationship between employees and management. It defines and assigns the task for each employee working in the organisation. The task is to be performed within the given constraints. It also defines positions, rights and duties, accountability and responsibility, and other working relationships. The human resource management system provides required information to timely and accurately. Hence, human resource management helps to maintain organisational structure. 3. Development Of Human Resources Human resource management provides favourable environment for e...

1. AGM of company is an Annual meeting of the body of member. 2. It whould be applicable on public or private company haveing share capital or not, OPC is not requiered to hold an AGM, Central Government company not required to hold AGM. 3.First AGM should be held whith in 9 monthfrom the end of first financialyear. 4. AGM shall be held on any day except  National holiday. 5. Two AGM shall be held on the same day provided separte notice. 6. AGM shall be held during business hours. 7. AGM shall be held at the Registered office of the company.

Foreign Currency Exchangeable Bond (FCEB) means a bond expressed in foreign currency, the principal and interest in respect of which is payable in foreign currency, issued by an Issuing Company and subscribed to by a person who is a resident outside India, in foreign currency and exchangeable into equity share of another company, to be called the Offered Company, in any manner, either wholly, or partly or on the basis of any equity related warrants attached to debt instruments. The FCEB may be denominated in any freely convertible foreign currency. FCEB is regulated by Foreign Currency Exchangeable Bond Scheme, 2008 issued by Ministry of Finance, Department of Economic Affairs.  Features of FCEB Issued by an issuing company, being an Indian company: (a) It is a bond expressed in foreign currency. (b) The principal and the interest thereon is payable in foreign currency. (c) This instrument can only be subscribed by a person resident outside India. (d) It is exchangeable into e...

A Foreign Currency Convertible Bond (FCCB) is a quasi-debt instrument which is issue by any corporate entity, international agency or sovereign state to the investors all over the world. They are denominated in any freely convertible foreign currency. Euro Convertible Bonds are usually issued as unsecured obligation of the borrowers.  At the time of issue, FCCB is like a debt and after maturity; it becomes an equity share or depository receipt.  In short, FCCB represents equity linked debt security which can be converted into shares or into depository receipts on its maturity. The investors of FCCBs have the option to convert it into equity in accordance with pre – determined formula at the time of issue of FCCB. FCCBs are bonds issued by an Indian company to raise money in a foreign currency. It is like a loan to the Company and it has fixed rate of interest. The Buyers of FCCBs have the option of redeeming their investment or converting the bonds into equity at matur...

Listed Company: A listed company can issue ADR/GDR to the person resident outside India under the FDI scheme.  Unlisted Company: An unlisted company can raise capital (Fund) from abroad (vide RBI Notification vide A. P. (DIR Series) Circular No. 69, dated 8th November, 2013) without the requirement of prior or subsequent listing in India, initially for a period of two years, subject to the following conditions:-  (a) Unlisted Indian companies shall list abroad only on exchanges in IOSCO/FATF compliant jurisdiction or those jurisdiction with which SEBI has signed bilateral agreements,  (b) The ADRs/GDRs shall be issued subject to Sectoral cap;  (c) The number of underlying equity shares offered for issuance of ADRs/GDRs to be kept with the local custodian and ratio of ADRs/GDRs to equity shares shall be decided upfront based on applicable FDI priding norms of equity shares of unlisted company;  (d) The unlisted Indian company shall comply with the instructio...

Depository Receipts (DRs) are negotiable securities and outside India by a Depository bank, on behalf of an Indian company, which represent the local Rupee denominated equity shares of the company held as deposit by a Custodian bank in India.  GLOBAL DEPOSITORY RECEIPTS: (Section 2(44) of the Companies Act, 2013) Global Depository Receipt means any instrument in the form of a depository receipt, by whatever name called, created by a foreign depository outside India and authorized by a company making an issue of such depository receipts.  A company issued Global Depository Receipts (GDRs) in accordance with the provisions of Companies (Issue of Global Depository Receipts) Rules, 2014. It is a form of depository receipt or certificate created by the Overseas Depository Bank outside India denominated in dollar and issued to non – resident investors against the issue of ordinary shares or foreign currency convertible bonds of issuing company.  In short, it is basical...

EURO ISSUE Euro issue means modes of raising funds by an Indian company outside India in foreign currency. This method is being used by the Indian Company for raising funds from outside India in the form of ADR/GDR.  The following Indian Companies have already issued their ADR/GDR:-  (i) ICICI Bank Ltd. (ii) Gail India Ltd. (iii) Infosys Ltd. (iv) HDFC Bank Ltd.

In the light of the Standard Chartered Rights Issue where rights could not be granted to IDR holders, SEBI amended ICDR regulations by inserting new chapter governing rights issue of IDR.  ELIGIBILITY  (i) Issuer should not be in breach of ongoing material obligations under IDR Listing Agreement. (ii) Application to all recognized stock exchanges, where such IDRs are listed, must have been made, for listing of IDRs to be issued by way of rights, before such issue.  DISCLOSURES  Following disclosures shall be made: (i) Disclosures as required in the home country of the issuer; (ii) An additional wrap (addendum to offer document) attached to the offer document.  The Regulations further provide for: (i)  Disclosures  in  Abridged  Prospectus  and  Abridged  Letter  of  Offer; (ii)  Disclosures  in  Addendum  to  Offer; (iii)  Dispatch  of  ab ridged  letter  of...

Regulatory Bodies: (i) The Securities and Exchange Board of India (ii) The Ministry of Corporate Affairs (iii) The Reserve Bank of India  Statutes Governing IDRs: (i) Section 390 of the Companies Act, 2013 (ii) Rule 13 of the Companies (Registration of Foreign Companies) Rules, 2014 (iii) SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009  RULE 13 OF THE COMPANIES (REGISTRATION OF FOREIGN COMPANIES) RULES, 2014  These rules are applicable to all foreign companies which intend to raise funds from the Indian Market via IDR. In other words, these rules are applicable to those companies incorporated outside India, whether they have or have not established any place of business in India.  ELIGIBILITY FOR ISSUE OF IDRS  An issuing company can issue IDRs only if it satisfies the following conditions: (i) Pre – issue paid – up capital and free reserves of at least US$50 million; (ii) Has a minimum average market capitalization...

Benefits to the Issuing Company: (i) Provides access to a large pool of capital to the issuing capital. (ii) Gives brand recognition in India to the issuing company. (iii) Facilitates acquisitions in India. (iv) Provides an exit route for existing shareholders.  Benefits to Investors: (i) Provides portfolio diversification to the investor. (ii) Gives the facility of ease of investment. (iii) There is no need to know your customer norms. (iv) No resident Indian individual can hold more than $200,000 worth of foreign securities purchased per year as per Indian foreign exchange regulations (FEMA).  However, this will not be applicable for IDRs which gives Indian residents the chance to invest in an Indian listed foreign entity.

INTRODUCTION Now, due to globalization and technology advancement, the Securities Market has become international.  Companies that previously had to raise capital in the domestic market can now tap foreign sources of capital in overseas market to raise fund from international market.  As India is a preferred investment destination among international investors, the Government of India has introduced the concept of Indian Depository Receipts (IDRs) to facilitate listing by foreign companies on India Stock Exchanges.  Indian Depository Receipts (IDRs) are like American Depository Receipts (ADRs) or Global Depository Receipts (GDRs), except that the issuer is a foreign company raising funds from the Indian market. IDRs are rupee – denominated and created by a domestic depository against the underlying equity shares of a foreign company.  IDRs Holders have all rights except attending annual general meetings and voting on resolutions, other rights are available...

It is a mutual fund scheme which invests in the schemes of same or other mutual funds present in the market instead of investing in securities.  These funds can be broadly classified into: Sector Specific Funds: These funds invest in the various sectors of the economy and protect themselves by not investing the whole amount in only one sector.  Asset Allocation Funds: They diversify the investments by holding several different kinds of assets at the same time. They are also known as life cycle funds.  Benefits of FOFs are: 1. Diversified investments: as a fund of funds invests in the schemes of other funds, it provides a greater degree of diversification. 2. Uncomplicated scheme: instead of investing in different stocks and keeping track record of all of them, it will be much easier to invest in and track only one fund, which in turn invests in other mutual funds. 3. Cheap: while entering into the capital markets it is difficult to diversify because of limited fund...

These schemes under Gold Exchange Traded Funds are allowed to invest primarily in Gold and Gold related instruments. Gold ETFs are subject to the following restrictions:-  (i) The initial issue expenses should not exceed 6% of the funds raised.  (ii) The funds should only be invested in the gold and gold related instruments.  (iii) They may invest in the short term deposits of scheduled commercial banks.

ETFs are new varieties of mutual funds which were introduced in 1993. Exchange Traded Fund is a security that tracks an index, a commodity or a sector like an index fund or a sectoral fund but trades like a stock on an exchange. It is similar to close – ended mutual fund listed on stock exchanges.  In other words, ETFs are baskets of securities that are traded, like individual stocks, on an exchange. In the simplest terms, Exchange Traded Funds (ETFs) are funds that track indices like the NIFTY Index, SENSEX etc. ETFs can be bought and sold exactly like a stock of an individual company during the entire trading day. Furthermore, they can be bought on margin, sold short or bought at limit prices. Exchange traded funds can help investors build a diversified portfolio that‟s easy to track.  In short, they are similar to index mutual funds but are traded like securities. As their name implies, Exchange Traded Funds represent a basket of securities that are traded on ...

▪Offshore means a place situated at sea some distance from the shore or outside the jurisdiction of a Country.  ▪It means any investments through an organized corporation/company from foreign country.  ▪Generally, these funds are targeting those countries which have tax – free regime. These hedge funds are typically organized as corporations in certain countries like Cayman Islands, British Virgin Islands, the Bahamas or Bermuda. They attract investments of US tax – exempt entities.

Hedge funds are organized as corporations in countries like USA as limited partnerships to accommodate investors that are subject to taxation policies of the United States.  This type of hedge fund may use the business form of Limited Liability Companies (LLC), Limited Liability Partnership (LLP) or Business Trusts.  In these types of business forms, LLC & LLP and business trusts are not liable to tax whereas the individual investors are liable to tax. This type of concept is very popular in USA.

Hedge means Fence, Barrier & Hurdle (other meaning – Protection & Security). In other words, it is a process of reducing and controlling future risk by taking some steps in advance.  Hedge fund refers to an alternative investment vehicle that is designed to protect investment portfolios from market uncertainty, while generating positive returns in both up and down markets. Hedge funds are unregistered private investment partnerships, funds or pools that may invest and trade in many different markets, strategies and instruments (including securities, non – securities and derivatives) to provide certain periodic and standardized pricing and valuation information to investors.  In short, it is an alternative investment that is designed to protect the Capital (investment amount) of an investor from market uncertainty and generate positive returns from the market fluctuations.  What is Hedging Concept?  Case Study: STEEL INDUSTRY  Facts: An...

▪It is a contract which gives the buyer/holder of the contract the right to buy/sell the underlying asset at a pre – determined price within or at the end of the specified period. It is not an obligation on the option holder. ▪The buyer/holder of the option purchases the right from the seller/writer for a consideration which is called as premium. The seller/writer of an option is obliged as per the terms of the contract when the buyer/holder exercises his rights.  There are two types of Option Contracts:  Call Option: A Call option is an option to buy an underlying asset at a specific price on or before expiry date of the contract. In this way, Call options are like advance money for purchase of any land and building.  Example: If you want to sell your one flat which located in Dwarka, New Delhi to Mr. Raman. You have asked Mr. Raman to pay Rs.10 lacs as an advance for selling of your flat. As per the terms and conditions of an agreement to sale, Mr....

The term “Derivatives” indicates that it has no independent value i. e. its value is entirely derived from the value of the underlying assets. The underlying assets can be securities, commodities, bullion, currency, livestock or anything else.  In other words, Derivatives means a forward, future and option or any other hybrid contract of pre-determined fixed duration, linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities. In India, the Govt. of India had introduced the concept of “Derivatives” in year 1999 by amending Securities Contract (Regulation) Act, 1956.  A Derivative includes: (i) A security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of securities.  (ii) Contract which derives its value from the prices, or index of prices, of underlying securities.

Mortgage – backed securities (MBS) are bonds secured by home and other real estate loans. They are created when a number of these loans, usually with similar characteristics, are pooled together. These securities assure a fixed return which is derived from the performance of the specific assets. They are issued with a maturity period of 3 to 10 years and backed by pooled assets like mortgages, credit card receivables, etc.  Example: A bank offering home loan might round up Rs.20 crore worth of such loans. That pool is then sold to a Government Agency or a government sponsored – enterprise (GSE), or to others to be used as the collateral for the new MBS.  Features of assets to be securitized: The assets to be securitized shall have the following features:- (a) The cash flows generated from the assets should be received periodically in accordance with a Pre – determined schedule. (b) The actual cash flows generated from the assets should be predictable. (...

It is a type of common stock which depends upon the financial performance of a specific business unit or an operating division. If the unit or division or subsidiary company performs well, the value of the stock increases and vice – versa. It is issued by a publicly held company to track the value of one segment of the company.  Example: ABD Ltd. is publicly held company and has 10 divisions at different locations and each division is producing separate products. One division which produces FMCG products, the company had issued tracking stocks for such division.  Important points for above example: (i) If such FMCG division earns profit, the tracking stock holders would get dividend. (ii) If such FMCG is in loss, the tracking stock holders would not get dividend even if the ABC Ltd. is having profits. (iii) The tracking stock holders have a financial interest only in that FMCG division. (iv) The tracking stock holders usually have no voting rights.  Tracking ...

▪Commodity bonds are bonds issued to share the risk and profitability of future commodity prices with the investor.  ▪It is a bond which protects the capital of investors from the future inflation of any commodity. Example: Petro bonds, silver bonds, gold bonds & coal bonds. Petro bond may carry fixed rate of interest with part of face value of bonds denominated in barrels of oil. ▪However, the commodity bond does carry more potential to generate a higher return than a fixed rate bond there is also more risk involved.  ▪While it is unusual, there is always the possibility that the underlying commodities will not perform as anticipated and the return will be less than originally projected.  In general, a commodity – backed bond tends to carry less volatility than many stock issues.

▪Dual Convertible Bonds mean a bond which is convertible into either equity shares or fixed interest rate of debentures/preference shares at the option of investor.  ▪The investor may exercise this option based on the prospect of the project. ▪In other words, the dual convertible bond gives an option to the investor for conversion of DCB into equity & fixed interest of debentures/preferences shares at the expiry of specified period.

Accordingly, Clip and Strip bonds have unique features like two separate instruments one for principal amount and another for interest amount, both instruments are separately saleable in the market.

▪It is a unique kind of bond in which the issuer company issues a bond in two parts.  ▪One part covers principal amount and another covers Interest (Coupon). In other words, it is an instrument which has two portions i. e. Principal Part or Interest Part and Interest part is attached as an additional instrument with principal amount. Therefore, it is clip (attached) and Strip (affixed) Bonds. ▪These bonds are also referred to as coupon notes, split the principal and coupon portions of a bond issue. An investor can sell both instruments separately to anyone.  Example: The Govt. of India issued bonds of Rs.10,000/- with a coupon of 10% and a maturity date of June 1, 2015. If all of the coupons are stripped off (Split), a buyer of the remaining bond portion will receive only one payment of Rs.10,000/- on June 1, 2015 if the bond is held to maturity. These will be no payments of interest on or before maturity, since the coupons have been sold to someone else. ...

These are the instruments issued at a discounted price and interest accrues in the first 2 years for subsequent payment in cash. It helps in the better management of cash flows.