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March 2, 2011
By Ashish Saklecha

Measuring and managing the liquidity needs are

vital for effective operation of commercial banks. By assuring a bank¶s ability to meet its
liabilities as they become due, liquidity management can reduce the probability of an adverse
situation developing. The importance of liquidity transcends individual institutions, as liquidity
shortfall in one institution can have repercussions on the entire system. Bank managements
should measure, not only the liquidity positions of banks on an ongoing basis, but also examine
how liquidity requirements are likely to evolve under different conditions.

Banks are in the business of maturity transformation. They lend for longer time periods, as
borrowers normally prefer a longer time frame. But their liabilities are typically short term in
nature, as lenders normally prefer a shorter time frame (liquidity preference). This results in
long-term interest rates typically exceeding short-term rates. Hence, the incentive for banks for
performing the function of financial intermediation is the difference between interest receipt and
interest cost which is called the interest spread. It is implicit, therefore, that banks will have a
mismatched balance sheet, with liabilities greater than assets in short term, and with assets
greater than liabilities in the medium and long term. These mismatches, which represent liquidity
risk, are with respect to various time horizons. Hence, the overwhelming concern of a bank is to
maintain adequate liquidity.

Liquidity has been defined as the ability of an institution to replace liability run off and fund
asset growth promptly and at a reasonable price. Maintenance of superfluous liquidity will,
however, impact profitability adversely. It can also be defined as the comprehensive ability of a
bank to meet liabilities exactly when they fall due or when depositors want their money back.
This is a heart of the banking operations and distinguishes a bank from other entities.

Objectives and Methodology of the Study

Though Basel Capital Accord and subsequent RBI guidelines have given a structure for
Liquidity Management and Asset Liability Management (ALM) in banks, the Indian banking
system has not enforced the guidelines in total. The banks have formed Asset-Liability
Committees (ALCO) as per the guidelines; but these committees rarely meet to take decisions.

Taking this as a base, this research article attempts to find out the status of Liquidity
Management in State Bank of India with the help of ³Cash Flow Approach´ methodology for
controlling liquidity risk. To achieve the main purpose, the following objectives are set forth:

Yp To identify the liquidity risks faced by the banks.

Yp Classification of assets and liabilities into different time buckets as per RBI guidelines
issued for liquidity management in banks.
Yp Analysis of liquidity risk through Cash Flow Approach Method.

The study covers SBI¶s data for evaluation. The relevant data have been collected from the
published annual report of the bank for the period from 2000 to 2007.

In order to have effective liquidity management, bank need to undertake periodic funds flow
projections, taking into account movements in non-treasury assets and liabilities [fresh deposits,
maturing deposits (and maturing) and new term loans]. This enables forward planning for Cash
Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) maintenance.

Cash Reserve Ratio

A scheduled bank is under the obligation to keep a cash reserve called the Statutory Cash
Reserve, with the Reserve Bank of India (RBI) under Section 42 of the Reserve Bank of India
Act, 1934. Every scheduled bank is required to maintain with the Reserve Bank an average daily
balance equal to least 3% of its net demand and time liabilities. Average daily balances mean the
average of balances held at the close of business on each day of the fortnight. The Reserve Bank
is empowered to increase the rate of Statutory Cash Reserve from 3% to 20% of the Net Demand
and Time Liabilities (NDTL). The rate of CRR in March 2007 was 6%.

Liabilities of a Scheduled bank exclude:

Yp Its paid-up capital and reserves

Yp Loans taken from the RBI or IDBI or NABARD
Yp The aggregate of the liabilities of a scheduled commercial bank to the State Bank or its
subsidiary bank, any nationalized bank or a banking company or a cooperative bank or
any financial institution notified by the Central Government in this behalf shall be
reduced by the aggregate of the liabilities of all such banks and institutions to the
concerned scheduled bank.

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March 7, 2011
By Ashish Saklecha

      

Afghanistan ² Carpets, wool, dry and fresh fruits.

Australia ² Wheat, wool, meat, dairy products.
Austria ² Machinery, textile, leather goods.
Belgium ² Glass, textiles.
Brazil ² Coffee.
Canada ² Wheat, machinery, newsprint.
Chile ² Copper.
China ² Rice, tea, silk, iron and steel, oil refining.
Cuba ² Sugar, Tobacco.
Denmark ² Dairy products.
England ² Textiles, machinery, medicines, motor cars.
Finland ² Textiles, paper.
France ² Textiles, silk, wine.
Germany ² Machinery, iron and steel goods, equipment and transport equipment, chemical
products, refrigerators, television, washing machines, lenses, radio etc.
Ghana ² Gold, manganese, coffee.
India ² Sugar, hides and skins, mica, manganese, tea, lac, jute, textiles.
Indonesia ² Sugar, spices, rice, oil, rubber, cinchona.
Iran ² Petroleum, dry fruits, carpet.

Iraq ² Petroleum, dates.

Italy ² Textiles, mercury.
Japan ² Automobiles, machinery, textiles, toys, silk, hosiery electronics.
Kuwait ² Petroleum.
Malaysia ² Tin, rubber.
Mexico ² Silver, petroleum.
Netherlands ² Machinery, electrical goods, aircraft.
Russia ² Heavy machinery, petroleum, iron and steel, chemicals.
Saudi Arabia ² Oil and dates.
Spain ² Lead.
Sweden ² Matches, timber.
Switzerland ² Watches, electrical equipment.
Taiwan ² Rice, Camphor.
South Africa ² Gold and diamond mining.
U.S.A. ² Automobiles, machinery, coal, wheat, petroleum.
Vietnam ² Tin, cinchona, rubber, rice and teak.
West Indies ² Sugar, tobacco.

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 Biggest Hotel ² Oberai-Sheraton on the shore of the Arabian Sea in South
Bombay.
Highest Mountain Peak ² K2 (8Ã611 metres)
Largest Populated City ² Mumbai
Longest River (Flow in India) ² Ganga (2510 km)
Highest Waterfall ² Gersoppa Waterfall, Karnataka, (830 ft.)
Largest Lake ² Wular Lake, Kashmir Longest Electric Railway Line ² Kolkata to Delhi
Largest State (area) ² Rajasthan (4Ã43Ã446 sq. kms)
Largest State (population) ² Uttar Pradesh (166,197,921)±2001 census
Longest River Bridge ² Mahatma Gandhi Setu, Patna (5‡75 km. Long)
Highest Gateway ² Buland Darwaja 54 metres (Fatehpur Sikari, Agra)
Wettest place or heaviest rainfall ² Masinram (Meghalaya)
Tallest Statue ² Statue of Gomateshwar, Karnataka (47 metres high)
Largest Tunnel ² Jawahar Tunnel (J & K State), 1½ km., Banihal Pass)
Largest Museum ² Indian Museum, Kolkata
Densest population ² West Bengal (904 persons per sq. kms)
Largest Zoo ² Zoological Gardens, Alipur, Kolkata
Largest Forest State ² Asom
Largest Road ² Grand Trunk Road (2,400 kms)
Largest Delta ² Sunderban Delta (12Ã872 sq. kms)
Largest Cave Temple ² Ellora (Kailash Temples, Maharashtra)
Largest Cantilever Span Bridge ² Howrah Bridge (Kolkata)
Highest Tower ² Qutub Minar, Delhi
Largest Dome ² Gol Gumbaz, Bijapur (Karnataka)
Largest Mosque ² Jama Masjid, Delhi
Highest Straight Gravity Dam ² Bhakra Dam
Smallest State (area) ² Goa
Smallest State (population) ² Sikkim
Largest Desert ² Thar (Rajasthan)
Largest man-made lake ² Govind Sagar (Bhakra)
Largest Corridor ² Rameshwaram Temple Corridor (121 metres long)
Largest Animal Fair ² Sonepur Fair, Bihar.

*This Data based on some information please confirm more at your own resources

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March 6, 2011
By Ashish Saklecha

&    ''

Venture Capital in India Venture capital is a relatively new class of capital in India about which
lot of people are not aware. A venture capital firm invests in a company at a very early stage,
sometimes even when the company has not even started earning revenues. Since banks are
unwilling to extend capital to such companies, venture capitalists step in and provide funds. In
India, where getting bank loans for Small and Medium Enterprises (SMEs) is extremely tough,
venture capital is an attractive option. Typically, the investment is anywhere between Rs. 10-25
cr in the first round of funding. The venture capital firms take equity stake in the company from
anywhere between 10-50% for this investment. They may also insist for a board seat in the
company and will demand some controlling rights. Since there is no collateral involved for the
venture investment, venture capital is also referred to as risk capital. In return for such high risk,
venture capital firms usually expect more than 20% return on the capital invested, much more
than what banks would hope to get from their loans to businesses. Usually, venture capital firms
exit the company, by either an Initial Public Offering (IPO), or by a strategic sale. The venture
funds typically look at exit within three to five years, with a return of 5-10 times the capital
invested.
There are typically six stages of financing classified as venture capital or private equity,
depending on the stage of investment: Angel Funding or Seed Money:Low-level financing
needed to prove a new idea (often provided by `angel investors¶, who are private individual
investors). Start-up Capital:Early stage firms that need funding for expenses associated with
marketing and product development. First Round: Funds provided for initial sales and
manufacturing. Second Round: Working capital provided for early stage companies that are
selling products, but have not yet been able to break even. Third Round:Also called Mezzanine
financing, this is expansion money provided to a newly profitable company. Fourth Round:Also
called bridge financing, the fourth round is intended to finance the `going public¶ process. An
early stage company usually suffers from two types of constraints: HR constraints and Capital
constraints. Capital constraints can be removed by providing risk capital to the entrepreneurs but
most of the time, it does not solve the HR issues. Early stage companies in India, most of the
time, have issues in hiring good talent since the concept of Employee Stock Option Plans
(ESOPs) is still new here. ESOPs allow the company to offer shares in the company at a
significant discount and let employees cash in on the profits whenever the company goes in for
an IPO or strategic sale. A good venture capital management firm usually has an entrepreneurial
background which helps them understand the issues of early stage companies better and be more
patient with them. They bring in good talent through their network and provide key strategic
advice to the team to help them scale-up the business. Venture capital industry had existed
outside of India for decades. In US, for example, venture capital firms have helped to create
giant companies like Google, Cisco, Sun Microsystems, üahoo, Amazon, Apple and a host of
other firms. It has been estimated that venture capital firms invest anywhere between $25-30 bn
in the US, while in India the figure ranges between $500-750 mn. In terms of industry size, India
is at stages similar to what US was in the early 1980s. The venture industry in India started in
late 1990s during the great dot-com boom. Those investments in India were not very successful
and after the dot-com bust, the venture industry revived back in early 2005. The success of
investments in this decade is yet to be seen. Usually, a venture capital fund will have investors,
called Limited Partners (LPs), who are usually based outside of India, mostly in US. These LPs
would give the venture capital firm, which is managing the fund an annual management fee of
anywhere between 1-2% of the fund size. They would also give a carry of 15-25% to the fund
managers which means the managers would get 15-25% of the profit from exits the firms makes
from the investments. India has handful of venture capital firms right now like Helion, IDG,
Nexus Venture Partners and Sequoia to name a few. This industry is still new in India and we are
at a very interesting stage where venture capital firms are waiting for their big exits. It is critical
that venture capital firms get good returns since that will help this industry in the long run and
help build great companies like Google in India too. So let¶s keep our fingers crossed

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March 15, 2011
By Ashish Saklecha

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Bank Rate is the rate at which central bank of the country (in India it is RBI) allows finance to
commercial banks. Bank Rate is a tool, which central bank uses for short-term purposes. Any
upward revision in Bank Rate by central bank is an indication that banks should also increase
deposit rates as well as Prime Lending Rate. This any revision in the Bank rate indicates could
mean more or less interest on your deposits and also an increase or decrease in your EMI.

)'X   (*&   +:

This is the rate at which central bank (RBI) lends money to other banks or financial institutions.
If the bank rate goes up, long-term interest rates also tend to move up, and vice-versa. Thus, it
can said that in case bank rate is hiked, in all likelihood banks will hikes their own lending rates
to ensure and they continue to make a profit.

)'X (

The Reserve Bank of India (Amendment) Bill, 2006 has been enacted and has come into force
with its gazette notification. Consequent upon amendment to sub-Section 42(1), the Reserve
Bank, having regard to the needs have securing the monetary stability in the country, can
prescribe Cash Reserve Ratio (CRR) for scheduled banks without any floor rate or ceiling rate.
[Before the enactment of this amendment, in terms of Section 42(1) of the RBI Act, the Reserve
Bank could prescribe CRR for scheduled banks between 3 per cent and 20 per cent of total of
their demand and time liabilities].RBI uses CRR either to drain excess liquidity or to release
funds needed for the economy from time to time. Increase in CRR means that banks have less
funds available and money is sucked out of circulation. Thus we can say that this serves duel
purposes i.e. it not only ensures that a portion of bank deposits is totally risk-free, but also
enables RBI to control liquidity in the system, and thereby, inflation by tying the hands of the
banks in lending money.
)'X *&   +

CRR means Cash Reserve Ratio. Banks in India are required to hold a certain proportion of their
deposits in the form of cash. However, actually Banks don¶t hold these as cash with themselves,
but deposit such case with Reserve Bank of India (RBI) / currency chests, which is considered as
equivalent to holding cash with themselves.. This minimum ratio (that is the part of the total
deposits to be held as cash) is stipulated by the RBI and is known as the CRR or Cash Reserve
Ratio. Thus, when a bank¶s deposits increase by Rs100, and if the cash reserve ratio is 9%, the
banks will have to hold additional Rs 9 with RBI and Bank will be able to use only Rs 91 for
investments and lending / credit purpose. Therefore, higher the ratio (i.e. CRR), the lower is the
amount that banks will be able to use for lending and investment. This power of RBI to reduce
the lendable amount by increasing the CRR makes it an instrument in the hands of a central bank
through which it can control the amount that banks lend. Thus, it is a tool used by RBI to control
liquidity in the banking system.

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Every bank is required to maintain at the close of business every day, a minimum proportion of
their Net Demand and Time Liabilities as liquid assets in the form of cash, gold and un-
encumbered approved securities. The ratio of liquid assets to demand and time liabilities is
known as Statutory Liquidity Ratio (SLR). Present SLR is 24%. (Reduced i.e. 8/11/208, from
earlier 25%) RBI is empowered to increase this ratio up to 40%. An increase in SLR also
restricts the bank¶s leverage position to pump more money into the economy.

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SLR stands for Statutory Liquidity Ratio. This term is used by bankers and indicates the
minimum percentage of deposits that the bank has to maintain in form of gold, cash or other
approved securities. Thus, we can say that it is ratio of cash and some other approved to
liabilities (deposits) It regulates the credit growth in India.

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Repo (Repurchase) rate is the rate at which the RBI lends shot-term money to the banks. When
the repo rate increases borrowing from RBI becomes more expensive. Therefore, we can say that
in case, RBI wants to make it more expensive for the banks to borrow money, it increases the
repo rate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo
rate

Reverse Repo rate is the rate at which banks park their short-term excess liquidity with the RBI.
The RBI uses this tool when it feels there is too much money floating in the banking system. An
increase in the reverse repo rate means that the RBI will borrow money from the banks at a
higher rate of interest. As a result, banks would prefer to keep their money with the RBI

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March 12, 2011
By Ashish Saklecha

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Indus Valley Civilization

This was the earliest civilization (between 2500 BC and 1750 BC) that flourished in India on the
banks of the river Indus, from frontiers extending from Manda on the Chenab near Jammuin the
north to Daimabad, on the Godavari in Ahmednagar in the south embracing 200 sites in the
Kutch-Saurashtra region of Gujarat.In India, important sites connected with the Indus valley
civilization are-Lothal near Ahmedabad (in Gujarat), Kalibangan (in Rajasthan), Banwali in
Hissar (district of Haryana) and Ropar near Chandigarh (in Punjab).

Vedic Civilization
Invasion of the Aryans recurrent floods and other possible natural causes like earthquakes were
responsible for the disappearance of the Indus valley civilization and the origin of Vedic
civilization.

The Aryans are supposed to have come to India from Central Asia. They first occupied Punjab.
Gradually, they pushed their way along the courses of
the Ganga and the üamuna and conquered the whole of northern India.
Their penetration was a long and slow process. The Indo-Aryans did not conquer the south. They
were tall and fair complexioned and possessed sharp features. They are responsible primarily for
Indian culture and civilization.

Indus Valley Civilization

This was the earliest civilization (between 2500 BC and 1750 BC) that flourished in India on the
banks of the river Indus, from frontiers extending from Manda on the Chenab near Jammuin the
north to Daimabad, on the Godavari in Ahmednagar in the south embracing 200 sites in the
Kutch-Saurashtra region of Gujarat.
In India, important sites connected with the Indus valley civilization are-Lothal near Ahmedabad
(in Gujarat), Kalibangan (in Rajasthan), Banwali in Hissar (district of Haryana) and Ropar near
Chandigarh (in Punjab).

Vedic Civilization
Invasion of the Aryans recurrent floods and other possible natural causes like earthquakes were
responsible for the disappearance of the Indus valley civilization and the origin of Vedic
civilization.
The Aryans are supposed to have come to India from Central Asia. They first occupied Punjab.
Gradually, they pushed their way along the courses ofthe Ganga and the üamuna and conquered
the whole of northern India.Their penetration was a long and slow process. The Indo-Aryans did
not conquer the south. They were tall and fair complexioned and possessed sharp features. They
are responsible primarily for Indian culture and civilization.

Hindu Religious Books

Vedas
There are four Vedas-
1. The Rig Veda
2. The Sama Veda
3. The üajur Veda and
4. The Atharva Veda
Upanishads
They represent the high water mark of Hindu intellect. They constitute the basis of vedantic
philosophy.
Epics
1. The Ramayan written by Valmiki
2. The Mahabharat written by Ved Vyas

Puranas
They are 18 in number. They constitute a mixture of religion, history, mythology and
tradition. These Puranas are-
01. Brahma Purana
02. Padma Purana
03. Vishnu Purana
04. Vayavya Purana
05. Bhagvad Purana
06. Naridiaya Purana
07. Markandeya Purana
08. Brahmvaivart Purana
09. Leng Purana
10. Varah Purana
11. Skanda Purana
12. Garud Purana
13. Brahmand Purana
14. Aagneyay Purana
15. Bhavishya Purana
16. Baaman Purana
17. Karma Purana
18. Matsaya Purana

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March 9, 2011
By Ashish Saklecha

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A manager in an organization is not always a leader. Management and leadership are two
different concepts, though often appear to overlap. Modern organizations tend to be complex and
operate in a global business environment. Therefore, there is renewed focus on the importance of
management and leadership and their distinctive roles in promoting and advancing the interests
of the organization. Hard competition and continuous pressures for change demand that
managers and leaders work closely together for achieving business goals.
On the practical level, a manager is called upon to evince the quality of leadership and a leader
the knack for managing difficult situations in their respective roles in any organization.
Pragmatically speaking, then, the distinction between a manager and leader is not problematic.
³A manager is often portrayed as a procedural administrator/supervisor²an individual in an
organization with recognized formal authority who plans, coordinates and implements the
existing directions of the organization (Koontz et al, 1986).´
A leader, on the other hand, is defined as someone who occupies a position of influence within a
group that ³extends beyond supervisory responsibility and formal authority´ (Vecchio et al.
1994: 504) and is involved in devising new directions and leading followers ³to attain group,
organizational and societal goals´ (Avery 1990: 453). This distinction between the supervisory
manager and visionary leader has to be understood in terms of their respective tasks and
functions.
Duns ford, a management guru, believes that management is concerned with µefficiency¶²with
tasks such as coordinating resources and implementing policy, while leadership has to concern
itself with µeffectiveness¶ of making decisions, setting directions and principles, formulating
issues and grappling with problems. Katz (1974: 90-102), however, has identified three critical
managerial skills and the last two happen to be attributes of competent leadership. These are:
technical skills (the ability to perform particular tasks or activities); interpersonal skills (the
ability to work well with other people); and conceptual skills (the ability to see the µbig picture¶).
Modern leadership theory supports an integrated approach to management and leadership. Early
work on leadership identified the various styles of leadership based on personal traits and
behavior of an effective leader, such as drive, desire to lead, decisiveness, honesty and integrity,
self-confidence, intelligence, job relevant knowledge (Kirkpatrick and Locke 1991: 48-60). The
behaviorist models focused on the relationship between a leader¶s actions and their impact on the
attitudes and performance of employees. These studies compared various styles of leadership,
such as authoritarian and democratic styles. They studied if an effective leader was more prone
to efficient accomplishment of a task rather than being inclined to the welfare of employees and
subordinates. The ideal style, as proposed by Stodgily in 1974, combined the best of both
approaches. In later work we find considerations of leadership theory as part of a wider approach
to modern management.
The traditional distinctions between a manager and leader are disappearing. Modern business
operates in the midst of uncertainties as the current global slowdown and enveloping financial
crisis show. Accordingly, the role of a manager demands flexibility, dynamism, management
skills as well as leadership quality