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Indian Bank listed at a Premium over offer An eMagazine forprice Informative Managerial Excellence Indian Bank made its debut on Indian bourses on Thursday, March 1st, 2007 listing a premium of 15.38% over its offer price of Rs.91 in BSE. The stock dipped momentarily to a low of Rs.77 immediately after listing but closed at Rs.98.70, a premium of 8.46%, over its offer price. Over five crore shares were traded during the day. Foreign Institutional Investors led by the govt. of Singapore, bought the stock, an industry source said. Analysts say Indian Bank would have had a better debut, had the market sentiment been robust. Sensex dipped 540.74 points on the previous day. “This bank has a good restructuring story and is doing a lot in terms of innovations. I feel that in a better market environment, the share would have listed at a higher premium,” says Vishal Goel, banking analyst with Edelweiss Securities, With the rise in interest rates and a slew of measures of the RBI to tighten liquidity, bank stocks have not been faring well on the bourses amid apprehensions that banks will take a hit on their bond portfolio. The bond portfolio depreciates when interest rates rise.
BUDGET 2007-08 Highlights on Income Tax & Banking proposals • •
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BANKING • •
SBI has lost 13.4% from a high of Rs.1200 it touched on 8 February 2007, ICICI Bank lost 16.6% and HDFC Bank lost 15.2% from their recent highs.
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Source:
mint dated Mach 2, ‘07 Compiled, edited and designed by Mr. K. V. S. Pillai, IB, STC, Mumbai
Threshold limit for Income Tax raised by Rs 10,000: Upto Rs 110,000 for men, upto Rs 145,000 for women and upto Rs 195,000 for senior citizens. An additional cess named “Secondary and Higher Education Cess on Income Tax” of 1% is to be introduced. Effectively the cess component of the tax payable has gone up from 2% to 3%. Deduction in respect of medical insurance under Section 80 (D) increased to Rs 15,000 and Rs 20,000 for senior citizens Limit for TDS on interest income on bank deposits (S.194-A) increased to Rs.10, 000 from existing Rs.5000. TDS to be applied also for 8% Savings (Taxable) Bonds 2003. Both effective from 1st June 2007. Deduction of interest payable on loan taken for higher education under Sec. 80E was available only to the individual taking the loan. It is proposed to amend section 80E so as to allow the deduction in case the loan is taken for the higher education of the individuals spouse and children also. Surcharge on income tax on all firms and companies with a taxable income of Rs 1 crore or less to be removed.
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Exemption for Banking Cash Transactions Tax now stands hiked from Rs 25,000 to Rs 50,000 for individuals and HUFs. RRBs will be permitted to accept NRE/FCNR deposits. The limit for DRI loans given to the weaker sections engaged in gainful occupations raised from Rs.6,500 to Rs.15,000 and the limit of the housing loan from Rs.5,000 to Rs.20,000 per beneficiary. For 2007-08, the target for Farm credit will be Rs.225,000 crore with along a target of adding 50 lakh new farmers to the banking system. The two per cent interest subvention scheme for short-term crop loans will continue in 2007-08 also.
Principal’s Views
THE LEARNING PAGE unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. Blue Ocean Strategy (BOS) is a recent Management theory which highlights the power of value innovation tools to create and capture new customer demand.
By studying 150 strategic moves in over 30 industries spanning more than 100 years, Kim and Mauborgne, Europe’s leading strategy guru team, set out to find a systematic pattern for achieving high growth that any company could replicate. From Ford’s Model T to Apple’s iPod, they identified 150 strategic moves that had one thing in common. All of them made the competition irrelevant and created an uncontested market space with the limitless potential of a blue ocean What is a blue ocean strategy? BOS is a way to make the competition irrelevant by creating a leap in value for both the company and its customers. What are red and blue oceans? In the red ocean, companies limit their own growth by only seeking customers from the current market. Instead they should look to non-customers outside of the market so they can create a new market space as vast and limitless as a blue ocean. Red oceans are all the known market space. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the ocean bloody- making it “red” ocean. Blue oceans, in contrast, denote all the industries not in existence today—the
What makes BOS imperative in today’s business climate? Prospects in most established market spaces—red oceans—are shrinking steadily. Technological advances have substantially improved industrial productivity, permitting suppliers to produce an unprecedented array of products and services. And as trade barriers between nations and regions fall and information on products and prices becomes instantly and globally available, niche markets and monopoly havens are continuing to disappear. As products and services increasingly become commodities in overcrowded industries and companies’ profitable growth shrinks, companies are driven to compete principally on cost. Is BOS is applicable to financial services sector? There is scope for financial services sector to swim in their own blue ocean. Recent examples have focused on financial services moving from an emotional to a functional approach to providing services. Relationship businesses (eg, insurance, investing, banking) that have in the past relied heavily on the emotional bond between the broker and their client are ripe for change in an online world. What are the steps involved identifying a Blue Ocean Strategy?
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The four steps outlined in the diagram on next page explain the process. The value innovation model requires a company to construct a “new value curve” for customers, giving them what they want at a (potentially profitable) strategic price and so create a blue ocean of uncontested market space.
Reduce Which factors should be Reduced well below the industry’s standard?
Create
Eliminate Which of the factors that the industry takes for granted should be eliminated?
A New Value Curve
Which factors should be created that the industry has never offered?
Raise Which factors should be Raised well above the industry’s standard?
In order to create new market space, the new value curve needs to be fundamentally different from that of its competitors. Competitor comparisons need to be prepared and then reviewed to ensure that there is management confidence in the proposed market innovation. The strategy canvas for a new value proposition will need to show how the new value curve will be demonstrably different from the competition. Value innovation, the cornerstone of blue ocean strategy, provides a powerful tool to help managers to move away from the competitive pack and to chart their own destiny. The objective is to create a new uncontested market space so competition becomes irrelevant.
BLUE OCEAN STRATEGY offers an inspiring message: that success is not dependent on fierce competition, expensive marketing or R&D budgets, but on smart strategic moves that can be used systematically by established companies and startups alike. Contributed by Mr .K. V. S. Pillai, SM (Faculty), STC, Mumbai, based on the Book of the same name
KNOW YOUR BUDGET TERMS A guide to financial terms
Budgetary Allocations: This is the amount that is allocated to a specific area or activity in the budget. There are allocations for different ministries/departments and within each of them there are amounts for specific projects and activities. Fiscal Deficit: The figure that shows the extent by which the government’s expenditure exceeds its revenue. Capital expenditure has to be kept separate from this figure. Plan Expenditure: Plan expenditure is the amount spent on schemes that are introduced in the on-going five- year plan period. This expenditure reflects the government’s investment in enhancing the economy’s productive capacity. Non-plan Expenditure: This expenditure arises on schemes carried forward from previous five-year plan periods. It supports the old schemes of the government. This expenditure maintains the existing capacity of the economy. . Demand For Grant: The estimates of expenditure included in the Annual Financial Statement are submitted in the form of demand for grants. Generally one demand for grant is presented in respect of each ministry, though more than one demand might be present for large ministries or departments. Finance Bill: This is presented before Parliament detailing the imposition, abolition, remission alteration or regulation of taxes proposed in the Budget. In simple words, the finance bill contains the actual changes that the budget proposes in the various areas of taxation.
related to taxation, expenditure, lending and investments, administered pricing, borrowing and guarantees. BE – Budget Estimates: This is the figure for the coming financial year presented in the budget. RE - Revised Estimates: The RE consist of figures for the current financial year that have been revised from the budget figures based on actual experience during the past months. Consolidated Fund: This is where all the revenue of the government, loans raised by it and loans recovered are taken. The government’s entire expenditure is incurred from this fund and no amount can be withdrawn from the fund without authorization from Parliament. Contingency Fund: This is an imprest (an advance or a loan of funds) placed with the President to incur expenditure on occasions when the government might have to meet urgent expenses, pending authorization from Parliament. Revenue Budget: Revenue receipts of Govt+Expenditure met Revenue receipts: Tax revenues+Interest & dividend on investments+fees & receipts for govt services. Revenue Expenditure: Expenditure, which doesn't result in the creation of assets+All grants given to state govts. Capital Budget: Capital receipts+payments. It includes transactions in the Public A/C. Capital receipts: Market loans+borrowings from RBI+loans from foreign bodies+ loan recoveries
Performance budgets: The physical and financial aspects of major programmes and schemes are covered in the performance budget presented to Parliament separately by the ministries/departments.
Capital Payments: Expenditure on land, buildings+ investments in shares+loans & advances granted by the centre to state & UTs+govt firms+corporations
Fiscal Policy Strategy Statement: This contains the policies of the central government for the ensuing financial year
Balance of Payments (BOP): It is the statement of the country's trade and financial transactions with the rest of the world during the year.
HEALTH
Whatever
is your position in your office it’s a fair assumption that the thing you do most of is sitting. Keeping fit was not so important earlier. But now that you are experiencing occasional sudden pains flashing through your shoulder blades, neck or lower back it is time that you do some thing – something, which facilitates movement and activity for your joints. Walking for Better Health Forget about all the exercises like jogging, swimming, table tennis or any other form of workouts, which you started in the past and left soon afterwards. Now you are a different person with a motivation to succeed with an easy pace. Considering your age and orientation the easiest and cheapest form of exercise that can be started forthwith is walking. It needs no special equipment, clothing, club membership or coaching. At most you may be interested in purchasing a pair of good walking shoes. Exercise walking is a perfect weight management system, improving both muscle tone and strength - for hips and thighs, stomach and buttocks. It is also a universal stress reliever. It helps you in facing depression, and gives better sleep. Walking on level ground burns 200, 280, 320, 400 and 480 calories for a speed of 3, 4, 5, 6 and 7 kilometres per hour. You can double the calories burnt if you walk on an incline. Getting Started Let’s begin the day with an early-morning energy-booster. No excuses. A 20minute or even 10-minute walk will do you far more good than the extra time spent in bed. And it will improve your
mood and energy level for the rest of the day. As you sleep, your body temperature and heart rate are normally lower. Taking that earlymorning walk will rev up your system. It will elevate your deep body temperature, get your circulation going and fill you full of verve and vitality for the day ahead. So step out with a brisk, confident stride. Think of your morning walk as a way of creating your own personal space – a quite time when you can prepare for the day ahead. Warm-up by walking for three or four minutes at normal pace before increasing speed, and cool down at the end by reducing speed over a few minutes. This will ensure you stay clear of pulled muscles and other injuries. Give yourself an oxygen boost whenever you feel tired, tense or anxious. Getting in the Rhythm It is always better to develop a rhythm while walking. For this you need to give some thought to what the rest of your body is doing. You walk tall from your heels upwards, pushing off with the ball and toes of your back foot and landing in the middle of your front heel, in a heel-toe rolling motion. Then, taking the longest stride which is comfortable, lead with your hips, and let your arms swing naturally in opposition to your legs. Keeping your elbows close to your sides, relax your shoulders and let your arms find their own rhythm. Breathing naturally though your nose, ensure that your hands are relaxed, not clenched and tensed. As you begin to walk faster, your arms will bend naturally and the motion will be more vigorous to keep up with the action of the legs. Regular, rhythmic walking in this way will help your relax, and it has profound psychological and meditaional benefits. Footnotes: The feet carry the entire weight of the body, holding it upright and maintaining
its balance and rhythm during walking. Acting as shock absorbers, they soak up the stresses and strain, which harass our bodies throughout the day. So to ensure your walking is stress-free, it’s important to protect your feet. Always make sure you buy shoes, which are comfortable, not just fashionable. These days you can buy specialist walking shoes designed for the beach and the boardroom. Buy shoes late in the day, as the feet tend to swell as the day wears on. Ensure that there’s enough room in the toe-box to wiggle your toes, and never suffer sales talk about shoes stretching and wearing in – they rarely do. If a shoe isn’t comfortable, don’t buy it. At the end of the day, try pampering your feet with a long soak in the bath, adding aromatherapy oil. If you look after your feet, they’ll look after you. Walking as Meditation This is a slow, ordinary walk based on the awareness of the feet touching the ground. You can walk in a circle or a line of ten to fifteen steps going back and forth, inside or out of doors. Eyes should be lowered on the ground a few steps ahead. While walking the attention should go to the contact of each foot as it touches the ground. Enjoy the contact. If other things arise stop paying attention to the feet, notice what else took your attention and then return to the feet. You can walk for 20 to 30 minutes. Walking with awareness is meditation.
Desk stress—Reducing the Strain A sedentary lifestyle poses the greatest single risk to the collective health of us all. Sitting over a desk automatically increases muscle tension of the neck, shoulders and upper arms. So next time you’re stuck for long periods at a desk or in front of a computer, try these quick methods to relax and ease the build-up of tension: 1. Take micro-breaks while using the computer. Every ten minutes remove your hands from the keyboard and relax the fingers. Look away from the screen to reduce your eyestrain. 2. Take a stretch break every 30 minutes to relax muscles. Get up and walk around; do a few simple stretches. 3. Take six deep breaths—this is enough to instantly reduce blood pressure and make you feel calmer. 4. Take a ten-minute walking break and also walk in the lunch hour. Remember the words of Sir Issac Newton, “A body in motion tends to stay in motion, and a body at rest tend to stay at rest”.
NEWSBITS Reaching out to the Common Man Mumbai Feb. 20, 2007. Indian Bank has opened a branch at Dharavi, Asia's largest slum in Mumbai, with core banking facilities and online ATM. The branch was inaugurated by Ms Usha Thorat, RBI's Deputy Governor. "The basic objectives are to bring people into the institutional framework and provide all banking products such as "no-frills" savings bank account, small overdrafts, general credit cards and life and medical insurance for promoting viable economic activity," said a statement from Indian Bank. Apart from traditional banking products, Indian Bank also plans to offer pension and mutual fund products. During the pre-opening period the branch has opened 6417 no-frills accounts and has mobilized Rs 51.60 lakh from Dharavi.
Banks to get interest on CRR RBI has enhanced the Cash Reserve Ratio (CRR) to be maintained by all SCBs on their demand and time liabilities from 5.5 % to 5.75% with effect from (wef) 17 Feb 2007 and to 6% w.e.f. March 3 2007. Until 24 June 2006, commercial banks were earning a 3.5% interest on the money above the CRR that they maintained over the minimum stipulated 3%. The payment of interest on CRR was stopped from June last year following an amendment in RBI Act abolishing 3% minimum cash balance floor, as well as the provision for interest payment of the remaining CRR. However, on 9 January, while formally notifying the amendment, the Central government dropped the relevant section of the Act that deals with CRR. Now RBI will pay 1% interest on eligible CRR Current Rates & Ratios balance from 17 February 2007. It will also CRR : 6% SLR : 25% pay 2% interest for the period between 9 Dec Bank rate: 6% 2006 to and 16 Feb 2007 and 3.5% interest Repo Rate:7.5% for the period between 24 June and 8 Dec Reverse Repo Rate : 6 % 2006.
Mangalore, March 1: The first general council meeting of the OIC (Oriental Bank of Commerce, Indian Bank, Corporation Bank) alliance was held in Bangalore on February 24-25. CMDs, EDs and General Managers of three banks attended the two-day meeting. The purpose of the meet was to generate synergies at the operation level, identify newer areas of collaboration and to generate newer ideas for customer value addition. On the first day of the conclave, Dr Blaine Lee, Senior Consultant, Franklin Covey, US, addressed the council members on `Leadership challenges and integration of processes for the alliance.' Mr Leo Puri, Director of McKinsey, spoke on the ideal business model for the alliance, the release added. Compiled, edited and designed by Mr. K. V. S. Pillai, IB, STC, Mumbai