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CONTINUUM 2003 CONTINUUM - A Prologue CONTINUUM, annual seminar series, is a regular event at Shailesh J Mehta School of Management, IIT Bombay. This event aims to cover the latest in management by inviting eminent speakers from business and academia. Each of these seminars focuses on issues and challenges faced by a management function, and aims at drawing insights from the knowledge and experience of the speakers. The seminars are well attended by delegates from different organizations and students from many business schools. The School has developed a strong competence in the area of Banking and Finance through extensive research and industry interaction. Some of the research topics include ‘Mergers and Acquisitions of Banks and Financial Institutions’, ‘Credit Risk Modeling’, ‘Performance of strategies for hedging foreign exchange risk’, ‘Financial Risk Tolerancethe development of a risk assessment instrument’, ‘Impact of Overseas Listing of Indian Firms’, etc. The industry has benefited from this expertise through short duration Management Development Programs (MDP), and Workshops organized by the School, and the Consultancy provided by the faculty of the institute. A number of doctoral students are also engaged in research in many different areas of banking and. finance. A two day seminar focusing on latest issues in the financial sector is being organized on August 23-24th, 2003 which includes the following themes:
CONTINUUM-2003 New age of Universal banking in India A universal bank is a ‘one-stop’ supplier of all financial products and services such as deposits, short-term and long-term loans, insurance, investment banking, etc. Global experience with universal banking has been varied. After the banking crisis of 1930s, the US banned all forms of universal banking through what is known as the Glass-Steagal Act of 1933. This prohibited commercial banks from investment banking activities, taking equity positions in borrowing firms, selling insurance products etc. The idea was to discourage risky behaviour by restricting commercial banks to their traditional activity of accepting deposits and lending. However, universal banking has been prevalent in different forms in many European countries, such as Germany, Switzerland, France, Italy, etc. Banks like ABN-AMRO, BNP Paribas, and Deutsche Bank have been universal banks for a long time. Nevertheless, the United States once again started moving cautiously towards universal banking through the Gramm-Leach-Bliley Act of 1999 which rolled back many of the earlier restrictions. This resulted in the grand merger of Citicorp (banking group) with Travelers (insurance group). Scenario in India has also changed after the Narasimham Committee (1998) and the Khan Committee (1998) reports recommended consolidation of the banking industry through mergers, and integration of financial activities. Today, the shining example is ICICI Bank, second largest bank (in India) in terms of the size of assets, which has consolidated all the services after the merger of ICICI Ltd with ICICI Bank. There are rumors of merger of IDBI with IDBI Bank. With the launch of retail banking, Kotak Mahindra has also embarked on the path of Universal banking. There are many others following similar path apart from these, with Information Technology enabling this integration. But the move towards integration of all financial services and products isn’t a very smooth one; there are many questions to be answered, and many regulatory requirements to be met before the formation of such an entity. In this seminar, we propose to look at how well diversified financial services companies function, their advantages, and the impact of integration on the present day brick and mortar banks.
CONTINUUM 2003 aspires to provide answers to these questions by offering a platform for interaction, debate, and an avenue for presenting a future roadmap for the banking sector. Indian Capital Market in Transition Capital markets are the lifelines of an economy. Indian capital market is amongst the oldest in Asia. Yet, this lifeline has been clogged for a long time in India. The Bombay Stock Exchange was established in 1875 as "The Native Share and Stockbrokers Association". India boasts of the largest number of companies listed on stock exchanges, but ranks much lower in terms of their total market capitalization. Indian Capital market is quite small compared to developed capital markets, and participation of retail investors accounts for only 2% of the total investor population while it is 50% in USA. The forces of change unleashed in the Indian Capital Markets over the last decade have transformed the structure and functioning of these markets. Today, there are a large number of mutual funds trying to get investors from those parts of the country, which have not been investing in capital markets. The government securities market was opened to retail participation in the recent past. By their very nature, financial markets are marked by a high degree of volatility. This results in high levels of risk, which need to be managed and mitigated. This need has led to new principles and methods of managing investments given the risk averse nature of most investors. These have resulted in reduced time to transact, improved credibility of dealers, better management of risk and better decision making. Trading in derivatives has surpassed the trading in equities for quite sometime now. Government is also committed to a liberalized capital market and economy in many ways. There should be a balance between freedom of the market participants and effective surveillance of the same to ensure adherence to the rules and regulations. There are many roadblocks to developing the capital markets further. The ban on badla led to decline in trading volumes and liquidity. The issues faced by the markets in transition warrant serious deliberation and discussion. Some of these issues are:
We at Shailesh J Mehta School of Management, IIT Bombay would like to provide a platform to keen observers of these markets to address some of the issues and seek answers through our Continuum seminar series. CONTINUUM 2003 – Other Details For further enquiries, please contact: |
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