The present issue comprises four research papers. The first paper, “The Use of OTC Derivatives by Italian Regions: For Hedging or Trading Purposes?”, by Giulia Fantini and Chiara Oldani, discusses how the poor economic performance and the European fiscal constraints contributed to reducing the resources that the central state transfers to local administrations in Italy. The study also highlights how the Italian Ordinary Statute Regions’ (OSRs) debt has just been doubled to the tune of 57 tn between 2007 and 2014. Further, the study also delineates how these regions have full legislative power over their debt and debt-related instruments and have extensively used Over-the-Counter (OTC) contracts to manage their growing liabilities with least regulation and control. Against this backdrop, the authors investigate, whether the OTC derivatives underwritten by these regions have been used as hedging tools to manage their debt exposure or just have been used as mere trading tools. However, the findings of the study confirm that most of the Italian OSRs have hedged their debt exposure with OTC derivative contracts.
The second paper, “An Empirical Study on Stability of Beta in Indian Stock Market with Special Reference to CNX Nifty 50”, by S Sathyanarayana and S N Harish, investigates the stability of beta in Indian stock markets for 15 years starting from 2000. The Capital Asset Pricing Model (CAPM) beta is computed by using market model regression and the Chow breakpoint test is deployed to examine the impact of the 2008 subprime crisis on the stability of beta. The results suggest that the structure of the beta series remains unaffected even in the periods of subprime crisis both for individual stocks and portfolios. Further, unknown breakpoints are investigated in the beta series using multiple breakpoint tests and a few unknown break points in beta series across the periods are observed. Subsequently, CUSUM was adopted to check for the sequential changes in the computed beta series. The overall results suggest that betas of both individual stock and portfolio vary across the study periods. As beta stability plays an important role in estimating the asset returns and devising winning strategies, the authors recommend that Indian market participants need to be extra cautious while using historical betas for prediction of future risk of the stock and portfolio.
The third paper, “Examination of Efficient Frontier Under Constraints in Indian Equity Market”, by A Kanagaraj and Abhinav Kumar, engages a set of risky stocks to construct efficient frontiers and examines the optimal portfolio behavior under various constraints in the Indian equity market. The authors engage BSE Sensex 30 stocks and BSE Sensex index daily price data as market benchmark for 10 years starting from 2006 in constructing and optimizing portfolio with the minimum variance and maximum return under different constraints. The efficient frontiers estimation is done by using average return of the portfolio and iteratively minimizing the standard deviation of the portfolio to the minimum possible extent. The study affirms that the efficient frontiers shifted towards left as more constraints were relaxed in its formation. The study concludes that the most constrained efficient frontier is the one with Value-at-Risk (VaR) at 95% and short sale not allowed, while the most relaxed efficient frontier is the one with short sales allowed.
The last paper, “A Cointegration and Causation Study of Gold Prices, Crude Oil Prices and Exchange Rates”, by Shilpa Lodha, using daily data for a period of nine years, examines the long-run and short-run interdependence between USD/INR exchange rates, gold prices and crude oil prices. The preliminary observation suggests that the three series are non-stationary at level, but stationary at first difference, which suggests possibility of long-run interdependence between the series. However, Johansen cointegration test results negate such long-run interdependence between the series. The results of Granger causality test and VAR model reveal that there is a bidirectional Granger causality between crude oil price series and USD/INR exchange rate and an unidirectional Granger causality runs from crude oil to gold price series.
Automated Teller Machines (ATMs): The Changing Face of Banking in India
Bank Management
Information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. This paper analyzes the development of this self-service banking in India based on the secondary data.
The Information and Communication Technology (ICT) is playing a very important role in the progress and advancement in almost all walks of life. The deregulated environment has provided an opportunity to restructure the means and methods of delivery of services in many areas, including the banking sector. The ICT has been a focused issue in the past two decades in Indian banking. In fact, ICTs are enabling the banks to change the way in which they are functioning. Improved customer service has become very important for the very survival and growth of banking sector in the reforms era. The technological advancements, deregulations, and intense competition due to the entry of private sector and foreign banks have altered the face of banking from one of mere intermediation to one of provider of quick, efficient and customer-friendly services. With the introduction and adoption of ICT in the banking sector, the customers are fast moving away from the traditional branch banking system to the convenient and comfort of virtual banking. The most important virtual banking services are phone banking, mobile banking, Internet banking and ATM banking. These electronic channels have enhanced the delivery of banking services accurately and efficiently to the customers. The ATMs are an important part of a bank’s alternative channel to reach the customers, to showcase products and services and to create brand awareness. This is reflected in the increase in the number of ATMs all over the world. ATM is one of the most widely used remote banking services all over the world, including India. This paper analyzes the growth of ATMs of different bank groups in India.
International Scenario
If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase as customers will be able to access their bank accounts from any geographic location. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a bank network to a customer will be determined in part by the final network size of the banking system. The statistical information on the growth of branches and ATM network in select countries.
Indian Scenario
The financial services industry in India has witnessed a phenomenal growth, diversification and specialization since the initiation of financial sector reforms in 1991. Greater customer orientation is the only way to retain customer loyalty and withstand competition in the liberalized world. In a market-driven strategy of development, customer preference is of paramount importance in any economy. Gone are the days when customers used to come to the doorsteps of banks. Now the banks are required to chase the customers; only those banks which are customercentric and extremely focused on the needs of their clients can succeed in their business today.
