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COVER
STORY
Thai
Banks: Regaining Glory
--Katuri Nageswara Rao
Thailand
is a free enterprise economy that welcomes foreign investment.
It had the distinction of enjoying the world's highest growth
rate during 1985-95. Banks contributed substantially for this
growth through their dominant presence in the economy. However,
during the 1997 Asian Crisis, the economy suffered heavily
due to speculative pressures on Thailand's currency. The domestic
currency Baht was massively devalued, and the nation switched
over to the managed float system of exchange. While there
was significant improvement since then in the external sector
management, banking sector has not regained the past glory
due to pile up of NPAs and losses from 1997 onwards. Thai
banking needs to face the challenge of bad loans from the
first principles.
© IUP. All Rights Reserved
BANKING
PRODUCTS
Branding
Strategies for Online Banks
--Subhojit Banerjee and Reena Ray
Increasing
online transactions are forcing banks to build online brands.
Strong online brand will help in building the trust and add
to overall asset value of the bank. It will also reduce their
NPAs and cost of transactions. The article provides seven
strategies, the type of brand name (suggestive or non-suggestive),
personalization, co-branding, information search and retrieval
technologies, synchronized advertising, positioning and design
to build a strong brand.
© IUP. All Rights Reserved
RECOVERY
MANAGEMENT
Asset
Management Companies Performance Snapshot
--Pramod Gupta
To
resolve the Non-Performing Loans (NPLs) problem, many Asian
countries have started Asset Management Companies (AMCs).
They basically adopted two kinds of models: Bank-based model
and Government-based model. However, except for Korean Asset
Management Company, many of them have not performed well and
their recovery rate is also low.
© IUP. All Rights Reserved
REGULATORY
ISSUES
Corporate
Governance in Banks: Embedded Conflicts
--GRK Murty
As
early as in 1776 Adam Smith observed that Directors of companies,
being the managers of other people's money rather than their
own, cannot be expected to watch over it with the same anxious
vigilance (as owners)... Negligence and profusion, therefore,
must always prevail, in the management of the affairs of such
a company. After 156 years, similar sentiments were aired
by Berle and Means: Control will tend to be in the hands of
those who select the proxy committee and by whom the election
of directors for ensuring period will be made. Since the proxy
committee is appointed by the existing management, the latter
can virtually dictate their own successors. Since then, the
concern for governance has intensified, leading to the concept
of "Corporate Governance".
© IUP. All Rights Reserved
BANKING
SCENARIO
Plight
of Rural Finance
--NS Sekhon
Eighty
percent of global population has 20% of the world's income....
While some 800 million people ... go to bed hungry every night,
the majority of them live in rural areas. Seventy percent
of the poor are from rural areas. (James D Wolfensohn President,
The World Bank Group). Lack of basic infrastructural facilities,
relative isolation from urban counterparts, urban- biased
policies, political intervention and lack of formal financial
institutions has resulted in the plight of rural finance.
Government policies, which are more focused on problems of
agriculture rather than on rural financial services are also
one of the reasons.
© IUP. All Rights Reserved
BANKING
SCENARIO
The
End of Development Finance
--CP Chandrasekhar and Jayati Ghosh
Concentration
risk, high level of NPAs and no access to low-cost funds were
the major reasons for low performance of DFIs. DFIs were mainly
serving large corporates. Some market analysts say that reduction
in tariffs, greater access to foreign funds and domestic equity
funds through stock markets as well as greater access to short-term
funds at lower costs are some of the reasons for the end of
the era of development banking in India.
Ó Business Line, February 17, 2004. Reprinted with permission.
RISK
MANAGEMENT
Potential
Minefield for Banks
--R Viswanathan
Use
of the derivative products is growing in India. To use them
safely, in-depth understanding of the subject and expertise
is needed. Derivatives can be highly complex contracts and,
used with little or no knowledge of the implications, they
can prove to be extremely destructive.
Ó The Hindu, March 1, 2004. Reprinted with permission.
BANKING
STRATERGY
Globalization
and the Banking Sector
--YV Reddy
The
global giants in banking all over the world are manned by
Indians, educated and trained in India. The best of technology
for the most sophisticated banks in the world is provided
by Indian companies and by Indians in foreign companies. Yet,
banks in India do not as yet appear to be world class. To
reach global standards, we need to focus on legal, institutional
and transactions aspects. Measures taken by RBI will help
in making a small beginning in addressing some of these issues.
Ó www.rbi.org.in. Inagural address at the twenty fifth Bank
Economists conference December 11, 2003 in Mumbai. Originally
published as "Towards globalization in the Financial Sector
in India." Reprinted with permission.
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