Banking for Beginners

Recently India has entered into Free Trade Agreements (FTA) with the United Arab Emirates (UAE) and Australia which has brought the spotlight on FTAs. After British PM Johnson’s visit,  there is a buzz of a FTA with UK. Let’s discuss - What are FTAs and what are advantages or disadvantages for the concerned countries and their economies. What are FTAs ? By definition a FTA connotes a treaty between multiple countries (set of two or more) whereby they agree, on a reciprocal basis, to open up access to their respective markets for trade and other economic activities, without restrictive entry barriers or export and import tariffs. To quote Encyclopedia Britannica “ free trade , also called   laissez-faire , a policy by which a government does not discriminate against  imports  or interfere with exports  by applying tariffs (to imports) or subsidies (to exports). A free-trade policy does not necessarily imply, however, that a country abandons all control and taxat...

  US Dollar (USD) is the most accepted currency across the globe although it may not be the strongest in nominal terms. USD ranks as 10 th strongest behind Kuwaiti Dinar (1 st spot), British pound (5 th spot) and the Euro (8 th spot). Despite its relatively low strength, USD is still considered and accepted as the World’s foremost reserve currency.   When US Federal Reserve first issued USD as the nation’s currency in 1914, British Pound was already dominating the globe, in line with Britain’s reigning status as the largest colonial power. However, during World War I (1914-18), the allies ( France ,   Britain ,   Russia ,   Italy ,   Japan ) had to depend on US for supplies (US joined the war in 1917) with payment being made in gold. This made US as the biggest holder of gold reserves and strengthened its currency (since it was backed by Gold reserves) as compared to British Pound which had weakened post war. This in turn led to various countries pegg...

SWIFT and RUSSIA   In recent days, the term SWIFT has been heard a number of times, in context with sanctions imposed on Russia by western countries, in retaliation for Russian invasion of Ukraine. Here an attempt is being made to explain SWIFT to the uninitiated, its importance and usage. We shall also briefly touch upon Russia’s position.   SWIFT stands for Society for the Worldwide Interbank Financial Telecommunication . When I joined the banking industry in early eighties, financial messages viz. opening of letters of credit were effected through tele printer (telex) machines The system was slow and over a period of time it was unable to handle increasing number of transactions. Therefore a need was felt for establishment of a an advanced secure messaging system that would facilitate cross-border financial transactions. SWIFT was born in 1973 with its headquarters at Brussels, Belgium. The organization started with 500 member institutions in 22 countries and ...

On Friday 30 th August When FM Sitharaman announced merger of several Public sector banks, she metamorphosed Indian Banking industry forever. From structural point of view, this is being considered as the biggest game changer after nationalization of Banks in two tranches on 19 th July 1969 and 15 th April 1980. Biggest consolidation exercise in Indian banking industry will result in merger of 10 banks into 4, thus reducing the total number of Public sector banks from 27 in 2017 to 12 now.  To summarize, United Bank of India and Oriental Bank of Commerce shall merge into Punjab National Bank, Syndicate Bank into Canara Bank, Allahabad Bank into Indian Bank and Andhra Bank alongwith Corporation Bank shall merge with Union Bank of India. Seeds of this consolidation exercise were sown 28 years back in 1991, when the Committee on Financial system headed by former RBI Governor M Narsimhan had recommended   3-4 mega Banks at the top who can have a Global footprint with oth...