Banking for Beginners

Those who are watching business television channels regularly or following on economic news, would have noticed that these days, more and more commentators are talking about US Dollar Index. For better appreciation, let us decipher the subject. What is Dollar index  Established in 1973, the US Dollar Index (USDX) is an empirical measure of the value of US dollar against six other foreign currencies (fixed basket of currencies), with assignment of varying weights to respective currencies ie. Euro  (EUR) 57.6 %, Japanese Yen  (JPY) 13.60%, British Pound  (GBP) 11.90%, Canadian Dollar  (CAD) 9.10%, Swedish Krona  (SEK) 4.20% and Swiss Franc  (CHF) 3.60%. Before 1999, when Euro became a legal tender, USDX consisted of ten currencies-Deutsche mark, French franc, Italian lira, Dutch guilder, and Belgium franc in addition to JPY, GBP, CAD, SEK and CHF. To draw an analogy, the value of a stock index like SENSEX or NIFTY is computed on the basis of a basket of ...

  What is a Bad Bank Over a period of time several of our household goods are rendered useless, but continue to occupy valuable space.   During Diwali cleaning these assets are either disposed off or dumped in a separate room which becomes the junk yard and from where these assets are disposed off gradually to salvage some value. This cleans the house and frees up space which can be used by items of better utility. Similarly, in a Bank several assets (generated form Bank’s loan) become “Non Performing” over a period of time due to various reasons. These Non Performing Assets (NPAs) become a drag on the Bank’s balance sheet and have to be offloaded so that the balance sheet continues to remain healthy. To draw an analogy to our home cleaning example, after the home is cleaned, it gives a better feeling to visitors, similarly once the Bank’s balance sheet is cleaned it gives a better feeling to visitors (investors, new customers etc.). The storage or junk room in our home is t...

  In last 3 months or so, International sanctions  have been in the news in light of Russia-Ukraine conflict. The moves initiated by United States have been followed up by its allies mainly in Europe. It’s imperative to examine nature of these sanctions and further, do such sanctions carry any validity under International Law.   Sanctions  are primarily, political decisions which graduate into diplomatic and economic steps, initiated by countries unilaterally or multi-laterally (through United Nations) against other countries or organizations or specific persons, under the notion of disciplining them. Real aim is to protect security interests of the sanctioning country while the purported aim could be maintenance of world peace. Sanctions are interventions for punishing an adversary, short of waging war with them, virtually bridging the gap between mere protest /denunciation and use of force.   But the political character of these sanctions cannot be negated. ...

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...