Amalgamation

On 30 August 2019, Finance Minister Nirmala Sitharaman announced that Allahabad

Bank would be merged with Indian bank. The proposed merger would create the seventh
largest public sector bank in the country with assets of ₹8.08 lakh
crore (US$110 billion). The Union Cabinet approved the merger on 4 March 2020. Indian
Bank assumed control of Allahabad Bank on 1 April 2020.

Indian Bank
is an Indian state-owned financial services company established in 1907 and headquartered
in Chennai, India. It serves over 100 million customers with 20,924 employees, 6,089
branches with 5,022 ATMs and 1,494 cash deposit machines and is one of the top performing
public sector banks in India. Total business of the bank has touched ₹430,000
crore (US$60 billion) as on 31 March 2019. Bank's Information Systems and Security
processes certified with ISO27001:2013 standard and is among very few Banks certified
worldwide. It has overseas branches in Colombo and Singapore including a Foreign Currency
Banking Unit at Colombo and Jaffna. It has 227 Overseas Correspondent banks in 75
countries. Since 1978, the Government of India has owned the bank. As per the
announcement made by the Indian Finance Minister Nirmala Sitharaman on 30 August
2019, Allahabad Bank merged from 1 April 2020, making it the seventh largest bank in the
country.

[Link] Shares 100%

Promoters 994549600 88.06%

ForeignInstitutions 9367901 0.83%

N Banks MutualFunds 28689608 2.54%
Central Govt. 0% 0%

Others 2.02% 2.02%

General Public 52363094 4.64%

Financial Institutions 21563600 1.91%

Key Milestones
1907- The Bank was incorporated on 5 March 1907 under the Indian Companies Act, 1882 as
"Indian Bank Limited" and commenced operations on 15 August 1907.
1932 - The Bank opened its Colombo branch.
1941 - The Bank opened its Singapore branch
1962 - The Bank acquired the Royalaseema Bank, the Bank of Alagapuri, the Salem Bank,
the Mannargudi Bank and the Trichy United Bank
1969 - The Bank was nationalized. It was appointed as the lead bank for nine districts in the
States of Tamil Nadu, Andhra Pradesh and Kerala and the Union Territory of Pondicherry.
1970 - The Head Office of the Bank was shifted to its own building
1981 - The first regional rural bank sponsored by the Bank, Sri Venkateswara Grameena
Bank, was founded
1989 - Indbank Merchant Banking Services Ltd was incorporated as a subsidiary of the Bank
1990 - Bank of Thanjavur Limited (with 157 branches) was amalgamated
1991 - Ind Bank Housing Limited was incorporated as a subsidiary
1994 - Indfund Management Limited was established to manage the operations of Indian
Bank Mutual Fund
1995 - The Bank's own training establishment, Indian Bank Management Academy for
Growth & Excellence (IMAGE) established.
2002-03 - The Bank received an award from NABARD for best performance under SHG in
Tamil Nadu and Andhra Pradesh.
2004-05 - The Bank entered into strategic alliance with Mahindra & Mahindra Limited and
TAFE Limited for pushing up tractor usage among farmers
2006-07 - The Bank entered into a strategic alliance with Oriental Bank of Commerce and
Corporation Bank
2006 -Indian Bank launches Bharat Card
2008 - Indian Bank has informed that: "Indian Bank has signed an Agreement with Reliance
Capital Asset Management Ltd. to act as a Corporate Agent to sell the Mutual Fund products
of Reliance Mutual Fund .
2008-09, Indian Bank bagged 5 State awards from the State government. -Indian Bank has
joined hands with Tata Motors for financing its range of passenger cars. Under the MoU, the
bank will offer loans at an interest rate of 11.5 per cent to customers buying Tata Motors'
passenger cars.
2010 - Indian Bank has launched visa business card to address the credit card and payment
requirements of corporates and small and medium enterprise (SME) clientele segments.
2011 - Indian Bank launches e-Treasury service. Indian Bank has appointment of the
following Statutory Central Auditor (SCA).
2012 - Scheme of Amalgamation of M/s. lndfund Management Limited, a wholly owned
subsidiary of the Bank with Indian Bank, Indian Bank.
2017 - Indian Bank has launched a unique, easy & hassle free home loan product IB Home
Enrich for repairs and renovation of residential dwelling units.
-National Award for Excellence in Lending to Micro Enterprises during 2015-16 - First Rank
and National Award for Excellence in MSE Lending by Public Sector Banks during 2015-16
- Second Rank to Indian Bank.
-Indian Bank (IB) has launched three unique, easy-to-use, environment friendly, tech
products to overcome the effects of demonetization for its customers without coming to the
branches.
2020 - On 1 April 2020 Indian bank and Allahabad bank merged. The oldest Joint Stock
Bank in the country, Allahabad Bank was founded on 24 April 1865 by a group of Europeans
at Allahabad, at a juncture when organized industries, trade and banking were taking shape in
India. Thus, the history of the bank now spreads over three centuries.

Allahabad Bank
Allahabad Bank was a nationalised bank with its headquarters in Kolkata, India. Until its
merger with the Indian Bank, it was the oldest joint stock bank in India. On 24 April 2014,
the bank entered into its 150th year of establishment. The bank was founded in Allahabad in
1865.

As of 31 March 2018, Allahabad Bank had over 3245 branches across India. The bank did a
total business of INR 3.8 trillion during the FY 2017–18.

The bank's market capitalisation in June 2018 was US$573 million and it ranked #1,882 on
the Forbes Global 2000 list. On 30 August 2019, the Finance Minister Nirmala
Sitharaman announced merger of Allahabad Bank with Indian Bank.

On 24 April 1865, a group of Europeans founded Allahabad Bank in Allahabad. By the end
of the 19th century it had branches at Jhansi, Kanpur, Lucknow, Bareilly, Nainital, Calcutta,
and Delhi.

Listings and shareholding

Shareholders (as on 31 March 2014)[13] Shareholding

 Promoter Group (Government of India) 64.80%

Indian FIs/MFs 16.60%

Foreign Institutional Investors (FII) 03.20%

Resident Indians 08.80%

Others 06.60%

Total 100.0%

Employees
As on 31 March 2013, the bank had 22,557 employees, out of which 3,293 were women
(15%). Out of the total employees, 51% were officers, 30% were clerks and remaining 19% were
subordinate staff. The bank recruited 1,950 employees (1,421 Officers, 390 Clerks and 139
subordinate staff) during the same financial year. The company incurred INR 20 billion on
employee benefit expenses during the same financial year.
Employee productivity: During the FY 2013–14, the business per employee was INR
13.50 crores and it earned a net profit of INR 4.77 lakhs per [Link] bank is now operating
in the following States/UTs

 Andaman And Nicobar Island

 Andhra Pradesh
 Arunachal Pradesh
 Assam
 Bihar
 Chandigarh
 Chhattisgarh
 Delhi
 Goa
 Gujarat
 Haryana
 Himachal Pradesh
 Jammu And Kashmir
 Jharkhand
 Karnataka
 Kerala
 Madhya Pradesh
  Maharashtra
 Manipur
 Meghalaya
 Nagaland
 Odisha
 Puducherry
 Punjab
 Rajasthan
 Sikkim
 Tamil Nadu
 Telangana
 Tripura
 Uttar Pradesh
 Uttarakhand
 West Bengal

Milestones:

Nineteenth Century
 April 24, 1865 – The Bank was founded at the confluence city of Allahabad by a group of
Europeans.
Twentieth Century
 1920's – The Bank became a part of P & O Banking Corporation's group with a bid price of
Rs.436 per share
 1923 –The Head Office of the Bank shifted to Calcutta on Business considerations.
 July 19, 1969 Nationalized along with 13 other banks, Branches – 151 Deposits – Rs.119
crores, Advances – Rs.82 crores.
 October, 1989 – United Industrial Bank Ltd. merged with Allahabad Bank.
 1991 – Instituted AllBank Finance Ltd., a wholly owned subsidiary for Merchant Banking.
Twenty–First Century
 2002 –  The Bank came out with Initial Public Offer (IPO), of 10 crores share of face value
Rs.10 each, reducing Government shareholding to 71.16%.
 2005 – Follow on Public Offer (FPO) of 10 crores equity shares of face value Rs.10 each with
a premium of Rs.72, reducing Government shareholding to 55.23%.
 2006 –  The Bank Transcended beyond the National Boundary, opening Representative
Office at Shenzen, China.
 2006 –  Rolled out first Branch under CBS.
 2007 – The Bank opened its first overseas branch at Hong Kong.
 2007 – Bank's business crossed Rs.1,00,000 crores mark.
 2008 – Bank announces special package for housing loan & MSME borrowers.
 2008 – Bank crosses Rs.125000 crore business.
 2008 – Allahabad Bank Launches Debt Waiver Scheme.
 2009 – The bank launches savings bank deposit mobilisation campaign.
 2009 – The bank launches retail selling of Gold Coins.
 2009 – Allahabad Bank ties up with UAE Exchange & Financial Services.
 2009 – Allahabad Bank signed an MOU with Maruti Suzuki for entering into a strategic
partnership for promotion of Car financing.
 2010 – Allahabad Bank business crosses Rs 1,96,800 crore.
 2011 – Allahabad Bank begun enrollment for Aadhaar, the brand name of the Unique
Identification number (UID).
 2011 – The bank allotted 2.95 crore shares of Rs 10 each at a premium of Rs. 217 to the
Government of India (GoI) on a preferential basis in return for Rs 670.00 crore fund infusion.
 2011 – Bank has implemented CBS in all its Branches 
 2012 – Bank crosses its net work of 2500 branches. 
 2013 – Bank crosses bench mark business figure Rs.3,00,000 crore and enters in “Orbit of
Large Banks”

Indian Financial System Code

The Indian Financial System Code (IFS Code or IFSC) is an alphanumeric code that

facilitates electronic funds transfer in India. A code uniquely identifies each bank branch
participating in the three main Payment and settlement systems in India: the National
Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS) and Immediate
Payment Service (IMPS) systems
The IFSC is an 11-character code with the first four alphabetic characters representing the
bank name, and the last six characters (usually numeric, but can be alphabetic) representing
the branch. The fifth character is 0 (zero) and reserved for future use. Bank IFS Code is used
by the NEFT & RTGS systems to route the messages to the destination banks/branches.[2] The
format of the IFS Code is shown below.

FINANCIAL SYSTEM

SAVINGS FINANCE INVESTMENT

CAPITAL,FORMATION

ECONOMIC GROWTH

The Concept of the Financial System

The process of savings, finance and investment involves financial institutions, markets,
instruments and services. Above all, supervision control and regulation are equally
significant. Thus, financial management is an integral part of the financial system. On the
basis of the empirical evidence, Goldsmith said that "... a case for the hypothesis that the
separation of the functions of savings and investment which is made possible by the
introduction of financial instruments as well as enlargement of the range of financial assets
which follows from the creation of financial institutions increase the efficiency of
investments and raise the ratio of capital formation to national production and financial
activities and through these two channels increase the rate of growth……"

Inter-relationship in the Financial System

A financial system provides services that are essential in a modern economy. The use of a
stable, widely accepted medium of exchange reduces the costs of transactions. It facilitates
trade and, therefore, specialization in production. Financial assets with attractive yield,
liquidity and risk characteristics encourage saving in financial form. By evaluating alternative
investments and monitoring the activities of borrowers, financial intermediaries increase the
efficiency of resource use. Access to a variety of financial instruments enables an economic
agent to pool, price and exchange risks in the markets. Trade, the efficient use of resources,
saving and risk taking are the cornerstones of a growing economy. In fact, the country could
make this feasible with the active support of the financial system. The financial system has
been identified as the most catalyzing agent for growth of the economy, making it one of the
key inputs of development

The Organisation of the Financial System in India

The Indian financial system is broadly classified into two broad

groups:

i) Organised sector and (ii) unorganised sector.

"The financial system is also divided into users of financial services

and providers.

Financial institutions sell their services to households, businesses and

government. They are the users of the financial services. The

boundaries between these sectors are not always clear cut.

In the case of providers of financial services, although financial

systems differ from country to country, there are many similarities.

(i) Central bank

(ii) Bank

(iii) Financial institutions

(iv) Money and capital markets and

(v) Informal financial enterprises.

2.1 Saving
The term saving refers to the activity by which claims to resources, which might be put to
current consumption, are set aside and so become available for other purposes. It represents
the excess of income over current consumption. The total volume of savings in an economy,
therefore, depends mainly upon the size of its material income and its average propensity to
consume, which, in its turn, is determined by the level and distribution of the incomes, tastes
and habits of the people, their expectations about the future, etc. As the size of the national
income increases, the volume and ratio of savings may generally be expected to rise, unless
the marginal propensity to consume is either equal to, or higher than the average propensity.
This is very likely to be the case in countries where the standards of living are very low, and
where the development policy places a heavy emphasis on the social objectives of raising the
living standards of the poorer sections of the community, or where the spending habits of the
people are strongly influenced by the "demonstration effect)

2.2 Composition of Savings

Total savings are composed of public savings and private saving. Public savings constitute
the savings of the government through normal budgetary channels and the retained earnings
of public enterprises. Private savings includes household savings and business savings. The
house hold sector makes the largest contribution 77% in 94-95, the public sector – 6.8% and
the business sector 16.2% of the savings of household sector, savings (gross) in the form of
physical assets accounted for 36.1% in 1998-99.

2.3 Factors determining saving

The volume of public savings depends largely upon the functions assumed by the state, the
general state of the economy, the tax structure, the fiscal policy of the government, its pricing
and investment policies. Private savings include household savings and business savings.
They occupy, by far, the most important position in democratic countries. The size of
household savings depends on the capacity and ability and willingness of the people to save,
which are influenced by a multitude of social, psychological and political factors, in addition
to the economic factors, the most important of which are the level and distribution of income
and the general fiscal, monetary and economic policies of the state. Business savings, in the
form of retained savings and depreciations and other provisions, claim relatively large
proportions of the total savings in developed countries. Such savings are identified generally
with corporate savings because the savings of other forms of business enterprises are not only
relatively small but are not easily distinguishable from household savings. Corporate savings
depend chiefly on the profitability of the enterprises and their policies of the distribution of
dividends, provision for depreciation, etc., and the retention of current earnings for financial
expansion programmes. These, in their turn, are largely influenced by the general state of the
economy (and of industry in particular), the fiscal policies of the state and expectations about
the future). Gross Domestic Savings The savings on a gross basis include: Depreciation at
book value in the case of the private corporate sector. In the case of the household sector,
savings in the form of financial assets without allowing for increase in household liabilities
which largely consist of loans and advances from banks, and In the case of physical assets of
the household sector, the difference in value of physical assets in terms of gross saving and
net saving which was a much as 43.2 per cent in 1994-95 (41.9 per cent in 1980-81). This
may be largely on account of depreciation and changes in stocks of unincorporated
enterprises which account for 80 per cent of the savings of the household sector. The gross
domestic savings ratio was 23.4% in 1998-99). Saving of Household Sector In the form of
Gold For long, gold has been kept out of the financial system. It has been left out of our
savings estimates and purchase of gold is treated as consumption. This is really going against
entrenched custom. Gold hoards which are estimated at $100 billion have to be brought into
the mainstream of the financial system. Further, out of our annual import of $6 billion (400 to
500 tones), 90 per cent goes towards investment in the form of jewellery. Gold should be
treated as a 'hybrid asset' as the Committee on Capital Account Convertibility (CAC) has
termed it. In the words of the Committee, "Gold is a surrogate for foreign exchange and
because of its special features it is a hybrid between a commodity and a financial asset". The
Committee on CAC recommended that asset." banks should be permitted to operate freely
both in the domestic and international gold markets, sale of gold by banks and financial
institutions (FIs) should be freely allowed to all residents, banks should be allowed to offer
gold denominated deposits and loans and banks should be allowed to offer deposit schemes
akin to gold accumulation plans. The liberalization of the overall policy regime of gold as
recommended by the Committee is the most far reaching and has a vital impact on our
savings and investment. Its implementation would have enormous impact in terms of growth
as gold can be mobilised for financing investment. Once we accept it as an instrument for
saving, estimates of household savings in the national income statistics would go up by 10-
12 per cent and overall gross saving and net saving ratios by 1.5 to 1.2 per cent. The inclusion
of gold in national income statistics is not suggested just to raise the savings rate. It is in the
national interest to put it to productive use. Savings of the Household Sector In Financial
Assets The financial assets in the order of their importance in 1998-99 are bank deposits,
provident and pension funds, non-bank deposits,currency, life insurance fund, claims on
government and shares and debentures. The composition of household sector's savings has
been generally in favour of financial assets as compared to physical assets on account of the
higher rates of return on financial saving, growing financial intermediation and preference of
households for less risky assets like bank deposits, contractional savings and small savings
instruments.

2.4 Saving Rate In Ninth Plan

The savings rate in 1998-99 of 22.3% fell short of the Ninth Plan target of 25.2 per cent. The
reliance on foreign capital and adoption of a deliberate policy to attract foreign savings into
portfolio and direct investments have become a part of the liberalisation policy since 1991-
92. Inflow of foreign savings was to finance an investment rate of 23.4 per cent in 1998-99.
While the high domestic savings of the Asian Tigers provided powerful evidence of a link
between thrift and growth, relying too much on foreign capital is a danger that could give rise
to an economic crisis. Mexico experienced such a crisis in 1994 where domestic savings fell
on account of the substantial inflow of foreign capital in the two or three years prior to 1994,
giving rise to the liquidity effect. The Asian crisis of 1997 also confirms that foreign capital
especially portfolio and debt are not only undependable but also aggravate financial stress
into a full. blown crisis. All this points to the importance of strengthening thrift. The recent
developments in credit financing of automobiles and white goods and the impulsive
expenditure-inducing effect of credit cards-are likely to make a dent in savings. The savings
rate in India is bound to rise as a result of the financial sector reforms. Financial sector
reforms in many developing countries in Latin America and Asia were introduced as a part of
an overall programme of economic liberalisation. While they were initiated in the mid70's in
Latin America countries, they gained prominence by the mid-80'[Link] to Jeffrey Sachs
and Nirupam Rajpal of the Harvard Institute for International Development, the possible
reasons for higher growth rate in India are the degree of market efficiency (a weighted
average of degree of openness, size of government and labour market flexibility) and the
savings rate. Market efficiency and savings rate account for 40 per cent variation in growth
rates. If India improved its competitiveness (World Economic Forum's Global
Competitiveness Report) to the level of other countries in East Asia, Sachs and Rajpal
estimate that India's rate of growth of income will rise to 7.2 per cent per year. If the savings
rate is . also stepped up to the levels achieved in East Asia, the rate of growth will rise to 8.37
per cent. Tariff reduction in the 1997-98 budget to an average of 25 per cent is closure to a
rate

of less than 10 per cent in the case of East Asia helping 'openness' of the economy.

2.5 Financial Liabilities

Household financial liabilities largely consist of loans and advances from banks. The total
financial liabilities were estimated at Rs. 26,722 crores or 1.3% of GDP in 1998-99.

2.6 Financial intermediation

The Institutions in the financial market such as Banks & other non banking financial
intermediatory undertakes the task of accepting deposits of money from the public at large
and employing them deposits so pooled in the forms of loans and investment to meet the
financial needs of the business and other class of society i.e. they collect the funds from
surplus sector through various schemes and channalised then to the deficit sector. These
financial intermediaries act as moblisers of public saving for their productive utilization.

Funds are transferred through creation of financial liabilities such as bonds and equity shares.

Among the financial institutions commercial banks accounts for more than 64% of the total
financial sector assets. Thus financial intermediation can enhance the growth of economy by
pooling funds of small and scattered savers and allocating then for investment in an efficient
manner by using their in formational advantage in the loan market. They are the principal
moblisers of surplus funds to productive activity and utilize this funds for capital formation
hence promote the growth.

Mobile banking, IndOASIS app: 

To receive mobile banking services, customers need to install the IndOASIS app on their
phones and start using it from February 15. Notably, the app is available on Google play store
and IOS.

Net banking services: 

Customers who want to avail internet banking services, they have to log into
[Link] from February 15 onwards with their existing log-in
credentials.
Cheque book, passbook: 

 Now the customers are allowed to use their existing cheque books till they are
exhausted or for another six months, whichever is earlier. However, the new passbooks in
line with the Indian Bank format will be issued after February 15. Customers must obtain a
new passbook of the bank (if not taken already) from their home branch. Customers must
note that the bank has taken full care to ensure that there are no problems for the customers in
getting the services from the bank. The account holders will get complete information about
the new rules through the website [Link]




Indian Bank completes core banking integration

Chennai-based public sector lender Indian Bank on Tuesday announced the successful
integration of its consolidated core banking solution (CBS) platform, following the merger
of Allahabad Bank into Indian Bank, effective April 1, 2020.
The CBS and all channels were made available for use by branches and customers on
February 15. The integrated CBS is running smoothly across branches and channels. Indian
Bank in a statement said that this was a ‘big bang’ merger by the CBS provider, TCS where
the data of 3000 plus branches and all channels of erstwhile Allahabad Bank were migrated
seamlessly to the Indian Bank database. The customer account numbers of both the banks
remain unchanged and the login credentials of internet banking and mobile banking were also
retained.

Indian Bank board approves share swap for Allahabad Bank merger

Indian Bank will issue 115 shares for every 1,000 shares of Allahabad Bank for merging
the latter with itself, according to an exchange filing.

As per the fair equity share exchange ratio approved by the board of directors of the bank,
115 equity share of Indian Bank are to be exchanged for every 1,000 shares of Allahabad
Bank, Indian Bank said in a regulatory filing.

In a separate filing, Union Bank said it has set March 23, 2020, as the record date for
issuing and allotting equity shares of Union Bank of India to the shareholders of Andhra
Bank and Corporation Bank.
In the biggest consolidation exercise in the banking space, the government in August 2019
had announced four mega mergers of public sector banks, bringing down their total
number to 12 from 27 in 2017, a move aimed at making state-owned lenders global sized
banks.

As psser this plan, United Bank of India and Oriental Bank of Commerce will be merged
with Punjab National Bank; Syndicate Bank will be merged with Canara Bank; Allahabad
Bank will be amalgamated with Indian Bank; and Andhra Bank and Corporation Bank will
be consolidated with Union Bank of India.

Last year, Dena Bank and Vijaya Bank were merged with Bank of Baroda. Prior to this,
the government had merged five associate banks of SBI and Bharatiya Mahila Bank with
the State Bank of India .

A Grievance Redressal Committee headed by 

How Stock Price Is Affected

In the days leading up to a Amalgamation, the share price of both underlying companies are
differently impacted, based on a host of factors, such as macroeconomic conditions, market
capitalizations, as well as the execution of the Amalgamation process itself. But generally
speaking, shareholders of the acquiring firm usually experience a temporary drop in share
value. In contrast, shareholders in the target firm typically observe a rise in share value
during the same pre-merge period, mainly due to stock price arbitrage, which describes the
action of trading stocks that are subject to takeovers or Amalgamation. Simply put: the spike
in trading volume tends to inflate share prices.

After a Amalgamation officially takes effect, the stock price of the newly-formed entity
usually exceeds the value of each underlying company during its pre-merge stage. In the
absence of unfavorable economic conditions, shareholders of the Amalgamation ompany
usually experience favorable long-term performance and dividends.

Shareholder Voting Power and Dilution

The shareholders of both companies may experience a dilution of voting power due to the
increased number of shares released during the merger process. This phenomenon is
prominent in stock-for-stock mergers, when the new company offers its shares in exchange
for shares in the target company, at an agreed-upon conversion rate.

Shareholders of the acquiring company experience a marginal loss of voting power, while
shareholders of a smaller target company may see a significant erosion of their voting powers
in the relatively larger pool of stakeholders

Why Amalgamation is good? – Benefits for various stakeholders:For Banks:

Small banks can gear up to international standards with innovative products and services with
the accepted level of [Link], which are geographically concentrated, can expand
their coverage beyond their outreach.A better and optimum size of the organization would
help PSBs offer more and more products and services and help in integrated growth of the
[Link] also helps in improving the professional [Link] will also end the
unhealthy and intense competition going on even among public sector banks as of [Link] the
global market, the Indian banks will gain greater recognition and higher [Link] volume of
inter-bank transactions will come down, resulting in saving of considerable time in clearing
and reconciliation of [Link] will also reduce unnecessary interference by board
members in day to day affairs of the [Link] mergers, bargaining strength of bank staff
will become more and [Link] staff may look forward to better wages and service
conditions in [Link] wide disparities between the staff of various banks in their service
conditions and monetary benefits will narrow down.

Why Amalgamation is good? – Benefits for various stakeholders: For government:

The burden on the central government to recapitalize the public sector banks again and again
will come down substantially.

This will also help in meeting more stringent norms under BASEL III, especially capital
adequacy ratio.

From regulatory perspective, monitoring and control of less number of banks will be easier
after mergers.
Indian Bank today announced the successful go-live of the consolidated CBS Platform. This
follows the merger of Allahabad Bank into Indian Bank that was implemented with effect
from April 1, [Link] CBS integration was taken up over the weekend of February 13/14
and successfully completed on [Link] CBS and all channels were made available for use
by branches and customers from February 15."The integrated CBS is running smoothly
across branches and channels. This is a ‘Big Bang’ merger by the CBS provider, TCS where
the data of 3,000-plus branches and all channels of the erstwhile Allahabad Bank were
migrated seamlessly to the Indian Bank database," said Padmaja Chunduru, MD & CEO,
Indian [Link] customer account numbers of both the Banks remain unchanged and the
login credentials of Internet Banking and Mobile Banking were also retained. Customers of
erstwhile Allahabad Bank have been migrated to IndOASIS the Mobile Banking App of
Indian Bank and they can avail mobile banking services with their existing
[Link] said“this is the final step in our amalgamation journey ‘Project
Sangam’.Starting immediately after the announcement of merger, the journey posed severe
challenges under Covid, but the determination and commitment of our teams from the field
and Corporate Office saw it [Link] support and cooperation from TCS (Technology
Partner) and Deloitte (Merger Consultant) and the way they worked shoulder to shoulder with
our team made this possible, she said."We have kept our customers informed all through and
shall be extra vigilant to ensure that we continue to deliver good service to our valued
clientele. We sincerely thank our customers for their support and unstinted co-operation in
our amalgamation journey,”

Role of RBI

The Reserve Bank‟s concern and involvement in the sphere of rural credit stemmed from its
very statute of incorporation. Specific provisions were made in the Reserve Bank of India
Act, 1934 both for the establishment of an Agricultural Credit Department (ACD) in the bank
and for extending refinance facilities to the cooperative credit system. Emphasis was laid on
setting up, strengthening and promoting financially viable provincial cooperative banks,
central cooperative banks, marketing societies and primary agricultural credit societies in
each province. The RBI, since 1942, also started extending credit facilities to provincial
cooperative banks for seasonal agricultural operations and marketing of crops. Generally the
co-operative societies (other than those operating in more than one State) is a State subject
like incorporation, regulation and winding up and is governed by the State laws on co-
operative societies. In the case of co-operatives established in more than one state are
governed by the Multi-State Co-operative Societies Act, 2002. Majority of the co-operative
societies are operating only in one State and the State Government appoints Registrar of Co-
operative Societies as regulatory authorities.

Financial Performance
Data on the proportion of societies in different tiers that reported making profits during 2000-
2001 and 2002-2003, the numbers that reported zero or negative net worth and the magnitude
of reported Based on available data, while the large majority of SCBs were reporting profits
during this period, more than 35 per cent of DCCBs and more than half the PACS were
reporting losses. About one in five SCBs and almost 38 per cent of the DCCBs have eroded
their net worth. Accumulated losses of DCCBs amounted to around Rs 3,200 crore in 2000-
2001 and increased to Rs 4,400 crore two years later. Accumulated losses of PACS exceed
that of DCCBs

THE FINANCE COMMISSION

Under the provisions of Article 280 of the Constitution, the President is required to appoint a
Finance Commission for the specific purpose of devolution of non-Plan revenue resources.
The functions of the Commissions are to make recommendations to the President in respect
of

(i) the distribution of net proceeds of taxes to be shared between the Union and the States and
the allocation of share of such proceeds amount the States.

(ii) the principals which should govern the payment by the Union of grants-in-aid to the
revenues of the States, and

(iii) any other matter concerning financial relations between the Union and the States.

The appointment of the Finance Commission is of great importance,for it enables the

financial relation between the Centre the units to be altered in accordance with changes in
need and circumstances. The elasticity in relationship introduced by this provision has great
advantage.

Ten Finance Commissions have so far been appointed by the Government since the
inauguration of the Constitution in 1951. The recommendations of the Finance Commissions
can be grouped under three heads-Division and Distribution of income tax and other taxes,

Grants-in-aid and centers‟ loans to States. For the first time, the Eighth Finance Commission
presided over by Y.B. Chavan, introduced a new formula for distribution of the income

tax proceeds among the States:

(a) 10 percent would continue to be distributed among the States on the basis of collection of
income tax:

(b) 90 percent of the proceeds of the income tax would be distributed among the States on the
following Criteria;25 percent on the basis of population; 25 percent on the basis of inverse of
the per capita income of the state multiplied by population; and 50 percent on the

basis of the distance of the per capita income of a state from the highest per capita income
state (i.e. Punjab) and multiplied by the population of the [Link] basic objective of this
three-factor formula was to bring about a high degree of equity among the States. The Ninth
Finance Commission (NFC) basically followed the above formula with minor

modifications.

The NFC added one more criterion. Viz., a composite index of backwardness of States based
on (a) population of scheduled castes and scheduled tribes and (b) the number of agricultural
laborers in different states as revealed in the 1981 census. According to the NFC the
composite index would correctly reflect poverty and backwardness of a state in large
measure. The states having a larger share of the two components are required to bear
substantial expenditure

responsibilities.

The Tenth Finance Commission (TFC) evaluated the formula of both Eight and Ninth
Finance Commissions and introduced the following formula / criteria to determine the shares
of the different States in the shareable proceeds of income tax:

(a) 20 percent on the basis of population 1971 :

(b) 60 percent on the basis of distance of per capita income of a State from that of the State
having the highest income:

(c) 5 percent on the basis of area adjusted ;

(d) 5 percent on the basis of index of infrastructure; and

(e) 10 percent on the basis of tax effort

Introduction

The term "Amalgamation"in the business sense means merger or coming together of two or
more business. It is defined as an amalgamation pursuant to the provisions of the companies
Act 1956. Amalgamation is defined by the companies Act 1956 would cover amalgamation
of two or more companies and absorption/take over of one or more company by other.A
completely new entity is formed to house the combined assets and liabilities of both
[Link] Amalgamation can help increase cash resources, eliminate competition, and
save companies on taxes. But it can lead to a monopoly if too much competition is cut out,
scale down the workforce, and increase the new entity's debt [Link] amalgamtion has
generally fallen out of popular use in the United States, being replaced with the terms merger
or consolidation. but it is still commonly used in countries such as [Link] transferor
company is absorbed into the stronger, transferee company, leading to an entity with a
stronger customer base and more assets..On the other hand, if too much competition is cut
out, amalgamation may lead to a monopoly, which can be troublesome for consumers and the
marketplace. It may also lead to the reduction of the new company's workforce as some jobs
are duplicated and therefore make some employees obsolete. It also increases debt: by
merging the two companies together, the new entity assumes the liabilities of both.
Amalgamation is a form of combination. Amalgamation is a blending of two or more existing
undertaking into one undertaking, the shareholders of each blending company becoming
substantially the shareholders in the company which is to carry on the blended undertakings.
There may be amalgamation either by transfer of two or more undertakings to a new
company or by transfer of one or more undertakings to an existing company.

This is a very comprehensive and clear description of amalgamation. As such, amalgamation

implies absorption also. Amalgamation may also be brought about by the transfer of one or
more undertakings to an existing undertaking so as to result in merger or fusion of the
undertakings. This form of combination is generally known as absorption.

Understanding Amalgamations

Amalgamation typically happens between two or more companies engaged in the same line
of business or those that share some similarity in operations. Companies may combine to
diversify their activities or to expand their range of services

The Pros and Cons of Amalgamtion

Amalgamation is a way to acquire cash resources, eliminate competition, save on taxes, or

influence the economies of large-scale operations. Amalgamation may also increase
shareholder value, reduce risk by diversification, improve managerial effectiveness, and help
achieve company growth and financial [Link] the other hand, if too much competition is cut
out, amalgamation may lead to a monopoly, which can be troublesome for consumers and the
marketplace. It may also lead to the reduction of the new company's workforce as some jobs
are duplicated and therefore make some employees obsolete. It also increases debt: by
merging the two companies together, the new entity assumes the liabilities of both.

Objective of amalgamation

1. Establishment and management charges are reduced.

2. Competitions among the amalgamating companies are eliminated.

3. Purchase of materials, in bulk, can be made at reduced price.

4. Production can be carried on in large scale

5. Capital amount is increased by combination of companies.

6. Manufactured products can be easily marketed.

7. All the advantages of combination are available.

8. Avoiding duplication of expenditure and reduction in cost.

9. Research and development facilities are increased.

10. Price maintenance can be regulated.

Comparative position of types of amalgamation

[Link] merger one company is merged with other company but the identity of both the
companies remains the same as before. In case of purchase, the company which is
amalgamated to other company does not exist in future.

2. In case of merger, the share-holders of both the companies can take part in the
management of the company while in case of purchase the share-holders have no right to take
part in the management.

3. The share-holders of transferor company in case of merger get shares in the transferee
company so that ownership can be continued. In case of purchase, the share-holders of
transferor company get payment of purchase price in the form of shares, debentures and cash.
The ownership of share-holders of transferor company does not continue.

4. In amalgamation in the nature of merger all types of reserves of transferor company are
included in financial statements of the transferee company, while amalgamation in the nature
of purchase, only statutory reserves like Development Allowance Reserve, Investment
Allowance Reserve etc. are included in the financial state

Procedure for Amalgamation

1. The terms of amalgamation are finalized by the board of directors of the

amalgamating companies.

2. A scheme of amalgamation is prepared and submitted for approval to the respective

High Court.

3. Approval of the shareholders’ of the constituent companies is obtained followed by

approval of SEBI.

4. A new company is formed and shares are issued to the shareholders’ of the transferor
company.

5. The transferor company is then liquidated and all the assets and liabilities are taken
over by the transferee company.
Purpose of Amalgamation

Companies go for amalgamation, for a number of reasons such as:

 Gaining synergy

 Avoiding competition

 Increasing efficiency

 Business expansion

 Reaping economies of large-scale production

When amalgamation is affected, some or all the assets and liabilities of the vendor
companies, are transferred to the vendee company. Similarly, the shareholders of the old
entity turn out as the shareholders of the amalgamated entity.

Why Amalgamation?

1. To acquire cash resources

2. Eliminate competition

3. Tax savings

4. Economic of large scale operations

5. Increase shareholders value

6. To reduce the degree of risk by diversification

7. Managerial effectiveness

8. To achieve growth and gain financially

Advantages of Amalgamation

 Competition between the companies gets eliminated

  R&D facilities are increased

 Operating cost can be reduced

 Stability in the prices of the goods is maintained

Disadvantages of Amalgamation

 Amalgamation may lead to elimination of healthy competition

 Reduction of employees may take place

 There could be additional debt to pay

 Business combination could lead to monopoly in the market, which is not always
positive

 The goodwill and identity of the old company is lost

Accounting of Amalgamation

Pooling of Interests Method:

Through this accounting method, the assets, liabilities and reserves of the transfer or
company are recorded by the transferee company at their existing carrying amounts.

Purchase Method:

In this method, the transfer company accounts for the amalgamation either by incorporating
the assets and liabilities at their existing carrying amounts or by allocating the consideration
to individual assets and liabilities of the transfer or company on the basis of their fair values
at the date of amalgamation.

Consideration

 The consideration for the amalgamation may consist of securities, cash or

other assets. In determining the value of the consideration, an assessment
is made of the fair value of its elements. A variety of techniques is applied
in arriving at fair value. For example, when the consideration includes
securities, the value fixed by the statutory authorities may be taken to be
the fair value. In case of other assets, the fair value may be determined by
reference to the market value of the assets given up. Where the market
value of the assets given up cannot be reliably assessed, such assets may
be valued at their respective net book values.

 Many amalgamations recognise that adjustments may have to be made to

the consideration in the light of one or more future events. When the
additional payment is probable and can reasonably be estimated at the date
of amalgamation, it is included in the calculation of the consideration. In
all other cases, the adjustment is recognised as soon as the amount is
determinable [see Accounting Standard (AS) 4, Contingencies and Events
Occurring After the Balance Sheet Date

Sections 391 to 394 of the Companies Act, 1956, govern all the three types of
amalgamation.i.e,,

(A) A new company formed to takeover the existing businesses of two or more
companies-i.e."amalgamation of companies"

(B) One company taking over the business of one or more other companies-i.e.
"absorption of companies"
 (C) A new company formed for taking over the business of an existing loss-
making company-i.e. "external reconstruction."

Treatment of Goodwill Arising on Amalgamation

 Goodwill arising on amalgamation represents a payment made in anticipation of

future income and it is appropriate to treat it as an asset to be amortised to income on
a systematic basis over its useful life. Due to the nature of goodwill, it is frequently
difficult to estimate its useful life with reasonable certainty. Such estimation is,
therefore, made on a prudent basis. Accordingly, it is considered appropriate to
amortise goodwill over a period not exceeding five years unless a somewhat longer
period can be justified..

 Factors which may be considered in estimating the useful life of goodwill arising on
amalgamation include:
(a) the foreseeable life of the business or industry;
(b) the effects of product obsolescence, changes in demand and other economic
factors;
(c) the service life expectancies of key individuals or groups of employees;
(d) expected actions by competitors or potential competitors; and
(e) legal, regulatory or contractual provisions affecting the useful life.

Disclosure

1. For all amalgamations, the following disclosures should be made in the first financial
statements following the amalgamation:
(a) names and general nature of business of the amalgamating companies;
(b) effective date of amalgamation for accounting purposes;
(c) the method of accounting used to reflect the amalgamation; and
(d) particulars of the scheme sanctioned under a statute.

2. For amalgamations accounted for under the pooling of interests method, the following
additional disclosures should be made in the first financial statements following the
amalgamation:
(a) description and number of shares issued, together with the percentage of each
company’s equity shares exchanged to effect the amalgamation;
 (b) the amount of any difference between the consideration and the value of net
identifiable assets acquired, and the treatment thereof

3. For amalgamations accounted for under the purchase method, the following additional
disclosures should be made in the first financial statements following the
amalgamation:
(a) consideration for the amalgamation and a description of the consideration paid or
contingently payable; and
(b) the amount of any difference between the consideration and the value of net
identifiable assets acquired, and the treatment thereof including the period of
amortisation of any goodwill arising on amalgamation.
Amalgamation after the Balance Sheet Date

4. When an amalgamation is effected after the balance sheet date but before the issuance
of the financial statements of either party to the amalgamation, disclosure should be
made in accordance with AS 4, ‘Contingencies and Events Occurring After the
Balance Sheet Date’, but the amalgamation should not be incorporated in the financial
statements. In certain circumstances, the amalgamation may also provide additional
information affecting the financial statements themselves, for instance, by allowing
the going concern assumption to be maintained.

Amalgamation after the Balance Sheet Date

 27. When an amalgamation is effected after the balance sheet date but before the
issuance of the financial statements of either party to the amalgamation, disclosure is
made in accordance with AS 4, ‘Contingencies and Events Occurring After the
Balance Sheet Date’, but the amalgamation is not incorporated in the financial
statements. In certain circumstances, the amalgamation may also provide additional
information affecting the financial statements themselves, for instance, by allowing
the going concern assumption to be maintained.

Main Principles

 An amalgamation may be either –

 a) an amalgamation in the nature of merger, or

b) an amalgamation in the nature of purchase.

 An amalgamation should be considered to be an amalgamation in the nature of merger

when all the following conditions are satisfied:

i. All the assets and liabilities of the transferor company become, after amalgamation,
the assets and liabilities of the transferee company.

ii. Shareholders holding not less than 90% of the face value of the equity shares of the
transferor company (other than the equity shares already held therein, immediately
before the amalgamation, by the transferee company or its subsidiaries or their
nominees) become equity shareholders of the transferee company by virtue of the
amalgamation.

iii. The consideration for the amalgamation receivable by those equity shareholders of the
transferor company who agree to become equity shareholders of the transferee
company is discharged by the transferee company wholly by the issue of equity shares
in the transferee company, except that cash may be paid in respect of any fractional
shares.

iv. The business of the transferor company is intended to be carried on, after the
amalgamation, by the transferee company.

v. No adjustment is intended to be made to the book values of the assets and liabilities of
the transferor company when they are incorporated in the financial statements of the
transferee company except to ensure uniformity of accounting policies.

 An amalgamation should be considered to be an amalgamation in the nature of

purchase, when any one or more of the conditions specified in paragraph 29 is not
satisfied.

 When an amalgamation is considered to be an amalgamation in the nature of merger,

it should be accounted for under the pooling of interests method described in
paragraphs 33–35.

 When an amalgamation is considered to be an amalgamation in the nature of

purchase, it should be accounted for under the purchase method described in
paragraphs 36–39.
 The Pooling of Interests Method

 In preparing the transferee company’s financial statements, the assets, liabilities and
reserves (whether capital or revenue or arising on revaluation) of the transferor
company should be recorded at their existing carrying amounts and in the same form
as at the date of the amalgamation. The balance of the Profit and Loss Account of the
transferor company should be aggregated with the corresponding balance of the
transferee company or transferred to the General Reserve, if any.

 If, at the time of the amalgamation, the transferor and the transferee companies have
conflicting accounting policies, a uniform set of accounting policies should be
adopted following the amalgamation. The effects on the financial statements of any
changes in accounting policies should be reported in accordance with Accounting
Standard (AS) 5 Net Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.

 The difference between the amount recorded as share capital issued (plus any
additional consideration in the form of cash or other assets) and the amount of share
capital of the transferor company should be adjusted in reserves.

Governing Laws for Merger and Amalgamation

 In India, the concept of Merger and Amalgamation is primarily governed by the
regulations of the Companies (Compromises, Arrangements and Amalgamations) Rules,
2020, and Section 230 to 234 of the Companies Act, 2013. However, the following key
legislation also regulate the activities of Merger and Amalgamation in India

 Foreign Exchange Management Act, 1999;

 Competition Act, 2002;

 Income Tax Act, 1961;

 Insolvency and Bankruptcy Code, 2016

 Indian Stamp Duty Act, 1899;

 SEBI (Substantial Acquisition of Share and Takeover) Regulations, 2011.

Disclosing the effects of such amalgamation on the followings:

a) Key Managerial Personnel (KMP)

b) Directors;

c) Promoters;

d) Non-Promoter Members;

e) Depositors;

f) Creditors;

g) Debenture Holders;

h) Deposit Trustee;

i) Employees;

j) Shareholders;

Features of Amalgamation

 Two or more existing companies are liquidated

 A new company is formed to take over the business of liquidating companies

 The nature of business of existing companies is similar

 Liquidating companies are called vendor companies and the new company is called
vendor companies.

 Generally,purchase consideration is discharged by the issue of equity shares of

purchasing company.
Branches of Allahabad bank to operate as branches of Indian bank from April 1,2020

The Amalgamation of Allahabad Bank into Indian Bank scheme,2020 dated March
4,2020,issued by the government of India was published under Extraordinary part 2-Section
3-Sub-section(i) in the Gazette of India sanctioning the Amalgamation of Allahabad Bank
into Indian Bank in terms of section 9 of the banking companies (Acquisition of Transfer of
Undertaking) Act,1970 (5 to 1970).The scheme comes into force on the 1st day of April 2020.

Consequently,all branches of Allahabad bank will function as branches of Indian Bank from
April 1,[Link] ,including depositors of Allahabad Bank,will be treated as customers
of Indian Bank with effect from April 1,2020.

Mergers and amalgamations are normal business phenomena across different industries.
Banking is no exception. Mergers take place between a weak bank with a stronger Bank to
improve its functioning and widen its capital base. In 1991, Govt of India appointed a
Committee for banking sector reforms under the Chairmanship of Sri M.L. Narasimham, who
recommended among other things (like NPA norms, Capital adequacy frame work under
Basle norms) for consolidation of a large net work of Indian Banks into 3/4 international
Banks, 10 national Banks and a few local Banks. Consolidation among public sector banks
has been on the agenda for the NDA government since 2014, when it first came into power.
In third set of major policy announcements to address economic concerns, Union Finance
Minister Nirmala Sitharaman on 30th August 2019 announced merger of six public sector
banks (PSBs) with four better performing anchor banks. This comes as a mega banking
realignment by the Narendra Modi government in order to streamline their operation and size.
This is the widest rearrangement of the banking sector since the nationalisation of 14 banks in
July 1969 The Oriental Bank of Commerce (OBC) and the United Bank of India (UBI) have
been merged into the Punjab National Bank (PNB). The PNB will now be the second largest
PSU bank after the State Bank of India, which earlier saw a similar consolidation with all its
associates merging with it. The Syndicate Bank has been merged with the Canara Bank while
the Andhra Bank and Corporation Bank will be merged with the Union Bank of India.
Besides this, the Allahabad Bank will merge into the Indian Bank. This will make it the
seventh largest state-owned bank in India. With this announcement of merger of banks, the
total number of PSU banks will come down to 12. Before 2017, when the government rolled
out bank-merger plan, the number of public sector banks in India was 27. The successful
experience of merging State Bank of India with five of its subsidiaries and Bharatiya Mahila
Bank, and the amalgamation of Bank of Baroda, Vijaya Bank and Dena Bank have given the
government confidence that another round of consolidation can be handled without hiccups.

Banking Performance in India releted to Finance

The finance and banking sector plays a vital role in the world’s economy. For example, the
world gross domestic product is valued at $79 trillion. (2017 figures, IMF), while the value of
shares trading on stock exchanges is $78.2 trillion, almost equating the total amount of goods
and services provided around the world. These numbers demonstrate that the finance and
banking sector can exert substantial influence over the global economy, including on aspects
related to human rights.

Finance and banking institutions can contribute both directly and indirectly to adverse human
rights impacts. Examples of direct impacts include: entire lending institutions denying
customers access to finance based on race, religion, or gender; a pension fund investing in a
food and beverage company that systematically buys produce from farms using child labour;
the management of assets belonging to a corporate or individual client involved in human
rights abuses; or investing in a company that buys or uses prospected minerals in countries
undergoing conflict. Financial instruments may also cause human rights violations indirectly
by lending money to agricultural companies involved in land grabs and funding infrastructure
projects that displace indigenous populations. (UN Working Group on the issue of human
rights and transnational corporations and other business enterprises).

An informal group of bank representatives called the “Thun Group of Banks” has published

two discussion papers on their interpretation of the UN Guiding Principles and what they
mean for banks in practice. While these voluntary efforts have been applauded, their
2017 discussion paper on UN Guiding Principles 13 and 17 in a corporate and investment
banking context has been criticised for misconstruing the central Guiding Principle regarding
the corporate responsibility to respect human rights (Comments by Professor John Ruggie) by
asserting that banks, by definition, do not contribute to harm except through their own
activities, such as employment practices.
In 2019, the OECD published key considerations for banks implementing the OECD
Guidelines for Multinational Enterprises. The paper is called Due Diligence for Responsible
Corporate Lending and Securities Underwriting and explains what due diligence for
responsible business conduct entails. It also provides practical considerations for banks at
each step of the due diligence process.

In the current global financial environment the banking and finance industry faces increasing
pressure to engage in broad cost reduction programs, preserve capital and boost profitability.
In addition regulatory compliance pressures are increasing making competitiveness a
significant challenge. New FINTECH companies are playing a significant disruptive role in
classical doing-business banking models.  Technology that enables new service models is a
key strategic differentiator in the ever transforming global financials markets.

We believe that shrinking IT budgets do not mean less innovation, but more. We are
committed to turning crisis into an opportunity for progress. To do this, Uni Systems offers
an innovative approach to banking industry through the intelligent usages of IT technology. 

We transform and replace rigid and legacy systems, technologies and infrastructures,
conceived and designed during previous decades, with flexible, agile ones that boost business
effectiveness and high performance.

The banking industry is the backbone of India’s financial services industry. The country has
several public sector (27), private sector (21), foreign (49), regional rural (56) and urban/rural
cooperative (95,000+) banks. The financial services offered in this segment include:

 Individual Banking (checking accounts, savings accounts, debit/credit cards, etc.)

 Business Banking (merchant services, checking accounts and savings accounts for
businesses, treasury services, etc.)

 Loans (business loans, personal loans, home loans, automobile loans, working-capital
loans, etc.)

The banking sector is regulated by the Reserve Bank of India (RBI), which monitors and
maintains the segment’s liquidity, capitalization, and financial health.

Classification of Financial Sector

The financial sector consists of many different industries ranging from
banks, investment houses, insurance firms, real estate brokers, consumer finance firms,
mortgage lenders, and real estate investment trusts (REITs).

Primarily, the financial sector includes financial institutions, banks, and non-banking
financial institutions. Financial institutions provide members and clients with financial
services. It is also called financial intermediaries since they act as intermediaries between
savers and borrowers.

Banks are financial intermediaries who provide lenders with capital to generate revenue and
accept deposits. They are strictly regulated as they provide market stability and consumer
protection. Banks include:

 Public banks

 Commercial banks

 Central banks

 Cooperative banks

 State-managed cooperative banks

 State-managed land development banks

Non-banking financial institutions are financial institutions, not banks, that facilitate financial
services, such as investment, risk pooling, and market brokering. They generally don't have
full banking licenses.

Career Opportunities in the Finance & Banking (Financial Services) Sector in India for Fresh
Graduates

The Indian financial market is one of the oldest ones in the world. It has got a fast rate of
growth, and one of the best markets in the emerging economies. Rapid growth in the industry
requires a huge workforce throughout the nation. The finance and banking sector primarily
looks for fresh graduates having commerce, finance, mathematics, economics or a business
management background. At the entry level, candidates get started in the financial advisory
companies. Mutual fund houses also hire fresh and skilled graduates and so as the stock
brokerage firms. The mutual fund company mainly includes sales and marketing, fund
accounting, investment and research, operations and administration. One can become an
advisor or a financial planner and with an experience of around five years go further to
become a research analyst and following that a fund manager. Besides, there are huge
opportunities in the financial KPO (Knowledge Process Outsourcing) sector.

Benefits of a career in the Finance & Banking Domain

1. Scope of high earning

Careers in financial services pay the best deal more than most other fields, with some of the
highest paying entry-level positions. On top of that, if you hard worker, you can very quickly
move forward in your career and experience an abundant increase in your income. As
per PayScale, the median annual salary of an entry-level business analyst in the finance and
banking domain in India is around INR 414, 000. With 4 – 5 years of experience,
professionals can earn INR 6 – 8 Lacs, excluding bonus and incentives.

2. Fastest Growing Job Prospects

According to The Bureau of Labor Statistics, due to “growing range of financial products and
the need for in-depth knowledge of geographic regions” finance positions are growing faster
than the average for employment in the United States. For example, careers in financial
analysis are to grow by 23 percent, financial management by 14 percent, and financial
advising by 32 percent. The opportunities will continue to present themselves as the economy
continues to recover. As a with any major, it’s important to keep a focus on what it’s like in
the job market upon graduation and it’s very fortunate that things look promising for those in
this major.

3. Challenging career

A job in finance is quite challenging than other jobs. It requires brains, hard work and
education to be successful in career. Because it is an intellectually stimulating field, it is very
rewarding in the long-term. Moreover, if one works hard and applies themselves fully in their
career it doesn’t take long to move up, so an individual can earn more and face new and
exciting challenges.

4. Plenty of career options

The financial sector is plenty full of many different career options for professionals. There is
a wide variety of specializations. One can attain to focus in on one aspect of the financial
sector. A finance degree allows you to work with the decision makers of outside
organizations. Examples of these organizations include banks, government agencies,
stockholders, suppliers, businesses, and more. Being able to distinguish yourself with a
finance degree will help you when searching for jobs, especially from a large number of
business majors. As a finance degree is harder to attain, it’s guaranteed to set you apart.

5. Job security

Job security is an important perk to a career in Finance, as it is an in-demand occupation.

Positions in this sector are generally secure. Because Finance is fundamental to everyday life,
there are many job options available. This gives you more freedom to switch companies,
cities, etc if you’re feeling like you want a new challenge or even change for the sake of
change.

6. The opportunity to continue higher education

Employers in the financial sector like their employees continue advancing their education.
Earning a higher degree (MA, MS or MBA) also means fast-tracking in the corporate ladder
and earning a fat paycheck. So that effort to educate yourself really pays off.

7. Wide Variety of Job Opportunities

As you can see above, finance careers are growing. This also means that the variety of careers
opportunities are growing as well. With a finance degree you can work in:

·         Corporate management

·         International financial management

·         Investment services

·         Financial planning services

·         Personal financial planning for individuals and private organizations

·         Brokerage firms

·         Insurance companies

·         Commercial and investment banks

·         Credit unions and private banks

As well as many other financial intermediary companies all employ finance graduates.

8. A balanced lifestyle

Most jobs in the financial sector allow for a fairly balanced lifestyle between work and a
personal life, especially for those who are independently employed and can choose their
schedule.

How India's banking and financial sector will shape up in post-COVID 2021

1. Home loans to stay soft

According to a report by TOI, housing loans hit an all-time low in 2020. While many lenders
feel rates have bottomed out, we’re in uncharted territory as far as policy rates go. Real
interest rates (adjusting for inflation) are negative. Globally, $17-trillion debt is yielding
negative returns and more countries, possibly the UK, may join the ranks. With banks riding
on surplus liquidity and no significant pick-up in credit, home loan rates could remain soft.

2. Overseas education & travel

Continuing portfolio flows are keeping the rupee strong vis-a-vis the dollar. Retail dollar
demand has not picked up as both overseas education and foreign travel were hit hard by
COVID-19. But a new administration in the US and ‘revenge travel’ are expected to revive
demand for dollars in both sectors

3. digital-payments-bccl

Over the years, most banking services got commoditised. Given RBI’s concerns of
systemic stability, the intense regulation could turn banks into utilities. But since there is no
stopping the march of technology, the space for innovation is being grabbed by neo-banks
and fintechs. The lack of a banking licence is not seen as a handicap as many smaller banks
are willing to lend their ‘bank identification number’. The account aggregators and UPI are
expected to do to banking what portability did to telecom services.
 4. Debt’s a four-letter word

As crashing interest rates turned the traditional safe haven of fixed deposits unattractive, the
write-down of Yes Bank and Lakshmi Vilas Bank bonds in 2020 also showed that debt could
be riskier than equity. As a result, banks will find it tough to sell bonds to retail investors.

5) New bankers in town

Machines took over most jobs in manufacturing, but it was assumed humans would be
needed for credit decisions. 2020 proved that wrong as lenders like HDFC Bank automated
most personal loans. RBI’s ban on fresh launches has delayed its auto loan portal, but there’s
no stopping the e-juggernaut

6) Foreign ‘helping’ hand

RBI’s earlier solution for troubled banks was a shotgun wedding. Acquiring banks would
have the advantage of additional branches. Now with branches no longer attractive and many
private banks facing stress, the RBI may open doors to foreigners to take over weak banks
like it did for CSB and Lakshmi Vilas Bank

How RBI's curb on HDFC business will impact you

1)Tech glitches and impact

The Reserve Bank of India’s move to temporarily ban private lender HDFC Bank from
onboarding new credit card clients and launching digital initiatives has prompted questions
on the sweep of services that will be affected. ET explains how the RBI order will affect
those that bank with the country’s most valuable lender.

2)What has the RBI done?

The Reserve Bank of India has asked HDFC Bank to temporarily stop all digital launches and
sourcing new credit card customers. The RBI order also states that the lender’s board needs to
examine these lapses and fix accountabilit

3)How does it affect you?

The RBI move does not affect existing clients. You will be able to access your mobile or
internet banking solutions. You will also be able to use your existing credit card, open bank
accounts, borrow loans and conduct a variety of other banking transactions.

4)What is allowed and not allowed?

If you are an existing credit card user and your card expires, the bank will issue you a new
card. If your card gets lost, you will be issued a replacement. But, since the bank will have to
stop sourcing new credit card customers, no new clients will be able to avail these services
until the RBI lifts the ban.

5)Why did the RBI do this?

This unprecedented move by the RBI came after the bank suffered its third big outage in the
span of just two years. The bank faced its first big outage in November 2018 while upgrading
its mobile application and internet banking. A year later, it faced its second outage in
December 2019, forcing RBI to send its team to study the issues the lender was facing.
Another incident happened on November 21 due to a power outage in its Primary Data
Centre, after which customers weren’t able to access digital offerings for 2 days.

6)How does it disrupt HDFC Bank’s digital rollout?

Some of the bank’s strategic digital initiatives -to improve the front end digital experience,
enhance digital origination, enable straight through processing, build next generation of
mobile and internet banking, and create APIs based banking on the edge - would now be
readied and launched after the approval and clearance from the regulator.

WhatsApp Pay goes official after NPCI approval

1)WhatsApp gets on the UPI bandwagon

According to a report by ET, on November 5, the National Payments Corporation of India

(NPCI) gave approval to WhatsApp to go live on the United Payments Interface (UPI) in a
graded manner. WhatsApp can start with a maximum registered base of 20 million in UPI,
NPCI said. "Now you can send money to your friends and family through WhatsApp as
easily as sending a message. There’s no fee, and it’s supported by more than 140 banks. And
because it’s WhatsApp, it’s secure and private too," Facebook CEO Mark Zuckerberg said in
a video.
2)A safer medium

"Digital payments are really important right now. It’s safer than handing someone cash and
eliminates the need from standing in line at the bank...we’ve been working on this with the
National Payments Corporation of India, who oversee everything to make sure it’s secure and
reliable. And we’ve built it using India’s Unified Payments Interface, which makes it easy for
anyone to instantly accept payments across different apps -- and for companies to provide
people with great services," he added.

3)Battling a possible monopoly

The National Payment Corp of India’s clearance for WhatsApp Pay limits the number of
users who can use the feature on the platform to 20 million in the first phase. Facebook-
owned WhatsApp has about 400 million users in India. The NPCI’s approval came on the
same day it limited the transactions a third-party app like WhatsApp Pay can carry out to
30% of the total volume on the UPI network. The move is expected to allay fears of
regulatory authorities including the Reserve Bank of India over potential monopoly risks.

4)Easy-peasy

In a separate blog post, WhatsApp said starting Friday, people across India will be able to
send money through WhatsApp and that the 'secure' payments experience makes transferring
money just as easy as sending a message. "To send money on WhatsApp in India, it’s
necessary to have a bank account and debit card in India. WhatsApp sends instructions to
banks, also known as payment service providers, that initiate the transfer of money via UPI
between sender and receiver bank accounts. People can send money on WhatsApp to anyone
using a UPI supported app," the company said.

5)Payment service behemoth

NPCI’s move comes just days after its popular UPI network has for the first time crossed the
2 billion monthly transaction mark to firmly establish itself as the primary retail payment
channel in the country. In October, UPI processed 2.07 billion transactions worth Rs 3.86
lakh crore. Market participants expect the UPI volume in India to further increase, aided by
the entry of WhatsApp Pay and a growing propensity in the country’s massive consumer
market towards digital payments.