e-track - Punjab National Bank Institute of Information...
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vol. V no. 2 quarterly journal april-june-2009 e-track business of future e-track e-CRM
Transcript of e-track - Punjab National Bank Institute of Information...
vol. V no. 2 quarterly journal april-june-2009
e-trackbusiness of futuree-track
e-CRM
e-track
April-June-2009
Editor
Pratima Trivedi
Editorial Team
Pramod Dikshit
Ambrish Mishra
Swapnil Srivastava
Sanjay Srivastava
Printed by
Swastik Printing Press
27, Mai Gi Ki Bagiya,
Kapoorthala Crossing,
Mahanagar, Lucknow
Mobile : 9415419300
punjab national bank institute of
information technology
Vibhuti Khand, Gomti Nagar,
Lucknow--226 010 (U.P.)
T : +91 522 2721442, 2721174
F : +91 522 2721201, 2721441
E-mail : [email protected]
URL : www.pnbiit.com
e-track
“Anyone who stops learning is old,
whether at twenty or eighty."
- Henry Ford
Thought for the quarter
From the editor
Dear Readers, As the internet is becoming more and more important in business life, many companies consider it as an opportunity to reduce customer-service costs, tighten customer relationships and most important, further personalize marketing messages and enable mass customization. Together with the creation of Sales Force Automation (SFA), where electronic methods were used to gather data and analyze customer information, the trend of the upcoming Internet can be seen as the foundation of what we know as e CRM today. E CRM comprises of activities which are required to manage customer relationships by using the Internet, web browsers or other electronic touch points. The challenge hereby is to offer communication and information on the right topic, in the right amount, and at the right time that fits the customer's specific needs. Since the company's performance depends upon the satisfaction of its customers which can be achieved through e CRM. Article on “e CRM” has been included in this issue to elaborate various intricacies attached to it. The Global Economy faced its biggest shock which was of such magnitude that many say that it is as worse as that of 1929 shock. Article “Slowdown in global economy and its effects on Indian banks” has been included in this issue to elaborate its impact on Indian Banks.One of the important indicators of financial health of a Bank is the proportion of NPAs in its books. Poor credit quality exposes the banks to vulnerability of further distress in its portfolio and adverse effect on profitability that leads to a vicious cycle. Though RBI has permitted sale of distressed loans to other banks and ARCs activities on the loan sales front are very tardy. The article on “Electronic Trading of Distressed Bank Loans” covers in detail various issues relating to it.Enterprise resource planning is a business tool, which seamlessly integrates the strategic initiatives and policies of the organization with the operations, thus providing an effective means of translating strategic business goals to real time planning and control. It is planned to facilitate information sharing, business planning and decision making on a broad business basis. Today various softwares are available in the market for SME segment depending on the size of the organization .Article “E.R.P trend towards SMEs” elaborates the topic.
Hope you find this issue of e track informative and interesting..
Happy Reading…………
Pratima Trivedie-mail : [email protected]
ContentsFrom Director's Desk Ajay Misra 3
E-CRM Sweety Dube 4
Slowdown in Global Economy and its Effect on Indian Banks Goutam Kumar Mukherji 10
Electronic Trading of Distressed Bank Loans M Ravindran 16
E.R.P TREND TOWARDS SMEs Research Scholar.......... Anchal Singh 22
Financial and Technical News 29
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It gives me immense pleasure to write this column once again, especially after completing 3 years of my taking the reign of the Institute. These years have been a great journey with this Institute in its evolution from a mere training establishment to an eminent organization ready to take a big leap towards educational activities. When I look back in retrospection I have a feeling of satisfaction in the sense that the Institute has slowly but steadily moved towards accomplishing its Mission. Training had remained the bread and butter for the Institute and there has been gradual broad basing in this dimension. With more than 15 Banking Organizations having used infrastructural and training resources of the institute the vision of the Institute to supplement training and infrastructure resources to the BFI sector stands justified. .The industry today looks at the Institute as a premier state of art organization in the information technology.
Banking and Financial sector has undergone a sea change during the last few years. It has witnessed deregulation, liberalization and migration from legacy system to Core Banking. The processes are getting increasingly IT oriented, handling very large volume of sensitive financial transactions online and managing critical financial data. The legacy workforce of the bank being less suitable for optimizing the technology all banks require fresh technical manpower. Most of the banks are on recruitment spree searching for techno bankers suitable to perform smooth and efficient banking operations using technology.
Taking a strong note of this requirement, PNBIIT had launched Advanced Diploma in Banking Technology (ADBT), which aims at creating a pool of responsible techno-bankers for banking and IT sector. This programme is unique blend of IT and its usage in the modern banking operations. It is designed to impart in depth knowledge and expertise to the students through innovative learning, supported by relevant high end technology.ADBT is aimed at creating professionals, who should be employable from the day one.
The launch of ADBT has been a march towards attaining the deemed university status for the institute as per the mission statement. The success of ADBT was an encouragement to explore more possibilities for educational endeavors. The immediate future course of action for the institute, should therefore be, brand imaging of ADBT and holding two programmes in a year thereafter graduating to long duration diploma/degree course in management and information technology for the students by the year 2010.In this context, I am thankful to Union bank of India for
considering ADBT of PNBIIT as an eligibility criteria for selection of Manager(Information Technology) in MMG-II. I am also thankful to Punjab National Bank, Dena Bank, United
bank of India, Hewlett Packard India and Nurture Technology for showing their interest in conducting campus recruitment at the Institute.
Another important area where the institute should make a foray with a rapid fire speed should be to broaden its organic linkage with the organization of national repute for the proposed sharing of resources and knowledge. This should be done by subsequent conduct of awareness seminar for the top executives of the BFSI, on the upcoming contemporary challenges in the area of IT.
Some of these areas could be Customer Relationship Management (CRM), Entreprise Wide Data Warehouse (EDW), Transaction Processing and Use of IT in financial inclusion.
The ultimate aim is to attain self sustenance both operationally and financially. At the moment when I relinquish the charge of this institute and pass on the baton to the new establishment, my message to the institute is very clear. The coming few years are crucial for consolidation of what has been achieved and focused efforts are needed to put on wheel the thoughts and actions emerged out of Governing Body and Academic Council of the Institute to accomplish its Mission. I congratulate the team of PNBIIT for all achievements and thank all learned members of Governing Body and Academic Council of PNBIIT and all eminent personalities of different premier organizations who associated with the institute and contributed for its development.
Ajay MisraDirector PNBIIT
Email – [email protected]
From Director's Desk
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e-CRM
Abstract:
CRM: A Changing Perspective
Conservative CRM Perspective
e-CRM is the latest buzzword in
the corporate sector and is CRM is THE business buzzword on the perceived as one of the most Internet these days. Customer Relationship effective tools in this direction for Management promises faster customer service at service companies. e-CRM lower costs, higher customer satisfaction and from provides a means to conduct this, better customer retention and ultimately interactive, personalized and customer loyalty. eCRM provides a more interactive relevant communication with customers across and personalized way of communicating with electronic channels. e-CRM is nothing but the customers. The advancement in the information and electronic counter part of CRM. It doesn't replace the communication technology has made the new traditional channels of communication, such as millennium “e-millennium”. Now, service phone or fax, but is just another extension for the organisations' activities are not confined to one customers to interact with companies on a one-to-single activity, but they provide a plethora of one basis. It's a more personalized and interactive services keeping in mind the requirement and form of communication and synchronizes convenience of customers. In the fast changing communications across both electronic as well as marketing environment worldwide, service traditional channels. Such a system has training companies in India not only need to learn the rules benefits too. A new salesperson, for instance, can use but also upgrade the skills as well as the tools of the CRM package to quickly learn about his modern marketing.customers or their past history.
Technology, people and customers are the A typical CRM application integrates and co-three elements on which the success of service
ordinates multiple business functions such as sales, companies hinges in the e-millenium. Technology marketing, support/service, and the multiple has been an enabler in managing the pace and channels of communication with the customer, such quantum of changes. Skilled human resource as, face-to-face, call center, and Web. Thus the key management has brought about success in requirements for a CRM solution includes: technology, which is fundamental in generating Analytical capabilities, unified channel of customer these capabilities. However, ultimately the service interaction, Web-based functionality, centralized company's performance depends upon the database of customer data, integrated workflow, and satisfaction of its customers. integration with ERP applications.
e-CRM provides Business Solutions by
integrating Process, Vision and Technology.
= Customer Contact through
·Telephone
·in person
=Personal Selling
-Sweety Dube
Expenses
Sales
Improve Sales
Reduce
Expenses
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= Direct benefits of an e-CRM system include:
= Service level improvements –
=
=Revenue growth –
Productivity – Internet-based CRM Perspective
=Customer satisfaction –
=
=
=
=
=
=
What is the Customer Life Cycle?
Finding the Customer
Emphasis on after sales service
Complaint handling Using an integrated
database to deliver consistent and improved Responsive Customer Servicecustomer responses.
Finally satisfied customer Decreasing costs by focusing on
retaining customers and using interactive service
tools to sell additional products.
Consistent sales and service
procedures to create efficient work processes.Customer database management
Automatic customer Effective data mining
tracking and detection will ensure enquiries are met Leveraging technology and issues are managed. This will improve the
Electronic point of sale customer's overall experience in dealing with the
organisation.Call centres
Service customization
Volume be serviced by technology and value
be given personalized service
It takes ten times more effort and costs ten
times more money to attract a new customer than to
keep an existing customer. This “statistic” alone
should be enough for companies to invest in CRM.
Finding customers is the first step and the faster you
get through the sorting process of qualifying
prospects into customers, the faster will be the
returns. A web environment adds to this process in a
very positive way. You can provide the means for
people visiting your site to select whether they are CRM is a comprehensive sales and marketing indeed right to be customers. Good design and clear approach to build long-term customer relationships information will aid in this goal.and improve business performance. The above
elaboration states about the transition which
Customer Relationship Management is undergoing The process starts with finding customers. The and how technology has affected the modern Internet allows you to attract customers in two ways: relationship with the customers. (1) getting them to find you through search engines,
CRM and the Customer Life Cycle
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links, and alliances with other sites; and (2), by organisations also have multiple lines of business
proactively finding them and sending material that interact with the same customers.
electronically.
Now that you have found your customer, it is
important to find ways to add value to the
relationship. Keep in mind that value is in the mind
of the customer. Find out what they perceive to be
valuable by surveying them either online, by phone,
or by regular mail.
e-CRM systems enable customers to do
business with the organisation the way the customer As you gain more experience with online wants - any time, via any channel, in any language or services you might use more sophisticated ways to currency—and to make customers feel that they are build customer loyalty and strong relationships. dealing with a single, unified organisation that Building customized or personalized sites for your recognises them every step of the way.customers to use will provide both added services
and give customers a reason to return regularly to
your e-business.
The e-CRM system does this by creating a It is easy to get customers to visit your website central repository for customer records and for the first time. It is much more difficult to get them providing a portal on each employee's computer to return. You must create value for the return visitor. system allowing access to customer information by Ensuring you have good content can do this. Content any member of the organisation at any time. Through can be unique articles about the industry or simply this system, e-CRM gives you the ability to know links to other sources of information. Content can more about customers, products and performance also be tools that a visitor may find useful. Many real results using real time information across your estate sites have mortgage calculators or home business.buying checklists that aid customers in using the
service.
In today's world, customers interact with an
organisation via multiple communication
channels—the World Wide Web, call centres, field
salespeople, dealers and partner networks. Many
Building Value for the Customer
Establishing Long-Term Relationships
A hotel may know, immediately after
registering the customer, what he prefers in the
morning-tea or coffee.E-Loyalty
How does e-CRM work? Communicating the customer about flight
through SMS is always the least
expensive.
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Customer Focus in Banking Services
CRM in Punjab National Bank
*
*
*
*
customers. Today customers are offered ATM
services, access to internet banking and phone As the intense competition becomes a way of banking facilities and credit cards. These have doing business, it is the customer who calls the shot elevated banking beyond the barriers of time and in deciding the nature of products and services space.offered in the market. The customers are becoming
demanding, dominant and selective. In fact the
perceptions and the expectations of the customers PNB is implementing CRM to reach have undergone a sea change, with the availability of customers and to create banking services to the customers at their door steps a robust marketing and through the help of technology. sales structure in the
Marketing of customer services aims at two o rg a n i z a t i o n . T h e
important goals: prosperity to the bank and satisfied objective is to have a
customers. Banks offer tangible services like loan well-defined methodology for sales, marketing and
schemes, interest rates and kinds of account and the pre-sales activities. CRM implementation has been
intangible services like behavior and efficiency of positioned as 'Customer First'. As the name signifies,
staff, speed of transactions and the ambience. The the initiative is mainly to highlight the importance of
banks may need to include customer oriented the customer to the bank and in turn generate a sense
approach or customer focus in their five areas of of recognition and loyalty into the customers as well
businesses such as Cash accessibility, asset security, as prospects.
money transfer, deferred payment and financial
advices.
There are four strategies available to customer
relations' managers:
To win back or save customers
To attract new and potential customers
To create loyalty among existing customers
and
To up sell or offer cross services.
The future of banking business very much
depends upon the ability of the banks to develop
close relationship with the customers. In order to
develop close relationship with the customers the
banking industry has to focus on the technology
oriented innovations that offer convenience to the
Functions In CRM:
Business partner Management:
Contact Management:
Activity Management:
The following activities can be
performed with the help of CRM:
Capturing
customers' basic information with the aim to sell
different products of the bank.
Maintaining customer
information and contact histories of existing
customers.
Providing calendar and
scheduling of activities of individual sales people.
Lead Management: Capturing potential leads from
new/existing customers and converting leads into
actual business. Campaign Management: Targeting
customer with promotions/offers based on customer
segmentation/data analysis and also analyzing the
effectiveness of the campaign.
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Glolbalised Scenario
Innovation
Competition from Foreign Banks and New
Private Sector Banks
Technological Advancement
SMS Banking
vistas and in turn has brought new possibilities for
doing the same work differently and in a most cost-"Change" is a continuous process and banking effective manner. Technology helps to have 24 hours industry is no exception to this natural law. Change a day banking, all seven days in a week. Tele in the Indian banking industry is inevitable due to the banking, Internet banking and E-banking have implementation of the financial sector reforms and opened new business potentials and opportunities policies in the country. The main objective of which hither to remained unexplored. All these financial sector reforms is to promote an efficient, technological advancement may pave the way for competitive and diversified financial system in the home banking rather than branch banking.country. Indian banking industry has undergone
tremendous transformation after liberalization and
globalisation process initiated from 1991. These Another important force of change in the changes have forced the Indian banking industry to Indian banking sector is innovation. Banks are adjust the product mix to effect the rapid changes in innovative, pro-active now-a-days and offer top their process to remain competitive in the globalised class service to customers. They play a dynamic role environment. not only as a provider of finance but also as a
departmental store of finance. As a result of this, new
products like merchant banking, mutual funds,
leasing, factoring, forfeiting, corporate advisory The entry of more and more foreign banks and services and venture capital are emerging. These new private sector banks, with lean and nimble innovative services may augment revenue with cost footed structure, better technology, market effective measures.orientation and cost effective measures, have
intensified the competition in the Indian banking
industry. Financial Institutions have also started
entering into the domain of banks. In recent years,
the share of business of public sector banks has
declined considerably. So there is a compelling need
for the Indian banking industry to modify its
marketing strategy to attract the customers and to
withstand the stiff competition from foreign banks
and new private sector banks
The advent of technology both in terms of
computers and communications has drastically When people are hard pressed for time, the
altered the methodology of banking business. In the need for "anytime anywhere" banking gains utmost
banking sector, the technology has opened new importance. Bearing this in mind, banks provide a
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novel service which gives retail customers account prepare appropriate manpower plans and strategies.
information and real-time transaction capabilities e-CRM applications could enhance the delivery of a from their cell phones. With SMS banking the CRM strategy, such applications should be chosen following services can be obtained: carefully to fit in with organisational culture,
Get account balance details process and legacy IT systems. The financial and
human resource cost as well as the amount of time Request a cheque book required for implementation of a CRM application
Request last three transaction details should also be key factors in the selection of e-CRM
Pay bills for electricity, mobile, insurance etc.applications.
To meet the new challenges, banks have to www.techtarget.com, www.efuture.ca
devise novel ways of meeting the customer's www.eca.com, www.findarticles.com
demands. To help the banking staff to get sufficient palisade.plynt.com/issues/2005Sep/sms-bankingexposure to technology, suitable packages relating
to hardware and software applications in relation to www.netbanker.com, www.crmtrends.com,
their works are to be provided. Further, a separate www.customerservicepoint.commarketing wing may be created in every bank to
market their banking services. They must be trained CRM at the speed of light by Paul Greenberg
suitably to keep pace with the changing CRM concepts & cases by Alok Kr. Raienvironment. In order to meet the challenges, the
Human Resource Department in banks have to
·
·
·
·
Development of the Skills of Bank PersonnelWeb references:
Books referred :
Author is PS to Director PNBIIT
'Starfish'Author Unknown
A friend of ours was walking down a deserted Mexican beach at sunset.
As he walked along, he began to see another man in the distance. As he grew nearer, he noticed that the local native kept leaning down, picking something up, and throwing it out into the water. Time and again, he kept hurling something out into the ocean.
As our friend approached even closer, he noticed that the man was picking up starfish that had washed up on the beach and, one at a time, was throwing them back into the water.
Our friend was puzzled. He approached the man and said, "Good evening, friend. I was wondering what you are doing?"
"I'm throwing these starfish back into the ocean. You see, it is low tide right now, and all of these starfish have washed up onto the shore. If I don't throw them back into the sea, they'll die from lack of oxygen."
"I understand," my friend replied, "but there must be thousands of starfish on this beach! You can't possibly get to all of them. There are simply too many! And don't you realize this is probably happening on hundreds of beaches all up and down this coast? Can't you see that you can't possibly make a difference?"
The local native smiled, bent down, and picked up yet another starfish and, as he threw it back into the sea, replied:
"Made a difference to THAT one!"
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Global Economy was growing also responded positively. But despite all these no
steadily since 2002 and everything concrete positive trend was visible. For example,
was going fine till beginning of after reduction in PLR, still the rates of some private
September, 08. Sub Prime crisis banks are comparatively high as is evident from the
incidence was first visible in mid following table-
2007. There was a general feeling of insecurity.
American consumers borrowed in excess, especially
against inflated home values. When the truth came to
light, the Economic slow down started. But all hell
broke loose at the end of the month. With SubPrime
crisis spreading its fang, the Global Economy faced
its biggest shock which was of such magnitude that
many say that it is as worse as that of 1929 shock.
The economic melt down was started with
bankruptcy of Lehman Brothers in Sept, 08 which
has secured Creditor of US $ 75 Billions and as per
one estimate the volume of Unsecured creditors is as
high as US $ 200 Billions. Federal Govt. had to
rescue financial giants like Citi Group, American
Insurance Group (AIG) etc. Subsequently, to When it was observed that despite the
prevent a financial collapse, Federal Govt had to reduction of SLR to 24%, some Banks are still
pump fund amounting to US $ 1 Trillion. holding SLR to the tune of almost 27%, Banks were
advised to lend more. On the contrary, Banks stated In almost all sectors recession started. With
that due to Economic slowdown the new companies recession trend in the European and other developed
are discouraged to set up any new plant and the Countries, the underdeveloped and Developing
existing companies are avoiding modernization and countries also started feeling the pinch. The direct
expansion. As a result the Corporate's credit demand and indirect affect of Global slow down came to
is declining. As per recently available estimated India due to reduced money flow and reduced trade.
figures, the corporate profit for the third quarter of Steps taken by Govt to Boost Liquidity – First this fiscal is likely to be reduced by 46.4%. The Booster DoseProfit after Tax (PAT) would be 3.3% against 6.5%
Initially Govt reacted by reducing various during the corresponding period last year.
Statutory ratios and there by injecting liquidity. With The Banks stated that against excess SLR reduction of 1% point in any ratio means releasing of
holding they are borrowing short term loan from the Rs.40,000.00 crores to the system. Liquidity of as Central Bank under REPO window. Banks are using high as Rs.180,000 crores was injected in the system this cheaper short term fund for giving credit to and banks were expected to cut rates. Some Banks
Table – 1
Comparative Latest PLR of a few major banks
Slowdown in Global Economy and its Effect on Indian Banks
-Goutam Kumar Mukherji
Name of Bank PLR (%)
PNB
SBI
BOB
Canara Bank
UBI
ICICI Bank
HDFC Bank
Axis Bank
12.00
12.25
12.50
12.50
12.50
16.75
16.00
15.75
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borrowers. But the Central Government is not observed that banks are lending more to this sector as
willing to buy this plea. is evident from the following figures
Recently, the Finance Secretary Shri Arun
Ramanathan has advised the State run banks to (Amount in Rs.crores)increase lending and also upwardly revise the Credit
Disbursement targets of banks for this fiscal by
Rs.56,000 crores.
The effect of economic slow down was
reflected in the decline in share prices of three Banks
which are included in BSE 30 Share Index till
31.12.08 which were very high and were as under Unsecured loan mainly comprises of
Corporate bill discounting & overdraft loan,
Personal loan products, education loan, credit card
receivables, loan against salaries, consumer
durables etc. Here the rate of return is high but risk is
also correspondingly higher. In case of economic
slow down, this portfolio is likely to suffer first and
most. The latest incidence is of M/S Satyam to whom
one of the Leading PSU Banks has advanced about
Rs.200 crores unsecured loan on the personal
guarantee and now is very worried about the fate of
the loan amount.
Central bank is giving more stress on giving As per latest available data Banks' credit loans to Corporate, Retail, Exports and SMEs. For growth on year to Year basis as on 21.11.08 in case of this they have come up with second booster dose Commercial and Non food credit sectors improved which has been given at the later part of the article. in comparison to the corresponding period last year
and were as under as on 21.11.08
Now Banks are increasingly turning to retail
lending as they did in 2001 after economic
slowdown. The main sectors are Housing, Auto,
Personal loans and Consumer durables. But with
recent scenario of job losses and reduction of salary
the repayment are likely to face problems. CRISIL in
its mid term review has already estimated that NPA
in Retail lending is likely to be increased from 2.7%
However if we take a closure look on the as on march, 07 to 4.0% as on march, 09.
Unsecured portfolio of the Banks' credit it may be
Table–4 Comparative position of Unsecured Loan
Table – 2
Share prices of 3 Banks included in BSE 30
Share Index
Banks Credit
Retail Lending
Table – 3
Comparative position of Year to Year (Y-O-Y)
growth in Bank's credit
Name of BankPrice as on 31.12.08
% Change
ICICI Bank
SBI
HDFC Bank
SENSEX
Rs.448.35 (-) 63.58
Rs.1288.25 (-) 42.76
Rs.997.60 (-) 42.37
(-) 52.0
Y-O-Y Growth % as on 21.11.08Name of Sector
Last Year This Year Commercial
23.1%
27.0%
Non Food
23.7%
26.9%
Unsecured loan
As on 31.03.07
As on 31.03.08
Growth %
PSU Banks 2692.95 3793.51 40.9 Private Banks 770.66 1076.87 39.7 Foreign Banks
577.07
851.22
47.5
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Export
Table - 5
Comparative Figures of Export and Import for
Nov, 07 Vis a Vis Nov, 08
SENSEX Variation
Table - 7
Variation in SENSEX data
Table - 6
Comparative Figures of Export and Import for
Apr- Nov, 07 Vis a Vis Apr- Nov, 08
From the above figures of October and
November, 08 it is clear that the present global India's export witnessed three-fold growth slowdown has caused reversal in the demands of during the boom period of Global economy during Indian merchandise and services from the 2002-03 to 2007-08. Despite this, the Country's Developed countries. As a fallout of the declining share in Global merchandise and Service market is export, the main affected sectors would be only about 1.5%. The country was trying to augment Traditional export items like textiles & apparels', the share by doing more export and the export clothing, metal & metal products and other performance was positive during the first half of this miscellaneous manufacturing units. Out of these fiscal.Textiles & apparels, Leather products, gem, jewelry But for the first time in last 5 years, India's & handicrafts. All these are great employment Export showed a negative growth of 12.1% during provider. The job cuts in these sectors are already the month of October, 08. The same trend continued being reported in various media. Many big Industrial in the month of November, 08 also as is evident from houses are reporting that they are short of order and the following figures :wef April, 09, they have to rethink their production
schedule.
Agriculture, the main employment provider in
India would also be adversely affected as many (Amount in Billion U S $) processed food units and other agriculture item
processing units will not require the raw materials
which otherwise would have been brought from the
market.
The negative Variation in SENSEX due to
various market forces as well as due to the Global However, the cumulative figure of Export till slowdown was as under :the month of November, 08 in this fiscal is showing
positive trend as is evident from the following
figures :
(Amount in U S $ billions)
However though the Index crossed 10000
marks later on but due to Stayam episode it has again
crashed. In all probabilities some time will be
required for necessary correction.
Particulars Nov ‘07 Nov‘08 Growth %
Exports 12.7 11.5 (-) 9.9%
Imports 20.3 21.5 6.1% Trade Deficit 7.6 10.0 31.6%
Particulars Apr -Nov ‘07
Apr– Nov ‘08
Growth %
Exports 99.9 119.30 19.4%
Imports 153.1 203.64 33.0%
Trade Deficit 53.19 84.34 58.6%
Date Index
10.01.08 21206.8
20.11.08 8451.0
26.12.08 9328.9
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Additional Steps taken by Govt to Boost direction several Silver Linings are clearly visible.
Liquidity – Second Booster Dose. Decline in Crude Oil Price & Finding new
Indian Government delivered the second domestic source.
booster dose on 02.01.09 by announcing various The crude oil price of late increased many measures to boost Indian economy. One major dose folds. Luckily for Indian and global economy, the was reduction in various rates of Interest and Ratio price of crude oil was drastically reduced in the as under: recent time which is evident from the following
figures has now declined as under;
(Price in US $ per barrel)
Due to this reduction in price of crude oil the
fertilizer subsidy is likely to be brought down from With the reduction in CRR by 0.5% Cash estimated Rs.119,000 crores to Rs.102,000 crores. amounting to Rs.20000 cr will be released in system In the next fiscal it is likely to be reduced by 50%. which will boost the Bank's lendable Fund. Similarly, the OIL & Gas subsidy will also be Various other measures have been announced substantially reduced. for Export. SME sectors, re-capitalisation of Banks
Recent development in India in the Fuel front etc. is a very good silver lining for the future fiscal Even Indian Railways have reduced the tariff management as is revealed by the following facts. by 6% for carrying Iron ore meant for export to any (i) Reliance Industries Krishna Godavari Gas Indian port. India's annual iron ore production is
Project has capacity to produce 550,000 barrels approximately 200 million tones out of which 50% per day of OIL EQUIVALENT. This production is exported. is equal to 40% of India's current output. But all these measures to boost exports may be
(ii) Cairn India's Barmer Oil Project can produce negated by importing countries as some countries 20% of the present domestic crude oil are contemplating imposition of anti Dumping or production. At present, 3 million barrels crude Countervailing duties to restrict imports and to oil is being processed in India per day out of increase demand for indigenous manufactured which only 0.8 million is domestic production goods. .and 2.2 millions is being imported.India has to search new opening for export as With expected additional domestic production well as conclude the Doha round of negotiations.
of such huge amount of crude oil and gas or oil
equivalent, the import bill will be substantially All attention is now focused to revive the
reduced and Current A/C deficit may be controlled to economy in 2009 and to put it back on rail. In this
some extent.
Table – 8
Reduction Announced on 02.01.09 Table– 9 Variation in Crude price
Positive aspects or Silver Lining for 2009
Price as on August, 08 Current price
148 40
Name of Ratio Previous Ratio
Present Ratio
Reverse Repo 6.5% 5.5%
Repo 5.0% 4.0% CRR 5.5% 5.0%
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Inflation
Table - 12
Inflow and Outflow of FIIs Fund in 2008
Table – 10 Variation in Inflation figureFood Sectors
Table – 13
Comparative Position of Required Buffer FOREX Reserve
stock vis a vis estimated stock
Table –11 Variation in Forex Reserve
Banks Profit from Treasury Operation
relevant figures are as under-
After a long gap of 16 years, the Inflation
figure registered its peak in the month of August, 08.
Luckily, the same started climbing down for straight th10 weeks and recently to a manageable level as
under
The position in the Food sector appears to be
comfortable which is evident from the under
mentioned figuresThis has enhanced the hope of further rate cut
by Banks.
Forex reserve including gold and SDR was (Quantity in million tones)
rising till September, 08 during this fiscal but after
that it started declining. For the first time as on
26.12.08, the declining trend was reversed as under
(Amount in Billion US $)
The additional stock will help to check the
prices and give more food security.
With the recent development in the Money The net increase of US $ 651 million in inflow
Market, one advantage has been accrued to the of FOREX during the week ended 26.12.08 was
Banks. The yield on 10 years Govt Bonds has fallen entirely due to increased inflow of US $ 652 millions
from 9.55% as on Sept, 08 to 5.43% as on last week by FIIs.
of Dec, 08. The net inflow of FIIs has become positive
Banks stand to earn 7 paise for change of every which has a wider ramification. For one of the main
basis point in the price of 10 year Govt. bonds. reason for crash in Share Prices was heavy
Therefore, there will be windfall profit for the Banks withdrawal by FIIs during later part of 2008 as is
from Treasury operation. However, the problem is evident from the following figures:
that the Banks can book profit only if they actually There was various reasons for the variation but
sell the above Govt. Security. Alternatively, if not one important point was withdrawal of funds by
sold, then the provision already been made by most Foreign Institutional Investors (FIIs) and the
of the Banks in the June, 08 quarter for rise in the
Expected StockCommodity Buffer stock Requirement
Quantity As on Quantity
Wheat
4.00
01.04.09
9.17
Rice
5.20
01.10.09
7.37
Inflow Outflow
US $ 17 Billions US $ 13 Billions
st1 week of August, 08 As on 26.12.08
12.91% 6.61%
As on Amount of Reserve
06.04.08 200.3 Sept, 08 278.0 19.12.08 253.9 26.12.08 254.6
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April-June-2009
price of 10 year Govt. bond and marking them to credit. For this it has increased the Credit Guarantee
market, can be offset. Anyhow, whether the Banks Limit from Rs.50 lacs to Rs.100 lacs. Further, units
book profit through actual sale or offset the earlier employing 10 or more people are being brought
provision, the profit will be increased and the same under Social Security Measures. Various other
may be utilised to make more provision for NPA, measures have been declared.
which is any way going to rise across the Board for
all banks as on March, 09. One of the Sliver Lining is that despite the
general belief that international tourist inflow to the
(i) The most important factor for Rural economy country would be reduced due the economic slow
is that the Agriculture Production is likely to down and terror incidence and terror threats, actually
be positive for four years in succession i.e. the international tourist inflow increased as is
from 2004-05 to 2008-09 which is a rare evident from the following figures:
phenomenon.
(ii) Huge Fund has been released to the Rural area
under various Govt. schemes. Like under
National Rural Employment Guarantee
Scheme alone out of total allocation of
Rs,26000 crores already 70% has been
released. Under Pradhan Mantri Gram Sadak
Yojana, Swarna Jayanti Gram Swarojgar
General Election is scheduled in the country Yojana and Indira Awas Yojana - 50% of the
this year. New American President is to take over allocated amount have been released.
charge shortly. Therefore priority shift may be there (iii) Minimum Support Prices (MSP) of all the after installation of New Government. major cereals has been increased. The MSP of
Sugar cane has also been increased.
As per Dr. Montek Singh Ahluwalia 2009 is (iv) The most important factor is that rural India is
going to be very difficult year for Global Economy. not affected by the Global Slowdown.
However, India can grow over 7 % next fiscal. All Therefore, more focus is to be given to rural
the present indications are directing to improvement areas by all may be it is Banks or Private
in the situation in India if not immediately but in the companies dealing with auto, telecom or
second half of 2009 as the country is determined to FMCGs.
overcome all adversaries and to grow.However, some problems are being faced in
* * *case of sugar and edible oil etc.
(Data Sourcing has been done from Economic Times
for which the Author expresses his sincere gratitude)SME contributes 8 to 9 % of the Country's
GDP. Government is also trying to boost SME
International Tourist arrival
Focus on Rural Area
Table – 14
Comparative Positive of International tourist
arrival and FOREX income
Conclusion
More stress in SME Sector
Author is Circle Head, Punjab National BankCircle Office Midnapur
Particulars In 2007
In 2008
Growth (%)
Arrival (in millions) 5.08 5.30 6.0 FOREX Earning (In billion US $
10.07 11.50 8.0
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April-June-2009
The proportion of NPAs in the entire banking system between 2005-06 and 2006-
bank loan books is an important 07 which is less than 1% of the total loan sales
indicator of financial health of the outstanding in the entire banking system.
bank and any adverse indicator shall
impact the bank's rating in the system
and its ability to raise capital for its business
efficiently. Poor credit quality exposes the banks to
vulnerability of further distress in its portfolio and
adverse effect on profitability that leads to a vicious
cycle.
Experience shows that any NPA account, if
unrecovered early, loses value over time. Over the
next few months, banks are likely to see a spurt in
their underperforming loans, thanks to the
economic downturn. Banks are also likely to face
more pressure from regulators and shareholders to
act decisively to eliminate problem loans—through The reasons are not far to seek. Currently, all
recovery or loan sales or both. For banks that attack loan sale deals are done off line. The entire loan
the problem aggressively through a regular program sales cycle take about 45 to 60 days on an average.
of distressed loan sales, the reward will be lower The number of players on the buy side is limited .As
NPAs, a stronger balance sheet and ultimately, a of now, there are only 11 RBI Approved Asset
higher share price. Reconstruction Companies and not all of them are
Though RBI has permitted sale of distressed very active in the loan sales market. Pricing is loans to other banks and ARCs (Asset another ticklish issue which is often arrived at after Reconstruction Companies), activities on the loan lengthy negotiation with the would be buyers and sales front is very tardy. there is no market mechanism for price discovery.
The entire loan sales cycle take about 45 to 60 The following are the credit facilities that are days on an average, as depicted below in Figure 1. normally traded between banks .
The table shows the total loan sales of the
Loan Sales
Amount in Rs.crores
Electronic Trading of Distressed Bank Loans-M Ravindran
Bank loan Products
0
5000
10000
15000
LoanSa le
s
2005-06
2006-07
2005-06 2006-07 Increase/Decrease
Loan Sales
13441.85 8041.82 -40.2%
As a % of total loan
0.89%
0.41%
Source: RBI
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RBI guidelines on sale of assets are summarized as 'without recourse' basis, i.e., the entire credit
under: risk associated with the non-performing
financial assets should be transferred to the The financial asset must be NPLs for at least purchasing bank. Selling bank shall ensure that 24 months.the effect of the sale of the financial assets Consideration for sale of NPLs, inter-se, should be such that the asset is taken off the within the banking system should be only in books of the bank and after the sale there the form of 'Cash'.should not be any known liability devolving on Post-acquisition, these NPLs cannot be sold the selling bank.before 15 months.Banks should ensure that subsequent to sale of NPLs will be treated as standard asset in the the non performing financial assets to other books of purchasing bank for 90 days, after banks, they do not have any involvement with which asset classification will depend on reference to assets sold and do not assume recovery with reference to cash flows operational, legal or any other type of risks estimated.relating to the financial assets sold.
NPLs, post-acquisition, must be realized Consequently, the specific financial asset
within 3 years and at least 5% must be realized should not enjoy the support of credit
in each half-year.enhancements / liquidity facilities in any form
or manner.A bank which is purchasing/ selling non-
Each bank will make its own assessment of the performing financial assets should ensure that
value offered by the purchasing bank for the the purchase/ sale is conducted in accordance
financial asset and decide whether to accept or with a policy approved by the Board.
reject the offer.While laying down the policy, the Board shall
Under no circumstances can a sale to other satisfy itself that the bank has adequate skills
banks be made at a contingent price whereby to purchase non performing financial assets
in the event of shortfall in the realization by the and deal with them in an efficient manner
purchasing banks, the selling banks would which will result in value addition to the bank.
have to bear a part of the shortfall.The Board should also ensure that appropriate
A non-performing asset in the books of a bank systems and procedures are in place to
shall be eligible for sale to other banks only if effectively address the risks that a purchasing
it has remained a non-performing asset for at bank would assume while engaging in this
least two years in the books of the selling bank.activity.
Banks shall sell non-performing financial The estimated cash flows are normally
assets to other banks only on cash basis. The expected to be realised within a period of three
entire sale consideration should be received years and not less than 5% of the estimated
upfront and the asset can be taken out of the cash flows should be realized in each half year.
books of the selling bank only on receipt of the A bank may purchase/sell non-performing
entire sale consideration.financial assets from/to other banks only on
·
·
·
··
·
Procedure for Sale of Non Performing Loans:
·
··
·
··
·
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April-June-2009
· ·
·
·
· Books of selling bank
·
·
Asset classification norms
·
·
Books of purchasing bank
·
·
A non-performing financial asset should be Where the purchase/sale does not satisfy any
held by the purchasing bank in its books at of the prudential requirements prescribed in
least for a period of 15 months before it is sold these guidelines the asset classification status
to other banks. Banks should not sell such of the financial asset in the books of the
assets back to the bank, which had sold the purchasing bank at the time of purchase shall
NPFA. be the same as in the books of the selling bank.
Thereafter, the asset classification status will Banks are also permitted to sell/buy continue to be determined with reference to homogeneous pool within retail non-the date of NPA in the selling bank.performing financial assets, on a portfolio
basis provided each of the non-performing Any restructure/reschedule/rephrase of the
financial assets of the pool has remained as repayment schedule or the estimated cash
non-performing financial asset for at least 2 flow of the non-performing financial asset by
years in the books of the selling bank. The pool the purchasing bank shall render the account
of assets would be treated as a single asset in as a non-performing asset.
the books of the purchasing bank.
The selling bank shall pursue the staff
accountability aspects as per the existing When a bank sells its non-performing instructions in respect of the non-performing financial assets to other banks, the same will assets sold to other banks. be removed from its books on transfer.
If the sale is at a price below the net book value
(NBV) (i.e., book value less provisions held),
the shortfall should be debited to the profit and
The non-performing financial asset loss account of that year.
purchased, may be classified as 'standard' in If the sale is for a value higher than the NBV, the books of the purchasing bank for a period the excess provision shall not be reversed but of 90 days from the date of purchase. will be utilised to meet the shortfall/ loss on Thereafter, the asset classification status of account of sale of other non performing the financial asset purchased, shall be financial assets.determined by the record of recovery in the
books of the purchasing bank with reference The asset shall attract provisioning to cash flows estimated while purchasing the requirement appropriate to its asset asset classification status in the books of the The asset classification status of an existing purchasing bank.exposure (other than purchased financial (Source: RBI Circular DBOD 16/2005-06 dt 13/7/2005asset) to the same obligor in the books of the
This article outlines the benefits that banks purchasing bank will continue to be governed
and financial institutions can realize by using the by the record of recovery of that exposure and
electronic trading platform for distressed loan sales. hence may be different.
Provisioning norms
Prudential norms for banks for the purchase/ sale
transactions
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From Offline Sale to Online Sale
Standardization of Documents
Simplified Process for Sellers Leads to Greater
Liquidity
Streamlining the Process for Buyers Creates
More Bidding
Smaller loan amounts would greatly expand the
universe of buyers. Reduced offering sizes would Although all banks still choose an offline enable investors with limited resources to enter the transaction to sell distressed debt, an online loan market, make bids and consequently increase sale would yield higher proceeds and a host of other liquidity. advantages. For example, in an off line sale, the
complexity of selling a, say, Rs.150 crore distressed
portfolio to multiple buyers can be too complex and The standardization of documents at an online time consuming. In a transaction of that magnitude, marketplace allows a lender to sell a single loan or conducting due diligence simultaneously with a pools of loans as easily to dozens of buyers as to one. large number of parties is asking for unnecessary When investors have the flexibility to purchase only complications. . what they want and nothing more, more bids are
generated, and that leads to higher proceeds for the
selling bank. In essence, the aggregate of many
smaller bids becomes greater than if a single bidder An online marketplace provides the greatest purchases the entire amount.number of options for sellers and buyers of
distressed loans because of its efficiency and The purchase and sale documents can be
simplicity. At an online marketplace, the loan sale standardized to be the same for each online sale. A
process is easier. Each time a loan sale is completed condition of participating at an online marketplace
at an online marketplace, it becomes part of the is the agreement to use standardized transfer
collective knowledge base. The parties working documents, which eliminates the time and expense
with an online marketplace can readily access this of individually negotiated loan documents. The
information to help set the seller's expectations transfer documents, which can be posted online, can
about the eventual sale price. be accessed by legal teams for review in advance of
the bidding. Standardized documents minimize the At an online marketplace, current market possibility of legal complications, while giving values are easy to obtain from multiple interested investors the confidence that there will be no parties and can provide a lender with a more surprises at the end of the transaction. Equally accurate measure of a loan's resale value. Once a important is the simplification of the closing lender decides to sell a loan/loan portfolio, more process. options are possible at an online marketplace. For
example, a lender can divide a large loan or pool of
loans into smaller pieces. Breaking up a loan into
tranches gives investors with limited capital an For buyers, an online marketplace makes it opportunity to bid. Instead of having to purchase the easier to purchase debts because the entire process entire amount, an investor can afford to bid on a has been streamlined, from identification of loans to smaller portion. Separating loan into individual due diligence to bidding and closing. Online components is also a better alternative for investors marketplaces make it easy to identify buying than offline sales where the highest bidder is sold the opportunities. Greater efficiency in prospecting for entire loan piece. loans reduces loan acquisition costs.
In off line transactions, investors are forced to Similarly, due diligence is more convenient buy the entire loan portfolio including unwanted and less expensive at an online marketplace than in pieces of debt to get the piece they really want. an offline sale. All the loan documents can be
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digitized and uploaded to the online platform and institutions identify the types of loans that can be
investors can review that information right at their sold/purchased, in setting the initial loan price and
desk. That reduces dead deal costs if the investor is in smoothly managing the process for both sellers
outbid or if the investor declines to bid. In addition, and buyers. In setting the loan pricing in off line
because due diligence documents have been sales, selling banks rely on their experience, but
standardized, investors don't waste time looking for electronic trading can significantly improve the art
information because it is in the same place every of loan pricing through the introduction of objective
time. Being able to calculate the numbers quickly data.
permits buyers to look at more deals in less time, Typically, an on line loan sale process will which leads to more liquidity. involve the following steps.
By contrast, the negotiation of separately
drafted legal documents is one of the key reasons
that closings for offline transactions can take weeks.
Electronic trading enables dynamic loan
pricing and allows small pieces of debt to be
purchased cost effectively. Because the fixed costs
of the loan sales are dramatically lower, it becomes
possible to sell loans in small pieces. Another
important factor is that investors can now buy
exactly what they want—and no more. Currently,
investors often end up with loans they didn't want Once the selling bank decides to proceed with but were forced to buy because loans were bundled
a loan sale after a review, the next step is to prepare together. With electronic trading, investors can an offer document summarizing all critical purchase loans with greater precision, which further information. The synopsis is intended to give buyers lowers costs and improves the deployment of enough information to quickly ascertain the asset's capital.value and decide if they should bid. Typically, the
document will not include the price but will give Of all the benefits of electronic trading,
details of book outstanding and value of co laterals. superior trade execution may rank as the most
The price discovery is through the process of significant. Secondy, with more buyers and more
bidding in the open market. The offer letter may be bids per transaction, assets will fetch higher prices
standardized into readily identifiable sections that for sellers.
allow buyers to find the same information in the Electronic trading can dramatically shorten same places for each transaction. The
the time from offer to closing from 45/60 days to standardization of offer documents is necessary for about less than a week and closings can be quicker decision making on the part of the buyers.expedited.
Once the offer document is uploaded on line, While electronic trading can bring new the selling bank can kick off the marketing
efficiencies to the loan sale process, human campaign in right earnest. To attract the greatest judgment is still indispensable. Experienced loan number of buyers, prospective investors may be professionals play the central role in helping contacted by e mail and regular mail. Using
On line offer document
Superior Trade Execution
Marketing campaignThe Critical Importance of Human Judgment
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technology, the selling bank can reach prospective and aren't allowed to increase it. In an open, e-cry
buyers very efficiently because they can provide auction, bidders can increase their bid in response to
timely updates by e-mail and target investors with other offers they are seeing in real time on their
specific interest in individual kinds of loans. When computer screen.
investors register online to participate in a sale, they
will indicate the exact types of loans in which they The price to be quoted on the screen takes into
are interested. Highly efficient marketing creates a account a wide range of quantitative and qualitative
larger pool of qualified investors.factors, such as book outstanding, the dependability
of the financial stream, quality of collateral, loan-to-
It is necessary that all relevant loan-related value ratio and debt-service coverage ratio, among
documents are converted into digital files. These others. It also includes financial factors such as
documents, in various electronic formats, may external/internal credit rating ,if any, whether the
include original loan documents, collateral account falls under suit filed category, interest rate
appraisals, operating statements, court proceedings trends in the market, yield, whether interest is fixed
or other information that supports the original offer or floating ,the term to maturity ,the age of the loans
document of sale. Online access eliminates the time etc . The pricing process can take as little as a day for
and expense of physically inspecting the loan files. simpler loans, such as a pool of personal loans or it
can take even a week for more complicated loans,
such as a high value term loan.Provision is to be made on line for answering
queries from prospective buyers and the more
questions that can be answered, the smoother the Successful buyers can be selected at the end of
transaction process. the bidding period. In most instances, a loan will be
sold to the highest bidder, but in rare cases, the
selling bank may choose another buyer if there the To streamline the loan sale process, the selling
buyer is unable to close the transaction. With a live bank can use a standard purchase and sale
e-cry format, bidders see for themselves who has agreement. Once the selling bank has agreed to
won at the conclusion of the session. In a sealed bid, conduct a sale, transfer documents may be posted
the buyer is notified by the selling bank shortly after online to allow buyers to review the document ahead
the bid deadline.of time. By making documents accessible in
Closing As soon as the seller accepts the advance, buyers and sellers minimize the possibility winning bids, the buyer must deposit the bid amount of ambiguity and help ensure that the transaction and the closing can occur within two business days. proceeds in a fair and straightforward manner.
The streamlined on line loan sale process can
accelerate liquidity in the marketplace. These Bids can be submitted by investors through an
process improvements can witness a surge in online sealed bid or an electronic “e-cry” format.
volume of loan sales. In uncertain times, this can be The bid may be kept open for a specific period say
very comforting both to the buy side and sell side.48 hours. The auctions can be executed by a sealed
bid, which can be done online, or by a live online
auction fixed for a particular day and time. In the
sealed bid, buyers generally give their best bid first
Pricing
Online due diligence
Handling investor inquiries
Bid award
Preparation of transfer documents
Competitive bidding
Author is working at : Training & Consultancy, Financial Technologies Knowledge Management
Company Ltd, Exchange Square, First Floor, Gundavali, Suren Road ,Andheri , Mumbai
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Abstract
Introduction
Origin of the phrase
Purchase and Inventory or other
combinations. It generally comes in Enterprise Resource Planning (ERP) is often different suites Manufacturing suite, considered synonymous with enterprise Nonmanufacturing Suite. CRM computerization, which significantly dilutes the (Customer Relationship Management) concept. It is really a business tool, which are the extended forms of Enterprises Resource seamlessly integrates the strategic initiatives and Planning. policies of the organization with the operations, thus
providing an effective means of translating strategic E.R.P. standardizes manufacturing process
business goals to real time planning and control. and HR information, as well as integrating financial
data, so that sales and accounts have the same Small and medium enterprises (SMEs) have figures.been receiving less focus from the software vendors
as compared to Large Enterprises (LEs).Research Today various soft wares are available in the
on the implementation of ERP in certain European market for SME segment depending on the size of
countries shows that the job of implementing an the organization. E.R.P. software should be flexible,
Enterprise Resource Planning package (ERP) is a secure, and should easily integrate with the present
riskier business for SMEs than for LEs. business applications. The single data base is the
simple core concept which enables different However, in the present paper an attempt has divisions and departments to easily share been made to highlight the significance of ERP for information and communicate with one another. It economy boosters Indian SMEs and shown the also allows the automation of previously paper evolution of the ERP concept, their working based process leading to various processing procedures through the help of various secondary efficiencies. For example, a workflow system within datas and research papers.an integrated ERP system can eliminate the time to
place an order. An E.R.P. system can also “control” E.R.P is an integrated software package process such as an order placed by an employee. It
which integrates nearly all the facets of the business , knows who the employee is, and the sign-off level; it including planning, manufacturing, sales inventory , can pass this information on to the supervisor as a HRIS(Human Resource Information System) part of work flow process , so that the order can be finance and marketing .E.R.P. denotes Enterprise authorized , before being sent on electronically to Resource Planning which is a technique of using the supplier. computer machinery to connect various functions
like accounting , inventory control and human Its evolution started in 1960 and until now the resources of any company as a whole. It is planned
evolution continues. The phrase ERP formerly to facilitate information sharing, business planning obscure systems intended to plan the use of and decision making on a broad business basis. enterprise-wide resources. Though the acronym Basically it is a multimodal application that ERP is derived from the manufacturing integrates cross functional department centrally. environment, but in this competitive era it has The three modules should be present Sales,
E.R.P TREND TOWARDS SMEs
Research Scholar Faculty of Commerce, B.H.U., Varanasi - Anchal Singh
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greater relevance and much broader scope. ERP due to which earlier lacunas were removed. It
systems usually try to meet entire fundamental tasks standardized and reduced the number of software
of an organization, despite the organization's business specialties needed within bigger business groups.
or charter. There is hardly any organization, be it
Corporate, non-profit firms, non-governmental Typically in an organization, every
organizations, governments, and other large entities department may be finance, human resources or
which has been untouched by this panacea.warehouse has its own computer system and E.R.P.
The ERP that earlier used stand-alone attempts to integrate all departments and functions applications include: Manufacturing, Supply Chain, across a company with a single unified software Financials, Customer Relationship Management program. For instance, if we have to track a customer (CRM), Human Resources , Warehouse order, then in a typical organization, the paper order Management and Decision Support System. system moves from department to department
ERP packages evolved into their present which causes delays and errors. But now days, a
form from the accounting tools that the large single software program removes this lacuna
corporations implemented for payroll processing in whereby, E.R.P. takes a customer order and provides
the 50's. Their functionality expanded into tracking a software roadmap for automating the process
stock levels, at the first for the purpose of financial involved in fulfilling the order. They can track down
controlling and later covering the entire process of the order at any point by logging onto the E.R.P.
good management. Material Requirement Planning system, which in turn reduces cost and time
(MRP) in the 70's automated the production overruns, brings in overall efficiency by minimizing
process, by scheduling operations and material errors and help in serving the customers faster. It can
purchasing based on the forecasted and current thus be used for other business process to optimize
requirements of finished goods and the constraints resources.
of the production facility. Manufacturing Resource E.R.P. in India is gaining popularity among Planning (MRP-II) systems in the 80's coordinated corporate. For effective implementation ,it should be the entire process, from planning the purchase of done on a modular basis, should be grounded in material and parts, requirement based production reality and should be a complete package in its capacity, planning, to distribution .The term E.R.P. coverage.was fist used by Gartner Group in the early 90's and
Most MSMEs in the manufacturing sector included multiple applications that automated parts
due to lack of awareness, technical know–how and of business (MRP –II, CAD, CAM, CAE, financial
low monetary resources continue to use inflexible module).
stand alone application and are not able to utilize the
benefits being reaped by the adoption of E.R.P.
MSMEs should try to streamline and upgrade their
operations for facilitating integration with supply
chain systems for gaining competitive advantage.
E.R.P. should be viewed not as an expense but an
investment that will reap in terms of higher sales, After emerging the ERP software the trends
profitability, hardware ensuring connectivity become differently changed. In this software ERP
through Electronic Data Interchange, Bar Code combined the data of formerly separate applications
How an E.R.P. works
The Gartner Group View.
After that
MRP
1980s 1990s 2000s
ERP eERP
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April-June-2009
System, ERP , Intranet and Extranet as follows. decisions.
Operation cost reductions, as evident by the
metrics used for measuring the success of the
implementation
There are five major reasons why companies
undertake E.R.P.
Integrating financial information
Increased customer responsiveness in
operations
Standardize and speed up manufacturing
process.
Reduce inventory
Successful E.R.P. implementation would Improved strategic decision makinginvolve following factors.
Sensitization process in the organization, so as SME stands for small and medium enterprises to change mindset of employees who are which have become a globally accepted acronym for generally unwilling to accept it. discussion on issues relating to this sector. Small and Transformation in the business activities for medium-scale enterprises (SMEs) have come to having judicious uses of resources. play a predominant role in the domestic economies
of most countries around the worldSelection of suitable software in conformity
with the needs of the organization. This segment has developed in parallel with
large scale and MNC corporations. A continuous Imparting training to personnel for acquiring growth and development of the companies in this new sets of processes and new software segment ensures a balanced growth of the economy interface. and acts as a facilitator towards entrepreneurial Selecting across functional team for development, business ownership and related overseeing the implementation process.wealth creation, employment generation etc.
Implementing E.R.P. requires major changes ERP has changed the way of businesses in in the organizational, cultural and business process.
India and at present, more and more organizations
and industries are implementing it. The most contributory factors towards the
The best practices of its implementation are to implementation of E.R.P. are:
involve all users in the planning stages, at the time of Need for a common platform for replacing data entry, process mapping testing and training. innumerable legacy systems. Companies should involve all users during Improvement in overall process expected implementation. from its implementation There are few well known ERP vendors Data visibility for improving operating available in India. SAP, Oracle, Apps, Microsoft
Enterprise Resource Planning (ERP) ·
·
·
·
Primers for E.R.P. Implementers ·
·
SME (Small Scale Enterprises)Ø
Ø
Ø
Ø
Ø
Implementation of E.R.P.Market Scenario
Reasons for implementation:
·
·
·
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Dynamics (Navision Axapta), SSA Global desirable tool for most organizations, in the medium
Technologies, Infor Global, QAD and Exact a nd scale sectors.
Software are offering ERP software for big Generally the need for this catalytic
organizations. SAP and Oracle have launched their component arises when a business organization
ERP for SME segment. encounters problems in their working operations
that are usually related with the flow of information.
Entrepreneurs now seriously consider ERP as ERP Software is very competitive and
panacea for all their present day ills and as an growing and almost every company wants to grow
imperative to retain their competitive edge for rapidly by adopting it apart from also opting new
improving efficiency. Some of the factors that have technologies .Today India has emerged as a lucrative
catalyzed this process are globalization, market place for ERP Companies. In India, lots of
competition, need for faster response to the market small and medium size companies are growing very
place and the pressure to contain costs and improve fast and they need a software package for managing
efficiencies It is usually observed that much of the their growth .So, ERP companies are targeting small
time is wasted in order to collect and compile and medium size company. Nowadays, every top
relevant information, which in turn results into educational institute, consultancy and company is
inadequate management decisions and ERP constantly working towards promoting itself.
removes these obstacles. If we consider SMEs, then According to Frost and Sullivan research
most often the decision to purchase Commercial Off conducted in India, it has been found that due to
the Shelf (COTS) products is made for reducing cost rising competitive pressure most of the Indian
and finished implementation as quickly as possible. companies are looking forward to equip themselves
with modern technologies and business process like
ERP solutions that can further provide unlimited Today there are many open source and COTS
access to information and enable them to compete solutions covering almost any area of
effectively. Higher ROI, Rapid industrialization and business. Due to economies of scale, these
ease of integration with legacy systems are solution costs less than developing a custom
influencing the growth of ERP software market in solution from the very beginning. The benefit
India. In mid 90s, ERP was dream for small and is to cover most functionality required in a
medium size company, but now it is implemented by short time, with a tested solution. There are
many small and medium sized companies. disadvantages such as less control over the
code, less certainty of how a component will
behave in an integrated environment or A few years back, ERP was a distant concept,
dependence on different types of vendors. perceived as applicable for the most elite of
companies, with deep pockets, who are ready to
experiment with new ideas. Today, the scene has The software selection process has been
significantly changed and it is considered as a formalized on different levels, depending on
ERP Software in SME Segment
·Build or Buy
The Need for ERP in SMEs
·Software acquisition
25
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April-June-2009
the objectives, and the complexity of the motivating management for defining
application selected. Most of the methods company's strategy that can be put into action
have been developed for large organizations, t h r o u g h r e o r g a n i z a t i o n a n d E R P
and the ones with high risks involved, namely implementation.
military or government. Large Enterprises Define new organization using the right
plan the software implementation keeping the amount of formalism because of the “adhoc”
long term goals in mind whereas SMEs, on the nature of SMEs compared to large companies
other hand decide to buy software for solving a a complex procedure of reorganization
particular problem at hand. involving lots of administrative and executive
changes which may discourage the
management, who might see these activities as Implementation of any complex software
wasting time.solution is associated with various risks. If we
make a comparison between SMEs and LEs
we can say that SMEs prefer slow – phased The typical risk of hiring a consultant is that he
implementation, as compared to Larger or she may not be acquainted with the
Enterprises that prefer implementation in a specifics of a particular company. There may
pilot project phase. be not be enough experience in one or more
of the fields that need to be covered by only
one person. The process in SMEs is simpler The agreed price of a complete ERP software
than the one involved in Larger Enterprises. usually includes licenses, installation and
Also careful screening should be made implementation charges. Consequently, the
regarding the consultant 's previous interest of the software implementation is to
experiences, and evaluate the performance of install the basic functionalities as quickly and
them who have a necessary broadness. with as few problems as possible, leaving
enough room for future major improvements.
Furthermore, if there is a solution on the In spite of the benefits offered by the ERP
market that can easily be integrated with the systems, these assume particular importance within
ERP to improve functionality. small and medium enterprises (SMEs), where
implementation and evaluation of the potential
benefits are still a difficult task.SMEs often don't know what is best for them,
due to lack of internal resources, SMEs need a Organizations have to face numerous
third party for the completion of their project problems while implementing it like inadequate
implementation. investment in ongoing training for involved
personnel, including those implementing and testing Drawing –up the current state of organization,
changes, as well as a lack of corporate policy defining processes, working procedures,
protecting the integrity of the data in the ERP
·
·Implementing software
·Risks regarding consultants:
·Conflicting Interest
Problems faced by the SMEs
·Need for an intermediary
·
26
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April-June-2009
systems and how it is used. These SMEs players are Hossain, Liaquat, Patrick, Jon David, Rashid
not in a position to leverage on the best ERP A. Mohammad, “Enterprise Resource
solutions, basically for two reasons. Planning” Idea Group Inc, 2002.
Firstly, the implementation of advanced ERP Globalization and Small and Medium
solutions is a very costly affair. Secondly, there is Enterprises (SMEs) –By Organization for
hardly any reputed IT company, which specializes in Economic Cooperation and Development -
comprehensive ERP solutions for such SME OECD Publishing.
merchants, due to which many companies have to
abandon their ERP systems http://www.nbzit.com/our-services.html http://www.123
eng.com/forum/viewtopic.php?t=12829&view=next
http://www.roseindia.net/services/erp/erp.shtmERP means much more than computerizing
| http://www.implement-erp.com/erp-in-india.htmlthe existing operations and is really an integrated http://www.bizbeginners.biz/india.html
change process, which encompasses all levels and http://nmcc-vikas.gov.in/MSMEDatabank/Pages/SSIProduct
Groups.aspxelevates the total organization to a higher level of http://nmcc-vikas.gov.in/ICTRediness/ICTTools/Pages/ERP.aspx
performance and expertise. The SME segment is http://www.aksatech.com/small_scale_industries.htm
large and offers substantial potential to the ERP http://www.aksatech.com/enterprise_resource_planning.htm
vendor. However, this segment is also extremely http://www.peoplesoft-planet.com/
http://www.articleclick.com/Article/Best-ERP-software-solution-price-sensitive and is generally intolerant of high ERP system - software-package-and-ERP-Manufacturing-S-W-gestations on realizations from investment.Company/ 963856
Hence, this segment would be keen on an http://emeraldinsight.com/Insight/ViewContentServlet;jsessionid
effective but low priced solution, which can be http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1085462
http://www.thegff.com/Publisher/article.aspx?id=96272speedily implemented and vendors have realized the http://www.nickmutt.com/erp.htmpotential of this segment and are working out ways http://www.erp-program-implementation.com/erpreview.php
to meet this requirement. http://www.abouterp.com/overviewerp/The_advantages_
of_erp.ht·http://www.abasturk.com/ makaleler/en/Implementation
% 20of%20Enterprise% 20Resource%20Planning %20 System.pdf
hhttp://www.erp-program-implementation.com/erpreview.php
http://www.indianmba.com/Faculty_Column/FC847/fc847.htm
Taylor, A. David, “Supply Chains-A http://www.indianmba.com/Faculty_Column/FC847/fc847.html
nd http://www.expresscomputeronline.com/20020708/indtrend1.shtmlManager's Guide”, Pearson Education, 2 Ed.
2004.
·
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Websites:
·
Conclusion·
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References ·
Books·
· ·
·
Things may come to those who wait but only the things left by those who hustle.-Abraham Lincoln,
1809-1865, 16th President of the United States
Author is Research Scholar Faculty of Commerce, B.H.U., Varanasi
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April-June-2009
The book titled Outliers (the term Malcom
Gladwell uses for truly exceptional individuals), anecdotes make
argues that while talent and hard work are indeed Outliers an absolute
important, fate and one's surroundings do play a pleasure to read.
major role too. The time at which one is born, the
upbringing and surroundings-all play as, if not more,
important a role in one's success.
The author does make a decent attempt to
explain this theory of success, which is a matter of
luck as much as hard work. In this book the author
explains that, “There is something profoundly
wrong with the way we look at success. We cling to
the idea that success is a simple function of
individual merit and that the world in which we grow
up and the rules we choose to write as a society, don't
matter at all."
The author is an amazing narrator and presents
his arguments in simple and direct language. He says The that after all, would Bill Gates have achieved what he
biggest lesson from Outliers is to be aware of your did if his school hadn't a computer or (to go back to surroundings and the environment you've grown up the matter of birth) if he had been born a few years in. They might end up playing a big role in your life. later or earlier? Similarly, the Beatles had a fair deal And that is a lesson not just for people, but also of talent but according to author, they wouldn't have enterprises-especially start-ups.become the legends that they did if they had not spent
several hours working away in smaller clubs at That said, Malcolm Gladwell's book should
Hamburg! Merit, thus, gets over ruled by a birthday. not be taken as gospel-his theory is just too pat and
This is not to say that hard work does not have a role simple and he mostly gives instances that support his
to play in a person's success. theory. The narration in this book are wonderful, the
anecdotes interesting, and as a reader you will find
yourself raising your eyebrows time and again
throughout the book.
various interesting
O u t l i e r s
mostly seems to
argue: choose the
right parents, the
right people and the
right period if you
truly seek to shine.
“Hero is born in
modest circumstances and by virtue of his own grit
and talent fights his way to greatness”.The author
stresses that most individuals need to work for about
10,000 hours before they can reach a level of
exceptional expertise. But he also points out that
getting access to facilities to practice is again
something that can be a matter of chance.
In Outliers the author
seeks to show that individual fame and fortune is
"grounded in a web of advantages and inheritances".
He argues that "no one – not rock stars, not
professional athletes, not software billionaires, and
not even geniuses – ever makes it alone". Uses of .
Book Review
Outliers: The Story of SuccessAuthor: Malcolm Gladwell
Publisher: Allen Lane an imprint of Penguin BooksISBN: 978-0-141-03624-3
Reviewed by Sanjay Srivastava(Librarian) PNBIIT, Lucknow
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April-June-2009
Microsoft takes the wraps off the preview version
of Windows 7
Screenshot for Windows 7 Build 7007
Screenshots Infosys to train students from Bhutan
Microsoft wraps off the preview version of
Windows 7, which will be the successor to Vista.
(Source : www.siliconindia.com)
At
first glance, Windows 7 maintains the streamlined
look of Vista, but appears more muted -- even
Windows XP-like. Mostly, Microsoft seems to be
focusing more on functionality, possibly in a bid to
put some distance between Windows 7 and the
criticisms which have dogged Vista. Windows 7 will
enable users to "work the way you want," "make
everyday tasks faster and easier," and "make new
things possible." Windows 7 will be easier to
connect to cameras, phones, and printers. Windows
7 reveals its new taskbar, which is sparser than in
previous iterations of the OS. From the screen shots,
it's clear that Microsoft has listened to criticism and
tuned many features, including search and access to
security controls. The look and feel of the user
interface is also highly customizable.
Infosys Technologies all set to fulfill its
promise made to Bhutan. It has facilitated free
training for hundred graduates from Bhutan, all at its
own cost. The student would most likely be trained at
its training center in Mysore, according to reports.
According to a Bhutanese daily - Kuensel, a
hundred graduates have left the country today to
undergo intensive in business processes and
software development for six weeks. They represent
the government's first official move to create an IT
skilled work force for the upcoming IT park in the
country.
The IT ministry of Bhutan, sees this as a step
further towards developing the IT sector by
providing an environment to attract local and foreign
Financial and Technical News
29
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April-June-2009
investment and provide employment, and a practice
like will test the future of investment.
(Source :Bhutanese daily – Kuensel)
RFID(Radio-frequency identification) in all new
mobiles by next summer
An EPC (electronic Product code) RIFD tag used
by wal-mart
Charge Your Phone on The Move in Delhi Metro
Italian Bank Inks Pact With SBI
information to motorists.
All new mobiles will be packing a RFID chip
by summer 2010 - ultimately opening up the
possibility of your phone also becoming the keys to
your car or your house. Radio-frequency
identification (RFID) is the use of an object
(typically referred to as an RFID tag) applied to or
incorporated into a product, animal, or person for the
purpose of identification and tracking using radio
waves. Some tags can be read from several meters
away and beyond the line of sight of the reader. It's a (Source: www.siliconindia.com)two-way, bio-directional RFID communication link
that makes this device work as a tag or as a reader."For the convenience of its commuters, the
Devices with RFID chips will have a secure Delhi Metro Rail Corporation (DMRC) will install environment on the SIM card where "trusted 134 multiple mobile charging machines at stations identities" or "secure elements" can be downloaded - by July this year in a phased manner.enabling the phone to take on other roles, such as the
All major metro stations are already equipped keys for your car or house, or a credit card or concert
with facilities such as bill-drop boxes, ATMs, tea and ticket.
coffee vending machines, coin vending machines, Mobile phones could also soon become eating joints, book shops and gift shops.
instruments of fraud detection. Credit card (www. tech2.com)
companies could make use of mobile user location
data and IP mapping to ascertain whether a credit Italian bank, Banca Popolare di Vicenza card transaction is taking place in the vicinity of the
(BPVI), has signed an agreement with State Bank of official card holder and provide dynamic travel India (SBI) for closer co-operation and growth of information to motorists.bilateral trade. "BPVI has become the first Italian RFID is used in enterprise supply chain bank to sign a co-operation agreement with State management to improve the efficiency of inventory Bank of India, the largest Indian commercial bank. tracking and management.The bank expects this will help in helping each
Another example of leveraging location data other's customers in exploring opportunities in
is to create real-time road traffic maps generated by Indian and Italian markets. He hoped that after the
analysing the speed of mobile phone base station agreement with SBI, BPVI will be able to assist more
hand-off to ascertain how fast cars are traveling on Indian and Italian entrepreneurs interested in forging
roads. This data could then be sold to GPS device ties with companies in the European country.
companies enabling them to provide dynamic travel (Source: www.siliconindia.com)
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April-June-2009
The King With Four Wives
Once upon a time there was a rich king who had four wives. He loved the fourth wife the most and
adorned her with rich robes and treated her to the finest delicacies. He gave her nothing but the best. He also
loved the third wife very much and showed her off to neighboring kingdoms. However, he feared that one
day she would leave him for another.
He also loved his second wife. She was his confident and she was always kind, considerate and
patient with him. Whenever the king faced a problem, he could confide in her to help him get through the
difficult times. The king's first wife was a very loyal partner and had made great contributions in maintaining
his wealth and kingdom. However, he did not love the first wife but although she loved him deeply, he hardly
took notice of her. One day, the King fell ill and he knew that his time was short. Thus, he asked the 4th wife,
“I have loved you the most endowed you with the finest clothing and showered great care over you. Now that
I'm dying, will you follow me and keep me company?” “No way!” replied the 4th wife and she walked away
without another word. Her answer cut like a sharp knife right into his heart.
The sad king asked the third wife, “I have loved you all my life. Now that I'm dying, will you follow
me and keep me company?” “No!” replied the 3rd wife. “Life is too good! When you die, I am going to
remarry!” His heart sank and turned cold. He then asked the 2nd wife, “I have always turned to you for help
and you've always been there for me. When I die, will you follow me and keep me company?”“I'm sorry, I
can't help you out of this time!” replied the 2nd wife. “The very most, I can only send you to your grave.”Her
answer came like a bolt of thunder and the King was devastated. Then a voice called out: “I'll live with you
and follow you no matter where you go.”
The king looked up and there was his first wife. She was so skinny, because she suffered from
malnutrition. Greatly grieved the King said, “I should have taken better care of you when I had a chance!”
Our 4th wife is our BODY. No matter how much time and effort we lavish in making it look great, it'll leave us
when we die. Our 3rd wife is our POSSESSIONS, STATUS and WEALTH. When we die, it will all go to
others. Our 2nd wife is our FAMILY and friends. No matter how much they have been there for us, the
furthest they can stay by us is up to the grave. Our 1st wife is our SOUL, often neglected in pursuit of wealth,
power and pleasures of the ego. However, our Soul is the only thing that will follow us wherever we go. So
cultivate, strengthen and cherish it now! It is your greatest gift to offer the world.
Appeal: As a part of our drive to make the contents of Journal more pertinent and
germane to the readers we welcome articles on latest topics of Banking /
Information Technology. Articles may be of about 1000 words. Published articles
are suitably remunerated .
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April-June-2009
PNBIIT goes International PNBIIT is conducting a training Programme for the Participants of Druk-PNB Bank
th thLtd, Bhutan from 15 June-25 July in which 32 newly recruited staff of the said Bank
relating to various cadres including senior executives are receiving training on Banking and
Banking Technology.
PNBIIT is also going to conduct a smilar training for Top executives of the Druk-PNB Bank
Ltd, Bhutan in the month of August 2009.
Next Batch of Advanced Diploma
in Banking Technology to start in October 2009Next batch of Advanced Diploma in Banking Technology is proposed to start from October
2009 . Wait for details on our website www.pnbiit.com.
Companies which came for campus recruitments for ADBT Batch-1
Union bank of India in their recruitment notification 2009 has considered Advanced Diploma
in Banking Technology (ADBT) from Punjab National Bank Institute of Information
Technology (PNBIIT), Lucknow as eligibility criteria for selection of Manager (Information
Technology) in MMG-II.
32
Nurture Technologies Dena Bank PNB HP/Alchemist
