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Money, Banking and Finance in India : Evolution and Present Structure
By R.K. Uppal

First Published : 2011
ISBN : 9788177082722
Pages : 498
Binding : Hardbound
Size : 7 x 9
Price : US$ 112
ABOUT THE BOOK

Money, banking and finance are at the heart of an economic system. A modern economy, characterised by acute specialisation and exchange, is unthinkable without money, banking institutions, financial markets and financial instruments.

The present work provides a fairly exhaustive account of the evolution and present structure of monetary, banking and financial system of India, with focus on post-1991 period. The book is organized into three parts.

Part I of the book deals with forms and functions of money (including e-money), role of the Reserve Bank of India (RBI) in monetary and credit management, and the evolution of monetary policy in India since Independence in 1947, focusing on post-liberalisation (1991 onward) period.

Part II describes and critically examines the functioning of various banking institutions in India, covering commercial banks, regional rural banks, urban co-operative banks, rural co-operative credit institutions, and development banks. Apart from these regular banking institutions, a number of other financial organizations play a significant role in the Indian financial system. Among them, the following three are also covered in this part of the book: non-banking financial companies, mutual funds and insurance organizations.

Part III begins with the role of financial system in economic development. It traces the evolution of India’s financial system since Independence and explains its present structure. It focuses on the reform measures introduced in money market, government securities market, capital market, corporate debt market, credit market, and foreign exchange market. It also dwells on payment, clearing and settlement systems, integration of financial markets, and emergence of financial derivatives in India.


CONTENTS
     
PART I: MONEY, RESERVE BANK OF INDIA AND MONETARY POLICY
 
1. FUNCTIONS AND MANAGEMENT OF MONEY
1.1 Definition and Kinds of Money
1.2 Electronic Money (E-money)
1.2.1 Meaning and Forms of E-money
1.2.2 Benefits of E-money
1.2.3 Implications of E-money for the Central Bank
1.3 E-money in India
1.4 Functions of Money
1.5 Currency Issue and Management by Central Banks
1.5.1 Maintaining Internal Value of the Currency
A. Bank Rate Policy
B. Variable Cash Reserve Ratio
C. Open Market Operations
D. Moral Suasions
1.5.2 Maintaining External Value of the Currency
1.6 Measures of Money Supply in India
 
2. RESERVE BANK OF INDIA: HISTORY AND FUNCTIONS
2.1 Establishment of RBI
2.2 Pre-Independence Activities of RBI
2.3 Functions of RBI
2.3.1 Sole Currency Authority
A. Printing of Currency Notes
B. Clean Note Policy
C. Anti-counterfeiting Measures
D. Computerised Currency Operations
E. Coinisation of Lower Denomination Notes
2.3.2 Banker to the Governments
2.3.3 Bankers' Bank and Lender-of-the-last-resort
2.3.4 Controller of Money and Credit
A. Quantitative Credit Controls
B. Selective Credit Controls (SCCs)
2.3.5 Controller of Foreign Exchange
2.3.6 Source of Economic Information
2.3.7 Promotional Role of RBI
2.4 RBI as Institution Builder
2.4.1 Deposit Insurance Corporation (DIC)
2.4.2 Specialised Financial Institutions
2.4.3 National Bank for Agriculture and Rural Development (NABARD)
2.4.4 Export Import Bank of India (EXIM Bank)
2.5 Post-1991 Reforms and Responsibilities of RBI
2.5.1 Financial Sector Reforms
A. Banking Sector
B. Development Finance Institutions
C. Capital Market
D. Debt Market
2.5.2 External Sector Reforms
A. Committee on Balance of Payments (Chairman: C. Rangarajan), 1993
B. Foreign Exchange Reserves: Cost and Utilisation Considerations
C. Committee on Capital Account Convertibility (Chairman: S.S. Tarapore), 1997
2.5.3 Deregulation of Interest Rates
2.5.4 Short-term Liquidity Management
2.5.5 Payment and Settlement Systems
2.5.6 Regulation and Supervision
2.6 Changing Role of RBI in the Financial Sector
2.7 RBI’s Consultative Process in Policy Formulation
2.7.1 Web-based Communication
2.7.2 Resource Management Discussions
2.7.3 Standing Technical Advisory Committees
2.8 Financial Sector Technology Vision Document
2.9 Global Financial Crisis and the RBI
2.10 Independence and Accountability of the RBI

3. MONETARY POLICY DEVELOPMENTS IN INDIA
3.1 Objectives of Monetary Policy
3.2 Monetary Transmission Mechanism
3.3 Monetary Policy-Fiscal Policy Interface in India
3.4 Economic Reforms and Monetary Management
3.5 Constituents of Monetary Reforms
3.5.1 Ways and Means Advances (WMA) Replace Treasury Bills
3.5.2 Reactivation of the Bank Rate
3.5.3 Deregulation of Interest Rate
3.5.4 Deregulation of Credit
3.6 Introduction of Liquidity Adjustment Facility (LAF)
3.6.1 RBI’s Internal Group on Liquidity Adjustment Facility (LAF)
A. Recommendations Regarding Day-to-day Liquidity Management
B. Recommendations Regarding Sterilisation
3.7 Changing Monetary Policy Paradigm in India
3.8 Operating Procedures of Monetary Policy
3.8.1 Liquidity Adjustment Facility (LAF)
3.8.2 Market Stabilization Scheme
3.9 External Sector Openness and Conduct of Monetary Policy
3.10 Globalisation and Monetary Policy
3.11 Monetary Policy Assessment
 
PART II: BANKING INSTITUTIONS IN INDIA
 
4. COMMERCIAL BANKS
4.1 Importance of Commercial Banks
4.2 Classification of Commercial Banks in India
4.2.1 Scheduled and Non-scheduled Banks
4.2.2 Indian and Foreign Banks
4.2.3 Public Sector and Private Sector Banks
4.3 Post-Independence Developments in Commercial Banking
4.3.1 Phase I: Early Years of Independence (1947-69)
4.3.2 Phase II: From Nationalisation of Banks till Initiation of Banking Sector Reforms (1969-91)
4.3.3 Phase III: Banking Sector Reforms since 1991
A. Backdrop of Banking Sector Reforms
B. Objectives of Banking Sector Reforms
4.4 Components of Banking Sector Reforms
4.4.1 Deregulation of Deposit and Lending Interest Rates
4.4.2 Lowering of Cash Reserve Ratio (CRR)
4.4.3 Lowering of Statutory Liquidity Ratio (SLR)
4.4.4 Lowering of Bank Rate
4.4.5 Organisation of Banking Structure
4.4.6 Duality of Control
4.4.7 Abolition of Selective Credit Controls (SCCs)
4.4.8 Managerial Autonomy for Public Sector Banks
4.4.9 Other Measures
4.5 Regulatory Framework and Supervision of Commercial Banks
4.5.1 Need for Regulation and Supervision
4.5.2 Regulatory and Supervisory Policy during the 1950s
4.5.3 Regulatory and Supervisory Policy during the 1960s
4.5.4 Nationalisation of Banks and Shift in Regulatory Focus (1970s)
4.5.5 Regulatory and Supervisory Policy during the 1980s
4.5.6 Post-liberalisation Period (1991 onwards)
4.5.7 On-site Supervision
4.5.8 Off-site Monitoring and Surveillance
4.5.9 Modernisation of Banking Regulation and Supervision
4.5.10 Risk Based Supervision (RBS)
4.5.11 Supervision of Financial Conglomerates
4.5.12 Board for Financial Supervision
4.5.13 Monitoring of Frauds
4.5.14 Securitisation Guidelines
4.5.15 Investment of Banks in Non-SLR Securities
4.5.16 Valuation of Instruments/Assets
4.5.17 Use of Credit Rating Agencies by Banks
4.5.18 Payment of Dividends
4.5.19 Investment Norms
4.5.20 Capital Adequacy Norms
4.5.21 Outsourcing by Banks
4.6 Income Recognition, Asset Classification and Provisioning
4.6.1 Provisions against Standard Assets
4.7 Mergers and Amalgamation of Banks
4.8 Exposure Norms
4.9 Transparency and Disclosures
4.10 Securitisation of Standard Assets
4.11 Anti-money Laundering Guidelines
4.12 Credit Information Bureau of India Ltd. (CIBIL)
4.13 Compliance Function
4.13.1 Consequences of Non-compliance
4.14 Migration to Basel Norms by Commercial Banks
4.14.1 Basel I Norms
4.14.2 Basel II Norms
4.14.3 Implementation of Basel Norms in India
4.14.4 Migration to Advanced Approaches
4.15 Management of Non-performing Assets (NPAs) by Commercial Banks
4.15.1 Securitisation, Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002
4.15.2 Corporate Debt Restructuring
4.15.3 Debt Recovery Tribunals
4.15.4 Lok Adalats (Peoples Courts)
4.16 Customer Services by Commercial Banks
4.16.1 Collection and Processing of Cheques
4.16.2 Door-step Banking
4.16.3 National Electronic Fund Transfer (NEFT)
4.16.4 ATM Networks
4.16.5 Credit Cards
4.16.6 Satellite Banking
4.17 Foreign Banks in India
4.17.1 Role of Foreign Banks
4.17.2 Advantages and Disadvantages of Foreign Banks
4.17.3 Road Map for Foreign Banks in India
A. Phase I: March 2005 to March 2009
B. Phase II: April 2009 onward
4.18 Challenges for Banking Sector
 
5. REGIONAL RURAL BANKS
5.1 Origin and Significance of RRBs
5.2 RRBs as Vehicles of Financial Inclusion
5.3 Amalgamation of RRBs
5.4 Autonomy for RRBs
5.5 Factors Influencing the Performance of RRBs
5.5.1 Area of Operation and Clientele Base
5.5.2 Capital Base and Organisational Structure
5.5.3 Loan Delinquencies
5.5.4 Cost Structure and Poor Financial Management Skills
5.5.5 Staff Structure
5.5.6 Dependence on Sponsor Banks
5.6 Restructuring of RRBs
5.7 Manpower Challenges of RRBs
5.8 Computerisation in RRBs
5.8.1 Working Group on Technology Upgradation of Regional Rural Banks, August 2008

6. URBAN CO-OPERATIVE BANKS
6.1 Role of UCBs
6.2 Regulation and Supervision of UCBs
6.2.1 Memorandum of Understanding (MoU) with the State Governments
6.2.2 Licensing of New Banks/Branches
6.2.3 Income Recognition, Asset Classification and Provisioning Norms
6.2.4 Exposure Norms
6.2.5 Off-site Surveillance
6.2.6 Know Your Customer (KYC) Guidelines
6.2.7 Priority Sector Lending
6.2.8 Disclosure Norms
6.3 Mergers/Amalgamations of UCBs
6.4 Relaxation of Investment Portfolios of UCBs
6.5 Restructuring of Scheduled UCBs with Negative Net Worth
6.6 Problem of Dual Control in Co-operative Banking
6.6.1 Impairment in Governance and Management
6.7 Medium-Term Framework (MTF) for UCBs
 
7. RURAL CREDIT CO-OPERATIVES
7.1 Significance of Rural Co-operatives
7.2 Rural Co-operatives in Historical Perspective
7.3 Classification of Rural Co-operatives
7.3.1 Short-term Rural Co-operatives
A. State Co-operative Banks (SCBs)
B. District Central Co-operative Banks (DCCBs)
C. Primary Agricultural Credit Societies (PACS)
7.3.2 Long-term Rural Co-operatives
A. State Co-operative Agriculture and Rural Development Banks (SCARDBs)
B. Primary Co-operative Agriculture and Rural Development Banks (PCARDBs)
7.4 Primary Agricultural Credit Societies (PACS)
7.5 Regulatory Framework and Supervision
7.5.1 Asset Classification for State Government Guaranteed Advances
7.5.2 Additional Provisioning Requirement for NPAs
7.5.3 Prudential Guidelines on Agricultural Advances
7.5.4 Inspections
7.6 Problem of Triangular Regulation of Rural Co-operatives
7.7 Task Force on Revival of Rural Co-operative Credit Institutions, 2005
7.8 Self-help Group (SHG)-Bank Linkage Programme for Micro Credit
7.8.1 Regional Spread
7.8.2 Graduation of Mature SHGs into Micro-enterprises
7.8.3 Microfinance and the Government
7.8.4 Microfinance and the RBI
7.9 Kisan Credit Cards
7.10 NABARD and the Co-operative Sector
7.10.1 Resources of NABARD
7.10.2 Rural Infrastructure Development Fund (RIDF)
7.10.3 Credit Extended by NABARD
7.10.4 Interest Rates charged by NABARD
 
8. DEVELOPMENT BANKS
8.1 Origin and Classification of Development Banks
8.2 All-India Financial Institutions (AIFIs)
8.2.1 All-India Development Banks
A. Industrial Finance Corporation of India (IFCI)
B. Industrial Development Bank of India (IDBI)
C. Industrial Credit and Investment Corporation of India Ltd. (ICICI)
D. Industrial Investment Bank of India (IIBI)
E. Small Industries Development Bank of India (SIDBI)
8.2.2 Specialised Financial Institutions
A. Export-Import Bank (EXIM Bank)
B. Infrastructure Development Finance Company (IDFC)
C. Tourism Finance Corporation of India (TFCI)
8.2.3 Investment Institutions
A. Unit Trust of India (UTI)
B. Life Insurance Corporation of India (LIC)
C. General Insurance Corporation of India (GIC)
8.2.4 Refinance Institutions
A. National Bank for Agriculture and Rural Development (NABARD)
B. National Housing Bank (NHB)
8.3 State Level Institutions
8.3.1 State Financial Corporations (SFCs)
8.3.2 State Industrial Development Corporations (SIDCs)
8.4 Regulation and Supervision of Financial Institutions
8.5 Working Group for Harmonising the Role and Operations of Development Finance
Institutions and Banks, 1998
8.6 Critical Assessment
 
9. NON-BANKING FINANCIAL INTERMEDIARIES
9.1 Non-banking Financial Companies (NBFCs)
9.1.1 Importance of NBFCs
9.1.2 Regulation and Supervision of NBFCs
A. On-site Inspection
B. Off-site Surveillance System
C. External Auditing
9.1.3 Guidelines for Mergers/Amalgamations
9.1.4 NBFCs in Insurance Business
9.2 Mutual Funds
9.2.1 Origin of Mutual Funds in India
9.2.2 Legal and Regulatory Framework
9.2.3 Features of Mutual Fund Industry in India
9.2.4 Problems of Mutual Funds
A. Competition with Government Schemes
B. Competition from Insurance
C. Volatility of Mutual Fund Performance
D. Tax System Encourages Short-term Objectives
9.2.5 Mutual Funds and the Stock Market
9.3 Insurance Organizations
9.3.1 Insurance Industry Prior to Reforms
A. Low Productivity
B. Lack of Information Technology
C. Limited Availability of Insurance Products
D. Poor Quality of Insurance Services
9.3.2 Malhotra Committee on Insurance Sector Reforms, 1994
9.3.3 Regulations and Controls
9.3.4 Post-liberalisation Developments in Insurance Business
A. Customer-friendly Products
B. Broad-based Marketing of Insurance Products
C. Rising Service Levels
D. Increased Penetration in the Rural and Social Sectors
E. Investment in Infrastructure and Social Sectors
F. Health Insurance
G. Micro Insurance
 
10. INTERNET BANKING IN INDIA
10.1 Internet-banking and Electronic-banking
10.2 Internet Banking in India
10.2.1 Products and Services Offered
10.2.2 Challenges of Internet Banking
10.3 Internet Banking and the Reserve Bank of India
10.4 Monetary Policy Implications of Internet-banking
 
PART III: FINANCIAL MARKETS AND INSTRUMENTS
 
11. FINANCIAL SECTOR REFORMS IN INDIA
11.1 Government Domination of the Financial Sector (1947-1990)
11.1.1 Nationalisation of Imperial Bank of India (1955)
11.1.2 Nationalisation of Life Insurance Business (1956)
11.1.3 Nationalisation of Commercial Banks (1969 and 1980)
11.1.4 Nationalisation of General Insurance Business (1973)
11.2 Consequences of Government Domination of Financial Sector
11.3 Financial Liberalisation (1991 onward)
11.4 Gradualism in Financial Sector Reforms
11.5 Strategy of Financial Sector Reforms
11.5.1 Developing and Strengthening Financial Infrastructure
11.5.2 Financial Regulation and Supervision
11.5.3 Financial Openness
11.6 International Security Standards
11.7 Migration to Basel II Norms
11.8 Accounting and Auditing Standards
11.8.1 Marking-to-market
11.9 Technological Solutions for Financial Services
11.10 Committee on Financial Sector Assessment (CFSA), 2009
11.11 Global Financial Crisis and India’s Financial Sector
11.12 Achievements of Financial Sector Reforms and Areas of Concern
11.13 Financial Inclusion Policy
11.13.1 Financial Exclusion and Financial Inclusion Defined
11.13.2 Advantages of Financial Inclusion
11.13.3 Strategy for Building an Inclusive Financial Sector
11.13.4 Recommendations of the Committee on Financial Inclusion
11.13.5 Recent Measures for Financial Inclusion
A. No Frills Account
B. General Credit Card (GCC)
C. Business Facilitator and Business Correspondent (BC) Models
D. Passbook Facility
E. Simplified KYC Procedure
F. Credit Counselling and Financial Education
 
12. FINANCIAL MARKETS IN INDIA
12.1 Significance of Financial Markets
12.2 Financial Market Reforms in India
12.3 Regulation and Supervision of Financial Markets in India
12.4 Financial Markets and Monetary Policy of the RBI
 
13. MONEY MARKET
13.1 Money Market: Meaning, Functions and Constituents
13.2 Developments in the Money Market since 1991
13.3 Components-wise Analysis of Money Market in India
13.3.1 Call/Notice Money Market
13.3.2 Commercial Paper (CP)
13.3.3 Certificates of Deposit (CDs)
13.3.4 Repos
13.3.5 Collateralised Borrowing and Lending Obligation (CBLO)
13.4 Report of the Technical Group on Money Market
13.4.1 Follow-up Action
13.5 Critical Review
 
14. GOVERNMENT SECURITIES MARKET
14.1 What are Securities and Government Securities?
14.2 Significance of Government Securities Market
14.3 Categories of Investors in Government Securities
14.4 Post-1991 Measures to Promote Government Securities Market
14.5 Technical Group on Central Government Securities Market, 2005
14.6 Measures to Strengthen Primary Market
14.6.1 Issuance Procedures
14.6.2 Widening of Investor Base
14.6.3 Gilt Funds
14.6.4 Foreign Institutional Investors
14.6.5 Retail Investors
14.7 Measures to Strengthen Secondary Market
14.7.1 Sale of Auctioned Stock
14.7.2 Primary Dealer System
14.8 Diversification of Instruments
14.9 Technological Infrastructure for Government Securities Market
14.9.1 Trading Infrastructure
14.9.2 Negotiated Dealing System (NDS)
14.9.3 Clearing Corporation of India Ltd. (CCIL)
14.9.4 Settlement Cycle
 
15. CAPITAL MARKET
15.1 Capital Market: Meaning and Significance
15.2 Capital Market in the Pre-reforms (i.e. Pre-1991) Period
15.3 Establishment of Securities and Exchange Board of India (SEBI)
15.4 Capital Market Reforms since 1991
15.5 Modernisation of Stock Exchanges
15.5.1 Stock Market
15.5.2 Trading Infrastructure in Stock Exchanges
15.5.3 Corporatisation and Demutualisation of Stock Exchanges
15.6 Depository System, Dematerialisation (Demat) and Rematerialisation
15.6.1 Depository System
15.6.2 Dematerialisation (Demat)
15.6.3 Rematerialisation
15.7 Introduction of Free Pricing
15.8 Strengthening of Disclosure Norms
15.9 Transparency and Efficiency
15.10 Shortening of Settlement Cycle
15.11 Growth of Service Providers
15.12 Protection of Investors
15.13 Financial Instruments of the Capital Market
15.13.1 Ordinary Shares
15.13.2 Preference Shares
15.13.3 Debentures
 
16. CORPORATE DEBT MARKET
16.1 Role of Corporate Debt Market
16.2 Corporate Debt Market in India
16.2.1 Emergence of Private Placement Market
16.3 Reasons for Slow Growth of Corporate Debt Market
16.4 High Level Expert Committee on Corporate Debt and Securitisation
16.4.1 Corporate Debt Market
A. Primary Market
B. Secondary Market
16.4.2 Securitised Debt Market
 
17. CREDIT MARKET
17.1 Credit Market Reforms
17.1.1 Measures to Reduce Non-performing Assets (NPAs)
17.1.2 Development of Securitisation Market
17.1.3 Roadmap for Foreign Banks
17.1.4 Complex Financial Products
17.1.5 Credit Derivatives
17.1.6 Credit Information Services
17.2 Allocation of Credit
17.2.1 Allocation of Credit between Government and the Private Sector
17.2.2 Inter-sectoral Allocation of Institutional Credit
17.2.3 Inter-regional Allocation of Credit
17.3 Flow of Credit to Agriculture and Allied Activities
17.3.1 Credit and Agricultural Development
17.3.2 Credit Needs of the Indian Farmers
17.3.3 NABARD and the Co-operative Sector
17.3.4 Micro Finance (Self-help Group-Bank Linkage Programme)
17.3.5 Kisan Credit Cards (KCCs)
17.3.6 Moneylenders
17.3.7 Agricultural Debt Waiver and Debt Relief Scheme, 2008
17.4 Credit Flow to Micro, Small, and Medium Enterprises (MSMEs)
17.4.1 Working Group on Flow of Credit to the Small and Medium Enterprises (SMEs), 2004
17.4.2 Group to Review Guidelines on Credit Flow to SME Sector, 2005
17.4.3 Policy Package for Credit to Small and Medium Enterprises
17.4.4 Working Group on Credit Delivery to the Micro and Small Enterprises Sector, 2008
17.5 Credit to Export Sector
17.5.1 Working Group to Review Export Credit, 2005
17.6 Expert Group on Credit-Deposit Ratio, 2005
17.7 Government Borrowings
17.7.1 Rationale for Government Borrowings
17.7.2 Constitutional Provisions Pertaining to Public Borrowings in India
17.7.3 Instruments of Government Borrowings in India
17.7.4 Reserve Bank of India as Debt Manager of the Government
17.7.5 Recent Trends in Central Government Liabilities
17.7.6 Separation of Debt Management from Monetary Management
 
18. FOREIGN EXCHANGE MARKET
18.1 Foreign Exchange Policy: Phase I (1947-90)
18.1.1 Foreign Exchange Regulation Act (FERA), 1947
18.1.2 Par Value System of Exchange Rate (1947-71)
18.1.3 Sterling Area Arrangement
18.1.4 Single Currency Peg
18.1.5 Basket Peg
18.1.6 Foreign Exchange Regulation Act (FERA), 1973
18.1.7 Introduction of Intra-day Trading in Foreign Exchange
18.1.8 Amendments to Reserve Bank of India Act, 1934
18.1.9 Foreign Exchange Crisis and Rethinking
18.2 Foreign Exchange Policy: Phase II (1991 onward)
18.2.1 Downward Adjustment of Rupee Rate
18.2.2 Introduction of Liberalised Exchange Rate Management System (LERMS)
A. Deficiencies of LERMS
B. Modified LERMS
18.2.3 Introduction of Current Account Convertibility
18.2.4 Expert Group on Foreign Exchange Markets
18.2.5 Foreign Exchange Management Act (FEMA), 1999
A. Distinguishing Features of FEMA, 1999
18.2.6 Capital Account Convertibility (CAC)
A. Pre-reforms Period
B. Initial Liberalisation Measures
C. Committee on Capital Account Convertibility, 1997
D. Impact of Capital Account Liberalisation on Indian Financial System
18.2.7 Technical Group on Foreign Exchange Market, 2005
A. Resident Entities
B. Commercial Banks
C. Non-Resident Entities
18.3 Present Structure of Foreign Exchange Market
18.3.1 Market Segments
18.3.2 Market Players
18.4 Sources of Supply and Demand of Foreign Exchange
18.4.1 Derivative Market Instruments
 
19. PAYMENT SYSTEMS, CLEARING AND SETTLEMENT
19.1 Role of Payment and Settlement System
19.2 Large Value Payment Systems
19.2.1 Real Time Gross Settlement (RTGS) System
19.2.2 High Value Clearing
19.3 Retail Payment Systems
19.3.1 Paper-based Systems (Cheques)
19.3.2 Electronic Retail Payment Instruments
A. Electronic Funds Transfer System (EFT)
B. National Electronic Funds Transfer (NEFT)
C. Electronic Clearing Services (ECS)
D. ATM Networks
E. Credit Cards
F. Satellite Banking
19.3.3 Deficiencies in Retail Payment Systems
19.4 Reforms Pertaining to Clearing and Settlement
19.5 Central Counterparties
19.5.1 Clearing Corporation of India Limited (CCIL)
A. Government Securities Segment
B. CBLO Segment
C. Forex Segment
19.5.2 National Securities Clearing Corporation Ltd (NSCCL)
19.6 Government Securities Settlement System
19.7 Role of RBI in Payment and Settlement System
19.7.1 Vision Document for Payment Systems, 2005-08
A. Action Points during 2005-06
B. Action Points during 2006-07
C. Action Points during 2007-08
19.7.2 Board for Regulation and Supervision of Payment and Settlement Systems (BPSS)
 
20. INTEGRATION OF FINANCIAL MARKETS
20.1 Need for Integration of Domestic Financial Markets
20.2 Measures Taken for Integration of Financial Markets in India
20.2.1 Free Pricing
20.2.2 Widening Participation
20.2.3 New Instruments
20.2.4 Institutional Measures
20.2.5 Technology, Payment and Settlement Infrastructure
20.3 Segment-wise Integration
20.3.1 Integration of the Government Securities Market
20.3.2 Integration of the Credit Market
20.3.3 Integration of the Foreign Exchange Market
20.3.4 Stock Market Integration
 
21. FINANCIAL DERIVATIVES: AN INTRODUCTION
21.1 Emergence of Complex Financial Products
21.2 Meaning of Derivatives
21.3 Reasons for the Popularity of Derivatives
21.4 Variants (or Types) of Derivative Contracts
21.4.1 Forwards/Forward Contracts
21.4.2 Futures/Future Contracts
21.4.3 Options
A. Warrants
B. LEAPS
C. Baskets
21.4.4 Swaps
A. Interest Rate Swaps
B. Currency Swaps
21.4.5 Swaptions
21.5 Participants in the Derivatives Market
21.5.1 Hedgers
21.5.2 Speculators
21.5.3 Arbitrageurs
21.6 Economic Role of Derivatives
21.7 History of Derivatives
21.8 International Experience of Derivatives
 
22. FORWARDS, FUTURES AND OPTIONS
22.1 Forwards/Forward Contracts
22.1.1 Salient Features of Forward Contracts
22.1.2 Advantages of Forwards
22.1.3 Problems of Forward Contracts
22.2 Futures/Future Contracts
22.2.1 Distinction between Futures and Forwards
A. Standardization
B. Liquidity
C. Conclusion of Contract
D. Margins
E. Profit/Loss Settlement
22.2.2 History of Futures
22.2.3 Introduction of Futures in India
22.2.4 Futures and Stock Indices
22.2.5 Index Futures
22.2.6 Settlements in the Futures Market
22.3 Options
22.3.1 Call Options
22.3.2 Put Options
22.3.3 Options in Historical Perspective
22.3.4 Advantages of Option Trading
A. Risk Management
B. Time to Decide
C. Speculation
D. Leverage
E. Income Generation
F. Strategies.
22.3.5 Distinction between Futures and Options
22.3.6 Pricing Options: Black-Scholes Formulae
 
23. DERIVATIVE INSTRUMENTS IN INDIA
23.1 L.C. Gupta Committee on Derivatives Trading in India
23.1.1 Regulatory Objectives
A. Investor Protection
B. Quality of Markets
C. Innovation
23.1.2 Derivative Products
A. Interest and Currency Futures
B. Single Stock Derivatives
23.1.3 Use of Derivatives by Mutual Funds
23.1.4 SEBI Related Issues
23.2 Amendment of Securities Contract Regulation Act (SCRA)
23.3 Measures to Protect the Rights of Investors in the Derivatives Market
23.4 Recent Developments in the Derivatives Market
23.5 Credit Derivatives
23.5.1 Forms of Credit Derivatives
A. Credit Default Swap (CDS)
B. Total Return Swap (TRS)
C. Credit Linked Note (CLN)
23.5.2 Significance of Credit Derivatives
23.5.3 Benefits of Credit Derivatives
23.5.4 Risks Involved in Credit Derivatives
23.5.5 Credit Derivatives and Sub-prime Crisis of 2007
23.6 Credit Derivatives in India
23.7 Asset Securitisation
23.7.1 Advantages of Securitisation
23.7.2 Pitfalls of Securitisation
23.8 Traders and Trading System of Derivatives
23.8.1 Traders in Derivatives Market:
A. Hedgers
B. Speculators
C. Arbitrageurs
23.8.2 Trading System:
A. National Exchange for Automated Trading (NEAT-F&O)
B. Trading Mechanism
C. Entities in the Trading System
D. Corporate Hierarchy
23.8.3 Order Types and Conditions
A. Time Conditions
B. Price Conditions
C. Other Conditions
23.8.4 Market Watch
23.8.5 Placing Orders on the Trading System
23.8.6 Eligibility Criteria for Securities/Indices Traded in F&O
A. Eligibility Criteria for Stocks
B. Eligibility Criteria for Indices
C. Eligibility Criteria for Stocks for Derivatives Trading on Account of Corporate
Restructuring
23.9 Clearing and Settlement System for Financial Derivatives
23.9.1 National Securities Clearing Corporation Limited (NSCCL)
A. Clearing Members (CMs)
B. Clearing Mechanism
C. Settlement Mechanism
23.9.2 Settlement of Institutional Deals
23.9.3 Risk Management
 
BIBLIOGRAPHY; SUBJECT INDEX; NAME INDEX

ABOUT THE AUTHOR
     

Dr. R.K. Uppal is Associate Professor and Head, Department of Economics, DAV College, Malout (Punjab). He did his M.A. in Economics from Punjabi University, Patiala in 1986. Thereafter, he obtained M.Phil. degree from MDU, Rohtak in 1987 and Ph.D. degree from Punjabi University, Patiala. He obtained D.Litt degree from International University California, USA in 2009.

Specializing in banking and finance, Dr. Uppal has 33 books to his credit on the subject. He has published 124 research papers on the subject in reputed national and international journals. He has participated and presented papers at national and international conferences/seminars including those held in Hawaii, Indonesia, Finland, Costa Rica, Australia, Pakistan and UK.

He has successfully completed 4 major research projects funded by University Grants Commission (UGC), New Delhi and Indian Council of Social Science Research (ICSSR), New Delhi. He has also been bestowed with Bhartiya Shiromani Purskar.


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