Professional Documents
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Management Accountant Jan-2016
Management Accountant Jan-2016
MANAGEMENT
THE
ACCOUNTANT
ISSN 0972-3528 JANUARY 2016 VOL 51 NO. 1 Pages - 124 100
STRENGTHENING
INDIAN
BANKING
SYSTEM
THE INSTITUTE OF COST ACCOUNTANTS OF INDIA
(Statutory body under an Act of Parliament) www.icmai.in 1
www.icmai.in January 2016 1 The Management Accountant
HONOURING CORPORATES
FOR ENHANCING PERFORMANCE
THROUGH COST MANAGEMENT
STRATEGIES
NATIONAL AWARDS
FOR EXCELLENCE IN
13 TH
COST MANAGEMENT
2015
The Institute of Cost Accountants of India, a premier
Cost and Management Accounting body, instituted the
National Award for Excellence in Cost Management in
the year 2003 to recognize and honor those
organizations which succeeded in their businesses by
applying best cost management practices and
innovative techniques of cost management.
2
The Management Accountant 2 January 2016 www.icmai.in
The Institute of Cost
Accountants of India
PRESIDENT THE INSTITUTE OF COST ACCOUNTANTS OF INDIA
CMA Pramodkumar Vithaldasji Bhattad
(erstwhile The Institute of Cost and Works Accountants of
[email protected]
VICE PRESIDENT
India) was first established in 1944 as a registered company
CMA Manas Kumar Thakur under the Companies Act with the objects of promoting,
[email protected] regulating and developing the profession of Cost Accountancy.
COUNCIL MEMBERS On 28 May 1959, the Institute was established by a special
CMA Amit Anand Apte, CMA Ashok Bhagawandas Nawal, Act of Parliament, namely, the Cost and Works Accountants
CMA Avijit Goswami, CMA Balwinder Singh,
Act 1959 as a statutory professional body for the regulation
CMA Biswarup Basu, CMA H. Padmanabhan,
CMA Dr. I. Ashok, CMA Niranjan Mishra,
of the profession of cost and management accountancy.
CMA Papa Rao Sunkara, CMA P. Raju Iyer, It has since been continuously contributing to the growth
CMA Dr. P V S Jagan Mohan Rao, of the industrial and economic climate of the country.
CMA Sanjay Gupta, CMA Vijender Sharma The Institute of Cost Accountants of India is the only
GOVERNMENT NOMINEES recognised statutory professional organisation and
K.V.R. Murthy, Surender Kumar, Sushil Behl,
licensing body in India specialising exclusively in Cost and
Ajai Das Mehrotra, P.K Mishra
Management Accountancy.
Secretary
CMA Kaushik Banerjee, [email protected]
Sr. Director (Administration)
CMA Arnab Chakraborty, [email protected]
Sr. Director (Technical)
CMA J K Budhiraja, [email protected] MISSION STATEMENT
Sr. Director (CAT, Training & Placement)
CMA L Gurumurthy, [email protected]
The CMA Professionals would
Director (Examinations)
CMA Amitava Das, [email protected] ethically drive enterprises globally
Director (Finance) by creating value to stakeholders in
CMA S R Saha, [email protected] the socio-economic context through
Director (Admin.- Delhi office, PR & International Affairs)
CMA S C Gupta, [email protected]
competencies drawn from the integration of
Director (Research & Journal) & Editor strategy, management and accounting.
CMA Dr. Debaprosanna Nandy, [email protected]
Director (Membership)
VISION STATEMENT
CMA A S Bagchi, [email protected]
Director (Discipline) & Jt. Director (Studies & Academics)
CMA Rajendra Bose, [email protected] The Institute of Cost Accountants of
Additional Director (IT) India would be the preferred source
Smt. Anita Singh, [email protected]
Joint Director (Tax Research)
of resources and professionals for
CMA Chiranjib Das, [email protected] the financial leadership of
Joint Secretary & In-Charge (CPD) enterprises globally.
CMA Nisha Dewan, [email protected]
Joint Director (Finance) & In-Charge (Infrastructure)
CMA Kushal Sengupta, [email protected]
Joint Director (President’s & Vice President’s office)
CMA Tarun Kumar, [email protected]
Joint Director (Professional Development)
CMA Dibbendu Roy, [email protected]
Deputy Director (Advanced Studies)
IDEALS THE INSTITUTE STANDS FOR
CMA M.P.S Arun Kumar, [email protected] • to develop the Cost and Management Accountancy profession
Editorial Office
CMA Bhawan, 4th Floor, 84, Harish Mukherjee Road, Kolkata-700 025
• to develop the body of members and properly equip them for functions
Tel: +91 33 2454-0086/0087/0184 , Fax: +91 33 2454-0063 • to ensure sound professional ethics
Headquarters
CMA Bhawan, 12, Sudder Street, Kolkata 700016 • to keep abreast of new developments
Tel: +91 33 2252-1031/34/35 , Fax: +91 33 2252-7993/1026
Delhi Office
CMA Bhawan, 3, Institutional Area, Lodi Road, New Delhi-110003
Tel: +91 11 24622156, 24618645 ,Fax: +91 11 4358-3642 Behind every successful business decision,
WEBSITE there is always a CMA
www.icmai.in
CMA P. V. Bhattad
President
The Institute of Cost Accountants of India
‘‘Take a leap of faith and begin this New Year by believing. Believe in yourself. And believe that
there is a loving Source - a Sower of Dreams - just waiting to be asked to help you make your
dreams come true.” Sarah Ban Breathnach
My Dear Professional Colleagues, and they are the brand ambassadors of the Institute after
passing out from the Institute.
Namaskar. I urge the members of Central Council, Regional
Councils and Chapters of the Institute to come forward
The New Year has arrived. This is the time to see things and take the initiative of Career Counselling. As elected
in new perspective. To make 2016 your year, keep it representatives of the Institute they know all about the
simple; Count your blessings first; Whatever you did Institute and the profession so their active contribution
last year, Do it better; Go step by step, One day at a time; in this regard will boosts the morale &confidence of
Create/make your own opportunities; Believe in your prospective students and give them new direction which
abilities at all times; Quitting is not an option. Keep Going could be beneficial for the whole society. Members in
and Finish what you started. I am joined by my Council Industry and in Practice also have a role to play in this
colleagues to wish all the stakeholders a great year ahead. regard. I urge them to contribute their bit and take active
May there be more happiness & joy in your life and your part in career counselling initiative of the Institute in best
march towards your goals would be swift. Wishing you possible manner. I believe that planned career counselling
renewed success in 2016. will give students a clear understanding about the CMA
Profession. It is imperative for us to highlight the following
Career counselling information during the counselling sessions before the
Choosing the right career option keeping the market prospective students:
in mind is as much necessary as selecting the right w Council decision on payment of course fee in
education institution. Unfortunately, not many students instalment to overcome the financial hardship of parents.
are able to discover their potential and interesthence w Continuousplacement services provided by the
pressure starts building. Career counselling sessions helps Placement Cell of the Institute whereingood packages
the students to know about different streams and career are offered to the students
path they offer, thus the students can make an informed w Career opportunities for practice and service are to
choice, and get a career assessment that helps avoid the be emphasised.
risk of change in career path later in life. As we all know I will welcome your views and constructive
that our Institute also thrives on the student strength suggestions in this regard.
Institute as member of Common Norms Committee and Maintenance Cost” (CAS-12) and Exposure Draftsof
of the Government CAS on “Treatment of Revenue for Cost Statement” and
Guidance Note on CAS 2 (Revised 2015) on “Capacity
I am happy to inform that the Ministry of Skill Develop-
Determination” for obtaining views/ suggestions/
ment and Entrepreneurship, Government of India, has
comments from the Stakeholders. The EDs will be hosted
included our Institute as member of Common Norms
on the Institute website shortly. I request members and
Committee to update and suitably revise the Common
Industry to send their views / suggestions to improve
Norms for the Skill Development Courses being con-
these drafts.
ducted by Government of India. The Chairman, CAT
Committee met the representatives of CAT ROCCs from
Eastern and Northern Regions on 19th&20th December CAASB initiatives
2015 to understand the progress of CAT Course and the The Cost Auditing and Assurance Standards Board
challenges being faced by them. The deliberations from (CAASB) in its meetings held on 10thDecember and
this meeting, I am sure will go a long way in expanding 24 thDecember 2015 approved the Cost Auditing
the Course in other parts of this country. Standards (SCAs) on “Audit Evidence”, “Materiality in
Planning and Performing an Audit” and “Cost Auditor’s
Professional Development Initiatives Responsibility Relating to Fraud in an Audit of Cost
l Keeping in view the fact that the Companies Act, Statements” and recommended to send it for approval
2013 has strongly emphasized on internal control of the Council of the Institute. Further, the Board also
system and has mandated for listed companies and some approved the Exposure Drafts (EDs) of SCAs on Using
classes of companies to appoint a Cost Accountant or the work of Internal Auditors;Using the work of Cost
alike professionals as internal auditor to provide the Auditor’s Expert;Analytical Procedures;Communication
Management and Board of Directors with an assurance those Charged with Governance; and Communicating
on the adequacy and effectiveness of Internal Financial Deficiencies in Internal Control to those Charged with
Controls, a seminar was organized on ‘Risk Based Internal Governance and Management. These EDs will be hosted
Audit’ on 11thDecember 2015 at New Delhi. The seminar on the Institute website shortly for obtaining views /
was well attended by large number of members from suggestions of the members and stakeholders to further
industry and in practice. improve these standards.
l On 18th December 2015 a meeting of the first study
group on “Healthcare Sector” was organized. The agenda Continuous Placement Process
of the meeting was to develop the Best Costing Practices The Campus Placement program for the June 2015
in Healthcare Industry for the benefit of industry and final qualified students still continues beyond the
as well as society at large. The meeting was attended by dates fixed in October 2015 and many companies like
eminent members of the institute working at top positions WIPRO, Genpact, Infosys visited our Chennai, Delhi and
in healthcare sector. Hyderabad campus for campus placement. It is heartening
l Professional Development Committee organized to know that the placement for final qualified has become
a programon “Governance for Sustainability- Issues, a continuous process now.I convey my compliments
Problems and Solutions” on 21st December 2015. to the Chairman,Members in Industry and Placement
l Vice-President, ICAI met Shri SanjoyMookherjee, Committee for his active contribution.
Financial Commissioner and Secretary to Government
of India Ministry of Railways during a program hosted Examinations
by Metro Railways on 24 thDecember, 2015.Shri December 2015 term examinations for the CMA course,
Mukherjee assured that he would arrange to engage CMA 1stbatch of Diploma Courses on Business Valuation, IS
professionals for study in improvement of profitability Audit and Control and Internal Audit were completed
of Indian Railways through activity based costing and in all the Centres except states of Tamil Nadu and
implementation of accrual based accounting system. Puducherry. The rescheduled examination time table
for the students of the Tamil Nadu and Puducherry states
CASB Initiatives is available on the Institute website.
The Cost Accounting Standards Board (CASB) in its
81stmeeting held on 23rdDecember 2015 approved the Welcoming new Associates and Fellows of the Institute
Guidance Note on Cost Accounting Standard on “Repairs I am happy to inform that during the month of
Internal
Opportunities for CMAs
Cost Accountants have been involves in waste reduction and
empowered statutorily vide Section enhancing productivity and process
138(1) of the Companies Act 2013 improvement.
for conduct of Internal Audit of The Internal Audit must be
the Companies. The internal audit synchronized to the expectations of
landscape dominated by financial the Board. It must develop an Internal
reporting, compliance related efforts audit strategy that is linked with the
is now being challenged by pressure organization’s strategic plan with a
on resources and growing demands CMA Biswarup Basu focus on optimizing risks, costs, and
to help improve overall business Council Member value. It must develop dynamic internal
performance. Internal audit has audit plans. The communication must
historically been viewed as stable, be done frequently with key stakeholders
traditional and beneficial but not necessarily critical on their needs, expectations, satisfaction with the internal
for the organization. But with globalization, winds of audit. It should leverage technology to optimize audit
change has also occurred in the mechanism in which operations and assist management in developing and
Internal Audit is conducted. It must have the capability maintaining a comprehensive performance management
of influencing change in managing risks, costs and value. framework. It should support and facilitate business
The modern role of Internal Audit has, therefore, now process improvement and re-engineering and provide
focused on driving value and efficiency with improvement active support in furthering good Corporate Governance.
in audits in creating, enabling, preserving and reporting CMAs have a colossal role to play as they have an unique
value. blend of core competencies in accounting, management
Presently, the role of Internal Audit has become and strategy. CMAs can apply their forward looking
more critical. The backdrop and changing business insights across the organization to manage risks, reduce
scenario and the role metamorphosed as technology costs and create new opportunities, preserve and enhance
have erased global barriers. Customer expectations have value.
increased and compliance demands are growing both in CMAs possess the expertise to evaluate the operational
terms of quantity and complexity. The Enterprise Risk efficiency, productivity and profitability, wastages,
Management is emerging as the key element in Corporate losses, inefficiency. They can apply their knowhow in
Management. judging efficiency of management of resources, capacity
The expectations of the Board from Internal Auditors utilization, channeling resources into productive
are now to assist the Board in identification, monitoring channels, standards of efficiency of performance,
and management of business risks and also to offer and production processes and performance of respective units.
provide insight, advice and assurance on enterprise Efficiency of business processes, Enterprise Performance
risks. The Internal Auditors should also inform directors Management, Business risks, Efficiency of Supply Chains,
about the tone of the organization-culture, ethics, Efficiency of Utilities / Energy Consumption, Sustainability
performance and continuously evaluate the efficiency of Business are critical drivers to keep the business focused
and effectiveness of operations. They should also check on priority areas.
compliance with laws and regulations and authenticate The perspective of CMAs have changed in the
the reliability of financial and management reporting. present era of mergers & acquisitions, new product
Internal Auditors has the added role of safeguarding the development and also to climate change and sustainability.
assets of the company. They should evaluate performance The financial perspective, customer perspective,
management and control systems and act as an advisor to operational perspective and people perspective all can be
the Management. The role of effective Cost Management aligned to meet the goal of the business.
(The complete article would appear in the subsequent issue of the journal)
Articles invited
We invite quality articles and case studies from members in the industry
with relevance to Cost and Management Accountancy, Finance, Management,
and Taxation for publication in the journal. Articles accompanied by color
photographs of the author can be sent to: [email protected]
Dear Sir,
Hi,
The Article named ‘An Accountant’s perspective on GST in India’ by CMA Debnath Mukhopadhyay in
September 2015 issue of ‘The Management Accountant’ is very useful one and the author has done
simply great job in helping to understand the GST in simple terms.
The Institute should focus on such topics which are quite useful. Well done.
Corrigendum
The readers may kindly note that Shri Rintu Nath (Rahul), whose article appeared on page 71 of The
Management Accountant journal, December 2015 issue, is affiliated to T H K Jain College, Kolkata
The Institute of Cost Accountants of India Professional Further, Ms. Sushmita Ghatak, CEO of ICRA Online
Development Committee organized a programme Ltd. deliberated about the present provisions of
titled “Governance for Sustainability- Issues, Companies Act, 2013 of Corporate Governance.
Problems and Solutions” on 21st December, 2015. Mohd. Kabir, General Manager (Business
CMA Vijender Sharma, Chairman of Professional Administration) of Siemens Ltd. provided a session
Development Committee provided the opening speech. on the topic of issues, problems and solutions of
CMA N.K. Bhola, Regional Director (Eastern & North- governance. Finally, CMA Nilanjan Chakraborty,
Eastern Region), Ministry of Corporate Affairs was the Senior Role Manager (Project), Capgemini presented
guest of honour. The programme had sessions from the compliance of governance and it’s impact in
experts of the industry and Government. Dr. Sudhir IT enabled environment. CMA Biswarup Basu,
Misra, IPS deliberated a session in e-governance in Council Member provided the vote of thanks for
Police. He is presently posted as Addl Director General the programme.The programme was attended by
of Police, State Crime Records Bureau, West Bengal. members of the Institute.
PAPERS INVITED
Cover stories on the topics given below are invited for ‘The Management
Accountant’ for the four forthcoming months.
The above subtopics are only suggestive and hence the articles may not be limited to them only.
Articles on the above topics are invited from readers and authors along with scanned copies of their recent passport-size photograph and
scanned copy of declaration stating that the articles are their own original and have not been considered for publication anywhere else. Please
send your articles by e-mail to [email protected] latest by the 1st of the previous month.
1 2
8 9
the program
On the dais: Advocate & Tax consultant Mrs. Aparna
Nandakumar, Regional Council Member CMA Jyothi
Satish, Patrons Woman’s Wing, Ms. Subhashini S and Ms.
Latha Venkatesh
11
15
Globsyn Business School (GBS), eastern India’s first speaker’s address and the participants included eminent
Corporate B-school collaborated with the Institute to personalities like Prof. (Dr.) Biju Paul Abraham, Dean
organize the second Globsyn Management Conference (Academic) of IIM (Calcutta), Dr. Soumendra De,
(GMC) on 18th December, 2015 at the Globsyn Professor of Finance, Menlo College (California), Prof.
Knowledge Campus. The theme of this year’s conference (Dr.) Imon Ghosh, former Director, Academy of Human
was ‘The changing Business scenario and evolving Resource Development and Mrs. Suchitra Guha, former
Management Practices’. The conference was attended Head, HR/IR, Tata Steel Limited. This panel discussion
by academics, industry experts, research scholars and was moderated by Prof. (Dr.) Ajitava Raychaudhuri of
students from across 5 states, 13 institutions and 3 Jadavpur University. This session turned out to be the
renowned corporations. most invigorating with each panel member offering new
Prof. R C Bhattacharyya, Vice Chairman, Globsyn insights for the eager audience to contemplate on —
Business School declared the conference open on a a hypothesis on the end of debt finance, the Japanese
celebratory note after the dignitaries present joined him concept of ‘Ikigai’, mark to market accounting and
in lighting the lamp. Prof. (Dr.) Subir Sen, Dean, Globsyn adaptability as the distinctive attribute of the successful.
Business School in his inaugural address spoke about the The post-lunch session of GMC turned out to be
ways in which post-liberalization India looks and behaves equally captivating with research papers on diverse
differently from the days of a closed economy while topics presented, ranging from contemporary business
Prof.(Dr.) Malabika Sarkar, Principal Advisor, Ashoka issues, risk management in investment banking, modern
University and former Vice Chancellor of Presidency lighting, workplace spirituality to flying drones and
University in her lecture drew attention to the fact that the gender discrimination prevalent in corporate India.
digital revolution has had as great an impact on human GMC concluded with the valedictory address delivered
civilization as the disruptive theories of Copernicus and by CMA Dr. Debaprosanna Nandy, Director (Research
Darwin. The keynote speaker of the conference, Mr. & Journal), The Institute of Cost Accountants of India,
R.N Kar, Regional Director of the Reserve Bank of India, and an appreciation from all present for the efforts made
encouraged the management students present to pursue by Globsyn Business School and ICAI to bridge the gap
banking as a career and in his informative speech dwelled between academia and industry by providing the research
on the continuous changes taking place in the Indian community with a platform like the Globsyn Management
banking sector since independence. Conference where they can exchange ideas to evolve an
A lively panel discussion followed the keynote effective paradigm for delivering quality education.
Transmission of
for arbitrarily manipulating the effective interest rates. as 4.75 per cent as on 21.04.2009 and the highest
Those borrowers who had the strength to bargain on being 16.00 per cent as on 09.08.2000. It is pertinent
interest rates with the banks succeeded in borrowing to note that the lending rates of the banks have not been
at as low as 6 to 7 per cent when BPLR was at 14 to so volatile during the corresponding period indicating
15 per cent. Such a practice also resulted in unethical that there is little co-relation between Repo Rate and the
and dishonest practices where interest rates were fixed lending rates of the commercial banks. However there
for considerations other than ethical business practices. has been some semblance of stability of Repo Rate in last
It brought to surface the dishonesty in fixing the lending 10 years where the Repo Rate has been at a low of 4.75
rate in respect of some large corporate loans and advances per cent as on 21.04.2009 and a high of 9.00 per cent
and obtaining undue favour and illegal gratification. as on 29.07.2008 with present Repo Rate being at 6.75
It also led to the small borrowers cross-subsidizing the per cent. The interest rates charged by the banks on their
interest rates on loans to large corporate borrowers. RBI loans and advances, however, have not moved even so
thus failed in its objective of introducing transparency in sharply during the corresponding periods. Such ground
fixing lending rates but succeeded in assessing the ability realities put a question mark on effectiveness of Repo
and willingness of the banks to use the mechanism of Rate being considered as a reference rate to determine
BPLR in an honest and objective manner. By the time the ultimate lending rates of the banks on their loans
RBI realised the misuse and fallacy of system of BPLR, and advances.
a long period of 7 years had passed. The perception amongst certain interest groups about
It would be quite interesting to observe that RBI has linkages between RBI’s reference rate and lending rates
been changing Repo Rate quite frequently. A perusal of the banks charged to borrowers appears to be based
of the following table would reveal that the Repo Rate on a wrong premise. The following table depicts the Repo
between 05.06.2000 and 29.09.2015 has been as low Rate between 06.11.2000 to 29.09.2015:
Table: Repo Rate (%) between 06.11.2000 and 29.09.2015
30.03.2007 7.75
29.09.2015 6.75
31.01.2007 7.50
Base Rate (BR) rates on bank lending were being determined on the basis
The shortcomings of the system of BPLR were sought of cost of funds and other components as mentioned
to be removed by introduction of the system of Base Rate herein before. The objective of RBI’s policy rate (Repo)
which was implemented with effect from 1st July 2010. had been to regulate the money supply and lendable
The Base Rate (BR) included all those elements of the resources at the disposal of the banks particularly to deal
lending rate that were common across all categories of with inflationary pressures. The banks have been using
borrowers. These elements are – the following methods to compute BR:
(i) Cost of Deposits/Funds a Average Cost of Funds Method
(ii) Negative carry on CRR & SLR, a Marginal Cost of Funds Method
(iii) Unallocatable overhead costs and a Blended Cost of Funds Method
(iv) Average return on net worth. After getting the feedback and public comments on its
The banks were allowed freedom to choose any bench- draft guidelines, RBI has decided to direct the banks to use
mark to arrive at the BR for a specific tenor to be disclosed Marginal Cost of Funds Method to compute their BR from
transparently. The freedom so afforded to the banks was 1st April 2016 onwards. This method will also have its
considered appropriate as long as it was consistent and own implications more particularly in an environment
made available for the review and scrutiny of RBI as and of declining interest rates on deposits. The marginal cost
when required. The banks were expected to determine the of funds will be much lower than the actual/ average
actual lending rates on loans and advances with reference cost of funds and hence this method would result in the
to the BR and by including such other customer-specific banks ending up fixing lower rate of interests on their
charges as considered appropriate by the banks. The loans and advances unless they modify their system of
banks used the internal rating system to determine the fixing spread over the BR. At such a critical juncture
‘spread’ over the BR to fix the interest rates on loans and where non-performing assets of banks are mounting
advances of their borrower customers. In case of large and growing every quarter, mandating the marginal
corporate clients, the external rating also influenced cost of funds method for computing the BR is going
fixing the interest rates. RBI imposed restrictions of not to be detrimental to the interest of the banks and will
charging an interest rate below the BR. However certain certainly make improvements in profitability a distant
categories of borrowers were kept outside the purview dream for the banks. This may prove to be an acid test of
of such restrictions as follows: the regulatory wisdom of RBI. The important aspects of
c Specified sectors of priority using Marginal Cost of Funds Method to compute BR, is
c Loans to bank’s own employees found to be more sensitive to changes in the policy rates
c Loans against bank’s own deposits as reported to have been experienced by RBI.
c Differential Rate of Interest (DRI) advances The Marginal Cost of Funds Method to compute
c Export credit BR provides for use of cost of funds by taking into
The floating interest rates based on external bench- consideration all sources of funds except the equity. The
mark were prescribed as equal to or above the BR at the cost of deposits should be calculated using the latest
time of sanction or renewal. The hall-mark of concept interest rates/card rates payable on all types of demand
of BR is that it is transparent and non-discriminatory and term deposits of various maturities. Similarly, cost of
in nature. The difference in the rates of interest could borrowings should be arrived at using the average rate at
be on account of risk premium and tenor of the loan. which funds are raised in last one month preceding the
RBI prescribed effective lending rates to be fixed by the date of review. Each of these rates should be weighted
banks as floating based on external bench-marks. RBI by the proportionate balance outstanding on the dates
expected banks to conduct review of their BR at least of review. The little role of Repo Rate in computing DR
once in a quarter and get it approved by Assets Liability on the basis of Marginal cost of funds can be completely
Management Committee (ALCO) or Board of Directors. eliminated by not availing loans from RBI at Repo Rate
RBI placed the draft guidelines on transmission of during the month preceding the review of BR.
monetary policy rates to banks’ lending rates in public RBI expects that new methodology of computing BR
domain for comments/suggestions. RBI was of the view would help banks in the medium term goal of pricing
that for monetary transmission to occur, lending rates their floating rate loans linked to an external bench-mark.
have to be sensitive to the policy rates (Repo). This was a The bench-marking agency viz., Financial Bench Mark
new dimension brought into play by RBI as the interest India Pvt. Ltd. (FBIL), shall publish various indices of
STRESSED
ASSETS
IN INDIAN BANKING
CAUSES AND MEASURES
Table -1: Gross NPA of Public Sector and Private Sector Banks (Rs in Crores)
Banks % Growth
(Figures in bracket indicates number of March 2014 March 2015
banks) 2015 2014
New private sector banks present a different picture. to service its debt, thus interest coverage ratio is used
Their gross NPA has risen by 33.85 per cent to Rs.24,943 and higher numbers are seen as favorable. The interest
crores in 2014-15 from Rs.18,635 crores in the previous coverage ratio of 5 and above represents a strong ability
financial year. ICICI Bank in this group grew by 43.68 to pay off debt though the threshold varies from one
per cent rise in gross NPA at Rs.15,095 crores against industry to another. The debt-equity ratio for BSE 500
Rs.10,506 crores, contributes to the maximum. The companies has gone up from 0.7 per cent in 2009-10
gross NPAs of old private sector banks shows a rise of to 0.9 per cent in 2013-14, while their interest cover - a
42.51 per cent at Rs.8418 crores against Rs.5,907 crores measure of a company’s ability to meet interest payments
in 2013-14. - halved to 3.6 times during this period. If one were to
Private sector banks characterized with a unique trend consider companies with a debt-equity ratio of more than
of abnormal hike in gross NPA during the last year 2015 1, the interest cover would shrink to 1.8 times. Over the
as compared to previous year. Gross NPA of this category last six months, the debt servicing capacity of companies
grew by over two times higher than the previous year has only worsened, with interest cover slipping to 1.6
(37.97 percent in year 2015 against 16.48 percent in times; companies with a very high leverage, of more than
2014) which leads to an inference that private banks 3, have an interest cover of less than 1, indicating that
have unveiled their hidden NPA during the year owing earnings are insufficient to meet interest payments. The
to regulatory change of higher provisioning norms on Financial Stability Report also flags the risk highlighted
restructured standard assets from current year. by the International Monetary Fund (IMF) in its report
on Asian countries, including India. Apart from the
Causes of Stress increase in overall leverage, the report talks of the
The stressed assets being amid concerns of the uneven and potentially problematic distribution of debt.
government and RBI, banks are directed to clean their A large share of corporate debt is concentrated in a few
balance sheet by year 2017 by implementing some major highly leveraged companies. About a third of total debt
decisions. The major reasons of mounting stress on the is owned by companies with a debt-equity of more than
assets quality in banks are presented herein the article. 3. The majority of the banks consider debt (total outside
liabilities) equity ratio at 4-5 which itself indicates poor
Financial Reasons repaying capacity of serving the debt. Thus, high leverage
a) Promoters Contribution ratio causing stress on the loan portfolio of public sector
Borrowers are expected to bring their contribution banks in country.
towards the loan into business which enhances their c) End use of Money
keen interest to run the business successful. At times it Effective monitoring of the end use of funds lent
is observed that banks are approving the loan without is of critical importance in safeguarding a bank’s
adequate worth and sources available with promoters interest. It acts as a deterrent for borrowers to misuse
for projected margin money that cause either delay the credit facilities sanctioned. Also, the shortcomings,
implementation or failure of business for want of required according to RBI and other external agencies including
margin from them. The infusion of funds by promoters CBI, observed in credit monitoring include depositing
are normally relied by the bankers on certificate submitted term loan disbursements to the current/cash credit
by chartered accountants that found to be fake in many accounts of borrowers and utilization thereof for day-
occasions. In light of increasing incidents of such false to-day operations. Banks relied exclusively on chartered
certification, the Chief Vigilance Commission has asked accountants’ certificates, both for infusion of promoters’
public sector banks to put in place a system to check rising contribution and deployment of banks funds. Besides, the
instances of fake certificate being submitted by borrowers periodical scrutiny of operating and financial statements
to get loan. The Institute of Chartered Accountant of of borrowers and regular visit of the assisted units and
India (ICAI) has also directed by the commission to make inspect the securities charged or hypothecated for loans
online directory of CAs available to banks. are missing.
b) High Leverage Ratio d) Willful default
Leverage ratio is considered to evaluate total amount A willful defaulter is one who can, but does not repay
of borrowing against the equity and also to assess it at his wish. There are serious consequences of being
company’s ability to service its debt. However, equity to listed as willful default such as not getting access to any
the total amount of borrowing does not indicate ability other loans by any financial institution, and that directors
be fake in large numbers. It is therefore, necessary for recovery of stressed assets. The RBI’s recent “Framework
bankers to obtain independent confirmation from the for Revitalizing Distressed Assets in the Economy”
Auditor/ Chartered Accountant of the borrowing entity proposes a few important changes – including formation
and return submitted by the private limited company of lender’s committee with timelines to agree to a plan for
with MCA-21 can also be verified the authenticity of resolution, incentives for lenders to agree collectively and
their Annual Financial Statements. quickly to a plan and a penalty in the form of accelerated
3) Marginability – provisioning in case an agreement cannot be reached,
Promoters contribution which is commonly known among other measures. It is an effective framework,
margin towards loan is one of the important covenants however, it can be further strengthen and quicker if the
of lending. Adequate margin amount and capability of Joint Lenders Forum (JLF) decision threshold should be
promoters to bring the margin need to be fully assessed at revised to 60% in terms of value and 51% in terms of
time of credit appraisal to avoid cases of stress owing to numbers as against the Framework’s 75% by value and
non-availability of borrowers’ contribution into business. 60% by number at present. Further, if any lender does
Liquid worth in form of investment, bank and cash not cooperate or participate in the meetings, the said
balance, gold and jewellary are reported to be main source lender should not count in the consensus estimation, and
of promoters contribution thus, credit managers while should attract a negative supervisory view. This would
appraise the loan proposal, should verify independently reduce the problem of banks ‘holding out’ and speed up
that borrowers / guarantors have liquid worth more the process. Also the tax breaks, should be provided to
than the amount projected to be raised from them as borrowers / promoters that initiate rectification under
contribution for loans. Such amount to be brought the Special Mention Account (SMA) classification, as
in through banking channel and end use certificate defined by the RBI, at the first signs of incipient stress.
from chartered accountants need to be obtained before
releasing sanctioned credit facilities. b) Penal Provision for Non Cooperation - There should
4) Skill Reformation be provision of higher degree of penalties for borrowers
Public sector banks are passing through the turmoil that do not cooperate with lenders. Such penalties
phase of superannuation of experienced bankers replaced should drive promoters to cooperate with lenders such
by new recruit who require to equip with managerial as (i) declaration as a willful defaulter (which will shut
efficiency, skill up gradation for proper assessment of borrowers out of the capital markets), (ii) transfer of
credit worthiness and a change in the attitude towards promoter shares to an escrow account until a turnaround
legal action, which is traditionally viewed as a measure of takes place (which will enable a change of management)
the last resort. Training academies of each bank should and (iii) debar the blood related family members to avail
come forward with comprehensive credit management credit from any banks and / or financial institutions.
program for new entrants for qualitative appraisal of
credit business. c) Effective Credit Monitoring - Banks should evolve some
5) Borderline Accounts Check effective system for monitoring projects at all point of
The potential accounts require quick diagnosis and time such as pre-operational stage, through effective
remedial measures so that they do not step into stressed pre sanction and post sanction appraisal. There is need
categories. The auditors of the banking companies must to employ technical staff at periodical intervals to visit
monitor all outstanding accounts in respect of accounts factory sites for ‘on the spot’ study to obtain first hand
enjoying credit limits beyond cut- off points, so that new information on the progress of the project for which
classified categories of standard assets in class of Special bank has lent.
Mention Account (SMA) -1 and SMA -2 can be effectively
monitored to slip back in sub-standard assets. d) Restorative Management - Banks can proactively
adopt the approach of restorative management under
B) Curative Measures its various functions to cure an account from stressed
This category includes the following treatments to categories. RBI has introduced the concept of Strategic
cure stress - Debt Restructuring enabling transfer of equity of
a) Incentivize Early Warning Signal - There is a strong borrowing company to lenders under its guidelines of
need for the banking system to recognize signs of stress revitalizing distressed assets in economy. Banks should
early and to take prompt steps towards restructuring and therefore, take timely action to manage stressed portfolio.
Sum - Up
Today banking industry is operating in an
environment which is highly competitive due
to integration of global markets. Post reform
epoch has changed the whole structure of
banking sector in India. The rising competition
has resulted in new confronts for the Indian
banks. The weakening domestic macroeconomic
conditions combined with continuing subdued
global growth and its increasing spillover risks
posed challenges to the banking sector in recent
past. The growth of the Indian banking sector
restrained in recent years as
there was a turn down in the growth of profits of Home Loan
banks, credit off-take slowed down and interest
rates soften. The asset quality also weakened more Loan against Property
detectably for public sector banks. Profitability
declined on account of higher provisioning on
banks’ delinquent loans and lackluster credit Rental Securitization
growth and increase in their losses coupled
with companies/projects are under stress. As
a consequence the Indian Banking System
Apna Hospital for Doctors
has seen augmented stress in loan portfolio.
Restructured accounts had a sharp increase Apna Office for Professionals
during recent years. In this article an attempt
has been made to analyze scene of raising NPAs
We also have special Schemes for CMA /CA/CS and other
and stress in loan portfolio of banks in India. The
professionals
major reasons of hike in stressed assets have been
explained with the suggestive measures to curtain We invite CMA/CA/CS and other professionals to join us
stress in banking as preventive and curative
measures. These shall help to improve health of
credit portfolio of banks with appropriate credit Feel free to Contact!!
appraisal and risk management mechanism. MA
Email: [email protected]
BANKER
THE COMPANIES
ACT 2013
‘B anking’ has been defined
under Section 5 ( b ) of the Banking
of bank’s advances. Banks feel that
advances to corporates are safe
Regulation Act, 1949 as ‘Accepting because:
for the purpose of lending or Company is an Artificial Legal
investment of deposits of money from Person, with a Common Seal and
the public, repayable on demand or perpetual succession
otherwise, withdrawable by cheque, It is easy to know about the advances
draft, order or otherwise” taken by a Company by taking a
In performing the primary ‘Search’ in the books of Registrar of
functions of accepting deposits Companies (ROC)
and lending money, banks come CMA S. Murali Probability of double finance against
across various types of customers. Director, Enhance Your Competence, the same assets is quite remote.
One of the main types is – Limited Adjunct Professor, IBS, Bangalore The charge against the security
Companies. Limited Companies open offered by the company for any
Current Accounts for their day-to- advances borrowed, shall have to be
day operations. Hence, the official registered with the ROC
in charge of opening the Current The second point and the fourth point
Account of Company needs to have discussed above would be effective if only
knowledge of the Companies Act the bank files with the ROC (Registrar
2013/Rules which he should comply of Companies), the charges against the
with. assets of the company which have been
When we think of lending function taken as security, within the prescribed
of the bank, Companies require huge CMA S. Chitra time limit. The provisions regarding
funds both for working capital and Consultant these have undergone change in the
purchase of fixed assets. Corporate Companies Act, 2013 when compared
advances account for a major portion with the earlier Companies Act, 1956.
The things shown in the above table is quite exhaustive. These companies are permitted to use the name of the
Some of the important aspects (concentrating more on company without the words Limited or Private limited.
advances department of the bank) are explained below: Important points to be noted in the
Memorandum of Association
The Memorandum of Association of a company is its
charter which contains the fundamental conditions upon
which alone the company can be formed. It defines and
confines the powers of the company. Any act done beyond
these powers will be ultra vires the company and so void.
The Memorandum shall be in respective forms
specified in Tables A, B, C, D and E in Schedule I as may
be applicable to such company.
Section 4 elucidates the contents of the Memorandum
as below:
Name Clause
Section 4(1)(a) The Memorandum shall state the name
of the company with the last word “Limited” in the case
The New Act has introduced a new type of Company of public limited companies or “private limited” in case
“One Person Company’. Hence, even a single individual of private limited company. This clause is not applicable
can form a Company and register under the Companies to companies registered under section 8.
Act, 2013 and enjoy ‘limited liability provisions’.
Another new classification of company - ‘Small Company’ Registered office clause
- has been brought under this Act. Section 4(1)(b) This clause describes the State in which
As per Sec 2 (85). ‘‘small company’’ means a company, the Registered office of the Company will be situated.
other than a public company,—
(i) paid-up share capital of which does not exceed Objects Clause
fifty lakh rupees or such higher amount as may be Section 4(1)(c) This defines the objects for which the
prescribed which shall not be more than five crore company is proposed to be incorporated and any matter
rupees; and considered necessary in furtherance thereof.
(ii) turnover of which as per its last profit and loss
account does not exceed two crore rupees or such Liability Clause
higher amount as may be prescribed which shall not Section 4(1)(d) This clause states the nature of liability
be more than twenty crore rupees: of the members- whether limited or unlimited.
Provided that nothing in this clause shall apply to—
(A) a holding company or a subsidiary company; Capital Clause
(B) a company registered under section 8; or Section 4 (1)(e) This mentions the amount of share
(C) a company or body corporate governed by any capital with which the company is registered and the
special Act; mode of its division into shares of fixed value. If there
Another major change is regarding the maximum are equity and preference shares, the division as such
number of members permitted in case of Private Limited needs to be shown.
Company – increased from 50 to 200. Salient points to be noted in the Articles of
Companies which are set up for the promotion of
commerce, art, science, sports, education, research, social
Association of the company
welfare, religion, charity, protection of environment or Articles of Association are the bye laws of the
any such other objects, Intends to apply its profits, if any, company which govern the ways in which the objects
or other income in promoting its objects and Intends to of the company are to be pursued. They contain all the
prohibit the payment of any dividend to its members are information regarding the power distribution among
now covered under Section 8 of the Act (Earlier Sec. 25). Directors, officers, shareholders etc. However the articles
Who is responsible for registering of charge? months or with fine which shall not be less than twenty
Sec. 77 of the Act very clearly says it shall be the duty five thousand rupees but which may extend to one lakh
of every company creating a charge to register the same rupees, or with both.
with ROC. The instrument creating charge shall be signed Does the Bank have any right to register charge if a
by the Company and the charge holder (Creditor/Banker)
Company fails to do within the prescribed time?
On What properties charge has to be created? If a company fails to register the charges within
The company shall register the charge the prescribed time, Bank may submit the form for
u within or outside India registration of charge on its own. The Registrar shall
u on its property or assets give notice about such application to the company. After
u property or assets of any of its undertakings receipt of the notice, the company, may, itself register the
u whether tangible or otherwise and charge. If it fails to register and also does not provide
u situated in or outside India reasons for not filing, the Registrar shall register the
charge within 14 days.
What is the Time Limit for creation of Charge? The section further gives right to the Bank to recover
The charge shall be registered with the Registrar of all charges incurred in this connection from the company
Companies within 30 days from the date of creation of (borrower).
charge by filing details under Form CHG-1.
What are the guidelines for Modification of Charge?
Does a Company which has failed to register within Same Procedure and same format as for Creation of
30 days, has any other remedy under the Act? Charge - Form CHG-1
Yes. The Registrar may, on an application by the What are the guidelines for Satisfaction of Charge?
company, allow such registration to be made within The company shall give intimation to the Registrar of
a period of 300 days (30 + 270) of such creation, on the payment or satisfaction in full of any charge within
payment of additional fees. a period of thirty days from the date of such payment
or satisfaction.
Is there any remedy for a Company if it fails to
register within 300 days? What are the duties of Registrar relating to registration
of Charges?
Sec.87 of the Act has dealt with this aspect. As per this
Section, Central Government is vested with the authority 1. Maintain a Register of Charges in respect of every
to condone any delay beyond 300 days. Only condition company and enter particulars of charges registered
is that Central Govt should be satisfied that the reasons under the Act. (Sec.81)
for delay are just and equitable. (Form CHG-8) 2. Issue a Certificate of Registration to the company
A Caveat here: The Section also clearly says that by and the charge holder {Sec.77(2) } (Form CHG-2)
permitting a company to register after 300 days, the 3. Issue a Certificate of Modification of Charge (Form
rights of any other lender shall not be prejudiced in CHG-3)
respect of the property concerned before the charge is 4. Allow any person to inspect The Register of Charges
actually registered. on payment of prescribed fees for each inspection.
5. Registrar shall note satisfaction of charge on the
What happens to the Company/Officials if they fail company and the charge holder (Bank) submitting
to register a charge? evidence of the same. He shall also issue a Certificate
indicating that the satisfaction of charge has been noted
Sec.86 of the Act contains guidelines regarding this. in his register {Sec.82(2) } (CHG-5)
As per this section, the company shall be punishable with 6. Sec. 83 provides powers to Registrar to make entries
fine which shall not be less than one lakh rupees but of satisfaction of and release of charge in absence of
which may extend to ten lakh rupees and every officer intimation from the company.
of the company who is in default shall be punishable 7. Under Sec.84 a Registrar is obliged to make entry in
with imprisonment for a term which may extend to six the register of charges regarding appointment of Receiver
In addition to the Register of Charges maintained by the Forms to be used for Creation, Modification and
Registrar of Companies, every company shall maintain Satisfaction of Charge
at its registered office a Register of Charges (along with
instrument of charges) giving details of the property or Form No. CHG-1 shall be used for both Creation and
assets of the company or any of its undertaking which Modification of charge
are charged for various borrowings (Form CHG-7).
The register of charges and instrument of charges, kept Form No. CHG-4 for filing Satisfaction of Charge
Main Differences between Companies Act, 1956 and Companies Act, 2013 regarding Charge Creation
Sl
Point of Difference Companies Act ,1956 Companies Act, 2013
No.
Sections covering
1. Sec. 124 to 145 Sec. 77 to 87
Company Charges
Form for Creation,
2 Form 8 CHG-1
Modification of Charge
Form for Satisfaction of
3 Form 17 CHG-4
Charge
Time Limit for registration
4 30 Days from Creation of Charge 30 Days from Creation of Charge
of charge
Further 270 days ( Total 300 days
Further 30 days (Total 60 days
from date of charge) on Registrar
Extension of Time if failed from date of charge) on Registrar
5 being satisfied about the delay and
to register within 30 days being satisfied about the delay and
payment of additional fees (CHG-
payment of additional fees
10)
Any legal remedy for delay Yes. Application to Company Law Yes. If Central Government is sat-
6 beyond 60 days (Old Act) Board isfied the charge can be registered
and 300 days (New Act) (Sec.141) (Sec.87)
Filing of Annual Return and financials of the Company Year irrespective of information that stood on the date
Annual Return is a yearly statement required to be of AGM.It is also necessary for every company to file
filed by every company irrespective of their nature or with the Registrar of Companies, a copy of the financial
status. It highlights the information about the company’s statement, along with the other documents, within thirty
various aspects relating to its composition, activities and days of the date of the annual general meeting of the
financial position. Every company is obligated to file its company.( Section 137)
annual return in Form MGT-.7. (Section 92).
The Companies Act, 2013 mandates to put information Place of keeping and inspection of registers, etc.
in Annual Return as on the last date of Financial The registers required to be kept and maintained by a
company and the copies of the annual return filed under Section 92 shall
be kept in the registered office of the company. It is significant to add here
that Section 120 has allowed the company’s records to be kept in electronic
form as well.
[email protected], [email protected]
Forensic
Audit -
Strengthening the
Banking System
B anks accept deposits in
various forms and provide loans to
It’s because we doubt the systems and
work culture of the bank.
its customers for various activities. Banks accept deposits in various
Area of concern for the banks is to forms and provide loans to its
recover the amount given as loan customers for various activities.
and to maintain the vigil on the Area of concern for the banks is to
funds available with it. One of the recover the amount given as loan
CMA Vineet Aggrawal
tools available with the banks to and to maintain the vigil on the funds
Consultant
deal with loan defaults and frauds available with it. In simple words,
is Forensic Audit. There are several banks are always vigilant on two
activities that can be called as red flags aspects; First, to get back the amount
and forensic audit ordered to know if given as loan for various activities
fraud has actually happened. Banks along with agreed interest. Second,
can get several answers once forensic audit techniques to ensure that customer funds available in their accounts
are adopted. and assets at all its branches across India are not siphoned
The word ‘Bank’ brings with it two elements – Trust off in any way.
and Confidence. Every occurrence of fraud takes away Most of the efforts of the banks are devoted towards
this trust and confidence. Why this trust is shaken even getting back the loan amount and when such amount
though we personally might not have lost any money? could not be collected it is known/classified as Non
Performing Asset (NPA). Banks try not to let any account fall under NPA category by restructuring the loan
(Commonly called as CDR). But despite all efforts, every bank has to deal with NPAs. Higher the NPAs, higher the
risk associated with it. Due to high NPAs cost of funds or interest rates on lending remain high and contain some
element of risk rate added in the lending rate. In other words, had there been a situation when bank had no NPA,
its lending rate would have been much lower.
As per the data made available by Indian Banks Association (IBA), 27 public sector banks had the following NPA
figures as on 31st March of each year:
% change 2013 % change 2014
Particulars 2013 2014 2015
vs 2014 vs 2015
As per the data made available by Indian Banks Association (IBA), 20 private sector banks had the following NPA
figures as on 31st March of each year:
% change 2013 % change 2014
Particulars 2013 2014 2015
vs 2014 vs 2015
As per the data made available by Indian Banks Association (IBA), 43 foreign banks had the following NPA figures
as on 31st March of each year:
% change 2013 % change 2014
Particulars 2013 2014 2015
vs 2014 vs 2015
If we combine all the above data of IBA, we get the data for all banks in India at the end of each financial year:
% change 2013 % change 2014
Particulars 2013 2014 2015
vs 2014 vs 2015
As can be seen, there is sharp increase in NPAs during the financial year 2013-14 and there is decline in rate of
advances in next year i.e. 2014-15. Had there been no NPA, funds to the tune of 1.75 lac crores would have been
circulated to new borrowers and due to low risk of loan getting bad, rate of interest would have been lower by at
least the risk rate on NPA.
Above data clearly show why reducing NPAs is a most important task for any bank. NPAs happen due to various
reasons which include economic and political situation, siphoning of funds, etc. While economic and political
Role of ARCs
in
NPA Management
R ising level of NPA has
caused an alarming situation in
bank and sold to an ARC. It is unique
in the sense that it does not require
borrower’s involvement and removes
today’s Indian banking industry. A
recent estimate shows that the total the NPA from bank’s balance sheet in
outstanding bad loans of the entire YTR one stroke
industry is now as high as around Rs
3 lakh crore and to that another Rs 4 Global Scenario
lakh crore could be added being the value In global terminology the companies
of restructured assets which RBI is no engaged in purchase and selling of
longer willing to consider as standard CMA Ela Sen bank loans are generally referred as
asset. According to credit rating agency Senior Manager Asset Management Companies (AMC).
Fitch The proportion of impaired assets Allahabad Bank, Kolkata These can take either of two distinct
may rise to 13 per cent of total advances routs for resolution of loan assets,
by March 2016. reconstruction or securitization.
RBI for long is exploring and Reconstruction route is used for
experimenting with various avenues to combat the revival of viable units. The methods applied to achieve
issue. Debt Recovery Tribunal was established in 1993 this goal are rescheduling the debts, lending additional
for speedy disposal of high value lawsuits. SARFAESI Act fund, find a financier, bring change in management and/
was passed in 2002 enabling the banks to sell assets of the or take control of management. For unviable units AMC
borrowers without intervention of court. Simultaneously undertake securitization route i.e., winding up of the
Corporate Debt Restructuring mechanism was introduced defaulting company and sale of its physical assets. RBI
by 2001/2003 for revival of the corporate in their guidelines for sale of assets by the banks are applicable
genuine need as well as for safety of bank funds. Banks to both RC and SC. In India, therefore, an ARC is entitled
were permitted to make out of court settlement with to perform both type of function.
the borrower through compromise. Sale of loans to In recent times AMCs worldwide have become quite a
an Asset Reconstruction Company (ARC) is the latest popular tool in NPA Management. Cross country
venture of RBI in this regard. In this process bad loans experience shows that during past few decades many
with all associated risks and benefits are hived off from a countries have encountered with major banking disaster
of which is paid by the ARC itself as upfront fee (increased Although RBI stipulates that after sale of assts the
from initial 5%). The balance is raised by issuing Security banks should have no further liability for that particular
Receipts (SR) to Qualified Institutional Buyer (QIB) who loan of a company, it has not clarified the treatment for
wants to invest in the trust. Generally the lender Bank opts any contingent liability like bank guarantee or letter of
to be the QIB and becomes holder of the SR. SRs are backed credit issued by the banks on behalf of the company
by the value of the charged assets and are redeemable which often turns out to be a funded liability in a future
after six years that can be extended up to eight years. date but cannot be sold to an ARC as per extant guidelines.
The difference between the sale price (cash component Last but not the least is the uncertainty over actual
plus value of SR) and net book value of loan assets (book value of recovery made and ARC’s commitment
value less provision) is carried to the profit and loss towards payment except the cash component. Although
account of the bank. In case of loss it has to write off the redemption of SR-s is supposed to be unconditional by
entire amount while in case of profit the excess amount the ARCs but in reality its payments are restricted to the
has to be transferred to the provision reserve for being value realized from that particular loan assets only and
adjusted in future against loss in other sale transaction not beyond that. Due to the equity nature of SRs, in case
SRs are shown in balance sheet of the banks under of failure of ARCs to resolve the loan within the agreed
the category of non SLR investment as an exposure to time, the bank as the holders of SRs has to bear the loss.
the ARC. The valuation is done on the basis of NAV (net In such cases a sale of assets would be tantamount to
asset value). for arriving at NAV SRs are to be mandatorily nothing but extending the period of write off.
rated by an approved rating agency every year.
The business being new, initially RBI took a cautious Conclusion
approach. As the ARCs has now established their role Recovery of NPAs is a special technique requiring
many relaxation has been gradually made to provide a expertise knowledge and consumes much time and
level playing field for them. Accordingly: effort. ARC with their sound financial base and skilled
ARCs are now allowed to join CDR or JLF as financier resource pool could provide a good solution. Sale of NPL
with the equal status of a bank to ARC would help the banks to clean their balance sheet,
Internal sale between ARCs are now permitted for improve their market value, lower cost of fund and to
aggregation of assets to take control of management focus on their core business. However survival of the
ARCs can now purchase NPAs from their sponsor business depends on its ability to resolve the loans in
banks. a meaningful way and recycle the fund entrapped in
Buy back of assets by the original borrower is allowed it. It is necessary that ARC not merely play the role of
Redemption period for SRs can now be extended beyond an agent to bail out the banks by deferring losses but
eight years becomes truly involved in the business on risk and return
Banks are now permitted to spread their loss in basis. Simultaneously it is essential to built up a proper
sale in more than one year as an incentive for sale. legal infrastructure in the country paving the way for
bankruptcy, foreclosure law. Also excessive political
Related Issue interference often creates obstacles in smooth recovery..
In spite of encouragement by RBI to promote the ARCs has the potential to push forth necessary changes
growth of the business of ARCs the sale of NPA by the and it is expected that they will use it. MA
bank is yet to be picking up. Many related issues are yet
to be resolved. References
The difference between bid price offered by the ARCs 1. RBI Circulars, Guidelines and notification o Banks
and reserve price fixed by the banks is causing a hindrance 2. Strategies and policies adopted by different Banks
to finalize the deal when each party accusing the other 3. Websites of various ARC/AMC
for unrealistic offer. Many auction has thus been failed. 4. Various newspaper items
Still today most bankers consider sale of NPAs as the 5. Blogs of Vinod Kothari/Ajay Shah
last recourse, primary responsibility of recovery being 6. Article by Daniela Kingebiel:
its own and thus delay the initiation of sale. This often 7. Article by Dr Manas Chakraborty
results in deterioration of value of security.
Bank’s reluctance to sale of loans also comes from their [email protected]
emotional attachment with the borrowers
QUALITY OF
This aspect should be cross checked by the bank in an levels of individual. As borrowings are not reflected in IT
intelligent way in addition to the various sources available Returns and personal finance from private lenders are
in this regard. not reflected in CIBIL report, the bankers should verify
b) Projections or Estimations: the flow pattern of credits and debits in savings bank
Projections of sales and revenues in case of business account or current account statements to cross check
organizations and projected income in case of individuals the multiple lending repayments etc of the applicant.
are to be thoroughly checked by credit officials. Over
projections or estimates lead to wrong credit appraisal. Bank Guidelines on Credit Products / Exposure Norms:
Thereby account turn into bad. Based on credit policy guidelines finalized by bank
For example, industry growth rate of a particular boards, these are advised to the operating staff or to
product is 5% average on year-on-year basis. But branches i.e., guidelines of various credit products,
prospective borrowers who apply for a loan of same delegation of financial powers of operating staff and also
product will mention 40% to 50% projections. These its exposure norms in various products. Credit department
areas are to be scrutinized by the Bank with authentic officials of the branches should be well versed with the
data available in the market. Otherwise excess finance above guidelines in full without any knowledge Gaps.
leads to misappropriation of funds and at a later date it Banks should communicate the same on an ongoing
is difficult for the bank to recovery loan. activity (whenever any changes are happening in product
c) Availability of Collaterals and Margins: features, delegation of financial powers and exposure
Collaterals for the proposed finance by the bank are norms etc). Without good knowledge and updates on
very important in fixing responsibility to repay the loan these vital areas to the operating staff, it will lead to high
by the borrower and to create an interest to involve in credit risk.
the proposed line of activity. Collaterals are useful to the
bank to recover the dues in case of default or failure of the How to overcome this problem:
business or loan. Accurate valuation of the collaterals is Communication on credit management guidelines
another area to reduce the credit risk of lending process. should be on a continuous process in the bank. As
Valuation of collaterals should be on present value and changes in credit management is a dynamic and to
under the circumstance of forced sale and not the future avoid communication gaps to operating staff, changes
appreciation value etc. Forced sale value is different from are to be informed to the Branches or operating staff
present value. In forced sale, the banker may not get even on regularly by the bank by using technology tolls
the present value of the property due to lack bidders and like email, e-circulars, dedicated web-sites, SMS (brief
demand etc. information on credit instructions changes) etc. the
A margin of the proposed loan is another important following strategies will help in this regard.
area in mitigating the credit risk. Higher borrower’s v Random scrutiny implementation of latest
stake or margin in the project, lowers credit risk and vice instructions in credit proposals by controllers of the bank.
versa. 100% bank financed in certain projects is always vAdvise operating staff on credit management latest
dangerous due to borrower’s contribution is zero in the guidelines and get acknowledgement.
activity. Margins are useful in case of fluctuations in vIssue of codified or master circular instructions on
collateral security and also in case forced sale of primary credit management by the bank as and when instructions
security. are frequent changes or modifications.
d) Credit Rating: vTighten the Internal Control System or Internal Audit
The rating of Business firms depends upon the strength or Concurrent Audit in credit function.
of balance sheet or financial statements, future growth vUsage of Technology, instant communication on
of business, surplus generate from business operations, credit management areas or instructions.
timely repayment of loans enjoyed by them earlier and Knowledge and communication gaps in credit
also the experience and charter of the promoters or management should be minimize, otherwise it leads to
borrowers. Higher Credit Rating is a ‘Extra Collateral higher credit risk.
Security’ to the Bank. In case of individuals, the rating is
depending on the annual income and net income, existing Demand and Supply Gap:
savings, financial obligations etc., In case of individuals Study demand and supply is one of the important sub-
banks are normally obtain Form 16 to arrive the income functions in credit management process. Whether in
sanctioning authority is as good as Quality Control vBoth physical visit and communication should be
Department of Bank Advance Products. established with the unit.
vIn case of negative symptoms, legal action is to be
Disbursement: initiated.
End use of funds is one of the important aspects in vUse of various Statutory Acts in recovery processes
the credit management process. Purpose of the loan in time.
and utilization of loan should be matched. Funds
diversification is always dangerous and advance account Credit Risk Mitigation Measures:
will turn into NPA. Here, banker should ensure the Credit Risk means default risk. Banks are trustees
objective of loan and it should not be mis-utilized by the for the public funds. Banks are sanctioning Loans and
borrower. Credit officials should pay more attention in advances with the help of depositor’s funds. High credit
disbursement stage. When funds or installments amount risk in the bank means decrease safety to depositors’
release by the bank, each and every stage ensure end funds. Once the depositors’ lost their confidence on the
use of credit. bank, then it leads to Asset Liabilities Mismatch due
to heavy withdrawal of funds by them. Hence, banks
How to ensure? : should give lot of efforts / energy in minimizing credit
vCredit officials should strictly implement the terms risk. Following Ten Commandments are useful to mitigate
and conditions of sanction a loan and disbursement the credit risk:
schedule without any deviation. i. Selection of right personnel in the credit function.
v If the disbursements are in stages, each stage of ii. Train them on continuous basis to improve credit
disbursement, the earlier amount disbursement amount appraisal skills.
is fully utilized by the borrower as per the purpose of loan. iii. Quality of lending bench mark to be fixed i.e.,
vFrequent visits are to be made by the Credit Officials (99%).
and verify the Primary Security (i.e., Asset created with iv. Incentives and accountability to officials of credit
Banks Funds) of the bank loan. function.
v If any deviations are to be noticed, further v. Post-sanction process should be strengthened.
disbursement should be stopped and inform to the vi. Strengthen internal controls & concurrent audit
controllers for further action. in credit function.
vVerify the documents like bills / invoices submitted by vii. Instant legal action in slippage accounts.
the borrower after purchase the assets with bank finance. viii. Optimum utilization of technology and
Rates, quantity and type of product are to be verified from communication credit function.
independent source and it should be matched with the ix. Study on regular basis on credit gaps, credit
project report submitted by the borrower. requirements, region-wise to develop and to
withdraw of credit products of the bank.
Follow-up x. “Quality Control” in credit is to be established in
Due to increase in volume of advance accounts, banks each and every process or step of Credit Management.
are not focusing on post sanction formalities of loans and
advances sanctioned by them. In post sanction, end use of Conclusion:
funds, follow-up stock statements, and activity is continue Prevention is better than cure. Instead of putting more
or not results timely recovery of loan and possibility for efforts on side effects of Credit Risk like providing more
the bank to rectify the slippage of loan accounts. provisions, decrease in net profit and net worth, attracting
more Tier-I and Tier-II Capital to maintain the required
Formalities to be fulfilled in Follow-up of Advances: CRAR etc., banks should give more focus on “Quality of
vContinuous contacts with the borrower. Lending”. This is only one way or remedy or best solution
v Frequent visits to the units and ensure proper to overcome all problems relates to the Credit Risk in the
utilization of funds. Banks. ‘Quality Control’ of each and every step of credit
vTimely recovery of EMI or Installments of the Loan. delivery process is the need of hour to mitigate the credit
vEnsure to submit stock statements etc. risk in the banks. MA
vIdentify major deviations or irregularities happen in
the Unit and timely action. [email protected]
I ndia,
large populace
the developing
Dr Manidipa DasGupta country, since
the very first Assistant Professor day of its post-
independence University of Burdwan era is facing an
awful situation due to constant
increase in unemployment and underemployment and also for
the resultant issues of these like poverty, socio-economic disparity
etc. Therefore, to curb these socio-economic problems, India has
to generate self-employment opportunity for its rural and urban
countrymen, specially for the first one, arresting under the socio-
economic distress more than the latter case. The Self-Help group
(SHG)1 in this context, is accepted to be the most emerging force in
introducing self-employment opportunity for the rural poor mainly
and thus empowering them by self-esteem, self-respect with economic
freedom. But the nominal asset base of the individual members
of SHG creates hindrances in their way to generate and operate
self-employment related activities with self-finance as well as bank
finance. This circumstantially confines them under the clutches of
the high-interest traders like Mahajan etc. for which poor becomes
Microfinance (mF), the masiha of inclusive growth in India, with an attempt to include the socio-
economically excluded poor people in the main stream of finance, has taken a revolutionary
step in 1992 with Self-Help Group – Bank Linkage Programme (SHG-BLP) of National Bank for
Agriculture and Rural Development (NABARD). Under this programme, two specific models,
Self-Help Group – Bank Linkage Model (SHG-BLM) and Microfinance Institutions – BLM (mFIs-
BLM) are introduced since 2006 with active involvement of different institutions among which
the Banks (termed as Agency Banks) play the most vital role in facilitating the unbanked poor
people financially and non-financially. This includes multidimensional social benefit and ensures
the promotion of socially responsible investment (SRI) in India.
poorer, rich becomes richer and socio-economic stability performance related attitude of Agency Banks under
becomes underprivileged again. SHG-BLP in flavor of the SRI.
From this perspective, in 1970, Government of In this present context, this study aims at (i) analysing
India introduced a specially designed financial device – critically the social performance of Agency Banks in India
Microfinance (mF) with social aims. mF stepped towards a under SHG-BLP with due respect with the SRI principle
historic movement in 1992 with the evolution of Self-Help and (ii) recommending some suggestions to the concerned
Group – Bank Linkage Programme (SHG-BLP) of National parties for further improvement in this issue following
Bank for Agriculture and Rural Development (NABARD). analytical research methodology.
Under this programme, two basic models like Self-Help
Group – Bank Linkage Model (SHG-BLM) and Microfinance SHG-BLP in India – A Conceptual Framework
Institutions – BLM (mFIs-BLM) were introduced with SHG-BLP in its social promotional stepping towards
active involvement of different beneficiaries amongst socio-economic progression of unbanked marginalised
which Banks (termed as Agency Banks) are supposed poor people, avails of the involvement of different
to be the most important practitioner of social goal of participants from financial institutions like Agency Banks
mF. Agency Banks with social impact create a rigorous [Commercial Banks (CBs), Cooperative Banks (CopBs),
linkage with the unbanked poor populace (without/with Regional Rural Banks (RRBs) and Small Industries
negligible collateral security base) with their ends and Development Bank of India (SIDBI)], mFIs and other non-
thus facilitate the poor in their livelihood2 promotion financial institutions like Non-Government Organisation
and self-employment generation. This social benefitting (NGO) etc.Till 2005-2006, SHG-BLP has been designed
attitude of Agency Banks, therefore, creates high social and operated under three delivery models – Model I (direct
performance3 with an image of Socially Responsible association of Agency Banks with SHG in formation and
Investment4 from their end. savings-credit linkage), Model II (formation of SHG by
But the other side of the fact sheet reflects a very NGOs) and Model III (formation and assistance in finance
depressing phenomenon when it is found that the related to SHG by mFIs with the financial support of Agency
financial institutions often are detected to be derailed from Banks). Since 2006-2007, SHG-BLP focuses only on two
the social goal of mF. The unmanageable pressure from models – Model I and Model III renamed as Self-Help
the end of the members of SHG for avilaingof financial Group – Bank Linkage Model (SHG-BLM) (formerly Model
assistance along with the self-centred solely commercial – I) and Microfinance Institution – Bank Linkage Model
attitudes of the financial institutions with profit motive, (mFI-BLM) respectively, limiting Model – II (Figure – 1)
are supposed to be responsible for the divergence. (DasGupta, 2015).
In this context, a question may arise if the Agency Banks SHG-BLM here contains the direct involvement of
under SHG-BLP can carry on their social performancein the first three Agency Banks (CBs, CopBs, RRBs) with
touch with Socially Responsible Investment (SRI) or not SHG in both financial (savings-credit relation) and non-
where the social performance is considered as the primary financial (formation) matters, while in second model,
aim of mF movement in our country. This issue attracted mFI-BLM, mFIs with a credit linkage with Agency Banks,
several researchers [Ghosh (2010), Guha (2010), Jothi, take the responsibility of both financial and non-financial
(2010), Gustavsson, (2012), DasGupta (2015)] to assistance to SHG. mFIs now are restructured under
deal with. But no significant study has taken the social
Therefore, the omnipotent direct/indirect linkage of Figure- 2: Social Performance of Agency Banks
Agency Banks with the poor deprived members of SHG under SHG-BPL linking with SRI
in financial as well as non-financial matters as specified
in two basic models of SHG-BLP, prove their potentiality
in establishing the SRI principle in India with which a
positive social movement in multifaceted dimensions can
be available under the light of sustainability5 .
Social Performance of Agency Banks under SHG-BLP
and SRI in India – A Critical Analysis
Agency Banks under SHG-BLP, with their promotional
stepping towards socio-economic sustainability, engage in
social performance in modes of financial inclusion, women
empowerment, poverty alleviation and development Now, the attempts of Agency Banks in materialising the
and promotion of new Micro Enterprises (MEs) with the social performance in the light of SRI are discussed below.
intension to generate SRI in India. l Social Performance of Agency Banks under SHG-BLP
SRI accepts monetary return with social benefit and introducing financial inclusion
environmental sustainability in investment where Under SHG-BLM, the Agency Banks directly invite the
investors may be willing to accept below market rates unbanked poor members of SHG without/with negligible
of return in order to contribute to certain forms of collateral security to be financially included through savings-
economic activity (Gustavsson, 2012). So the social credit linkage. As per NABARD Report (2013-2014), the
benefit (financial and non-financial) as offered by Agency Agency Banks include more than 7.4 million SHG and 97
Banks to marginalized poor at their affordable condition, million rural poor under their purview. In savings-credit
can be related to SRI. linkage with per unit SHG, the Agency Banks are maintaining
Figure – 2 exhibits the way of social performance of more/less a positive growth rate since 2008-2009 with a very
Agency Banks in India with a flavour of SRI principle. few exceptions (Diagram – 1 & 2).The Agency Banks in this
Now, though the SRI related issues are considered mainly context have to face a critical financial state with lower level
for the large scale projects having huge investment scale of per unit savings amount with SHG in comparison with the
with high level of risk and longer maturity period, the per unit credit amount to SHG. The gap was the maximum
emerging socio-economic impact of mF, practiced by in 2010-2011(mainly for Andhra Pradesh) after that the
the Agency Banks should also be recognized under its gap maintained a slow positive growing pace (Diagram – 3).In
purview. mFI-BLM, the Agency Banks grant financial assistance to
mFIs ( `10282.49 crore, NABARD, 2013- 2014) to support SHG financially and non-financially.
0.4
0.3
0.2
0.1
Diagram – 3: Year-wise amount of per unit savings with and loan to SHG by Agency Banks
In this issue, in 2013-2014, the Agency Banks offered scheme of mF is found to be in vain.
financial assistance to SHPI for ` 47.11 lakh (NARABR All these unprofessional loan financing principles of
Report, 2013-2014). Agency Banks ultimately invite huge burden of loan
In promoting social performance through savings-credit outstanding with Non-Performing Asset (NPA) both
linkage with SHG and credit linkage with mFIs, the Agency against SHG and mFIs (under mFI-BLM). In 2013-2014,
Banks have to consider so many constraints which obstruct the amount of loan outstanding and NPA against SHG
their activism towards social sustainability and thus put were 4292752 and 196636 respectively, while the same
a question mark on their acceptance and application of against mFIs were found as 1651744 and 7565154
SRI principles in practice. Under SHG-BLM, the Agency respectively (NABARD Report, 2013-2014). All these issues
Banks have to bear tremendous pressure to create financial create unnecessary blockage of fund in some unproductive
inclusion (though sometimes is not taken importantly) for fields which ultimately obstruct banks in investing in some
which they have to adopt liberal policy in loan financing other self-employment generating fields having high
without verifying the creditworthiness of the members of socio-economic benefit to our society. This again creates
SHG and also their genuine motive for utilizing the granted hindrances in the social performance of Agency Banks
fund in their financial practices. Moreover, the Agency and thus hampers the SRI related principles.
Banks, having underutilised rural network, consider SHGs In addition thereto, the Agency Banks often are being
as the main means of generating profitable rural banking responsible for unnecessary delay in delivering credit to
for which they force SHG to open saving bank accounts SHG, entering transaction in SHG passbook and providing
only (Dasgupta, 2015). financial reports to SHG in the time of audit.
In their loan financing, Agency Banks sometimes are Under mFI-BLM, the Agency Banks do not follow the
blamed to favour some specific regions (Southern, Western SRI principle while assisting the mFIs financially. The
etc.) where the concerned amount may be unmanageable social enterprise8 , mFIs here are found to be inclined
to some extent, while the other regions irrespective of with ‘mushroom like business’ charging higher interest
holding potentialities in entrepreneurial performance amount against the loan finance to the neediest SHG (22%
and social development may be rejected to be financed in. - 26% p.a.) focusing only on the commercial aspect. In this
Moreover, before granting loan support to SHG members, issue, mFIs make the frequent small amount of SHG loan
the Agency Banks may not want to preserve and verify financing with huge operational cost as responsible ones.
the members’ registrar which attracts falsification in the This alsoviolates the principle of financial inclusion from
number and actual existence of members in SHG having the end of mFIs as huge cost of loan finance may redress
actual requirement of microcredit. The beneficiaries off the socio-economically excluded poor people from being
under NRLM also suffer due to this unsystematic loan linked with the mFIs.
disbursement principle of Agency Banks for which the Some mFIs today enlist their names in stock exchange
poor from BPL may be deprived of and poverty alleviation to arrange financial assistance for market as commercial
Due to some enterprises. All these allotment of financial fund to the underprivileged section
circumstantial violate the social of our society having genuine demand.
pressures, entrepreneurial norm. l They should keep and verify the membership record of
unprofessional The Agency Banks, SHG systematically and visit SHG to meet the beneficiaries
mechanism in financial in this context, are periodically to know the actual utilization of the bank
policy etc., the Agency indirectly related to loan account.
Banks may not be able this unethical attitude l They must avail of the services of accredited credit
to maintain the SRI of mFIs through their rating agencies and should introduce strict debt recovery
principle. The benefiting loan financing to that actions from willful defaulter SHG and mFI.
target groups sometimes end depriving other l Agency Banks have to maintain a strong ethical
also are found to violate social performance. This standard with a financial and non-financial performance
the social norms. All issue also violates the relating to SHG and mFIs. Focus here should be maintained
these issues invite SRI norm which claims on adequate financial services to the very end at affordable
doubts on the proper social performance not interest rate.
maintenance of social only by assisting units l The Agency Banks should also verify the proper
performance of Agency but also by the assisted maintenance of social performance of mFIs before granting
Banks to target groups ones. loan finance focusing on the ethical return in the mode of
of poor people in the Moreover, though the social benefit with commercialisation.
light of SRI in India. Agency Banks try their l The environmental issues while financing in a proposed
level best to generate or running MEs, built up by the members of SHGs should
women empowerment, due to the lack of information of the also be focused on by Agency Banks.
respective assistance to the target groups, the initiative is Hence, it can be stated that the Agency Banks have
found to be an impractical one. In some MEs, developed with to travel a long distance to avail of the standardized
the assistance of Agency Banks, the age and gender-wise performance of SRI in their activities with SHG and mFIs
the standardized labour laws are not followed. Employees with which India can get actual social benefit of mF in
here are to perform in an inconvenient standardised shapes of socio-economic-environmental issues. It can
working environment. Moreover, MEs may not adopt any be concluded herewith that in a developing country like
practice for environmental protection and prevention India, the mF model is basically built on trust and seems
of pollution. All these circumstantially curb the social to be a complex one as it is operated without collaterals
impact of the self-employment activities as introduced and at high operating cost. Therefore, the benefitting
by the members of SHG and Agency Banks without the movement of the Agency Banks under SHG-BLP should
verification of social benefit from MEs, may again divulge be appreciated with a wish that some days it will address
their social performance and thus SRI principles. off all the hindrances in their ways in social performance
Therefore, the Agency Banks under SHG-BLP consider to achieve social value with which ultimately SRI will be
only the financial inclusion as taken as the main important established in India with their end. MA
motive of mF in India, while the other two wings of SRI
related principle - society and environment are neglected References
or somehow not considered with importance. 1.DasGupta, M. (2015), Can Banks under Self-Help Group –
Bank Linkage Programme ensure Socially Responsible Investment
Conclusion and Recommendations in India? – A Critical Analysis, UGC-HRD Centre and Department
With their social performance in the light of SRI, the of Commerce, C.U., Kolkata.
Agency Banks are supposed to be the main contributors 2.Ghosh, M. (2012),Micro-finance and Rural Poverty in India
in motivating social progression towards sustainability in SHG–Bank Linkage Programme, Journal of Rural Development, Vol.
India. Nevertheless, due to some circumstantial demands 31, No. 3, July - September : 2012 NIRD, Hyderabad.
3.Guha, S. (2010). Microfinance for Micro Enterprises: An Impact
Agency Banks have to operate commercially limiting the
Evaluation of Self Help Groups. Development of Economic Analysis
SRI related issues and philanthropic attitude. Now, to and Research, NABARD. Mumbai
materialize the SRI motive and to achieve ethical goals, the 4.Gustavsson, B. (2012).Microfinance as ethical investMents?
Agency Banks may be offered to the following suggestions: International Journal of Business Ethics in Developing Economies,
l Agency Banks should implement the adequate Volume 1, Issue 1.
governance practice and policy for proper utilization and 5.Jothi, V.N. (2010). Socio-Economic Impact: Microfinancing
This programme is intended mainly for the Faculty Members, Professionals and Research Scholars
working in the domains of Management, Commerce, Economics, Social Sciences, Environmental
Sciences and other related fields.
Please mail us for registration and further query at: [email protected] / [email protected]
Last date of receiving application: 15 February 2016
T he provisions regarding
valuation of goods where whole or
part of the excisable goods are not sold
Tax-Vapi2015 (12) TMI 731 -
CESTAT Ahmedabad, it has been
held that Rule 4 are in any case to
but captively consumed are given be preferred over the provisions of
in Rule 8 of the Central Excise Rule 8 not only for the reason that
Valuation (Determination of Price they occur first in the consequential
of Excisable Goods) Rules,2000 . of the valuation Rules but also for the
Prior to Notification No, 14/2013- reason that in a case where both the
Central Excise (N.T.) dated 22nd CMA Rakesh Singh Rules are applicable, the application
November, 2013, valuation under Former President of Rule 4 will be allowed to determine
rule 8 mainly referred to goods where value which will be more consistent
Institute of Cost Accountants of India
no part sale was effected or such goods and in accordance with the parent
which were wholly consumed within statutory provisions of Section 4 of
the unit. The Rule now provides that the Central Excise Act 1944.
where whole or part of the excisable goods are not sold Facts:
by the assessee but are used for consumption by him 1. The relevant facts of the case, in brief, are that the
or on his behalf in the production or manufacture of appellants were engaged in the manufacture of Ortho
other articles, the value of such goods that are consumed Nitrate Anisole (ONA) classifiable under Chapter 29 of
shall be one hundred and ten per cent of the cost of the Schedule to the Central Excise Tariff Act 1985. A
production or manufacture of such goods. show cause notice dtd 14.1.2006 was issued proposing
In the case of M/s Aarti Industries Ltd Versus demand of duty alongwith interest and to impose penalty
Commissioners of Central Excise, Customs and Service on the ground of undervaluation of the goods. It has been
view, the appellant rightly paid duty on transaction value Ltd vs. CCE, Chandigarh - 2003.153.ELT.579 (Tri.) and
for the period 2003-04 to 2005-06 and the demand of VinirEngPvt Ltd Vs CCE Bangalore - 2004.168.ELT.34
duty alongwith interest and penalty cannot be sustained. (Trib). So, we find force in the submission of the Learned
6. The demand of duty for the period 2001-02 and Counsel on behalf of the appellant that the quantification
2002-03, the learned Counsel on behalf of the appellant of demand of duty for the first two years is required in
fairly submits that they are liable to pay duty under the light of the decision of the Tribunal. As the demand
Rule 8 of the Valuation Rule read with CAS-4 system. of duty alongwith interest for the last three years cannot
It is contended that CAS-4 system was introduced be sustained and the first two years also required to be
in 30.2.2003. So, the demand of duty is liable to quantified, the imposition of penalty is not warranted.
re-determined under the provisions of Rule 8 and CAS-4 8. In view of the above discussion, the demand of duty
for the first two years. alongwith interest for the period 2003-04 to 2005-06
7. The Learned Counsel on behalf of the appellant is set aside. The demand of duty for the period 2001-02
submits that the duty has already been determined to 2002-03, the adjudicating Authority is directed to
without adjustment of the excess payment with the examine in the light of the decision in the case of M/s
short payment, which is contrary to the decision of the Bajaj Tempo Ltd (supra) after giving adjustment of excess/
Tribunal in the vase of M/s Bajaj Tempo Ltd vs CCE, Pune short duty in accordance with law. The penalty is set
- 2004.172.ELT.473 (Tri.Mum) and Essar Steel India aside. The impugned order is modified accordingly. MA
Ltd Vs CCE&ST - 2014.307.ELT.569 (Tri.Del). We find
that the Tribunal in the case of Bajaj Tempo Ltd (Supra) Reference:
allowed adjustment of the demand of the differential
duty against excess payment and short payment. This is TMI
also supported by earlier decision of the Tribunal in the
case of M/s Smithklin Beecham Consumer Healthcare [email protected]
Benefits
L Outright grant to the maximum extent of Rs. 1,00,000.00 in the event of critical illness.
L Outright grant to the maximum extent of Rs. 2,00,000.00 in the event of death.
L Financial assistance of prescribed amount repayable in prescribed manner in case of financial distress due to
prolonged illness or temporary loss of employment, illness of spouse/dependent children of member of the Fund.
L Members of the Fund are covered by the group personal accident policy from New India Assurance Co. Ltd as
per the MOU between the Institute and New India Assurance Co. Ltd.
Procedure
L By one time payment of Rs. 2500.00 to become life member.
Eligibility
L Members whose names continue to exist in the Registrar of Members of the Institute.
At the helm
Our heartiest congratulations to CMA Lakshmi Prasad K, a fellow member of our Institute, for being
elevated as JAG officer at Registrar of Companies, North Eastern States, Shillong and Official Liquidator (with
additional charge), Gauhati High Court with effect from November 9, 2015. He was previously associated
with Indian Corporate Law Service – ICLS, Ministry of Corporate Affairs, New Delhi. He was also associated
as Assistant Registrar of Companies, in Kolkata and Hyderabad and had been serving as Deputy Registrar of
Companies, AP and Telangana from July 2015 till November 2015.
We wish CMA Lakshmi Prasad K the very best in all his future endeavours.
Taxation Department
l CBEC amends Notification No. 69/2011-Customs, In terms of Section 110 of Customs Act, 1962 if the
dated 29th July, 2011 so as to provide a concessional proper officer has reason to believe that any goods are
rate of basic customs duty in respect of tariff item liable to confiscation under this Act, he may seize such
84082020 [engines of a kind used for the propulsion goods that may include valuables such as gold. In the
of motor vehicles – of cylinder capacity exceeding 250 recent past, the smuggling of high value goods, especially
cc] and 87084000 [gear box and parts thereof, of motor gold is on the rise, as evidenced by the increasing number
vehicles], w.e.f. 1st of January, 2016 at 5.94% and of seizures made by Directorate General of Revenue
8.13%, respectively, when imported under the India- Intelligence and the field formations. In order to prevent
Japan Comprehensive Economic Partnership Agreement such loss/theft of valuables in future, the following
(IJCEPA) vide Notification No. 57/2015-Cus,dt. 14-12- guidelines are issued re-inforcing/ re-iterating and in
2015. continuation of the existing instructions/circulars in
this regard for strict compliance by all field formations.
l CBEC levied definitive anti-dumping duty on Valuables
Abendazole, originating in, or exported from the For the purpose of these guidelines, the valuables
People’s Republic of China, for a period of five years vide include:
Notification No. 62/2015-Cus (ADD), dt. 14-12-2015. i. diamonds, precious and semi-precious stones, pearls,
Read more at: http://www.cbec.gov.in/htdocs-cbec/customs/cs-act/ gold/silver;
notifications/notfns-2015/cs-add2015/csadd62-2015 ii. articles including jewellery made of or containing
these valuables mentioned at (i) above;
l CBEC fur ther amended Notification No iii. high value watches;
12/2012-Central Excise dated 17.03.2012 so as iv. currency including foreign currency; and
to increase the Basic Excise Duty rates on Petrol and v. such other articles of small bulk and high value as
Diesel(both unbranded and branded) vide Notification Commissioner of Customs may by special or general
No. 46/2015-CE, dt. 16-12-2015. order specify as valuables.
Read more at: http://www.cbec.gov.in/htdocs-cbec/excise/cx-act/ Custodian
notifications/notfns-2015/cx-tarr2015/ce46-2015 i Only experienced officers whose integrity is absolutely
beyond doubt, should be posted as in charge of the strong
l Revision of monetary limits for filling of appeals by the room/ valuable godown. Similar check from vigilance &
Department before Income Tax Appellate Tribunal and integrity angle should also be ensured for the superior
High Courts and SLP before Supreme Court - measures officer who is given the overall supervision of the strong
for reducing litigation vide Circular No. 21 / 2015 dated: room and custody of the second key.
10 December, 2015. i Whenever the Custodian or his superior officer is
Read more at: http://www.incometaxindia.gov.in/communications/ transferred, a regular substitute should be provided,
circular/circular21_2015.pdf who shall take proper charge of the strong room/valuable
godown.
l Relaxation of additional fees and extension Source: Instruction [F.No.394/97/2015-Cus (AS)] dated: 01-12-
of last date of in filing of forms MGT-7 (Annual 2015, GOI, Ministry of Finance, Department of Revenue, CBEC
Return) and AOC-4 (Financial Statement) under Read the full notification at: http://www.cbec.gov.in/resources//
the Companies Act, 2013 htdocs-cbec/customs/cs-instructions/cs-instructions-2015/guidlns-
In continuation of this Ministry’s General Circular handlng-strg-goods-cs-asu.pdf
1412015 dated 28.10.2015, keeping in view requests
received from various stakeholders, it has been decided to l Excise duty exemption to units in North Eastern
relax the additional fe€s payable on e-forms AOC4, AOC Region
(CFS) AOC-4 XBRL and e- Form MGT-7 upto 30.12,2015, CBEC clarified that new units or units undertaking
wherever additional fee is applicable vide General Circular substantial expansion after 01.12.2014 and upto
No. 15/ 2015 dated: 30-11-2015. the cut-off date of 31.03.2017 shall continue to the
eligible for excise duty exemption under notification
l Guidelines for handling and storage of No.20/2007-Central Excise dated 25.04.2007 subject
valuable goods that are seized/ confiscated by the to the conditions specified there under vide Circular
Market Participants, i.e., residents and FPIs, are (i) 21.25 per cent from April 2, 2016;
allowed to take positions in the cross-currency futures (ii) 21.00 per cent from July 9, 2016;
and exchange traded cross-currency option contracts (iii) 20.75 per cent from October 1, 2016; and
without having to establish underlying exposure subject (iv) 20.50 per cent from January 7, 2017
to the position limits as prescribed by the exchanges. The Read more at: https://www.rbi.org.in/Scripts/NotificationUser.
existing position limits of USD 15 million for USD-INR aspx?Id=10167&Mode=0
contracts and USD 5 million for non USD-INR contracts,
all put together, per exchange, for residents and FPIs, l Regional Rural Banks - Priority Sector Lending
without having to establish underlying exposure, shall – Targets and Classification
remain unchanged. The hedging procedure for residents The comprehensive revised guidelines on Priority Sector
as laid down in A.P. (DIR Series) Circular No. 147 dated Lending – Targets and Classification for Regional Rural
June 20, 2014 and for FPIs as laid down in A.P. (DIR Banks are enclosed as Annex. The revised guidelines
Series) Circular No. 148 dated June 20, 2014 shall also supersede all earlier guidelines mentioned in the Master
remain unchanged. Circular RPCD.CO.RRB.BC 5/03.05.33/2014-15 dated
AD Category-I banks may undertake trading in all July 1, 2014 on Regional Rural Banks - Lending to
permitted exchange traded currency derivatives Priority Sector.
within their Net Open Position Limit (NOPL) subject
to limits stipulated by the exchanges (for the purpose Some of the salient features of the guidelines are as
of risk management and preserving market integrity) under:-
provided that any synthetic USD-INR position created Targets:
using a combination of exchange traded FCY-INR and 75 per cent of total outstanding to the sectors eligible
cross-currency contracts shall have to be within the for classification as priority sector lending and sub sector
position limit prescribed by the exchange for the USD- targets as indicated in subsequent paragraphs.
INR contract. Categories of the Priority Sector:
Source: Notification No. RBI/2015-16/267 [A.P. (DIR Series) Medium Enterprises, Social Infrastructure and Renewable
Circular No. 35] dated: December 10, 2015 Energy will form part of the Priority Sector, in addition
Read more at: https://www.rbi.org.in/Scripts/NotificationUser. to the existing categories, with a cap of 15 per cent of
aspx?Id=10172&Mode=0 total outstanding.
Agriculture:
l Inclusion of “IDFC Bank Limited” in the Second 18% per cent of total outstanding should be advanced
Schedule to the Reserve Bank of India Act, 1934 to activities mentioned under Agriculture.
“IDFC Bank Limited” has been included in the Second Small and Marginal Farmers:
Schedule to the Reserve Bank of India Act, 1934 vide A target of 8 percent of total outstanding has been
Notification DBR.PSBD. No.5270/16.01.0146/2015-16 prescribed for Small and Marginal Farmers within
dated October 13, 2015, and published in the Gazette of Agriculture.
India (Part III - Section 4) dated November 07- November Micro Enterprises:
13, 2015. A target of 7.5 per cent of total outstanding has been
Read more at: https://www.rbi.org.in/Scripts/NotificationUser. prescribed for Micro Enterprises.
aspx?Id=10172&Mode=0 Weaker Sectors:
A target of 15 per cent of total outstanding has
l Section 24 and Section 56 of the Banking been prescribed for Weaker Sections.
Regulation Act, 1949 - Maintenance of Statutory Monitoring:
Liquidity Ratio (SLR) Priority Sector Lending will be
As announced in the fourth Bi-Monthly Monetary Policy monitored on a quarterly as well
Statement 2015-16 by the Reserve Bank of India on as annual basis.
September 29, 2015, it has been decided to reduce the Read more at: https://www.rbi.
Statutory Liquidity Ratio (SLR) of scheduled commercial org.in/Scripts/NotificationUser.
banks, local area banks, primary (Urban) co-operative aspx?Id=10155&Mode=0
banks (UCBs), state co-operative banks and central
co-operative banks from 21.5 per cent of their Net l Interest Equalisation
Demand and Time Liabilities (NDTL) to: Scheme on Pre and
course including its career prospects. Ms. Neha Rani, Academic Coordinator (CAT) delivered audio visual
presentation followed by career counseling. Pre-placement Training Program was conducted at the chapter
from September 20, 2015 till October 4, 2015 for June 2015 final qualified students.
Renowned Personalities will share their vision to Make Great India Greatest
Guidelines to submit full Paper w Comparative Analysis of Equity & Derivative Markets
w Credit Rating
♦♦ Soft Copy of the full paper should be submitted in
double space, 12 font size, Times New Roman, keeping w SME Financing through Capital Markets
a margin of 1 inch in four sides, MS Word 2003.
w Role of SEBI in Capital Markets
♦♦ Each paper should be preferably within 5000 words
including all. w Risk–Return Relationship in the Stock Market
♦♦ An abstract of not more than 150 words should be w Stock Market Volatility
attached. w Commodity Hedging and Risk Management
♦♦ The cover page should contain the title of the paper, w Arbitrage Trading
author’s name, designation, official address, contact
phone numbers, e-mail address. w Valuation Models
Papers must be received within 1st March, 2016 in the following email id:
[email protected]
* This volume will be published in association with National Institute of Securities Markets
(NISM), an educational initiative of SEBI.
Members who fail to receive The Management Accountant Journal due to incomplete/
incorrect addresses are requested to inform us at [email protected] immediately. Such
addresses of the members whose journals have been returned undelivered are regularly
hosted on the website of the Institute (www.icmai.in) under the ‘journal’ section.
Please inform the membership department immediately any address update to ensure
regular and timely delivery of journals to you. Members can also update their addresses
online in the ‘members’ section. The new address gets automatically updated in the
centralized data base of the Institute, from where the journal mailing list is prepared.
The Institute of Cost Accountants of India is second largest body of CMAs in the World after the Chartered Institute of
Management Accountants (CIMA). Its Head Quartered in Kolkata, with Delhi Office, 4 Regional Councils in 4 Metro Cities,
96 Chapters spread all over India and 9 Overseas Centres, 3 Centre of Excellence in India, 84 CMA Support Centres. It is under
the administrative control of the Ministry of Corporate Affairs, Government of India. There are about 69,000 members in
employment & practice and about 475,000 students pursuing the Course. The ICAI-CMA, a national accounting body, is also a
founder member of International Federation of Accountants (IFAC), Confederation of Asian and Pacific Accountants (CAPA)
and South Asian Federation of Accountants (SAFA).
Vision Statement
“The Institute of Cost Accountants of India would be the preferred source of resources and professionals for the
financial leadership of enterprises globally.”
Mission Statement
“The Cost and Management Accountant professionals would ethically drive enterprises globally by creating val-
ue to stakeholders in the socio-economic context through competencies drawn from the integration of strategy,
management and accounting.”
MESSAGE OF PRESIDENT
Shri Narendra Modi, Hon’ble Prime Minister of India launched Mission“Make in India” with an aim to provide India an economic
global recognition. It is intended that investors should take it as an opportunity and not as market in India. The program is also aimed
to renew an Indian economy from services-driven growth model to the labour-intensive manufacturing-driven growth. A successful
implementation of the program may generate employment for more than 10 million people in India. The initiative is also supposed to
attract top foreign companies to set up their business here in India.
Competitiveness pertains to the ability and performance of a firm, sub-sector or country to sell and supply goods and services in a given
market, in relation to the ability and performance of other firms, sub-sectors or countries in the same market. Where the competitiveness
is derived from cost factors, it is called cost competitiveness. One of the most important factors is pricing; to get right price, the company
must identify the actual costs involved in supplying the service or product — right across the enterprise. Understanding the competitive
market is the key element to this, but it is also critical to have a full understanding of how customer “value” is created and to ensure that
full information on costs is available to the pricing decision-maker. A delicate balance is required to successfully deliver price increases
without reducing competitiveness.
The major sectors which are critical to the success of Make-In India initiative are Healthcare, MSME, GST, Social Sector and
empowerment of Local Bodies amongst many others. This constitutes the agenda for 57th National Cost Convention of Cost Accountants
to be held at Delhi on 30th – 31st January 2016. Renowned and reputed speakers from every walk of economy will be deliberating the role
of CMAs in all these important sectors. The contribution of CMAs in Healthcare, MSMEs, Social Sector and other important sectors
is critically significant as these segments of economy are still low on efficiency and productivity. If we are able to find way to improve
these sectors they will have multiplier effect in resurgence of the country’s economy.
CMAs are a preferred source for sharing knowledge to spread tax-literacy and GST-awareness, as the economy is getting geared to shift
the tax-incidence from Origin-to-destination principle. CMAs pledge to extend professional expertise for seamless roll-out and effective
implementation of GST in India.
It is necessary that the impact of the Social sector is appropriately assessed and evaluated from time to time so that these can be
appropriately modified wherever needed to make them more effective for implementation, otherwise phased out if their utility is
rationally acceptable. The professional evaluation of the whole gamut of aspects relating to the social schemes by CMA would enable
identification of vulnerabilities and deficiencies in the process of roll out and implementation of various social schemes.
The competitiveness of MSMEs comes from both intellectual capital as well as the capacity to absorb new technologies. The current
need for competitiveness is cost and quality. With the competition from other countries with low cost products, it is important for
MSMEs to focus on cost and the role of CMAs as a facilitator to MSMEs by providing them technological support and help in financial
and tax-related matters is very significant.
Coverage of new industries like Education and Healthcare in the ambit of Cost Rules is a great opportunity to understand business
models of these industries and develop the competencies of CMA fraternity to support them in developing management accounting
models to enable them to provide essential services at affordable cost and also to improve the governance system to ensure the quality
of services and effectiveness of resource utilization match with the global standards.
Such mega events can be successful only with the support from leading Corporate Houses of the Country. I request for your kind support
by nominating delegates and sponsoring one or more events to make this Mega Event a Grand Success. I also urge upon all the regional
councils, chapters and members of the Institute to combine their efforts to show the strength of CMA profession to all stakeholders by
mobilising resources and attending the event in large numbers.
I am confident that with the live participation and valuable support of distinguished guests and delegates from profession, industry,
regulators and government this NCC-2016 will be another feather in the cap of the Institute and CMA profession.
(CMA PV Bhattad)
16th December 2015
CHAIRMAN MESSAGE
The Institute has been organizing its “National Cost Convention (NCC)” annually for last 56 years in various
constituencies across the country to focus on contemporary issues and challenges faced by the nation, fellow
citizens, corporates, and professionals. The Convention aims to provide optimal solutions with the help of mutual
discussion by panelist, experts and well experienced professionals. This year, the Institute has planned to organize
the 57th National Cost Convention (NCC-2016) on 30th and 31st January, 2016 at New Delhi on theme Building Cost
Competitiveness-Mission “Make in India”.
NCC-2016 seeks to address the challenges in building cost competitiveness and explore the contributions that CMAs
can make to nurture the Indian economy by playing catalyst role in accomplishment of the mission “Make in
India”.
Competency can be achieved by organizations through one and many ways, but being in the consumer’s marketplace,
attaining cost competence is very crucial. While achieving cost competitiveness, the India Inc. will have to focus on
continuous innovation and process re-engineering to offer super quality products at affordable prices in the global
market. The aim is to explore huge domestic markets and attract foreign investments. On the social front, the
nation may benefit with growth in employment opportunities and better standards of living for masses.
This two day National Cost Convention-2016 has one plenary session- Building Cost Competitiveness- Mission
“Make in India” and six technical sessions- (i) Develop Yourself- Develop III-Tier; (ii) Your Health- Economic
Health; (iii) Cost Competitiveness- Through Cost Audit; (iv) Nation Needs-Goods and Service Tax (GST); (v) You
and Your MSME; and (vi) Reach the Unreach that shall have focused and objective discussions to accomplish the
National Mission: “Make in India”. Varied topics would be discussed by senior bureaucrats, eminent experts, and
dignitaries from industry, academia and professional bodies. The take away for the participants will be clarity in
identifying role for partnering into this national programme. The participants shall be able to simulate new ideas
and inputs for formulating strategies to empower their own businesses and professional practices in line with the
national agenda of “Make in India”.
We look forward to meet you at the convention and seek your active contribution towards making this National
Cost Convention a huge success.
Thanking You,
CMA Manas Kumar Thakur CMA S.K. Bhatt CMA Vijender Sharma
Chairman, Co-Chairman Convenor
Convention Committee Convention Committee Convention Committee
The government is facilitating ‘Ease of Doing Business’ by making India an attractive destination for foreign investment and
international trade. Under the mission “Make in India”, the government has also identified 25 sectors where incentives and
support will be provided to foster growth. The implementation of GST in India would further enhance investor confidence,
promote transparency and good governance in the corporate environment. Also, various schemes have been launched by the
government to promote and boost entrepreneurship development and skill enhancement. Initiatives through “Make in India”
will provide the impetus to the Micro, Small and Medium Enterprises (MSMEs) in the country. The MSME sector not only
contributes significantly in the GDP of the country but also generates employment for the skilled and unskilled labour. With the
expansion of the MSME base, not only does the nation target self-reliance and widening of the domestic markets in the country
but also employment generation and prosperity for the masses.
The government has also introduced several schemes for financial and social inclusion for the vulnerable sections of the Indian
society to provide them adequate protection and security.
In this National Programme “Make in India”, it is the responsibility of each and every responsible citizen to partner with
the government and make this national agenda a huge success. As a part of its inherent responsibility, the Institute of Cost
Accountants of India, proudly associates itself with this national programme and identifies its role for making this programme
a success.
The Institute understands and advocates that ‘Cost Competitiveness’ shall be the strategy, with which the India Inc. can create
and sustain its position as an ideal destination for attracting foreign investments and carrying out manufacturing excellence.
With this strategy in place, India can emerge as the hub for international trade. Being cost competitive, the organizations need
to continuously reengineer their working methods, products and activities to simultaneously create value at competitive prices
for the consumers.
On the social front, CMAs have a major role in ensuring that the intended benefits of the social schemes launched by the
government are actually percolating down to the grassroot level. They may also valuably contribute in the projects associated
with the development and sustenance of smart cities in the country, a mission to be achieved under the vision “Make in India”.
For this, they may engage in project monitoring, project evaluation and performance and project appraisal activities including
social audit of these projects. Apart from above, CMAs may also play significant role in prevention of misappropriation of funds
and perpetuation of frauds that may hinder the pace and dignity of the national development agenda.
The Institute appreciates the visionary agenda of “Make in India”, being mentored by our Hon’ble Prime Minister. The Institute
has been organizing various programmes and seminars to devise ways for cost accountants to add value and partner in this mission.
Although, there is nothing confining to the role of the Institute in the nation building exercise, but in order to be more focused
and objective, the two day National Cost Convention, will include one plenary session and six technical sessions that shall
discuss and deliberate upon the key facets of the National Programme “Make in India” and the role of CMAs in making this
programme a success.
PROGRAMME SCHEDULE
Venue for the Two-Day NCC-2016: Venue for the Cultural Programme on 30th January 2016:
Vigyan Bhawan, Siri Fort Auditorium,
Maulana Azad Road, New Delhi- 110001 Asian Games Village Complex, New Delhi – 110049
Contact Details
HEAD QUARTERS: DELHI OFFICE:
THE INSTITUTE OF COST ACCOUNTANTS OF INDIA THE INSTITUTE OF COST ACCOUNTANTS OF INDIA
CMA Bhawan, 12 Sudder Street, Kolkata-700016. CMA Bhawan, 3, Institutional Area,
Ph: + 91-33-22521031-35, Fax + 91-33-22527993 Lodhi Road, New Delhi 110003.
E-mail: [email protected],Website: www.icmai.in Ph: + 91-11-24666100, Fax + 91-11-43583642
NORTHERN INDIA REGIONAL COUNCIL
THE INSTITUTE OF COST ACCOUNTANTS OF INDIA
Northern India Regional Council, CMA Bhawan,
3, Institutional Area, Lodhi Road, New Delhi 110003
Ph: + 91-11- 24626678
57th National Cost Convention, 2016 6
Behind Every Successful Business Decision, There is always a CMA
SUB THEMES
The focus of “Make in India” is on job creation, innovative revival, skill development, building intellectual and
physical infrastructure and state-of-the-art technology deployment, primarily, in twenty-five sectors of Indian
economy. While attaining this agenda, the country envisions not only to be self-sufficient but also to be a global hub
for high quality manufacturing products. One of the missions of the “Make in India” programme is “enhancing global
competitiveness of the India’s manufacturing sector”. Collaborating into this national initiative, Cost & Management
Accountants have taken a lead role in building “Cost Leadership” in the India Inc. for attracting inflow of investment
and resources from abroad.
The global manufacturing landscape has been evolving at a very fast pace. Existing dynamism and fierce competition
in the global market space compel all players to maintain their products and services at competitive price without
compromising on the quality. CMAs with their acumen in managing costs and providing cost-effective business
models, can be instrumental in ensuring cost competitiveness in Indian manufacturing companies by reducing
wasteful activities & waste production; continuously innovating and improving the processes and systems to reduce
“avoidable costs”, and attain quality standards of production; fostering an environment of vigilance & monitored
controls for avoiding all kinds of frauds and financial misappropriations; and positioning themselves as a low-cost hub
of manufacturing quality products.
The propagation of cost-effective and cost-efficient methods of implementing and managing projects by cost
accountants shall also be instrumental in the agenda of developing smart cities across the country. Development
of smart cities require infrastructural, social and technological support by the government in implementing various
schemes and projects for sustainable development of cities. Cost accountants can assure that these support schemes
and projects are implemented in cost-effective and cost-efficient manner.
This plenary session will include discussions & deliberations upon the National Programme of “Make in India” and
the imperative of providing cost competitive environment to encourage global players to come and make in India. This
is the key to transform India into a global manufacturing hub; to achieve the targeted economic growth; and to pull
India’s poor from poverty. And this is going to happen.
Local government is, in real sense, a government of the local people, by the local people and for the local people.
They serve the local citizenry from “cradle to the grave”. This III-Tier of governance act as rallying point for identifying
SUB THEMES
pressing spatial needs and an advantage to mobilise human and ancillary resources to hammer out situation specific
solutions. To achieve this, they need to be given administrative and financial powers with a degree of autonomy in
decision making, enabling them to play the strategic functions of economic stabilisation and redistribution, with a
view to make development more inclusive.
Therefore, main objective of PRIs is to develop a system of democratic decentralization of powers with an aim of fostering
rapid social and economic development and prompt justice through greater participation in local government by people
and more effective implementation of development programmes. Government, from time to time, has launched various
programs for development of people at the grassroot level, such as National Rural Health Mission (NRHM), National
Rural Employment Guarantee Act (NAREGA), Sarva Shiksha Abhiyan (SSA), Mid-Day Meal (MDM), Accelerated
Rural Water Supply Programme (ARWSP), Total Sanitation Campaign, Janani Suraksha Yojana (JSY) etc.
For the effective functioning of this III-Tier of governance, it is essential that appropriate accountability and fund
utilization mechanism is put in place. CMAs have an imperative role in facilitating the PRIs to meet their set objectives
by assisting in effective utilization of allocated resources; monitoring procurements; design and maintenance of
delivery systems; designing project appraisal, evaluation and monitoring techniques; preparation of various reports
and returns prescribed under the scheme; preventing leakage of funds; capacity building and training for PRIs; and
implementing requisite controls.
For the national & state governments, CMAs can assist in periodical reporting of all cost and financial data, linking
resources with the outcomes; undertaking social accounting and audit together with performance appraisal & impact
analysis; and acting as key resource person for the rural business hubs.
This technical session shall focus on how efficiency of the III-Tier of Governance is instrumental in the overall growth
of the nation and the distinct contribution of CMAs in ensuring all inclusive development.
To achieve this, first we need to strengthen our Economic Health; then to provide education, good health and decent
living to all citizens. Helped by positive policy actions and lower global oil prices, Indian economy is fast reviving.
Last quarter, our GDP growth was at 7.4%, manufacturing activity grew by 9.3%, both fiscal deficit & CAD are in
the comfort zone, and the services have shown resilient performance. To continue on this trend, India is revitalizing
the investment cycle and has accelerated economic and structural reforms. Indian economy has become a bright spot
in the global landscape, becoming one of the fastest growing big emerging market economies in the world, surpassing
China.
The challenge for any country around the world today is to keep good health for its citizens at affordable cost.
SUB THEMES
While many factors contribute to success in the global economy, no country can be competitive without a healthy and
productive population. Total cost of an unhealthy population is growing at an unsustainable pace. An acute challenge
to the maintenance and sustenance of healthcare is the rising costs; especially the high indirect costs. Perhaps, the
reasons could be over dependence on technology. Standardization of clinical procedures, practices and costs may bring
in equilibrium in the entire process of healthcare to achieve the nation’s objective to provide affordable healthcare to
all, including free healthcare to the economically weaker section of society.
Cost Management and business sustainability are essential for the interplay of an efficient healthcare sector. There
is huge opportunity for the private healthcare providers for the sustenance and growth if they can micro manage
their costs within the benchmark levels. Cost management is emerging as a major need in the healthcare sector. Cost
control and cost reduction are the most challenging issues being faced by the healthcare industry today. Healthcare
professionals and CMAs working together can optimize the costs. Health care sector unfolds enormous opportunities
to CMAs who can provide their expert services in enhancing the organization’s competitiveness enabling it to provide
quality healthcare at minimal prices and to the customer’s satisfaction.
As per IFAC, financial reporting satisfies the compliance requirements but falls short of a performance based
reporting for improved Board governance. Costing methodologies applied in organization measures the consumption
of resources and support the accountability of business performance. IFAC suggested six key principles underlying
good practice in evaluating and improving costing in organizations, external reporting and providing assurance to
stakeholders; recognizes traceability and assurance of costs as a good practice.
Cost Audit is an innovation introduced for the first time in the world. India took this innovative step with a view to
regulate vital industries on healthy and sound lines. The concept and scope of cost audit is much wider and emphases
on the evaluation of efficiency of operations and propriety of management actions and decisions, and executive
programs and policies. In this sense, cost audit appears to be synonymous with efficiency audit. Cost Audit aims
to provide requisite data analytics that helps the management to take correct business decisions, reduce costs, and
improve efficiency, productivity, profitability, and sustainability. It also helps in providing cost effective products and
services to the customers; enhances Government revenues and assures higher returns to all other stakeholders.
Companies (Cost Records and Audit) Rules 2014 (Rules 2014) framed under Section 148 of the Companies Act, 2013
prescribe maintenance of cost accounting records and audit thereof in host of industries/sectors covered under Table-A
and Table-B of the Rules. In the present competitive scenario of globalization, this framework provides reliable and
authentic feedback to the government and its various departments/agencies that is used for various purposes such as
anti dumping measures, competition laws, transfer pricing etc. Revenue authorities also use this data for verifying
assessee claim relating to ex-factory prices of excisable goods especially in cases of inter-unit transfers and goods
produced for captive consumption.
SUB THEMES
This technical session will focus on bringing out the essence of Cost Audit as an important tool in attaining ‘Cost
Competitiveness’ in the manufacturing and service sector of the Indian economy.
Technical Session IV: Nation Needs – Goods and Service Tax (GST)
Indian indirect tax system is plagued with multiplicity of taxes - at different rates - at multiple points. Absence of
proper setting off mechanism coupled with huge compliance cost results in cascading effect and high tax cost, which
is clearly unsustainable in the current scenario.
Goods and Service Tax (GST) is a long pending indirect tax reform which India has been waiting for, and is expected
to iron out all wrinkles in the existing tax system. Implementation of GST would result in abolition of multiple taxes
and would bring the much needed uniformity and certainty in tax rates. It will subsume indirect taxes like excise duty,
countervailing duty and service tax; plus certain state levies like value added tax (VAT), octroi, entry tax and luxury
tax. GST would also avoid double taxation and reduce the cost of manufacturing.
GST is one of the major policy initiatives that would certainly instil investor confidence and attract foreign investors in
India. This would alleviate the present situation of multiplicity of taxes and would pave way for achieving the dream
project of our Hon’ble Prime Minister, “Make in India” that would enable India to become a global manufacturing
hub. GST would be one of the most important reforms in contributing to the India growth story. As per experts, it is
expected to add about 2% in the country’s GDP.
GST is aimed to make the taxation regime more transparent and simple. It will also help in increased compliance,
boost tax revenues, reduce tax outflow in the hands of the consumers and make exports competitive. It would
have magnanimous impact on every business in the country; would ensure investor friendly tax policies; and create
congenial business environment in India. GST is a win-win situation with the consumer, industry, government and
economy – all gaining in the long run. The Revolutionary Tax Reform is on board pending the penultimate leg of
receiving the legislative approval for its implementation.
Government of India has released the draft GST Act. A panel headed by Chief Economic Adviser has recommended
standard GST rates of 17-18%; revenue neutral rate in the 15-15.5% ranges; and scrapping of 1% additional levy.
GST implementation will lead to immense scope for CMAs who with expert knowledge on manufacturing, costing and
pricing will assist the industry in determining the correct cost of manufacturing goods or rendering services. CMAs
may also educate the suppliers/vendors about GST and ensure input tax credit is availed correctly; help in arriving at
the cost of the products correctly by considering/availing input tax credit; can ensure tax compliance; e-filing monthly
returns, availing of credit and payment of taxes; and can ensure tax planning and correct interpretation of the Act
and educating the various departments like strategic sourcing, payables, supply chain management, marketing etc.
Further, CMAs may actively engage in sharing knowledge to spread tax literacy and GST awareness in the Country
and extend professional expertise for seamless roll out and effective implementation of GST in India.
This technical session will include a panel discussion of learned dignitaries who will deliberate upon the readiness
of the country to welcome the introduction of the GST regime of indirect taxation. The deliberations will surround
associated benefits and opportunities GST shall bring along and the role of CMAs in ensuring smooth and hassle free
integration of the indirect taxation regime with the GST.
SUB THEMES
As per latest estimates, there are about 50 million MSMEs working in the manufacturing, services and wholesale or
retail trade. They employ more than 110 million people, having total market value of their fixed assets of more than
USD$ 200 billion. Apart from providing wide range of services, MSMEs produce more than 6000 products ranging
from traditional to high tech items.
MSME sector has emerged to be the backbone of Indian economy with sustained growth rate of 10% (over the
past few years). The sector contribute about 38% in the nation’s GDP and its share in the country’s exports
stands at commendable 40% with total production of nearly US$ 300 billion. It is also playing a pivotal role in the
social-economic growth of the country by means of employment generation and technology deployment at the
grassroot levels, even in the rural areas.
Where the “Make in India” programme of the Government of India is poised for attracting domestic and foreign
investments in the sector, making a significant impact in the area of indigenization; the role of CMAs in enabling the
MSME sector shall be of high pertinence.
MSME sector has limited structured training on costing, resource planning, capital management and labor
management. As a result, this sector is struggling in managing the cost and quality of their products to provide them
at competitive price. CMAs can play pivotal role by providing their helpful services to the MSMEs in areas of financial
management, cost management, cost computation for tendering, performance monitoring etc. CMAs can apply their
expertise and experience in helping MSMEs to manage risks, reduce costs, evaluate strategy, create new opportunities,
preferably for women entrepreneurs and preserve & enhance value. In addition, CMAs could provide training on issues
like working capital management, cash flow management, raising both short-term and long-term funds, managing
working capital, designing systems for monitoring cost efficiency and developing early warning systems. This shall
thereby help MSMEs in appropriate pricing of their products and services.
Institute of Cost Accountants of India has signed two MOUs with ASSOCHAM to offer the coveted “Virtual Centre
for Development of MSMEs” and “SME Excellence Award” jointly to promote, develop and enhance competitiveness
of MSMEs in the country as well as to spread the importance and awareness about MSME sector in the Indian
economy.
SUB THEMES
equitable growth opportunities for all sections of the society. The target of achieving ‘inclusive growth’ is more
challenging for a country like India, which has huge diversities.
Real problem of India’s rural development lies in an urgent need to impart literacy, skill development, and
education of the teeming masses. The under privileged masses of Indian population, whose per capita income is
very low, suffer from several social, economic, religious and other barriers. Further, India’s performance in the
matter of education and skill development of the under privileged masses cannot be considered satisfactory. The
Government of India notified six religious communities, viz.; Muslims, Christians, Sikhs, Buddhists, Zoroastrians
(Parsis) and Jains as minority communities. There are many challenges for these masses ranging from education,
health, housing, sanitation, purchasing power parity etc. With these challenges on face, the government is
advancing all possible projects and initiatives to citizens from all diverse backgrounds and with varied economic
status and classes.
Ministry of Minority Affairs, through its Vision committed for empowering the minority communities and
creating an enabling environment for strengthening the multi-racial, multi-ethnic, multi-cultural, multi-lingual
and multi-religious character of our nation. Also, through its Mission statement committed to improve the socio-
economic conditions of the minority communities through affirmative action and inclusive development so that
every citizen has equal opportunity to participate actively in building a vibrant nation; and to facilitate an
equitable share for minority communities in education, employment, economic activities and to ensure their
upliftment.
The Pradhan Mantri Jan Dhan Yojana (PMJDY) is a major initiative to ensure financial inclusion and social
security, especially for the vulnerable class of the society. Furthermore, under the “Make in India” national
programme of the Government, all efforts are being advanced to generate employment and enhance skill
development amongst the youth while developing the domestic Indian market and attracting foreign investments.
Government is also making laws to completely eliminate child labour and prescribing standards for ensuing
dignified working environment for labour. The government has also initiated a process of providing an umbrella
card to the unorganized sector workers. Government has introduced and implemented Skill Development
Programme (SDP) and Additional Skill Development Programme (ASDP) in all states of the country. Our
Institute is humbly the first partner in the two programmes in the state of Kerala. All these initiatives by the
Government of India are a part of its Nation Building Exercise.
Many other projects like Atal Pension Yojana, Pradhan Mantri Jeevan JyotiYojana, Pradhan Mantri Suraksha
Beema Yojana, BalikaSamridhiYojana are aimed at providing social cover to the vulnerable sections of the
society. The Mudra (Micro Unit Development and Refinance Agency) Bank Yojana has been launched to promote
entrepreneurship amongst the capable youth of India. Also the other parallel national projects to Make in India,
such as Skill India, Digital India, Smart Cities Project etc. are all working hand in hand to take all efforts to reach
the unreached sections of this country with a wide geographical spread.
The CMAs working as a partner in the nation building exercise of the Government acknowledges its role in
ensuring that all these schemes and programmes live up to their intended objectives and provides optimum
benefits and welfare to all the sections of the India society. This technical session shall include discussions on the
need and relevance of the inclusive growth for the nation and the role CMAs can play in optimizing the benefits
of the government projects and schemes targeting financial and social inclusion for all.
MEMBERS MEMBERS
CMA Debasish Mitra, Chairman WIRC CMA Balwinder Singh
CMA K Sanyasi Rao, Chairman SIRC CMA Dr. P.V.S. Jagan Mohan Rao
CMA Shiba Prasad Padhi, Chairman EIRC CMA DC Arya, Past Chairman, NIRC
CMA Anil Sharma, Treasurer, NIRC
CHAPTER REPRESENTATIVES
CMA Neeraj Sharma, Chairman- Ghaziabad Chapter CMA LD Pawar, Treasurer, WIRC
CMA Prashant Deshmukh, Chairman, NOIDA Chapter CMA Suresh R Gunjalli, Treasurer, SIRC
CMA Ashis Banerjee, Treasurer, EIRC
CMA Musarrat Rai Handa, Chairman, Faridabad Chapter
TECHNICAL COMMITTEE
CMA R.K. Bhandari, Chairman, Jaipur Chapter
CHAIRMAN
CMA Ashok B. Nawal
MEMBERS
CMA Balwinder Singh
CMA H Padmanabhan
DELEGATE COMMITTEE
INTERNATIONAL DELEGATE CHAIRMAN
COMMITTEE CMA Balwinder Singh
CHAIRMAN MEMBERS
CMA P. Raju Iyer CMA Dr. I Ashok
SPONSORSHIP DETAILS
PLATINUM SPONSOR (` 10,00,000/-)
Delegates fee (non-residential) exemption for 10 delegates. Prominent Display on the Convention Backdrop as
Platinum Sponsor and all other prominent places Sponsor logo in badges and all Convention Material
NOTE : One colour full page advertisement in the Souvenir for all above mentioned categories.
PAYMENT
The Cheque / Demand Draft to be drawn in favour of “The Institute of Cost Accountants of India
- 57th NCC 2016” payable at NEW DELHI, Details for NEFT / RTGS payment: Name of Bank:
Punjab National Bank, Lodhi Road, New Delhi-110003; Saving Bank A/c No.: 0128000100648224;
MICR Code: 110024060; IFSC Code: PUNB0012800 PAN No.: AAATT9744L
PARTICIPANTS
Corporate Directors, CFOs and Management Accountants and other Senior Management Executives in the
Corporate Sectors, Practicing Professional in Secretarial, Financial, Legal, Management and Academics who
would benefit from participation in the convention.
DELEGATE FEES
PARTICULAR FEES
Corporate Delegates ` 5,000/-
Cost Accountant – in –Practice / Self ` 3,500/-
Sponsored Members
Spouse ` 2,000/-
Foreign Delegates USD $ 300/-*
*The Foreign Delegate Fee of USD $ 300/- is inclusive of charges for one day trip to Agra. Agra is 206 Kms away
from the National Capital, Delhi and its main attraction is Taj Mahal the 7th Wonder of the World and Red Fort).
Other Delegates may also opt for one-day trip to Agra on additional payment of ` 3000/-, For details please refer to
the separate leaf “Added Attraction”
The Entire fee is payable in advance and is not refundable once the nomination is received. The Delegate
Registration Form duly filled in along with delegate fess may please be sent to:
The Chairman
Delegate Committee
THE INSTITUTE OF COST ACCOUNTANTS OF INDIA
3, Institutional Area, Lodhi Road, New Delhi-110003
Thanking you,
Yours sincerely
CMA BALWINDER SINGH
Chairman, Delegate Committee
PAYMENT
The Cheque / Demand Draft to be drawn in favour of “The Institute of Cost Accountants of India
- 57th NCC 2016” payable at NEW DELHI, Details for NEFT / RTGS payment: Name of Bank:
Punjab National Bank, Lodhi Road, New Delhi-110003; Saving Bank A/c No.: 0128000100648224;
MICR Code: 110024060; IFSC Code: PUNB0012800 PAN No.: AAATT9744L
CEP CREDIT: 6 HOURS
Yours sincerely
CMA AVIJIT GOSWAMI
Chairman- Souvenir Committee
PAYMENT
The Cheque / Demand Draft to be drawn in favour of “The Institute of Cost Accountants of India
- 57th NCC 2016” payable at NEW DELHI, Details for NEFT / RTGS payment: Name of Bank:
Punjab National Bank, Lodhi Road, New Delhi-110003; Saving Bank A/c No.: 0128000100648224;
MICR Code: 110024060; IFSC Code: PUNB0012800 PAN No.: AAATT9744L
ABOUT DELHI
Delhi, the capital of India, is situated in northern India and stands on the west bank of Yamuna River
bounded by Uttar Pradesh in east and on the north, west and south by Haryana. Delhi is spread over an area of
1483 sq. kilometers, and has a population of around 14 million.
Delhi is an amalgam of many cultures, with a foothold in the past; it is also gaining in importance and significance
as a powerhouse for the future
The city has its historical importance as it had been the home to Mughal Empire. It was the capital of seven
empires in Indian history and has several monuments built over several millennia.
Apart from its historical importance, Delhi also happens to be the political hub of India, where every political
activity in the country traces its roots to Delhi.
Delhi is the fifth most populated urban area in world with satellite towns like Ghaziabad, Faridabad, Gurgaon
and Noida making it a NCR, called the National Capital Region.
Apart from being the political capital of India, Delhi is an important administrative unit of Government of
India. Major ministries of Government of India are situated in Delhi. The Parliament of India - emblem of
Indian democracy - is situated in Delhi. All the major government offices and departments find their place in
Delhi.
Delhi has the advantage of its cosmopolitan society where there are people from all regions of India. This
makes the city multi linguistic and multi cultured. Being the capital of the world’s largest democracy, Delhi has
embassies of more than 160 countries. It is also becoming the major Corporate Hub, Information Technology
destination of India.
Delhi has tourist attractions like, India Gate, Lal Quila, Jama Masjid, Akhsardham Mandir, Qutab Minar, Birla
Mandir, Lotus Temple, Connaught Place etc.
More Tourist details can be found from website of Delhi Tourism at www.delhitourism.gov.in and Tourist City
Information Service No. 1280.
ADDED ATTRACTION
The delegates opting for excursion to Agra, are requested to add `3,000/- in the
delegates Fee as given in “Delegate Registration Form”. The delegates are requested
to confirm and pay extra amount towards excursion to Agra by 24th January 2016
so that the Institute may make necessary arrangements accordingly.
• The participants paying premium registration fee will be taken for an excursion to the city of Agra on 1st
February 2016 along with the foreign delegates.
• The premium registration amount of ` 3000/- includes charges for transportation [deluxe bus- to and
fro(Delhi to Agra)], arrangements for all logistics and meals).
• The participants who wish to opt for premium registrations may mention the same in the Registration Form.
3 The Ashok Chanakyapuri 011 2611 0101 [email protected] 4.6 10.5 8 7000 8000
4 Vivanta by Taj - Ambassador Sujan Singh Park 011 6626 1000 [email protected] 2.1 15.8 6 7500 8500
5 Le Meridien 8 Windsor Place 011 2371 0101 [email protected] 1.9 13.4 4 11000 12000
112
6 The Suncourt Hotel Yatri Karol Bagh 080101 14400 [email protected] 7.2 15 4 2299 2599
7 Hotel Kingston Park Karol Bagh 011 45023266 [email protected] 7.2 15 4 2000 2500
8 The Corus Hotel Connaught Place 011 4365 2222 [email protected] 4.1 13 3 4000 4500
9 Hotel Forest Green Sadiq Nagar 011 4524 2424 [email protected] 8.6 14 13 3000 4000
Final Brochure
10 Hotel Walnut Castle Karol Bagh 011 4567 9495 [email protected] 7.2 15 4 3000 3500
11 Hotel Crest inn Karol Bagh 011 2576 0224 [email protected] 7.2 15 4 2400 3000
January 2016
www.icmai.in
The Institute of Cost Accountants of India
(Statutory body under an Act of Parliament)
SPONSORSHIP FORM
The Chairman,
National Cost Convention 2016
The Institute of Cost Accountants of India
CMA Bhawan,3, Institutional Area, Lodhi Road,
New Delhi-110003. Ph: +91-11-24666100
Dear Sir,
RATES OF SPONSORSHIP
Particulars Amounts (`) Particulars Amounts (`)
Platinum 10,00,000 Gold 5,00,000
Silver 3,00,000 Dinner 3,00,000
Lunch 3,00,000 Convention Kit 2,50,000
Mementoes 1,50,000 Cultural Event 1,50,000
Other Sponsorships 75,000
The Chairman
Final Brochure
DElEGATE REGISTRATION FORm
Delegate Committee
National Cost Convention 2016
The Institute of Cost Accountants of India
CMA Bhawan,3, Institutional Area, Lodhi Road, New Delhi-110003.
Dear Sir,
Please register the following delegates for attending the 57th National Cost Convention – 2016 to be held on
30th – 31st January 2016 at New Delhi. The particulars of the delegates are as under:
Name of the Delegates Designation Address of the Delegate
DElEGATES FEE
Particulars Fees (`) Particular Fees (`)
Corporate Delegate 5,000* Spouse 2,000*
Cost Accountant-in-Practice/ Self Sponsored Member 3,500* Foreign Delegate $300
*Add ` 3000/- for Indian delegates, if they opt for an excursion to Agra.
The Chairman
Souvenir Committee
National Cost Convention 2016
The Institute of Cost Accountants of India
CMA Bhawan,3, Institutional Area, Lodhi Road,
New Delhi-110003, Ph: +91-11-24666100
Dear Sir,
We are pleased to release the following advertisement for the Souvenir to be brought out at 57th National Cost
Convention- 2016 to be held during 30th – 31st January 2016 at New Delhi.
Advertisement in Size Tariff (`) Please Tick
Back Cover 18 cm x 24 cm 1,00,000
Front / Back Cover Inside 18 cm x 24 cm 75,000
Colour Full Page 18 cm x 24 cm 75,000
Colour Half Page 18 cm x 12 cm 50,000
Black & White Full Page 18 cm x 24 cm 40,000
Black & White Half Page 18 cm x 12 cm 30,000
Role of CMAs in
Strengthening Indian Banking System
Project Financing:
Project finance is best suited for developing infrastructure where the capital expenditure is relatively high and
the revenue visibility is long term in nature. There are several banks/FIs that have been active in undertaking
project finance. Considering the long-term nature of project loans and risks involved in specific projects, banks have
specialized teams for carrying out due-diligence of projects. CMAs with their professional expertise can carry out
due diligence of projects including doing pre-bid advisory, preparing financial model by estimating cash flows for the
project, doing promoter analysis and preparing structure of the funding to meet specific requirements in a project.
Selection of Borrower:
CMAs can lend a hand for effective pre-enquiry by the bank for sanctioning the loan to a customer, ensure
credibility of the borrower and find out the original purposes of the loan required by the borrower by feasibility
study of the project. Combining traditional wisdom with modern statistical tools like Value-at-risk analysis and
Markov Chain Analysis CMAs can assess the creditworthiness of the borrowers.
SME Lending:
To alleviate the overall disease of lack of appropriate growth of Indian SMEs – Small and Medium Enterprises,
adequate credit delivery to SMEs, better risk management and technological upgradation is a must. Among them,
the major problem of inadequate financing to SMEs needs an urgent attention. The CMAs in this regard can facilitate
the banks to formulate their own model(s) or choose any intermediary for extending micro credit and formulate
the criteria for selection of micro credit organizations. They can lend a hand to the banks to deal with micro credit
organizations having proper credentials, track record, system of maintaining accounts and records with regular
audits in place and manpower for closer supervision and follow-up.
theMANAGEMENT
NPA Management and Corporate Debt Restructuring
ACCOUNTANT
THE JOURNAL FOR CMAs JANUARY 2015 VOL 50 NO. 1 `100
January theMANAGEMENT
S Cost Competitiveness through Leadership
ACCOUNTANT
THE JOURNAL FOR CMAs FEBRUARY 2015 VOL 50 NO. 2 `100
both for stakeholders and for the investment needs of the business. A firm
pursuing a cost leadership strategy attempts to gain a cost competitive
advantage primarily by reducing its economic costs below its competitors.
B Attaining Cost leadership requires aggressive construction of efficient
scale facilities and strong pursuit of cost reductions through experience,
COST
COMPETITIVENESS
tight cost and overhead control, cost of production, advertising etc. THROUGH
A SPECIAL FOCUS
INSIDE ‘Develop cost effective production units to meet competition and maximize returns’ page 56
LEADERSHIP
The Institute of Cost Accountants of India
(Statutory body under an Act of Parliament) www.icmai.in
theMANAGEMENT
C
February
ACCOUNTANT
THE JOURNAL FOR CMAs MARCH 2015 VOL 50 NO. 3 `100
March theMANAGEMENT
0 FDI and Economic Growth ACCOUNTANT
THE JOURNAL FOR CMAs APRIL 2015 VOL 50 NO. 4 `100
1
1966 ~ 2015
April
theMANAGEMENT
Integrated Reporting and Business Sustainability
ACCOUNTANT
THE JOURNAL FOR CMAs MAY 2015 VOL 50 NO. 5 `100
H
1966 ~ 2015
As can identify business risks and ensure its mitigation in infrastructure industries’ PAGE 36
SELF-HELP GROUPS
The Institute of Cost Accountants of India
(Statutory body under an Act of Parliament) www.icmai.in
2
July
1966 ~ 2015
THE JOURNAL FOR CMAs AUGUST 2015 VOL. 50 NO. 8 `100
August
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THE JOURNAL FOR CMAs SEPTEMBER 2015 VOL. 50 NO. 9 `100 Securities Markets in India & Economic Growth
The Indian Securities Markets have witnessed extensive reforms in
the post liberalization era in terms of market design, technological
1966 ~ 2015
A SEPTEMBER 2015
The InsTITuTe of CosT ACCounTAnTs of IndIA
THE
(Statutory body MANAGEMENT
under ACCOUNTANT
an Act ofParliament) www.icmai.in
www.icmai.in 1
the MANAGEMENT
September
‘CMAs can identify business risks and ensure its mitigation in infrastructure industries’ PAGE 36
ACCOUNTANT
S Digital Revolution in India
THE JOURNAL FOR CMAs
1966 ~ 2015
DIGITAL
OCTOBER 2015 VOL. 50 NO. 10 `100
REVOLUTION
H Digital India is an umbrella program which will restructure and refocus
several existing schemes to bring in a transformative impact. The vision IN INDIA
of Digital India Programme also aims at inclusive growth in areas of
electronic services, products, manufacturing and job opportunities. The
B program aspires to transform the country into a digitally empowered
society and knowledge economy.
A OCTOBER 2015
T(Statutory
he InsTITuTe of CosT ACCounTAnTs of IndIA
THE MANAGEMENT ACCOUNTANT
body under an Act ofParliament) www.icmai.in www.icmai.in 1
October
C Cost Management Strategy for Economic
Sustainability
K Sustainability enables a nation to raise living standards through profitable
products subject to less environmental hazards by minimization of wastage of
wealth, optimum utilization of resources etc. Sustainable Economic Development
strategies generate substantial economic and employment growth and sustainable
business and community development as a whole. MSME, Healthcare, Tourism
and Hospitality, Education, Insurance, Transport are some of the well mentioned
sectors to bring economic sustainability of the nation where CMAs have a huge
November ACCOUNTANT
0
THE JOURNAL FOR CMAs DECEMBER 2015 VOL 50 NO. 12 100
THE MANAGEMENT ACCOUNTANT
5 green
15
20
the environment, controlling the environmental damage, reducing
VOL. 50 NO. 12
December
l A stock market index is created by selecting a group of stocks that are representative of the whole market or a specified sector or
segment of the market. An Index is calculated with reference to a base period and a base index value. As the value of stocks within an
index change, the index value also changes.
l Nifty 50 closed at 7946.35 as on December 31, 2015, an increase of 11.10 points (0.14 %) as against 7935.25 as on November
30, 2015. Nifty Media index gained the most (8.23 %) amongst all the indices during the month whereas the Nifty PSU Bank index
(-11.47 %) was the biggest loser during the one month period ending December 31, 2015. During the 3 month period ending
December 31, 2015, the biggest gainer is Nifty Energy (12.34 %) and the biggest loser is Nifty PSU Bank (-7.57%). The biggest gainers
during the 1 year period ending December 31, 2015 in their respective index categories are Nifty Smallcap 100 (7.21 %).
B. Performance (Share Price) of different companies under Nifty Media (as on Dec. 31, 2015)
Index Name 1 Month Return% 3 Months Return% 6 Months Return% 9 Months Return% 1 Year Return% 3 Years Return%
Eros Intl.Media 441.47 202.58 4.83 10.38 58.38 183.67 6.27 24.14 13.22 240.70 2252.08 15.39 2.12 0.7594
Inox Leisure 302.82 27.11 2.59 6.13 19.38 211.08 2.11 17.92 6.40 238.80 2303.46 40.82 3.23 0.9709
Zee
1021.59 24.94 63.94 0.09 195.04 -17.18 1.65 30.52 19.09 437.25 41993.49 53.45 16.35 1.0481
Entertainment
T.V. Today Netw. 126.42 24.32 8.19 0.05 24.32 84.10 4.08 34.73 19.24 336.00 2004.36 25.93 4.45 1.298
Sun TV Network 568.09 11.60 20.35 0.07 218.38 41.37 5.54 79.67 38.44 426.40 16803.57 20.18 4.97 0.9458
Jagran
122
425.29 6.56 1.41 14.91 58.31 4.18 1.78 29.67 13.71 159.65 5219.15 22.42 5.05 0.6007
Prakashan
Siti Cable 145.95 6.28 8.06 33.73 -31.18 -18.93 NA 16.45 -21.36 36.20 2453.03 NA 13.90 0.503
Netwrk.18 Media 16.94 5.81 4.78 13.04 -20.26 9.40 NA -36.07 -119.60 58.75 6150.82 NA 2.27 1.2064
Den Networks 224.43 2.00 26.5 19.68 -61.28 181.49 NA -3.99 -27.30 112.30 2001.19 NA 1.21 1.1039
Capital Market Corner
TV18 Broadcast 133.49 -4.90 7.96 4.23 9.83 -66.43 0.06 12.44 7.36 47.30 8108.92 76.29 2.32 1.0714
January 2016
Sources: Capitaline Corporate Database
Notes: NS-Net Sales, RPAT-Reported Profit after Tax, EPS-Earning Per Share (Adj) (Unit Curr.), PATM- Profit after Tax Margin, LMP-Latest Market Price, MCap-Market
Capitalisation, P/E- Price Earnings Ratio and P/BV – Price to Book value ratio as on 31’st December,2015.
Methodology: Nifty Media stocks are considered for the study. Nifty Media Index is computed using free float market capitalization method, wherein the level of the index reflects the
total free float market value of all the stocks in the index relative to particular base market capitalization value. NS growth% i.e. (NS on Sept, Qtr. 2015 less NS on Sept, Qtr. 2014) /
( NS on Sept, Qtr. 2014) x100. Beta calculated for one year (31.12.2014 to 31.12.2015). LMP, MCap, PE, P/BV is based on 31st December 2015.
Disclaimer: All information contained herewith is provided for reference purpose only. ICAI assures no warranty or representation as to the accuracy, completeness or reliability of any
of the information contained herein and disclaim any and all liability whatsoever to any person for any damage or loss of any nature arising from or as a result of reliance on any of the
information provided herein. The information contained in this document is not intended to provide any professional advice.
www.icmai.in
National
CMA Practitioners’
Convention
2016
Jointly organized by
THE INSTITUTE OF COST ACCOUNTANTS OF INDIA
(Statutory Body under an Act of Parliament)
&
EASTERN INDIA REGIONAL COUNCIL
e-mail: [email protected] / [email protected]
Venue
SUNDAY
21 FEBRUARY J.N. Bose Auditorium
ICAI HQ, 12 Sudder Street
2016 Kolkata - 700016
124
The Management Accountant 124 January 2016 www.icmai.in