Public Sector Bank Mergers

Why is it decided to merge banks?

Government promised a capital of Rs. 70,000 Cr. to the banks. Instead of making thin payments to multiple entities, it can disburse relatively large money to only few, but strong entities. That way they can start lending and reap the benefits in long run.


Why this combination?

It was the core banking technology that made the combination for mergers. Canara and Syndicate Banks run on iFlex Core banking while Indian Bank and Allahabad Banks run on BaCNS making the transitions smoother. The remaining 6 banks runs on Finnacle CBS platform, but Government opted not to merge all 6 of them into one, as it would be really tough to manage such a large entity. So it opted to merge three entities each into two.

Why Now?

One can only assume that banks like Bank of Maharashtra are not touched for now with state elections around. In fact, the proposal for mergers by finance minister was announced exactly before the GDP numbers were made public. GDP growth numbers for Q1 showed a six year low. It is indeed a tricky time with growth declining in few of key sectors in turn rising unemployment numbers. However government was working on this for past 6 months. It seems it was Narasimha  committee in late 1990’s who proposed merging strong banks and dissolve weaker banks. Of course, it would be a risky step for any government to shutdown banks with lot of opposition.

Areas to watch

Bank employees’ associations are protesting saying the timing is not right to proceed with merging and are implying merging as closure of banks that deflects the interests of many bankers. While this may not be completely right, there are two areas to watch out.

  • The recapitalisation of Rs 70K Cr should make a difference at ground level. Nationalised banks are loosing their market share in incremental business, incremental deposits, credit market.
  • A strong governance in the nationalised banks. Many times, certain personnel are appointed at board level with government nominations. There should be minimal influence of pushing political agenda during key reforms at board level.

In summary, with an intend to strengthen banking sector, yet another aggressive step by government, let’s hope this move transforms our banks to a global level.


India’s strategic win at UNSC

Inspite of slight tense situation created by our strategic partner Britain, India is able to convince United Nations Security Council that the situation in Kashmir is normal and there is no need to assume any panic.

(Source courtesy : Wikimedia Commons)

Nearly after 54 years, UNSC has Kashmir as a topic of discussion. This meeting was called up by permanent member China and its ally Pakistan claiming havoc in Kashmir after revoking article 370 in Jammu and Kashmir. Pakistan has earlier wrote a formal letter to UNSC for a meeting on Kashmir. UNSC declined an open formal meeting but agreed for a meeting close doors where all the details are not to be made public.

With China backing its move to bring in Kashmir as an international dispute, Pakistan made a final attempt to get US buy-in on Friday. However US, Britain, France and Russia has ruled in favour of India saying Kashmir remains a bilateral issue between India and Pakistan and this cannot be ‘internationalized’.

An anxious moment raised when Britain agreed China’s proposal that an informal outcome to be notified through UNSC president. This could mean that a statement be issued on Kashmir’s situation by UNSC. However eventually 4 out of 5 permanent UN members denied any intervention on Kashmir. India has been appraising the circumstances and on going normal situation to 5 permanent and 10 non permanent members from the day article 370 was revoked

Its getting intense for India to deal Maldives situation

China is looking to establish an ocean observatory station in one of the island that is near to India cost line. It is not only a mere observer, but is capable of military application and submarine base. Though China sources denied, it was reported a week ago that 11 Chinese warships sailed towards Maldives in spite of current emergency situation in Maldives. This proves the fact that the ocean station is a threat to India’s interests in Indian ocean.

Meanwhile, despite multiple requests from Nasheed, the opposition leader in Maldives, India is currently in helpless situation to proceed with Military intervention. Any aggression from India’s side in spite of global support, would bring direct conflict with China in current situation.

(image courtesy :

Maldives is the second country to sign the Free Trade Agreement with China in December 2017, after Pakistan. Maldives now supports for Maritime Silk Route as part of the Belt and Road Initiative of China. Adding with the new observatory station planned, it would be difficult for India to dare anything in Maldives that is strategically located in Indian Ocean.

It was a great thought to have all 10 heads of Asian heads on single dais to witness the Republic day parade, but standing by what we say and protect the people of our neighborhood during crisis situation is really a litmus test to our integrity. While we partially succeeded in case of Doklam in Bhutan, Maldives situation is relatively tougher situation to deal with.

India’s stand on emergency in Maldives

With unrest in Maldives, it is vital for India to wait cautiously and take a strategic decision.

Yameen, current leader has declared sudden emergency in Maldives, with fear of loosing government elections. This started creating ripples eventually leading to unrest between China and India. The current government under Yameen has become a close ally to Chinese for past few years. China has been investing big time in Maldives with the moto to gain its military presence in Indian Ocean.

india china flag
(image courtesy:

The opposition leader Mohamed Nasheed who has been in good terms with India, when in power until 2012 is pitching his voice against the sudden emergency. Other opposition leaders like Abdul Gayoom were also arrested and there is increasing revolt. Opposition is now requesting India for its military intervention like in 1988. Any step towards bringing its  military, India would lead itself to a direct conflict with China

China on other side has two extreme choices to make. Either support current government or support democracy with proper elections. Supporting government with current emergency situation would only give advantage to countries like India to bring in their Military in opposition and loosing its global support. On other side, supporting democracy and facilitating elections could also risk dethroning the current government from power and indirectly helping India to gain its control back.

Key events impacting Economies in 2018

Today’s article in ET by Reshmi Khurana and Probal Dasgupta has given a clear insight on key political events that could affect global as well as India’s economy.

With his unconventional leadership style, Trump is redefining US relationship with rest of world, especially with Russia, China and West Asia.

Analysts say, China is all set to fill in any leadership gap that US could not, in global politics. For instance, China is expected to oppose Trump’s move to decertify Presidents Obama’s nuclear deal with Iran in 2015. With support of EU and Russia, this could strongly help represent China’s position as global power.

United Nations Headquarters
(image courtesy:

US and Russia has different positions in West Asia. US stand to declare Jerusalem as Israel capital has raised tensions. China has already announced it intent to play a role in resolving the dispute, signally itself as a global peace broker. With Russia supporting China here, this would bring both these two countries politically closer. Not sure yet on US sanctions on Russia, but this would also have impact on Russia’s undersea Nordstream pipeline between Germany and Russia. This in turn might strangle the ties between US and EU.

With US supporting Japan and India w.r.t trade in India Ocean region, where China is strategically to start dominate the region, the global relations among these key super power countries would define the economies significantly.

North Korea would be another key flashpoint in 2018. With countries 70th anniversary and South Korea hosting Winter Olympics any aggression on either side would have high impact globally.

Other key event happening is Brexit. While there are still couple of years to see its full affect, things like reduced immigration etc have started showing the impact. With reduced availability of technicians and skilled labour from other EU areas, the labour cost is increasing in UK.

In Summary, 2018 looks to be a crucial year in defining the global economies

(feel free to provide your views on

India’s current foreign relations

The dynamics in global relationships are changing frequently. Some have been favourable to India and others are posing challenges for its growth.

India ensured a clear approach on West Asia policy. A combination of investment, defense and security, counter terrorism was understood with Gulf Arabs and Iran. This is done tactfully, while maintaining a a special relationship with Israel. The crown prince of UAE, will be India’s chief guest for Republic Day 2017. Maintaining a deeper relationship with Gulf countries should help further weaken their current unhealthy relation with Pakistan

(image courtesy:

Africa is India’s maritime neighbour separated by Indian Ocean. With huge resources and opportunities evolving, African countries would be definitely a strategic and economic partner to India.

With active participation in Naval exercises and making this years Nuclear deal, India has made a very progress in strengthen the relationship with Japan. It also started passive support to other countries along with Japan in keeping tab on China’s aggression in south China Sea.

Key nations has always been curious about Trump’s strategy. Well, with India it seems to be have positive till now. His ‘remarks’ till now placed India in a comfort zone, also considering his remarks for Pakistan and China. The only thing that is bothering till now is on the visa’s and its impact on IT industry. Experts has given mixed opinions on it, but India need not worry on it immediately.

Relations between Russia and India peaked in October this year after the annual summit held in Goa. Russia has been a reliable partner in defense, nuclear energy. However instances like Russia’s strategies supporting Taliban to check Islamic State would hamper the relationship.

It is quite evident that Pakistan has been one of the biggest threats for India in the area of terrorism. While India can make certain aggressive steps like in Indus Water Treaty, it will have implications. With new man as GHQ, India can wait and see on how Pakistan’s next step.

China has been India’s hindrances for economic growth. At the same time we rely on China on many areas, how India deals with China in 2017 will determine its own global rise.

With alliances and relationships getting complicated globally , India should be cautious choosing its strategies.

(Analysed from Indrani Bagchi, TOI, Stanly John from TheHindu,NILOVA ROY CHAUDHURY, RIR

GST – What Next?

Much awaited “one nation, one tax, one market” came to reality with RS passing the GST bill last week. The next steps include

  • Get the CAB (constitution amendment bill) approved by at least 50% states
  • Create a GST council
  • Concluding the Center GST and State GST rates with cabinet approval
  • Training, documentation, digital (IT) readiness


While implementing GST is noted as a historic economic reform like the one in 1991, let us see the challenges with each of the phases mentioned above:

  • Get the CAB (constitution amendment bill) approved by at least 50% states, generally called as ratification. GST being a revenue loss on certain items in some states for a brief time, they would like to have an assurance from centre on the compensation. 16 out of 31 states should approve the CAB to proceed to next phase. 11 states including BJP ruling will approve without any problem. Other states like Andhra Pradesh, Telangana, Kerala, WB, Tripura would support the ratification. The whole process looks to be completed by September 2016 with all the support.
  • Creating CST council: GST council is very much needed that will decide the GST rates. Here comes the crucial part. Many states where they see the rates will hamper their revenue as compared to pre-GST era would raise concerns and this may delay the GST rollout. The council once formed will resolve these disputes. The rates would be as low as 12% for essentials, and as high as 40% for luxury items. The council will exclude both petroleum and alcohol items from GST for now (it is simple – the tax revenue from alcohol for some states is high. Including that in GST will benefit the alcohol prohibited states or states with low revenue from alcohol. It is wiser not to include in GST. Also similarly electricity and petroleum are also been considered not to be included).
  • Rolling out the GST: it is expected to be rolled out from 1st April 2017. If the challenges expected are resolved in time, we are good by next year.
  • Training, documentation, digital (IT) readiness: Infosys is working on the IT infra for GST. Tax officials may have to now deal with simpler tax calculations, but transition from older to new one can be tricky and government is creating a strong transition mechanism.


Internet of Things(IoT) today

“If the outside temperature is more than 350 C, turn on AC at my home when I am about to reach in 15 minutes”. Internet of Things (IoT) has grown at a higher pace like many experts predicted few years back . Today, IoT extends from smart homes to wearable watches to healthcare instruments.


The smartphones are multiplying and the electronic sensors are getting cheaper and smarter. At the same time on the infrastructure side, many are adopting cloud with high speed networks. The connection between millions of devices and sensors has become cost efficient now.

These are facilitating the rise of IoT and indicate that many industries are adopting it. Manufacturing, Health Care and Pharma, Heavy machinery, Energy and Utilities, Agriculture, transportation, aerospace industries get greatly benefited with IoT. Also this is helping them to give customers altogether a new experience.

Energy & Utilities:
We would have seen the ads in TV for Philips where lights in home are switched on/off automatically based on our needs.

There are companies like JBL, heavy machinery that uses IoT to monitor its vehicles and gets alerted before a break happens in any of it equipment. The cost of fixing the break is way higher than fixing before it occurs.

Virgin airlines recently implemented IoT for a set of its airplanes, that most components on the planes are connected to internet, making the it more live and reducing the maintenance costs.

IoT can enable agriculture by creating a network of connected devices, providing real-time information on weather, data and alerts on soil condition for a type of crop, monitoring for floods etc. There are applications like identifying a sick animal in the cattle and remove them before they infect others

There are already IoT applications that reminds elderly patients to remind the time to take pills, give the cups with prefilled medicines with push of a button. There are devices that monitor the body temperature, urine flow etc and can alert before a heart failure, kidney injury happens.

More work to do:

Like any other evolving technology, IoT has its own obstacles. Some are concerns on data security and privacy – and others at core is skill or expertise to design and implement the IoT. Reports and surveys show there are not enough skilled professional to implement the IoT that meets the current demand. IoT is still as of now complex in nature to implement. However, with many advantages of IoT and need for it, we are sure it will be used widely across globe!

How will GST work in India

Let us begin with the understanding of how taxes are applied before VAT came into picture.

Consider this flow of a product: Manufacturer -> Retailer -> Consumer
Say the initial price is 100 and sales tax is 10%. Then

  • Manufacturer sets the price at 100 +10% =110. (Tax is 10)
  • Say Retailer adds 390 as his costs and profit making the product value 500. He then sets the price at 500+10%=550 (Tax is 50)
    The consumer buys at 550 where in he payed 50 as tax.


From the year 2005, the above sales taxes are replaced with Value added Tax (VAT). With VAT, the consumer actually pays 40 as tax instead of 50. VAT=output tax-input tax i.e. 40. (50-10).
VAT is imposed by state governments and vary from state to state.

Service Tax

In addition to VAT most of us are aware that a service tax is applicable in many service industries like restaurants, travel, insurance, phone bills payments etc. This is imposed by central government.

GST (Goods and Services Tax)

GST is uniform tax imposed on any sales, manufacturing or goods & services at national level. This tax will substitute all other taxs imposed by state and central government. (Exports and direct tax like income tax, corporate tax and capital gain tax will not come under GST).

Why GST is better than VAT

  • VAT is imposed on only goods whereas GST on both goods & services
  • GST is a uniform rate in all the states and is imposed by center where as VAT varies from state to state.
  • In case of VAT, input tax credit (i.e. calculation of output tax – input tax , 40 in the above example) is applicable on only goods sold within the state whereas incase the of GST this is applicable across country and also applicable on the services too apart from goods.

GST will overcome the above three limitations of VAT.
GST will create a common market across states. It eliminates complexity of different taxes. It is beneficial to consumer. It will ensure a transparent and neutral way to raise revenue.

Why is GST opposed in Parliament?

However, GST has it own negative aspects. As GST imposed by center eliminates all the other taxes imposed by states, It is like parent asking a child to stop earning and instead giving him pocket money. Child looses his financial independence here.

Hence to have some financial independence, the current GST bill proposed by BJP excludes Petroleum and Alcohol – revenue generating sources for states. Also a 1% inter state tax (for manufacturing states like Maharastra, TN, Gujarat that fear loosing more if GST is imposed)

Currently, the GST is been opposed by Congress on three grounds.

  • A 18% cap should be made a part of constitution, ensuring consumers does not end up paying based on mood of central government. But, BJP feels that this could flaw the syatem as goods like Luxury products are supposed to attract higher taxes.
  • 1% additional inter state tax to be removed to provide an equal advantage to all states
  • Formation of a GST council that will decide on any GST issues based on majority. Congress says to have 1/4th vote weightage to Center and remaining 3/4th to State. However, BJP wants it to be 1/3rd and 2/3rd


In summary, GST bill is designed to replace more than dozen state taxes to a single uniform central tax proving a single market. Removing complexities, to raise revenue in a nuetral way


Cloud is benefiting Microsoft, Amazon, Google

It is easy to rent access to computers for a monthly fees rather than buying them and maintaining them for a lifetime. Cloud has proved to be a profitable business for Microsoft, Amazon and Alphabet as large enterprises shift to Internet-based services to host and manage their data. (Alphabet – parent company of Google). These 3 companies excelled their profit estimates for the last quarter with major contribution coming from cloud computing services they offer. On the contrary, technology companies like IBM, HP, EMC (will be merging with DELL) etc. are seeing a downtrend with decline in sales of their traditional hardware, software because of the cloud providers. Google, Amazon and Microsoft provide their computing services to many companies who are eagerly seeking for low cost alternatives. Otherwise those companies would have gone for traditional hardware, software from HP, IBM.

Kalyan_ Cloud

While many firms try providing cloud services in the market, winning in cloud is not for everyone! Amazon, Microsoft and Google invest significant sums to build huge, so called state-of-the-art data centres. “Developing a data centre infrastructure along with the required marketing and operations support is simply beyond the reach of all, but to the companies like Amazon, Google, Microsoft” says chief analyst John Dinsdale from Synergy Research Group.

Many of the Indian IT companies like TCS, Infosys, Wipro are already focusing in the digital and Cloud computing services partnering with companies like Microsoft. Indian IT companies are seeing a reduction in larger deals from customers who traditionally rolled out tenders of hundreds of millions of dollars, but they are many transactions from customers in lower value deals linking with Cloud and digital. Like Google’s CEO Sundar Pichai said “Every business in the world is going to run on cloud eventually” let us see how it rains dollars!

Please refer to Bloomberg, The Walls Street Journal,, Forbes for more details.