MUSINGS

Theory of Consumption - Indifference Curve Analysis The advocates of  Indifference Curve Analysis  make the following assumptions for the analysis of the behaviour of the consumer. 1. Utility cannot be measured 2. When the consumer is given more of a commodity, he will always prefer to have more to less of that commodity. 3. It is based on the Principle of Transitivity. If there are many combinations of two commodities, and if the consumer is indifferent between the combinations of A and B, and also indifferent between B and C, so he will be indifferent between the combinations of A and C. 4. The Indifference Curve Analysis is based on the  Law of Diminishing Marginal Rate of Substitution. Properties of Indifference Curve There are definite properties of the Indifference Curve(IC). On these properties is built the shape of the IC. 1.  An IC slopes downwards from left to right, because as the consumer increases the consumption of one commodity, ...

Theory of Consumption - Revealed Preference Analysis Introduction: In 1960 Mr. Samuelson  introduced the Revealed Preference Analysis to explain the behaviour of the consumer. The fundamental difference between the Utility Analysis, Indifference Curve Analysis and Revealed Preference Analysis is that when the first two are based on the psychology of the consumer, the revealed Preference is based on the actual behaviour of the consumer. Assumptions:  In order to explain the behaviour of the consumer with the help of Revealed preference Analysis, Mr. Samuelson made the following assumptions. 1. Utility cannot be measured. 2. The consumer always prefers more of a good to less, until his income is exhausted. 3. It is based on the Principle of Strong Ordering. This means that if the consumer is given many commodities, he can place them in order of his preference. 4. It is based on the Principle of Consistency, and the consumer acts consistently. 'Consistency in ch...

Creativity is at the heart and soul of advertising.It helps to transform strategic thinking into ideas that enable the advertiser and the ad agency to make ads that standout esp in the mind of the prospect. Creativity is the ability to generate novel and innovative ideas that can be used as a solution to communication problems. 3 aspects are most accepted: The creative process The creative person and The creative situation The Creative process 1. Preparation During the preparation step of the creative process model, an individual becomes curious after encountering a problem. Examples of problems can include an artistic challenge or an assignment to write a paper. During this stage, she may perform research, creates goals, organize thoughts and brainstorm as different ideas formulate. For example, a marketing professional may prepare for a marketing campaign by conducting market research and formulating different advertisement ideas. 2. Incubati...

Non-Banking Financial Intermediaries: Non-Banking financial Intermediaries are a heterogeneous group of financial institution, other than commercial and cooperative banks. These institutions are an integral part of the Indian financial system. A wide variety of financial institutions is included in it. These institutions raise funds from the public, directly and indirectly, to lend them to ultimate spenders. The Development Banks (such as the IDBI, IFCI, ICICI, SFCs, SIDCs, etc.) fall in this category. They specialize in making term loans to their borrowers. LIC, GIC and its subsidiaries and the UTI are its other all India big term-lending institutions. Out of these three, only UTI is a pure non-banking financial intermediary, the others raise funds in the shape of premium from the sale of insurance. Besides this, there are provident funds and post offices who mobilize public savings in a big way for onward transmission to ultimate borrowers or spenders. A large number of sm...

Self-Help Groups: SHGs have been launched to combat the problem of growing poverty at the grass roots level. Small, cohesive and participative groups of the poor are formed who regularly pool their savings to make small interest bearing loans to its members. In the process, they lean the nuances of financial discipline. Initially bank credit is not primary objective. It is only after the group stabilizes and gains ability to undertake productive activity and bear risk that micro-credit comes into play. The SHG bank linkage programme has proved to be the major supplementary credit delivery system with a wide acceptance by banks, NGOs and various government departments. It encourages the rural poor to build their capacity to manage their own finances, and then 10 negotiate bank credit on commercial terms. Certain norms have to be observed in the formation of SHGs. To become a member, a person has to be below the poverty line. Only one member of a family can become a member a...

Micro-Credit: In spite of the phenomenal outreach of formal credit institutions, the rural poor still depend upon the informal sources of credit. Two major causes for this are the large number of small borrowers with small and frequent needs. Also the ability of these borrowers to provide collateral is very limited. Besides, the long and cumbersome bank procedures and their risk perception have also been limiting factors. Micro-credit has emerged as the most suitable and practical alternative to conventional banking in reaching the hitherto untapped poor population. Micro-credit or micro-finance means providing very poor families with very small loans to help them engage in productive activities or grow their tiny businesses. Over time, the concept of micro-credit been broadened to include a whole range of financial and non-financial services like credit, equity and institution building support, savings, insurance etc. Micro-finance institution is an organization that provi...

Rural Banking: On the birth anniversary of Mahatma Gandhi on October 2, 1975, Rural Banks were established with a view to stepping up rural credit. In 1975, the Government of India appointed a working group under the Chairmanship of M. Narasimham, the Deputy Governor of the Reserve Bank of India to review the flow of institutional credit to the people in rural areas. The committee was to study the availability of institutional credit to the weaker section of the rural population and to suggest alternative agencies for this purpose. The committee concluded that the commercial banks would not be able to meet the credit requirements of the weaker sections of the rural areas in particular and rural community in general. The Government accepted the recommendations of the working group and passed an ordinance in September 1977 to establish Regional Rural Banks. Need to Establish Regional Rural Banks The main need and objective of the RBBs was to provide credit and other facilitie...

Retail Banking: With a jump in the Indian economy from a manufacturing sector, that never really took off, to a nascent service sector, Banking as a whole is undergoing a change. A larger option for the consumer is getting translated into a larger demand for financial products and customization of services is fast becoming the norm than a competitive advantage. With the Retail banking sector expected to grow at a rate of 30% players are focusing more and more on the Retail and are waking up to the potential of this sector of banking. At the same time, the banking sector as a whole is seeing structural changes in regulatory frameworks and securitization and stringent NPA norms expected to be in place by 2004 means the faster one adapts to these changing dynamics, the faster is one expected to gain the advantage. In this article, we try to study the reasons behind the euphemism regarding the Retail-focus of the Indian banks and try to assess how much of it is worth the atten...

Corporate Banking: Cooperative banking typically serves the financial needs of large corporate houses- both domestic and multinational-public sectors and governments. However, traditionally banks had primarily been focusing on production based activities and financed working capital requirements as well as term loans to corporates due to following reasons: • From the beginning till the pre-reform era, business houses were heavily dependent on banks for their financial needs. The capital markets were not well developed, joint ventures norms had not been liberalized, mergers and 5 acquisitions were not the preferred route and numerous restrictions were placed on raising finance from overseas markets. • The banking institutions too showed a preference for providing credit to the corporates. This way their paper work was markedly reduced as the numbers of clients were less. Not only the workload was eased but also the risk involved was considerably less as corporate borrowin...

Definition of a Bank Chamber’s Twentieth century Dictionary defines a bank as, “an institution for the keeping, lending and exchanging etc. of money”. According to Banking Regulation Act, “Banking means the accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, and an order or otherwise”. Evolution of Banking The term bank is either derived from Old Italian word banca or from a French word banque both mean a Bench or money exchange table. In olden days, European money lenders or money changers used to display (show) coins of different countries in big heaps (quantity) on benches or tables for the purpose of lending or exchanging. According to some authorities, the work “Bank” itself is derived from the words “bancus” or “banqee,” that is, a bench. The early bankers, the Jews in Lombardy, transacted their business on benches in the marketplace. For centuries, banks have borrowed ...

A computer has three essential characteristics: 1.It responds to a specific set of instructions in a well defined manner 2. It can execute a pre-recorded set of instructions 3. It can quickly store and retrieve large amounts of data Computers in their simplest form can be traced back to 3000 BC in the form of abacuses. The first use of the word computer is said to have been done in 1613 AD, referred to a person who performed calculations or computations and continued to be used in that sense in the 20th century The origin of the computer can be traced to first tally sticks and then abacuses Tally Stick (above) Abacus This was followed by Napier's Bones invented by John Napier in 1614. It allowed the user to multiply, divide and calculate sq roots and cube roots by moving the rods around and placing them in specially constructed boards The Slide Rule followed in 1622 based on Napier's logarithms In 1672 came the Stepped Reckoner This could add, d...