TRANSFORMATIONAL MOBILE BANKING FOR FINANCIAL INCLUSION

M.Rajanikanth, PGDM 1st year Student, Vignana Jyothi Institute of Management, can be reached at - raajee.25@gmail.com

ABSTRACT Financial inclusion means ease of availability, accessibility and usage of the formal financial system to all the sections of the society. Despite the tremendous growth of the banking industry in developing countries, people have fewer options for accessing banking services, since there is less deployment of formal banking structure: fewer branches and ATMs and low banking penetration. So a branchless banking channel using mobile phones could be more advantageous to poor people travelling to distant branches and queuing for a long time and forging their daily wages. The majority of the people in developing countries has no savings accounts, do not receive credit from a formal financial institution, and have no insurance policies. It is the proven fact that it lowers the cost of delivery to banks of building and maintaining a delivery channel and availability of funds to customers of accessing services. Hence, the developing countries concentrating more on implementing the mobile banking access to the unbanked mobile users, as a tool of financial inclusion, which is known as Transformational mobile banking. Hence the success will eventually have an important global impact on financial inclusion for the poor. KEY WORDS Financial Inclusions, ATM, mobile banking INTRODUCTION About, three billion poor people in developing countries do not have provision for accessing the basic financial services needed to help them manage their precarious lives. The basic tool for improving familys well-being and productivity is to make every person access to financial service which may be as savings, credit, money transfers and insurance. It empowers the poor by reducing their vulnerability and offering them many opportunities to improve their living. In this era, mobile banking can do wonders for the developing economies for growth of an economy is possible with the help of financial inclusion which plays a prominent role in the inclusive growth of a country. Financial inclusion has been become one top priority for some of the developing countries as policymakers and regulators in financial sector development introducing effective measures to improve access to financial services and for the usage of tailored financial services. (World Bank, 2012). - 356 -

Some of the developing countries have adopted mobile banking services as one key measure for including unbanked people for gaining access to the financial services. The mobile banking services like M-Pesa of Kenya, GCash of Philippines and Easy Paise of Pakistan provide a great learning in the adoption of mobile banking as a tool of poverty alleviation. But mobile banking in India is yet to explore its functions to the rural areas as it can fulfill its goals in reaching the unbanked population. In fact rural subscribers in India are the vital contributors to the inclusive growth, as it is not very difficult to go for a mobile phone than going for a computer in rural areas. Transformational mobile banking is the provision of banking services using a mobile phone (m-banking or cell phone banking) in such a way that currently unbanked people are targeted. These transformational banking services increasingly have been an effective tool for bringing financial services to the largely unbanked population in the developing countries. The transformational potential of m-banking is due to the increased access to the mobile communication infrastructure by the rural unbanked and the introduction of new players such as the MNOs (mobile network operators) and airtime merchants in the financial system. (DFID, 2008). Given the rural unbanked unique characteristic associated with being poor, it must be affordable to the poor people and must be customer oriented. LITERATURE REVIEW Mobile banking is a tale of two meta markets in India one is rural market and another is urban market. In urban areas, many consumers have bank accounts but still rely on cash from 90 to 95 per cent of small-ticket transactions. Mobile payments would be a tremendous convenience for these consumers. Over the next five years, unbanked rural markets could begin to rival the urban market in size. Mobile banking in India is set to generate fee-based income of Rs 20,250 crore over the next five years, mainly driven by lower transaction cost, favorable regulatory environment and UID project. By 2015, $350 billion in payment and banking transactions could flow through mobile phones, compared with about $235 billion of total credit-card and debit-card transactions today. This forecast is based on a recent analysis conducted by The Boston Consulting Group. Therefore, there is a need to explore mobile banking to every nook and corner of the country. (NextBigTeamWhat, 2011) Cluckey 2012 report states that in recent years, the RBI has introduced programs designed to reach the nations 75,414 villages that have more than 2,000 residents, but no banking services, with the aim that every household in the country should have at least the most basic, no-frills bank account by the end of the year. Currently only three out of five households have an account. Since April of 2010, this initiative has extended financial inclusion to nearly 100 million Indians who now own no-frills bank accounts, the total worth of which exceeds 87 billion rupees ($1.57 billion), but its a tiny fraction of the estimated $450 billion value of the rural economy. Hence, India is facing a huge challenge of making many people inclusive in growth. - 357 -

A Price Water House Coopers (2011) report submitted by price water house coopers, shows that the total revenue expected from mobile banking is Rs 2600 crore by 2015. The report furthers state that Mobile banking can help banks as well as MFIs to deliver and collect credit in a faster and cheaper way. The study ends on the note that the Mobile banking is the cost effective way of doing banking transactions but his study is silent about the perception of consumers as well as awareness towards mobile banking services. Janet Hernandez, Jeff Bernstein, and Amy Zirkle differentiated transformative and addictive mobile banking as M-banking services can be both transformative in targeting the unbanked, and additive by targeting those who already have a bank account and providing an alternative means of accessing the services available with that account and concluded that mobile banking will have a positive impact on economic development. (GSR Discussion, 2011). Juniper Research 2011 predicts that over one billion mobile phone users will have made use of their mobile devices for banking purposes by the end of 2017, compared to just over 590 million this year. While the forecast of one billion users by 2017 represents just less than 15% of the mobile subscriber base, it should be acknowledged that around half of all mobile subscribers remain unbanked, with limited access to traditional financial services. The report finds that many consumers already see the benefits of accessing banking services on their mobile phones. The future foundation firmly believed that the recession has played a major role in boosting the adoption of mobile phone banking. However, they stress that it is a contributory factor in the accelerating uptake of the mobile technology. The report also states the benefits offered by mobile banking which will continue to be valued after the economy returns to growth; immediacy and the ability to use time efficiently are very important to consumers whatever the health of the economy. (Future Foundation, 2010). The Bain & company (2012) conducted surveys on retail banking in different countries. They explored various customers habits in banking. They found that mobile banking has tremendous potential to delight customers and turn them into strong advocates of the bank. Isaac and David examined how M-Pesa is used as well as its economic impacts. They analyzed data from two waves of each data on financial access in Kenya, they found that increased use of M-Pesa lowers the propensity of people to use informal savings mechanisms such as RoSCAs (Rotating Savings and Credit Associations), but raises the probability of their being banked. By this there is evidence that people use their M-Pesa accounts as a place to store wealth and the results suggested that M-Pesa improved individual outcomes by promoting banking and increasing transfers. - 358 -

The Federal Reserve (2011) Board advocates that mobile technology offers the potential to better integrate the unbanked and under banked into the mainstream financial system. According to the authors, with the emergence of these technologies, some financial institutions are exploring whether they can realize sufficient cost savings and better meet the needs of the unbanked since the technology and business models are so new and still evolving. They also conducted a survey to look at consumers usage of and attitudes towards mobile phones and mobile financial services. OBJECTIVE The goal of the paper is to provide a detailed study of how mobile banking helps in financial inclusion in various developing countries like India, Kenya and Philippines and also to discuss various types of Bank models. RESEARCH METHODOLOGY This paper employed the archival method of reviewing literatures available -theoretical, applied and empirical to provide an overview of transformational mobile banking. DISCUSSION Any technology which is well-accepted, widely available at affordable costs and suitable for banking and payment services provides an immense opportunity to extend the financial services to all remote areas such as banked and unbanked. An increasing number of countries are committing to improving access to and usage of financial services, informed by a fast-growing body of country experience and knowledge. While more than 60 countries have introduced reforms to stimulate an expansion of financial inclusion in recent years, there is an increasing emphasis on a comprehensive approach with a sequenced package of measures conducted by a range of relevant actors, leading to more significant improvements in financial inclusion that are beneficial for new consumers. Mobile technology is being one of the important measures to include poor people in the growth of their economies as mobile technology scores on all these parameters and can act as a catalyst to usher in the universal goal of financial inclusion. In a large country like ours where a majority of the population still lives in rural areas that do not have the presence of formal banking providing banking facility has been a major challenge. The unique characteristics of mobile technologies such as ubiquity and convenience added with the fast growth of mobile phone usage in the developing world has made the mobile phone the preferred choice for delivering financial services to the unbanked. The unbanked are people without formal bank accounts who operate in a cash economy; they are limited in their ability to maintain savings, take loans or make remote payments (Medhi and Ratan 2009). - 359 -

TRANSFORMATIONAL MOBILE BANKING As mobile usage expands, there are many opportunities to the unbanked to be banked. With mobile banking, low-income people no longer need to use scarce time and financial resources to travel to distant bank branches, often located far from low-income communities. Therefore, an m-banking transaction costs far less to process than a transaction at any ATM or branch which is also far away from their places, banks can make a profit handling even small money transfers and payments. Mobile is already reaching the unbanked poor: in Kenya and Philippines which are explained further, one-third of people without bank accounts own a mobile phone or have access to one. Many of these people are poor. M-banking therefore holds a great promise to these unbanked populations. One way to achieve transformational mobile banking is to use the Access Frontier Approach methodology (figure 1). This methodology seeks to distinguish usage of a product or service from accessing to it, and seeks to understand the obstacles which may prevent everyone from accessing that product or service. This approach is divided into different market zones. A key feature of the access frontier approach understands the reasons for non-use, to enable to distinguish unbanked categories. A survey called FinScope was conducted by FinMark Trust on the unbanked people of South Africa in 2007. (David Porteous, 2007)

Fig 1: Market Map uses Access Frontier Approach The above frontier approach used by FinScope on South Africas mobile banking service revealed a fact that most poor people are unbanked primarily due to economic reasons which relate in part to their work status, unable to maintain accounts and, perceptions and choice of access to mobile banking. The conclusion drawn on this survey was that having a bank account relates to the value proposition of the mobile banking and that the propositions of convenience and safety are less appealing to the unbanked and customers - 360 -

using mobile services are much more driven than banked people in general by convenience, both in terms of deposits and withdrawals and in terms of making payments. (David Porteous, 2007) There are also few other studies made such as a study on South African mobile banking services and other on Canadian contactless cards, and both the studies stated that value proposition is crucial for consumers. Therefore it is clear that when payments or savings are to be made through electronic models, customers need to understand how they benefit by switching the positives and the negatives of the new system when they compare with the old system. This specific need for customers can be taken as an area of focus by the banks/service providers but it largely depends on the regulations of those particular countries which allow the smooth interoperability of a bank or MFI, mobile network operator and a technology. (Martina, 2011) TWO DISTINCTIONS OF TRANSACTIONAL MOBILE BANKING Different countries are following different mobile banking models depending upon their requirements and availability of infrastructure. There are two main models such as Bank led model and Non-bank led model. BANK LED MODEL In this model, banks are offered to substantially increase the use of their services, both by extending new mobile services to their existing customers and mobile telephony customers who do not have a bank account. Under this model, a licensed financial institution or a bank delivers financial services through a retail agent, who handles all customer interactions. The bank-led model can use the services of Business correspondent (BC) arrangement which is under pilot study in developing countries like India. The transformational mobile services are used in South Africa Wizzit and MTN Banking which are the best examples of bank led models. NON-BANK LED MODEL The non-bank led model is one where a bank does not come into the picture, except possibly as a holder of surplus funds and, the non-bank, the MNO performs most of the functions depending upon the partnership under each sub-models. The sub models of the non - bank model are: Joint venture model, Third party providers and Telecom led model. DEVELOPING COUNTRIES IN IMPLEMENTING THE MOBILE BANKING ACCESS KENYA Kenya has made impressive strides in the overall financial inclusion over the last five years, thanks to the launch of the M-PESA mobile money transfer service by Safaricom - 361 -

Ltd. M-PESA has within the same period opened the eyes of the world to the potential of mobile money and mobile payments, creating what would easily pass as a financial services revolution. In this country, branchless banking has the increased poor peoples access to financial services like easy account opening (both on site and remotely), etc... In response to m-Pesas success, the model has been imitated in other countries. Africas biggest mobile operator MTN has rolled out schemes elsewhere, the most ambitious in Kenyas neighbour Uganda. Central banks in some countries, such as Brazil, have now created financial inclusion teams, with a vision for using similar systems to bring financial access to the poor and isolated. (Ken Banks, 2012). The Indian government has also shown determination to achieve this aim, and analysts predict, with its strong IT infrastructure and dense population, India too could be on the road to becoming a cash-light, financially inclusive economy in the near future. PHILIPPINES The Philippines is among the most advanced mobile money markets in the world. In 2001, SMART Communications launched SMART Money in partnership with Banco de Oro. The service, which uses SIM Tool-Kit, enables customers to buy airtime, send and receive money domestically and internationally through mobile phone, and pay for goods by using a debit or credit card by using it. In 2004 Globe Telecom launched GCASH, and SMSbased offering, which offers a similar suite of functionality entirely using the mobile phone services (GSMA). FINANCIAL INCLUSION IN INDIA THROUGH MOBILE Financial inclusion is a critical issue in India because the fruits of two decades of rapid economic growth have gone disproportionately to well-off Indians. Of the 0.6 million villages in India, the total number of villages with banking services through brick and mortar branches and alternate banking channels stands at about 0.14 million villages as at end March 2012. India has the highest number of households (approximately 145 million) who are excluded from banking. The Table 1 gives information on the key indicators for financial inclusion in India (IMF, 2011) - 362 -

Table No 1 Access to & Use of Financial Services

Commercial bank branches per 1,000 km2 ATMs per 1,000 km2 Outstanding deposits with commercial banks (% of GDP) Deposit accounts with commercial banks per 1,000 adults Household deposit accounts with commercial banks per 1,000 adults 30.43 25.43 68.43 Commercial bank branches per 100,000 adults ATMs per 100,000 adults Outstanding loans from commercial banks (% of GDP) Loan accounts with commercial banks per 1,000 adults Household loan accounts with commercial banks per 1,000 adults 10.64 8.90 51.75

953.06

142.02

853.02

20.62

Source: (International Monetary Fund, 2011) There is a strong relation between poverty and lack of access to basic financial services such as savings accounts and taking loans. When poor people are shut out of the formal banking system they have to depend on less-efficient and potentially characterized sources of credit, such as money lenders. One of the biggest issues is that banks make more money off wealthier clients in urban areas than the poor in rural areas. Many rural dwellers still live too far from bank branches and cannot open accounts. Also, poor rural customers who are near to banks usually deposit and borrow small amounts, making the business they bring to banks less profitable. For example, it costs a bank roughly the same to sell at 10,000-rupee or a 1-million-rupee loan to a customer, but the interest income that the bank earns from the latter is much higher. (Jain, 2012) However, with the growing reach of the mobile to many people living in remote areas of the country, it has now become possible to provide the banking facilities to people who were not able to enjoy this facility so far. Usage of mobile banking services among this huge base of subscribers is, however, very low which is approximately one-third of total wireless subscribers. Even among the existing bank customers less than one per cent of them are covered under the mobile banking services. Although the low base of customers exists, the growth in mobile banking transactions has shown an increasing trend. (Harun R. Khan, 2012) When poor people have access to financial services, they are given a good opportunity to come out of poverty, as they can save their little agriculture income or they can make efficient investments in health like buying medicines, education like sending their children to - 363 -

school, agriculture and businesses by investing in their own enterprises, by saving money. This in turn will allow them to live systematically and making their life easier and happier. This has been Indias efforts to promote inclusive growth in the country. STATUS OF MOBILE BANKING IN INDIA Currently, 65 banks have been approved by the Reserve bank of India to conduct of mobile banking out of which 47 banks have started offering these services. Transactions in mobile banking have been increasing. During February 2012, more than 2.8 million transactions for close to Rs. 1961.23 million were transacted; a 300 % increase, which is very high in volume and it is more than 200% in value terms when compared to 0.7 million transactions for close to Rs. 616.19 million during February 2011. But only a few bank customers i.e. Over 12.23 million have so far registered for mobile banking services. These numbers are not satisfactory and do not give any cheers to the RBI initiatives because of the two below facts: i. ii. At the end of January 2012, the total wireless subscriber base was 936 million, which included 313 million subscriptions in the rural areas. Only 55% of the total population of India have deposit accounts.(Dr.Chakrabarthy, 2012)

RBI INITIATIVES IN MOBILE BANKING The Reserve Bank of India modified guidelines of mobile banking in December 2011, to allow banks to facilitate funds transfer both for personal remittances and purchase of goods and services without any ceiling. Hence, banks are now free to decide on the limits, based on their own risk perception. In respect of small value transactions fund transfers up to Rs 5,000/- can be affected through the mobile phone without the need for end-to-end encryption. (Dr K. C. Chakrabarty, 2012) In order to provide a domestic money transfer facility especially to migrant population who do not have access to formal banking channels, domestic money transfer guidelines have been issued in October 2011. Remittance from a bank account for cash payout to the beneficiary not having a bank account at an ATM/BC outlet has also been facilitated up to Rs 10,000/- per transaction subject to a monthly cap of Rs 25,000/- per beneficiary to the remitting bank obtaining only the full name and address of the beneficiary. Similarly cash pay in facility has been permitted up to Rs 5,000/- per transaction subject to a monthly cap of Rs 25,000/- per remitter for transfer of funds to a bank account. Remitter has to provide only the minimum details (name and address). The bank need not take any document or proof of address. (RBI Bulletin, 2011) - 364 -

With the approval of the Reserve Bank of India, The Interbank Mobile Payment Services (IMPS) operated by the National Payments Corporation of India (NPCI) has increased the efficiency of mobile banking by enabling real time transfer of funds between bank accounts and providing a centralized inter-operable interbank settlement service for mobile banking transactions with confirmation features. (Dr K. C. Chakrabarty, 2012)

RBI POST INITIATIVES EFFECT ON MOBILE BANKING In India mobile banking is bank-led model as per Reserve Bank of India guidelines. This has encouraged several stakeholders such as handset manufacturers, network providers and telecom operators to tie up with banks to develop a scalable model. Some of the offerings and their affects are listed below which have emerged or are around the corner over the past year. When RBI came up with the regulation of an additional factor across IVR and mobile channels it had affected mobile service aggregators such as ngpay, Mchek and Paymate. (IDRBT Report) With the RBI initiative, several new banks have come up with their mobile banking applications. Newer channels such as USSD and SMS have also gained in prominence after RBI increased the limit for unencrypted transactions over mobile channels to INR 5,000 per day. (IDRBT Report) Banks like State Bank of India (SBI) offer certain value-added services such as prepaid mobile recharge, which has been a hugely successful functionality. SBI boasts more than 1 million customers in its mobile banking platform freedom by virtue of several balanced service offerings and maintaining effective communication with customer. (IDRBT Report) Apparently, the regulator believes that mobile banking is yet to show remarkable growth even after the daily transaction limits have been raised to INR 50,000 per day per customer. Apart from major banks such as SBI and ICICI, other banks are still to gain numbers in terms of volume and value of transactions. (ERNST& YOUNG)

CONCLUSION This study brings together available facts to frame important debates on financial inclusion through transformational mobile banking in various developing countries like Kenya and India. Mobile Technology has the great potential to extend banking services to a many of un-banked people especially those living in rural areas and can reach easily to these areas with lower costs and higher efficiency. These mobile services can be observed from the experiences of Kenya, Philippines. - 365 -

The Indian government sees mobile banking as a key area for the countrys development and actively encourages banks and mobile operators to develop these services for both people with bank accounts and mobile phone users without having a bank account through various government schemes. The mobile banking industry in India is ready to rise, especially with the ecosystem players i.e. Operators, banks and mobile manufacturers coming together and launching pilot services. Therefore, the mobile banking transformation could be significant if its implementation is compatible with current financial and social practices of the rural unbanked (e.g. Susu savings); potential users are given the ability to trial services; and if trust is maintained through a reliable network, while providing accessibility and convenience of these services through the removal of geographic barriers. REFERENCES 1. Chakrabarty.K.C, Deputy Governor, (2012) address on M-Banking in IndiaRegulations and Rationale, available at http://www.r bi.org.in/scripts/ BS_SpeechesView.aspx?id=681 David Porteous, (2005), The access frontier as an approach and tool in making markets work for the poor DFID, (2008), Regulating Transformational Branchless Banking: Mobile Phone and other Technology to Increase access to finance Douglas Pearce and Claudia Ruiz Ortega, (2012), Financial Inclusion Strategies Reference Framework, Prepared by the World Bank for the G20 Mexico Presidency Emerging Trends in Mobile Banking with Monitise, (2010) Financial Access Survey, (2011), Key Indicators of Access to and Use of Financial Services, available at http://fas.imf.org/ GSMA, Mobile Money for the Unbanked, (2009), Mobile money in the Philippines Harun R. Khan, (2012), Customising mobile banking in India: issues & challenges, available at http://www.rbi.org.in/scripts/BS_SpeechesView.aspx?id=726 Harun R. Khan, (2012), Customising mobile banking in India: issues & challenges, available at http://www.rbi.org.in/scripts/BS_SpeechesView.aspx?id=726 IDRBT (Institute for Development and Research in Banking Technology), Ernst & Young, Technology in Banking Insight and Foresight. Isaac Mbiti, David N. Weil, (2011), Mobile Banking: The Impact of M-Pesa in Kenya, NBER Working Paper No. 17129 - 366 -

2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

12.

Ken Banks of National Geographic Emerging Explorer, (2012),The Invisible Bank: How Kenya Has Beaten the World in Mobile Money, available at http:// newswatch.nationalgeographic.com/2012/07/04/the-invisible-bank-how-kenya-hasbeaten-the-world-in-mobile-money/ Porteous. D, (2007). Just How Transformational is M-Banking?, South Africa FinMark Trust, February, available at http://www.finscope.co.za/documents/2007/ transformational_mbanking.pdf Rani,Martina (2011) Collaborations and Regulations for Transformational Mobile Banking in Emerging Markets, available at http://www.academia.edu/901582/ Mobile_Banking Santanu Sengupta, (2010), Speeding Financial Inclusion Through-BC-BF-Model, available at http://www.scribd.com/doc/33355764/Speeding-Financial-InclusionThrough-BC-BF-Model Sudeep Jain, (2012), Why So Few Indians Have Bank Accounts, available at http:/ /blogs.wsj.com/indiarealtime/2012/11/01/why-few-indians-have-bank-accounts/ Team NextBigWhat. (2011), Mobile Banking In India$350 Billion Worth Of Transaction Expected By 2015, available at http://www.nextbigwhat.com/mobilebanking-in-india-report-297/ The World Bank (2012), Financial Inclusion Strategies Reference Framework, available at www.worldbank.org/financialinclusion Tobin, Peter, (2012), The adoption of Transformational Mobile Banking by the Unbanked: An Exploratory Field Study available at http://search.proquest.com/ docview/1024446623?accountid=147271

13.

14.

15.

16. 17.

18. 19.

Acknowledgement: I would like to thank Dr. Martina Rani, Associate professor of Vignana Jyothi Instit ute of Management for her valuable guidance and advice.

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BUSINESS CORRESPONDENT MODEL AN INNOVATIVE BUSINESS PRACTICE IN BANKING SECTOR

B. Renuka, Research Scholar, School of Management Studies, University of Hyderabad, Hyderabad. Can be reached at - r_bacharaju@yahoo.com.

ABSTRACT The Indian experience with reforms in the last two decades reveals that while there have been achievements on the economic growth front, inequalities have increased and exclusion continues. Ever since the enactment of the Cooperative and Regional Rural Banks Acts and nationalization of scheduled commercial banks, financial inclusion measures in India have led to physical expansion in the country. Unfortunately, the expansion has not brought about the necessary change in the backward and rural areas as financial services are yet to reach a vast majority of the population. To overcome this problem, RBI has permitted to use agency banking system called Business Correspondence Model since 2006. The present work emphasizes on the significance of BC model, its role in equitable development. This paper also examines the perception of beneficiaries towards BC model. KEY WORDS Business Correspondents, Customer Service Point, Financial Inclusion Inclusive Growth, Technology Vendors. INTRODUCTION A World Bank Report defines Financial Inclusion or broad access to financial services as an absence of price and non-price barriers in the use of financial services. The report clearly brings out the distinction between the key words used such as access to and use of. Access essentially refers to the supply of services, whereas use is determined by the demand as well as supply of various financial services. It also recognizes the distinction between voluntary and involuntary exclusion and stresses that the problem of financial inclusion addresses the involuntarily excluded as they are the ones who, despite demanding financial services, do not have access to them. In the Indian context, the issue of financial inclusion was analysed in greater detail by the Committee on Financial Inclusion. The Committee among other things, examined the term Financial Inclusion and provided a working definition. According to the Committee, the Financial Inclusion was defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost. This definition also covered the main aspect of providing timeliness and adequacy of credit to this segment of people at an affordable cost. In other words, it also addressed the issue of demand and supply side perspectives of Financial Inclusion. - 368 -

The RBI followed up the recommendations of the Khan Working Group and the Rangarajan Committee on Financial Inclusion by issue of series of Circulars beginning from January 2006. As the focus of the definition of Financial Inclusion was providing credit support to the vulnerable groups at an affordable cost, the RBI instructions to banks too were aimed at introducing simplified products such as no frills accounts and creating expanded outreach in the hinterland through the agency of BFs and BCs. The banking system responded with opening a number of no-frills accounts without further effort to provide deeper saving services or credit related services to the clients. The Working Group to review the Business Correspondent Model by the RBI looked at Financial Inclusion in a holistic manner. The Group observed that the financial inclusion involved the three critical aspects of (a) access to banking markets, (b) access to credit markets and (c) financial education. It also emphasized that there should be a proper understanding and appreciation of the BC model by all stakeholders, in particular, by the banks. According to the NSSO 2003 report, the majority of rural population still does not appear to have access to finance from a formal source. About 59% of rural households do not have a deposit account and 79 per cent of rural households have no access to credit from a formal source. Dr. Subir Gokarns, Deputy Governor, RBI (2010) stated that 57% of adult population of India is having Bank accounts, 10 % life insurance and 0.6% non- life insurance, 13% of the population is having debit cards and 2% credit cards. BUSINESS CORRESPONDENTS (BCS) The year 2005-06 can be considered a watershed in the annals of Indian Banking as it marked the beginning of new approaches to rural banking. Two significant announcements were made by the Finance Minister in his Budget Speech 2005-06. The first one was requesting the Reserve Bank of India (RBI) to examine the issue of allowing banks to adopt agency model by using the infrastructure of civil society organizations, rural kiosks and village knowledge centres. The second one was advising banks to consider appointing MicroFinance Institutions (MFIs) as Business Correspondents to provide transaction services on their behalf. The RBI then constituted an Internal Group to examine the issues addressed by the Honble Finance Minister. Among various recommendations made by the Group, it set forth guidelines for two types of support systems for banks to make use of viz., Business Facilitator Model (BF) and Business Correspondent Model (BC). The starting point for speeding Financial Inclusion through BC and BF models was the Khan Committee recommendations in 2005 and refined later on the basis of Rangarajan Committee recommendations in 2008. As per extant instructions of the RBI on Financial Inclusion, in addition to activities listed under the BF model (facilitation / non-financial services only), the scope of activities that could be undertaken by the Business Correspondents (BCs) included - 369 -

(i)

Disbursal of small value credit,

(ii) Recovery of loan principal / collection of interest, (iii) Collection of small value deposits, (iv) Sale of micro insurance/mutual fund products/ pension products/ other third party products, and (v) Receipt and delivery of small value remittances/ other payment instruments. The activities to be undertaken by the BCs were to be within the normal course of the banks banking business, but conducted through the permitted entities at places other than the bank premises. The Working Group on BC model also observed that most of the banks that have employed BCs have appointed the Section 25 Companies or Trusts / Societies as BCs. Another significant observation made by the WG was almost all the Section 25 Companies appointed as BCs were set up by the technology service providers who had provided the smart card or biometric solutions for account opening, etc. The WG while discussing the enlarging the category of entities permitted as BCs deliberated at length the desirability of including entities like telecom companies, oil companies and other corporates as BCs. It however, decided not to consider any of these entities as BCs. The WG, therefore, recommended the following as BCs in addition to those already covered by extant guidelines of RBI : (i) Individual kirana/medical/Fair Price shop owners

(ii) Individual Public Call Office (PCO) operators (iii) Agents of Small Savings schemes of Government of India/Insurance Companies (iv) Individuals who own Petrol Pumps (v) Retired teachers, and (vi) Authorised functionaries of well run Self Help Groups (SHGs) linked to banks. mutual fund products/ pension products/ other third party products, and (v) Receipt and delivery of small value remittances/ other payment instruments. OBJECTIVES OF THE STUDY 1. 2. 3. To understand the mechanism of BC model. To identify various channels of financial services available for a common man especially in rural areas and its approach. To analyze the perception of beneficiaries (account holders through BC model) on services provided by Business Correspondents. - 370 -

RESEARCH METHODOLOGY The study adopted following methodology: 1. LITERATURE REVIEW A literature review was carried out to take stock of existing knowledge, issues, concerns and regulations on the agent banking. 2. SELECTION OF BANK FOR STUDY: BENEFICIARIES OF BC MODEL THROUGH Andhra Bank is selected for studying their initiatives and concerns of BC networks for the purpose of the study. However, relevant information from different banks has been taken from various reports of Banks. 3. SAMPLE SELECTION Mahaboobnagar and Warangal districts were selected based on the services of BCs. Convenient Sampling technique is used to collect data from beneficiaries. 4. METHODOLOGY OF STUDY A sample of 100 beneficiaries is collected from six villages of above two districts. Rudraram, Chilkuru, Moinaba, Kondurg, Jadcharla and Mogil Gidda are the sample villages. While analyzing the perception and satisfaction of beneficiaries, statistical tools like simple average method are selected. LITERATURE REVIEW David Craig (2005) opinioned that inclusive growth is achieved through inclusion of the vulnerable by offering the prospect of development, participation and social inclusion. The key dimension of the inclusive convergence may from economism to social inclusion. The broader economism, good governance, social liberty, education, infrastructure and social inclusion too will change the dimensions of a country positively. Appropriate economical policies leads to financial empowerment in the society and it will lead to bring the social cohesion. Authors said that people participation in economy, society, governance etc,. will lead to inclusive growth. Usha Thorath (2007) stated that Financial Inclusion is considered to be critical for achieving inclusive growth which itself is required for ensuring overall sustainable in the country. FI can be thought of in two ways. One is exclusion from the payments system i.e. not having access to a bank account. The second type of exclusion is from formal credit markets, requiring the excluded to approach informal and exploitative markets. Poor infrastructure, lack of awareness, low incomes/assets, social exclusion, illiteracy, distance from branch, branch timings, cumbersome documentation and procedures, unsuitable products, language, staff attitudes etc are common reasons for exclusion. - 371 -

C. Rangarajan (2007) presents an overview on the need for an attitudinal change, the need for a change in organizational structure and the need for innovative models of delivery at the door step. The financial inclusion is no longer an option but it is a compulsion. It is not possible for banks to open branches in every village, but that such problems could be addressed through BCs. The solution of financial inclusion lies in finding an intermediary. BC is a good model. The repayment ethics of the self-help groups is very high and that the model should be replicated across the country. The Business Standard Reporter (2009) stated that to reach out to the people in the unbanked rural areas, the State Bank of India (SBI), the largest public sector bank, plans to cover all the Gram Panchayats (Gps) of Orissa under Business Correspondence Model. This is being done in line with the Reserve Bank of India (RBI) guidelines on financial inclusion. Under the plan, open Banking Outposts will be opened in 6234 Gram Panchayats (GPs) of the state in joint initiative of SBI and the Orissa government. SBI has roped in the Mumbai based Zero Mass Foundation (ZMF) as Business Correspondent for the scheme. This model can also be extended in other states of India. Finance Minister Pranab Mukherjee (2010) urged banks and their technology partners to work together to reach out to the unbanked and help the government achieve its goal of inclusive growth through financial inclusion. He opinioned that this process can also help the government deliver the benefits of social security efforts, NREGA payments to the rural poor directly through the banking system which may reduce the time and transaction costs. Former UN Secretary-General Kofi Annan(2003), said that the stark reality is that most poor people in the world still lack access to sustainable financial services, whether it is savings, credit or insurance. The great challenge is to address the constraints that exclude people from full participation in the financial sector. In addition, one country must build inclusive financial sectors that help people improve their lives. Dr. K.C. Chakraborthy (2008) has said that Indias demographic profile was changing and it has its own impact on the economy and polity. Its impact would be severe on the banking and insurance sectors. Nearly 60 per cent of the population had been denied banking services. Nearly, 80 per cent of the people have not availed life insurance products in India. Therefore, the people of India are expecting the best financial or insurance products to protect their savings as well as their lives. R.K. Anand (2008) opiniend that insufficient income, low capabilities due to lack of financial education, training or experience, lack of financial and physical assets, negligible market values etc,. are the main reasons for financial exclusion. To enhance the financial inclusion there is a solution called theory of three pillars. The first is, Appropriate framework is to be provided by State Government. Next is the formal financial System represented - 372 -

primarily by banks which would provide savings facilities, efficient payment system and low cost credit. And the last pillar states that services of community based organisations (like SHGs) and NGOs are to be adopted. Stephen Sinclair (2009) and his co-authors opiniend that exclusion from the financial system brings real and rising costs, often borne by those who can least affords them. Promoting financial inclusion has therefore been, and continues to be, a key priority for the Government. In UK though basic bank accounts and the Post Office Card Account have been popular, offer limited services in relation to access to banking, credit, insurance etc. particularly in case of lower income households. Less reliable information and skills on possession of savings and assets is the main reason for the financial exclusion. Smt. Usha Thorat( 2006) determined that the focus on financial inclusion reflects both on the banking system and society at large. Banks need to understand the market and develop products suited to the clientele. They need to develop data sets to evolve risk assessment models for proper rating and pricing. Financial inclusion has to be viewed as a business strategy and should focus on rural connectivity, through roads, power and telecom can ensure greater penetration by the financial system into remote areas and provide safe and efficient financial services to large segments of the financially excluded. Mandira Sarma (2010) identified five major forms of financial exclusion access exclusion, where segments of population remain excluded from the financial system, condition exclusion, when exclusion occur due to conditions that are inappropriate for some people; price exclusion, when the exclusion happens due to unaffordable prices of financial products; marketing exclusion, when exclusion occurs due to targeted marketing and sales of financial products and self-exclusion, that takes place when certain groups of people exclude themselves from the formal financial system owing to fear of refusal or due to psychological barriers and therefore we can say that financial inclusion is a multi dimensional area. MECHANISM OF BC MODEL Banks operate a number of channels through which they deliver financial services: branches, ATMs and the internet are the traditional channels. The Business Correspondent option offers a new channel through which banks can extend services the guidelines are written in a way which requires a bank to be involved and is the ultimate provider of services. While RBI has oversight and regulatory responsibility for the BC banking channel as part of its regulatory regime, the principal banks are responsible for the acts of their correspondents. - 373 -

This new channel works through a process of collaboration by the bank with one or more partners. These partners often include: TECHNOLOGY AND VENDORS: Who provide a range of hardware and processing capacity and connectivity which can link clients to BCs and BCs to the bank. BUSINESS CORRESPONDENTS: Which are organizations or individuals that organize and offer one or more points of transaction outside of bank branches. The BCs organize and manage a network of such transaction points in partnership with a bank. CUSTOMER SERVICE POINT: CSP are individuals, shops or other outlet points which are responsible for the direct contact with the clients. CSPs open bank accounts, conduct KYC, cash out withdrawals, receive payments and in some cases, extend credit. For the channel to become financially viable, regulations require that all revenue from the services be collected by the bank. The Tech Vendors, BCs and CSPs are not permitted to charge fees to clients for the services. The banks revenue may come from the extension of services: accounts, savings, credit and payments. The Bank under contractual relationships then makes payment of service charges to the BCs and Technology Vendors. FINANCIAL INCLUSION IN ANDHRA BANK Andhra Bank has empanelled M/s Bartronics India Ltd as service provider to give an end to end solution for the FIP. This bank is allotted with 1,144 villages with population above 2,000 for providing such outlets. Of which, 1,060 are located in Andhra Pradesh State. Bank has proposed to provide the basic banking products as suggested by RBI to the customers.TheFinancialInclusionPlan(FIP)coveringallthevillageshasbeensubmitted to Reserve Bank of India. M/s Bartronics India Ltd., the Institutional Business Correspondent(BC) appointed by Bank for the FIP implementation has deployed individual B.Cs/ Customer Service Providers (CSPs) in each village for conducting the banking transactions through Point of Sale (PoS) devices. The CSPs have been deployed after a due diligence process undertaken by the respective Branch Managers. Bank has proposed to provide the four basic products through these BC operated banking outlets at the doorstep of the villagers. They are a) simple savings bank account with built-in overdraft facility; b) a recurring deposit product; c) remittance facility; and d) entrepreneurship credit in the form of KCC or GCC. - 374 -

Table No 1 Financial Inclusion Plan (FIP) implementation to provide banking service outlets in villages having population above 2,000 - Progress:
Particulars Coverage of Villages having population above 2000 No. of customer a/cs opened Target as on 31-032011 500 Achievement by 31-03-2012 Progress as on 31-032011 808 Achievement as on 31.3.2012 1144

540

1.5 lakhs

1.52 Lakhs

2.28 lakhs

6.00 lakhs

Source: www.andhrabank.com ANALYSIS OF THE DATA There are 3 major channels of financial services especially in rural areas. The variation in services is considered while understanding the feedback of beneficiaries. Table No 2 Saving and withdrawal analysis

Bank 1 hr ( on an average 6kms. For whom who has no bank branch at their village) Rs.10 to Rs. 15

Post office

Business
Correspondence

a. How much time will it take to travel to do a transaction

hr.

15 minutes

b. What is the cost you spend on transport for a transaction

Nil

Nil

What is the opening deposit amount?

Rs. 500.00 ( In most of the nationalized banks) Rs. 50,000 ( In most of the nationalized banks)

Rs. 10

Re.1

What is the maximum saving amount?

Rs. 500 per day

Rs. 1000 per day

- 375 -

What is the minimum withdrawal

Rs. 150 ( Subject to different banks) 50,000 ( Subject to different banks)

Rs.10

Re.1

What is the maximum Withdrawals Time spent on waiting line for payment

50,000

Rs. 1000 per day

2 hrs.

1 hr.

20 minutes

Availability in a week

6 days

5 and day

7 days

Total hrs. available in a day

6 hrs.

6 hrs.

18hrs.

Servicing Providing Time

45 minutes

30 minutes

10 minutes

Credit Availability

Yes

No

No

Availability of remittances facilities ( NREGA & SSP)

Yes

Yes

Yes

Note: The above data is given by considering majority of the nationalized banks information. However, the above information may vary in respect of corporate financial institutions.

- 376 -

Table No 3 Sample Collected: 100

Bank Post Office Business Correspondent 50% 50% 40% 40% 0% 60% 30% Yes - 80% (20% not responded)

Convenient Satisfied with Cost spent on transportation Satisfaction with Savings Satisfaction with withdrawals Satisfaction with Credit Satisfaction with waiting time Satisfaction with over all Services BCs must be given right to handle credit

10% 10% 30% 20% 60% (40% not responded) 10% 30%

40% 40% 30% 40% 0% 30% 40%

----

----

Andhra Bank has around7,00,000 account holders through BCs by 30-06-2012 out of which 70,000 are from Mahaboob nagar and Warangal Districts. A sample of 100 beneficiaries is taken by making an assumption that the above sample can reflect the characters of entire population and there is homogeneity in entire beneficiaries. OBSERVATIONS 1. 2. 3. The above table states that on an average of 50% of sample felt that BC model is convenient and they are satisfied with BCs cooperation. It is observed that there is no proper CSP (Customer Service Point) for Business Correspondents. Most of the BCs are using their home place as work place. It is observed that there are technological problems to make transactions. There is smart card system or bio metric card which must be inserted in a Pause Machine to record the transactions. But those Pause Machines found dead for long time and service provider has not taken any action to correct it. - 377 -

4. 5.

BCs are not given permission to handle credit. 80% beneficiaries opinioned that BCs must be given right to handle credit to meet emergencies. 60% beneficiaries said that the Business Correspondence Model is very much convenient for them as it saves time to travel (as BCs are available within village), Cost reduction on travelling, reduction in waiting time, Provision of immediate service, giving financial literacy in a friendly manner, encouragement of savings etc. is top most priority of a BC. Under BC model minimum saving and withdrawal amount per day is Re.1. This is so useful for the farmers who wish to save or withdraw petty cash. This model found failure in some villages due to lack of initiation and interest of BCs. Most of the Service Providers are giving Rs. 500.00 p.m as their remuneration (irrespective of transactions). This is one of the de-motivational factors for BC. There is no significant effect of opening an account to get residential facilities.

6. 7.

8.

SUGGESTIONS 1. Though RBI and GOI focusing more on Agency Banking Model and despite having various benefits of this model, it is found dead in some villages. But it is observed that this model can activate if banks make more effective strategies. BCs must be given minimum of Rs. 5,000p.m and additional pay for each target to be paid. Banks must check the possibility of allocating right of handling credit as credit is the boost for any financial institution. It is to understand that Rights and Responsibilities must be equally allocated. The study observed that BCs are suffering with huge work stress with less income.

2. 3.

4.

CONCLUSION The message that comes out of the event is loud and clear - the focus of the model has to shift significantly to ensure that it finds space in the business strategies of the banks and not in the footnotes of their annual reports. The BC model is in its infancy. The different experiments being tried out enhance the understanding and the skill sets of the sector to make the model a viable and feasible instrument of increasing financial services outreach. In the initial stages, the focus seems to be on inclusion. The experiments are by and large not treating the BC-led inclusion as a commercial prospect and seek to contain costs, not only of the current kind but also of investments which are critical from a long-term point of view. The key to success of BCs lies in banks making client acquisition and business expansion a business proposition and not just treating it as a CSR activity. When BC becomes an instrument of business expansion and profitability, banks find practical answers to the many problems that exist today. - 378 -

REFERENCES 1. 2. 3. 4. 5. A report by CGAP, Access Development Services, Business Correspondents and Facilitators path way to financial inclusion. Business Standard (2009), Asian Management review Journal. www.businessstandard.com CGAP (2006), Indias vision on technology and financial Inclusion. David A Payne; Robert F McMorris (1967),A book on Educational and Psychological Measurement, 419 pg. Waltham,Mass., Blaisdell Pub. Company. David Craig and Doug Porter (2005), The third way and the third world: poverty reduction and social inclusion strategies in the rise of inclusive liberalism, Review of International Political Economy, p.p 226263, ISSN 0969-2290. Dr.K.C.Chkraborthy (2008), A presentation on financial inclusion in Manggloreans Meet. Former UN Secretary-General Kofi Annan (2003), en.wikipedia.org/wiki/financial inclusion. Mandira Sarma (2010), Index of Financial Inclusion, Discussion Papers in Economics presened at Centre for International Trade and Development , School of International Studies, Jawaharlal Nehru University, India Pranab Mukharjee (2010), An overview on Speed up of financial inclusion, Economic Times Bureau, Mumbai. R.K Anand (2008), Financial inclusion in India, Book Dynamics of Indian Banking: Views and Vistas, Pgs.387 401, ISBN 978 81 269-0998-8. Rangarajan.C (2009) SKOCH summit, Business line, Business Daily from THE HINDU group of publications. RBI report (2006), Financial Inclusion by Extension of Banking Services - Use of Business Facilitators and Correspondents. Circular no.RBI/2005-06/288. Smt. Usha Thorat(2006), Financial Inclusion - and the Millennium Development Goals, The 4th Programme on Human Development and State Finances at Pune. Stephen,Fiona McHardy, Louise Dobbie, Kate Lindsay and Morag Gillespie (2009), Understanding financial inclusion, Published by Friends Provident foundation Pixham End, ISBN 978-1-906249-51-9. Usha Thorat(2007),Financial InclusionThe Indian Experience, RBI Monthly Bulletin. Usha Thorath (Deputy Governor of the Reserve Bank of India), Financial inclusion the Indian experience, A speech at the HMT-DFID Financial Inclusion Conference 2007, London, 19 June 2007. - 379 -

6. 7. 8.

9. 10. 11. 12. 13. 14.

15. 16.

A STUDY ON BUSINESS AND PROFITABLE MODELS OF FINANCIAL INCLUSIONS

Vandana Samba, Research Scholar (OU), Associate Professor, R.G.Kedia College. She can be reached at Vandana_samba20@rediffmail, 9885436982

ABSTRACT Rural India presents a remarkable opportunity for banks and financial institutions to seek their fortunes and bring prosperity to the aspiring poor through financial inclusion. In a fast growing economy like India the poor are the middle class of tomorrow and banks could, therefore, ill-afford to ignore this segment. Although for the general public and even for practitioners Posts may seem an unlikely champion in the fight against financial exclusion, judging from current results the Post is actually a key lever in advancing the inclusion of un banked populations into the formal financial system. Indeed, after banks, postal operators and their postal financial subsidiaries is the second biggest worldwide contributor to financial inclusion with more than 1 billion people banked through the post. Banks, however, argue that while the benefits of financial inclusion can be easily understood, the costs of serving the poor can be significant in the short-term, thereby impacting profitability. Banks, therefore, need to take bold decisions and reach out to rural India with strategies and business models which are beyond the realm of conventional thinking. This paper looks at some of the business models and the essential elements of profitable models for financial inclusion. KEY WORDS Business Models, Financial Exclusion, Financial Inclusion, Financial Subsidiaries, Financial System, Profitable Models. INTRODUCTION The Committee on Financial Inclusion (Chairman: Dr C Rangarajan, 2008) has defined Financial Inclusion as the process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low-income groups, at an affordable cost, in a fair and transparent manner by mainstream institutional players. Financial inclusion is important for the poor as it provides them opportunities to build savings, avail credit, make investments and equips them to meet emergencies. The development process so far has not brought balanced economic growth across the country. The financial system which has grown in size and complexity ably supporting the economic progress India has seen in the last two decades. But despite this growth, India continues to face serious concerns on poverty alleviation, being home to the worlds largest - 380 -

number of poor. Among other things, access to formal banking services still evades majority of Indias population casting serious aspersions on the inclusive growth. FINANCIAL INCLUSION FROM CONCEPT TO PRACTICALITY Financial inclusion is the process of ensuring access to appropriate financial products and services like credit, savings, insurance and payments and remittance facilities needed by vulnerable groups such as weaker sections and low-income groups, at an affordable cost in a fair and transparent manner by mainstream institutional players. With the primary focus on unbanked rural population, the key financial services that are of great relevance from a financial inclusion standpoint are: Risk management or insurance services vis--vis economic shocks to rural population arising from adverse weather conditions, natural disasters, health emergencies, accidents, untimely death of the only earning member of the family all leading to high uncertain future of thousands of poor families; and Affordable credit taking into account their seasonal inflow of income from agricultural operations, migration from one place to another, and seasonal and irregular work availability and income, and at the same time generating business opportunities for banks. This is sustainable only if banks are able to distribute relevant as well as remunerative products through highly cost effective & scalable delivery methods. Table No 1 KEY BANKING PARAMETERS FOR INDIA, 2004 - 11
Indicator Branches per 1,00,000 people ATMs per 1,00,000 people Deposit accounts per 1000 people Loan accounts per 1000 people Branches per 1000 km2 ATMs per 1000 km2 2004 8.99 607.61 88.24 22.75 2005 8.96 607.30 100.37 23.17 2006 8.93 618.04 100.85 23.58 2007 9.04 3.38 648.07 124.12 24.37 9.11 2008 9.35 4.26 711.42 130.89 25.69 11.70 2009 9.63 5.24 794.42 132.01 27.01 14.68 2010 10.05 7.18 864.52 139.58 28.73 20.51 2011 10.64 8.90 953.06 142.02 30.43 25.43 Benchmar k (OECD) 10-69 47-167 976-1671 248-513 1-159 1-43

Source: IMF Financial Access Survey - 381 -

BENEFITS OF FINANCIAL INCLUSION Financial inclusion initiatives would provide banks with a low-cost and stable source of funds, helping them improve their asset-liability management (ALM). The potential to tap the rural areas for raising low-cost and stable deposits is high. In urban areas whenever interest rates start rising banks are faced with a higher interest outgo on account of migration of deposits from savings to term deposits. This type of churn, however, would be far lower in rural India as financial literacy levels there are far lower. Therefore, ensuring a good mix of rural and urban deposits becomes strategically important for banks. Rural India can also help banks significantly increase their low-cost current account-savings account (CASA) deposits, thereby, helping protect margins and spreading the business risks. There are several benefits for banks from pursuing financial inclusion. Financial inclusion initiatives the fast growing activity in the rural credit markets also offers banks excellent opportunities for boosting their retail loans and ensuring a balanced mix of retail and corporate loan exposures. Opening savings accounts for rural Indians can be a win win proposition for banks, customers and governments. Once the bank accounts are opened customers can receive payments in these accounts directly from governments towards subsidies through direct cash transfers, social security transfers and Mahatma Gandhi National Rural Employment Guarantee Programme (MGNREGA) wages into their bank accounts of beneficiaries through the Electronic Benefit Transfer. This will minimize both transaction costs and leakages and banks can gain from the float income in these accounts as several hundred million bank accounts are opened. Further, the savings of the rural poor would be Brought into the formal financial system and channelized into investment. Banks would also be able to reduce their dependence on bulk deposits i.e. purchased liquidity and effectively manage liquidity risks and asset liability mismatches. MODELS OF FINANCIAL INCLUSION 1) 2) Business correspondent (BC) model Non Business correspondent model

Business correspondent model allows the bank to muse third party financial institutions to handle account opening, transaction management, and other financial services. Regulations from RBI emphasize that transaction should be visible in the banks books within 24 hours. Such a compulsion has encouraged the smart cards and mobile technology by the BCs. The biometric device is used for the identification and authentication of the beneficiary. Once authenticated, the Radio Frequency Identification Device (RFID) chip embedded in the card gets charged. This chip communicates with the mobile device, and the necessary transaction forms are made available in the mobile. - 382 -

The BC selects the relevant option and feeds the transaction amount and sends the message to the back end server. The server authenticates the message, processes the transaction, and sends an update back to the mobile, which in turn writes back to the card. When the card is brought close to the printer, a transaction report is printed. This technology can also be used to conduct other financial activities like fixed deposits, loan disbursement and insurance. RBI WORKING GROUP SAYS BUSINESS CORRESPONDENT MODEL IS VITAL FOR FINANCIAL INCLUSION NEW ENTITIES FOR BC A Reserve Bank Of India Working Group has expressed the view that banks would need to accept the BC model as extremely vital for achieving the goals of financial inclusion. As the traditional Brick and Motor branches would penetrate in to remote areas of the vast country only to a limited extent, this model presented banks with a workable option to provide banking services in inaccessible areas in a cost-effective manner. Working group has recommended the following new entities for the appointment of Business correspondents (BC) for banks in rural and semi urban areas. 1) 2) 3) 4) 5) 6) Individual kirana/medical/fair price shops owners Individual Public Call Office (PCO) operators Agents of Small Savings Schemes/of Government of India/Insurance companies Individuals who own petrol pumps Retired teachers Authorized functionaries of well run Self Help Groups (SHGs) linked to banks.

The Working Group has further opined that as recommended by the High Power Committee to Review the Lead Bank Scheme in its draft report, the objective of having a banking outlet at every village with a population of over 2000 at least once a week on a regular basis y March 2011 could be achieved by substantially scaling up the BC model NON BUSINESS CORRESPONDENT MODEL In Non Business Correspondent model the Business correspondent is excluded from the system and the customer himself is provided with a mobile device .The regulatory policies of India have recently allowed transactions from mobile devices, but with a very small ticket size. The mobile devices are used to store information of the user, conduct transactions and maintain transaction records. Various models have been proposed to realize mobile-based banking. One model is where the mobile devices are equipped with near field Communication - 383 -

(NFC) technology and RFID chip, which are then used for user authentication and some transactions. Another model which proposes to leverage the widespread network of retail agents involves both banks and telecomm operators where the retailer has an account in the bank and the transactions re carried out in a manner similar to the way customers recharge their phone. In Brazil, the non BC model has been a huge success in the past, more because of regulatory relaxations at an early stage. PROFITABLE MODELS Several models have been tried across the world, namely ,no-frills accounts banking, branchless banking (business correspondent model), banking without a bank (using mobiles as conduits for financial transactions), micro lending etc for pursuing financial inclusion. Global experience has, however, revealed that there is no one size fits all type of solution to the problem of financial inclusion and the above models have succeeded differently across the world. The Reserve Bank has, therefore, studied various models for financial inclusion before deciding upon the business correspondent (BC)model for India. Banks have been advised to leverage the benefits of low-cost technology solutions and appoint BCs ie agents of banks who would serve as the Doorstep Bankers and provide the last mile connectivity and reach out to millions of rural Indians. The BC model has been a major success in Brazil, which has a similar demographic profile to India. According to an article Financial inclusion models from around the world, (Forbes India, November 2010),the major reason why the BC model has worked there is that the authorities established a strong business case for BCs. For example, the payment of bills of any kind is required to be done through the banking system using a standard form called Boletos. Bill payments comprised 75percent of volume (1.6 billion) and 70 percent of value ($105 billion) transacted through Brazilian correspondents in 2008 alone and have been growing. Further, according to a Wharton School study, the average cost per transaction in India at a BC is the lowest at INR 4.50 ($1 = INR 45 approx.) per transaction as compared to an ATM (INR 18) and a bank branch (about INR 45). Finally, Indians are already familiar in dealing with individuals as agents for transacting in financial products especially for insurance, postal savings, etc.The Reserve Bank has made a commitment to a bank-led model of financial inclusion through BCs and has stated that it will support banks in their financial inclusion initiatives by way of information dissemination, sharing of best practices and also through regulatory incentives.RBI has also advised that under their financial inclusion plans, banks at a minimum should offer four products: Savings-cum-overdraft account Remittance product Kisan Credit Card / General Credit Card and Entrepreneurial credit. - 384 -

Banks may additionally offer micro-insurance and micro pension products. It is important to note, however, that the Reserve Bank has refrained from deliberately imposing a uniform business model on the banks as it wanted each bank to build its own strategy in line with its business model and comparative advantage. This approach is also expected to ensure better ownership of the business model. Banks would, therefore, need to pursue both conventional and unconventional measures to reach out to the rural masses. PROFITABLE MODELS FOR FINANCIAL INCLUSION THEREFORE, HAVE THE FOLLOWING FEATURES: i. COULD,

OFFERING A CLEAR CUSTOMER PROPOSITION AND CUSTOMIZED BOUQUET OF PRODUCTS To succeed in their financial inclusion initiatives, banks would need to offer customers a clear proposition and a customized bouquet of product offerings. According to the BCG Report quoted earlier, banks need to offer the following services at a minimum: government payments, savings accounts, credit, remittances and insurance as part of an overall package to attract customers. Each of these offer significant value to customer and enable banks to generate value through transaction fees.

ii.

TRANSACTION-DRIVEN PAY-PER-USE FEATURES To enhance revenues from the financial inclusion drive, BCG has recommended that banks should offer credit products in addition to deposits and remittances and shift their transaction model from the conventional rich mans float-based model to an unconventional yet poor-friendly, transparent pay-per-use model, where customers are charged a small fee for every withdrawal.

iii.

SCALABLE BUSINESS MODEL WITH SIMPLE, USER FRIENDLY LOWCOST TECHNOLOGIES Profitable business models would need to be scalable and incorporate simple, userfriendly and low-cost technologies so that investments would be recouped and profits begin showing up as the number of people serviced by a particular branch or outlet increases overtime.

iv.

COLLABORATE WITH LOCAL AGENTS AND FOR-PROFIT COMPANIES According to consulting giant McKinseys report A newidea in banking for the poor by Alberto Chaia, Robert Schiff and Esteban Silva (November 2010), the basic problem of lastmile access can be solved if banks can team up with retail outlets (business correspondents) in low-income, often hard-to-reach areas to offer financial services to rural masses, thereby, creating value both for themselves and their - 385 -

customers. These retail outlets could be kirana stores, grocery stores, petrol bunks, post offices, etc. Villagers know the owners/managers of these outlets because they frequent them for other purposes, speak their language and are aware of the local customs and culture. Banks would also do well to take advantage of regulatory relaxations and engage even for-profit entities as BCs as done by Axis Bank, SBI, ICICI Bank, etc for offering financial services / products such as remittance, savings, credit, micro insurance, micro SIP and micro pension by tying up with thousands of retail outlets of Idea Cellular, Airtel, Vodafone and Aircel across the country, thereby, making the benefits of banking available to the Indian rural masses and building a more inclusive society. v. BANKS NEED TO LEARN FROM BOTH CORPORATE INDIA AND THE INFORMAL SECTOR The rural markets are coming alive and many corporate are now concentrating on the rural areas. Fast moving consumer goods (FMCG) companies, for instance, have unveiled specific strategies that target villages with a population of less than 5,000, known as micro-markets. Late Prof. C K Prahalads work on profit at the bottom of the pyramid (BoP) has helped and encouraged corporates to build sustainable and profitable rural business models. Banks can, therefore, follow their clients to their markets by opening branches/banking outlets in villages as inclusive banking goes beyond the conventional notions of commercial banking. According to the BCG, the informal sector has been a major success in the rural areas. The formal sector must, therefore, learn from the informal sector. It must also innovate and improve service levels in order to provide the same level of accessibility as the local moneylender, friend or relative. vi. SUBSIDIARY MODEL TO DRIVE DOWN COSTS According to the BCG, Indian banks should explore the subsidiary route to drive down distribution costs in their financial inclusion drive. Given that the average distribution cost of banks, at INR 5.5 lac per employee, is prohibitive, BCG is, urging banks to consider floating subsidiaries to bring down their human resource costs. These subsidiaries could harness local talent (at substantially lower average distribution cost of INR 1 lac or less per employee) in rural and semi-urban areas for reaching basic banking services to the un-banked. It is also urging policymakers allow banks to set up low-cost subsidiaries only for the financial inclusion drive. BCG has also assessed that in the traditional model for pushing financial inclusion, the cost-income ratio was about 1000 percent ie the cost of rendering service (at about INR 600) per account exceeds income earned from the account (INR 60). Ideally, this ratio should be around 50 percent. Studies also suggest that a bulk of the borrowing by rural poor is for - 386 -

consumption-related purposes followed by income generation activities and education respectively and the dependence of rural India on the informal channel (money lenders/ friends and family) for credit to smoothen income gaps is still very high. vii. EDUCATE AND TAKE THEM ON BOARD RBI has been advising banks to focus on financial literacy to boost the demand for financial products. Banks should, therefore, make boosting financial literacy in rural Indian an essential component of their business model for financial inclusion. viii. RIDE ON GOVERNMENT PAYMENTS In August 2011, the GOI has amended its landmark MGNREGA scheme to ensure that beneficiaries receive wage entitlements under the Act within 15 days through institutionalized channels like banks and post offices. The amendments now make it mandatory under the law for State governments to ensure that every beneficiary has a bank/post office account and the disbursements are made exclusively through these channels. The GOI is also considering shifting to a direct cash transfer programme instead of subsidy for the Public Distribution Schemes. This will also involve banks and positively benefit financial inclusion initiatives. Again, according to the BCG, successful models of financial inclusion would, therefore, ride on government payments as an important source of a recurring float providing them another strong reason to push financial inclusion. ix. INNOVATE AND TEST-MARKET PILOT PRODUCTS/SERVICES Banks need to realize that the poor find it difficult to save on a regular basis and may also resort to consumption loans to supplement their savings whenever required from a variety of sources to meet emergencies. Banks, therefore, need to keep such realities in mind while designing their products/services for the poor. With some understanding and innovation, over a period of time, banks can also capture a bulk of the rural remittances market, a significant chunk of which Currently happens through informal channels. McKinseys report cited above also suggests that financial service providers should test-market low-cost pilots to see which products/services are found acceptable before large-scale introduction. In India, RBI has initiated several measures to achieve greater financial inclusion, such as facilitating no-frills accounts and GCCs for small deposits and credit. Some of these steps are: OPENING OF NO-FRILLS ACCOUNTS Basic banking no-frills account is with nil or very low minimum balance as well as charges that make such accounts accessible to vast sections of the population. Banks have been advised to provide small overdrafts in such accounts. - 387 -

Suffice for opening such accounts. The banks were also permitted to take any evidence as to the identity and address of the customer to their satisfaction. It has now been further relaxed to include the letters issued by the Unique Identification Authority of India containing details of name, address and Aadhaar number. ENGAGING BUSINESS CORRESPONDENTS (BCs): In January 2006, RBI permitted banks to engage business facilitators (BFs) and BCs as intermediaries for providing financial and banking services. The BC Relaxation on know-your-customer (KYC) norms KYC requirements for opening bank accounts were relaxed for small accounts in August 2005, thereby simplifying procedures by stipulating that introduction by an account holder who has been subjected to the full KYC drill would model allows banks to provide doorstep delivery of services, especially cash in-cash out transactions, thus addressing the last-mile problem. The list of eligible individuals and entities that can be engaged as BCs is being widened from time to time. With effect from September 2010, for-profit companies have also been allowed to be engaged as BCs. USE OF TECHNOLOGY Recognizing that technology has the potential to address the issues of outreach and credit delivery in rural and remote areas in a viable manner, banks have been advised to make effective use of information and communications technology (ICT), to provide doorstep banking services through the BC model where the accounts can be operated by even illiterate customers by using biometrics, thus ensuring the security of transactions and enhancing confidence in the banking system. ADOPTION OF EBT Banks have been advised to implement EBT by leveraging ICT-based banking through BCs to transfer social benefits electronically to the bank account of the beneficiary and deliver government benefits to the doorstep of the beneficiary, thus reducing dependence on cash and lowering transaction costs. GCC With a view to helping the poor and the disadvantaged with access to easy credit, banks have been asked to consider introduction of a general purpose credit card facility up to 25,000 at their rural and semi-urban branches. The objective of the scheme is to provide hassle-free credit to banks customers based on the assessment of cash flow without insistence on security, purpose or end use of the credit. This is in the nature of revolving credit entitling the holder to withdraw up to the limit sanctioned. - 388 -

SIMPLIFIED BRANCH AUTHORIZATION To address the issue of uneven spread of bank branches, in December 2009, domestic scheduled commercial banks were permitted to freely open branches in tier III to tier VI centres with a population of less than 50,000 under general permission, subject to reporting. In the northeastern states and Sikkim, domestic scheduled commercial banks can now open branches in rural, semi-urban and urban centre without the need to take permission from RBI in each case, subject to reporting. OPENING OF BRANCHES IN UNBANKED RURAL CENTRES To further step up the opening of branches in rural areas so as to improve banking penetration and financial inclusion rapidly, the need for the opening of more bricks and mortar branches, besides the use of BCs, was felt. Accordingly, banks have been mandated in the April monetary policy statement to allocate at least 25% of the total number of branches to be opened during a year to unbanked rural centres. CONCLUSION Traditional and conventional banking solutions may not be the answer to address the problem of financial inclusion in India. Banks, therefore, need to innovate and think out-ofthe-box for solutions to overcome the problem of financial exclusion in India. They need to walk the talk, go the extra mile, deploy new technologies and create financially viable models to take forward the process of financial inclusion in an effective manner. The problem of financial exclusion needs to be tackled with urgency if we want our country to grow in an equitable and sustainable manner. This way banks in India would be doing a great service to the cause of financial inclusion and make their name in history. Banks, which are laggards in financial inclusion, would do well to speed up because if history is any indication the window of opportunity to capture market share through financial inclusion would be available only for a short period. In a fast growing economy like India the poor are the middle classes of tomorrow and banks could, therefore, ill-afford to ignore this segment. Select public sector banks in India have played a pioneering role in financial inclusion and their success should encourage the rest of the banks to put their financial inclusion efforts too on the fast track. As Dr D Subba rao, Governor, RBI, advised in his remarks at the Bankers Club in Kolkata on December 9,2009, financial inclusion is a win-win opportunity for the poor, for the banks and for the nation. Because of improving awareness levels aspirations of the poor are on the rise and banks will not be forgiven if they do not rise up to meet these aspirations. It is for the banks to convert what they see as a dead-weight obligation into an exciting opportunity and move on aggressively on financial inclusion that banking on the poor can actually be a rich banking proposition. Banks would also do well to remember the advice given by Late Prof. C K Prahalad in his epic book, Fortune at the Bottom of the Pyramid - 389 -

What is needed is a better approach to help the poor, an Approach that involves partnering with them to innovate and achieve sustainable winwin scenarios where the poor are actively engaged and, at the same time, the companies providing products and services to them are profitable. Financial inclusion may be a social responsibility for the banks in the short-run but will turn out to be a business opportunity in the long-term. As Dr C Rangarajan has stated, Financial Inclusion is no longer an option; it is a compulsion. The entire world is looking at this experiment in India and it is important that banks rise up to this challenge and meet it successfully. To sum up, financial inclusion is the road that India needs to travel toward becoming a global player. Financial access will attract global market players to our country and that will result in increasing employment and business opportunities. Inclusive growth will act as a source of empowerment and allow people to participate more effectively in the economic and social process. REFERENCES 1. 2. 3. 4. 5. A new idea in banking for the poor by Alberto Chaia, Robert Schiff and Esteban Silva, McKinsey Quarterly, November 2010 ADB, (2007): Low-Income Households Access to Financial Services, International Experience, Measures for Improvement and the Future; Asian Development Bank BCG Report, The Next Billion Consumers - A roadmap for expanding financial inclusion in India, by Janmejaya Sinha and Arvind Subramanian Buckland, J., and B. Guenther (2005): There Are No Banks Here, Financial and Insurance Exclusion in Winnipeg North End, Social Sciences and Humanities Research Council of Canada (September) Financial inclusion models from around the world, Forbes India Magazine, November 2010 edition Financial Inclusion: Challenges and Opportunities (Remarks by Dr. D. Subbarao, Governor, Reserve Bank of India at the Bankers Club in Kolkata on December 9, 2009) H.M. Treasury, (2007): Financial Inclusion: the Way Forward, HM Treasury, UK, March How to design a Winning Business Model? by Ramon Casadesus-Masanell and Joan E. Ricart , Harvard Business Review, January 2011 edi - 390 -

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Kempson, E. (2006): Policy Level Response to Financial Exclusion in Developed Economies: Lessons for Developing Countries, Paper for Access toFinance: Building Inclusive Financial Systems, World Bank, Washington, Kempson, E., J. Caskey, C. Whyley and S. Collard (2000): In or Out? London: Financial Services Authority Mohan, R. (2006): Agricultural Credit in India: Status, Issues and Future Agenda, Economic and Political Weekly (March), pp.1013-23. Peachy, S. and A. Roe, (2004): Access to Finance - What Does it Mean and How Do Savings Bank Foster Access?, Brussels: World Savings Bank Institute. Report of the Committee on Financial Inclusion in India (Chairman: C. Rangarajan) (2008), Government of India Sen, Amartya, (2000): Development as Freedom, Anchor Books, New York, 2000. Social Development Perspectives, M. P. Vasimalai, Executive Director, DHAN Foundation World Bank (2006), World Development Indicators, World Bank, Washington World Bank (2008): Finance for All - Policies and Pitfalls in Expanding Access, World Bank, Washington.

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COMMODITY DERIVATIVES AND PRICE PREDICTION THROUGH FUNDAMENTAL AND TECHNICAL ANALYSIS AN EMPERICAL STUDY IN INDIA
Ananthnarayan Tripurari, *Research scholar,(Part-time Ph.D), JNTUH, Kukatpally, Hyderabad and Junior Analyst (Research ) at PCS Securities Ltd. Hyderabad. E-Mail : ananth_vmk@yahoo.co.in.

ABSTRCT The present study attempts to show the impact of Fundamental analysis , Technical analysis , and Technological analysis on improved rate of returns of investors and traders in Indian stock market.The stock market is one of the familiar inversting places because of its expected high profit.In this paper common market analysis techniques such as Fundamental analysis , Technical analysis and Technological analysis are discussed and compared one with each other.Fundamental analysis forecasts are based on economic data and Technical analysis forecasts are based on historical prices and volumes. Technological analysis forecasts are based on Neural Networks. The objective of the study is to present the use of Fundamental analysis , Technical analysis and Technological analysis for predicting the direction of stock market.This paper describes the three types of predictive analysis methods namely Fundamental analysis,Technical analysisand Technological analysis. KEY WORDS Fundamental analysis, Technical analysis, Technological analysis and Neural Networks. INTRODUCTION Fundamental analysis is an approach to determine intrinsic value of a commodity. Technical analysis is a method of evaluating future commodity prices and market directions based on statistical analysis of variables such as trading volume, price changes etc to identify patterns. Neural Networks are physical cellular systems which can acquire, store and utilize experiential knowledge. Neural Networks are mathematical models originally inspired by biological processes in the human brain. They are constructed from a number of simple processing elements interconnected by weighted pathways to form Networks. Each element computes its output as a nonlinear function of the weighted input when combined in to Networks. These processing elements can implement arbitrarily complex, non linear Networks which can be used to solve classification, prediction, and optimization problems. - 392 -

Chart 1

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Figure 1

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OBJECTIVE OF THE STUDY To study the commodity derivatives price prediction through Fundamental analysis , Technical analysis and Technological analysis. REVIEW OF LITERATURE The process of using fundamental variables to make stock trading decisions begins with Benjamin Graham, as early as 1928. Hamilton (2009) argues that the oil price run-up of 2007-2008 can account for much of the early stages of the Great Recession. Gertler and Watson (1997) note the broader point that most US recessions have been preceded by large oil price increases. Routledge, Seppi and Spatt (2000) list striking differences between commodity futures and other investments such as stocks and bonds. Commodity future prices are frequently below the spot, which often implies positive convenience yields. Carlson, Khokher and Titman (2004) predict that without adjustment costs, the futures term structure will be upward sloping. Convenience yields are negatively correlated with inventories. Brennan (1958) tests this Theory of Storage for agricultural commodities and Litzenberger and Rabinowitz (1995) relate variation in the convenience yield to price volatility. Technical analysis (Murphy) refers to the various methods that aim to predict future price movements using past stock prices and volume information. It is based on the assumption that history repeats itself and that future market directions can be determined by examining historical price data. Most of the techniques used in Technical analysis are highly subjective in nature and have been shown not to be statistically valid. Neural Networks have been extensively applied to accounting, finance, and other business studies in areas such as forecasting, pattern recognition, and classification (Wong et al., 1997; OLeary, 1998; Vellido et al. 1999). Tam and kiang (1992) find Neural Networks to be a superior approach in bankruptey predictions. Echoing Tam and Kiang (1992) , other researchers in economics and finance recognize the strength of the Neural Networks in handling non-linear relationships and accommodating various probability distributions. Azoff (1994) recommends the Neural Networks approach as a multivariate nonlinear nonparametric inference technique that is data driven and model free. Beltratti et al. (1996) provide a more fundamental explanation for the appeal of the Neural Network in economic modeling. Kim and McLeod (1999) demonstrated superiority of Neural Network models in bankruptcy prediction, especially when there exist nonlinear patterns in data sets. RESEARCH METHODOLOGY This study is based on both primary and secondary data. The primary data is in the form of Questionnaire and followed by the interview based on the objectives of the study. - 396 -

Questionnaire consists of 5 questions related to Fundamental analysis, Technical analysis and Technological analysis to predict commodity derivatives price of a GOLD scrip which is collected from 3 groups of people and each group consists of 5 members of PCS SECURITIES LTD.Secondary data is from Journals , various articles , books etc. HYPOTHESES H1: There is considerable improvement in the rate of return by minimizing the risk and maximizing the profit by using Fundamental analysis , Technical analysis and Technological analysis in predicting the commodity derivatives price. SCOPE OF THE STUDY The scope of the study is wide from a concept point of view because it covers major aspects of quantitative trading. However from an empirical point of view the scope of the study is narrow.Time period of the study is JAN 2011 to OCT 2012. ANALYSIS OF THE STUDY DATA Data of commodity derivatives GOLD prices are taken for the analysis . RESULTS FUNDAMENTAL ANALYSIS It is based on DEMAND AND SUPPLY conditions of GOLD. TECHNICAL ANALYSIS It is based on price and volumes of GOLD with the help of technical indicators. TECHNOLOGICAL ANALYSIS GOLD ARMA TRADUNG RESULTS

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IMPLICATIONS: Fundamental analysis can help to identify the underpriced and overpriced commodities in the market so that investment decisions can be made. Technical analysis can help investors anticipate what is likely to happen to prices over time. Technological analysis with the ARMA MODELS provides more accurate and efficient predictions. The study provides insights for investors and traders to comprehend the concept of a commensurate rate of return they can secure by operating in the commodity markets with the help of Fundamental analysis , Technical analysis and Technological analysis. CONCLUSIONS AND SUGGESTIONS OF THE STUDY H1: There is considerable improvement in the rate of return by minimizing the risk and maximizing the profit by using Fundamental analysis , Technical analysis and Technological analysis in predicting the commodity derivatives price Accepted. This paper presented the various issues related to Fundamental analysis, Technical analysis and Technological analysis. This paper motivates future researchers to come up with smarter and more robust research mechanisms and make their work safer. REFERENCES: 1. 2. 3. 4. 5. Alquist, Ron1. Fadalla, A., Lin, Chien Hua An analysis of the application of Neural Networks in Finance , Interfaces 31:4 July August 2001 pp 112-122. Bosworth, Barry P. and Robert Z. Lawrence, 1982, Commodity prices and the new inflation. The bookings institution. Schwartz, E.S. (1997) The Stochastic Behavior of Commodity Prices: Implications for valuation and Hedging Journal of Finance 52(3), 923-973. S.Moshiri, and F.Foroutan, Forecasting nonlinear crude oil futures prices, The energy journal vol.27, pp.81-95, 2005. P.Silvapulle, and A.Mossa, The relation between spot and future prices: Evidence from the crude oil market, The Journal of Futures Markets, vol. 19(2), pp.175-193, 1999. Collard, J.E. (1992). Commodity Trading with a Three Year Old. Neural Networks in Finance and Investment, ed. R. Trippi and E.Turban, 411-420. Chicago: Probus Publishing Co. - 398 -

6.

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Baker, S.A. and Van Tassel, R.C. (1985), Forecasting the price of Gold: A Fundamentalist Approach, Atlantic Economic Journal, Vol. 13, pp.43-51. Frank, M. and Stengos, T. (1989), Measuring the Strangeness of Gold and Silver Rates of Return, Review of Economic Studies, Vol. 56 (188), pp. 553-567. Alquist, Ron and Lutz Kilian, 2010, What Do We Learn from the Price of Crude Oil Futures? Journal of Applied Econometrics 25(4). Fama, Eugene F. and Kenneth R.French, 1987, Commodity Futures Prices: Some Evidence on Forecast Power, Premiums, and the Theory of Storage, The Journal of Business, 60(1) 55-73. Moosa, Imad and Nabeel Al-Loughani, 1994, Unbiasedness and time varying risk premia in the crude oil futures market, Energy Economics 16(2), pp. 99-105. Pindyck, Robert S., 2001, The Dynamics of Commodity Spot and Futures Markets: A Primer, Energy Journal 22(3): 1-29.

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