Tuesday, February 22, 2011

Pakistan : Affected by Circular Debt !

Some good reads on the topic, I strongly agree with the last para :

from : http://www.finance30.com/forum/topics/circular-debt






It is easier to explain with an example. Suppose A owes 100 to B, B owes 100 to C and C owes 100 to A then we have a classic circular debt case. It will make the balance sheets of all 3 (i.e. A, B and C) unnecessarily weaker than what they are (both assets and liabilities higher by 100).

I have been reading about circular debt problem in Pakistan's power sector for over a year. However, I could not really understand it. I think Pak ministers are using circular debt as a euphemism for the government's inability to pay the promised subsidies to power producers / distributors.

The way it unfolds is, power producers sell power to distributors who are unable to collect full payment from power users, naturally distributors are unable to make full payment to producers, who fail to make full payments to fuel suppliers. Fuel suppliers stop supplying fuel (furnace oil etc) which leads to lower production and consequent widespread load shedding. Government says the load shedding is due to circular debt! I find the circle incomplete.




I am not fully acquainted with all the facts. As I have said earlier, to me it does not appear to be circular debt as the circle is incomplete. My knowledge is based on published reports available to me in Mumbai.

Suppose, the circle is indeed complete. In that case, handing over cheque to one party and expecting to receive it back from the last one down the chain would be naive. A more robust mechanism would be to nominate a commercial bank as a central agency (temporary - for this purpose only) that would examine all the links and after assuring itself of the circularity, will open special current accounts for this purpose only.

All claims and liabilities forming part of the circular debt problems will get assigned / novated in favour of the central agency, who will credit / debit the special accounts accordingly. If the claims are properly identified (that they do indeed constitute a circular debt problem) all special accounts will have zero balance at the end of the day, with all claims satisfied.

You might have noticed, what I am suggesting is a typical stock exchange clearing house arrangement. These clearing houses consider the claims and liabilities of scores of brokers and after canceling out circular claims determine net liabilities / claims of each broker.

It appears simplistic, it indeed is; but if we have real circular debt issue, I think it should be an effective and inexpensive way of tackling it.

I, however, feel you do not have a circular debt problem. The problem seems to be the one we have in India - power theft, inefficient (corrupt) distribution companies and non payment of power charges by many of those consumers who are not stealing. Tackling it, like in India, will require political grit.



SBP mops up Rs 14.2 billion

SBP mops up Rs 14.2 billion


KARACHI: The State Bank of Pakistan (SBP) conducted Open Market Operation (OMO) and mopped up Rs 14.2 billion.
According to a statement of SBP here on Tuesday, the 2-day Repo- Sale offered s 19.7 billion, however, the Central Bank accepted bids worth Rs 14.2 billion at the rate 12.05 percent.
Copyright APP (Associated Press of Pakistan), 2011

Sunday, February 20, 2011

Visit Khan Academy , When you want to get away from books !



Sometimes during study we get bored or tired with the books, for that time I recommend that you guys should go through this playlist of Khan Academy (http://www.youtube.com/user/khanacademy) They have posted some good video lectures on Banking. Also those who are new to banking and want to have some basic knowledge of banking can see these videos. 

WOW ! IBP website got a New Look !


Today was off and I was browsing through various banking sites and for some information I opened the Institute of Bankers website www.ibp.org.pk and to my surprise there was a new website look !

And I am pleased to see this long awaited new look !

Congratulations to IBP and all the examinees for this !

Lets have a look what new we got in this website.

The color scheme of the website is very good ! White & Blue color gives a decent look. The main page give a spacious look and have a large banner which is the latest fashion on websites. This not only provide space for advertising and marketing but also add a look to website. There are small icons to quickly jump through the menus.


There are six main headings with some subheadings. Main Headings are
About IBP
Banking Qualification
Training
Trainers
Publications
Others

These sections comprehensively cover all the sections of IBP.

Then there is a Quick link option on the top right side alongwith a search box. When I clicked in the search box to try search I found three sub categories of search, those are

Workshops
Exams
Website

Overall website looks good and many congrats to all the stakeholders.
But I think that there are some sections which the website is missing, like there should be a section through which the members can do online trainings. There should be a discussion board. Some facebook fanpage links.

Discussion board is a very important part of such website where people visit to seek knowledge. Through Discussion board they can provide a big platform for the students of IBP.

There is an other option I couldn't find, in which we could ask a questions to the trainers & experts of IBP. That option was a very good option but uptill now I couldn't find any link for that.

I hope that facility is still offered by the institute.

But as Winston Churchill said, "To improve is to change, to be perfect is to change often."

So this change is a good sign and I hope that the Institute of Banker Pakistan would keep bringing change for good.


Saturday, February 19, 2011

Banking Mohtasib Website

Banking Mohtasib's role in the financial industry is to resolve disputes of customers and banks.

I have found their website ( http://www.bankingmohtasib.gov.pk/index.php )quite informative especially the case studies are very interesting ( http://www.bankingmohtasib.gov.pk/case_studies.php )

Those preparing for the paper of Law Relating to Financial Services, I recommend that go through these case studies. Also check the other portions of this website.

Soft Books for preparing JAIBP !

My computer skills are good and that is why I think I prefer Soft copies of books rather than hard copies.

They are also easy to share, easy to carry and you can always share them with your friends.

Some of my friends don't like to read from soft copies, to which I always suggest that don't read from them, but just keep them with you for reference purposes.

While preparing for exams of Junior Associateship of Institute of Bankers Pakistan an important part is solving the old papers. Which also have a big objective portion. For those, such soft books are so useful. They are best for reference purposes, because you can find words very easily in them and if you have such books with you, you can easily find answers of your questions.

I have uploaded lot of books in soft form to my website and also in this blog. However, if you need more you can email me for the e-Books. Those are free and are of very good quality. And if you have some books do share with me ! You are more than welcome !

So I recommend that before or during preparation of your IBP test, collect as many book around you so you don't have to disturb your friends or seniors to find answers of your questions.

Can IT people become Junior Associate of IBP (JAIBP) ?

Recently I got a message from a Banker who is in IT department of a Bank, asking that how she could pass JAIBP.

First of all I was a bit surprised to know that an IT professional wants to take JAIBP, instead of some .NET or CISCO certification. But then I went through the requirement of IBP which says

"All ardent knowledge seekers whether working in a financial institution or not
may enter in to this process. The entry qualification is graduation or equivalent
from a recognized university with minimum second class (marks obtained
45%) or masters in any discipline."

so this means that the IT people who have a bachelors degree can also become Junior Associate of Institute of Bankers Pakistan.

Hence, for those who want to appear in the next JAIBP and belongs to IT field should consider the following points,

Your main hurdles would be Accounting, Economics, Law related subjects.

In stage-I Accounting, Macroeconomics & Law would be tough. For those who don't have accounting background, I strongly recommend to take tuition for at-least three months and give max time to this subject.

Then come the Macroeconomics, and don't listen much to those who says that you can pass it by studying on the weekends.... I am afraid they are underestimating this. Macroeconomics and other JAIBP papers are becoming more practical and the objective section covers the subject comprehensively. So I strongly recommend that they should give more time to this subject too.

Law Relating to Financial Services is an interesting subject ... at least for me.
This subject is more interesting when you are experiencing all these laws in your banking life (if you are working in a bank).

In stage two ... the IT subject for IT people should be a piece of cake... even I got a distinction in that subject.

But Lending Operations & Risk Management is a hard nut there ! so beware of that and do prepare well for that.

Marketing and HR are subjects which could be covered through some self study.

In the third stage these IT people have to face tough time ! as Monetary Economics, Management Accounting & International Trade and FOREX Operations are very tough subjects for those guys ! So I recommend those who are in big cities, take IBP coaching classes... and its a must if you are in a bank ... I am sure your bank have a policy to pay for these classes and for the papers you pass.

Optional subjects are not that tough.

I have uploaded many books on accounting & economics. You can find the links in this blog somewhere !

So lets get started and take it seriously ... its not impossible.. just a bit tough ! And a person of IT background with banking knowledge have bright career prospects, because all banks are going online now and IT is a must for them now !

Good Luck !

"The more you sweat in Peace, the less you bleed in war !"

Friday, February 18, 2011

Banking Review 2010 - Business Recorder

http://www.brecorder.com/pdf/br_2010.pdf

This Review by business recorder covers current Banking Issues. Topics are discussed in a brief and interesting way. I recommend that JAIIBP examinees should go through this.
Some interesting Topics covered are,

Consumer Banking Crisis
Treasury Role
State of Anti-Money Laundering laws in Pakistan
SME in Pakistan
Evolution of Banking Valuation in Pakistan
Sharia Compliant Banking
Branchless Banking

So its a must read for bankers and those students who are taking exam for Junior Associateship of Institute of Bankers Pakistan. JAIBP