This study of cotton and mentha derivatives aims to analyse the information efficiency of the Indian agri-commodity derivatives market. We find weak information linkages: the cotton spot market dominates in price discovery and its futures market in volatility spillover, and the futures market leads the spot market for both price discovery and risk hedging for mentha. To develop the market and improve the transmission of information, it is necessary to build a physical spot market and integrate it with the derivatives market, create awareness, build institutional capacity, improve delivery-based support, and redesign contract specifications.

Risk disclosures provide an insight into the risk management policies and practices adopted by institutions and are useful in assessing the risk for various stakeholder groups. With the increasing incidence and complexity of operational risks in banks, it is imperative for banks to establish and follow suitable operational risk disclosure practices. The chapter attempts to examine the operational risk disclosure practices and the impact of bank specific characteristics on disclosure practices among Indian banks. Findings indicate disclosure levels to be inadequate, showing an insignificant improvement over the years. Bank profitability and depositor confidence significantly impact disclosure practices. The authors suggest that Indian banks should enhance their current operational risk disclosure levels to communicate to the stakeholders about the strength of their operational risk management framework. The Reserve Bank of India may issue new guidelines with respect to minimum disclosure requirements on operational risk to improve the quality of disclosures.

The disclosure of information by banks is beneficial to several categories of the public as well as to the stability of the financial system. Operational risk disclosures are particularly important, since operational losses may impact both the financial condition and the reputation of banks. This paper compares the levels of operational risk disclosure in the banking industries of India and Romania. We develop an unweighted disclosure index with forty-three items, with data collected from the 2015 annual reports of all commercial banks in India and Romania. We then perform a regression analysis to investigate the extent to which banks' characteristics impact the level of operational risk disclosure in these two countries. First, our results reveal a similarly low level of disclosure, namely an overall index average of 27% in the case of India and of 29% in the case of Romania. These results are surprising, as India's culture appears to be more inclined toward transparency than Romania's. Second, our results point toward a positive association between bank size and the level of operational risk disclosure. This paper contributes to the existing body of research, which comprises few empirical studies on the particular topic of operational risk disclosure in banks.

Mandatory directed credit program (DCP) or priority sector lending (PSL) program, which is part of the regulatory framework for commercial banks/ financial institutions in many countries, presently focusses mainly on achieving the national objective of balanced sectoral development. With a small change in the guidelines, it can also be made an effective instrument for reducing geographical inequalities in any federal structure of government. Since the program involves a significant proportion of the economy’s resources and has a social objective to serve, its use should be optimal and in alignment with the current national priorities. The present paper therefore, aims at examining the patterns, preferences and challenges of directed lending by banks across various states in India, with a view to identifying state specific characteristics, which may impact its distribution, and to thereby offer policy suggestions for strengthening the program. The paper is based on an analysis of secondary data relating to priority sector lending (1999-2013) for thirty-five states and Union Territories in India, and is supplemented by the findings of a survey of ninety-seven lending officers of different banks. The results indicate notable disparity in PSL across various states and regions in India. They also identify state specific characteristics like its level of economic development, urban orientation, agrarian/industry oriented economy, and bank penetration, which have a significant impact on its per-capita PSL amount. The findings thus, indicate that contrary to the objectives, the economically advanced states are receiving higher per-capita PSL amount. Based on its findings, the paper offers policy suggestions to enable a more equitable regional flow of priority lending and to thus, serve the achievement of national policy objective of balanced geographical development through the Directed Credit Program of a country.

This article investigates the impact of commodity transaction tax, in effect from 1 July 2013, on the information linkages for the Indian commodity market. We use daily data on five sample commodities—gold, aluminium, copper, zinc, and crude oil from 1 May 2010 to 31 August 2016. MCX has been used as a reference commodity exchange for India, while we use COMEX and DGCX for gold, LME and SHFE for base metals, and NYMEX and ICE for crude oil for international comparison. Price discovery has been evaluated using static and dynamic cointegration procedures, while volatility spillover has been evaluated based on BEKK-GARCH and Diebold Yilmaz models. We find that CTT imposition has weakened the price discovery and volatility spillover process, thus reducing the price and hedging efficiency of the Indian commodities market. For gold and crude oil, the information linkages have been severely hampered, owing to their international character. For base metals, MCX takes greater time for information transmission. International information linkages seem to have been more adversely impacted, owing to lower cost competitiveness of Indian commodities market. The findings of the study are pertinent for the policymakers, commodity exchanges, and other stakeholders.

The paper presents the results and interpretations of primary analysis of data collected through a questionnaire-based survey. The study assesses the adequacy of the existing banks’ risk management framework and identifies the relevance of bank-specific characteristics and global financial crisis in explaining the banks’ risk exposures. The outcome of the study suggests that though the organizational structure for risk management is perceived to be highly mature, a lot of issues need to be addressed by the RBI. It needs to formulate risk management guidelines, recognizing the relevance of bank-specific characteristics in the process of integrated risk management.

This paper examines the relationship between merger announcements with the stock returns in the Indian Banking during the period of 1999-2008. Using event study methodology, it attempts to ascertain whether the bidder banks experience significant abnormal returns during the post-announcement and pre-announcement periods. The results indicate that bidder banks may or may not experience any significant abnormal returns during the post-announcement period. No bank specific characteristics could explain the pattern of market reaction to merger announcements. How-ever, significant abnormal returns were observed in daily share prices in majority of the cases, during the pre-announcement period, indicating possibility of leakage of information in the market.

Mandatory directed credit or priority sector lending (PSL) is part of the regulatory framework for commercial banks/financial institutions in many countries, both developing and developed. However, compliance and lending effectiveness of such programs may be determined by a host of factors. This may be particularly so in developing countries, where availability of finance for the vulnerable sectors like agriculture, small businesses, weaker sections, is scarce. The present paper aims at examining the patterns of priority sector lending by banks, with a view to identifying the factors which determine this lending, and implementation challenges for lending by banks in such programs. The paper is based on an analysis of secondary data relating to priority sector lending (1998-2014) for eighty banks in India, and is supported by findings from the survey of ninety-seven lending officers of various banks. The results indicate gaps in patterns of the sect oral target compliance by different bank groups, along with the lending preferences and challenges faced by banks in such lending. It also identifies bank-specific characteristics like the nature of ownership, size, performance, etc., which have a significant impact on the priority sector lending patterns. Based on its findings, the paper offers policy suggestions for improving the effectiveness of priority sector lending program.

This paper examines the economic consequences of Commodity transaction tax (CTT) for the Indian commodities market. We use daily data on 5 sample commodities, namely gold, aluminum, copper, zinc and crude oil from 1st May 2010 to 31st August 2016. MCX has been used as a reference commodity exchange for India, while we use COMEX and DGCX for gold, LME and SHFE for base metals and NYMEX and ICE for crude oil for international comparison. We find that CTT imposition has weakened the price discovery and volatility spillover process, thus reducing the price and hedging efficiency of the Indian commodities market. International information linkages seem to have been more adversely impacted, owing to lower cost competitiveness. CTT has also substantially decreased commodity market liquidity and increased return volatility. Analysing the impact of CTT on total tax revenue, involving transaction tax, income tax and service tax, we conclude that CTT has been revenue negative. Additionally, CTT is found totally unjustified on the grounds of market parity and curbing speculation. Based on the economic and market related arguments, the study suggests a phased withdrawal of CTT, which would not only boost the growth and development of Indian commodities market but also imply greater fiscal revenues besides bringing in economic competitiveness among commodities stakeholders.

Mandatory directed credit or priority sector lending (PSL) is part of the regulatory framework for commercial banks/ financial institutions in many countries, both developing and developed. However, compliance and lending effectiveness of such programs may be determined by a host of factors. This may be particularly so in developing countries, where availability of finance for the vulnerable sectors like agriculture, small businesses, weaker sections, is scarce. The present paper aims at examining the patterns of priority sector lending by banks, with a view to identifying the factors which determine this lending, and implementation challenges for lending by banks in such programs. The paper is based on an analysis of secondary data relating to priority sector lending (1998-2014) for eighty banks in India, and is supported by findings from the survey of ninety-seven lending officers of various banks. The results indicate gaps in patterns of the sect oral target compliance by different bank groups, along with the lending preferences and challenges faced by banks in such lending. It also identifies bank-specific characteristics like the nature of ownership, size, performance, etc., which have a significant impact on the priority sector lending patterns. Based on its findings, the paper offers policy suggestions for improving the effectiveness of priority sector lending program.

Professional management and sincere efforts towards upgrading Credit Risk Management (CRM) framework have gained reasonable pace in both the public and private sector banks alike. The present study, first of its kind, attempts to find the difference in the strength of overall CRM framework of private and public sector banks in India in quantitative terms and also identifies the specific CRM elements leading to such differences in their respective frameworks, if any. A mathematical evaluation tool, namely, CRM Index Score, comprising quantitative assessment of the current set of CRM practices relating to organization, policy and strategy, operations and systems at transaction level and operations and systems at portfolio level, the four basic elements of CRM framework, were deployed for making a comparative evaluation. The findings revealed that the strength of the overall CRM framework did not vary significantly between public and private sector banks as on the whole there existed very little difference in the scores of the public and private sector banks.

A wide array of credit risk management (CRM) practices have been followed by commercial banks since their inception. These practices have evolved over the years; new practices/strategies have been formulated, old practices have been updated/revised, traditional operations are being replaced by new sophisticated procedures. With such continuous evolution of CRM practices, CRM capability maturity of banks has also improved over time. Further, the role/importance and effectiveness of each CRM practice in determining the maturity of CRM capability is an important issue that needs to be addressed. A number of capability maturity models have been suggested in general for a business organisation. However, these studies focus on the assessment of overall business risk management maturity and do not offer any model to trace the path of evolution towards maturity in CRM capability in commercial banks. This article attempts to fill this gap by investigating into how commercial banks mature in their ability to manage credit risk in their advances portfolio. The objective of this study is to go beyond descriptive in terms of specifying practices, challenges and issues in each stage of CRM capability maturity and also be prescriptive in terms of recommended strategies and actions to move on to the next higher level of CRM capability maturity. The path of evolution of credit risk management capability maturity is illustrated on the basis of primary data collected from 35 Indian commercial banks (representing 70 per cent of the population) through a structured questionnaire in year 2007–2008. A comprehensive list of questions relating to major elements of CRM namely, ( a) CRM organisation, ( b) CRM policy and strategy; and ( c) CRM operations and systems at the transaction level; and ( d) CRM operations and systems at the portfolio level were included in questionnaire. The CRM index tool is employed to benchmark a given commercial bank’s approach to CRM against four standard levels of maturity. The statistical analysis of scores in four major elements of the CRM index for banks lying in different stages of maturity clearly brings out whether or not credit risk processes/techniques/tools/procedures are adequate, identifies realistic targets for improvement and shall enable bank management to frame concrete plans for evolving towards a higher CRM capability maturity level. This study, by drawing conclusions from empirical data, is unique and contributes to additional insights into the risk management literature in emerging economies.

This study examines the stock market performance of Indian state-owned public sector units (PSUs), which were privatized through initial public offerings (IPOs) and further public offerings (FPOs). The analysis of stock price reaction is conducted for different event dates related to these offerings, that is, public notice date (PND), issue announcement date (IAD), price band/actual issue date (PAD), and the offer price date (OFD). The study also compares the price reaction for IPO and FPO issues. Furthermore, as the public sector equity offerings are generally sold at a discount, we also empirically analyze the degree of underpricing of such offerings. The study uses event methodology for 18 PSUs that made FPOs between 2002 and early 2013. The results report positive abnormal returns (ARs) (i.e., excess returns over and above the expected returns) after the primary offerings (IPO) of the equity. Furthermore, it was observed that in the case of first-stage further offerings (FPO-1), positive ARs are observed prior to the public notification of such offering followed by negative price reaction until the date declaration of offer price. For second-stage further public offerings (FPO-2), negative ARs (i.e., when actual returns are less than expected returns) after the public notification continue even after the date of stock offering. The price discounts on PSU issues exhibit a declining trend from IPO to successive stages of FPOs. Based on the empirical analysis, we recommend that the disinvestment should be spread over three stages of offerings, that is, primary issue (IPO), first-stage further offerings (FPO-1), and second-stage further offerings (FPO-2). In addition, selection of investment bankers and market timing needs special consideration. Furthermore, the regulatory surveillance needs to be strengthened to check the presence of ARs even before the event dates.

Over the last decade, the role of credit risk management practices in the overall risk management in the commercial banks was well accepted and banks have established a set of these practices, collectively known as Credit Risk Management (CRM) framework. The present paper evaluates the strength of CRM framework in the Indian banking industry, and makes a quantitative assessment of the overall CRM framework and each of its three major elements, namely, CRM organization, CRM policy and strategy, and CRM operations and systems. The CRM operations and systems are closely studied at transaction and portfolio levels. The paper statistically arrives at two potential areas of improvement that bank management should focus on in the near future, namely, credit risk monitoring at transaction level and credit portfolio risk analysis. The study provides new insights into CRM process and CRM framework in commercial banks.

Mergers have the potential of possible value creation for various stakeholders, which in turn may affect their wealth. The wealth effect of merger may be noticed right from the time when the merger is announced, as share market would, generally react to such announcement affecting the stock characteristics of the company. The impact of such reaction has been a matter of concern and confusion particularly from the perspective of shareholder’s of bidder banks. The market reaction to merger announcement has primarily been examined in terms of impact on stock returns and very little attention has been paid to other stock characteristics. This paper examines the impact of merger announcements in Indian banking sector on shareholder’s wealth, focusing on three stock characteristics namely, stock returns, volatility and liquidity of the bidder banks. It is assumed that volatility and liquidity also influence value for the shareholder’s wealth. The paper is based on the study of market reaction of merger announcements in Indian banking since 1999. It was found that the merger announcement had a mixed impact on the returns to the shareholders of the bidder banks. As far as other stock characteristics are concerned, there was limited impact of merger announcement on volatility in share prices of the bidder banks and no significant impact on the liquidity of the shares of bidder banks.

This chapter contains a summary of discussions and findings presented in this book. The findings are based primarily on the analysis of the data collected through a field survey of 106 companies who have invested in B2B e-commerce infrastructure. It has been supplemented by the analysis of the data that was collected through an on-line evaluation of 65 B2B e-exchanges in order to examine the relationship between the levels of trust and various trust inducing web dimensions. These results have been discussed in context of the components of the 'Trust and Technology' model and the related eleven hypotheses.

This study examines the role of several antecedents in explaining the consumer’s attitude towards cause co-branded credit cards where the bank makes a commitment to donate a percentage or a designated amount to the ‘non-profit organization’ (NPO) each time the customer uses such credit card for payment. The results of the study conducted on Indian consumers confirm and enrich the findings of earlier research in the brand alliances literature which were based on antecedents such as prior attitude towards the ‘for-profit organization’ (FPO) and NPO brands, Brand Name Fit and Product Cause Category Fit.

Building trust in complex electronic environment of B2B e-commerce requires a strategy which is different from the one which would be useful in the conventional trading environment. For example, in the conventional B2B e-commerce trading environment, the security practices are generally not revealed to keep the element of surprise as a shield. But, building trust in the virtual environment of B2B e-commerce requires willingness on part of each player to regularly demonstrate to the "other players' satisfaction that the game is honest, open, following the rules and properly controlled" (DeMaio, 2002). In other words, it is necessary for the trading partners to demonstrate their commitment to address various technology-related trust issues. This would require clearly defining plans of action that the company intends to implement specifying the responsibilities in respect of the trust issues. Unless such plans are formally outlined in the form of well documented IT policies and procedures, the trading partners may not gain confidence in the B2B e-commerce infrastructure. Thus, in addition to the technology-related practices discussed in Chapter 6, adoption of appropriate technology related policies and procedures and communication of such technology policies and procedures to trading partners might also influence the levels of trust.In this study, it is hypothesized that the two technology-related policies that have the potential to influence levels of trust in B2B e-commerce are the security policy and the privacy policy. The relevant technology-related procedures examined in this study relate to (a) Regular review of policies (b) Ethical hacking; (c) Formulation of a security team; (d) Conduct various awareness and training programs; (e) Membership of security regulatory institutions; (f) Allotments of certificates from various seals of approvals; etc. The present chapter examines the relationship between levels of assurance with regard to these technology-related policies and procedures and the levels of trust in B2B e-commerce.