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  • Robotic Process Automation(RPA) in Finance

    We've all been terrified that one day, robots would take away all of our employment. The day is not far away it seems. Here comes RPA. RPA is a software technology that allows users to develop software robots, or 'bots,' that can learn, imitate, and execute rules-based business processes. Users may construct bots using RPA automation by monitoring human digital behaviours. Show your bots what to do, then leave them to it, it’s that simple. Finance may not be the first application that springs to mind when you consider RPA. It is one of the most interesting commercial technologies today. While RPA is currently used in industrial manufacturing in large armatures and robotic fabricators to build anything from vehicles to small plastic components, automation is increasingly penetrating the back office as well. Traditionally, automation has had an impact on a variety of office operations. However, many financial operations have remained manual, either due to a lack of acceptable solutions or an organisational apprehension about putting critical functions in the hands of robots. Because no one package can perform all of the essential activities, managing a company's finances generally necessitates a diversified range of software tools. Because of the separation of systems, there is frequently a substantial quantity of boring, repetitive work—work that is suitable for automation via RPA. It reduces operational expenses by automating transaction-heavy, labour-intensive operations such as reconciliation. Digital employees can obtain and combine data from numerous back-office systems, reconcile amounts and act in real-time to address issues. Financial organisations may use RPA to have consumer behaviour data automatically distributed to particular personnel inside the business. RPA assists financial services businesses in managing risk and meeting industry regulatory needs. Auditors and financial stakeholders appreciate the prescribed, replicable and accurate nature of RPA, along with the audit trail the bots keep of their work. Because of RPA's efficiency and cost advantages over outsourcing, businesses may be able to retain their data in-house and under their direct control. With its plethora of precise workflow procedures, susceptibility to regulatory demands, and need to minimise risk, RPA appears to be tailor-made for the financial services sector. RPA allows you to increase production, reduce expenses, and simplify compliance. It gives you and your team more time to act proactively and focus on strategic work that brings you joy and provides value to your organisation. Accuracy is crucial to businesses in all industries, but highly regulated, high-risk, high-return industries like financial services are perhaps more reliant on process accuracy than others. RPA technology is exceedingly accurate. Mistyping and formatting errors are no longer an issue. Unlike humans, who may miss a step by accident, change the sequence of steps, or add other irregularities, an RPA robot accomplishes tasks without bias or variance. RPA will support consistent application of rules and adherence to control frameworks as long as you define your workflows clearly and accurately. Remember that humans still have control over robotic accounting, and the right rule configurations ensure there is someone to double-check any potential exceptions. Finance teams have been using robotic process automation (RPA) for years to increase the speed, efficiency, and accuracy of certain processes. RPA is now being taken to the next level by merging it with machine learning (ML). According to a recent Gartner study, around 80% of finance leaders have already deployed or plan to implement RPA. You hate it or love it, it will do everything it can. Authors: Ramya Sehgal and Tushasp Illustration by: Sai Aditya

  • The Predictive Powers of the Yield Curve

    When markets get shaky investors and economists start talking about the yield curve because they might not have a crystal ball, but the yield curve is the next best thing. What is the yield curve? To understand the yield curve, we first need to understand bonds. Bonds are one of the safest investments in the market and are staples of many investment portfolios, from pension funds to retirement accounts. A bond is a chunk of money an investor lends to a company or a government with the agreement that over time they’ll be repaid with interest. The amount of money an investor gets back from a bond's coupon (interest) payments is known as the yield. The bond market, rather than its volatile cousin, the stock market, is thought to be a stronger gauge of the economy. The yield curve's behaviour is constantly monitored because interest rate movements can reveal a lot about what highly sophisticated institutions think about the economy's future health. The yield curve measures the yields of all bonds the treasury is selling over a long period of time. The x-axis shows when the bonds will be repaid and the y-axis measures yield, the interest that the bondholders will receive annually. A normal and healthy, upward-sloping yield curve reflects the fact that short-term interest rates are frequently lower than long-term rates of bonds. Investors and economists look at the way the curve bends to predict the health of the economy. The US yield curve, in particular, operates as the key barometer of investors' profound comprehension about the future path of the world's largest economy and has a solid track record of predicting downturns before they occur, given to the dollar's central position in the global financial system. An inverted yield curve has always been an omen or the harbinger of recessions. Inversions of the yield curve have historically foreshadowed recessions in the United States. Because of this historical association, the yield curve is frequently used to forecast business cycle turning points. What causes the yield curve to invert? There are two levers- the first is the Fed which influences the short-term bonds on the left side of the curve. in a booming economy, the Fed raises the short-term interest rates to limit inflation which can get out of hand when too many people are borrowing and the economic growth is moving too quickly. However, when the economy is stagnant, the Fed often lowers the rates to encourage borrowings. The Federal Reserve recently raised interest rates for the first time in more than three years, an incremental salvo to combat soaring inflation without jeopardizing economic growth. Investor sentiment controls the right side of the curve. When investors think that the economy is in a good shape, they take money out of the long-term bonds and instead pour their money into riskier assets like stocks. The lower demand causes the price of bonds to sink, pushing up the yield curve reflecting that the price of a bond is inversely related to the yield. Hence, when the bond prices sink, the yields rise and vice versa. But when the investors think that the economy is headed for a rough patch, they pull their money out of stocks and put it somewhere safer like long-term bonds, and this causes the yields to drop. Therefore, when short-term interest rates go up and investor sentiment goes down, the yield curve starts to flatten and can eventually invert. How do negative yields work? The yield is the calculation of how much an investor can expect to make from holding onto a bond bought at a particular price for a particular length of time. When the bond market is experiencing unusually high demand due to investor sentiment or when the central banks around the world set their interest rates below zero. Central banks are banks for commercial banks. Hence, when they set negative interest rates, commercial banks must pay them for the privilege of holding their money. This further incentivises the commercial banks to lower the interest rates they charge to average consumers. Negative interest rates incite the investors to buy bonds rather than pouring their money at a bank. This drives up the demand for the bonds and drives down the yields, so much that they reach the negative territory. The million-dollar question is this: Wouldn't it be safer for investors to keep their money under their pillows rather than invest in bonds with negative yields? but If the demand continues to rise, buying now means potentially selling bonds later at a higher price. This can help offset losses in the short run but the long-term implications of negative yields could mean lower returns on retirement accounts and pension funds, meaning workers would have to save more and work longer. Negative bond yields and negative interest rates are, therefore, are viewed as short-term remedies to get the economies moving. What has been happening with the yield curve more recently? The US yield curve reversed in 2019, raising concerns that the extended economic growth that followed the global financial crisis was coming to an end. When the Covid epidemic forced the closing of large sections of the global economy, the result was a recession. Even the most ardent supporters of the yield curve do not claim that it can predict pandemics. Still, we'll never know if the US was on the verge of a recession, and the predictive potential of inversions has maintained its great record. Short-term government bond yields have risen rapidly this year, indicating anticipation of a series of rate hikes by the US Federal Reserve, while longer-term government bond yields have risen more slowly, owing to concerns that policy tightening could harm the economy. As a result, the Treasury yield curve has been flattening in general and hinting toward a recession. Whether or not that turns out to be correct, financial market clairvoyants are likely to keep staring at the yield curve. Conclusion However, it is important to remember that the use of yield curves as an economic harbinger can be both confusing and scary to an average investor. When the media proclaims that the sky is falling because of flat or inverted yield curves, or that the economy is booming because of a steep yield curve, it's crucial to remember that this is just a glimpse. The yield curve is an indicator, not a forecast. Treating the yield curve as a single piece of data rather than a perfect forecast of the economy as a whole can assist investors in making the best investing decisions possible. References: CNBC Forbes Financial Times Investopedia Authors: Madhav Goel and Aagya Mehta Illustration by: Arab Kansal and Shubham Kandoi

  • ABG Shipyard: A Sinking Ship

    This article is an excerpt from the Feb 2022 edition of the Finance Gazette Volume IV. Click to read the whole edition India is a country that has a rich history of frauds. In this cut-throat competition of scams, we have witnessed a new champion, ABG Shipyard. Based in Surat, the company was once regarded as a powerhouse in the shipbuilding industry, with an order book of Rs. 16,600 crore. It has set the bars high with the successful construction of 165 vessels over a span of 16 years. The Indian shipbuilding industry is not the only place where the company has reached new heights. Defrauding a consortium of 28 banks, causing losses to the tune of Rs. 22,892 crore, ABG Shipyard’s controversy surpassed Nirav Modi’s Punjab National Bank Fraud, being touted as the ‘Biggest fraud in India’s banking history.’ Before we dive deeper into how the ship sank, let's trace back the journey of ABG Shipyard Ltd. Promoted by Mr Rishi Agarwal, ABG Shipyard Ltd. is the flagship company of the ABG group. Prior to the controversy, it was thriving as a major player in the shipbuilding and repair industry. Incorporated as Magdalla Shipyard Pvt. Ltd. in March 1985, it was renamed ABG Shipyard Ltd in June 1995. Over the past 16 years, the company built over 165 vessels, 80% of which were for international customers. This includes specialised vessels such as floating cranes, newsprint carriers, interceptor boats, self-discharging and loading bulk cement carriers, and dynamic positioning diving support vessels. All international classification societies have given the ships class approval. The company’s journey is rife with achievements and milestones. It was awarded a contract to build pollution-control vessels for the Indian Coast Guard in 2004. In June 2011, it was awarded a ₹ 9.7 billion deal by the Government of India to build warships and other vessels for the Indian Navy. It is one of the three private shipyards in India selected by the Indian Navy to construct naval vessels and has built 23 vessels for the Indian defence sector. But soon after, things went downhill for the firm. The company has been accused of cheating a pool of 28 banks, including the State Bank of India, ICICI Bank, and many such renowned financial institutions of the country. The entire conspiracy was carried out within a span of 5 years, involving several web transactions which were made on the part of ABG Shipyard Limited with a motive to gain profit out of the banks’ funds. So, what was the iceberg which everyone overlooked? What led to the Titanic’s eventual sinking? The company was already having a rough sail before the 2008 global crisis. The crisis headed by the U.S. housing bubble hit ABG Shipyard Limited’s financial position terribly. As per the CBI report, the crisis resulted in a “significant increase in the operating cycle, thereby aggravating the liquidity and financial problem.” Despite the company’s financial position, banks continued to extend loans to the company between 2005 and 2012. The company took humongous loans and further diverted them in the acquisition and purchase of assets, fund transfers to overseas subsidiaries and related parties. The company was accused of this 6-year long fraud involving disbursements of bank funds for the company’s ulterior motives. After 2012, there were several steps taken by various banks and the government of India. On 30th November 2013, the account of ABG Shipyard Limited was declared to be a Non-Performing Asset (NPA). This meant that the company was in no position to meet the stated loan obligations due to its poor financial position. Further, the State Bank of India decided to use the path of Corporate Debt Restructuring to restructure the loans extended to the company. The restructuring failed due to the declining graph of the shipping industry. As stated in the FIR, the shipping industry was amidst a “downturn, one of the worst ever seen, the operations of the company could not revive”. After the failure of restructuring, the account of ABG Shipyard Limited was officially declared as a Non-Performing Asset (NPA), “with a back-dating to 30th November 2013”. The fraud was finally unravelled in the year 2019, after a long delay in the investigation. In a forensic audit conducted by ‘Ernst and Young LLP’, the company found strong evidence of the well-planned and concealed fraud. According to the audit, the fraud was carried out through “diversion of funds, misappropriation, and criminal breach of trust, with an objective to gain unlawfully at the cost of the bank’s funds.” The State Bank of India filed an FIR in November 2019 regarding the fraud. This was followed by a more comprehensive official complaint being filed in August 2020. According to the filed complaint, the company dispersed Rs. 1,415 Crore through several group companies with an aim to settle its own dues. The money was also used to invest in its overseas subsidiary, namely, ABG Singapore. Rs 83 Crore was used for fund transfer to various companies. This money was also used in the acquisitions of assets and properties which was not reflected in the company’s fixed assets. This manipulation of their accounts was one of the key factors which led to the carrying out of the fraud. Moreover, ABG Shipyard Limited was also accused of violating the terms of its CDR agreement which stated, “all cash inflows should be routed through the trust and retention account”. After a long tenure of investigation on the part of the SBI, the Central Bureau of Investigation took over the case on 7th February 2022. CBI booked ABG Shipyard and ABG International Private Ltd. under the case. Currently, the ABG Shipyard fraud case is being covered on every news channel and newspaper. CBI has started its investigation and has already pointed out some crucial findings. As of 15th February 2022, a lookout notice against promoter Rishi Agarwal, and ABG executives Santhanam Muthuswamy and Ashwini Kumar has also been issued. According to the recent CBI report, the company owes a huge amount of Rs 22,842 Crore. The official statement, as of 7th February 2022, states that “the company owes ICICI (which was leading the consortium) Rs 7,089 crore, SBI Rs 2,925 crore, IDBI Bank Rs 3,639 crore, Bank of Baroda Rs 1,614 crore, Punjab National Bank Rs 1,244 crore, Exim Bank Rs 1,327, Indian Overseas Bank Rs 1,244 crore, and Bank of India Rs 719 crore, among others.” This doesn’t even include the punitive interest, which would further increase this amount. So, who were the passengers who got thrown overboard from the sinking ABG ship? For such a huge corporation thus, it stands to reason that the eventual fraud and the financial troubles of ABG Shipyard impacted a lot of stakeholders and parties in a variety of ways. The biggest losers in the scam, without a doubt, were the Banks involved. While according to Swaminathan Janakiraman, the Managing Director of State Bank of India, the banks would be able to recover the money being owed to them, the truth might be a lot different. On previous occasions like the Nirav Modi scam, the Kingfisher scam and the Videocon scam, more often than not banks have incurred heavy losses and have been unable to recover all the money which was owed to them. Banks were unable to recover around 20% of the money owed in the Videocon Scam and around ₹5000 cr. from the Vijay Mallya scam is yet to be recovered. As for the Nirav Modi scam, banks still haven’t been able to recover a single penny of what was owed to them. Thus, while in theory, it may seem that the banks would get some of their lost money back if history is anything to go by, they may lose a huge chunk of what was owed to them, and the money they do get back would without a doubt take a long time. This is just the tip of the iceberg. Even though ABG Shipyard was declared an NPA all the way back in 2013, the recent limelight has caused a massive sentimental reaction in the stock market towards these banking shares. Valentines’ day showed no love towards these banking stocks with SBI shares falling by 5.2%, ICICI bank shares by 4.73% and IndusInd bank shares by 4.52%. The fact that yet another humongous fraud has come to the limelight after the Nirav Modi and Mehul Chowksi scandal, and that this case has seen so many delays in being registered with the CBI has created a lot of negative sentiment towards the banking sector in general. And rubbing salt to the wound, not one, not two but 28 banks were defrauded, which has naturally caused a lot of backlashes towards the banking sector. Aside from the Banks which were hit so hard by this scandal, we must also not forget that ABG shipyard had a massive client base too. The eventual bankruptcy impacted its clients like the Indian Navy who had to cancel the orders for shipping vessels that had been placed with ABG shipyard. The irony however lies in the fact that it was these very orders from the Indian navy and coast guard which allowed ABG Shipyard to commence their fraud in the first place. Being able to show that they had orders from high profile clients like the Navy, gave ABG a massive amount of goodwill, and on the basis of this, they were able to get loans from most of the banks they approached. Lastly, the ABG shipyard had tried to siphon money into personal assets and tax havens. This means that they robbed the government of a huge amount of taxes. Not just the government though, the money which could have gone to the general public was lost to ABG. It’s tough to comprehend the sheer size of the fraud, so let’s actually put the total amount of the fraud into perspective. During the pandemic, the Uttar Pradesh government had spent around twenty thousand crores on family welfare and health which is still around two thousand crores less than the fraud committed. During the same time Assam saw lending of twenty-two thousand crores to 1.78 million micro, small and medium enterprises, and a similar amount was given as loans to weaker sections of the society in all of Northeast. All of these were less than the amount that ABG shipyard defrauded the country off. This means that the money which was lost could have been used to save lives and serve over 16% of India’s population in the pandemic, or could have served around 4.4 million underprivileged people to start their lives or help start around 2 million new small enterprises. This goes on to show that the ramifications of the fraud go beyond just a few arrest warrants. From financially hurting some of the nation’s top companies, to negatively impacting the stock indices, these kinds of scandals impact one and all. Most importantly it robs the general public of the opportunity to raise their standards of living. So, why was the crew unable to forecast the impending storm?... 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  • Mentorship and Consulting | FIC Hansraj College

    Mentorship and Consulting FIC Hansraj realizes the ever-increasing industry requirements and the challenges that come with it. The Mentorship and Consulting wing was thus set in motion to help students acquire business acumen and to apply their skills by undertaking live projects. The wing has successfully executed several live projects spanning across Financial Modelling, Technical Analysis, Market Research to CSR strategies. The core vision of the society is to provide organizations with high quality and affordable consulting services in order to develop pragmatic as well as sustainable solutions to the challenges they face. With this, the wing aims at setting a benchmark in youth-based consulting. Collaborate with us About Us With a goal to promulgate financial knowledge among the university students, The Finance and Investment Cell, Hansraj College has always aimed to furnish students with a platform that can augment skill development and apprise them of industry needs. Our focus is to develop consulting-oriented thinking among the members and equip them with the tools and resources necessary for careers in the consulting domain. Our objective is to establish a professional body which is directed towards implementing the precise combination of proficiency, creativity and analytical skills to deliver exclusive and extremely economic consulting services. As a student body of budding consultants, each of whom possesses the zeal and strength to make a difference, we aspire towards providing empirical, ingenious and viable solutions to philanthropic organizations around the globe to assist them in transforming their capacity to convey positive social impact. We aim to join hands with these socially conscious institutions who have set out to address some of the world's most pressing issues. Our Domains Operations Management We focus on improving the efficiency of the value chain by devising strategies to reduce costs and optimizing business processes. Market Research We conduct tailor-made research for our client’s unique and varied requirements. This research is carried out independently to provide value added information to our clients for their decision making processes. Growth Strategy We devise an adroit roadmap for our clients to overcome current and future challenges to ensure that they achieve their desired growth rate. Industry Research We conduct industry analysis covering aspects like key players and competitors, growth and industry trends. Marketing Strategy Devising an overall game plan for a business to reach its prospective consumers and turning them into customers of their products or services. ​ Competitive Benchmarking We can help you know your competitive position in the market, to help you work on a strategy to maintain an edge in the market. Our Past Projects Global Phrase Media | Industry Research, Competitive Benchmarking We drew up a comprehensive plan for our client to establish their presence in the Digital Marketing Space. After thorough industry analysis and a detailed study into the competitors’ strategy, we provided our conclusions and recommendations through a detailed report. Contact Us ficmentorshipconsulting@gmail.com Text us on WhatsApp Our Team Muskan Mehra Manuj Bengani

  • Editorial & Marketing | FIC Hansraj College

    Editorial & Marketing Department The EDM department integrates the public in the FIC family by getting them subscribed and associated with us by reaching out to them. Through the writing prowess of the members, it strives to provide the best content to its special pool of readers and followers. about us The Editorial and Marketing Department (EDM) plays a pivotal role in the daily functioning of the cell. Details regarding any activity of the cell, be it any event, session or publication has to reach the public in the crispest yet intriguing manner so that justice is done to the tremendous efforts put behind curating these articles. Swami Vivekananda rightly said,” Think of the power of words”. The words knitted in a beautiful piece of article on any finance topic can do wonders and go a long way in letting our audience know everything under the sun of finance. This is what the department stands for. The EDM department is responsible for maintaining the social media presence of the Cell across all platforms. This holds paramount importance as every content that goes out on the social media pages constitutes the face of the Cell. Functioning in tandem with the Tech department, especially among the other departments, EDM releases its own set of financial articles through the weekly post and story series. From the recent market trends in news to lesser-known trivia facts about finance, the Cell has got it covered. The Hansraj Finance Gazette was another initiative of the EDM department that started in 2020 and springboarded to success in a short span of time. Marketing is the heart and soul of the department. The elite activities conducted by the Cell should be voiced out to every realm so that the maximum number of people can reap the benefits. The department ensures extensive marketing is done through moment marketing posts, collaborating with other societies, and tapping several other channels. 1500+ registrations in Empresa’ 21 and 400+ registrations in the Young Investors’ Fellowship Programme’21 is a testimony to the efforts put in by the department. CONTACT US pr.fichrc@gmail.com Text us on WhatsApp Our Team Mayank Kedia Lavina Garodia Jayesh Rungta Aarushi Agarwal

  • Organizing & Sponsorship | FIC Hansraj College

    Organising & Sponsorship Department We at OS department are majorly focused towards generating funds and organising events for the society. We believe in building strong professional relationships with the clients by providing promising deals and entering into mutually beneficial collaborations. Collaborate with us about us The Organising and Sponsorship department works with outside entities to bring in sponsorship for FIC, Hansraj College and organizes all kinds of events for the society. The department primarily works towards generating funds to support all the activities of the society throughout the year. The work consists of converting clients into a mutual agreement over sharing deliverables. It also works harmoniously with clients to maintain a healthy working relationship. Right from generating funds for an event to its organisation and execution, everything is handled by the OS department. Our past Sponsors CONTACT US osfichrc@gmail.com Text us on WhatsApp Our Team Harsh Jaglan Ekagrata Arora Anirudh Garg

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