Industry Breakout Session
Financial Services
US India Business Summit, Mumbai, November 29-30, 2006
Agenda
Indian Banking Structure
Investing in India
Treasury Management Trends
Bank of America in India
Indian Banking Structure
RBI
Commercial Banks Co-operative Banks Banking Institutions NBFIs
All India Development Housing Finance
Public Sector Banks Primary urban coop
Banks Companies
State and central coop State Finance Non - Bank Finance
Private Sector Banks
banks Companies Companies
Primary Agricultural
Foreign Banks Specialized Institutions
Credit Societies
Land Development NABARD / NHB
Regional Rural Banks
Banks / EXIM
Government Owned
Multi Layered Structure
Ongoing Banking Transformation
Alliances (Corporation / OBC/ Indian Bank)
Consolidation (BOP / Centurion / LKB, IDBI / IDBI Bank, GTB / OBC)
Evolving Foreign Ownership / FDI Norms
No geographic, INR restrictions, Foreign Banks branch license needed
Investing in India
Entry Options
Entry Strategies
Self Third Party
Liaison Office Distributorship/ Agency
Branch Office/ Project Office Technical Collaboration / Licensing
Wholly-owned subsidiary Contract Manufacturing / Job Work
Joint Venture
Unincorporated Joint Ventures
FDI
Automatic Route Not covered under Automatic
Route
Investors are only required to notify the Regional office Considered by the Foreign Investment
concerned of RBI within 30 days of receipt of inward Promotion Board (FIPB)
remittances and file the required documents with that office
within 30 days of issue of shares to foreign investors
Investment / Repatriation Options
Cost of capital
Decision Tenor
Factors - Choice Eligibility
of funding Legal aspects
Equity
Preference shares
Funding Convertible Debentures
Options Inter-company loans
Trade Credits
Buy Back of Shares
Dividend
Repatriation Royalty and Technical Know-How Fees
Options Management / Consultancy Fees
Outbound Investments
Cash Optimization Options
*
Bank Deposits
Low / Medium 6.00 – 7.00 %
Invest in Bank time deposits (available from 7 days
onwards)
TDS applicable on interest
Liquid Mutual Funds Medium 5.50 – 6.50 %
Invest in Liquid / Floating rate mutual funds
Tax exempted from Dividend
Government Bonds/Treasury Bills
Low 6.75 – 7.25 %
Invest in Central Government Securities/ T Bills
CSGL account to be opened for buying/selling of
securities
Short Term Commercial Paper
Medium / High 8.25 – 8.40 %
Invest in Commercial Paper of “P1+” rated Indian
companies
TDS applicable on interest
Counterparty corporate risk
* Indicative Levels
Treasury Management Trends
Current Scenario
Constraints Issues
Geographically dispersed market Delays in receiving credits
Predominantly paper based clearing system Uncertainty of payments
Check / Drafts - the most common method
of funds transfer Reconciliation issues
Checks physically sent to locations.
Realization time up to 30 days High fraud potential
Over 1000 independent clearing houses Administrative Burden
Over 70,000 Bank Branches
Changing Scenario
Move Towards electronic clearing environment
Client Needs Key recent initiatives by Reserve Bank of India
Expedite the collection of receivables from across the country
(RBI) :
Electronic banking interfaces to automate disbursements Real Time Gross Settlement (RTGS)
Implement efficient account structure for concentration of funds National Electronic Fund Transfer (NEFT)
Minimize excess cash and overdraft balances Cheque Truncation (Cheque 21 equivalent) – Pilot testing
Sound MIS for effective planning and decision making National Settlement System (NSS)
End-to-end integration with bank’s interface & ERP systems
Electronic banking solutions gaining recognition due to
Automation
Improving telecom networks
Rapid restructuring programs
Electronic Payment Systems
Predictability of Cash Flows :
Clients know when their accounts debited or credited
Increased efficiency:
Lower transaction costs
BENEFITS STP results in fewer errors, quicker processing
Economic Factors :
Fast, secure and irrevocable settlement of major business and financial market transactions
Robust, modernized payments system
Real Time Payment Settlement :
Payments made on real-time and transaction by transaction basis
Gross Settlement :
RTGS Continuous settlement without netting
Lower Risk
No Credit Risk: Payments settled instantly, no end of day procedures
Reduced Systemic Risk: Intraday Finality
Net Settlement System
Netting positions of clearing participants
Facilitates paperless inter and intra bank settlements, both inter and intra city
NEFT There is no Maximum value limit for an individual NEFT transaction.
Available for one to many electronic settlements
Cheque Truncation System (CTS)
RBI’s Vision -To increase efficiency and speed of cheque / instrument clearing, use electronic exchange
CTS is an image-based cheque clearing system (Check 21 in the US)
Current Status
To be Implemented in the National Capital Region
Expected live testing of CTS in NCR Delhi by Q4’2006
Benefits
Time Saving
Reduced Physical Transportation
Electronic clearing within hours
Multiple clearings in a day (with truncation at Branches)
Ease of Operations
No physical transportation
Lesser and Quicker reconciliation
No chances of lost cheques and discrepancies at Clearing house
Higher efficiencies, better managed operations
Reduced Costs
Savings on travel cost
No need for expensive Magnetic Ink encoding, and fault prone encoders
Reduction in Logistics overhead
Eliminate Frauds
Bank of America
Global Franchise
LEADING PLATFORM PREMIER INVESTMENT BANK(a)
Leading
Over 175,000 associates worldwide serving clients in more than Over 800 investment banking professionals in the United
Financial 150 countries States, Europe and Asia
Institution International offices in 35 countries #1 arranger of leveraged loans by volume
One of the world’s largest banks, with $1.29 trillion in assets, a #1 loan syndications
loan portfolio of $573 billion and $238 billion in market value
#2 book manager of US high yield issues
Client roster includes 98% of the U.S. 2005 Fortune 500 and 82%
of the Global Fortune 500 (as of August 15, 2006) #1 asset based lending platform
Completed in excess of $1.0 trillion of debt, equity and advisory #1 liability management
Global Reach
transactions on behalf of our clients annually #1 private placements
#3 in convertible debt underwriting
#6 US high grade corporate debt YTD 2006
#6 advisor in announced U.S. general industrial M&A
transactions
Leadership across #8 global equity-linked issuance
Products
($ in billions)
MARKET CAPITALIZATION (b)
300 Bank of America, N.A. Ratings
S&P A-1+ / AA
Insightful Advise 250 240 Moody’s P-1 / Aa1
233
Fitch F-1+ / AA
202 Duff & Phelps D-1+ / AA
200
157
150
131
117
111
98
Building 100
Relationships 57
51
50
0
Citi BAC HSBC JP Morgan Mitsubishi Wells Fargo UBS CCB Deutsche ABN
UFJ
Citi BAC HSBC JP Morgan Mitsubishi UFJ Wells Fargo UBS CCB Deutsche ABN
Source: Various
(a) Dec 31, 2005 unless otherwise noted
(b) Market capitalization as of September 11, 2006
Bank of America in India - Presence
5 Full Service Branches
Gurgaon
2005 New Delhi
1977
2 Processing Centers
Kolkatta
Mumbai (Bombay) (Calcutta)
1964 1966
Mumbai Hyderabad
2005 2004
1 Knowledge Center
Bangalore Chennai (Madras)
2001 1968
Growing Commitment to India
Full Service Corporate & Investment Banking Capabilities in India
Five branches located in strategic metros + comprehensive partner bank coverage
Long and established presence in India (40 years), well-entrenched relationships with
government, financial institutes and corporate clients
300+ corporate clients and 600+ export clients
Solid track record as focused Corporate & Investment Bank
Innovative, Solutions oriented Treasury Services Bank
Growing Commitment to India
Additional capital of US$ 175 million into India franchise to provide for growth of business
needs of clients in India, taking the total capital base of the Indian arm (Bank of America
NA) to US$ 420 million
Comprehensive Product Suite
Global Treasury Services Global Markets Group
Comprehensive Banking Services FX - Risk Management/Advisory
Cash Management Services Derivatives (Rate/Currency/Commodity)
Trade Services and Financing Money Market & Securities Trading
Structured Trade Finance
Electronic Banking Solutions
Debt Capital Markets Portfolio Management
Domestic fixed income /Structured deals Working Capital Facilities
Asset Securitization Long Term Financing / Term Loans
Offshore Syndications and Capital Markets Comprehensive Risk Management Platform
Dedicated Debt Subsidiary : BASIL
Global Treasury Services
All India collection, coverage over 4500 locations
Receivables Direct debit, tracking, MIS and lock-box arrangement
Management
Electronic payments (ECS (Dr)/ NEFT/ RTGS) and Auto-Recon through ERP integration
Outsourcing of bulk payments processing
Payment Solutions Secure environment for processing payments
Zero balance Accounts and transmission of adhoc payment instructions
Corporate - Inventory Finance (pre-shipment) and Receivables Finance (post-shipment)
Trade Solutions Structured - Buyer’s Credit / Supplier’s Credit Buyer Supported Vendor Financing
Electronic Interface – Trade Direct ( download advices, establish LCs, authorize payments online)
Bank Fixed Deposits
Liquidity
Management Government Securities / Treasury Bills, Corporate Commercial Paper / Bonds
Solutions Inter Company Loans and Short term (liquid) Mutual Funds
Electronic File Delivery (EFD) facilitates Bulk Payments – Corporate Checks, NEFT and RTGS
Electronic
Interfaces & BA Direct, Strategic Global Information Reporting (SGIR) facilitates online account information,
Integration enquiry and reporting
Thank You