Subnetting and IP address Scheme Project Assignment

Subnetting and IP address Scheme Project - Assignment Example In fact, it will take into consideration the fact that XUMUC has about four departments that include finance, sales, human resources, as well as research and development. Further, it will concentrate on the WAN transport issues that will ensure that the network design can eliminate high overheads when the company needs to expand in the near future. Introduction Recently, XUMUC institution that was only based in San Francisco merged with a Denver campus. The networking scheme was poorly documented for the original campus alone thus resulting in the presentation of poorly designed IP addressing schemes and an IP addressing table. In efforts to correct this error and ensure that the merger does not bring down the operations in the company, this paper presents details for their network design depending on various issues. ... the background information provided for XUMUC campus, the organization has WAN links in place for the set up of any new locations in the Houston Region. The organization, which currently has two main campuses in San Francisco and Denver, was originally based in one campus (San Francisco). Further, the work of the consultant created very large routing tables at the summarization points and at the San Francisco Campus. In addition, the organization lacks VLAN structures that isolate broadcast traffic. In any case, the organization has about four main departments that should be considered and they include sales, finance, human resources, as well as research and development. Hence, the newly designed networking design documentation should also note that the WAN transport is able to accommodate the network traffic. Moreover, it should ensure that all addresses in the network are dynamically assigned to ensure that unlike the previous design, the high administration does not experience ove rhead when changes are needed within XUMUC. Business Requirements and Network Growth for XUMUC As previously stated, XUMUC has expanded and requires a network design that can assist the organization cater for network requirements of the campus in San Francisco and Denver. The Wan Link that is always available for the expansion to new locations in the Houston region is very useful as it is concerned about the network requirements at the higher level. However, the network needs to be set up in a way that it takes care of the expansions in the lower level as well. This is in the sense that the IP addressing scheme should integrate the two regions and leave room for addition of users within the network. This is because in XUMUC network growth is necessary especially considering the fact that

La Cosa Nostra Essay Example | Topics and Well Written Essays - 1250 words

La Cosa Nostra - Essay Example It is the most notorious American organized crime in the country’s history, a notoriety that has often been depicted on the big screen such as the classic films The Godfather and The Untouchables. La Cosa Nostra: The Beginning When Sicily was annexed to Italy in the 1860s, the Sicilian authorities had trouble enforcing order due to a restructured society engendered by a land reform that redistributed public land to Sicilian peasants. Banditry became prevalent as peasants were forced to lawlessness to survive as the lands given to them were too small for them to live on. Traditional sources of livelihood such as firewood gathering were lost when church estates and public land were confiscated and redistributed by the government. The state of lawlessness gave rise to the formation of a secret society that offered its services for a fee to protect merchants and landowners from bandits and other lawless elements. This underground society was called the Mafia and protected merchant s and landowners. Although the group operated through vigilante means, a member is considered â€Å"A Man of Honor† because of the protection he gave his family and society. Eventually, members became abusive and turned to extortion to force landowners and merchants to hire them at high price. This was, however, tolerated because of their role as protectors (FBI). The Sicilian Mafia eventually branched out to politics, forcing people to vote for the candidates they want, but when Benito Mussolini came to power in the early 1920s he felt threatened by it and ordered a relentless campaign against its members. This became the turning point of the Sicilian Mafia as many of them were arrested and imprisoned. Some mafia members or Mafiosi, however, were able to flee to the United States (FBI). The American Mafia Mussolini’s campaign against the Mafia in Sicily drove many of them to flee to the US illegally. However, the first Sicilian Mafia who came into the US was Giuseppe Esposito, who fled with six other Mafiosi after murdering the chancellor and vice chancellor of a Sicilian province. He was deported to Italy after arrest in 1881 in New Orleans. In 1990, the first major Mafia operation took place with the execution of David Hennessy, New Orleans police chief superintendent. Although hundreds were arrested and 19 eventually indicted, a subsequent acquittal led New Orleans citizens to organize lynch mobs and killed many of the defendants (FBI). The LCN operates in such cities as Boston, Chicago, Philadelphia, and in Miami, but the group’s greatest stronghold is New York. Previously, the group also operated in Cleveland, Detroit, Kansas City, Las Vegas, LA, New Orleans and Pittsburgh, but has been greatly weakened and is now almost non-existent. Eighty per cent of its estimated 1100 membership are said to be operating in the NY metropolitan area where five families are lording it over: the Bonanno family; the Colombo family; the Genovese family ; the Gambino family; and the Lucchese family (Finckenauer 1). LCN operation in the US officially began in the 1920s and since then this group has been known as the foremost criminal organization in the country associated with organized crime. The group is known for ruthless violence such as beatings and killings, which it uses as an operational tool externally and internally. Arson, bombings, explosions are used as tools by the LCN in operating its business and gain

Globalisation And The Impact Of The Internet Marketing Essay

Globalisation And The Impact Of The Internet Marketing Essay Globalization is the system of interaction among the countries of the world in order to develop the global economy. Globalization refers to the integration of economics and societies all over the world. Globalization involves technological, economic, political, and cultural exchanges made possible largely by advances in communication, transportation, and infrastructure. Internet is a global network connecting millions of computers. More than 10 countries are linked into exchanges of data, news and opinions. Unlike online services, which are centrally controlled, the Internet is decentralized by design. Each Internet computerhttp://kona.kontera.com/javascript/lib/imgs/grey_loader.gif , called a host, is independent. Its operators can choose which Internet services http://kona.kontera.com/javascript/lib/imgs/grey_loader.gif to use and which local services to make available to the global Internet community. Remarkably, this anarchy by design works exceedingly well.   http://a.stanzapub.com/delivery/lg.php?bannerid=599campaignid=535zoneid=934source=acf=loc=1referer=http%3A%2F%2Fsocyberty.com%2Fissues%2Fthe-internet-and-globalization%2Fcb=48e48290e7 The internet has changed the way business is conducted . Through various web business applications, it has given great opportunities for business to increase their revenues, cut their cost and manage their daily operations in a more efficient and effective manners. Communication is the key of globalization.    Businesses large and small needed a way to advertise, sell, purchase, and enhance their product worldwide. What better way to accomplish this than through the use of the Internet.    The Internet provides a cheaper, faster and easier method of communication, an alternative that has created a global audience', as mentioned by Renato Ruggiero, Director General of the World Trade Organization. There has been a great deal of discussion in recent years about globalization, which can be defined as the intensification of economic, political, social and cultural relations across borders. Evidence of globalization is seen in our daily lives. We are being influenced by the on rush of economic and ecological forces that demand integration and uniformity and that mesmerize the world with fast music, fast computers and fast food with MTV, Macintosh and McDonalds, pressing nations into one commercially homogeneous global network: one Mc world tied together by technology, ecology, communication, and commerce. Technology is perhaps the most visible aspect of globalization and in many ways its driving force. Communication technology has revolutionized our information systems. Globalization tends to be most perceptible and observable in almost every facet of life mainly due to the emergence of internet technology. The internet technology is globally integrating and amalgamating the people of the world. The advent of the Internet in its unquantifiable shape and form has over the past decade provided a common platform upon which countries from all corners of the Earth are able to communicate and share information. Despite of the widespread usage and availability of new technology, the issue been brought to the forefront of the debate between advocates on both sides of the globalization aisle. According to economists, there are a lot of global events connected with globalization and integration. It is easy to identify the changes brought by globalization. 1.  Ã‚   Improvement of International Trade. Because of globalization, the number of countries where products can be sold or purchased has increased dramatically. 2.   Technological Progress. Because of the need to compete and be competitive globally, governments have upgraded their level of technology. 3.   Increasing Influence of Multinational Companies. A company that has subsidiaries in various countries is called a multinational. Often, the head office is found in the country where the company was established. An example is a car company whose head office is based in Japan. This company has branches in different countries. While the head office controls the subsidiaries, the subsidiaries decide on production. The subsidiaries are tasked to increase the production and profits. They are able to do it because they have already penetrated the local markets. The rise of multinational corporations began after World War II. Large companies refer to the countries where their subsidiaries reside as host countries. Globalization has a lot to do with the rise of multinational corporations. 4.  Ã‚   Power of the WTO, IMF, and WB. According to experts, another effect of globalization is the strengthening power and influence of international institutions such as the World Trade Organization (WTO), International Monetary Fund (IMF), and World Bank (WB). 5.  Ã‚   Greater Mobility of Human Resources across Countries. Globalization allows countries to source their manpower in countries with cheap labor. For instance, the manpower shortages in Taiwan, South Korea, and Malaysia provide opportunities for labor exporting countries such as the Philippines to bring their human resources to those countries for employment. 6.  Ã‚   Greater Outsourcing of Business Processes to Other Countries. China, India, and the Philippines are tremendously benefiting from this trend of global business outsourcing. Global companies in the US and Europe take advantage of the cheaper labor and highly-skilled workers that countries like India and the Philippines can offer 7. Civil Society. An important trend in globalization is the increasing influence and broadening scope of the global civil society. Civil society often refers to NGOs (nongovernment organizations). There are institutions in a country that are established and run by citizens. The family, being an institution, is part of the society. In globalization, global civil society refers to organizations that advocate certain issue or cause. There are NGOs that support womens rights and there are those that promote environment preservation. These organizations dont work to counter government policies, but rather to establish policies that are beneficial to all. Both the government and NGOs have the same goal of serving the people. The spread of globalization led to greater influence of NGOs especially in areas of great concern like human rights, the environment, children, and workers. Together with the growing influence of NGOs is the increasing power of multinational corporations. If the trend continues, globalization will pave the way for the realization of the full potential of these two important global actors. The globalization that we intuitively know call centers in India, toy factories in China is just one piece of an increasingly competitive landscape. As manual work becomes more automated and trade barriers fall, companies chase knowledge workers and efficiency just as much as they do cheap labor and access to new markets. In this new calculus, it is often surprising who comes out ahead. According to the Business Competitive Index, the Global Competitive Indexs sibling measure developed by Harvard economist Michael Porter, the countries with the lowest wages relative to competitiveness that is, the best values as investment locations are Taiwan, Hong Kong and India, followed by Chile, Singapore, the Czech Republic and the US. And so we are left with a world that even just five years ago would have seemed topsy turvy: an Indian software firm that employs 500 people in Puerto Rico, a Chinese auto-parts maker with RD centers in Detroit and Ontario, Calif. If youre a region trying to hang on to business, geography offers little protection anymore, especially as free-trade zones proliferate in countries from Dubai to Mauritius, and burgeoning heavyweights like Turkey take out full-page ads in US magazines boasting about their university graduates and gains in GDP. Your competitors are in your backyard now in a way they never were before, says Alec Hansen, president of the Economic Competitiveness Group, an outfit that advises governments, companies and development organizations. The world has gotten a lot scarier. The best way for a region to overcome those fears and win out is to figure out how its talents best fit into the global supply chain, says Eduardo Tugendhat, president and CEO of Carana Corporation, a company which designs economic development programs. In Macedonia, a land-locked country with a small domestic market, Tuhendhats firm suggested harnessing the nations long tradition of metal working and pushing into the machining and automotive parts sectors in order to take advantage of the growing auto industry in neighboring Slovakia and Romania two countries that have become a hot spot because of their inexpensive labor and access to the markets of the European Union. But with transportation costs continuing to plummet and markets becoming freer, there are many more places for companies to set up shop, and traditional advantages such as cheap labor or a lack of tariffs mean less and less in many industries. Multinationals are increasingly opening major operations in second- and third-tier cities GlaxoSmithKline in Posnan, Poland, Google in Belo Horizonte, Brazil places that plenty of people have never even heard of. Companies are adopting an all-shore strategy, says Dennis Donovan, principal of Wadley Donovan Gutshaw Consulting, which helps companies decide where to locate. Searching for an edge, many regions are applying the concept of clustering with renewed zeal. The idea of focusing a geographic area on a particular industry in order to achieve economies of scale has been kicking around since at least 1890, when the economist Alfred Marshall coined the term industrial district to refer to neighborhoods that contained both factories and all their workers. In the 1990s, Harvards Porter started using the word cluster to get at the usefulness of companies in close proximity sharing infrastructure, ideas and employees like high performance cars in Germany. Some predicted that a globalized companys ability to cherry pick regions would kill the notion of clusters, but countries are trying to establish industrial niches for themselves more than ever. Turkey established a textiles cluster to try to fend off lower-cost rivals. Jordan has positioned itself a regional center for medical services. Singapore is making a play for biotechnology. Of course, there is always a risk in spending massive amounts of focus and money on one sector since so many factors have to align for economic development to work. Is Singapore really where the top scientists in the world want to be working? asks Carana Corp.s Tugendhat. Just because you build a great campus doesnt mean theyre going to come to it. When clustering does work, though, its gold. Consider Yokkaichi, Japan, a city of 300,000 people that is the premier place to make NAND flash memory, which is used in cell phones and MP3 players. Sandisk, a Milpitas, Calif.-based company that designs, manufactures and sells memory cards, moved its manufacturing base there from Manassas, Virginia a few years ago, partly to be closer to Toshiba, a company it partners with. Yokkaichi already had the infrastructure for both manufacturing and for the large RD outfit that goes along with making memory cards. By having it all in close proximity, it reduces overhead costs, says Sandisk president and COO Sanjay Mehrotra, and thats the name of the game, to be able to produce product at the lowest possible cost. (Notice that had nothing to do with cheap labor.) Now Sandisk is building a new factory in Yokkaichi to produce 40% more wafers a month, which will significantly increase the $1 to $1.5 billion the?company already annually invests to keep its fabs on the cutting edge. And that leads to another major reason Sandisk is in Japan: the countrys?advanced capital structure and low interest rates let the company borrow money cheaply. Clustering may work well, but other aspects of a countrys competitiveness like its macroeconomic fundamentals still matter. The bottom line, says the Economic Competitiveness Groups Hansen, is you have to do everything right. In todays economy, a big part of that everything is being able to produce a desirable workforce. If were hearing a mantra today, its workforce finding the qualified people, says Rob DeRocker, executive vice president of Development Counsellors International, a firm that helps regions position themselves. The global chase for talent is just as true for manufacturing workers you have to find skilled labor if all your machines are computer-controlled as it is for PhD scientists. Microsoft knows a thing or two about the latter. The Seattle computer giant has six high-end research centers three in the US, one in the UK (abutting the Cambridge University computer science department), and two newer outposts, in Beijing and Bangalore. The strategy is partly to go where the worlds great universities are: the Beijing lab is placed squarely between Beijing and Tsinghua universities, the so-called Harvard and MIT of China. But part of it is also a recognition that as more countries move from developing to developed, with the amenities and job opportunities that used to only be found elsewhere, the talent in many cases would rather stay home. We realize that increasingly we will not be successful in recruiting the best people in the world and getting them to come to and stay in the US, says Craig Mundie, Microsofts chief research and strategy officer. Of course, the world doesnt completely change over night. Many of the classic reasons companies set up shop in far-flung locales, like gaining a foothold in a new market, are still in the mix. Nissan, for instance, is among the carmakers now building a plant in Russia, a country flush with money from the skyrocketing price of oil. In 2003, Nissan sold 8,000 cars in Russia, a number that jumped to 24,000 in 2004, and to 50,000 in 2005. We started thinking, if this isnt a fluke, we need to think about localization, says Dominique Thormann, Nissans senior vice president for administration and finance in North America both because of how expensive cars are to ship and because of the 25% tariff charged at the border. Thats a very traditional way for a company to think about reaching overseas. But even the auto industry isnt immune from the evolution of globalization. These days, its not uncommon to source auto parts for a particular car from around the world: cast iron from India, seat fabric from Tunisia. The competition continues to deepen. The computerization of business and telecommunications has led to much talk about the new economy and, possibly, a related surge in productivity. A less recognized development is that information technology, particularly the Internet, is changing the labor market and labor organizations in important ways. internet has been largely felt by the business fraternity. In fact, with the introduction of internet, the definition of business development has gone for a permanent changeover. Unlike the past, today quality and quantity are not the only benchmarks for the growth and development of a business. Today visibility in the market is a bigger factor. Your brand should reach the global market. Your products should be visible everywhere. People across the world should recognize your brand. Today product promotion and campaigning are the most important criteria for achieving success in a business. And for successful prpoduct promotion and campaigning you need to improve your communication and interaction with people. With its modern tools, internet helps you to do that. The days of publishing advertisements in newspapers are over. You need to reach people faster and you can do that through online marketing. People can get to know about you, your company and every detail about it just with a click on the mouse at any time and from any place. Regular communication between all entities of the business, such as manufacturer, supplier, buyer, seller, wholesalers and dealers is very important. The modern interactive tools like chats, emails, SMSes helps a business organization to create a supply chain management that keeps all entities of the business closely linked with each other For one thing, the increased demand for those working with the Internet, and computers more broadly, has boosted both their wages and the hours they work, NBER Research Associate Richard Freeman finds. Further, the low cost of transmitting information over the Internet is shifting job search and recruitment activities to the Web, he adds. Third, the ease of communicating and interacting over the Internet has led unions to experiment with web-based modes of servicing members, perhaps thereby improving union democracy and reversing the long-run decline in membership, and carrying their message to the wider public. The new technologies, together with other important changes, such as the continued increase in the educational attainment of the work force, shift of employment to service sectors, and increased employment of women, are producing a labor market that differs greatly from the industrial labor market that characterized the 20th century, Freeman writes in The Labor Market in the New Information Economy Companies can use the Internet and Internet technologies to improve the efficiency and effectiveness of particular value chain activities: a powerful tool for better supply chain management improving internal operations, e.g.: just-in-time inventory gear production schedules and production quantities to buyer orders more accurate monitoring of buyer preferences and shifts in demand introducing collaborative data sharing with distribution channel partners: online systems reduce transaction costs The impact of internet on globalization has both positive and negative aspects. The positive impact of the internet technology on globalization include the modernization and improvement in the business sector on a world wide basis. Businesses improve their global competitiveness and productivity with more efficient electronic transaction processing and instant access to information. New information and communication technologies (ICT) as well as radically changing international political and regulatory environments reshaped the nature of management consulting. It was during this period that ICT took center stage for global management consulting firms. The market is now more competitive with consumers having greater choices. With the advent of the internet technology work in the foreign countries is more available and accessible because the domestic laws are not as rigorous as they once were, thus assisting in the global nature of the business and allowing new consulting firms to establish a presence in countries that was once restricted. The services of the IT Professionals have been dramatically impacted by the explosive growth in Internet use and related technologies. In the 21st century, venerable trends in ITPS such as centralization and globalization are accelerating, and this is overturning and reversing the leverage ratios and thus introducing completely new capabilities. The Internet is impacting the way that services are bought, sold, and delivered, altering relationships among clients, firms, and employees and speeding the globalization of the consulting industry. There can be seen a better relationship between the clients and the firms through internet which is globally seen all over the world. Instead of face to face meetings the clients can easily deal with the big firms and industries via internet and thus developing a firm client relationship. With the use of the internet technology there can be seen a great positive force on globalization as it tends to increase the communication processes between people living in different parts of the world and also helps to promote the political, social, economic, and cultural aspects of a country. As there is a positive impact of internet on globalization there can be seen a negative impact of internet on globalization as well. While the interdependence and the internet technological advancement have increased in some parts of the world. The globalization of internet technology in the less developed countries typically is a one way proposition: the people do not control any of the information; they only receive it. It is also true that worldwide the ability to control or generate broadcasts rests in the hands of the tiny minority. This shows that in these countries the internet technology generally does not have a neutral application. The placement of the internet technology in developing countries often causes social costs, as well as costs in the form of urbanization, employment displacement, and the digital divide. There can be seen specific and particular risks in the global environment because the gain in power from the techno-economic progress is rapidly being overshadowed. Risks in this sense can be viewed as the probability of harm arising from technological and economic change. Hazards linked to industrial production, for example, can quickly spread beyond the immediate context in which they are generated. Although the current globalization system has different attributes, rules, incentives, and characteristics, but the system is as pervasive as the Cold War system. In order to create a balance in the application of the internet technology it must adhere to the specific standards. The internet technology no matter where it is applied, can only be understood and valued in relation to the social group that creates or uses it, because every model of society and development conceives of and uses a different kind of technology, which should neither give priority to community action nor to the local necessities. Thus the internet both has positive as well as negative effects on globalization and they play equally an important part in the financial and economic status of a specific country. The negative impact on the globalization can be reduced if an equilibrium and balance is created and developmental techniques and schemes of information technology are introduced in the less developing countries so that they may progress and pace forward in the 21st century. This current wave of globalization has been driven by policies that have opened economies domestically and internationally. In the years since the Second World War, and especially during the past two decades, many governments have adopted free-market economic systems, vastly increasing their own productive potential and creating myriad new opportunities for international trade and investment. Governments  also have negotiated dramatic reductions in barriers to commerce and have established international agreements to promote trade in goods, services, and investment. Taking advantage of new opportunities in foreign markets, corporations have built foreign factories and established production and marketing arrangements with foreign partners. A defining feature of globalization, therefore, is an international industrial and financial business structure. Technology has been the other principal driver of globalization. Advances in information technology, in particular, have dramatically transformed economic life. Information technologies have given all sorts of individual economic actors-consumers, investors, businesses-valuable new tools for identifying and pursuing economic opportunities, including faster and more informed analyses of economic trends around the world, easy transfers of assets, and collaboration with far-flung partners. Globalization is deeply controversial, however. Proponents of globalization argue that it allows poor countries and their citizens to develop economically and raise their standards of living, while opponents of globalization claim that the creation of an unfettered international free market has benefited multinational corporations in the Western world at the expense of local enterprises, local cultures, and common people. Resistance to globalization has therefore taken shape both at a popular and at a governmental level as people and governments try to manage the flow of capital, labor, goods, and ideas that constitute the current wave of globalization. So in a nutshell, the importance of internet in business development is immense. In fact, without this wonderful gift of technology, prosperity of business in todays world would have been a great challenge. For the business fraternity, internet has been the greatest support and will surely keep on serving it better in the future too. Importance of internet, business development, technology to mankind, online marketing The Internet has significantly affected globalization. The needs of the globalized world are the accelerator of Internet-related technologies.

A Website Analysis on the Reformation of Marijuana Laws Essay -- Inter

A Website Analysis on the Reformation of Marijuana Laws NORML, or the National Organization for the Reform of Marijuana Laws, founded in 1970, is a non profit, public interest advocacy group which fights for those Americans who oppose marijuana prohibition and want an end to arresting responsible marijuana smokers. In its website, the organization states that its mission is to â€Å"move public opinion sufficiently to achieve the repeal of marijuana prohibition so that the responsible use of cannabis by adults is no longer subject to penalty† (NORML website). Cannabis, the scientific term for the plant which the marijuana leaf is grown on, is used throughout the site. NORML, the oldest and largest marijuana legalization organization in the country, supports the idea of a legal marijuana market, and removal of all criminal penalties for the private possession and responsible use of marijuana by responsible adults. Through their website, NORML hopes to inform people who are interested in helping their cause to lear n more about them, and to keep organization members connected to what is happening in other chapters and around the world. A similar website is the organization, Efficacy’s site. Efficacy is a Connecticut-based, non-profit organization advocating peaceful ways to respond to social problems. The site is very effective in attracting people’s attention through colors and quick, interesting facts. It does this by having a bar on the top of the screen that change every couple of seconds, with facts such as, â€Å"The US imprisons more of its own people than any other country in the world,† and â€Å"the drug war has been Americas longest war†(Efficacy-Online). Beyond this, the first headline on the ... ...look at from an analytical stand point because of the contrasting views that people generally have drilled into their heads since a young age. Before looking at the NORML web site, I did not know that there was a site such as NORML that was professionally run, and politically active. Although Efficacy is not presented as professionally, I feel that the site reaches a person like me much easier. The site reaches for a much broader audience, and interesting facts kept me attention. This is a good example of a large group looking for change which splits into smaller groups, and will be able to gain an even larger audience than if they were in one group. NORML will get the attention of people in power, and while they may not be taken too seriously because of their extreme views, they will pave the way for more moderate groups like Efficacy to create social change.

Teamwork, Collaboration, and Conflict Resolution

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Macroeconomic Cash Reserve Ratio

mrunal. org http://mrunal. org/2012/08/econ-crr. html [Economy] Cash Reserve Ratio (CRR) Controversy between SBI & RBI: meaning, implication on Economy Explained 1. What is CRR? 2. What is Scheduled Commercial Bank? 3. Examples of Scheduled Commercial Banks 1. Case # 1: High CRR and SLR 2. Case # 2: Low CRR and SLR 4. Repo Rate 5. Reverse Repo Rate 6. Bank Rate 7. What is the need of all these CRR,SLR,Repo rates? 8. What is the problem with CRR? 9. How much CRR deposit does RBI have? 10. What does SBI want? 11. Deputy Governor of RBI 12. Timeline of Events 13.Mock Questions Before proceeding further, do read the earlier articles on 1. Statutory Liquidity Ratio (SLR) 2. Cost Push Inflation 3. Demand Pull Inflation What is CRR? CRR means Cash Reserve Ratio. Banks in India are required to hold a certain proportion of their total deposits with RBI in cash form. Right now, CRR is about 4. 75% that means if people deposit total Rs. 100 in SBI, then SBI would have to deposit Rs. 4. 75 in RB I. This is CRR or Cash Reserve Ratio. CRR rule doesnot apply to Regional Rural Banks, Non Banking Financial Companies (NBFC), Mutual funds or insurance companies.What is Scheduled Commercial Bank? Scheduled banks are those banks which have been included in the second schedule of the Reserve bank of India act of 1934. The banks included in this schedule list should fulfill two conditions. 1. The paid capital and collected funds of bank should not be less t han Rs. 5 lakhs. 2. Any activity of the bank will not adversely affect the interests of depositors [hahaha, does it mean Non-scheduled banks are allowed to adversely affect the interests of depositors !? ] Examples of Scheduled Commercial BanksPublic Sector Majority of stake is held by the government. 1. State Bank of India (SBI) 2. Punjab National bank (PNB) Private Sector Majority stakes are held by private players. 1. ICICI, 2. HDFC, 3. AXIS Bank Case #1: High CRR and SLR Suppose total deposit deposited in (by you and me) State Bank of India =Rs. 100 Total Deposit CRR: 15%SBI has to park this much amount of total deposit in RBI, without getting any interest. SLR: 38%SBI has to park this much amount of total deposit, in Government securities / treasury bonds. SBI earns around 7. % interest rate on this investment. click me for more on SLR Money left with SBI Rs. 100 -15 -38 100-1538=Rs. 47 Case #2: Low CRR and SLR Total Deposit CRR: 4. 75%SBI has to park this much amount of total deposit in RBI, without getting any interest. Rs. 100 -4. 75 SLR: 23%SBI has to park this much amount of total deposit, in Government securities / treasury bonds. SBI earns around 7. 5% interest rate on this investment. Money left with SBI -23 100-4. 7523=Rs. 72. 25 In either case, as long as you’re running a bank, you’ll have some input costs such as 1.Salary to Bank PO , Clerks, peons and security guards (With rusted guns) 2. Office rent 3. ATM machine’s electricity and maintenance. 4. Newspaper advertizement s. To pay above salary and bills, SBI would need to maintain certain amount of profit margin, no matter what RBI does with CRR,SLR or Repo Rate. In Case# 1, when SBI has only Rs. 47 in the hands, what can it do to keep the profit margin same? Obviously SBI will have to increase the interest rates on car,home,bike,business loans given to customers.In case# 2, when SBI has Rs. 72, what can it do? Here the situation is not that bad. So, SBI chief would decrease the interest rates on car,home,bike,business loans to seduce more customers. We already discussed this- SBI has more money so it can cut down interest rates and suffer temporary reduction in profit, in order to seduce more customers (compared to ICICI) So once SBI has reduced the interest rates, other banks will need to reduce their interest rates, to stay in the competition. Repo RateLet’s continue assuming the Case# 2, that SBI has only Rs. 72. 25 left in its locker. SBI chief comes to know that recently Samsung Company has launched Galaxy S3 mobile so plenty of youngsters may want to buy it because of the advertisements that appear on TV channels 24/7 Thus there will be demand for more personal loans (EMI) or credit card based shopping. But SBI got only Rs. 72. 25. So SBI chief would borrow some more money from RBI @8% interest rate and then re-lend this money to customers as personal loan @16% (and thus aking a killing profit of 16-8=8%) or he can supply money to customers for Credit Card shopping, and in that case he can earn interest rate anything between 16-37% or even more (depending on hidden terms and conditions of credit card. ) This 8% : the rat e @which RBI lends short t erm loans t o client s, is called Repo Rat e. Reverse Repo Rate As the name suggests, Reverse repo rate is â€Å"reverse† of Repo rate. So, if SBI chief feels there is not enough demand for loans and most of those 72. 25 Rupees are sitting idle, he’ll deposit some of that cash, in RBI.RBI will pay SBI chie f 7% interest rate on such deposit. Thus, Reverse repo rate is the interest rate which RBI pays its client s* for their shortterm deposits. Note: Reverse Repo Rate is automatically kept 1% less than Repo rate according to new RBI rules. [Since Nov. 2010, Reverse Repo rate is constantly 1% less than Repo]. Side Question Why would SBI chief put his money in RBI? Because on your normal savings account in SBI, the chief pays you around 4% interest rate, while RBI is giving him 7% Reverse repo rate, so he’s making a profit of 3%. Bank RateBank rate is the interest rate which RBI charges from its clients* for their LONG-t erm loans. Recall that Repo Rate = RBI charge that much interest from its clients on SHORT t erm loans. *Who’re the clients of RBI? 1. Union Government 2. State Government 3. NABARD (through that money goes to Microfinance companies and Regional Rural Banks) 4. Commercial Banks (SBI, ICICI etc) 5. Non Banking Financial Companies (NBFC) like Muthoot Finance and Mannapuram Gold Loans. (^list is not exhaustive. ) please not e: 1. Bank Rate, Repo Rate and Reverse Repo Rate applies to all Clients of RBI. . The CRR,SLR applies to Commercial Banks. (including Urban Cooperative banks but excluding Regional Rural Banks) What is the need of all these CRR,SLR,Repo rates? RBI’s main job = control inflation by controlling money supply in the market. Too much money in the market =easy to get loans= not good. Because It’ll create inflation. [Demand Pull] Too less money in the market= again not good, because businessmen find it hard to get loans, thus input cost of production increases= not good for economy either and it’ll create inflation. Cost push] Therefore, RBI will increase/decrease these CRR, SLR and Repo Rates according to the situation in order to adjust the money supply in market and thus control inflation. [Monetary policy] Nowadays RBI doesn’t touch Bank rate much and mostly relies on Repo rate to control the money supply. CRR and SLR are also not changed as frequently as Repo rate. And Reverse repo rate is automatically kept 1% less than Repo rate, so that makes Repo rate the â€Å"most f requent ly used t ool† in RBI’s monetary policy, in last two years.Apart from that, CRR,SLR and Repo Rate also help those competitive magazine wallas to fill up pages with ridiculously unimportant data tables to make your life more miserable. What is the problem with CRR? How much CRR deposit does RBI have? In July 2012 [all approximate numbers] Total Deposits in all Scheduled Commerical banks (SBI,ICICI etc) CRR: 4. 75%Banks have to keep this much amount of total deposits in RBI. Interest earned by SBI/ICICI etc on CRR deposits made in RBI 65 lakh crores 65 lakh crores x 4. 75%=around 3 Lakh crores sitting idle in RBI lockers. lakh crores x 0% = Rs. 0 If SBI/ICICI etc. could lend these 3 lakh crores (CRR deposits) to customers @10%, they could easily earn Rs. 30,000 crores in interest pa yment. Thus, CRR makes a huge difference in the profit of banks. UK, Canada, Sweden, Australia and New Zealand donot have CRR system in any form. In USA, there is graded system i. e. small banks don’t need to maintain any CRR with their central bank. While â€Å"big† banks would need to maintain CRR Deposit according to their size. Side Question: How â€Å"bigâ€Å"? Answer: no need to do Ph. D on that question trail.By the way, USA’s RBI (Central Bank) is known as Federal Reserve syst em and commonly known as â€Å"Feds†. So sometimes while randomly surfing through BBC/CNN you might come across lines like â€Å"Market boomed /crashed after Feds cut down the rates† they’re talking about USA’s RBI changing their repo, SLR etc. rates Interestingly, USA’s RBI (Feds) pays interest on the CRR deposits, while India’s RBI doesn’t pay any interest on CRR deposits. What does SBI want? Recently SBI Chairman Pratip Chaudha ri said that CRR does not help anyone and it is unfair to apply it only on banks.Even if CRR is required why should it be on banks alone? There are a number of institutions that raise funds from the public – insurance companies, mutual funds and NBFCs so CRR should be applicable to all. Because of CRR, every year we lose Rs. 3,500 crore. Pratip Chaudhari = Chairman of SBI In India, Businessmen get loan @11 per cent while that for a Chinese equipment manufacturer gets loan in his country for only 4 per cent. So CRR= less money in market= higher interest rate= increases the input cost of Indian products. Deputy Governor of RBIOn SBI chief Pratip Chaudhari’s demand for removal of CRR, the Deput y Governor of RBI K C Chakrabart y, replied that if the SBI Chairman is not able to do business as per our regulatory environment, he has to find some other place. On this [rude] comment of Chakrabarthy, SBI chief Pratip Chaudhari replied, (doesn’t matter what anyone says) I wanted to start a debate on CRR in the public domain, so let that debate happen. Timeline of Events Early 90s 1992 1996 1999 2007 CRR used to be as high as 15% and SLR used to be as high as 38. %, thus making life of businessmen and aam juntaa difficult. RBI introduces system of Repo rate. RBI introduces the system of Reverse Repo Rate RBI st art s paying interest rates to banks, on CRR deposits. Sub Prime Crisis in USA RBI st ops paying interest rates to banks on CRR deposits. 2010 Eurozone Crisis. For more on that topic, Click ME High inflation, RBI starts increasing Repo rate to fix it. 2011 Throughout the year, RBI keeps increasing Repo Rate to combat inflation. Repo rates gets as high as 8. 50%. August 2012 SBI chief Pratip Chaudhari demands removal of CRR. He has been doing it since a long time, even in 2011 seminars] So, This CRR removal news topic would have faded away just like it did in 2011, had the RBI deputy governor not replied on SBI chief’s statement. But RBI Deputy governor did, so the media blows the news out of proportion that â€Å"RBI snubs SBI chairman. † And thus the Innocent aspirants of UPSC, bank and MBA exams, are forced to learn one more topic i. e. CRR controversy. By the way, during this time, 1. 2. 3. 4. Bank Rate=9% Repo =8% (reverse repo would be obviously 8-1=7%) CRR=4. 75% SLR=23% Mock Questions Q1.Which of t he f ollowing st at ement s are incorrect ? 1. The NBFCs are required to maintain CRR deposits with RBI. 2. RBI pays interest rates on CRR deposits. 3. An Increase in CRR would decrease the liquidity from the market. 4. At present, Bank Rate > Repo Rate > Reverse Repo Rate. Q2. Which of t he f ollowing st at ement s are correct ? 1. Repo rate is the interest rate paid by RBI to banks on short term deposits. 2. A decrease in repo rate will increase the home loan interest rates. 3. HDFC is a Non-scheduled Commercial bank. 4. SLR is always 20% higher than CRR. Q3.What were the steps taken by RBI in its moneta ry policy during 2011 to control inflation in India. Do you think RBI achieved its objective? Give reasons to justify your stand. (Mains) Q4. If you were the RBI Governor, what steps would to take regarding the CRR issue? (interview) Ref: 1. Indian Economy by Ramesh Singh (Tata McGraw hill Publication) 2. http://moneylife. in/article/cash-reserve-ratio-a-non-performing-asset-forbanks/28066. html 3. http://www. indianexpress. com/news/cut-crr-to-fuel-positive-sentimentchaudhuri/980459/0 4. http://www. allbankingsolutions. com/DATA. htm August 30th, 2012 | Category: Economy