Long Form Audit Report Format 2020: Fill & Download for Free

Sec 5 of the Banking regulation Act 1949 says that “ Banking means accepting for the purpose of lending deposits of money from the public repayable on demand or withdrawable by cheque draft or otherwise.” This is the essence of banking in it's basics. However over a period of time the primary concepts are changing. As a commercial organisation meant for making profits the interest that's payable on accepted deposits in Demand and Time liability formats is the expenditure of banks and interest recieved on funds deployed in Loans and advances will constitute it's income. Basically the spread or.margin in between the 2 interest expenditure and income constitutes it's profits.Now the funds are deployed on the basis of the quantum recieved in various liability segments called buckets. The bank prepare ALM ( asset liability management) to manage the funds recieved as deposits. Only a certain % of it's long term funds after providing for CRR and SLR are deployed in Term liabilities and others within Demand liability concept ( < 36 months) This is done in such a manner that deployment of long term liabilities are done as per quantum and contracts of term deposits, not repayable on demand. Technically for every RS.100 rec'd as deposit 23.5 is prempted as CRR and SLR and only 76.5 is available for lending. The ratios are prescribed primarily for liquidity maintenance and it's also a weapon of RBI to control money supply in the economy. Though there are different innovative deposit schemes and lending schemes giving varied interest, charges and commission head in expenditure and income, the aforesaid is how the bank functions. If functioning of a bank is as per the minimum of such regulations no bank can fail.Now how can a failure come into banking business. The past history of some failed banks reveal that whenever the deployed funds are lost, misutilised or remain stuck in non performance, the information that goes to public by various reporting avenues including RBI can raise an alarm amongst public and depositors.Sensing a loss as above if public starts crowding at a particular banks counter, such bank can go into failure expeditiously. This is because though all loans are technically repayable on demand; many types of loans repayment is structured in installments and instant demand cannot fetch the money back. This is why the trust, on which bank functions, if ever lost is certain to create a run on the bank leading to failure. In such situations normally RBI interferes in it's responsibility as the” lender of last resort” and after it's officers ascertain the internal position of such problem bank will declare “ morotarium' on routine functions to regulate the public crisis and bring about some equanimity in the troubled confidence or trust of public. Thereafter it can be cleared or the troubled bank merged with a properly functioning bank so that public trust is restored. The DICGCI protection, that guaranteed protection to depositors to a maximum of RS.1 lakh, is also to be recalled here as available to depositors.Now let's come to PMC bank case that you cited. This Co operative bank is supposed to deal with public small savings and deployment in agricultural and urban poor segments as per concepts of a Cooperative bank. If all it lends in a big way to a single customer or it's groups ,the total exposure cannot exceed 15% of it's Tier1 capital by way of loans and advances. PMC banks loan book at RS.8500 crores consisted of a single exposure to a realty based customer HDIL to the tune of RS.6500 crores. So Abt 80% exposure to a single custoner., which turned into NPA. The Chairman of PMC bank was a director of HDIL company holding more than 2% stake in capital. Once the HDIL got the loans the director Waryam Singh resigned his directorship and sold of his stake stocking profits. The sanction of loans at PMC didn't have the boards approval. However, such lendings weren't objected as well excepting the audit reports of the bank. RBI was late to act despite many harsh lessons thst the banking Industry currently faces. Once audit reports came public and public weren't getting back their deposits the run started. So you will appreciate such rouge working in banks cannot bring results other than bankruptcy. The trust of public and it's confidence eroded.Now such situations aren't reported in ICICI or HDFC functions. The status of such banks in private segment is no reason for frauds and failures. Both have reputation and are functioning normally. However recently a.big Private player like Yes Bank is shaky and in difficulty.The greed for profits or iregularites in loans and advances or foul play by directors, poor internal and external supervision, poor knowledge of staff in credit matters, lack of diligence in RBI responsibility etc can trigger a run on bank or finally it's bankruptcy. The Basel 3 committee recommendations are to be implemented by March 2020 and it clearly specified the “ too big to fail “ concept that failed miserably in the case of many big banks in 2008 crisis. It reiterates the fact that being big is no guarantee against failure but faces the same risk like any other bank and is prone to crisis and failures,if internal supervision fails. This Basel committee itself is a development from the rumblings of 2008 crisis and seeks fiirmness in effective internal supervision to prevent such situations.

No. Well extremely unlikely.However, it is a Global Power. The USA is currently the only superpower, and although it is experiencing some stumbling blocks, the only likely future superpower in the medium to long term is China. Obviously beyond the long term horizon other countries may be possible as well.UK ranked second most powerful country in the worldThe ‘Audit of Geopolitical Capability 2019‘ reveals that, aside from China, the major Western democracies – not least the UK and US, as well as France, Germany and Japan – still hold a substantial lead over their emerging competitors.Building on the ‘Audit of Geopolitical Capability’ from September 2017, the new studyfrom the Henry Jackson Society provides an assessment of the geopolitical capabilities of twenty major countries, drawn from the G20, with the addition of Nigeria. The organisation say that as more countries have been added, the original framework and methodology have had to be refined, all the data can be found here.The Henry Jackson Society say that this updated Audit reorders geopolitical capability – the ability to overcome the ‘tyranny of distance’ and influence physical space, including counterparts located within that space – into a framework with four central attributes: ‘national base’, ‘national Structure’, ‘national instruments’ and “national resolve’.According to the author James Rogers, the audit is a deliberately comprehensive study that measures the geopolitical capabilities available to the world’s major powers. It differs from other ranking systems in several ways:It includes a broad spectrum of capabilities, across several areas of national capacity, from the capacity of each major power’s projection forces to the scale of its sporting prowess (it does not only measure “soft power”, or global presence, etc.);It is not necessarily a ranking of countries’ warfighting capacity, even assuming that the major powers – especially those armed with nuclear weapons – could engage and prevail in such conflict. Rather, the Audit assumes prevailing geopolitical circumstances, where the major powers compete for influence in the “grey zone” between “peace” and “war”.Unlike other ranking systems it seeks to avoid ‘double-counting’ by including indices that overlap by using the same base data.The result, say the Henry Jackson Society, is a model involving four attributes, 33 indicators and 1240 potential data observations, which offers the most comprehensive picture of the major powers’ geopolitical capabilities.What are the results?The headlines results are similar to the 2017 Audit, the US remains ‘by some margin the world’s only superpower’: it maintains the largest national base, the most extensive national structure, and has access to overwhelming national instruments, not least awe-inspiring military might says the study.The key difference is that China has leapfrogged France to become the world’s third strongest power.The audit also shows that once again that the UK – though far behind the US – still enjoys a lead over China (albeit less than in 2017), despite having access to a far smaller national base.“Indeed, in 2019, the UK remains second only to the US in terms of overall geopolitical capability, with a particularly strong performance in relation to diplomatic leverage and national resolve.”Branding the UK “a truly global power”, the rankings find Britain retains its “unique capacity to project and extend itself around the world”.The audit also claims that Britain’s fundamental capacities have faced no “discernible impact from Brexit”.“Boosted by its overseas investment, aid and military, the study ranks the UK ahead of both China and Russia; despite the respective regimes’ expansionist foreign policies. The audit finds that UK retains a military might greater than that of China and technological prowess far in advance of Russia.”However, it attributes much of the UK’s comparative power to its diplomatic, financial and cultural capabilities and links around the globe.“Of the report’s nine key sub-categories, the UK is a top-five power in eight spheres. It is second in the world in five of those categories. Britain’s standing qualifies it as one of just three ‘global powers’, the second highest grading, according to the audit’s methodology. A ‘global power’ means that the UK is capable of projecting itself and defending its own interests anywhere on Earth. Russia meanwhile is a ‘regional’ power meaning it can only prosecute its objectives within its own regional surroundings.”However, the study’s Chief Analyst, James Rogers, warns that this position may now be under serious threat from China. He warns that, by as soon as next year, China’s economic growth and naval investment could see it overtake the UK as a global power.Just 0.4% separates the two nations after China added approximately 65,000 tonnes of large new warships to its fleet since 2016, comparable to around one fifth of the mass of the Royal Navy combat fleet.HMS Queen Elizabeth, HMS Sutherland and HMS Iron Duke.The study identifies a particular weakness in China’s five-point lead over the UK in “technological prowess” warning that – in the absence of “urgent remedial action” to boost Research and Development spending – the UK risks falling dangerously behind, warns the audit.Superpower (80%-100%) – A country with a vast national base and enormous national structure, from which to generate overwhelming national instruments and resolve to project and extend itself and its interests – often comprehensively – around the world.Global Power (50%-79.9%) – A country with a large national base and/or structure, from which to generate extensive instruments and resolve to project and extend itself and its interests – sometimes selectively – around the world.Hemispheric Power (40%–49.9%) – A country with a significant national base and/or structure, from which to generate substantial instruments and resolve to defend itself and its interests, primarily within its own hemisphere.Regional Power (30%-39.9%) – A country with a moderate national base and/or structure, from which to develop modest instruments and resolve to defend itself and its interests, primarily within its own region.Local Power (below 30%) – A country with a lacking or unharnessed national base and/or structure, from which only weak or uneven instruments and resolve can be generated to try to defend itself and its interests, primarily within its own neighbouring areas.The study advises that despite its smaller national base, the UK is the most ‘geopolitically-capable and well-rounded’ of the European major powers.HMS Albion arrives in Oman.“It has a robust capability portfolio from which to draw in the years ahead, particularly as it navigates withdrawal from the EU. In terms of national instruments – in which it leads overall – it has the largest diplomatic leverage and second-biggest military might (after Russia).It has the largest military budget in the EU, while the Royal Navy, in terms of total displacement of large warships and auxiliaries, is larger than the navies of France, Italy and Germany combined. However, despite its inherent strengths, the UK needs to concentrate on developing a robust strategy in the years ahead to cultivate and mobilise its overall capability.”A Vanguard class nuclear submarine carrying Trident nuclear weapons.Other Western powers – France, Germany, Japan, Canada and Australia – score prominently, as the world’s fourth, fifth, sixth, seventh and eighth geopolitically most-capable countries, respectively. India – the world’s ninth leading power – has greater geopolitical capability than Russia, which in turn is only marginally ahead of industrious South Korea.A closer look at the UK’s capabilitiesThe British Armed Forces comprise the Royal Navy, a blue-water navy with a comprehensive and advanced fleet; the Royal Marines, a highly specialised amphibious light infantry force; the British Army, the UK’s principal land warfare force; and the Royal Air Force, with a diverse operational fleet consisting of modern fixed-wing and rotary aircraft.The country is a major participant in NATO and other coalition operations and is also party to the Five Power Defence Arrangements.Recent operations have included Afghanistan and Iraq, peacekeeping operations in the Balkans and Cyprus, intervention in Libya and again operations over Iraq and Syria. Overseas defence facilities are maintained at Ascension Island, Belize, Brunei, Canada, Diego Garcia, the Falkland Islands, Gibraltar, Kenya, Bahrain and Cyprus.The UK still retains considerable economic, cultural, military, scientific and political influence internationally. It’s a recognised nuclear weapons state and its defence budget ranks fifth or sixth in the world. The country has been a permanent member of the United Nations Security Council since its inception.The British Armed Forces place significant importance in the ability to conduct expeditionary warfare. While the armed forces are expeditionary in nature, it maintains a core of “high readiness” forces trained and equipped to deploy at very short notice, these include; the Joint Expeditionary Force (Maritime) (Royal Navy), 3 Commando Brigade (Royal Marines), 16 Air Assault Brigade (British Army) and No. 83 Expeditionary Air Group (Royal Air Force).Typhoons in the Middle East.Oftentimes, these will act in conjunction with a larger tri-service effort, such as the UK Joint Rapid Reaction Force, or along with like-minded allies under the UK Joint Expeditionary Force. Similarly, under the auspices of NATO, such expeditionary forces are designed to meet Britain’s obligations to the Allied Rapid Reaction Corps and other NATO operations.In 2010, the governments of the United Kingdom and France signed the Lancaster House Treaties which committed both governments to the creation of a Franco-British Combined Joint Expeditionary Force. It is envisaged as a deployable joint force, for use in a wide range of crisis scenarios, up to and including high intensity combat operations. As a joint force it involves all three armed Services: a land component composed of formations at national brigade level, maritime and air components with their associated Headquarters, together with logistics and support functions.What about Russia and China?While you may have noticed their scores above, many will fail to and have only read the headline of this article. In 2017, we published an article regarding a previous report and were inundated with comments asking ‘What about Russia and China?’ as if the UK could only place so high with their omission (Seriously, have a look at the comments and tweets in response to this article being published)“Since the last audit China has leapfrogged France in the ranking, and it has done so at the same time as its leadership has reaffirmed its commitment to being a one-party state. not yet a superpower alongside America, China’s trajectory is nevertheless clear, assuming growth is sustainable. Russia on the other hand, for all its military capability, languishes behind Canada and India.”Well, I’ve decided to list their summaries below.Russia – Although holding the largest national base and strongest military might – courtesy of the biggest defence budget in Europe and the world’s leading nuclear arsenal – Russia performs below the European average all other areas, apart from diplomatic leverage. Due to a lack of economic diversification, Russia’s economic clout – heavily dependent on the export of energy and raw materials – is smaller than that of Italy and only marginally better than that of Turkey, two countries with substantially smaller national bases. Meanwhile, it terms of cultural prestige and national resolve, Russia’s performance is dire, not least because the country’s authoritarian regime is corrupt, unruly and unresponsive. Without progressive political change, Russia is unlikely to reach the potential its national base could unleash.Russian carrier Kuznetsov in the dry-sock that was recently heavily damaged.China – With the world’s largest population and a national base second only to the uS, China has the potential not only to leave the uK trailing, but also to reach the top spot. However, China still has a long way to go: lacking in cultural prestige and national resolve – namely, the established freedoms needed to unleash and sustain a creative economy, combined with effective government – the country will be forced to confront an array of problems over the coming years if it wants to get its foot in the door of the superpower club.A Chinese aircraft carrier, a converted Soviet vessel.Why does the UK place ahead of both Russia and China in military terms in this study?The key in this matter is that while countries like China for example have a larger military than the United Kingdom, it does not have the logistical capability to deploy, support and sustain those forces overseas in large numbers.As the report outlines, raw manpower is not a particularly useful indicator of military capability or power. Without access to overseas military bases, warships, logistics vessels and transport aircraft, and so on, it would be hard to move military personnel beyond their respective homelands, rendering them all but useless except for national defence.Professor Malcolm Chalmers, director of UK Defence Policy Studies at the renowned Royal United Services Institute, says Britain would have a clear advantage in a straight fight at an equidistant location. This was described in a 2011 Briefing Paper:“The UK will never again be a member of the select club of global superpowers. Indeed it has not been one for decades. But currently planned levels of defence spending should be enough for it to maintain its position as one of the world’s five second-rank military powers (with only the US in the first rank), as well as being (with France) one of NATO-Europe’s two leading military powers. Its edge – not least its qualitative edge – in relation to rising Asian powers seems set to erode, but will remain significant well into the 2020’s, and possibly beyond.”According to Business Insider, Chalmers has since expanded on this:“I think my 2011 comment remains valid. If you take individual elements of front line military capability – air, sea, land — the UK armed forces continue to outmatch those of China in qualitative terms by some margin. The UK also has greater capabilities for getting the most out of these forces, through key enabling capabilities (command and control, intelligence, strategic transport).Not least, the UK has greater capability than China for operating at range. China (and even more so other Asian powers) remain focused on their immediate neighbourhoods, with limited capabilities for power projection. This is likely to change over the next decade. For now, though, China would still be out-matched qualitatively in a ‘straight fight’ with the UK in an equidistant location (the south Atlantic? The Gulf?), and would be unable to mobilise a force big enough to outweigh this quality gap. China’s quantitative advantages would come into play in the event of a conflict in its own neighbourhood – and its qualitative weaknesses would be less important, though still significant. So my statement was never meant to imply that the UK could outmatch China off the latter’s own coastline.”How does this compare with other studies?The United Kingdom also scores highly in the Chinese ranking system called ‘Comprehensive National Power’, this is a putative measure, important in the contemporary political thought of the People’s Republic of China, of the general power of a nation-state.In addition, a recent report titled ‘word’ report measuring economic, diplomatic and cultural clout has named the United Kingdom as the worlds top soft power. A copy of the report can be found here.The ‘Soft Power 30’ index, first launched in 2015, measures a country’s soft power via objective data on six categories, such as government and culture, and international polling on seven other indicators. It was produced by communications consultancy Portland in partnership with the University of Southern California Center on Public Diplomacy.The UK was followed by France, Germany, the United States and Japan. Canada, Switzerland, Sweden, Netherlands and Australia rounded out the top 10.The UK’s first-place finish was a “surprise” given how the negotiations for Brexit has had “little tangible progress”, the report wrote. As such, there are “huge question marks” over the UK’s future relationship with the European Union, its long-term global influence and its role in the world.“Moreover, should the exit be a chaotic one, it is hard to see global public opinion on the UK remaining buoyant,” it added.“The UK edges out France – only just – to take the top spot in this year’s Soft Power 30 index. The UK’s return to first place will no doubt come as a surprise to many analysts, commentators, and diplomats.The past year has seen Brexit negotiations dominate headlines and consume virtually all of the government’s bandwidth withlittle tangible progress made. As a result, there are huge question marks over the UK’s future relationship with the EU, its long-term global influence, and its role in the world. However, as of July 2018, the UK remains a member of the European Union, and thus nothing has changed in the objective data with respect to theUK’s position in Europe.For the UK, this year’s results are an encouraging sign that the nation still commands significant soft power clout. The UK’s soft power strengths continue to sit across the Engagement, Culture,Education, and Digital sub-indices.”Regarding the UK position, the report concludes:“Where the UK goes from here is anyone’s guess. It is not clear if HM Government has a compelling vision for what Britain will look like in five years’ time. Much remains to be done if the calls for “Global Britain” are to amount to anything more than a slogan.Intent must be matched with sufficient funding and resources, lest it become an empty branding exercise.The UK can only rely on the success of the GREAT campaign for so long. As we approach March 2019, all of the as-yet-tobe-answered questions on the UK’s future relationship with Europe and its role in the world will have to be addressed.”Meanwhile, the US slipped one spot to be ranked fourth, due to “detrimental effects” of the Trump administration’s protectionist and nationalist approach to foreign policy, the report said.“Last year, a very sharp decline in global perceptions of the US was reported in the polling data whereas this year objective metrics have also registered the erosion of American soft power,” the media release wrote, citing an “obvious fall” in the government category from twelfth to the sixteenth position.Conclusions of the auditAlthough the Audit is not intended to provide an instrument to ascertain the major powers’ ability to prevail over one another in a major military confrontation – insofar as direct armed confrontation between those that are nuclear-armed is even possible – it does offer an instrument to identify their various strengths and weaknesses, both in an internal and external context, under prevailing conditions.Indeed, due to its unique framework and methodology, the Audit is constructed to account for the increasingly comprehensive nature of geopolitical competition, waged in the “grey zone” between “peace” and “war”, utilising a wide array of national capabilities.James Rogers, the Audit’s Chief Analyst commented:“The pervasive spread of neo-declinism in Britain is wholly without foundation. Brexit has had no discernible impact on the UK’s fundamental ability to apply itself around the World. Although the UK is likely to retain its leadership role in Europe, it is also increasingly wedded to the so-called ‘Anglosphere’ – further investment in groupings like the Five-Eyes could help cement its successes.China’s rapidly expanding geopolitical capacity poses a serious challenge to the West. Over the past year, China has added tens of thousands of tonnes to its Navy and if current trends continue – it will overtake Britain as a global power by as soon as next year. If the rules-based order is breaking down, the UK should urgently invest in its armed forces’ projection capacities forward basing – not least in the Indo-Pacific region – if it seeks to halt this shift.Urgent remedial action is also required – in 2019 – to secure Britain’s continued economic, industrial and technological leadership. Without significant new funding for Research and Development, the UK risks falling dangerously behind in the new technological race.”The audit has shown that the UK – for all the difficulties thrown up by the intricacies of withdrawal from the EU – is still richly endowed with geopolitical capability across many different sectors.“Because of its well-developed national structure and instruments, it still remains the world’s second-most capable power. Combined with its strong national resolve, it has the potential – at least – to be able to weather whatever political storms that come its way. The key questions are: does the UK have the vision, and strategy, to transform its capabilities into effective power, both during and following EU withdrawal?In particular, does Britain have the will to allot more resources to research and development to uphold its innovativeness? Does it have the national resolve to allocate more to defence spending to maintain its status as a military power, not least as the international environment becomes more volatile and competitive?And can the UK find a greater level of symbiosis between its cultural prestige – underpinned by a vibrant and independent civil society – and its national priorities and interests, particularly as command over strategic narratives has become central to the new age of global competition?”Finally, the audit also shows that China – uniquely among the major powers that were trailing their Western counterparts only twenty years ago – ‘has caught and leap-frogged almost every other major power except for the UK and US (and it has even leapt over them in some areas)’, a copy of the report can be found here.

Thanks Arun Kumar for the questionIs gold smuggling a big business in Kerala?Yes, it is.Gold Smuggling is one of the biggest illicit activities happening in Kerala. However, Kerala is not all alone in this. India as large, is one of world’s biggest gold smuggling hubs and in some study reports has identified the country to be the biggest nerve point in converting illegal gold into legal one. Gold Smuggling is very common in India and almost present everywhere.India one of the largest gold smuggling hubs in the world: reporthttps://impacttransform.org/wp-content/uploads/2019/11/IMPACT_A-Golden-Web_EN-Nov-2019_web.pdfBut within Indian figures, Kerala is likely to rank one among top 5 position. In my understanding, Mumbai is the biggest hub for gold smuggling in India, followed by Delhi (not exactly Delhi City, but the zone as Indo-Nepal border is the most active gold smuggling channel and lot of illicit gold make Noida and Eastern NCR area as its hub). In mostly likely Kerala could be third most active zone.As per some studies, approx 15% of total Gold Smuggling in India is based in Kerala (Mumbai-Nagpur Belt holds around 28%, while Delhi NCR around 22%).My answer is strictly remaining within realms of Kerala, though the story is much more Pan-Indian phenomenon, nothing unique to the state.The first part- Why smuggling happens?Any case of smuggling, be it gold or drugs or even simple polyester, it needs 3 factors to prosperHigher Demand for the productLess/restricted supply channel for the productPrice difference/higher margin for smuggled productsFirst the DEMAND factor.Why there is a high demand of Gold in Kerala?Cultural affinityGenerally Indians have extreme cultural affinity to Gold and most of our savings, reserves and every monetary expression is linked to Gold. Indians in general believe Gold as the best saving form.Now within India, South India has much more stronger affinity to Gold than North India or East India. Within South India, Kerala is extremely obssessed with Gold. The gold craze of Malayalees are well known. Unlike in North or even in some parts of South, Malayalees do wear heavy jewellery in public and its part of traditional fashion concept. For any function or event, gold is mandatory in Kerala culture.Gold is intergal part of a Malayalee’s life. Right from the birth to death, Malayalees associate gold with every stage of their life. When a baby is born, the first thing we do is giving a concoction of Honey with gold particles (Thenum Vayambum) to the baby. During the naming ceremony, golden bangles and chains are adored by the baby for the first time. The first letters are introduced to a kid (Vidyarambam) with a priest writing the holy words on tongue using a gold ringVidyarambham or induction to world of letters done on Vijayadashmi day with Gold ring used to write the first alphabets on a kid’s tongue.And the most famous- the Marriages. Anyone who seen brides of Kerala or marriage functions, one would be amazed with the sheer amount of Gold, brides are often decked uponI don’t think no other brides in India wear this much gold as Kerala brides do. Such level of wearing is insanely high and may even look ridiculous, but essentially part of Malayalee culture (partly due to show off and ego etc)Its not just case of marriages around. Even in ordinary or casual functions, Malayalees generally wear heavy goldActress Asin in a function in ethnic Malayalee costume. One can see the amount of heavy gold she is adoringThis huge cultural affinity forces people to buy more and more gold. When you want more gold than whats available legally, illegal gold gets a good space.2. Emotional appeal and SavingsFor majority in Kerala, gold is an emotional product. In English we use the word- My dear Honey as an expression of intense romance and affection. Its equivalent in Malayalam would be Ente Ponne - Ohh my dear gold. That highlights the emotional connect of Malayalees to the gold.This emotional appeal has pushed Gold as a savings or investment tool. If you look, gold is hardly a worthy investment asset in strict Economy terms. It is a dead asset, meant to be stored in vaults, not something that stimulates economy. But in emotional terms, its an extreme valuable asset. You feel secured, if you have a gold. A daily wearing gold chain is a sort of ready-made insurance in everyday life. If any contingency comes, immediately one can sell that chain and raise money. For a common man, its far better than an insurance.This means, Malayalees out of emotional reasons invest so much in gold. Gold is purchased not in times of happiness alone. Its heavily purchased in times of distress as a sort of security for future. For example during the Covid time, most of the business are down, but Jewelry business in Kerala is booming. People are rushing to jewelries to convert their liquid cash or savings into Gold which is almost like buying an insurance.Heavy rush in jewelleries to buy gold amid lockdownIts on the same logic, Sree Padmanabhaswamy temple has tonnes of Gold reserves historically, now all worth nearly a Trillion.3. JewelriesNow, this is something normal in Kerala. This means, in Kerala you have extraordinary number of jewelries too to sell the gold. Kerala alone has nearly 19K plus jewelries operating in organized sector and double the number in unorganized.Out of top 10 Jewellery brands of India that control the majority of gold in organized market, 4 are from Kerala (Joy Alukkas, Malabar Gold, Kalyan and Bhima) making them as the largest. Malabar Gold is the second largest Jewelry brand in India controlling approx 18% of total gold sales in India (this brand has more than 250 stores across the world).If you walk around Thrissur, often hailed as Gold Capital of India, you will find Gold Jewelleries akin to Kirana stores selling groceries in other parts of IndiaFor the Love of Goldhttps://jmag.in/why-kerala-is-golds-own-country-2/When you have this much jewelries, is the total legally imported gold enough for all these jewelries?Now supply factorIndia always have issues in defining proper supply routes and channels. Often we mess up supply routes and channels thro’ series of restrictive import licences, import regulations and massive taxationsIndia mainly procures direct Gold from Africa and to some extend from Dubai and Singapore Bullion markets.We have only 22 agencies (mostly banks and few nominated agencies) that have import licence and import under very strict regulations and higher tax ratesOne classic example of restrictive practice is that India subsidizes import of Gold Dore. Dore is crude Gold mixed with all other impurities as mined directly from the mine. The non-Banking licence holders in India buy these dores from many unorganized companies and name-sake African companies which is of limited quanity. As the imported gold dore is of limited quantity, the gold refiners in India is also limited. Hardly 600 tonnes of Gold can be refined in India in organized sector. Whereas more than 1000 tonnes of gold are sold in India alone. So from where the remaining 400 tonnes are processed?So what happens- There is a very huge informal unorganized refineries operating in India which are not legal entities, but does refining activities of illicit dore illegally brought to India (smuggling)Now, apart from Indian refined Gold, there is a huge market demand for foreign refined gold in the market. Remember, majority of refined gold is meant for domestic consumption, so Indian market preferences matters a lot. Indian refineries are not where closer to the ones in Switzerland or China. The quality standards of many Gold refineries in India not standard. This has resulted in comparatively poorer quality of Gold processed in India, while foreign refined gold are much of higher quality. Remember, in gold- Purity matters a lot. So there is an extraordinary demand for foreign processed gold which has ridiculous taxationFurther there is a Kerala specific problem too. Gold refineries in India are mostly based in North India and North Indian sensibilities have purified/refined gold in 22 carat format with Copper mixed to make it more red in color. North Indians prefer more reddish shade goldBut in Kerala,we love bright Yellow shade gold, so 22 carat gold must be mixed with an alloy of silver, zinc and copper, not pure copper. So legally refined Indian gold will have less takers within Kerala, whereas processed refined gold from outside India like the Swiss/China gold. This is one key reason lot of Smuggling happens specific to Kerala.And finally the issue of taxation. India has an issue of Current Account Deficit and two items that increases this CAD is massive Oil and Gold Imports. To counter CAD, India frequently increases Gold Import rates to disincentive Gold Imports as many Indian Govts believe, its not an essential item unlike Oil. However Gold has an extraordinary demand among locals, so to beat the higher taxation, smuggling happensDespite Covid-19 pandemic, gold smuggling in Kerala continues unabated.Gold smuggling on the rise as high prices boost appeal in IndiaNow the last point- difference in gold rates and higher profit margin.As I mentioned above, the higher import rates imposed by Govt, makes Gold expensive in India when compared to other places. Whenever there is a difference of price between 2 markets, smuggling happens.Now I must pin point other fact.80% of India’s gold smuggling happens via UAE, specific to Dubai. Why UAE? Because Dubai is one of world’s largest Metal trading market. Almost 70% of Gold is exchanged via Dubai as Dubai’s gold market is such a huge entity.Gold from African countries, Switzerland, China, Australia, Americas all end up in Dubai. And for Dubai, India is the biggest consumer of these gold.As I mentioned before, most of the gold in Arabia/Dubai Markets are from Switzerland or China, which will have much higher gold purity and more shining Yellow color, thus its of Malayalee’s taste and interest to procure Gold from Dubai market (Malayalees know this as often we say- foreign gold is of high purity than Indian gold).And since there is NO TAXATION in Dubai, Gold is damn cheaper in DubaiJust for example, 1 Kg of Gold today in Dubai costs AED 2,12,547 ie equal to INR 43,51,368 (43 Lakh). Out of this approx 10,000 AED is VAT in Dubai which is refundable for tourists and foreign exports from UAE. So real price of Gold in Dubai is approx INR 41 Lakh equivalent.Now the price of same 1KG of Gold in India today costs- INR 48,46,160, ie 48 Lakh Rs.So the difference between Dubai rate and Indian rate for 1 kg is approx 7 Lakh Rs, which is a huge valueThis price difference or the margin of profit that could be made if one smuggles gold from Dubai to India. A 10 Kg of Gold can easily fetch 70 Lakh Rs of profit, which is the average smuggling size per transaction. Even after paying all other expenses, a profit of 40 Lakh can easily be made for the gold jewelers.For Gold Jewellers their advantages areHigh quality gold with less purityHigher profit marginBetter trust factor. If you have good quality gold, you have better trust with customers. Indian Gold are not of that high quality.So Smuggling happens.Now there are some specific points to considerWhile majority of Indian Gold refineries are based in North (which happens due to presence of larger investors who are more connected to get licences in the cumbersome DGFT procedures and Kerala having more unorganized refineries which can’t spend that much to secure import licences), 1/3rd of India’s gold Jewellery manufacturing units are based in Kerala. Most of the gold meant for South India are generally manufactured by units located in Thrissur-Malappuram-Shornour-Coimbatore belt, with Thrissur being the largest Gold Jewellery manufacturing hub. Naturally these industries often depend on smuggled gold more than refined gold from North Indian refineriesUnlike black money or hard cash or property, illicit gold trail is hard to find out. Once a smuggled gold enters into India, it can easily be converted into legal gold. Its too tough for Govt to audit the source of gold. Why so? Gold is melted and formed into new gold bars or jewellery. The origin of gold is hard as there are multiple sources, the biggest being traditional gold. What if a jeweler or manufacturing unit claims, the extra gold outside the purchase of legally procured gold is from traditional gold held by someone? How we verify it?Most of the smaller refineries and manufacturing units of Gold in Kerala are in SME sector. Some are informal too. There is a huge category of Goldsmith community (Thattan) in Kerala, who too refine and make gold at their homes and sell it to jewellers. Auditing all these is impossible and no proper system can be established for selling suchNow the interesting part-. Arabs and Keralites are extremely close to each other. We have more than 2000 years of trading relationship and extremely close. Kerala historically sells spices to rest of the world and imports Gold in return of that, which was traditionally facilitated by Arabs. So historically Arab and their merchant ships brought gold to Kerala shores and its essentially part of our cultural history. So its nothing unfamiliar for Malayalees and Arabs to procure gold from Arabian markets and bringing to Kerala. This means Malayalees can easily connect with an Arab merchant or entity to procure gold and secretly bring to India. And Dubai, being a mercantile city, donot insist proper export channel rules. This also allows people to smuggle gold out of Dubai easily.Gold smuggling is encouraged or patronized by Indian jewellers. From larger brands to smaller ones, everyone is patronizes smuggling due to the price advantage. This is one reason, why majority of Malayalee Jewellers try to establish atleast one branch in UAE or other Gulf countries as they can spearhead or lead such illegal operations. Its a well-known secrets, most of large Jewelries in Kerala are at forefront of handling these smuggled gold. They are so rich, that they pay everyone, from Media to politicians, thus hardly not much attention goes into output factor of the smuggled goldUnlike drugs which are handled by organized large cartels, Gold smuggling is done by small rackets. There was a customs report reported in Malayalam dailies few years back, there are more than 1800 rackets operating in Kerala-Dubai alone. These rackets are pretty small, say 4–5 member team. And they don’t become carriers directly. They identify NRI commoners in UAE who will be approached and given with good offers like free air-ticket, some petty goods and a sum of Rs 20k-30k… Its good for these poor NRKs as they are getting a full paid holiday for carrying some gold. They don’t even know who are there in the racket etc. If caught, its their fate. Since they have no knowledge of to whom they should give the gold or where the gold reaches, hardly Customs or any govt department able to identify the end of the chain link. Thus investigations never becomes fruitful and proving in court of law is much difficultThese rackets work in tandem with customs and immigration officials in airport. The officials who are part of this, are paid as monthly salary for doing so, not per parcel value basis. Thus they too effectively part of itHow we can stop this?Very simple- make Gold rates at par with Dubai rates. If we reduce the Gold Import tax rate, the whole idea of smuggling becomes expensive, thus inattractive to smuggle.If we look, untill 2012, gold import rate was just 6%. Then it slowly increased to 8% by P Chidambaram in former UPA govt citing CAD. Then when Modi came to power, he increased to 10% and now to 12.5%. As the import tariff rates increases, gold smuggling cases will also increaseKeeping the gold import rates to 8% of 6%, will help India in a long run2. Removing restrictions for Gold import licences and encourage SMEs to secure gold import licences. This will help many SME companies to directly secure licence and import legally3. Encourage Banking sector to push for active Bullion market and streamline the same to encourage legalized exports4. Stop treating gold as a luxury item and consider the local cultural sentiment as essential.Budget 2020: Gold smuggling spikes in 2019; possible duty cut can curb menaceOfcourse there are much more suggestions, but I am not from Gold industry to know industry specific concerns etc.Gold Smuggling will definitely happen as long as India donot liberalize this sector. Mere airport oriented customs check cannot help preventing this.Further readingKerala's jewellery hub becomes big destination for smuggled gold | India News - Times of IndiaHow gold from West Asia is smuggled into KeralaGold smuggling on the rise as high prices boost appeal in IndiaExplained: How in Kerala gold smuggling rackets, the big sharks always escapeThe growth dilemma for Indian gold refinersThis sleepy Indian town is a mecca of gold jewellery—and a smuggling hotspot