Issue: 3 In-house magazine of FCFP members January — February 2023

TRADE INFRA
IN
INDIA
RISE & FALL
OF CRYPTO FTX

THE

PROGRESSION

1
INGENIOUS Jan-Feb 2023

Dear Readers,

HAPPY NEW YEAR 2023!

The past year 2022 has been one of the best as we had jointly initiated and launched our first bi-
monthly “Ingenious Magazine” on 15th September 2022 and second issue was on 18th November
2022; by the alumni of Foundation Course in Financial Planning (FCFP) 2022 1st Batch from Gopast Centre for
Learning Pvt. Ltd., under the able guidance of our Guru Shri Gopinath Radhakrishnan Sir. It comprises of write
ups on financial products and latest news articles related to economy, finance and insurance industry based on
our research. This is our 3rd bi-monthly magazine for January & February 2023.

Here are the links for our previous magazines:

https://www.slideshare.net/AnkurShah26/ingenious-sept-2022pdf

https://www.slideshare.net/AnkurShah26/ingenious-nov-dec-2022pdf

We just want to say how thankful we are for your support for the last year; and we are wishing you all the best
as we have already entered a grand new year 2023 and wish the same support from you all ahead too.
Wish you all a happy reading!

Thanking you & Regards,

Savita Pillai
Secretary
On behalf of the Organizing Committee
Alumni FCFP

Content Page
The Progression 3
Know your AWF Qualifiers 6
Did you know? 7
Data Centre 8
Cover Story—RBI launches e-Rupee 9
Trade Infra in India 11
Rise & Fall of Crypto Exchange FTX 12
Role & Importance of a Professional Insurance Advisor 14
RBI’s Monetary Policy Statement, 2022-23 (07-Dec-2022) 17

Magazine designed and compiled by:

BINDRA Inderpal Singh

2
INGENIOUS Jan-Feb 2023

… the
Progression

R. Gopinath

SOLVENCY: nuses vested ll then is payable.

The value of the assets of an enterprise, righ ully, should be Contractual benefit at the end of five years of this policy will
more than the value of its liabili es. Such enterprises are said be: (If the company had declared bonuses @50 per thousand
to be solvent. They will be able to meet their liabili es with Sum assured)
their assets. · 1,25,000 payable on survival of the life assured on ma-
For eg: Value of Assets: 100 Crores Value of liabili es : 95 Crores. turity (15 years from now)
This enterprise is solvent. · 1,25,000 payable in case of death of the life assured
before maturity (within 15 years from now)
What purpose does a Solvency Margin serve? The Discre onary Benefits as at the end of 5th year will be
1. To safe guard insurance companies from running · The value of the bonuses that may be declared will be
out of funds due to significant adverse experiences payable on survival of the life assured at the end of 15
2. To serve as an alert to the regulator to put a com- years from now.
pany on watch list and monitor its financial posi on · The value of the bonuses that may be declared ll year
3. Regulators need not micro manage the insurance of death of the life assured if death happens within the
companies, thereby giving freedom to the compa- next 15 years.
nies in governing themselves within a broader Future bonuses depends upon the quantum of profits gener-
frame work. ated therefore they form a part of the discre onary benefits.
But bonuses already declared have vested in the policy ac-
SOLVENCY MARGIN: count therefore are a part of the contractual benefits.
This is to the extent the value of the assets are in excess of the
VALUATION:
value of the liabili es. From the above example 5 crores is the
Let us use our above calcula on to understand in simple
solvency margin.
terms how the valua on of liabili es are done by an insurance
Especially for life insurance companies this solvency margin company.
requirements ma er a lot. Therefore it is mandatory that the
value of the assets should exceed the value of liabili es by a Value of the Contractual Benefits
specified margin. This is required because of the nature of the The above policy has run 5 years and the present age of the
life insurance business. It is different from the nature of other life assured is 45 (age at entry 40, age at maturity 60)
concerns in manufacturing or service sectors.
The liability under a life insurance policy in simple terms is
explained through this equa on:
Liability = (Value of Contractual Benefits payable under the
policy + Value of the Discre onary Benefits likely to be paid +
Value of the likely expenses in respect of that policy) - (Value
of the premiums receivable in future).
Every new business introduced in the life insurance company
will add to the liability of the company, and the prospects of
the future premium receivable from that new business will The value of the Discre onary Benefits
cons tute the asset part of the company. The value will be arrived at in a similar fashion, by making
certain assump ons on the bonus rates likely to be declared
The benefits payable under a tradi onal life insurance policy
during the next 15 years.
can be classified as under:
1. Contractual benefits; and Value of expenses
2. Discre onary benefits There are two types of Expenses; Fixed and Variable. Variable
expenses like the commissions are pre-determined at the be-
Let us say a policy provides as under:
ginning of the policy contract itself. So calcula ng the present
Upon survival of the life assured upto the end of 20 years (on
value of the same should be easy. Whereas the fixed expenses
the maturity date) the Sum assured 1,00,000 is payable along
like salaries, rents and opera onal expenses like cost of elec-
with all vested bonuses.
tricity, sta onary and all need to be suitable adjusted consid-
Upon death of the life assured during the term (before the ering the infla on factor and then discounted to arrive at its
end of 20 years) the Sum assured 1,00,000 along with the bo- present value.

3
INGENIOUS Jan-Feb 2023

… the
Progression

R. Gopinath

Value of the premiums receivable ce the Surplus generated as men oned in the previous para-
Policy year Probability of death at age Value of the contractual graph is not fully distributed, but a small por on of it is trans-
benefit Discount factor for PV A B C A*B*C 6 46 1,25,000 1 ferred to a special reserve account and this is known as
year 7 47 1,25,000 2 years 8 48 1,25,000 3 years so on for eve- “Solvency Reserve”. This is also known as Solvency Margin
ry year 9th, 10th …. 1,25,000 20 60 1,25,000 15 years sum Reserve.
total of all PVs= The amount of premium receivable each year Available Solvency Margin:
for the next 15 years is mostly a constant figure. But we must
· The Shareholder’s Capital and the Free reserves in
consider the probability of the life assured surviving for the
Shareholders’ fund.
next 15 years, on a year by year basis.
· Any reserve held for solvency margin either in Share-
The liability under this policy at the end of 5 years will be: holder’s fund or in Policyholders’ fund.
(PV of Benefits + PV of Expenses) - (PV of the Premiums).
When solvency reserve is held in the policyholders’ fund, it
The total assets of the company is then no onally distributed gets invested as per the guidelines of investment of policy-
among all policies in a manner that the value of the assets holders’ fund.
allocate to each policy will be equal to the liability under that
Normally such reserves in the Policyholders’ fund are main-
policy. This value is technically called as the Asset Share of the
tained as implicit reserve, whereas the reserves held in Share-
policy.
holders fund mostly are explicit reserve and is created out of
A er no onally alloca ng the assets to the policies, if further the shareholders share of surplus.
value of assets remain, it is called as the Surplus.
Required Solvency Margin:
You will observe from the above valua on process that many This is the minimum reserve that the regulator expects a com-
factors involved in this exercise are based on some assump- pany to maintain. It is prescribed as a formula:
ons made. Generally the actuaries take a very conserva ve
RSM = (4% of Liability) + (0.3% of Sum at Risk)
approach in making these assump ons. For example slightly
higher rates of mortality, infla on and lower rates for interest Solvency ra o is the ra o of the Available Solvency Margin
and yields. This to provide a margin as a buffer to meet any and the Required Solvency Margin.
adverse experiences. This margin is known as Margin for Ad- As per the present norms prescribed by IRDA under the insur-
verse Devia on (MAD). But this margin alone may not be suffi- ance act this ra o should be a minimum of 1.5
cient to take care of significant devia ons. Therefore in prac-

Solvency Margin Statement of LIC of India

Mathema cal reserves (including the reserve of outstanding claims): mathema cal capital values of future claims.
4
INGENIOUS Jan-Feb 2023

… the
Progression

R. Gopinath

This statement obviously indicates the financial strength of

this company. This also shows the prudent approach this com-
pany has been taking in last so many decades in declaring ap-
propriate levels of bonuses and providing proper reserves to
meet the fluctua ons in the interest rates, infla onary trends
and changes in the yield on funds due to changing economic
condi ons globally and na onally. You will observe from the
above statement that even without the considera on of the
Shareholders’ fund, the Available reserve in the policyholders
fund itself is sufficient to demonstrate the solvency margin
requirements. This data substan ates the wisdom of the com-
pany in providing implicit reserves for years before the regula-
tor (IRDA) started prescribing Solvency Margin Rules for the
insurance companies in India. In fact given the Sovereign
Guarantee provision to the policies of LIC, the Company could
have afforded to be less prudent. But it has not done so, and
has followed the accoun ng and the actuarial principles pru-
dently. This helped the company to con nuously declare sur-
pluses year a er year withstanding the changes in the poli cal
scenario in the country, the economic swings country had
faced and the mortality experiences during epidemics and
calami es.
Solvency ra o does show the capacity of the
company in mee ng its obliga ons towards its
Policy holders.
But this alone is not a sufficient data for the intermediar-
ies to decide on selec ng a suitable company to place
their business with.
One must watch for the signals like:
· Making big promises to beat the compe on
· Price war strategies
· Not providing adequate reserves hoping that the
MAD factored alone will be sufficient to deal with
adverse situa ons
· Over dependence on the Shareholder’s capital with
less dependence of Policyholders’ fund to demon-
strate Solvency margins.
Historically such companies have got into trouble. So we
must make a comprehensive study of the company in eve-
ry aspect before we recommend it to our customers.

“
Opportunities search for people who
are well prepared to welcome it and
reach them. For others it may reach
only by it's own mistake which gets a
name "LUCK".
- rg

5
INGENIOUS Jan-Feb 2023

Mr. Ankur SHAH Ms. Bharathi SRINIVASAN Mr. Ajay Kumar TYAGI
AWF — 28-Aug-2022 AWF — 29-Sep-2022 AWF — 30-Sep-2022

Mr. Ashok G SUTTAR Mr. Keshav H AGARWALLA Mr. Suresh Kumar ARORAI
AWF — 30-Sep-2022 AWF — 07-Oct-2022 AWF — 09-Oct-2022

Mr. Amit Uttam SARANG Mr. Umesh PANCHWAG Mr. Inderpal S BINDRA
AWF — 29-Oct-2022 AWF — 17-Nov-2022 AWF — 30-Nov-2022

6
INGENIOUS Jan-Feb 2023

In accordance with LIC’s circular dt. 24-Jan-2020; the suicide clause

(covered after 1 year) is applicable on all the plans introduced on or after 01-Jan-
2014 from the date of risk and also from the date of revival.
This indicates that whenever the premium is paid after the days of grace,
the policy is treated as revived and the waiting period for the suicide clause
comes into consideration (even during claim concession period).
Hence; in the future we need to ensure that all premiums should be paid be-
fore the end of grace period; to ensure 100% coverage of policy features for the
benefit of loved ones (family members) of every precious life insured.

Inderpal Singh Bindra

We need to resist all that stops us from

realising our dreams. In that resistance
we pay the price for that prize.
-rg

7
INGENIOUS Jan-Feb 2023

D a t a C e n t re
Latest Policy Rates (Source RBI website) as at 01:30 pm on 10-Jan-2023
Policy Rates Reserve Ra os Exchange Rates Lending / Deposit Rates
9.10% -
Policy Repo Rate 6.25% CRR 4.50 % INR / 1 USD 82.21 Base Rate
9.40%
Standing Deposit Facility 7.30% -
6.00% SLR 18.00 % INR / 1 GBP 100.06 MCLR (Overnight)
Rate 8.15%
Marginal Standing Facili- 2.70% -
6.50% INR / 1 EUR 88.28 Savings Deposit Rate
ty Rate 3.00%
INR / 100 Term Deposit Rate > 1 6.00% -
Bank Rate 6.50% 62.35
JPY Year 7.25%
Fixed Reverse Repo Rate 3.35%

Money Market 10-Jan-2023 GDP (US$ million) by country

Call Rates 4.40% - 6.12% * IMF
* as on previous day Sr. No. Country/Territory UN Region
Es mate Year
Government Securi es Market World — 10,15,60,901 2022
7.26% GS 2032 7.3427% # 1 United States Americas 25,035,164 2022
6.54% GS 2032 7.3650% # 2 China Asia 18,321,197 2022
7.38% GS 2027 7.2161% # 3 Japan Asia 4,300,621 2022
5.74% GS 2026 7.1777% # 4 Germany Europe 4,031,149 2022
6.69% GS 2024 6.9208% # 5 India Asia 3,468,566 2022
4.56% GS 2023 6.9453% # 6 United Kingdom Europe 3,198,470 2022
91 day T-bills 6.3571%* 7 France Europe 2,778,090 2022
182 day T-bills 6.7801%* 8 Canada Americas 2,200,352 2022
364 day T-bills 6.9249%* 9 Russia Europe 2,133,092 2022
* cut-off at the last auc on 10 Italy Europe 1,996,934 2022
#
as on end of previous working day 11 Iran Asia 1,973,738 2022
Capital Market 12 Brazil Americas 1,894,708 2022
S&P BSE Sensex 60747.31 * 13 South Korea Asia 1,734,207 2022
Ni y 50 18101.20 * 14 Australia Oceania 1,724,787 2022
* as on previous day 15 Mexico Americas 1,424,533 2022
Latest Small Savings Schemes Rates

Compounding
Instrument Rates %
Frequency

Savings Deposit 4.00 Annually

1 Year Time Deposit 6.60 Quarterly
2 Year Time Deposit 6.80 Quarterly
3 Year Time Deposit 6.90 Quarterly
5 Year Time Deposit 7.00 Quarterly

5 Year Recurring Deposit 5.80 Quarterly

Senior Ci zen Savings Scheme 8.00 Quarterly & paid

Source MOSPI (Government of India Ministry of
Monthly Income Account 7.10 Monthly & paid Sta s cs And Programme Implanta on)

Na onal Savings Cer ficate 7.00 Annually US Fed Rate 4.25 to 4.50% (A er a 0.50% hike on 14th Decem-
ber, 2022 Fed meet)
PPF 7.10 Annually
10 Year US Bond yield 3.6114% (As on 10.01.2023 source Trad-
Kisan Vikas Patra ing Economics)
7.20 Annually
(Matures in 123 months)
US CPI 7.10% (As on 10.01.2023) compared to 7.70% Novem-
Sukanya Samriddhi 7.60 Annually ber’s rate. (source Trading Economics) (Target Infla on 2%)

8
INGENIOUS
C S
N ¨ Quick
a onal Payments Corpora on of India (NPCI) in
associa on with Department of Financial Services
(DFS), Na onal Health Authority (NHA), Ministry of
Health and Family Welfare (MoHFW), and partner banks, has
launched an innova ve digital solu on – ‘e-RUPI’.
The users of this seamless one- me payment mecha-
nism will be able to redeem the voucher without a card, digi-
tal payments app or internet banking access, at the mer-
chants accep ng e-RUPI. e-RUPI would be shared with the
beneficiaries for a specific purpose or ac vity by organiza-
ons or Government via SMS or QR code.
This contactless e-RUPI is easy, safe and secure as it
keeps the details of the beneficiaries completely confiden-
al. The en re transac on process through this voucher is
rela vely faster and at the same me reliable, as the re-
quired amount is already stored in the voucher.
BENEFITS OF e-RUPI
Corporates
¨ Can enable well-being of their employees.
¨ End to end digital transac on and doesn’t require any
physical issuance, hence leading to cost reduc on.
¨ Voucher redemp on can be tracked by the issuer.
¨ Quick safe and contactless voucher distribu on.
Customers
¨ Contact less: Beneficiary should not carry a print out
of the voucher.
¨ Easy redemp on: 2 steps redemp on process.
¨ Safe & secure: Beneficiary doesn’t need to share per-
sonal details, while redemp on, hence privacy is
maintained.
¨ No digital or bank presence required: consumer re-
deeming the voucher need not have a digital pay-
ment app or a bank account.
Merchants
¨ Easy and secure: voucher is authorized via a verifica-
on code
¨ Hassle free & contactless payment collec on: Han-
dling of cash or cards is not required.
Jan-Feb 2023
Geeta MOHAN
redemp-
on process: The
voucher can be re-
deemed in a few
steps and lesser
decline due to pre-
blocked amount.
PRESS RELEASE — RBI
29TH NOVEMBER 2022
Opera onalisa on of Cen-
tral Bank Digital Currency
– Retail (e₹-R) Pilot
The Reserve Bank announces the launch of the first
pilot for retail digital Rupee (e₹-R) on December 01, 2022.
The pilot would cover select loca ons in closed user
group (CUG) comprising par cipa ng
customers and merchants. The e₹-R
would be in the form of a digital to-
ken that represents legal tender. It
would be issued in the same denom-
ina ons that paper currency and
coins are currently issued. It would
be distributed through intermediar-
ies, i.e., banks. Users will be able to
transact with e₹-R through a digital
wallet offered by the par cipa ng
banks and stored on mobile
phones / devices. Transac ons can
be both Person to Person (P2P) and
Person to Merchant (P2M). Pay-
ments to merchants can be made
using QR codes displayed at mer-
chant loca ons. The e₹-R would
offer features of physical cash like
trust, safety and se lement finality. As in the case of cash, it
will not earn any interest and can be converted to other
forms of money, like deposits with banks.
9
INGENIOUS
The pilot will test
the robustness of the
en re process of digital
rupee crea on, distribu-
on and retail usage in
real me. Different fea-
tures and applica ons of
the e₹- R token and ar-
chitecture will be tested in future pilots, based on the learn-
ings from this pilot.
Eight banks have been iden fied for phase-wise par-
cipa on in this pilot. The first phase will begin with four
banks, viz., State Bank of India, ICICI Bank, Yes Bank and IDFC
First Bank in four ci es across the country. Four more banks,
viz., Bank of Baroda, Union Bank of India, HDFC Bank and
Kotak Mahindra Bank will join this pilot subsequently. The
pilot would ini ally cover four ci es, viz., Mumbai, New Del-
hi, Bengaluru and Bhubaneswar and later extend to Ahmed-
abad, Gangtok, Guwaha , Hyderabad, Indore, Kochi, Luck-
now, Patna and Shimla. The scope of pilot may be expanded
gradually to include more banks, users and loca ons as
needed.
DIFFERENCES BETWEEN E-RUPEE AND UPI, RTGS AND
OTHER PAYMENT OPTIONS
e-Rupee is legal tender, not a pay-
ment medium
e-Rupee is an electronic form
of sovereign currency while UPI appli-
ca ons such as Google Pay, PhonePe,
NEFT, and RTGS are different methods
of transferring funds or payment me-
diums. The main difference is that UPI
transac ons are completely backed
by physical currency and the digital rupee is a legal tender
not supported by a physical currency.
Digital rupee is not limited to just currency
It must be men oned that the usage of the e-Rupee
is not limited to payments as it is a type of currency. The
digital rupee also serves the purpose of being a 'unit of ac-
count' and more importantly, a 'store of value'.
The key difference between digital rupee and UPI is
that digital rupee is a store of value like currency and UPI is
just an overlay infrastructure on top of any form of store of
value like bank accounts (which have normal currency), pre-
paid instruments, credit cards, etc. UPI can be an overlay on
any store of value. The e-Rupee is a store of value that can
be transferred digitally instantly with finality of se lement.
No intermediation of Banks
Digital transac ons in UPI or NEFT or RTGS must go
through a bank while in the case of the e-Rupee, the money
gets transferred from one wallet to another.
Clarifying the difference between the digital rupee
and UPI, RBI Governor Shak kanta Das had said during a
press conference on December 7, 2022, "Any UPI transac-
on involves intermedia on of the bank. In CBDC, just as the
paper currency you go to a bank, draw currency and keep it
in your purse, you go to a shop and pay from your wallet.
Similarly, here also you can draw digital currency and keep it
in your wallet which will be your in mobile phone and when
Jan-Feb 2023
you go and make a payment in a shop or to another individ-
ual, it will move from your wallet to his wallet. There is no
rou ng or intermedia on of the bank.”
Anonymity a big factor
The transac ons via digital rupee are more anony-
mous than the current digital transac ons including UPI,
NEFT, RTGS, men oned experts. The fundamental feature of
cash is anonymity. So; for anonymity purposes currency can
be used. How anonymity will be ensured in the case of the
digital rupee can have various sugges ons. We are firstly
looking at largely the technological solu ons. It is also possi-
ble to get a legal provision to ensure anonymity.
In the case of the digital rupee, even though the
transac ons are recorded in the centralised ledger, it is fairly
anonymous as the owner of the wallets are not known to
the government or intermediaries in the ecosystem."
In the case of UPI or NEFT or RTGS, the transac on
happens between the two bank accounts, and it can be easi-
ly tracked. "UPI transac ons are all linked back to the bank
account and can be tracked by the regulatory intermediaries
in the system.”
Will require PAN for digital rupee transac ons a er a
certain limit
At present, a person making a
cash transac on above a certain
threshold needs to submit his or her
PAN. The same rule will apply to the
digital rupee. "There is no difference
between paper currency and digital
currency. The income tax department
has got certain limits for cash pay-
ments like beyond a certain limit you
have to give PAN number; the same
rules will apply in the case of CBDC because both are curren-
cies.
For digital rupee users, SBI has allowed Rs 1 lakh
holding limit for the wallet. Users can load or unload up to
Rs 25,000 per day, as per the website. Up to 20 transfers
including inward and outward payments are allowed in a
day. Users can pay or collect up to Rs 10,000, according to
the bank's website.
At present, the upper limit per UPI transac on is Rs 2
lakh. However, the upper limit may vary from one bank to
another.
¨ The implementa on of the Digital Rupee aims to re-
move the security prin ng cost borne by the general
public, businesses, banks, and RBI on physical curren-
cy which amounted to ₹49,848,000,000.
¨ Already countries like China, Nairobi and Ghana have
introduced e-currency
Sources:
h ps://www.npci.org.in/what-we-do/e-rupi/product-overview
h ps://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/
PR12755768C88D86624673A14B2C7F5CF68908.pdf
h ps://economic mes.india mes.com/wealth/save/digital-rupee-
how-is-rbi-cbdc-retail-e-rupee-is-different-from-upi-ne -rtgs/
ar cleshow/96269789.cms
Geeta Mohan
Ar cle Compiler
10
INGENIOUS Jan-Feb 2023

S a m a c ha a r

jor exports by the twin headwinds of Covid-19 and heavy re-

stric ons imposed by its biggest trade partner, China.
Bilateral trade is expected to more than double to
around $60 billion over the next five years, a er a pact that
cuts or eliminates tariffs on a number of goods and services,
Bharathi Srinivasan
and gives greater recogni on of professional qualifica ons,
Bangalore comes into place on Dec. 29. While that’s s ll just a sliver of
Australia’s two-way trade of $280 billion with China, India’s
Boos ng Trade, the Key to Stronger Indo-U.S. Ties widely recognized as a huge piece of the country’s diversifica-
In a speech delivered at Microso in New Delhi in No- on puzzle.
vember, United States (US) treasury secretary Janet Yellen
called for a deepening of US-India es and emphasized the
More ini a ves on anvil to boost steel sector in
importance of “friend shoring” between the world’s two larg- 2023
est democracies. She iden fied climate, digital trade, and de- With increasing steel produc on in the country, the
velopment as areas ripe for coopera on. focus in 2023 will be on boos ng raw material supplies and
India has taken over the G20 presidency, giving it an producing more special grade steel, according to Union minis-
opportunity to push for coordina on on climate ini a ves and ter Faggan Singh Kulaste.
expanded trade in environmental goods and services. This can India produced 113.43 million tonne of crude steel in
enhance India’s access to cu ng-edge environmental services, January-November 2022, which is 10 per cent higher com-
which could be par cularly beneficial in tackling pollu on, pared to the year-ago period. The government aims to double
water quality, and waste management. In turn, US leadership the country's annual crude steel making capacity to 300 MT
of the Asia-Pacific Economic Coopera on could support G20 from 150 MT at present.
efforts. In an interview to PTI, Kulaste - the Minister of State for
Steel, said more ini a ves for the sector will be taken in 2023.
India looks to boost trade with South-east Asia us- Last year, the government introduced the Produc on
ing river network Linked Incen ve (PLI) scheme for specialty steel to enhance
India proposes to extend its waterways connec vity the produc on of the high-end alloy.
project to South-east Asia right up to Thailand, aiming to link Special grade steel is used in various sectors, including
regional river routes to develop trade. The trade that can be power, shipping, railways and auto. The demand for this steel
conducted through the network is es mated at over $50 bil- is being met through imports.
lion. "Our focus will also be on taking measures to support
According to officials in the ministry of ports, shipping industry besides finding new markets as the produc on of
and waterways, the Eastern Waterways Connec vity steel con nues to grow in the country," he said.
Transport Grid, as the project is called, will be an extension of
the India-Bangladesh protocol route, under which land routes
have already been opened up for trade, and river routes are Source – Economic mes and Livemint
expected to be opera onal from January.

Australia looks to double India trade

Australia is eyeing India’s burgeoning middle class to
help offset the economic damage wrought to some of its ma-

11
INGENIOUS
RISE AND FALL OF
CRYPTO EXCHANGE FTX
Savita Pillai
Mumbai
On November 12, FTX said it had detected
unauthorized transac ons (Bloomberg)
Crypto exchange FTX filed for Chapter 11 bankruptcy
protec on in the United States on Friday following its spec-
tacular collapse that has sent shivers through the industry.
The US bankruptcy proceedings involve mul ple FTX
group companies with more than 100,000, and possibly over
1 million, creditors.
Here is a history of FTX since its founda on in 2019:
2019:
May - Former Wall Street trader Sam Bankman-Fried and ex-
Google employee Gary Wang founded FTX, the owner and
operator of FTX.COM cryptocurrency exchange.
2021:
July - A $900 million funding round valued FTX at $18 billion.
September - FTX signed a sponsorship deal with Mercedes'
Formula 1 team.
October - FTX raised capital at a valua on of $25 billion
from investors including Singapore's Temasek and Tiger
Global.
2022:
Jan. 27 - FTX's U.S. arm said it was valued at $8 billion a er
raising $400 million in its first funding round from investors
including So Bank Group and Temasek.
Jan. 31 - FTX raised $400 million from investors including
So Bank at a valua on of $32 billion.
June 4 - FTX signed a reportedly $135 million sponsorship
deal for naming rights of the Miami Heat's home court.
July 1 - FTX signed a deal with an op on to buy emba led
crypto lender BlockFi for up to $240 million.
July 22 - FTX offered a par al bailout of bankrupt crypto
lender Voyager Digital. Voyager called it a "low-ball bid".
Aug. 19 - A U.S. bank regulator ordered FTX to halt "false
and misleading" claims it had made about whether funds at
the company are insured by the government.
Nov. 2 - Crypto news website CoinDesk reported a leaked
balance sheet that showed Alameda Research, Bankman-
Fried's crypto trading firm, was heavily dependent on FTX's
na ve token, FTT. Reuters was unable to verify the report.
Nov. 6 - Binance CEO Changpeng Zhao said his firm would
Jan-Feb 2023
S a ma c h a ar
liquidate its holdings of FTT due to unspecified "recent reve-
la ons".
Nov. 7 - Bankman-Fried said "FTX is fine. Assets are fine".
Nov. 8 - Binance said it was planning a deal to acquire FTX.
Nov. 9 - Binance decided against pursuing a nonbinding
agreement to bail out FTX.
Nov. 10 - FTX suspended on-boarding of new clients as well
as withdrawals un l further no ce
Nov. 10 - Bankman-Fried told staff in a memo that he was
seeking a capital raising and had held talks with Jus n Sun,
founder of the crypto token Tron.
Nov. 10 - Reuters reported that Bankman-Fried was seeking
to put together a rescue package of up to $9.4 billion for
FTX.
Nov. 11 - FTX started voluntary Chapter 11 proceedings in
the United States, along with its U.S. unit, crypto trading
firm Alameda Research and nearly 130 other affiliates. Bank-
man-Fried resigns as CEO.
Nov. 12 - Reuters reported at least $1 billion of customer
funds have vanished from FTX.
Nov. 12 - FTX said it had detected unauthorized transac-
ons. Blockchain analy cs firms es mated ou lows be-
tween $473 million and $659 million in "suspicious circum-
stances".
Nov. 13 - Bahamas securi es regulator launched a probe
over collapse of FTX.
Nov. 14 - Reuters reported that U.S. prosecutors in New
York were probing FTX's collapse.
Nov. 15 - Financial regulators in the Bahamas appointed
liquidators to run FTX's unit in the country.
Nov. 16 - FTX outlined a "severe liquidity crisis" in U.S. bank-
ruptcy filings, which showed the group could have more
than 1 million creditors.
Nov. 16 - A court filing showed FTX's Bahamas unit, FTX Digi-
tal Markets, was seeking protec on from creditors in the
U.S. under Chapter 15 of the U.S. Bankruptcy Code.
Nov. 16 - Bankman-Fried was sued in a U.S. court by inves-
tors alleging the company's yield-bearing crypto accounts
violated Florida law.
Nov. 16 - Liquidators for FTX Digital Markets "reject the va-
lidity" of FTX's U.S. bankruptcy proceedings.
Nov. 16 - Major crypto player Genesis Global Capital sus-
pended customer redemp ons in its lending business, ci ng
the sudden failure of FTX.
Nov. 17 - The U.S. House Financial Services Commi ee said
it planned to hold a hearing in December to inves gate the
collapse of FTX.
Contd...
12
INGENIOUS
ADDITONAL KEY TAKE AWAYS FROM
MR. GOPINATH RADHAKRISHNAN SIR’S TEACH-
INGS ON THE RESEARCH DONE BY HIM:
ET Markets Explainer: The rise & fall of crypto ex-
change FTX:
The collapse
Crypto exchange FTX is set for bankruptcy proceedings in
the US and its CEO Sam Bankman-Fried has resigned a er a
shocking collapse. The business has to cover a shor all of $8
billion.
2-year ascent
May 2019: Wall Street trader Sam Bankman-Fried co-founds
FTX | Jan 2022: FTX raises $400 million from investors at $32
billion valua on.
What happened in November?
Sam Bankman-Fried's firm was heavily dependent on FTX's
na ve crypto token FTT. Binance said that it would liquidate
Jan-Feb 2023
S a ma c h a ar
its holdings of FTT. Further, Binance announced it will ac-
quire FTX only to recall the decision a day later.
The impact
FTX then suspended its withdrawals as it lacked the money
to fulfil requests and started the bankruptcy process. Bank-
man-Fried quit following this saga.
Cryptos crash
Crypto market cap crashed by over $200 billion from about
$1 trillion as investors feared the contagion of FTX's col-
lapse. Bankman-Fried's wealth fell from $16 billion to zero
($).
What’s next
With aggressive rate hikes, shaky empires are evapora ng
fast. Bull markets mask mismanagement, only to be laid
bare by a turn of the cycle. Customers will lose the most and
will turn away from crypto.
Source: Economic Times & Mint
13
INGENIOUS
Role & Importance
of a Professional
Insurance Advisor
L
ife insurance is a very important contract. When
there is a sufficient cover provided for the family in
case of unfortunate death of a family member a life insur-
ance policy becomes a life saver for the remaining family
members for their remaining life me. When a sum of mon-
ey or series of income or combina on of both is received
from a properly & professionally guided insurance policy it
takes care of a family’s all the future working capital need &
once a while nonnego able major expenses plus debt if any.
Role & knowledge of a professional insurance advisor is not
only important in analyzing client needs and sugges ng a
proper insurance policy or a combina on of policies in a
complex world of life insurance products but also in filling up
the proposal form. The ques ons are so technical, they also
require a help of an experienced professional advisor. If the
answers of proposal form are not properly given it may re-
sult in rejec on of a death claim up on which your family’s
en re future depends.
I will explain the role & importance of a professional advisor
in 2 stages.
· Need analysis for the recommenda on of right prod-
uct and in a proper quan fied manner.
· Technical things involved in processing of insurance
proposal form
In part 1 we discussed need analysis for the recommenda-
on of right product and in a proper quan fied manner in
previous issue. Now let’s discuss further in this issue.
As shown in above figure Indian contract act 1872 applies to
life insurance as well.
Offer & Acceptance: A proposer offers his risk cover
in the form a proposal form to life insurer & life insurer ei-
ther accepts it at ordinary rates or rejects it. Or in some cas-
es makes a counter offer to accept it with extra premium, a
Jan-Feb 2023
Part—2
lien, a reduced term, a reduced Sum Assured or for an insur-
ance plan other than asked by proposer. In this case a coun-
ter offer is made to proposer and he needs to either accept
it or reject it.
Considera on: Considera on for the proposer is risk
cover & he pays premium for the risk cover provided by life
insurer. Considera on for the insurer is premium for which
he provides risk cover to the proposer.
Rest three are self-explanatory so I will not go in to their
details. Now apart from these 6 valid essen als 3 more prin-
ciples also apply to insurance. Let’s have a look at them.
Insurable Interest
Life Insurance at Incep on
General Insurance at Incep on & Claim
Utmost Good Faith
Un l FPR is received
At revival
Principle of Indemnity (Applied in General Insurance)
Insurable Interest: A proposer can not take a life
insurance policy on just anyone’s life. You can buy life insur-
ance only & up to economic loss on someone’s death. There
must be sufficient insurable interest for purchasing a life
insurance policy. There is no par cular defini on of insura-
ble interest, it varies case to case. Let’s look at some of the
examples.
1. Husband and wife have unlimited insurable interest in
each other’s life.
2. Creditor has insurable interest in debtor’s life up to
the amount of debt.
3. An employer has insurable interest in to its key man’s
life.
In life insurance insurable interest is applied at the me of
buying insurance while in general insurance insurable inter-
est is applied both at the me of buying insurance and at the
me of claim also.
Utmost Good Faith: The principle demands that pro-
poser should disclose every material fact correctly whether
asked or not asked that affects underwriter’s decision to
accept or reject or provide insurance then terms other then
asked for. An insurer put’s utmost good faith in to the pro-
poser’s disclosers. If anything in the proposal form is found
wrong or any material informa on is withheld and the same
is proved by insurer the contract may be cancelled and may
result in repudia on of death claim. Proposer’s duty of ut-
most good faith does not end on just submi ng proposal
form but by the me the proposal is processed and un l FPR
(first premium receipt) is received it is proposer’s duty to
bring in to no ce to the insurer of any changes in health,
occupa on or any other material fact. 14
INGENIOUS
Role & Importance of a Professional Insurance Advisor
Once the FPR is issued there is no need to disclose any
changes that may happen a er it.
When a lapse policy is being revived it is as good as buying
new insurance and at the me of revival again proposer
need to follow principle of utmost good faith.
Principle of indemnity: The principle of indemnity
states that an insurance policy shall not provide compensa-
on to the policyholder that exceeds their economic loss.
This limits the benefit to an amount that is sufficient to re-
store the policyholder to the same financial state they were
in prior to the loss. In other words, the principle of indemni-
ty ensures that the insured gets made whole from their loss
but will not benefit, gain, or profit from an accident or claim.
Nor will you get less than what is necessary to restore you to
the same financial posi on. It is only applied to general in-
surance and not to the life insurance.
Preamble of a life insurance policy bond. Basically,
there are three parts in the preamble. Part 1 makes proposal
form basis and part of the contract. Part 2 provides opera-
ve clause. And part 3 is proviso (makes terms and condi-
ons printed on policy bond part of the contract).
Above is a typical sample of a preamble printed on a
stamp duty paid bond which makes proposal form basis and
part of the contract. Now you must have understood the
importance of role of a professional advisor in filling up the
proposal form.
Even the comple on of applica on forms, especially
those for insurance and pension products, calls for the advis-
er’s professional knowledge. For example:
· health ques ons may be difficult for the general pub-
lic to interpret;
· pension ques ons may require technical understand-
ing; and
· ques ons on occupa on and leisure ac vi es may
require supplementary informa on not indicated on
the ques onnaire.
There may be places on the applica on form where
untruthful answers appear to be more helpful to the success
of the client’s applica on than the truth. For example, the
client may not wish to disclose that they are overweight or
have an unhealthy lifestyle (e.g. a heavy smoker). Good
prac ce demands that the adviser insists on truthful an-
swers and points out the legal implica ons of misrepresen-
ta on and non-disclosure.
The adviser’s responsibility does not end when all the
applica ons are completed, signed and ready for submission
Jan-Feb 2023
to product provider(s). Further tasks might include:
· explaining to the client the administra ve processes
the applica on will go through and the mescales
involved;
· telling the client about the documents they will re-
ceive and how to respond to them;
· preparing the client for the fact that medical reports
or examina ons may be required;
· arranging required medicals and seeing that the cli-
ent a ends; and
· ensuring that enquiries from product providers are
answered quickly and that all necessary ac ons are
taken to ensure that technical processing can be
completed efficiently.
By this me, you must have understood the role & im-
portance of a professional financial advisor. Now let’s look
at the dome of the data from IRDAI’s (Insurance Regulatory
and development authority) last annual report.
The figure here shows Channel wise new business under-
wri en by life insurers. From the figure it is clear that in LIC
93.87% of total business is underwri en by individual agents
and only 23% business is underwri en by individual agents
in private sector. In LIC only 3% business is underwri en by
banks and in private insurers 54.55% business in under-
wri en by banks. Source last published IRDA annual report.
The figure on the next page shows share of Unfair
Business Prac ces complains received as a percentage to
the total complaints. LIC where almost 94% business in un-
derwri en through agents show 3.57% complaints related
to UFBP. In private sector where almost 54% business in
underwri en through banks show 74.14% of total com-
plaints related to UFBP.
Source last published IRDA annual report.
15
INGENIOUS Jan-Feb 2023

Role & Importance of a Professional Insurance Advisor

Channel-wise Mis-Selling Complaints. Source last published

IRDA annual report.

Above figure shows penetra on of insurance in India. It is

measured in 2 ways. As a percentage of premium to GDP &
as a ra o of insurance premium to popula on (Insurance
Density). If you look at the figures in both the terms insur-
ance penetra on is very low in India. Source last published
IRDA annual report.

Looking at all the above factors, low penetra on of

insurance in India, Largest protec on gap in life insurance,
India needs physical presence of well trained, experienced
and professional advisors. Physical presence of a profession-
al advisor has a very big role to pay for the families to ensure
every family is financially secured in the absence of earning
member. For the country by making penetra on as percent-
age of GDP in double digit and contribute in India becoming
largest economy in the world.
As per above figure in India protec on gap stood 83%.
Means people were insured only to the tune of 17% of re-
quired cover. Source Swiss Re, Sigma No. 04/2022. Ankur Shah
16
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INGENIOUS Jan-Feb 2023

O f f i c e B e a re r s

CHAIRPERSON
Mr. R. Gopinath
CONVENOR

MEMBER
SECRETARY

Mr. Ankur Shah Ms. Savita Pillai Ms. Bharathi Srinivasan

MEMBER

MEMBER

MEMBER

Mr. Atul Jain Mr. Ajay K Tyagi Mr. Inderpal S Bindra

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