Financial Services(12MBAW-49)

Introduction

Financial Services

BY

SADDAM HUSSAIN

Unit –I (Syllabus)

• Introduction to Financial System and Financial Markets, Instruments

• Evolution of Indian Financial System• Financial Services: concepts, features,

constituents and types• Regulatory Framework for Financial

Services(NBFC)• Stock Exchanges of India; SEBI

Financial Services??

Financial Services

Services required for

mobilizing and channelizing savings to productive activities for producing final goods &

services

Financial Services

Most significant element of a financial system interlinking all other elements.

COMPONENTS OF INDIAN FNANCIAL SYSTEM

FourthElemen

t

Financial Services

Includes various services created and

delivered by the financial system-not

only helps raise funds but ensure their

efficient deployment.

Functions of Financial Services

• Mobilization of funds• Effective Deployment of funds• Provision of need based services• Provision of regulated service• Enhancement of Economic

Development

Categories of Financial Services

Categories of Financial Services

Asset Management Companies

e.g: Leasing Cos., Mutual Fund Cos,

Merchant Bankers…

What is being Managed??

Liability Management Companies

e.g. Bill discounting

houses, Acceptance

houses, Factoring,

Securitization, … etc.

Categories of Financial Services….

FUND BASED Fin. Services

Co.s•Own the fund by directly raising it from the market

• Lend it to those who need them

Ownership &

Utilization of Fund

FEES BASED Fin. Services Co.s

• Help others raise funds

• Do not own the fund raised

• Provide advisory services for effective

deployment of fund

Categories of Financial Services….

Fund Based servicesfirms raise equity, debts and deposits and invests in securities and lends to those who are in need of capital

Caters to both short term and long term need

E.g. Commercial banking, Term lending, Bill discounting, Leasing, Factoring, Forfaiting, Hire purchase, VCF….

Categories of Financial Services….

Fees-Based Services Enables the corporate sector &

others to raise capital from the market or exchange financial assets & risks with other participants of the market..against a FEES

E.g.-Merchant Banking, Stock Broking, credit Rating, Mutual Funds, Portfolio Mgt. services…

A Glimpse of the variety of Financial Services

LEASING

Means for financing capital equipments

Contractual agreement by which a firm acquires the right to use an asset for a definite period by paying rentals

FACTORING

FS designed to manage the receivables of a firm

An arrangement for obtaining funds by selling receivables to a specialized financing agency (factor) .

BILL DISCOUNTING & SECURITIZATION

Bill discounting is a practice of lending against the commercial bills of a trader.

Securitization is a process of pooling & packaging homogenous illiquid asset (receivables-long term) into marketable securities.

MUTUAL FUNDS

Are financial intermediaries that collect the savings of

small investors and invests them in a diversified

portfolio of securities to minimize risk and maximize

returns for investors

MERCHANT BANKERS

Provide specialized services as managing new

issues, underwriting, portfolio mgt., financial restructuring, advisory

services for M&A…..

VENTURE CAPITAL FINANCING

Provide a form of equity financing designed

especially for funding high risk and return projects

(new products/inventions/innovations).

CREDIT RATING

A specialized form of financial services involved in the assessment of the

credit record, integrity, and capability of a prospective borrower to meet its debt

obligation.

Salient Features of Financial Services

Highly Customer OrientedIntangibilityInseparabilityPerish abilityPeople-based serviceDynamism

CONSTITUNTS OF FINANCIAL SERVICESCONSTITUNTS OF FINANCIAL SERVICES

INSTRUMENTS

• Debt• Equity• hybrid

MARKET PLAYERS

-Banks, FIs, MFs, MBs,

Brokers, ….

SPECIALIZED

INSTITUTIONS

-Credit rating agencies,

depositories….

REGULATORYBODIES

-RBI, SEBI, Dept. of Banking &

Insurance, IRDA…..

Constituents of Financial Services

Financial Services Sector…

A torchbearer throwing light on the

sources of funds the quantum of funds that can be

mobilized from such sourcesProviding solutions to problems

faced by various components of Fin. System

Increasingly contribute to economic growth & development

List of top 10 financial services companies in India

•  

SBI Capital Markets Limited:This happens to be the oldest organizations in the sphere of capital markets in India. Established in 1986 in the form of an ancillary of SBI, they have ranked second in Asia's Project Advisory services. The company is a traiblazer in privatization and securitization. The subsidiaries of SBI Capital Markets are SBICAPs Ventures Ltd., SBICAP Trustee Co.Ltd. and many others.

Bajaj Capital Limited:One of the major financial services companies in India, Bajaj Capital offers best investment advisory and financial planning services. The services are meted out to the institutional investors, NRIs, corporate houses, individual investors, high network clients as well.

DSP Merrill Lynch Limited:A major player in the equity and debt market in India, DSP Merrill Lynch offers financial advises to varied corporations and institutions. With an array of wealth management and investor services, their services are customized in a manner that they meet every investor requirement. 

Birla Global Finance Limited:The subsidiary of Aditya Birla Nuvo Ltd., this company has operations in the corporate finance and capital market arena. An alliance with Sun Life Financial of Canada, they have given birth to Birla Sun Life Insurance Co Ltd., Birla Sun Life Distribution Co. and alike.

Housing Development Finance Corporation:A best financial solution for home loans, NRI loans, HDFC is the one stop destination for personal finance. With overseas branches in Singapore, Kuwait, Qatar, Saudi Arabia and many others, HDFC has been going great guns every year.

List of top 10 financial services companies in IndiaPNB Housing Finance Limited:This company offers premium solutions for relieving the borrower segment. The Home Loan Life Insurance Plan of this has come in conjunction with TATA AIG, with the lowest premium when compared to the peers.

ICICI Group:Wide arena of financial products and services, ICICI Group has solutions like InstaBanking, Online Trading, Insta Insure, ICICI Bank imobile etc. Providing high class financial services in all segments of the society, ICICI Group deals with Mutual Fund, Private Equity, Securities, and Life Insurance etc.

LIC Finance Limited:It is the biggest Housing Finance Company in India, providing finance to individuals for repair or construction or renovation of any old or new apartment or house.

L & T Finance Limited:Established in 1994 by the Larsen and Turbo group, this has become a significant name in the financial sector. Funds for automobiles, Agricultural Instruments, secured loans; they have all types of loans for a long tenure. 

Karvy Group:With Mutual Funds Services, Depository Services, Debt Market Services, Investment Banking and many others, Karvy Group has spanned across the domestic financial sector as well as abroad.