Merchant banking and financial services

2. FINANCIAL SERVICES
 THE FINANCIAL SERVICES INDUSTRY LEADS THE
WORLD IN TERMS OF EARNINGS AND EQUITY
MARKET CAPITALIZATION.
 COMMERCIAL BANKING
 INVESTMENT MANAGEMENT
 PORTFOLIO MANAGEMENT
 VENTURE CAPITAL

3. EMERGENCE & DEVELOPMENTS
 The asset management industry in India is among the
fastest growing in the world. November 2019, 44 asset
management companies
 End of March 2018, at Rs 21.36 lakh crore
 India registered a record inflow of amount of 31.43
lakh crore billion in mutual funds in FY 2020-21.
 Mutual fund (MF) portfolios have increased to 66.5
million as of December 2017.
 Mutual fund (MF) equity portfolios in India reached a
10-year high of 49.3 million, by end of 2017.

4. DEVELOPMENTS AND CHALLENGES
AHEAD
 The number of listed companies on NSE and BSE
increased from 6,445 in FY10 to 7,501 in March 2018.
 The market Capitalisation of all the companies listed on
the BSE reached a record Rs 150 lakh crore
 The amount raised by IPOs in India increased to US$
10,888 million in FY 2017-18.
 Initial Public Offers (IPOs) by small and medium
enterprises (SMEs) in India received record funding of
Rs 16.79 billion in 2017 through 133 issues.
 The total amount of initial public offerings increased to
Rs 84,357 crore by the end of FY18.

5. FUND BASED ACTIVITIES
 AMOUNT USED TO ACQUIRE ASSETS OR FUNDS FOR
CUSTOMERS. – PRIMARY, SECONDARY, FOREIGN
EXCHANGE MARKET AND SPECIALISED FINANCIAL
SERVICES.
 LEASING(A Lease can be defined as a contract where a party
being the owner (lessor) of an asset (leased asset) provides the
asset for use by the lessee at a consideration (rental), either fixed
or dependent on any variables, for a certain period (lease
period), either fixed or flexible, with an understanding that at
the end of such period, the asset, subject to the embedded
options of the lease, will either be returned to the lessor or
disposed off as per the lessor’s instructions.)
 HIRE PURCHASE (Hire purchase is an arrangement for buying
expensive consumer goods, where the buyer makes an initial
down payment and pays the balance plus interest in
installments. )
 FACTORING (Factoring is a transaction between a business
and a third-party (the factor) which provides quick cash flow in
exchange for accounts receivable and/or other assets.),

6.  FOREFEITING (Forfaiting is a method of trade finance that
allows exporters to obtain cash by selling their medium and
long-term foreign accounts receivable at a discount on a
“without recourse” basis)
 MUTUAL FUNDS (A mutual fund is a type of financial vehicle
made up of a pool of money collected from many investors to
invest in securities like stocks, bonds, money market
instruments, and other assets.)
 BILLS DISCOUNTING (Discounting of bill refers to the
encashment of the bill before the date of its maturity. The bank
deducts its charges from the bill.)
 CREDIT FINANCING (The credit analysis process refers to
evaluating a borrower’s loan application to determine the
financial health of an entity and its ability to generate sufficient
cash flows to service the debt.)
 HOUSING FINANCE
 VENTURE CAPITAL (Venture capital (VC) is a form of private
equity and a type of financing that investors provide
to startup companies and small businesses that are believed to
have long-term growth potential)

7. NON FUND BASED OR FEE BASED
ACTIVITIES
 OPERATING IN SPECIALISED FIELD TO EARN INCOME IN
THE FORM OF FEE,COMMISSION, BROKERAGE,
DIVIDENDS.
 ISSUE MANAGEMENT (The management of issues for raising
funds though various types of instruments by companies is known
as Issue management.)
 PORTFOLIO MANAGEMENT (Trade in exchange/securities on
behalf of their clients and also manage their portfolio.)
 CORPORATE COUNSELLING (Corporate counseling denotes the
advice provided by the Merchant Banking to the corporate unit to
ensure better corporate performance in terms of image building
among investors, steady growth through good working and
appreciation in market value of its equity shares.)
 MERCHANT BANKING (a financial institution that
conducts underwriting, loan services, financial advising, and
fundraising services for large corporations and high-net-worth
individuals)

8.  CREDIT RATING (Credit rating is an analysis of the credit risks
associated with a financial instrument or a financial entity.)
 STOCK BROKING (Stockbroking is a service which gives retail
and institutional investors the opportunity to buy and sell
equities.)
 CAPITAL RESTRUCTURING (Capital restructuring is a
corporate operation aimed at changing the ratio of equity and
debt in a firm's capital structure.)
 BANK GUARANTEE (A bank guarantee is a type of financial
backstop offered by a lending institution. The bank guarantee
means that the lender will ensure that the liabilities of a debtor
will be met)
 LETTER OF CREDIT (A letter of credit, or "credit letter" is a
letter from a bank guaranteeing that a buyer's payment to a seller
will be received on time and for the correct amount.)
 DEBT RESTRUCTURING (Debt restructuring is a process used
by companies, individuals, and even countries to avoid the risk
of defaulting on their existing debts, such as by negotiating
lower interest rates.)

9. MODERN ACTIVITIES
 INVESTMENT
 FINANCING DECISIONS
 DIVIDEND DECISION

10. NEW FINANCIAL PRODUCT AND
SERVICES
 LOAN SYNDICATION - Loan arranged by a bank called
lead manager for a borrower who is usually a large
corporate customer or a government department
 FACTORING - It refers to managing the process of sales
ledger by financial service company.
 FORFEITING - It’s a technique by which forfeitor
(Financing Agency) discounts an export bill and pay
ready cash to the exporter who can concentrate on the
export front without bothering about the collection of
export bills.

11. INNOVATIVE FINANCIAL
INSTRUMENTS
 TIME SHARE -
 FOREIGN CURRENCY CONVERTIBLE BONDS - A foreign
currency convertible bond (FCCB) is a type of convertible
bond issued in a currency different than the issuer's
domestic currency. In other words, the money being raised
by the issuing company is in the form of foreign currency.
A convertible bond is a mix between a debt and equity
instrument. It acts like a bond by making regular coupon
and principal payments, but these bonds also give the
bondholder the option to convert the bond into stock.
 ZERO COUPON BONDS - It did not involve any annual
interest on the bonds. But it had a higher maturity value on
the initial investment for a particular time period.

12.  INFRASTRUCTURE BONDS - Governments and companies need to
borrow money for projects or expansion. Infrastructure bonds are
borrowings to be invested in government funded infrastructure
projects within a country. They are issued by governments or
government authorised Infrastructure companies or Non- Banking
Financial Companies.
 COMMERCIAL PAPER - Commercial paper, also called CP, is a short-
term debt instrument issued by companies to raise funds generally for a
time period up to one year. It is an unsecured money market
instrument issued in the form of a promissory note and was introduced
in India for the first time in 1990.
 CERTIFICATE OF DEPOSIT -
 AMERICAN DEPOSITORY RECEIPT(ADR) & GLOBAL DEPOSITORY
RECEIPT( GDR)
 INTER BANK PARTICIPATION(IBP)
 FLIP FLOP NOTES