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MANAGEMENT OF FINANCIAL
SERVICES
UNIT 1
INTRODUCTION
• A system that aims at establishing and providing a regular,
smooth, efficient and cost effective linkage between
depositors and investors is known as financial system.
• An efficient financial system not only encourages savings and
investments, it also efficiently allocates resources in different
investment avenues and thus accelerates the rate of
economic development.
FUNCTIONS OF FINANCIAL SYSTEM
FINANCIAL CONCEPT
1 Financial Assets
A financial assets is one which is used for production or
consumption or for further creation of assets. For instance, A
buys equity shares and these shares are financial assets
since they earn income in future.
2 Financial Intermediaries
3 Financial Markets
4 Financial Rates of Return
The return on Government securities and bonds are
comparatively less than on corporate securities due to lower
risk involved therein.
5 Financial Instruments
DEVELOPMENT OF FINANCIAL SYSTEM IN INDIA
• Nationalization of Financial Institution
• Starting of Unit Trust of India
• Establishment of Development Banks
• Institution for Financing Agriculture
• Institution for Foreign Trade
• Institution for Housing Finance
• Stock Holding Corporation of India Ltd. (SHCIL)
• Mutual Funds Industry
• Venture Capital Institutions
• Credit Rating Agencies
• Multiplicity of Financial Instruments
• Legislative Support
WEAKNESSES OF INDIAN FINANCIAL SYSTEM
(i) Lack of Co-ordination between different Financial Institutions
(ii) Monopolistic Market Structures
(iii) Dominance of Development Banks in Industrial Financing
(iv) Inactive and Erratic Capital Market
(v) Imprudent Financial Practice
CONCEPT, NATURE AND SCOPE OF FINANACIAL SERVICES
Financial services including banking, insurance, stock broking
and investment services as well as a wide range of other
business and professional services.
In other words, what we can say is that financial services are
services that ensure the smooth flow of financial activities in
the economy.
Financial services sector is regulated by the Securities and
Exchange Board of India (SEBI), Reserve Bank of India and the
Department of Banking and Insurance, Government of India.
CHARACTERISTICS OF FINANCIAL SERVICES
SCOPE OF FINANCIAL SERVICES
Fund based activities :
(i) Underwriting of or investment in shares, debentures, bonds
etc. of new issues (primary market activities)
(ii) Dealing in secondary market activities.
(iii) Participating in money market instruments like commercial
papers, certificate of deposits, treasury bills, discounting of
bills etc.
(iv) Involving in equipment leasing, hire purchase, venture
capital, seed capital etc.
(v) Dealing in foreign exchange market activities.
Non-fund based activities :
(i) Managing the capital issues i.e., management of pre-issue and
post-issue activities relating to the capital issue in accordance
with the SEBI guidelines and thus enabling the promoters to
market their issues.
(ii) Making arrangements for the placement of capital and debt
instruments with investment institutions.
(iii) Arrangement of funds from financial institutions for the
clients’ project cost or his working capital requirements.
(iv) Assisting in the process of getting all Government and other
clearances.
Modern Activities
(i) Planning for mergers and acquisitions and assisting for their smooth
carry out.
(ii) Guiding corporate customers in capital restructuring.
(iii) Acting as Trustees to the debenture-holders.
(iv) Recommending suitable changes in the management structure and
management style with a view to achieving better results.
(v) Structuring the financial collaboration/joint ventures by identifying
suitable joint venture partner and preparing joint venture
agreement.
(vi) Rehabilitating and reconstructing sick companies through
appropriate scheme of reconstruction and facilitating the
implementation of the scheme.
(vii) Managing the portfolio of large Public Sector Corporations.
(viii) Undertaking risk management services like insurance services,
buy-back options etc.
Causes for financial Innovation
NEW FINANCIAL PRODUCTS AND SERVICES
INNOVATIVE FINANCIAL INSTRUMENTS
CHALLENGES FACING THE FINANCIAL SERVICES SECTORS
REGULATORY FRAMEWORK FOR FINANCIAL SERVICES
The Regulatory Framework
A] Framework for Banking and Financial services :-
B] Framework for Insurance Services :-
C] Framework for Investment services :-
D] Framework for Merchant Banking and Other services :-

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Financial Systems and Markets; Concept, Nature and Scope of Financial Services; Regulatory Framework for Financial Service

  • 2. INTRODUCTION • A system that aims at establishing and providing a regular, smooth, efficient and cost effective linkage between depositors and investors is known as financial system. • An efficient financial system not only encourages savings and investments, it also efficiently allocates resources in different investment avenues and thus accelerates the rate of economic development.
  • 5. 1 Financial Assets A financial assets is one which is used for production or consumption or for further creation of assets. For instance, A buys equity shares and these shares are financial assets since they earn income in future.
  • 8. 4 Financial Rates of Return The return on Government securities and bonds are comparatively less than on corporate securities due to lower risk involved therein. 5 Financial Instruments
  • 9. DEVELOPMENT OF FINANCIAL SYSTEM IN INDIA • Nationalization of Financial Institution • Starting of Unit Trust of India • Establishment of Development Banks • Institution for Financing Agriculture • Institution for Foreign Trade • Institution for Housing Finance • Stock Holding Corporation of India Ltd. (SHCIL) • Mutual Funds Industry • Venture Capital Institutions • Credit Rating Agencies • Multiplicity of Financial Instruments • Legislative Support
  • 10. WEAKNESSES OF INDIAN FINANCIAL SYSTEM (i) Lack of Co-ordination between different Financial Institutions (ii) Monopolistic Market Structures (iii) Dominance of Development Banks in Industrial Financing (iv) Inactive and Erratic Capital Market (v) Imprudent Financial Practice
  • 11. CONCEPT, NATURE AND SCOPE OF FINANACIAL SERVICES Financial services including banking, insurance, stock broking and investment services as well as a wide range of other business and professional services. In other words, what we can say is that financial services are services that ensure the smooth flow of financial activities in the economy. Financial services sector is regulated by the Securities and Exchange Board of India (SEBI), Reserve Bank of India and the Department of Banking and Insurance, Government of India.
  • 13. SCOPE OF FINANCIAL SERVICES Fund based activities : (i) Underwriting of or investment in shares, debentures, bonds etc. of new issues (primary market activities) (ii) Dealing in secondary market activities. (iii) Participating in money market instruments like commercial papers, certificate of deposits, treasury bills, discounting of bills etc. (iv) Involving in equipment leasing, hire purchase, venture capital, seed capital etc. (v) Dealing in foreign exchange market activities.
  • 14. Non-fund based activities : (i) Managing the capital issues i.e., management of pre-issue and post-issue activities relating to the capital issue in accordance with the SEBI guidelines and thus enabling the promoters to market their issues. (ii) Making arrangements for the placement of capital and debt instruments with investment institutions. (iii) Arrangement of funds from financial institutions for the clients’ project cost or his working capital requirements. (iv) Assisting in the process of getting all Government and other clearances.
  • 15. Modern Activities (i) Planning for mergers and acquisitions and assisting for their smooth carry out. (ii) Guiding corporate customers in capital restructuring. (iii) Acting as Trustees to the debenture-holders. (iv) Recommending suitable changes in the management structure and management style with a view to achieving better results. (v) Structuring the financial collaboration/joint ventures by identifying suitable joint venture partner and preparing joint venture agreement. (vi) Rehabilitating and reconstructing sick companies through appropriate scheme of reconstruction and facilitating the implementation of the scheme. (vii) Managing the portfolio of large Public Sector Corporations. (viii) Undertaking risk management services like insurance services, buy-back options etc.
  • 16. Causes for financial Innovation
  • 17. NEW FINANCIAL PRODUCTS AND SERVICES
  • 19. CHALLENGES FACING THE FINANCIAL SERVICES SECTORS
  • 20. REGULATORY FRAMEWORK FOR FINANCIAL SERVICES
  • 21. The Regulatory Framework A] Framework for Banking and Financial services :- B] Framework for Insurance Services :-
  • 22. C] Framework for Investment services :-
  • 23. D] Framework for Merchant Banking and Other services :-