2. INTRODUCTION
• Financial services refer to services provided by
the financeindustry.
• Servicesthat are financial innature.
• The finance industry encompasses a broad
range of organizations that deal with the
management of money.
• Among these organizations are banks, credit
card companies, insurance companies,
consumer finance companies, stock
brokerages, investment funds and some
government sponsored enterprises.
3. (Continued….)
• It can also be known as ‘Financial
Intermediation’ which is a process by which
funds are mobilized from a large number of
savers and make them available to all those
who are in need of it and particularly to
corporate customers.
• A well developed financial service Industry
is absolutely necessary to promote industrial
development in a country.
4. (Continued…)
• Suppliers of financial services include the
following types of institutions:
Unit Trusts
Stock Exchanges
Banks and Financial Institutions
Finance Companies
Non Banking Finance Companies
Leasing Companies
Investment Companies etc.
5. Features of Financial
Services
• Variety of Services: (Different people-different need)
• Intangible: (Measuerd in quality, attractiveness,feedback)
• Massive Branch Network: (Local, National, International
customers)
• High Personnel Costs: (Highly labour intensive, use of
technology)
• Information-based: (Information based industry)
• Customer Oriented: (Responsibility-protect customer’s
interest)
• Direct sale: (No middleman)
7. Fund Based Services
• The firm raises funds through debt, equity, deposits
and the bank invests the funds in securities or lends to
those who are in need ofcapital.
8. Leasing
• A lease transaction is a commercial arrangement
whereby an equipment owner or Manufacturer
conveys to the equipment user the right to use
the equipment in return forarental.
• In other words, lease is a contract between the
owner of an asset (the lessor) and its user (the
lessee) for the right to use the asset during a
specified period in return for a mutually agreed
periodic payment (the leaserentals).
9. Underwriting
Underwriting in the context of a company
means undertaking a responsibility to give a
guarantee that the shares offered to the
public will be subscribed for. The firm which
takes the guarantee are called
‘Underwriters’.
10. ConsumerCredit
• Consumer credit is basically the amount of credit used
by consumers to purchase non-investment goods or
services that are consumed and whose
value depreciates quickly.
• Thisincludes automobiles, recreational vehicles (RVs),
education, boat and trailer loans but excludes debts
taken out to purchase real estate or margin on
investment accounts.
• For example, a mortgage for purchasing a house is not
consumer credit. However, the 52 inch television you
put on your credit card is consumercredit.
11. HirePurchase
• A system by which a buyer pays for a thing in
regular installments while enjoying the use of it.
During the repayment period, ownership (title) of
the item does not pass to the buyer. Upon the
full payment of the loan, the title passes to the
buyer.
• A method of buying an article by making regular
payments for it over several months or years. The
article only belongs to the person who is buying it
when all the payments havebeenmade
12. Factoring
• Factoring is a financial transaction
whereby a business sells its accounts
receivable (i.e., invoices) to a third
party (called afactor) at adiscount.
13. Advantages ofFactoring
• Time Savings. Factoring can save you time and effort that would
otherwise be spent on collecting from customers.
• Good Use for Growth. The instant cash to generate growth, maybe
hiring another salesperson who will bring in more business. Or
buying an advertisement that will reach new customers. Or buying a
piece of equipment that willaccelerate production.
• Doesn’t Require security. Unlike traditional bank loans, factoring
doesn’t require to risk your home or other property ascollateral.
• Qualify for More Funding. Factoring firms will typically give a cash
advance on up to 80% of receivables. That may be more than be able
to get from abank.
14. Forfaiting
• It is aform of financing of receivables relating to
international trade.
• It is a form of supplier credit in which an exporter
surrenders possession of export receivables,
which are usually guaranteed by a bank on the
importer’scountry.
• Forfaiting is amechanism of financingexports:
– by discounting exportreceivables
– evidenced by bills of exchangesorpromissory notes
– without recourse to the seller (viz; exporter)
– carrying medium to long-termmaturities
– on afixed rate basisupto 100%ofthe contract value.
15. Bills Discounting
• While discounting , banks buy the bill before it
is due and credit the value of the bill after a
discount charge to the customer'saccount.
• There are two types of billdiscounting
– Import Bill Discount is a kind of short-term finance
offered by the bank to the importer according to
his demand upon receiving the bills under the
letter of credit and the import collection items.
– Export Bill Discounting is financing of money in
transit supplied by the bank.
16. • According to the IndianNegotiable
Instruments Act, 1881
– The bill of exchange is an instrument in writing
containing an unconditional order, signed by the
maker, directing a certain person to pay a certain
sum of money only to, or to the order of, a certain
person, or to the bearer of that instrument.
Bills Discounting
17. • Housing finance is what allows for the
production and consumption ofhousing.
• It refers to the money we use to build and
maintain the nation’s housing stock.
• But it also refers to the money we need to pay
for it, in the form of rents, mortgage loans and
repayments.”
Housing Finance
18. Venture Capital Financing
• It is a fund that is available for investment in
an enterprise which offers the probability of
profit along with the possibility of loss.
• Venture is a course of proceeding associated
with risk whose outcome isuncertain.
• Capital means the financial resources to start
an enterprise.
19. FeeBased Services
• The services wherein financial institutions
operate in specialized fields to earn a substantial
income in the form of fees or dividends or
brokerage on operations.
• The major fee based financial services are
as follows:
– IssueManagement
– CorporateAdvisory Services
– Credit Rating
– Mutual Funds
– AssetSecuritization
– Stock Broking Services
20. StockBroking
• The process of investing in the share market,
either individually or through a broker is
known asstock broking.
• This is primarily done by opening a Demat
account.
• If done through a broker, he opens an
account, helping to operate through online
stock broking facility.
21. Stockbroker
• Licensed agent who has to pass certain qualifying
tests to be certified to offer securities investment
advice to investors.
• Heor shemay
– counsel what and when to buy
– counsel whether tohold or sell securities,
– executebuy-sell orders on behalf of the investors, and
– charge apercentage of the transactionamountants
brokerage fee for the servicesrendered.
22. CreditRating
• It is an opinion on the future ability and legal
obligation
payments
of an issuer to
of principal and
make timely
interest on a
specific fixed incomesecurity.
• Asper credit rating agencies regulations 1999
rating means
– An opinion regarding securities
– Expressedin the form of standardsymbols
– Assigned by acredit rating agency
– Usedby an issuer of suchsecurities
23. CRISIL rates a wide range of entities,including
CRISIL:Credit Rating and Information Servicesof IndiaLimited.
• Industrial companies
• Banks
• Non-banking financial companies(NBFCs)
• Infrastructure entities
• Microfinance institutions
• Insurance companies
• Mutual funds
• State governments
• Urban local bodies
