The document outlines financial products and services, detailing their definitions, functions, and classifications within the Indian financial system. It discusses the management of financial products through planning processes aimed at meeting individual financial goals, such as investment strategies, risk management, and the provision of financial advice. Additionally, it highlights various categories of financial instruments and the roles of financial institutions and markets in facilitating economic development.

1. Understanding
Financial Products
Financial Services Marketing (303)
Mrs. Charu Rastogi, Asst. Proff.

2. Agenda
• What are Financial Products?
• What are Financial Services?
• Financial System, its functions
• Indian Financial System
• Financial Products
o Banks
o Money market
o Capital market
o Asset / Fund based
o Fee based
• How are financial products managed?
o Financial Planning Process
o Individual Financial Plan
o Customer needs and product solutions

3. Financial Product
• A financial product is a facility (arrangement or intangible property) through
which, or through the acquisition of which, a person
o makes a financial investment
 the investor gives money to another person and the person uses the contribution to
generate a financial return, or other benefit, for the investor
 the investor has no day-to-day control over the use of the contribution to generate
the return or benefit
 Eg: a person paying money to a company for the issue of shares (the company uses
the money to generate dividends for the person and the person, as a shareholder,
does not have control over the day-to-day affairs of the company)
o manages financial risk
 manage, avoid or limit the financial consequences to them of particular
circumstances happening
 Eg. taking out insurance and hedging a liability by acquiring a futures contract or
entering into a currency swap
o makes non-cash payments
 by ways other than making physical delivery of a domestic or foreign currency in
the form of notes / coins
 Eg: facility for direct debit of a deposit account, a facility for the use of cheques

4. Financial Service
• A person provides a financial service if they
o provide financial product advice
 to influence a person in making a decision in relation to a particular financial
product
o deal in a financial product
 acquiring/issuing/varying/disposing a financial product
 underwriting the securities or interests
o make a market for a financial product
 through a facility, at a place or otherwise, the person regularly states the prices at
which they propose to acquire or dispose of financial products on their own behalf
o provide a custodial or depository service
 a financial product, or a beneficial interest in a financial product, is held by the
provider in trust for the client

5. Financial System
• Financial system supplies the necessary
financial inputs for the production of goods and
services which in turn promotes the well being
and standard of living of the people of a country
• Efficient functioning of the financial system
facilitates free flow of funds to more productive
activities and thus promotes investment
• It the intermediation between savers and
investors and promotes faster economic
development

6. Functions of Financial System
• It serves as a link between savers and investors.
• It channelizes flow of saving into productive investment.
• It provides payment mechanism for exchange of goods and
services.
• It provides a mechanism for the transfer of resources across
geographic boundaries
• It provides a mechanism for managing and controlling the risk
involved in mobilizing savings and allocating credit.
• It promotes the process of capital formation by bringing
together the supply of saving and the demand for investible
funds.

7. Financial System in India

8. Constituents of Indian Financial System
• Financial Institutions
o facilitate smooth functioning of the financial system and act as
middlemen or intermediaries between savers and borrowers
• Financial Markets
o Centers and arrangements which facilitate buying and selling of
financial assets, claims and services
o Unorganized market and Organized market;
 Capital Market: Market for financial assets with long or
indefinite maturity period
• Industrial Securities Market (Primary and Secondary)
• Government Securities Market
• Long term loans market (Term loans, mortgages)
 Money Market: Market for short term liquid assets

9. Constituents of Indian Financial System
• Financial Instruments / Assets / Securities
o represent a claim against the future income and
wealth of others
o Can be classified as per marketability
 Marketable (shares, bonds, g-sec)
 Non-marketable (FDR, PF, Pension funds, NSCs)
o As per type: Cash, debt, stock assets
o As per maturity: Short term, long term assets
• Financial Services
o Fund / Asset based
o Non-fund / Fee based

11. Financial products: Banks
Corporate Retail
◦Business Loan ◦Current account
◦Capital raising (Equity, debts) ◦Savings account
◦Mezzanine financing (subordinated ◦Money market account
debt or preferred equity ◦Certificate of deposit
instrument, superior only to equity ◦Individual retirement account
shares) ◦Credit card / debit card
◦Project finance ◦Mortgage
◦Revolving credit (No fixed number of ◦Personal loan (Home, auto,
payments. eg. Credit cards) education)
◦Risk management (commodities, ◦Time deposit
interest rate derivatives) ◦Depository services
◦Term loan ◦Credit Cards
◦Cash management services
◦Agency services

12. Financial Products: Money Market
• Treasury bill: short term borrowings of the government
(14 days, 91 days, 182 days, 364 days)
• Commercial bills: banks make advances to customers
against these
• Inter bank call money: source for banks for getting
overnight and short term funds
• Commercial paper: short term unsecured instrument
issued by a company via promissory notes with fixed
maturities
• Certificate of Deposit: issued by commercial banks at
a discount on face value

13. Financial Products: Capital Market
• Derivatives: forwards, futures, options, swaps
• Shares, right, bonus, preference
• Debentures
• Bonds
o Euro convertible bonds
o Deep discount bonds

14. Financial Products: Fund based
o Underwriting (shares, debentures, bonds, etc.) of new
issue
o Equipment Leasing
o Hire Purchase
o Bill discounting
o Venture capital
o Housing finance
o Insurance services
o Factoring, etc

15. Financial Products: Fee Based
o Corporate advisory services
o Merchant banking
o Issue management
o Loan syndication
o Credit rating
o Stock Broking
o M&A
o Capital restructuring

16. How are financial products managed?

17. Financial Planning Process
o Financial planning is the process of managing your funds to
achieve your desired goals in the required time frame.
o It involves analyzing your existing financial position,
expected future cash flows, inflation and identified financial
objectives to develop a comprehensive financial planning
roadmap.
o This is aimed at making available the right amounts of funds
at the right time in the future
o Insurance planning is an integral part of financial planning.
An insurance plan takes care of the unforeseeable demands
on your finances.
o For instance, an unfortunate illness requiring a surgery can
be covered under a medical insurance plan and you need
not dig into your savings and other investments to pay for it.
o In effect, insurance helps to keep your financial plan on
track.

18. Financial Planning Process
Mrs. Charu Rastogi, Asst. Proff.

19. How an Individual Manages Financial
Products?
• An individual investor will undertake comprehensive financial planning:
o Determine his current financial situation
 income, savings, living expenses, and debts
o Develop financial goals
 Retirement, Child’s Education, Child’s Marriage, Asset purchase, Insurance,
Investment, Tax planning
o Identify alternative courses of action
 Consider investment options wrt his risk return profile (conservative, moderate,
aggressive)
 Mutual funds, equities, bonds, bank deposits
o Create and implement financial plan
o Sources of information:
 Family, spouse
 Printed materials, Internet, provider website
 Co-workers
 Seminars, meetings
 Financial Advisor

20. Individuals Financial Plan
3. Growth Opportunities
2. Controllable Priorities
1. Non-controllable Events

21. Customer needs and product solutions
Customer Need Financial Product Solution
Secure depository for readily accessible cash
managing receipts and payments Current Account
Secure depository for cash that pays interest
Deposit Account / Saving
Secure depository for cash that pays interest
Account
Corporate bonds
Means of investing lump sum for long term growth Government bonds
Growth funds
Income funds
Means of investing lump sum to generate income Annuities
Pension schemes
Means of protecting tangible assets from fire, theft,
General Insurance
accidentl damage, etc.
Life Assurance
Means of protecting human assets from risks associated Disability insurance
with death, illness and medical conditions Critical illness insurance
Permanent Health insurance

23. Possible Questions
• Discuss various Financial Products and how these
products are being managed?
• Explain different Financial Products? How are they
managed?
• How Financial Planning of Individual is done through
Financial Products? How it is managed?