This document contains an assignment with 5 questions related to financial services management. The first question asks to select a bank, identify the types of risks it faces, and the strategies to manage those risks. The second question asks to explain what a debt market is, and discuss changes needed to make the Indian debt market more efficient. The third question asks to explain the portfolio management process and discuss parameters to measure mutual fund performance in India.

1. ASSIGNMENT
Course Code : MS-46
Course Title : Management of Financial Services
Assignment Code : MS-46/TMA/SEM-II/2022
Coverage : All Blocks
Note: Attempt all the questions and submit this assignment to the coordinator of
your study centre. Last date of submission for July 2022 session is 31st
October,
2022 and for January 2023 session is 30th
April, 2023.
1. Select any bank of your choice and try to find out the different types of risks faced
by that bank and also the strategies available to manage those risks. Give a brief
report on your findings.
2. What is a 'Debt Market'? Discuss the issues that need to be addressed and changes
to be brought about in the existing policy framework to make the Indian debt market
more efficient and vibrant.
3. Explain the steps involved in the Portfolio Management Process. Discuss the
parameters used to measure the operational efficiency of mutual funds in India.
4. Select any bank of your choice and try to find out the different types of Credit
Cards provided by them and the additional facilities and services associated with
those cards. Give a brief report of your findings
5. Who is an 'Insurance Agent' and an 'Insurance Broker'. Explain the different types
of Insurance Brokers. Discuss the functions of a Direct Broker and Reinsurance
Broker.

2. 1. Select any bank of your choice and try to find out the different types of risks faced
by that bank and also the strategies available to manage those risks. Give a brief report
on your findings.
Ans:- It is often said that profit is a reward for risk bearing. Nowhere is this truer than
in the case of banking industry. Banks are literally exposed to many different types of
risks. A successful banker is one that can mitigate these risks and create significant
returns for the shareholders on a consistent basis. Mitigation of risks begins by first
correctly identifying the risks, why they arise and what damage can they cause. In this
article, we have listed the major types of risks that are faced by every bank. They are
as follows:
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Credit Risks
Credit risk is the risk that arises from the possibility of non-payment of loans by the
borrowers. Although credit risk is largely defined as risk of not receiving payments,
banks also include the risk of delayed payments within this category.
Often times these cash flow risks are caused by the borrower becoming insolvent.
Hence, such risk can be avoided if the bank conducts a thorough check and sanctions
loans only to individuals and businesses that are not likely to run out of income over
the period of the loan. Credit rating agencies provide adequate information to enable
the banks to make informed decisions in this regard.

3. The profitability of a bank is extremely sensitive to credit risks. Hence, even if credit
risk rises by a small amount, the profitability of the bank can get extremely impacted.
Therefore, to deal with such risks banks have come up with a wide variety of measures.
For instance, banks always hold a certain amount of funds in reserves to mitigate such
risks.
The moment a loan is made, a certain amount of money is appropriated to the provision
account. Also, banks have started utilizing tools like structured finance to mitigate
such risks. Securitization helps remove the concentrated risk from the bank’s books
and diffuse it amongst the various investors in the capital markets. Credit derivatives
like credit default swap have also come into existence to help banks survive in the
event of a credit default.
Unpaid loans were, are and will always be a byproduct of conducting the banking
business. Modern banks have realized this and are prepared to handle the situation
without becoming insolvent until a catastrophic loss occurs.
Market Risks
Apart from making loans, banks also hold a significant portion of securities. Some of
these securities are held because of the treasury operations of the bank i.e. as a means
to park money for the short term. However, many securities are also held as collateral
based on which banks have given loans to their customers. The business of banking is
therefore intertwined with the business of capital markets.
Banks face market risks in various forms. For instance if they are holding a large
amount of equity then they are exposed to equity risk. Also, banks by definition have
to hold foreign exchange exposing them to Forex risks. Similarly banks lend against
commodities like gold, silver and real estate which exposes them to commodity risks
as well.
In order to be able to mitigate such risks banks simply use hedging contracts. They use
financial derivatives which are freely available for sale in any financial market. Using

4. contracts like forwards, options and swaps, banks are able to almost eliminate market
risks from their balance sheet.
Operational Risks
Banks have to conduct massive operations in order to be profitable. Economies of scale
work in the favor of larger banks. Hence, maintaining consistent internal processes on
such a large scale is an extremely difficult task.
Operational risk occurs as the result of a failed business processes in the bank’s day to
day activities. Examples of operational risk would include payments credited to the
wrong account or executing an incorrect order while dealing in the markets. None of
the departments in a bank are immune from operational risks.
Operational risks arise mainly because of hiring the wrong people or alternatively they
could also occur if there is a breakdown of the information technology systems. A
lapse in the internal processes being followed could also lead to catastrophic errors.
For instance, Barings Bank ended up bankrupt because of its failure to implement
appropriate internal controls. One trader was able to bet so much in the derivatives
market that the equity of Barings Bank was wiped out and the bank simply ceased to
exist.
Moral Hazard
The recent bailout of banks by many countries has created another kind of risk called
the moral hazard. This risk is not faced by the bank or its shareholders. Instead, this
risk is faced by the taxpayers of the country in which banks operate. Banks have
become accustomed to taking excessive risk. If their risk pays off, they get to keep the
returns. However, if their risk backfires, then the losses are borne by taxpayers in the
form of bailouts. This too big to fail model has caused banks to become reckless in
their pursuit of profit. Although central banks are using audits to ensure that safe
business practices are followed, banks nowadays indulge in risky business the moment
they are not under regulatory oversight.

5. Liquidity Risk
Liquidity risk is another kind of risk that is inherent in the banking business. Liquidity
risk is the risk that the bank will not be able to meet its obligations if the depositors
come in to withdraw their money. This risk is inherent in the fractional reserve banking
system. Therefore, in this system, only a percentage of the deposits received are held
back as reserves, the rest are used to create loans. Therefore, if all the depositors of the
institution came in to withdraw their money all at once, the bank would not have
enough money. This situation is called a bank run. This has happened countless times
over the history of modern banking.
Modern day banks are not very concerned about liquidity risk. This is because they
have the backing of the central bank. In case there is a run on a particular bank, the
central bank diverts all its resources to the affected bank. Therefore, the depositors can
be paid back when they demand their deposits. This restores depositor’s confidence in
the banks finances and the run on the bank is averted.
Many modern day banks have faced bank runs. However, none of them have become
insolvent due to a bank run post the establishment of central banks.
Business Risk
The banking industry today is considerably advanced and diversified. Banks today
have a wide variety of strategies from which they have to choose. Once such strategy
is chosen, banks need to focus their resources on obtaining their strategic goals in the
long run.
Hence, there is always a risk that a given bank may choose the wrong strategy. As a
result of this wrong choice, the bank may suffer losses and end up being acquired or
may simply collapse. Consider the case of banks such as Washington Mutual and
Lehman Brothers. These banks chose the subprime route to growth. Their strategy was
to be the preferred lender to people who have less than perfect credit scores. However,
the whole area of subprime lending went bust and since these banks had heavy
exposures to such loans, they suffered dire consequences too.

6. Banks have no possible way to mitigate the risks that are created by following
inappropriate business objectives. Which objectives were right and which were
wrong? This question can only be answered in hindsight. When Lehman Brothers was
focusing their resources on subprime lending, it must have seemed like the
strategically right thing to do!
Reputational Risk
Reputation is an extremely important intangible asset in the banking business. Banks
like JP Morgan bank, Chase bank, Citibank, Bank of America etc have all been in the
business for hundreds of years and have stellar reputations. These reputations enable
them to generate more business more profitably.
Customers like their money to be deposited at places which they believe follow safe
and sound business practices. Hence, if there is any news in the media which projects
a given bank in a negative light, such news negatively impacts the banks business. For
instance Citibank was recently viewed as manipulating the Forex rates via conducting
false trades with its own trading partners. When regulators found out about Citibank’s
predatory tactics, they levied huge fines on the bank.
Apart from the fines Citibank also lost reputation as a bank that follows fair trade
practices when the customers found out that they tend to resort to market manipulation.
Many prospective customers may have shifted their business away from Citibank as a
result of this discovery causing monetary loss as a result of reputation loss.
Banks can save their reputation by ensuring that they never participate in any unfair
or manipulative business practices. Also, banks need to continuously ensure that their
public relations efforts project them as a friendly and honest bank.
Systemic Risk
Systemic risk arises because of the fact that the financial system is one intricate and

7. connected network. Hence, the failure of one bank has the possibility to cause the
failure of many other banks as well. This is because banks are counterparties to each
other in a lot of transactions. Hence, if one bank fails, the credit risk event for the other
banks becomes a reality.
They have to write off certain assets as a result of the failure of their counterparty. This
writing off often leads to the bankruptcy of other banks and an unstoppable domino
seems to take over. Systemic risk is an extremely bad scenario to be in. For instance
when the subprime crisis happened in 2008, it seemed like the entire global financial
system would collapse.
The very nature of banking system therefore makes them prone to systemic risks.
Systemic risks do not affect an individual bank rather they affect the entire system.
Hence, there is very little that an individual bank can do to protect itself in the event
that such a risk materializes.
Thus, the management of banks requires a lot of skill since multiple types of risks need
to be mitigated. Some of these risks can be avoided whereas for the others the best that
banks can do is to minimize their damage.
2. What is a 'Debt Market'? Discuss the issues that need to be addressed and changes
to be brought about in the existing policy framework to make the Indian debt market
more efficient and vibrant.
ANS:- Debt Market
Debt security investments generally have lower returns in comparison to equities.
However, since debt investments do not fluctuate as much as stocks, the risk involved
is also much less.
Moreover, in the event that a company has to be liquidated, the business’ bondholders
are paid first.

8. The most common debt instrument is a bond. Bonds are issued by the government and
corporations with the purpose of raising funds for their undertakings and business
operations. The interest rates for these investments tend to be fixed, and while they
may be unsecured, third-party agencies attest to the integrity and legitimacy of the
bond issuer in the form of ratings.
Additionally, note that bonds can be resold by the original buyer in the secondary
market. While the sold bond retains the face value, the true net profit or yield will be
lost as a certain amount as interest will have already been paid. Depending on the
interest rate fluctuations in the market and the time period for a particular bond to
reach maturity, the current actual value of the bond may be more or less than its face
value. Hence, it may be sold at a discount or premium according to where its face value
currently stands.
The debt market assumes a vital part in the economy as it helps in activating,
dispensing, estimating debt reserves, other than financing the formative exercises of
the public authority. In that the Corporate Bond markets are vital components of the
financial markets, particularly for a developing economy like India, they can act as
effective buffers vis-à-vis bank financing in infrastructure and power projects [1]. The
Indian debt market while made out of securities, both Government and Corporate, is
really overwhelmed by G-Sec with more than 90 per cent of Indian debt market,
leaving little space for corporate securities. The focal government securities are the
dominating and most fluid segments of the security market. Nonetheless, regardless of
the expanded volumes, the quantity of members is restricted to around two dozen
dynamic players. Since a lion's share of members is AAA – evaluated and 80 per cent
of exchange is immediate, there exist settlement hazards [2]. The market would further
develop once uniform guidelines on accounting, valuation and so on are in place. 1.2
THE G-SEC MARKET The Indian debt market and the government securities
specifically, are at a defining moment in India with critical changes occurring in the
domestic economic climate alongside different proposed administrative changes. Dr.
Rakesh Mohan, Dy. Lead representative says the government securities market before
the 1990s was portrayed by regulated interest rates, high SLR necessities that
prompted the presence of captive investors and the shortfall of a liquid and transparent
secondary market for G-Secs [3]. Moreover, low interest rates were obtainable on
Government securities to remain Government borrowing costs downwards, which
made real rates of return depressing for a number of years till the mid-1980s. During
the 1980s, the volume of Government debt extended significantly, especially short-

9. term debt, because of programmed convenience to Central Government by the Reserve
Bank, through the system of unplanned Treasury Bills. Nonetheless, with a captive
investor base and low interest rates, the secondary market for Government securities
stayed torpid. Counterfeit yields on Government securities influenced the yield design
of financial assets in the framework, and prompted a general high interest rate climate
in the rest of the market. Driven by these impulses, the Reserve Bank's money related
administration was portrayed by a system of directed interest rates, and rising Cash
Reserve Ratio (CRR) and SLR remedies. High CRR and SLR generally ruled out
money related moving. The RBI needed to embrace a long and staged program of
changes to make a progress from the present circumstance to one where interest rates
would be market decided, Government getting would be market based and would
reflect market costs Indian Debt Market: Need for More Reforms JEFMS, Volume 4
Issue 04 April 2021 www.ijefm.co.in Page 275 [4]. The changes were additionally
significant for building up the climate for viable money related approach making and
financial transmission instruments. 1.3 CURRENT SCENARIO The G-Sec market is
generally prevailing and dynamic part of the debt market. The key instruments that are
exchanged this market are fixed rate security, floating rate securities, zero coupon
securities and swelling list securities and depository bills. Securities gave by state
governments, local bodies and municipal bodies are likewise exchanged here. The
market is huge on the grounds that it gives signals regarding where the interest rates
are going in the economy. The market participant are institutional investors like banks,
financial institutions, mutual funds, provident funds, insurance companies and
corporate [5]. Of these, banks are the predominant players because of the legal
liquidity proportion necessities. According to the RBI rules, banks need to put 23 per
cent of their deposits in G-Sec. When the securities are given, secondary trading G-
Sec in dematerialised structure is done on automated request driven arrangement of
National Stock Exchange, Bombay Stock Exchange and OTCEI. The everyday
turnovers of G-Sec market are around Rs.30, 000 to 50,000 crore. 1.4 CORPORATE
BOND MARKET Economists observe the part of corporate security market as a
channel that joins countries savings into investment opportunities if of fundamental
significance for a few reasons. For the issuer (borrower) it gives low cost funds which
authorize them to keep away from intermediary role of a bank. In spite of the fact that
corporate require to go through intermediaries like brokers, underwriters in the debt
market as well, the severe competition between them push down the cost of fund raiser
[6]. Presence of security subsidizes gives the corporate an extra methods for raising
long term capital. For the investor (lender) there provide premium possibility in
resemblance to traditional deposits at banking institutions. It additionally expands the
investment opportunities in various sorts of instruments and tailors hazard reward

10. profile agreeing their inclinations. It is intriguing despite tremendous latent potential
the corporate bond has not shown the promised growth for various reasons. The key
factors inhibit the growth of corporate security market are:  The regulatory limits on
institutional investors  Non consistent stamp duty  mainstream issue being private
placement and not public issue  TDS on corporate security  deficiency of un-rated
or deprived rated/sub-investment rank securities  extremely low down retail
involvement  deficiency of market maker The government is previously addressing
the key issues describing to instant revitalization of corporate security market. New
technique start as the kick-off of 2004 are yet to make principle result despite the fact
that it guarantee better action in the corporate security market. The RBI report features
a major advancement by the presentation of the Real Time Gross Settlement System
which will encourage better liquidity management [7]. The DvP III method of
settlement has been empowered which grants net settlement of the both funds and
securities legs. The DvP III method of settlement has additionally allowed the rollover
of repos. Another huge advancement was the presentation of the Market Stabilization
Scheme which has extended the instruments accessible to the Reserve Bank for dealing
with the surplus liquidity in the framework. These changes can be momentarily seen
as an efficient exercise for the improvement of the debt market just as reconciliation
of the whole financial markets by making it profound, wide and transparent [8]. In
glancing back at the succession and speed of these changes that have been set up longer
than 10 years, one starts to value the complexity and difficulty that is characteristic for
the advancement of a productive debt market we actually have far to go. These changes
were connected to operational self-sufficiency of the RBI, measures for example, the
cancellation of planned adjustment throughout ad-hoc Treasury Bills (in 1997) and its
replacement by Ways and Means Advances facility, with restrictions, to convene
temporary cash flow befuddle for the Central Government were view as basic for the
change of monetary policy. We are also aware that these measures have been taken in
close collaboration with the market players. RBI report also highlights other measure
it had adopted since then 1.5 INTEREST RATE FUTURES (IRFS) Consequent upon
the decision to introduce IRFs on NSE, guidelines in respect of RBI regulated entities
were formulated to enable their participation. NSE introduced three futures
instruments on June 3, 2003, futures contracts on notional 91 day Treasury Bill, futures
contracts on notional 10 year coupon bearing bond and futures contracts on notional
10 year zero coupon bonds. While banks were permitted to utilize futures just to fence
their G-sec investments in Held for Trading (HFT) and Available for Sale (AFS)
classes, PDs were permitted to interest rate derivatives (IRDs) for both hedging and
trading. Nonetheless, because of the absence of liquidity of the exchange traded futures

11. market, Securities and Exchange Board of India (SEBI) in meeting with FIMMDA
improved on futures contracts on a 10-year notional bond, which is evaluated based
on the Yield To Maturity’ (YTM) of a bushel including three securities with
development going from 9 to 11 years [9]. The exchanges are currently dispatching
another product. 1.6 LEGALITY OF OTC DERIVATIVES – AMENDMENTS TO
SCRA OTC interest rate derivatives are offered in 1999, banks could embrace essential
FRA and IRS contracts for their possess balance sheet management and as well for
market making intention, if they assurance acceptable structure, risk management
system and internal control system [10]. The quantity in the market has developed
detectably with the outstanding notional sum at around Rs. 6, 40,000 crore. In any
case, there has been a number of apprehension in hold to authority of OTC derivatives
with section 18A of the Securities Contracts (Regulation) Act, 1956 (SCRA),
formation just derivatives contracts that are carry out on exchanges legal and suitable
[11]. As desires assured adjustment via beneficial actions to the future change are
being talk about with the Government of India to guarantee that the projected revision
don't put at risk the legal status of OTC derivatives. In particular, it has been suggested
that section 18A be amended so as to make contracts of the group and nature as give
notice by RBI legally appropriate, even if they are not traded on any recognized stock
exchange. Exchange traded derivatives have their own role to take part in in the debt
market but by their immensely nature they have to be standardised products. OTC
derivatives, on the other hand can be customized to the requirements of the trading
entity [12]. Consequently both OTC and exchange traded derivatives are essential for
market development. In particular, it has been recommended that segment 18A be
corrected in order to make agreements of the class and nature as informed by RBI
lawfully legitimate, regardless of whether they are not exchanged on any perceived
stock trade. Trade exchanged subsidiaries have their own task to carry out in the
obligation market - however by their very nature they must be normalized items [13].
OTC subsidiaries, then again can be altered to the necessities of the exchanging
elements. Hence both OTC and trade exchanged subsidiaries are fundamental for
market advancement. 1.7 ROLLOVER OF REPOS Rollover of Repos: With the
choice to move progressively towards an unadulterated between bank call/term
currency market, there is a need to eliminate the operational/administrative limitations
in the repo market. One of the noticeable obstacles in the development of the repo
market is the weakness to rollover contracts [14]. To make powerful constant access
to assets from the repo market, it was selected to allow rollover of repos which will be
empowered alongside DvP III. DvP III Mode of Settlement: In request to diminish the
price risk expected by market participants, sale of securities recently bought is
proposed to be allowed with specific shields worked in to forestall short sales [15]. To

12. empower this just as to empower rollover of repos, net settlement in securities is
required. In this manner, it has been selected to progress the settlement method to DvP
III. 1.8 MARKET STABILIZATION SCHEME As a reaction to the large-scale capital
inflows lately and the subsequent issues looked in overseeing liquidity, the Reserve
Bank presented the Market Stabilization Scheme (MSS) in the wake of consulting the
Government of India for wiping up liquidity of a really suffering nature in March 2004.
Under this plan, the Government would give existing instruments, for example,
Treasury Bills as well as dated securities via auctions under the MSS, notwithstanding
the normal borrowing prerequisites, for engrossing liquidity from the framework. The
expectation of MSS is basically to separate the liquidity assimilation of a seriously
suffering nature via sanitization from the everyday normal liquidity management tasks
[16]. To provide transparency and constancy to the financial markets, a expressive
schedule for issuance of Treasury Bills/ dated securities on a periodical basis is being
reported. 1.9 CAPITAL CHARGE FOR MARKET RISK With a sight to guarantee
even modify to the standards under Basel II, banks were positive to stay on up capital
charge for market risk more than a two year time period as under: (i) Banks would be
essential to stay on up capital charge for market risk in observe of their trading book
exposure (including derivatives) by March 31, 2005. (ii) Banks would be essential to
remain up capital charge for market risk in observe of the securities incorporated below
obtainable for sale (AFS) categorization by March 31, 2006.
3.Explain the steps involved in the Portfolio Management Process. Discuss the
parameters used to measure the operational efficiency of mutual funds in India
ANS:- Steps involved in Portfolio management process
Portfolio management involves complex process which the following steps to be
followed carefully.
Identification of objectives and constraints.
Selection of the asset mix.
Formulation of portfolio strategy
Security analysis
Portfolio execution

13. Portfolio revision
Portfolio evaluation.
Now each of these steps can be discussed in detail.
1. Identification of objectives and constraints
The primary step in the portfolio management process is to identify the limitations and
objectives. The portfolio management should focus on the objectives and constraints
of an investor in first place. The objective of an Investor may be income with minimum
amount of risk, capital appreciation or for future provisions. The relative importance
of these objectives should be clearly defined.
2. Selection of the asset mix
The next major step in portfolio management process is identifying different assets
that can be included in portfolio in order to spread risk and minimize loss.
In this step, the relationship between securities has to be clearly specified. Portfolio
may contain the mix of Preference shares, equity shares, bonds etc. The percentage of
the mix depends upon the risk tolerance and investment limit of the investor.
3. Formulation of portfolio strategy
After certain asset mix is chosen, the next step in the portfolio management process is
formulation of an appropriate portfolio strategy. There are two choices for the
formulation of portfolio strategy, namely
an active portfolio strategy; and
a passive portfolio strategy.
An active portfolio strategy attempts to earn a superior risk adjusted return by adopting

14. to market timing, switching from one sector to another sector according to market
condition, security selection or an combination of all of these.
A passive portfolio strategy on the other hand has a pre-determined level of exposure
to risk. The portfolio is broadly diversified and maintained strictly.
4. Security analysis
In this step, an investor actively involves himself in selecting securities.
Security analysis requires the sources of information on the basis of which analysis is
made. Securities for the portfolio are analyzed taking into account of their price,
possible return, risks associated with it etc. As the return on investment is linked to the
risk associated with the security, security analysis helps to understand the nature and
extent of risk of a particular security in the market.
Security analysis involves both micro analysis and macro analysis. For example,
analyzing one script is micro analysis. On the other hand, macro analysis is the analysis
of market of securities. Fundamental analysis and technical analysis helps to identify
the securities that can be included in portfolio of an investor.
5. Portfolio execution
When selection of securities for investment is complete the execution of portfolio plan
takes the next stage in a portfolio management process. Portfolio execution is related
to buying and selling of specified securities in given amounts. As portfolio execution
has a bearing on investment results, it is considered one of the important step in
portfolio management.
6. Portfolio revision
Portfolio revision is one of the most important step in portfolio management. A
portfolio manager has to constantly monitor and review scripts according to the market

15. condition. Revision of portfolio includes adding or removing scripts, shifting from one
stock to another or from stocks to bonds and vice versa.
7. Performance evaluation
Evaluating the performance of portfolio is another important step in portfolio
management. Portfolio manager has to assess the performance of portfolio over a
selected period of time. Performance evaluation includes assessing the relative merits
and demerits of portfolio, risk and return criteria, adherence of the portfolio
management to publicly stated investment objectives or some combination of these
factors.
The quantitative measurement of actual return realized and the risk borne by the
portfolio over the period of investment is called for while evaluating risk and return
criteria. They are compared against the objective norms to assess the relative
performance of the portfolio.
Just as it is important to make the right investments, it is equally essential that you
review them on a periodical basis, to ensure that they continue to perform in line with
the markets and your expectations. A periodical review of your mutual fund
investments may help you to replace the underperforming mutual funds with better
schemes. If you are also thinking about how to track mutual fund performance, this
article aims to share key ratios to help you analyse the performance of your mutual
fund schemes. Mutual fund fact sheet may help you get key information about your
fund and its performance.
Here are six critical parameters against which you may measure your fund
performance:
1. Fund performance against its benchmark
As per SEBI guidelines, the mutual fund schemes need to be benchmarked with an
acceptable index and the performance must be compared with the benchmark index,
where ever such performance is being disclosed. As such, the investors must check if
the fund has been underperforming or outperforming its benchmark. The benchmark

16. performance tends to reflect the broader market performance as also suiting the
scheme allocation. So, if the fund has underperformed the benchmark consistently, it
is time for you to replace it with a better performing fund.
2. Long term returns
Mutual funds need to disclose the 1-year, 3-year, 5-year & since inception returns for
the schemes. While the investors may get excited with the strong 1-year returns, the
performance review should ideally capture the long-term returns, since that may be a
better reflection of the long term investing decisions.
3. Risk-Adjusted Returns
The investors tend to make their investment decisions based on the returns so
disclosed. Risk-return trade-off generally implies that higher the risk is taken, higher
should be the returns, but it assumes importance also to check if such returns are
coming at the cost of much higher risk. As such, doing some number crunching with
statistical ratios like Sharpe Ratio, Standard Deviation, Credit Profile etc. may help
you get a better sense of risk-adjusted returns.
Standard deviation helps to judge the risk of the mutual fund scheme, in terms of
volatility in the returns. Sharpe ratio helps you to ascertain the returns of the fund on
every additional unit of risk taken. So, the fund with a higher Sharpe ratio as compared
to the category average reflects that the fund has generated higher returns for the extra
risk taken.
4. Alpha & Beta
Alpha represents the outperformance of the mutual fund scheme, as compared to the
benchmark returns. Beta reflects the sensitivity of the mutual fund portfolio as

17. compared with the benchmark index. If the beta value is more than one, it reflects that
for every single point movement in the benchmark, the fund value is likely to move
greater than such movement. As such, a fund with a beta higher than 1.0 must have a
positive alpha. A higher alpha tends to reflect on the fund manager’s ability to generate
superior returns. So, if two funds have a similar beta, you must choose the fund with
a higher alpha, since the fund manager has been able to generate better returns for a
similar risk.
5. Average Maturity and Yield
While the above-discussed ratios may be suitable for equity schemes, debt schemes
need to be analyzed with respect to average maturity and yield. Average maturity
refers to weighted average of maturities of all debt instruments in the fund portfolio.
A longer maturity of the debt fund results in higher sensitivity to the interest rate
movements. As such, the performance of debt funds, especially long duration funds,
must also be seen in the light of the past and expected monetary policy actions.
6. Total Expense Ratio (TER)
TER refers to the total expenses being incurred by the mutual fund scheme, including
fund management charges, selling and brokerage expenses, etc. Since mutual funds
act in a fiduciary capacity, the related expenses are also recovered from the investors
only, as a deduction to the fund returns. For example, if your fund generates 16%
returns and the TER is 2%, the NAV (Net Asset Value) of the fund would have grown
by 14%, reflecting the returns for the investors. Further, active funds tend to have a
higher expense ratio, on account of higher fund management charges, which are
marginal in passive funds and ETF (Exchange Traded Fund). As such, if an active fund
is underperforming the benchmark, it makes sense to consider investing in index funds,
which are relatively cheaper and deliver returns equal to the underlying benchmark
returns.
4. Select any bank of your choice and try to find out the different types of Credit

18. Cards provided by them and the additional facilities and services associated with those
cards. Give a brief report of your findings.
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ticket.
Features and Benefits of Axis Bank Select Credit Card
This card comes loaded with attractive benefits that a cardholder can use. Some of
them are listed below:
 Joining benefits: Cardholders can bag vouchers worth Rs.1000 that they can
redeem across different products and categories. A reward of 5000 Axis eDGE
points (worth Rs.1000) will be credited to the cardholder's Axis eDGE account
within 10 business days of the first activation or swipe.
 Cardholders can earn complimentary membership to Club Marriott that includes
offers on dining, stay, and exclusive discounts on other services across selected
Marriott hotels. This offer is applicable on the cardholder's successful
completion of 3 card transaction made in 60 days of activation of the card.
 Cardholders can bag a complimentary membership to Priority Pass (worth
USD99). This pass will give them access to more than 900 lounges across the
globe. On their Axis Bank Select Credit Card, cardholders can get six
complimentary visits to lounges under Priority Pass in one year. They can enjoy
two complimentary visits each calendar quarter to domestic airport lounges with
their Axis Bank Select credit card.

19.  Cardholders can get free movie tickets from BookMyShow using the Visa
Blockbuster Weekend offer. (This offer will be available on a first-come-first-
served basis and on tickets under Rs.300 from Thursday to Sunday).
 Cardholders can bag three complimentary golf lessons/rounds at beautiful
golfing grounds per year.
 Cardholders can enjoy extraordinary weekend experiences using their Axis
Bank Select credit card. From sailing on a yacht to taking over the kitchen of a
fine dining restaurant, enjoy exotic experiences to make memories of a lifetime.
 Using the Axis Bank Dining Delights, cardholders can get a minimum discount
of 15% at partner restaurants across the country.
 Axis Bank Select credit card comes loaded with special benefits that make the
experience of using this card a joyride.
 The credit limit on this card is communicated to the cardholder at the time of
the card delivery and the same is mentioned in all the monthly statements.
 Cardholders can withdraw 40% of the credit limit in case they need some cash
advance.
 Cardholders can share this financial freedom with their family members by
availing supplementary or add-on credit cards.
 Cardholders can use the Axis Bank Select credit card to pay their telephone,
electricity, insurance, and other such utility bills.
 Cardholders of Axis Bank Select credit card can opt for the e-statement facility
using which they can access their Axis Bank credit card statement anywhere
and anytime.
View Free Offers
Cardholders can get the fFollowing Benefits
 Cover for the loss of check-in baggage: Up to USD500
 Cover for air accident: Up to Rs.2,50,00,000
 Liability cover for loss of card: Rs.3,00,000
 Coverage for delay in check-in baggage: USD300

20.  Coverage for loss of travel documents: Up to USD300
 Purchase protection: Up to Rs.1,00,00
 Cardholders can earn 10 Axis eDGE reward points each time they spend Rs.200
on their card.
 They can also earn 2X each time they spend Rs.200 on retail shopping.
 Cardholders can earn 5000 Axis eDGE reward points annually. (Only on
spending Rs.3 lakhs or more in a single year).
Fees and Charges of Axis Bank Select Credit Card
How To Apply For Axis Bank Select Credit Card?
Individuals interested in procuring an Axis Bank Select Credit card can apply for this
card online as well as offline. Here’s how they can do it:
Offline method:
 Applicants can walk into their nearest branch of Axis Bank and can ask for an
application form. After filling up the form, they can attach the necessary
documents and identity proofs and submit the form at the branch itself.
 Applicants can call the Axis Bank phone banking number 1-860-419-5555 or
dial 1-860-500-5555 (with the STD code of their area) and ask the Axis bank
credit card customer care executive to put them in touch with the credit card
department.
Online method:
 Applicants can go to the official website of Axis credit cards,
www.axisbank.com and click on Axis Bank Select Credit Card from the credit
cards listed on the site. They can click on the ‘Apply’ section and follow the
instructions.
Axis Bank Select Credit Card Eligibility Criteria
 A primary cardholder should be between the age of 18 years and 70 years.
 A supplementary cardholder should be over the age of 18 years.
 The net income of the applicant should be Rs.9 lakh or above per annum.
 The applicant must be a resident of India.

21. *It is to be noted that the above-mentioned criteria are just indicative. The bank holds
the right to decline or approve any application for the credit card.
Check Your Eligibility
Documents Required to Apply for Axis Bank Select Credit Card
The applicant would need to submit the following documents as proof of identity and
proof of address:
 A copy of their PAN card or Form 60
 A copy of their latest payslip/Form16/a copy of IT return as a proof of income
 Proof of address (any one from the ones listed below)
 Driving licence
 Passport
 Electricity Bill
 Ration Card
 Landline or telephone bill
FAQs of Axis Bank Select Credit Card
1. How do I get the PIN of my Axis Bank Select Credit card?
The PIN of the Axis Bank Select Credit card will be sent to you in the welcome kit
itself.
2. In case of theft or loss, how do I block my Axis Bank Select credit card?
You can block you Axis Bank Select credit card by sending an SMS to 5676782 from
the mobile number that is registered with the bank.
3. How can I turn my purchases made on Axis Bank Select credit card into
EMIs?
You can contact the bank to turn your purchases made on Axis Bank Select credit card
into EMIs. However, the transaction should be of more than Rs.2,500.
4. How can I activate my new Axis Bank Select credit card?
You can activate your card by sending an SMS ACA space followed by the last four

22. digits of the card to 5676782 from your registered Indian mobile number and to
9717000002 from an international phone number.
5. Will I have to make a separate request to receive the e-statement of the
credit card?
Yes, you will need to inform the bank in case you need just an e-statement to be sent
to you via email.
6. How do I reach the customer care desk of Axis Bank?
You can reach the Axis Bank customer care desk at 1-860-419-5555 or dial 1-860-
500-555.
7. Do I get a liability colour for lost card?
Yes, you get a liability cover of cover for loss of card: Rs.3,00,000.
8. Will I get an e-statement of the credit card?
You can opt for the e-statement facility using which they can access their Axis Bank
credit card statement anywhere and anytime.
9. What are the dining benefits with the credit card?
When you use the Axis Bank Dining Delights, you can get a minimum discount of
15% at partner restaurants across the country.
Q.5. Who is an 'Insurance Agent' and an 'Insurance Broker'. Explain the different
types of Insurance Brokers. Discuss the functions of a Direct Broker and Reinsurance
Broker.
ANS:- An Insurance Agent, on the other hand, sells, negotiates, or promotes financial
products on behalf of their employer organization. They act as the sales representatives
for the company and its financial products. An independent agent also sells various
financial products like property insurance, casualty insurance, life insurance, etc.
An Insurance Broker is interested in selling, buying or negotiating various financial
products best suited to their individual client’s needs for compensation. This means
that they are more invested in finding out what’s best for you and can offer a host of
options from across companies and organizations, as per your requirements.
There are a number of categories of Insurance Brokers. The categories of Insurance

23. Brokers include Direct Brokers, Reinsurance Brokers and Composite Brokers. This
piece of discussion provides the meaning and functions of different categories of
Insurance Brokers.
Categories of Insurance Brokers
There are five categories of Insurance Brokers which have been listed as follows:
Direct Broker (Life)
Direct Broker (General)
Direct Broker (Life & General)
Reinsurance Broker
Composite Broker
Who is Direct Broker?
A direct broker is simply an Insurance Broker who has been registered with the
Insurance Regulatory and Development Authority of India (IRDAI[1]). The direct
broker asks for remuneration or charges a fee for soliciting and arranging insurance
business for his clients with insurance located in India. He also provides claim
consultancy, Risk Management services or other similar services which have been
permitted under IRDAI (Insurance Brokers) Regulations, 2018.
What are the functions of Direct Brokers?
Following are the functions that an insurance broker needs to perform:
To obtain details of client’s business and risk management philosophy
To familiarize himself with client’s business and underwrite information which can be
explained to an insurer and others
To render advice on appropriate insurance claims and terms

24. To maintain detailed knowledge of available insurance markets, the ones who are
applicable
To submit quotes received from insurers for consideration of a client
Provide requisite underwriting information required by an insurer in assessing risk to
decide the pricing terms and conditions for cover
Act in a prompt manner on client’s instructions and provide written
acknowledgements and progress reports
To assist clients in paying premium u/s 64VB of Insurance Act, 1938
To assist in negotiation of claims
To maintain proper records of claims
To assist in opening of e-insurance accounts
To assist in issuing e-insurance policies
Any other function which the authority may specify
Who is a Reinsurance Brokers?
Among the different categories of Insurance Brokers, Reinsurance broker is also an
insurance broker. A reinsurance broker is simply an Insurance Broker who has been
registered with the Insurance Regulatory and Development Authority of India
(IRDAI). The reinsurance broker asks for remuneration or charges a fee for soliciting
and arranging re-insurance business for his clients with insurers or reinsurers with
reinsurers who are located either in India and/or abroad. He also provides claim
consultancy, Risk Management services or other similar services which have been
permitted under IRDAI (Insurance Brokers) Regulations, 2018.
What are the functions of Reinsurance Brokers?
Following are the functions that a Reinsurance broker needs to perform:
The reinsurance broker must be familiarized with the client’s business and its risk
retention philosophy
Maintain proper records of the insurer’s business so that the same can be used to assist

25. the reinsurer(s) or other
To render advice based on technical data on the reinsurance covers which is available
in the international markets of insurance and reinsurance
To maintain a database of available reinsurance markets which includes solvency
ratings of the individual reinsurers
To render risk management services for the purpose of reinsurance
Select or recommend a reinsurer or a group of reinsurers
To negotiate with a reinsurer on behalf of client
To assist in case of commutation of reinsurance contract placed by them
Act in a prompt manner on client’s instructions and provide written
acknowledgements and progress reports
Collect and remit premiums and claims/refunds within the time as agreed upon
Maintain proper records of claims
Assisting in negotiations and settlement of claims
To exercise diligence and due care at the time of selecting reinsurers and international
insurance brokers with regard to their respective security rating and establish
respective responsibilities at the time of engaging their services
To create market capacity and facility for stresses, new and existing businesses and
asset class for and from both direct insurers and reinsurers
Rendering preliminary loss advice within a reasonable period of time
Separate norms have to be followed for both Inward and Outward business based on
the nature of business
A. Inward business
The broker needs to have specific knowledge of the country whose business is being
offered in terms of political stability, tax laws, local regulations, economic position
etc.
Introducing new business/ products on the basis of reinsurers’ business plan and risk

26. appetite
B. Outward business
Market credibility and rating of the insurer
Ensuring prompt collection and remittance of funds, following up for funds before the
due dates for settlement from cedant to reinsurer and from reinsurer to cedant
To comply with the relevant laws and other requirements of local jurisdiction at the
time of arranging insurance/ reinsurance for clients/ insurance companies that based
outside India
Any other function which the authority may specify
Who is a Composite Broker?
A composite broker is simply an Insurance Broker who has been registered with the
Insurance Regulatory and Development Authority of India (IRDAI). The composite
broker asks for remuneration or charges a fee for soliciting and arranging insurance
and/or reinsurance business for his clients with insurers and/or reinsurers who are
located either in India and/or abroad. He also provides claim consultancy, Risk
Management services or other similar services which have been permitted under
IRDAI (Insurance Brokers) Regulations, 2018.
What are the functions of Composite Brokers?
Following are the functions that a composite broker needs to perform:
All the functions performed by both the direct brokers and reinsurance brokers
Where a composite broker has been appointed by the client to act as a direct insurance
broker, then he shall not influence the concerned insurer to appoint him as reinsurance
broker for arranging reinsurance on the same contract. However, if the insurer follows
a due and transparent process, then he can appoint the composite broker as a
reinsurance broker for arranging the reinsurance on the same risk on which the
composite broker acted as a direct broker. In order to ensure that the interests of the
clients and insurers are not harmed, the composite will see to it that proper systems

27. and controls are in place.