introduction of financial service

1. ELECTIVE – I
FINANCIAL SERVICES

2. CONTENTS
Introduction
Meaning of Financial Services
Nature of Financial Services
Characteristics of Financial Services
Types of Financial Services
Developing Financial Services
Role of Financial Services in Industry in
economic growth
Regulation of Financial Services

3. introduction
The Indian Financial Service industry was
dominated by commercial banks and financial
institutions which provides the requirements of
the Indian Industry.
The Capital Market plays secondary role.
The economic liberalization has brought in a
complete transformation in the Indian Financial
Service industry.
The Indian Financial service sector was
characterized by so many factors which lead to
growth of this sector.

4. Significant factors
 Excessive control in the form of regulations of interest rates, money rates
etc..
 Too many control over the prices of securities under erstwhile (previous)
the controller of capital issue.
 Non-availability of financial instruments on a large scale as well as on
different varieties.
 Absence of independent credit rating and credit research agencies.
 Strict regulations of the foreign exchange market with too many
restrictions on foreign investment and foreign equity holding in Indian
companies.
 Lack of information about international development in the financial
sector.
 Absence of a developed government securities market and existence of
stagnant capital market without any reformation.
 Non-availability of debt instruments on a large scale.

5. Meaning of financial services
In general Financial Services means, “Mobilizing and
allocating savings.”
It involves all activities involved in transformation of
savings into investment.
Financial service is also called as ‘Financial
Intermediation’
Financial Service is a process by which funds are
mobilized from a large number of savers and make
available to all those who are in need of it and
particularly to corporate customers.
Financial Service is a key area and plays a vital role for
Industrial developments.

6. Nature of Financial service
Traditional Activities:- it covers a wide range
of services and includes both capital market
and money market.
Modern Activities:-the financial
intermediaries render various services like
clearing services, registration and transfers,
safe custody of securities and collection of
income of securities.

7. Features of financial services
Financial services are intangible.
Financial services are customer oriented.
Production and delivery of service are
simultaneously functions.
As Financial services varies with the changing
requirements of the customer and socio-
economic environment.
It acts as a link between the investor and
borrower.

8. Types of financial services
Fund Based Services
Fee Based Services

9. Fund based services
It refers to services that are used to acquire
assets or funds for a customer.
It consists of-
1. Primary Market Activities
2. Secondary Market Activities
3. Foreign Exchange Activities
4. Specialized Financial Services

10. Fund based services
Leasing
Hire purchase
Factoring
Forfeiting
Mutual Funds
Bill Discounting
Credit Financing
House Financing
Venture Capital

11. Fee based services
 when financial institutions operate in specialized fields to
earn income in the form of fees, commission, brokerage or
dividends it is called fee based services.
 It includes-
1. Issue Management
2. Portfolio Management
3. Corporate Counseling
4. Merchant Banking
5. Credit Rating
6. Stock Broking
7. Capital restructuring
8. Bank Guarantee
9. Letter of Credit
10. Debt Restructuring

12. Development of Financial Services
economic growth and development of any country
depends on efficiency of developed financial system.
Growth of financial sector is an indicator of an
economic development of a country.
Stage-I before independence: the system was
unorganized, there was no separate issuing
institutions.
Stage –II after independence: transfer of ownership
from private to public, nationalization of RBI, setting
up of SBI and other institutions.
Stage-III after 1990: entry of private sector, changing
role in DFIs, emergence of NBFCs, growth of mutual
fund industry, SEBI, developments in secondary
market, significant changes in financial market

13. Players in financial sector
Banking institutions
organized sector
1. commercial banks
2. co-operative banks
3. Regional Rural banks (RRBs)
4. foreign banks
unorganized sector
1. indigenous banker
2. money lenders

14. Players in financial sector
Non-banking institutions-
organized financial institutions
1. IFCI
2. ICICI
3. IDBI
4. SFCs
5. SIDCs
6. IIBIL/ IRDB
7. SIDBI
8. merchant banker

15. Players in financial sector
unorganized financial institution
1. NBFCs
2. investment companies
3. hire-purchase companies
4. equipment leasing finance companies
5. loan companies
6. Residuary NBC (RNBCs)
7. UTI
8. MBFCs
9. MNBCs/ chit fund