Professional Documents
Culture Documents
Financial Services
Financial Services
Financial Services
Financial System
Existence of a well organized financial
system
Promotes the well being and standard of
Financial System of any country consists of financial markets, financial intermediation and financial instruments or financial products
Flow of funds (savings)
Seekers of funds (Mainly business firms Flow of financial services and government)
Incomes , and financial claims
Organized Regulators Financial Institutions Financial Markets Financial services Financial Instruments
Un-Organized
Money lenders
Local bankers Traders
Landlords
Pawn brokers
Regulators 1.MoF
Financial Instruments
Financial Markets
Financial Intermediaries
2.SEBI
3.RBI 4.IRDA Forex Market Capital Market Money Market Credit Market
Market
Instruments
Intermediaries Regulator
SEBI
Primary
Secondary
Equity
Players
CRA
Corporate Intermediaries
Individual
Banks/FI
FDI /FII
Financial Markets
Mechanism which allows people to trade Affected by forces of supply and demand Process used In Finance, Financial markets facilitates
financial) assets from one owner to another. They provide liquidity. Liquidity refers to how easily an asset can be transferred without loss of value. A side benefit of capital markets is that the transaction price provides a measure of the value of the asset.
Formation Promotion of Industrial Growth Raising of long term Capital Ready & Continuous Markets Proper Channelisation of Funds Provision of a variety of Services
Equity
Debt
Primary Market
Secondary Market
1.Public 1.NSE Issue 2.BSE 2. Private 3.OTCEI Placement 4.ISE a. Domestic Market 5.RSE b. International Market
Derivative Market
1.Exchange Traded 2.Future & Option a. Index b. Stock
Secondary Segment
Industrial financial institution. Legislative measures Growing public confidence Increasing awareness of investment opportunities
Growth of underwriting business Setting up of SEBI Mutual Funds Credit Rating Agencies
Money Market
Market for short-term money and financial assets
and near substitutes to money is used to denote any financial asset which can be quickly converted into money with minimum transaction cost
Money Market
It is a place for Large Institutions and government
Interest rates
Inadequate banking facilities
FINANCIAL INSTRUMENTS
Money Market Instruments The money market can be defined as a market for short-term
money and financial assets that are near substitutes for money. The term short-term means generally a period up to one year and near substitutes to money is used to denote any financial asset which can be quickly converted into money with minimum transaction cost.
Some of the important money market instruments are briefly discussed below;
1. Call/Notice Money 2. Treasury Bills 3. Term Money 4. Certificate of Deposit 5. Commercial Papers
2. Term Money Term Money market for deposits of maturity beyond 14 days is referred to as the term money market. The entry restrictions are the same as those for Call/Notice Money except that, as per existing regulations, the specified entities are not allowed to lend beyond 14 days.
3. Treasury Bills. Government Paper Securities Duration of 91 days Promissory note of the government to pay a specified sum after a specified period
4. Certificate of Deposits
Certificates of Deposit (CDs) is a negotiable money market instrument
and issued in dematerialized form or as a Usance Promissory Note, for funds deposited at a bank or other eligible financial institution for a specified time period. Guidelines for issue of CDs are presently governed by various directives issued by the Reserve Bank of India, as amended from time to time. CDs can be issued by (i) scheduled commercial banks excluding Regional Rural Banks (RRBs) and Local Area Banks (LABs); and (ii) select all-India Financial Institutions that have been permitted by RBI to raise short-term resources within the umbrella limit fixed by RBI. Banks have the freedom to issue CDs depending on their requirements. An FI may issue CDs within the overall umbrella limit fixed by RBI, i.e., issue of CD together with other instruments viz., term money, term deposits, commercial papers and interoperate deposits should not exceed 100 per cent of its net owned funds, as per the latest audited balance sheet.
5. Commercial Paper CP is a note in evidence of the debt obligation of the issuer. On issuing commercial paper the debt obligation is transformed into an instrument. CP is thus an unsecured promissory note privately placed with investors at a discount rate to face value determined by market forces. CP is freely negotiable by endorsement and delivery. A company shall be eligible to issue CP provided - (a) the tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs. 4 crore; (b) the working capital (fund-based) limit of the company from the banking system is not less than Rs.4 crore and (c) the borrowal account of the company is classified as a Standard Asset by the financing bank/s. The minimum maturity period of CP is 7 days.
The capital market generally consists of the following long term period i.e., more than one year period, financial instruments; In the equity segment Equity shares, preference shares, convertible preference shares, nonconvertible preference shares etc and in the debt segment debentures, zero coupon bonds, deep discount bonds etc.
Equity Market
1 .Primary Markets Helps companies in raising funds through issue of securities like shares and debentures. Governed by SEBI (Securities and Exchange Board of India). Methods of issuing securities in Primary Market: Public Issue Rights Issue Bonus Issue Private Placement Bought-out Deals
and to ensure protection against depreciating home currencies. emergence of new technologies in the area of financial services, development and deregulation of financial markets
Equity Instruments
GDR:
instruments which possess a number of underlying shares held by the
custodian domestic bank of the company. The GDRs are traded on a foreign stock exchange, issued to the non-resident investors. The GDRs are denominated in the foreign currency and the underlying shares are denominated in the local currency of the issuer. The GDRs are considered as common equity of the company and are entitled to dividends and voting rights.
ADR
Is a dollar denominated negotiable certificate traded in the US-markets
whose underlying securities are of non-US companies. ADR Level-I :first step for an issuer to enter the US market, minimum disclosure required, need not comply with the American GAAP. Can trade only on the OTC market and not on any national stock exchange. ADR Level-II: significant disclosures to be made to the SEC, company allowed to list on AMEX, NYSE. ADR Level-III :fresh capital can be raised company to be registered with the SEC and shall even follow US GAAP.
Euro Bonds
These are the bonds that are issued outside the
country of the currency in which it is denominated Features: No with holding of tax on interest payments These are in bearer form with coupon interest attached Listed on stock exchanges though traded on the OTC market
Foreign Bonds
Bonds floated in the domestic markets denominated
in the domestic currency by the non-resident. Yankee Bonds Samurai Bonds Bulldog Bonds Shibosai Bonds
Yankee bonds
These are US dollar denominated issues by the
foreign borrowers in the US markets. Features Regulated by the SEC. Requires more disclosure than that given by the prospectus. Foreign borrower to adopt US accounting policies Bonds sponsored by the underwriting syndicate Requires SEC registration before the sale. To be rated by the US credit rating agencies
Samurai Bonds
Yen denominated bonds issued in the Japanese
markets by the non- Japanese companies. Features Maturity: 3-20 years Borrowers in order of priority sovereigns, supranational and their entities, high quality private corporations having some kind of Japanese trade links.
UK market. Features: Maturity 5 for short maturities 25 for long maturities. Subscribed by the long-term institutional investorspension funds, life insurance Cos Bonds offered by placing or offer for sale process will have to be listed on the London SE
Shibosai Bonds
Privately placed bonds issued in the Japanese
market Features Offered to institutional investors, including banks the issues eligibility, coupon rate, etc governed by the Japans MOF guidelines Pricing done based on base rate and spread which depends on the rating of Co or country.
Forex Markets
Foreign Exchange Market: Deals with transactions in currencies
other than ones own currency. Exchange rate: The rate at which one currency can be converted into another currency Participants: Exporters Importers Commercial Banks Central Banks Authorized Dealers and Money Changers Brokers
Equity Market
2. Secondary Market Securities already issued in the primary market are traded in the secondary market. Provides liquidity to the securities held by the investors. Provides liquidity to the securities held by the investors. Operates through stock exchanges that regulate the trading activities in this market.
Equity Market
3. Derivatives Market Financial derivative is a product derived from the market of an underlying asset. Participants: Hedgers Speculators Arbitrators Types of Derivatives: Futures Options - Caps - floors and Collars
Debt. Market
Government of India, public sector units and corporations
together comprise as dominant issuer of debt markets in India. Local governments, mutual funds and international financial institution issue debt instruments as well but very infrequently. The Central Government mobilizes funds mainly through issue of dated securities and T-bills. Bonds are also issued by government sponsored institutions like the development financial institutions (DFIs) like IFCI and IDBI, banks and public sector units. Some, but not all, of the PSU bonds are tax-exempt. The corporate bond market comprise of commercial papers and bonds. In recent years, there has been an increase in issuance of
Financial Institution
Financial Institution
Financial Institutions Industrial Development Bank of India (IDBI) Industrial Finance Corporation of India (IFCI )
organizations, having fixed amount of authorized capital provides services through conserving and managing property for those who cannot manage their own funds. Mutual Benefit Funds or Nidis: Sources of their funds are share capital, deposits. Merchant Banks : Offers financial advice & services for fees; Services offered are management, marketing, underwriting of new issue, project promotion & finance, corporate advice, BOD, venture capital etc.
Hire Purchase Finance Companies Lease Finance Companies Housing Finance Companies
RBI, Aim is to promote housing finance Institution at local & regional levels, It refinance housing loans to scheduled commercial & co operative banks, housing finance companies etc. Venture Capital Funding Companies
FINANCING ACTIVITIES
Project Activities Financial Services Corporate advisory Services
PROMOTIONAL ACTIVITIES
Played a key role in the development of cooperatives in the sugar and
textile sector It has promoted technical consultancy organisation primarily in less developed state, to provide necessary services to the promoters of small and medium- sized industries in collaboration with other banks and institutions. It has developed many institutions like
Investment and credit rating agency Tourism finance corporation of India Rashtriya Gramin Vikas Nidhi
DISADVANTAGES
The reasons to this dismal state of affairs of the company are as follows Operational Inefficiency Political Interference Traditional sector financing Higher provisioning for Non performing assets
The steps taken for the revival of IFCI are as follows: IFCI constituted an expert committee in 2001 To formulate a medium-to long term strategic plan for IFCI in the emerging new business environment The committee has laid down the road map plan for the next five years It has made recommendations covering a wide range of structural and operational areas It has strengthened its risk management techniques and is putting in efforts to bring down the NPAs to a manageable level, through corporate debt structuring It has initiated action against defaulters and has filed suits against defaulter companies
RBI In 1976, the banks ownership was transferred to the Government of India IDBI has engineered the development of capital market through helping in setting up of the Securities Exchange Board of India (SEBI) National Stock Exchange of India Limited (NSE) Credit Analysis and Research Limited (CARE) Stock Holding corporation of India Limited (SHCIL) Investors Services of India Limited (ISIL) National Securities Depository Limited (NSDL) Clearing Corporation of India Limited (CCIL)
IDBI has undertaken several initiatives to reposition itself as a universal Bank: In April 2001, IDBI appointed Boston consulting Group India Private Limited (BCG) as consultant to draw up a road map for conversion into a universal bank Formation of high level risk management committee to develop overall risk management policy The bank has constituted a credit risk management group to evaluate credit risk both at the transaction level and also at the portfolio level It has pioneered the setting up of Asset Reconstruction Company (India) Limited (ARCIL) in 2002 in association with select banks and financial institutions
IDBI-SERVICES
IDBI provides Merchant banking and wide array of corporate advisory
services as part of its fee based activities This includes professional advice and services for - issue management - private placement of equity/debt instruments - project evaluation - credit syndication - share valuation - corporate restructuring including mergers and acqusitions and divestment of equity the bank also offers a number of Forex related services on a commission basis including opening of letters of credit and remittance of foreign currency on behalf of its assisted companies for import of its goods and services
IIBI
Established in 1985 under the IRBI Act 1984 It is a principal credit & reconstruction agency for re-habilitation of sick
& closed industrial units. The range of its services include provision of infrastructure facilities , consultancies , managerial & merchant banking facilities & making available machinery & other equipment on a lease or hire purchase bases It was renamed as industrial investment bank of India & brought under companies act 1956 since March 17 1997. It finances new projects , modernization work , balancing equipment needs , correcting imbalance in current Assets , relieving strains on cash resources , repayment of pressing liabilities and other activities.
IDFC
Conceived as an institution to facilitate the flow of private finance to
commercially viable infrastructure projects & help mitigate commercial & structural risk contain therein , by designing innovative products & processes. It operates in areas such as energy , telecommunication & IT , integrated transportation , Urban infrastructure & food & agri-business infrastructure. It offers the variety of services to projects in the infrastructure & advisory services. It helps promoters raise resources from international markets It intends offering advisory services to these funds to facilitate & strengthen their connectivity with infrastructure projects.
NABARD
Established in July 1982 under an act of parliament , is an apex dvpt.
Bank for promotion & dvpt. Of agriculture , small-scale industries , cottage & village industries & other allied economic activities in rural areas. Objective is to promote integrated rural development for overall prosperity of rural areas. Provides long term investment credit to the Farm sector for various approved agricultural & allied activities such as minor irrigation , plantation etc. It also extends refinance to banks for financing government sponsered programmes like prime minister Rojgar Yojna , Swarna Jayanti Gram Swarozgar Yojna etc. Other important development includes setting up of micro finance development fund by NABARD.
SIDCS
Established under the companies act 1956, as wholly owned
undertakings of the state governments with the specific objective of promoting and developing medium and large industries in the respective states. It undertakes a range of promotional activities including: -repression of preparation of feasibility reports . -conducting industrial potential surveys. -entrepreneurship training and development programs. -developing industrial estates. It also offer package of developmental services that include Technical guidance, assistance in plant location and coordination with other agencies.
EXIM BANK
Established in 1982, is a wholly government owned financial institution
setup for the purpose of financing, facilitating and promoting Indias foreign trade. Its financing services include a range of fund and non-fund based programs to enhance the exports, competitiveness of Indian companies. Its major operations presently comprise -financing of projects -products and service exports -building export competitiveness -promotional programs -Financing of research and development activities of exporting companies.
SFC
It is a state level development bank setup under the
SFCs act, 1951, for the development of small and medium scale industries in their respective states. It aims at bringing about balanced regional development by wider dispersal of industries and generating larger employment opportunities. It includes composite loan scheme, scheme for women entrepreneurs, modernization scheme, equipment finance scheme etc.
SIDBI
It offer a chain of financial product covering micro
finance, business,incubation, venture capital etc. It also provides support services such as training, market information and advise for enhancing the inherent strength of small scale units.
Financial Regulators
Financial Regulators
Securities and Exchange Board of India (SEBI) Reserve Bank of India Ministry of Finance IRDA
(SEBI) was first established in the year 1988 Its a non-statutory body for regulating the securities market It became an autonomous body in 1992
Functions Of SEBI
Regulates Capital Market.
Checks Trading of securities. Checks the malpractices in securities market.
Functions Of SEBI
It enhances investor's knowledge on market by
providing education.
Objectives of SEBI
It tries to develop the securities market. Promotes Investors Interest. Makes rules and regulations for the securities
market.
Mumbai.
Monetary Authority: Formulation and Implementation of monetary policies. Maintaining price stability and ensuring adequate flow of credit to the Productive sectors. Issuer of currency: Issues and exchanges or destroys currency and coins. Provide the public adequate quantity of supplies of currency notes and coins.
Functions Of RBI
Functions Of RBI
Regulator and supervisor of the financial system:
Prescribes broad parameters of banking operations Maintain public confidence, protect depositors' interest
Functions Of RBI
Developmental role:
Performs a wide range of promotional functions to
function for the central and the state governments. Maintains banking accounts of all scheduled banks.
Monetary Measures
(a) Bank Rate: The Bank Rate was kept unchanged at 6.0 per cent. (b) Reverse Repo Rate: The Repo rate is around 7 per cent and Reverse repo rate is around 6.10 per cent. (c) Cash Reserve Ratio: The cash reserve ratio (CRR) of scheduled banks is currently at 5.0 per cent.
Objectives Of MoF
Reorientation of the economy
operations
To remove structural rigidities and inefficiencies To attain a balance between the goals of financial
Recommendations
market
Strengthen legal protections
Recommendations
Deregulate the insurance industry Drop proposed limits on pension reforms Increase consumer ownership of mutual-fund
products
Introduce a gold deposit scheme
Recommendations
Speed up the development of electronic payments. Separate the RBI's regulatory and central-bank
functions
Lift the remaining capital account controls Phase out statutory priority lending and
IRDA
IRDA
Service Provider ----------------------1.Care-Site 2.Tech Support
III
EXAM
IRDA Function.
Data Correction Approval (License) Shows list of data correction requests by DPs IRDA can approve these requests Cancellation Approval (License/Certificate) Shows list of license cancellation requests IRDA can approve or reject IRDA can cancel with or without refund Recall Cancellation Approval Shows list of license recall cancellation requests IRDA can approve or reject Termination Approval Shows list of license termination requests by Corporate DP IRDA can approve or reject termination requests Terminate License IRDA can terminate individual/corporate license
Thank you