VIEW QUESTIONS| What are the financial seryj 1 2 1 tO fing 4. Whatis financial service Market? 5. 6. i. OF fins, 8. 9. What is factoring? Explain the types of factoring? 11. Explain the theoretical framework of factoring, . What is factoring cost? . What are the advantages and disadvantages of factoring? Write a note on Factoring in India. Differentiate between Factoring and Forfaiting, Explain the working of forfaiting. 17. Explain the benefits and drawbacks of forfaiting. 18. What is bill discounting? Ou 19. Explain the framework of bill discounting. é 20 Explain the Bill Market Schemes, A Distinguish between Factoring and Bill Discounting in Receivable Management, 22. Explain the concept of financial services, oe 23 What are the objectives / functions of financial services 24. What are the characteristics of financial services? 26. What is financial service market? 7. What are the financial service market constituents? 28. Trace the growth of financial services in India. __ _—___iS Seraces that are oflered bY financial com, rei companies include both Aggy Asset gg 9 services’ Final “ne Management Companies. Assy ye." and Liability include leasing companies mutual funds, meres, , ‘ant portfolio a" discounting 2 (12 OBJECTIVES FUNCTIONS OF FINANCI4, SF nd acceptance houses Following are the objectives of financial ser “oflered by financial companies 1, Fund raising Financial services help to, T of investors, indlviduals, natitutions snr from a bos purpose, varios inruments of finance Ar used Thy by corporates houses, individuals, ete 12, Funds deployment An array of financial ser 1 markets which help the players the financial deployment of the funds ranted Financial services o tnaking regarding the financing mix Services wich {acloring of debtor, parking of short term fur in th rang, ecommerce, and securitization of debt» are services fms in order to ensure efficient management of 3. Specialized services The financial Sern specialied services such as credit rating, venture cap. fancing, factoring, mutual funds, merchant banks depository, credit cards, housing finance, book-busd 7 banking and insurance Institutons and agencies such as wre financial institubons. non-bank specialed and general companies, subsidies of financal institutions, companies alo provide these services. 4 . Regulation There are agencies that are involved © Be fea eis acts In India, agencies such as the Se ae of India (SEB), Reserve Bank of Indio ment of Banking and Insurance of the Government agers. Liability Management Conn, in, 10 Trotiona Financ Sra 3 ic jethore of legislations, regulate es 2 Futons. uate the functioning ofthe financial service anata |HARACTERISTICS OF FINANCIAL SERVICES] Like any other service, financial services are characterized by the folowing 1. Intangblity Te bac charac fac seis a steiner For nace ees sues ete nated the nettonsprotingh mist hove nd no rete fs hens. Qulty an novavene of eves ee 1 point or building credibility and galing the ust of the ens ‘2, Customer orientation The institutions providing the financial sanices study the needs ofthe customers in derail. Based on the resus of vray they come out wth innovative financial rales that ge de ts, liquidity and maturity considerations for various financial tomer oriented gard 10 cost vcs. This way, financial services ae cs 4h Imeeparabilty The functions of producing and spying Front services have to be cari iy. This calls for a perfect derstanding between the ied out simultaneous financla services firms and their ents ‘4 Perlahability Financ services have tbe crated and delered 10 ‘he tage clients They cannot be stored. Thy have 0 be supplied aig to dhe equiterents of customers Hence, 8 imperative that he al veraces ensue a match between dean supply must be dynamic. They have f0 o-economic charge standard of iva be proactive if of the providers of 5, Dynamism be constantly redefines cecurring in the economy, such level of education, etc: Finandal ature, and evolve new services smasket ‘The financial services «band refined onthe bass of so ‘as disposable income, ‘sevice institutions 70s ‘by visaliing the expectations2. Specialized 4 Regulation Thee ace agencies that are ohio he vel marc services activites. In India, agencies such as the Secures rae Board of Inia (SEB), Reserve Bank of India (RBY) 2 Dipwaea fads Ga sex Irn ovative Prey © SEBI (Debenture Trustees) Regulation, aes 7 Cade of Advertisement fo Capital Ofeing Following are the regulations pertain 8 to y other intermedianes. *9 the 1 Registration sth the SEBI under ay, commencing business rele, = Presepson of eligibility norms ang sen an ing” Fans 3. Carving out the inspection of books any — oa re eer wd sseesoaton on the afi of the intermecion, "Song A feeer pene SS ees sae comes action against them wherever required “Ay wn a customers. and wiminanes 4 Dee compliance sith al the sudelines oy i pln the “due-digence certificate ea "armen 5. Observance of guidelines under the SEB. . ‘ secon ase eat a sod lever Potton, 192 relating seo tae cn 25 we tp be flowed ty the acquirer and the mec rere fa axcustion of shares under the SEBI (Substangg ag! einaeneae stig ‘and Take-over) Regulations, 199 una malay for the Unification of Private Law (UNIDROM, ne. 1988+ [BLFACTORING AND FORFAIT A Si cach ncaa SE ee Po = hoe whch ee ase provided by the! “ FACTORING + Finance Maintenance of accounts between 8 Factor and following serices to be + Collection of debts the Latin word ‘fa + Protection against credit risk ings done Factoring originated in make or do or t0 ge UK France, et where specialized fi Factoring can also be broadly defined as an agreement in uhich receivables arising out of sale of goods / services are sold by 4 ben (chent) to the “Factor” (a financial intermedia). as resuk of hich the tle to the goods / services represented by the said receivables passes on to the Factor. Hencaforth, the Factor becomes respon for all credit contol, sales accounting and debt collection fom the cede I requireme: uunts receivables OSS Tecenabies| an ianagng Suny debs and sale se: Factoring Means ‘Instant Cash’ commercial and rang fim nthe capacity of an agent fora comm Factoring ia eolleton and france serie deg empoe you 5s Known as “Factoring! Factoring, as a fund-based financal mash flow, tring your credit sles invoices into rendy cash Tush provides resources t finance receivables, besides faciltating tele factoring, SBI factors ates 10 of receivables Factor you invoiees on a continuing bass3 9G red aan 5 Somes 2 at PN 2G © aR ag w ae § cE SES 2G OE AS SOE] AG GE REGS SOE R= Ree ag sEoomy See SIRS 2G 56 0 aes soar ag So SEGRE oe sag me cased AE 3 Rate ag SGI SRO oe) Sey RINE] Z eaeied oe wun Sus mat eek yee ag Sane oe! Sew] ae p me wp EE ae = Semsed mogum ing 2g Se aommietoce ems ag a seo aude ag Sema nee 5 oe ag me ime wx SRDS A] Sa AGS eS a Se ere BE Se wgen ay cr swe aie ag oe ead Se ee ee AE Se ime agen sent ag HE A Te pa = oes sede a aur: Ag SURE TEREST & ME ATT SEES peep t sswae saasee = xk song. 30 2 Ses See] TUG Seek: eeuG = ee = xyes manure a Sones: SUE NE SE ey SuInnewanie Financ Serco (TYTN ™ fA prwee uy in ct - wm one nave very ge 1 prwcowet Uectoring [is menor twee Nhe Arnica of the stir pee the mennne providing finance Book debts *" He. cr secures ox binning financial nccommadation fe fswert Enctoring Wr 1 an exper ove assed 10% Vanoy ,, tance w one 07 the ae M spree nt rn tt Feo part Feats of Tomer Hae porter CR NOK hear oi 4 Senet cant A em Ta Toe Fat bok cexcete am g nT percent of he expan, lant 8 advance, f+ dean eve enh os x ve-coure and 06 Inctoning ao a exporter whi, maton in the Inport ‘he oa ry nan rng of the export dca st taal ana ery a ne gmeiet e y hale expete's Cereal! am reno ad tac pied 10 the CED tony eres erm Comite Poppe sales, The Fodor take rere fo te for export prometon ye a i mjocumenson complete, end tl Hee aoe seas the soe dion Ihe pone, “The inpemtat feat : aeneenne a Expon factoring, uhere an import Factor Is engages y, the enya Fiona the deblors end oe cies serine foceting’, OF Ye WO-FBIOE Syste foctnit, Th pores vive ae the exporter (client, the importer (custom, Crom Border F sre Cm = (a five mice 1 | era et ue te omy wy tp Trodtiona Pane ol Ser eng ; Ge veto of eae 9 cela 1m bene Inte, ser we tactor The exprmer inform es ingran chent demas 20 Fason oben the exe © pe A pen ctedn 1 specter enictry cera es Ancor The e190 FC wes thy wot ‘importer We eter dome eT nin) of te IMPORT. eee abet the meager, fann et. ofthe imperer The expat delves the sr ts ha 2 ett Hires, wh env, ne eg deceit oh npr nan cher 00 mp acted 0 2 NO TECHN asi He aly Pals of lading an erp recxivatles a ee nF Ce ag Se ee i in we ee aay een Fa i aon soon a (se cai Fa vrai period, or on collection. i ee eee eer a ee om full-service Factoring Fullserie factoring, also known a6 Oldline factoring. s 2 ope of fecering whereby the Factor as no recourse othe seller inthe eve of he fare of the buyers to make prompt payment oftheir dues to the Fecer. lubich might result from financial inability / insolvency | bankruptcy of the bayer tis a comprehensive form of factoring that combines the features f alms ll actor services, specaly these of non-recoure and advance foecnng With Recourse Factoring “The salen features ofthis type of factoring arrangement are a follows 4+ The Factor has recourse to the client fr inthe ever ofthe book debs pachased becoming imecoverable isks associated withthe receivables +The Factor assumes no creditchotvatte oy pawn + TY BR beones or +The Bactor charges the « masntanning sales Felgen 6 The sabent features of this type of factoring + Norght with the tor to have recourse to the + The Factor bears the loss aris + The Factor charges higher commission called ‘d as @ compensation for the said loss @ Out of irrecoverable + The Factor actively involves in the process of gr extension of line of credit to the customers of the client Advance and Maturity Factoring The essential features of this type of factoring are as follows: factoring a Went of ere * The Factor makes an advance payment in the range of 70 t0 80 pereey 4 of the receivables factored and approved from the client, the balany —[Rieneeat foment | amount being payable after collecting from customers - a i + The Factor collects interest on the advance payment from the client a £ Functions | {Type ‘onceot vy + The Factor considers such conditions as the prevailing short-term hae | \Crecter | \* the financial standing of the client and the volume of turnover whi, | mee determining the rate of interest Conca \ kk is variation of advance and maturity factoring. Under this type o! factoring, the Factor arranges a part of the advance to the clients through the banker. The net Factor advance will be calculated as follows y [Factor Advance Percent * Bank Advance Percent} kes payment either o nf payment date or on the date of « ther on the guaranteed being fixed after taking into acco: the previous ledger 9 oc * ent and the date of collection being reckoned after the dec cae of the GanInnovative Francs Services TYBy4< x FACTORING Ve BILLS DISCOUNTING Factoring Bills gine Chaactertte = Dace, 3° Meytewthor Onur : whoa une "tng = Feocrsthe cleo Drawer cate te 2 gees elector of receivables a Bewdesfrancing Only fi . foaty rervober — Svalane 2, serves ao enwnse! Receablesonce ‘Bis ¢ Renarons once ci ° fpomedcamatbe | canbe stored ies 5 BikFrane Fencing Phong ba arangenent coves bad ceere quantum of reenobles Mae tAcuting—Isancfftlonce No such oasis sheet fac {14 ADVANTAGES AND DISADVANTAGES OF FACTORING) ADVANTAGES Factoring, as an innovative financial service, commands the foll advantages: “s Cost Savings Factoring allows for the elimination of trade discounts. Besides, it ale helps in reduction of administrative cost and burden, facilitating cog savings. There is also overall savings in cost, expenses and efforts as there i no need for the client to maintain a special administrative set-up 0 lol alter credit control. ; Leverage Another advantage of factoring is that it hel at it helps improve the scope ‘operating leverage men. eee Enhanced Return Factoring is considered at i's considered atractive to users as it helps enhance return. >» i i enances Liquidity ofthe fm by ensunng een working scrent For instance it hlps avid increased debs inthe case factoring, Similarly, efficient management of current: recourse sed working capital requirements, besides helping to of 0s 10 red ast pad debt losses eo x piscine Mr bing about beter credit dscpine amongst casomer de 19 reson on of dues. This achieved trough efecve contol of he regu Ey. reduced credit risk. beter working capital management, ete. toes ura ey goads te cent (eer) to selon to cstmers with Fact ng, thus bringing about ced icine, Further. feta gat owe sespoen of mattelrepuaton, fancal sandng, buns allows [at ofthe partes CO ” cash Flows eceterated cosh wuhen they ar8@ creait Certification ‘The Factor’s acceptance wy the factoring agency. cerned 1ows help the client meet liabilities promptly, as and f the client's receivables is tantamount to ceedit certification B Prompt Payment Factoring. foci insurance against bad debts. iitates prompt payments and credits by providing Information Flow Factoring ensures constant flow of critical information forthe purpose af dzcsion-making and folow-up. It therefore helps eliminate delays end wastage of man-hours Infrastructure Factoring acts as @ stimulant to go in for sof towards high-level specialization in credit control and sales ledger administration. phisticated infrastructurei resets Fr Seve Ty oS Better Linkages comotion of linkages bet Factoring alow fF the PP ges betiven, sectan Sot argerent lps beter dealings, ey, ey, cllecion of ses lngers Boon te SSI Sector cacoong arangenents work as ¢ Boon £0 thE SS) goo, ae 0 sewn ees fe pote of inadequate working capita T,0". Wh Factor woud be 2 great advantage 0 the Sg) _ its, seresasane ' « undenabes the responsibilty of credit control, say. sceomcanon and sedi colecson problems. Thus, the gig, te coal aes ofthe business such a8 planning, punt . Prk a 1, mating. and finance Reduced Risk cong sls fr reducton in the uncertainty and risk asso, sele,snce funds from a Factor are an additional ouside the purview of MPBF. with the colection Skt Export Promotion Faccrng facies are designed to help exporters avail of finan assistance on atractve terms, which in tur allows for promotion ot emer DISADVANTA‘ eames te ae tat fang offers an excellent sort of finan ‘eres a hs sles of gods on cet basi o avoid bad db she same time ensre prompt collection from buyers, itis fraught with following drawbacks Engoging a Factor may be. reflective Tasso oleiseahalg MANE the sp Prt Ftoet eres cron nt development in the Indian factoring services took place iG INDIAN SCENARIO} otal ti pls wom *n January, 1988. The study group aimed at examining " ‘nanism of organizing factoring business in India. The 5. Ka ple a xd mec! spite ip a Study Group’ under the chaitmanship of Shei C fe report in January 1989, Various functional formliies the Importance of promoting factoring inthe country, with of banking and non-banking financial se. were examined by the group. A detailed summary of ‘Study Group’ report, 1988, is given in the annexure mediaries like 0 on i banks: asundaram od ofthe chalet x FACTORING FIRMS ue to the postive efforts of the RBI, a number of banks and non set up factoring companies. A brief description of some vats atthse es ven elo pt FACTORS AND (COMMERCIAL SERVICES gl Facors and Commercial Services (SBI FACS) was lated by the gg essay in March 1991, wth apa up capital of € 25 cores Features, 1, The exporter Exporter submits to SBI FACS a detailed list of castoness (importers) together with credit line requiements, The Indian Srporter applies for a ctet limit in respect ofthe overseas importer. The taporter nies info an export factoring agreement with the SBI FACS, sihich is the export Factor. The exporter then assigns all the expon receivables to export Factor, and subsequent assignment to the respective import Factors. While shipping goods, the exporter ensures that each invote is payable to a specific Factor in(the importer’s country 2, The Import factor The SBI FACS selects an import Factor locate in the customers’ country. The import; Factor rates the importer, ani intimates the result to SBI FACS. The import Factor grants the credit lin based on the creditworthiness of the overseas importer. The import Facto emits the funds to SBI FACS on receipt of sale proceeds from the buyer 0 the due date of the invoice. In the event of the importer defaulting to pa the proceeds of the goods exported, the import Factor pays the receivable 100 days after the due date to the export Factor.«1 Trational Financial Services a7 woe RIC _4CTORING INDIAN SCENARIO] iis ; important development in the Indian factoring services took place "RB setting up @ “Study Group’ under the chairmanship of Shri C vith i ® wunaram in January, 1988. The study group aimed at examining s asl and mechanism of organizing factoring business in India. The the “abmited its report in January 1989, Various functional formalities, jeatons and the importance of promoting factoring in the country, with inp ipaion of banking and non-banking financial intermediaries like merchant banks, etc. were examined by the group. A detailed summary of the aanasundaram Study Group’ report, 1988, is given in the annexure, a the end of the chapter. MAJOR FACTORING FIRMS Due to the positive efforts of the RBI, a number of banks and non- panies set up factoring companies. A brief description of some the Pa banking comy of these firms is given below: FACTORS AND COMMERCIAL SERVICES SBI Factors and Commercial Services (SBI FACS) was floated by the SBI, as its subsidiary, in March 1991, with a paid up capital of % 25 crores. ‘SBI Feature 1, The exporter Exporter submits to SBI FACS a detailed list of customers (importers) together with credit line requirements. The Indian exporter applies for a credit limit in respect of the overseas importer. The exporter enters into an export factoring agreement with the SBI FACS, which is the export Factor. The exporter then assigns all the export receivables to export Factor, and subsequent assignment to the respective import Factors. While shipping goods, the exporter ensures that each invoice is payable to a specific Factor in(the importer’s country. 2. The Import factor The SBI FACS selects an import Factor located in the customers’ country. The import; Factor rates the importer, and intimates the result to SBI FACS. The import Factor grants the credit line based on the creditworthiness of the overseas importer. The import Factor emits the funds to SBI FACS on receipt of sale proceeds from the buyer on the due date of the invoice. In the event of the importer defaulting to pay the proceeds of the goods exported, the import Factor pays the receivables 100 days after the due date to the export Factor.s against the approved export rwovivalh Invoices and. shipping documents f0 foreign currency remittances IntO FUP ‘exporter, SBLFACS levies @ imgoice, It sends statements ind itervals It acts only as expost Fat Factor ‘anaadvane® PAVED LO the on ng eon me met FACtOr It cont “at nanses the process 3. SBI factor SBL FACS makes reds 1g yO ~2 percent of the vay" sevice fee yn the above Geta 0 RBL ay ait, oe ant is not authorized 10 act 4, 0 ing Services + Undertaking the responsi [Bil-discounting facity Undertaking collection and credit fh by tel ralzation of cbs or receivables (A S converted into instant cash mgs ox even forge for payment BY the purchya 0 908 uct services designed 10 improve ba h upto 80 percent without hayin wat for 30. 60 ‘of collection of debts due fom cli fens customers + Underaking the maintenance of cents’ sales ledger anakasis, overdue invoice a + Providing monthly sles WSs gy ‘customer pagent report 0 clients signed its services based on the models prevalent Tralonesia, and adapted them with change + SBIFACS hos counties ke Singapore a Saitabe to the domestic business environment «at aervces are provided agninst recoverable service charges, withag Guam or secunty being insisted upon, Factoring services gy alate to al business organizations engaged in manufacturing aa veding (Canara Bank Factors “The Canara Bask Factors Le was set up a6 a subsidiary of Canae Bank Li in Angst 1991. The paid up capital of € 10 croves was contribute by Canara Bank, Andhra Bank and Small Industries Development Bank India. in the proporion of 6.2020, The Factor started its operat niall inthe south sone wen Enisarowth Factors ‘The first company to be set up in the prvate sector was FairGrow Factors Lad: It started functioning in Saas ng 9 Apri 1992 with paid up capital off 9 1910 Indian exporters in 1997 ix venture between the Mohan Exports and the Nations Bank joi sonoxporation (USA) 20th Century Finance Corporation and overseas © fpe ICDs Gre? owls wince pent 0 svar eso 90 pmo aro +g the eran 20 recent 9 be pak when fal payment woot goa the customer / DUET red HO ve eve sk protection on Mutsy agreed terms, and the adalitional benefit of open account trading without ont oak mente of Fs Chan Ina» gop at «et ahs Maa ol stn since the FFL Prschange Factoring Net vi their overseas account F uses the standard work Intemational Electronic Data it can provide speedy and reliable report WAL PROF sic Fact Factoring is ofthe recourse factoring (YP he Factor undertakes collection and credit services snot available for deferred credit transac + Factoring 1 type of credit sales «+ Factoring advance upto 80 percent is available tothe seller (lent) | Factors also undertake maintenance of the sales ledger by using Computerized systems, monthly sales analysis and overdue invoice analysis + Factors provide customers’ payment reports tothe clients Availability in cash is directly geared to sales once a line of credit is exablished «+ Factors charge for factoring receivables by way of service charges ithout quarantee ‘security being insisted upon, etc feeIovate Pnancol Services (Ty BA, gional Financ! Services Sem, 1 Export Factoring © cof legal amework avaiable shich is capable of protecting + Approval by RBI of the scheme evolved by the Expor {ook 10% snd Other parties involved in factoring c tC uo OT of the Factor pa verre careraon of Inia (ECGC) FF the exporg, My 9 . fund based otters ye to wider funding sources on the same scales as available purpose of providing non export-factoring servicg"¢ es ice | aehet ance companies “ con equity funds, forcing ther to have @ non. tng non-fund based export factoring aan in. hoy EOGC prov se CGC granting 100 pereent credit protection to bill gay, 1° ae ces owmesbser trough endorement tothe poly ep India to issue adler cerfcte xt of banks in + FOGC enters into a tripartite agreement with the exporter pute OF case of Pook debs by the Factor uthorized dealer which provides for the following: ang? eo away achieved in export factoring ‘a. Guarantee for making the bill immediately on the bank's ad a Not much pe fact that the factoring sevice 1? India is in its infancy. the espiry of 30 days from the date of the bill wth regarg Py conse 8 gouth is relative ited, future depends on payment of any factored bill ga thats ae wy genuine operational obstacles, some ‘of; which Discounting by the authorized dealer in consideration of the gy, "En ound abo ‘unconditional guarantee Ao, «Authorization to deduct the ECGC’s factoring charges (which shou GARCTORING VS FORFAITING 1p 18 percent fam he proceeds ofeach bland remittance she oii of diction beraeen factonng and ors seme to the ECGC % —Fetowing are A Factoring Forfeiting ‘d. ECGC would have recourse tothe exporter if non-payment ofthe SNe For tansactons with For tansactons eo hut of the exporter ‘The authorized deler woul! be paid byat sa eect matty with medlu-tem CGC in accordance wih the guarantee contained in the tian __i peed maa seement po Reena Cant ether with ot nhout i mihoutrecoure recourse on «e EOGC would obtain directions from RBI in ther turnover, entitling the gg SS Rskeanbe mastered” Al le 2 jb maner the amount fom the foreign party In the event of tosoller ‘sumed bythe exporting to realize the export proceeds inthe stipulated time, = ete OPERATIONAL PROBLEMS IN INDIAN FACTORING 4 Cost Costoffactoringis Cost of forfaiting is ININI touallyboe by the bore by he 2 Lackof access to any authentic common soure of information ad een b Lack of experience and database to take on jc 5 Tore c a fon jobs such as cei 5 Coverose Covers a whole sof Structuring and eee yobsata costing done on © Expensive system of determined pice acasetOcase Sree sxen of mtibe daatases maintained by indus 7 basis - “nan rly acerain percent Hundred percent ae 6 ent of Financing Only a certain percent iormity in the wotking of frecenables facored frances Pomerat ing of specialized credit informatice cohen aaiable 7 Bass offiancing _‘Fnancng depends on Financing theedi sanding of depends onthe the exporter financial sanding of profitability for the ofthe vaiing bark High samp duty ‘on assignment of debt to Fat Hah eo of Factors Fess mors and consequent eros® Ione ne Serer —_— SS n Faeroe Sees z trcted 10 U2N6° DIS ely \v) Bill wediscounting should be rest Danks. The banks should not rediscount Pils e2rller diseg, Vy Caines “ey Jace shes ofthe drwe the Inadlion © YF agement neta ued ts mount faces ke ° aes ledger maintenance {wi Pads accepted by banks for pestle houg nea contingent Hab, Prvson acter aor services are ase mad deployed for discounting bills ‘ wore ‘onl exist vaitable in fctoring (i) Overal ves including bill oligo beeen a sae anvot ave redscounng fect ‘ rt ttt Erase Such compan ey veal tha 2g hat ope of account eve should not exceed three times the Mt worth Panis soba ils fecha - ot , pits by NBFCS. the bi (vit) For discounting LC-tacked PE fr the benetic REVIEW QUESTIONS) accompanied ya no-obiecton = ed eee ccs atl acne OE ohne y 1 Balan concept of ian srvies dacounting Preset, the veut a 09 evan AR NEE Far are the objectives fants of iancia serves Se TE 8 Ee et com) gw a the cars of financial serees? Rio remediating marge NEF nt ills toting! 4 Whatis nana sens market? ich companies vain road 0 EON F natarethe financial service market constituents? (123 BL DISCOUNTING VS. FACTORING 6 Trace ea a easel Pomers 3} explain the problems in finan 1 sector soon mewn ae dsc ane SHEET SUES of : oni? eras ye oe aierences tee the HO fq, § Whatare Banking and Non-Banking Companies cows fe a ee 9 What is factoring? eng Deccan 25 Fase A COMES in the types of factoring? i Factoring _ 22 sian he ey 3 [ee npadaivoene This ona whole Ramone Das, 11 Explain the theoretical framework of factoring ah 12, What is factoring cost? eaurnnennpenn soem! Seomapemetmasnmy 3, Wa eh aheannan ot os of tectoring? see nee ach ies comme utero te rte a note on Factoring in India. ero. shaped cncetan ance Nese a 9 arn rg 136. Differentiate between Factoring and Forfatting STAIN Ries Stor te ena ne “Je. Explain the working of frtaiing newt and ee ge . a mand Se Oe tnenefits and drawbacks of fortiting EET Fo te pemece nk 3 Ges prod fr more pen 18 What s bul discounting? tape ancmre aah smces Oak cope of ch docu arr 19. Explan the framework of bil dxcounting eecn ihe oops EE NE oo. Esplin the Bal Market Scheres, ae comes Ela Market Scheme Danger are mvema up Poet Nowhot change bares siento / 31. Distinguish between Factoring and Bill Discounting in Receivable cot Seamount of mone a Management Thar s repumatik on} = Dea Explain the concept of financial services 23. What are the objectives / functions of financial services onerous faceny 8s He Score secret foe he emt case feng — % ‘What are the charactensis of financial services” What is nancial service market? Dececesaeaermmote he Tears somone aban oe SES eres ee _ A. Was ae the franca service market constant? ot Noemaw aces 28 Trace the growth of financial services in India.eg Buyone a0 Supues ove sauodk a9 24 uo spuodap yo Bupueis pan avn Supuen) wospuadep unueuy ——BupUEUY yo seg f agorene paoueape s syaoueuy paso) sqgeno1 jo juaotad paxpunyj —yuaoiad uewa>e fu, Supueuiy jo waR 9 509 areocpaer® sud pauuowpant wo auop 5 Bus0> e590! jue Bupniong Jo ps apynesi¥0D a60:0809 ¢ (eavodua) ating season saps ‘yi fq auiog ayy fq a1L09 fens Buy} yo oq) SFR 0 09 ’ 220) ap 64 paunsse 22250 are sjsuy peuoyeuen 29 ue eu £ ‘uo asmooas «esos noun rouge aq ues) 10 yu gy 9 HED inca 2 ppouad fauryew pouad uy uapow qm tunes wa HOKE nae 1 ewnresuea 104 yt suoupesue 20 Buono Buyorsey Suyapoy pue Buyoyoe uaamag UOHDUN [ONILIAuOS "SA una 1hHSH “OAR Ya a4 aod mt P Saquodas amua ayy souodea WAD @ wantoo wes worn wmpow anbiin WP 348 po esrpauus sam wneomp 2 1 noe af W2> ad gt age H ments vy BO} oH OL BLS patpLaune Spare sey auntie ng sas SH6} OH Ol Uo sased ap ap ay uo aafad aon ows ey SSP) 2 q quoued ys ayepaw mBq oko ue pun an “Ped anjanas oF YB ay dn saNB sapodo a auaKos Suen 2 pe) uy ©} Swi ysmbup, 20 si $940 dn an, }OUNp prom uals @ st yepD e, wa pailapelenaghabiyhanehanpael ‘Soda ue jay 0} pafojdua sysow st anbuypa sy, \Sygenzoa1 jsube Gusweuy jo zanos agoue Suns SNR ioe ‘pue sopey, = “og ue ages uaaneg pawn fae | suogenony 6g oyu sua seg "oto rue unos oy 098000 oginountve Financial Series 1.4 FINANCIAL SERVICES MARKET — CONCE The mutt forthe exchange of nancial produc, through a wide variety of players. each one offering. 4 in stm nab Sethe Trance seven tg (FINANCIAL SERVICES MARKET — CONSTIAU * = CONSTITUENTS) The financial services market comprises of four stated below: maj VF consti, 1. Market players Financial services are instuins and agencies that understand end meet And meet the regi hey wide specrum of customer. The players incude. potent ‘institutions, mutual funds, merchant bankers, stockbroken fitayg, * nerves, market makers, ete Stes, ong offered by 2. Instruments Finer insruments cons the financial series mae. The insuments ink instruments include equi * eb iarumens, Hybrid and exoteInstumene tg an)! financial services market that a number of innovative inst ve 2ero-oe Innovative Final Series (TYEMS 5, “a Accese to market Asset scunization etables the ongng se ange her tha” thei ou mira of credit enhancement re National SIOck Exchange oh assets. Thi wil cay na, 192 access the securities market a Corporate ratings through the novel “diversification of risk For instance, @ lannouneed that it wil allow listing of securities uly evlop an active scondary market and improve Hawi Benefits to Investors ‘2. Multiple new investment ins preferences ». Enabling the end-investor pool thatthe issue represents 1y for te investor sroments fr Investor 10 meet gy. to ook post the suing entity 10 he cola, Reduction in uncertain ‘by mininzing the 15k elt through transparency Benefits to Borrowers Securitization falitates greater €20" to borowers jomy in the use of capital. Finan institutions pass die benefits ‘by providing more Funds af lowe, General Benefits Securitization, by allo focitiates effective capital utilization in economy ts benefited through securitization. |=, NEW GUIDELINES ON SECURITISATION] as issued guidelines allowing commercial banks to which have been formed to transer ‘Some of the important guidelines wing for easy lending and recycling of fund the economy. Thus the whole Recently, the RBI france Special Purpose Vehicles (SPVs) securiised assets separated from them. (i) Al banks, term lending institu standard ase. (i) Banks can finance SPVs which are engaged in transferring s tions and NBFCs have to securities only securitised assets. ii) While financing SPVs, an independent third party, other than the originators (banks) group entities, should provide at least 25 per cent of the liquidity facility. It means that every bank should locate a third party for financing SPVs 1 ling aetna a 00 pang the Kinane @ ring breach of Waranties. we preroetmanaana of nvesors, and (REVIEW QUES: ge HANRGEMENT AND ITERMEDIAES 9 echt Barer Lead Mange ee sale es of te Set wes oP Bir nde? 5 WM a note om Reston of undeuntr, we 4 eral obligations Mave the general obligations and responsbites of undenante? jankers to an issue? rations? framevcth of Merchant ro ore paca ote on: Resistation of Banker io an sue 1e general obligations ar what are the 9 gations and responsibilities of bankers to an 4 wo are Broker 0 an issue? .0CK BROKING 1 Who are Stock Brokers? 1 wat nate on : Registration of Stock Brokers + Esplin the Code of Conduct for Registered Stock Brokers 1 What are the general obligations and responsibilities of tock brokers? § Wat i the liability for contravention of the SEBI Act, Rules Regulations for a stock broker? & Biplain the Capital Adequacy norms for brokers 7 Miho are Sub-Brokers? 5. Wie a note on : Registration of Sub-Brokers, 4 What are the general obligations of sub-brokers? P) Matis the code of conduct for sub-brokers?Pocket _—_ self-regulatory role properly rane at the stock exchan rp the stock stock broking is emare net” E¥@r since SEBT bose nmnae dasha thee ms i TING as ‘ © monitor brokers, ries. A cla, bro Tequirements of a mature coe advisory service, in tune with te Use 4, stock exchanges j . u di 0 Mges in the country | d into betwee character as inherit eee wed to Pay a Scteen-based, ringless, automated contrast = a tbatines to the traditional, closed ' Brot 2.7 STOCK BROKERS) iding the amount. "i i take Stockbroker is a member of and in respect of the sells or deals in securities. areholders. Brokerag” institutions / bankers a. @ recognised stock exchange who buys, mandatory to act as a broker A certificate of registration from SEBI is SEBI is empowered to impose conditions while granting the certificate. As a member of a stock exchange, he will have lounts devolving on thy { the issues to abide by its rules, regulations and by-laws, pay the prescribed feeland take adequate steps for redressal of investors’ grievances within one month brokerage within two the broker. on re ications bearing nature and other particulars of such complaints. ‘of the receipt of the complaint and keep SEBI informed about the number Registration so. A broker, seeking registration with SEBI, has to apply through the stock ys Lo ic a member. The application must be forwarded by . eis102 Innovative Financtal Services com laws of the stock exchange with respect te N Proper person. uy Payment of Fee Every "es specified registration fee based on | of sect! eal sear, on HIS OWN ACEOUNY ag cat al turnover UP %0 © 1 cro he SEBI. For an annual turnover eon M000 plus one hundredth of ong bas for each financial year, me to his business broker has 10 pay istered ihe annual f rities received account 5,000 is to be paid as fee tot! 1 crore, the registration fee is the tumover in excess of © 1 0% ‘computed would be recoverable 25 under: transactions that I day t0 day, al tan, (i) With respect fo jobbing that ae squared of uring te same d2¥ and have not been ung, bya broker on behalf of clients the fees would be computed ‘fone two hundredth of one percent in respect of the .sale s transactions. rsactions in government securities, bonds ise! traded in a similar mane {ii)_In respect oft computed at the rate of one- thousand Public Sector Undertaking and the unit fee payable would be per cent ofthe turnover: I cae of cay forvard, renewal or badla transactions, the fe vox domputed a the rate of one-hundredth of one per cent ofthe tn tod the reverse offsetting transactions would not be counted ase the turnover. brokers are carrying out transactions in securities them to the stock exchanges, those transactions would bt : account for the purpose of turnover and the fees computed at y of one-hundredth of one per cent of the turnover. 2s without rep 5 taker (v) The trade put through on other Stock exchanges would be inci j 2 of that exchange if the market for that security = exist onthe exchange of which he is a member, and the fees wo computed at the rate of one hundredth of one per cent of the tu? (vi) one as underwriting and collection of deposits should 1ccount for the purpose of calculating the turnover To keep his registration in f 7 in force alter five years, the broker woul! to pay €5,000 fora block of five financil year commencing tom #8 ainve Monagorent ond Securtiation 108 seo. The authenticity ofthe annual tumover should be certified by the stack xchange concerned or a Ne percent per annum for each month of dela hy other action which the SEB! may take against him, under the by a broker due / payable registration under the derivative Where a corporate entity is formed by converting the individual ‘partnership card of the exchange, it would be exempted from payment of fee for the pesiod for which the erstui dual / firm has already pai the fee, provided he becomes a whole-time director and holds at least 40 per cent ofthe paid-up capital ofthe corporate, for at least three years. The conversion of individual / partnership membership card of the stock ‘exchange into a corporate entity should be deemed to be in continuation of and no fee would be collected again from the converted dls isu corporate entity for the period for which the erstwhile entity has paid the fee ed r these regulatio lar ma by, as per these regulations. nS, that is day to da e day and have fe rent Securities, bo, nits traded in a si Where a SE forms a subsidiary company that becomes a stockbroker of another SE, the turnover of the stockbroker buying / securities, through the subsidiary company os a sub. @ fee wy, excluded from the tumover of the subsidiary company only when he has Of the tun, Paid the turnover based fee for a block years, in accordance with ted as paq, these regulations of the concerned SE that has formed the subsidiary ‘company. adla transactions, th h of one per cent would not be cou «in securities without rep Code of Conduct Registered stockbrokers have to abide by a code of ansactions would be taken. conduct specified as follows: the fees computed at thew General First, a stockbroker has to maintain high standards of turnover. integrity, promptness and faimess with due skills, care and diligence in the conduct of all his business. He should not indulge in manipulative fraudulent or deceptive transactions or schemes or spread rumours with a View to distorting the market equilibrium or making personal gains. He should not create a false market either singly or in collusion with others, indulge in any act detrimental to investors’ interests or which leads to of deposits should not Interference with the fair and smooth functioning of the market and not involve hi excessive speculative business in the market beyond ‘easonable levels, but commensurate with his financial soundness. Finally, be has to abide by all the provisions of the SEBI Act, and the rules and one per cent of the turnove. ® commencing from