3RD SEM MBA- FINANCE SPECIALISATION

INDIAN FINANCIAL SYSTEM

IMPORTANT QUESTIONS (Previous Year Question Paper)

MODULE-1
OVERVIEW OF FINANCIAL SYSTEM
1 Discuss the role of financial system on the economic development of the
country (2020)
ANS The financial system of an economy provides the way to collect
money from the people who have it and distribute it to those who can use it best.
So, the efficient allocation of economic resources is achieved by a financial system
that distributes money to those people and for those purposes that will yield the
best returns. The financial system provides links between lenders and borrowers so
that money may flow from surplus funds to deficit funds.
1. Pooling of Funds.
2. Capital Formation.
3. Facilitates Payment.
4. Provides Liquidity.
5. Short and Long Term Needs.
6. Risk Function.
7. Better Decisions.
8. Finance government Needs.
9. Finances Government Needs.
10. Economic Development.

2 Discuss the features of IFS (2019, 2020)

MANASA H
Asst Professor, Dept of Management EWCM
ANS
 It plays a vital role in economic development of a country.
 It encourages both savings and investment.
 It links savers and investors.
 It helps in capital formation.
 It helps in allocation of risk.
 It facilitates expansion of financial markets

3 Explain in brief the constituents/ components of IFS (2019, 2017)

ANS

MANASA H
Asst Professor, Dept of Management EWCM
4 Give an overview of Global Financial SYSTEM (2016)
ANS The global financial system is the worldwide framework of legal
agreements, institutions, and both formal and informal economic actors that
together facilitate international flows of financial capital for purposes
of investment and trade financing. Since emerging in the late 19th century during
the first modern wave of economic globalization, its evolution is marked by the
establishment of central banks, multilateral treaties, and international markets.
Functions of the Global Financial System
A. Generates and allocates savings
B. Stimulates the accumulation of wealth
C. Provides liquidity for spending
D. Provides a mechanism for making payments
E. Supplies credit to aid in the purchase of goods and services
F. Manages financial risks
G. Supplies a channel for government policy in helping achieve economic
goals
H. Facilitates trades
I. Provides a mechanism for the pooling of resources
J. Provides price information
K. Provides ways for countries to transfer economic resources across borders
and among different industries with ease

MANASA H
Asst Professor, Dept of Management EWCM
 MODULE- 2
FINANCIAL INSTITUTIONS

1 Explain the Functions and Objectives of Industrial Finance co-operation of

India (2019,2017)
ANS The government of India established The Industrial Finance
corporation of India on July1, 1948 as the development financial institution in the
country cater to the long term finance needs of the industrial sector.
Formation of IFCI
The IFCI was the first specialized financial institution set up in India to
provide term finance to large industries in India. It was established on 1 st July,
1948 under the Industrial finance corporation Act 1948.
Objectives of IFCI
To provide medium and long term financial assistance to large scale
industrial undertakings, particularly when ordinary bank accommodation does not
suit the undertaking or finance cannot be profitably raised by the concerned by the
issue of shares.
1. Soft Loan Assistance
2. Entrepreneur Development
3. Industrial Development in Backward Areas
4. Subsidized Consultancy
5. Management Development

2 Discuss the Structure and Present status of Insurance sector in India. (2019,
2018)
ANS The Life Insurance Corporation of India (LIC) came into existence on
July 1, 1956 and the LIC began to function on September 1, 1956.

The LIC gets a large amount of insurance premium and has been investing in
almost all sectors of the economy, viz, public sector, private sector, co-operative
MANASA H
Asst Professor, Dept of Management EWCM
sector, Joint Sector and now it is one of the biggest term-lending institutions in the
country. LIC was established to spread the message of Life Insurance in the
country and mobilize people’s savings for nation-building activities.

Organization and Structure:

LIC with its central office in Mumbai and seven Zonal offices at Mumbai, Kolkata,
Delhi, Chennai Hyderabad, Kanpur and Bhopal operates through 100 divisional
offices in important cities and 2048 branch offices. As on March 31, 2003 LIC had
9.88 lakh agents spread over the country. LIC also entered the international
insurance market and opened its offices in England, Mauritius and Fiji.

Present Status of LIC

(i) To mobilize maximum savings of the people by making insured savings more
attractive.

(ii) To extend the sphere of life insurance and to cover every person eligible for
insurance under insurance umbrella.

(iii) To act as trustees of the insured public in their individual and collective
capacities.

(iv) Promote all employees and agents of the LIC, in the sense of participation and
job satisfaction through discharge of their duties with dedication towards
achievement of LIC objectives.

(v) To ensure economic use of resources collected from policy holders

(vi) To conduct business with utmost economy and with the full realization that the
money belong to the policy holders.

3. Discuss the Changing Trend in LIC of India (2017)

ANS

 Cover for Pandemics

 Customer-Focused Solutions

MANASA H
Asst Professor, Dept of Management EWCM
  Digital Access
 Enhanced Claim Settling
 Increased Options & Benefits

4 Explain the functions of EXIM bank of India (2016)

ANS EXIM Bank or Export-Import Bank of India is India’s leading
export financing institute that engages in integrating foreign trade and investment
with the country’s economic growth. Founded in 1982 by the Government of India,
EXIM Bank is a wholly-owned subsidiary of the Indian Government. The current
Managing Director is David Rasquinha. It is headquartered in Mumbai,
Maharashtra

Functions of the EXIM Bank

1. Finances import and export of goods and services from India

2. It also finances the import and export of goods and services from countries
other than India.

3. It finances the import or export of machines and machinery on lease or hires

purchase basis as well.

4. Provides refinancing services to banks and other financial institutes for their
financing of foreign trade

5. EXIM bank will also provide financial assistance to businesses joining a joint
venture in a foreign country.

6. The bank also provides technical and other assistance to importers and
exporters. Depending n the country of origin there are a lot of processes and
procedures involved in the import-export of goods. The EXIM bank will
provide guidance and assistance in administrative matters as well.

7. Undertakes functions of a merchant bank for the importer or exporter in

transactions of foreign trade.

MANASA H
Asst Professor, Dept of Management EWCM
8. Will also underwrite shares/debentures/stocks/bonds of companies engaged in
foreign trade.

9. Will offer short-term loans or lines of credit to foreign banks and governments.

10. EXIM bank can also provide business advisory services and expert knowledge
to Indian exporters in respect of multi-funded projects in foreign countries

5 Explain the role of UTI (2016)

ANS Unit Trust of India was first Set up in 1st February 1964 under the Unit
Trust of India Act, 1963. It is a statutory public sector investment institution having
the main objective to encourage and mobilize the savings of the community and
canalize them into productive corporate investment
Functions of UTI

 Mobilize the saving of the relatively small investors.

 Channelize these small savings into productive investments.

 Distribute the large scale economies among small income groups.

 Encourage savings of lower and middle-class people.

 Sell nits to investors in different parts of the country.

 Convert the small savings into industrial finance.

 To give investors an opportunity to share the benefits and fruits of

industrialization in the country.

 Provide liquidity to units.

 Accept discount, purchase or sell bills of exchange, warehouse receipt,

documents of title to goods etc.,

 To grant loans and advances to investors.

 To provide merchant banking and investment advisory service to investors.

MANASA H
Asst Professor, Dept of Management EWCM
 Provide leasing and hire purchase business.

 To extend portfolio management service to persons residing in other countries.

 To buy or sell or deal in foreign currency.

 Formulate a unit scheme or insurance plan in association with GIC.

 Invest in any security floated by the RBI or foreign bank

6 Discuss the objectives and Functions of IDBI (2016)

ANS IDBI is the Industrial Development Bank of India, set up in the year 1964.
Its headquarters are in Mumbai and its parent company is Life Insurance Corporation
(LIC) The purpose of setting up the IDBI is to financial and other credit facilities to
struggling industries. Moreover, the IDBI came into existence with the aim to
provide financial support credit assistance to needy industries

Objectives
:
 Co-ordination, regulation and supervision of the working of other financial
institutions such as IFCI , ICICI, UTI, LIC, Commercial Banks and SFCs.
 Supplementing the resources of other financial institutions and there by
widening the scope of their assistance.
 Planning, promotion and development of key industries
and diversification of industrial growth.
 Devising and enforcing a system of industrial growth that conforms to
national priorities.

Functions

 To grant loans and advances to IFCI, SFCs or any other financial institution
by way of refinancing of loans granted by such institutions which are
repayable within 25 year.

MANASA H
Asst Professor, Dept of Management EWCM
  To grant loans and advances to scheduled banks or state co-operative banks
by way of refinancing of loans granted by such institutions which are
repayable in 15 years.
 To grant loans and advances to IFCI, SFCs, other institutions, scheduled
banks, state co-operative banks by way of refinancing of loans granted by
such institution to industrial concerns for exports.
 To discount or re-discount bills of industrial concerns.
 To underwrite or to subscribe to shares or debentures of industrial concerns.
 To subscribe to or purchase stock, shares, bonds and debentures of other
financial institutions.
 To grant line of credit or loans and advances to other financial institutions
such as IFCI, SFCs, etc.
 To grant loans to any industrial concern.
 To guarantee deferred payment due from any industrial concern.
 To guarantee loans raised by industrial concerns in the market or from
institutions.
 To provide consultancy and merchant banking services in or outside India.
 To provide technical, legal, marketing and administrative assistance to any
industrial concern or person for promotion, management or expansion of any
industry.
 Planning, promoting and developing industries to fill up gaps in the industrial
structure in India.
 To act as trustee for the holders of debentures or other securities.

7 Explain the objectives and Functions of ICICI (2018)

ANS The creation of Industrial Credit and Investment Corporation of India
(ICICI) is another milestone in the growth of the Indian Capital Market. It was
incorporated in the year 1955, as a company registered under the Companies Act.
The ICICI was incorporated to finance small scale and medium industries in the
private sector.

MANASA H
Asst Professor, Dept of Management EWCM
Objectives of the ICICI
 To assist in creation, growth and modernization of business enterprises in the
non-public sector.

 To encourage and promote the involvement of internal and external capital

sources, in such enterprises.

 To motivate pvt ownership of industrial investment and to promote and assist

in the expansion of markets.

 To provide equipment finance.

 To provide finance for rehabilitation of industrial units.

Functions of the ICICI

 Providing finance in the form of long-term or medium term loans or equity
participation.

 Sponsoring and underwriting new issues of shares and other securities,

 Guaranteeing loans from other private investment sources.

 Making funds available for reinvestment by revolving investment as rapidly

as possible.

 Providing project advisory services i.e. offering advice –

1 to private sector companies in the pre-investment stages on Government

policies and procedures, feasibility studies and joint venture search, and
2 to Central and State Governments on specific policy related issues.
 Underwriting of public issues and offer or sale of industrial securities.
 Direct subscription to such securities.
 Securing loans in rupees payable over periods up to 15 years.
 Providing similar loans in foreign currencies for payment of imported capital
equipment and technical service.

MANASA H
Asst Professor, Dept of Management EWCM
 Guaranteeing payments for credit made by others.

 Providing credit facilities to manufacturers for promoting sale of industrial

equipment on deferred payment terms.

 Providing financial services like leasing, installment sale and asset credit.

MANASA H
Asst Professor, Dept of Management EWCM
 MODULE 3
NON-BANKING FINANCIAL INSTITUTIONS
1 Discuss the role of Non-Banking Financial Institutions in the development of
the Indian Economy.(2018,2019)
ANS A Non-bank financial institution (NBFI) is a financial institution that
does not have a full banking license and cannot accept deposits from the public. ...
Examples of nonbank financial institutions include insurance firms, venture
capitalists, currency exchanges.
1. Boost employment
2. Render long-term credit
3. Mobilization of resources
4. Nurtures standard of living
5. Innovative Products
6. Infrastructure Lending
7. Promoting Inclusive Growth

2.What are NBFCs ? State the principal business of NBFCs in India.

ANS A Non-bank financial institution (NBFI) is a financial institution that
does not have a full banking license and cannot accept deposits from the public. ...
Examples of nonbank financial institutions include insurance firms, venture
capitalists, currency exchanges
1. Asset Finance Company
2. Loan Company
3. Mortgage Guarantee Company
4. Investment Company
5. Core Investment Company
6. Infrastructure Finance Company
7. Micro Finance Company
8. Housing Finance Company

MANASA H
Asst Professor, Dept of Management EWCM
3 Discuss the structure and Principal business Of NBFCs in India.

ANS

Principals Business of NBFC’s

1. Asset Finance Company
2. Loan Company
3. Mortgage Guarantee Company
4. Investment Company
5. Core Investment Company
6. Infrastructure Finance Company
7. Micro Finance Company
8. Housing Finance Company

MANASA H
Asst Professor, Dept of Management EWCM
 MODULE – 4
FINANCIAL SERVICES

1.Write a note on credit rating agencies in India (2016)

ANS
1 CRISIL- Credit Rating Information Services of India Limited
 One of the oldest credit rating agencies was first established in 1987.
 The agency stepped on to infrastructure rating in 2016.
 CRISIL has been operated in countries such as USA, UK, Poland,
Hong Kong, China and Argentina in addition to India.
 The company provides rating, analytics and solutions, research with a
very good track record innovation and growth.
2 ICRA- The Investment Information and Credit Rating Agency
 A joint venture of Moody’s and Indian financial and banking service
organization was established in the year 1991
 The organization is known for assigning corporate governance rating,
performance rating, mutual funds ranking and more
3 CARE- Credit Analysis and Research
 The in the year 1993, the next credit rating agency which came up was
CARE.
 It has its head office in Mumbai.
 It is India’s second largest credit rating agency
 It is one of the five partners of international rating
4 BWR- BRICK WORK Rating India Pvt
 In addition to registering with SEBI, BWR is accredited by RBI and
empaneled by NSIC- National Small Industries Corporation Ltd.
 NCD- Non convertible Debentures
 MSME- Micro, Small and medium enterprises grading services.
 Canara Bank was the leading promoter and strategic planner for Brick Work.

MANASA H
Asst Professor, Dept of Management EWCM
2 Explain the role and functions of Merchant Banker (2016,2018, 2019)
ANS Merchant Banker as “any person who is engaged in the business of
issue management either by making arrangements regarding selling, buying, or
subscribing to the securities as manager, consultant, adviser in relation to such an
issue management”.
 Corporate Counselling
 Project Management-
 Capital Restructuring Services
 Portfolio Management
 Issue Management
 Loan/Credit Syndication
 Arranging Working Capital Finance
 Other Facilities
Mergers & Acquisitions, Share valuation

3 Discuss in brief the different types of Financial Services(2018)

ANS Financial Service refers to services which are financial in nature
offered by financial industries to its customer is called Financial Services.
In other words financial services are the products or services offered by
financial institutions like banks, credit card companies, insurance companies, stock
brokerage companies etc.
FUND BASED FINANCIAL NON- FUND BASED/ FEE- BASED
SERVICES FINANCIAL SERVICES

 LEASE FINANCING  ISSUE MANAGEMENT

 HIRE PURCHASE  MERCHANT BANKING
 CONSUMER CREDIT/  CREDIT RATING
CONSUMER FINANCE  DEBT RESTRUCTURING
 BILL DISCOUNTING  STOCK BROKING
 FACTORING
 INSURANCE

MANASA H
Asst Professor, Dept of Management EWCM
4. Explain in detail the various schemes of mutual funds in India.(2018) /
Give a detailed account of various types of mutual funds available in the
Indian Market(2020)
ANS A mutual fund is a company that brings together money from many
people and invests it in stocks, bonds or other assets. The combined holdings of
stocks, bonds or other assets the fund owns are known as its portfolio. Each
investor in the fund owns shares, which represent a part of these holdings.
All the mutual funds are registered with SEBI. They function within the
provisions of strict regulation created to protect the interests of the investor.

TYPES OF MUTUAL FUNDS

I. On the basis of II. On the basis of III. Other Types
Execution & Yield &
operation Investment
pattern

 Open -Ended  Fixed income or  Leverage/

Funds debt mutual funds Borrowed funds
 Close- ended  Growth/Equity  Dual Funds
Funds Fund  Index Funds
 Balanced funds  Bond funds
 Specialised Funds  Offshore mutual
 Liquid fund fund
/Money market  Property Fund
Mutual Funds  Real estate Mutual
 Taxation Funds Funds

 Gold Exchange
traded funds

MANASA H
Asst Professor, Dept of Management EWCM
5. List the difference between Fund based and Fee based Financial Markets
(2019)
ANS
Basis Fund Based Fee Based

Meaning When financial services are The term fee-

used for creating assets or are
supported by assets where the
funds are transformed into
assets, they are known as
Fund/ Asset based financial
services
based investment refers to a
product offered by
an investment company, bank,
or other institution where the
financial professional is
compensated through a fee as
well as a commission for
selling the investment vehicle

Cash Flow Immediate cash flow No Immediate cash outflow

Liquidity More Liquidity Less Liquidity

Interest No regular interest only only Regular interest in the form of

lump sum payment fees, commissions

Example Lease, hire purchase, Factoring, Issue management, credit

bill discount, insurance etc rating, stock broking, debt
restructuring etc

6.Explain the different types of Lease (2019)

ANS Lease is a form of contract transferring the use or occupancy of Land,
Space, Structure, or Equipment, in consideration of payment, usually in the form of
Rent.
Parties of Lease

1 Lessor – He is the owner of the asset. Leasing is a core business of the Lessor
MANASA H
Asst Professor, Dept of Management EWCM
2 Lessee – User of capital asset is a lease. For lessee Leasing is indirect source of
financing

Types of Leasing

 Operating lease

 Finance/ Capital lease-

 Leveraged and non-leveraged leases

 Conveyance type lease

 Sale and leaseback

 Specialized service lease

 Net and non-net lease

 Cross border lease

 Import Lease

 International lease

7.What are the advantages of Credit Rating (2020)

ANS A Credit Rating agency evaluates and assesses an individuals or a

company’s credit worthiness, that is these agencies consider a debtors income and
credit lines to analysis the debtors ability to repay the debt or if there is any credit
risk associated. A credit rating is a quantified assessment of the creditworthiness of
a borrower in general terms or with respect to a particular debt or financial obligation

Advantages of Credit Rating Agencies

1. Low cost of Information
2. Provides a basis for suitable risk and returns
MANASA H
Asst Professor, Dept of Management EWCM
3. Helps in formulation of public policy
4. Provides Superior Information
5. Enhance Corporate Image

MANASA H
Asst Professor, Dept of Management EWCM
 MODULE – 5
FINANCIAL MARKETS

1 Write a short note on (2016)

ANS
a) Call money
Call money market is an essential part of the Indian Money Market,
where the day-to-day surplus funds (mostly of banks) are traded. The money
market is a market for short-term financial assets that are close substitutes of
money. The loans are of short-term duration varying from 1 to 14 days, are
traded in call money market. The money that is lent for one day in this market
is known as "Call Money", and if it exceeds one day (but less than 15 days)
it is referred to as "Notice Money". Term Money refers to Money lent for 15
days or more in the Inter Bank Market.
b) Commercial papers
Commercial paper, also called CP, is a short-term debt instrument
issued by companies to raise funds generally for a time period up to one
year. It is an unsecured money market instrument issued in the form of a
promissory note and was introduced in India for the first time in 1990.
In other words, the company can directly sell the commercial paper to
buyer or can take the help of some agency. The minimum face value of a
commercial paper is Rs 5 lac. It is used to demand of a short-term
seasonal need and the requirement of working capital.

c) Treasury Bills
Treasury bills are money market instruments issued by the
Government of India as a promissory note with guaranteed repayment at a
later date. Funds collected through such tools are typically used to meet
short term requirements of the government, hence, to reduce the overall
fiscal deficit of a country.Treasury bills are short-term instruments issued
by the Reserve Bank of India on behalf of the government to tide over

MANASA H
Asst Professor, Dept of Management EWCM
 short- term liquidity shortfalls. This instruments is used by the government
to raise short-term funds.

d) Certificate of deposits

The Certificate of Deposit (CD) is an agreement between the

depositor and the bank where a predetermined amount of money is fixed for
a specific time period. The Certificate of Deposit is issued in dematerialised
form i.e. issued electronically and may automatically be renewed if the
depositor fails to decide what to do with the matured amount during the
grace period of 7 days. It also restricts the holder from withdrawing the
amount on demand or paying a penalty, otherwise. When the Certificate of
Deposit matures, the principal amount along with the interest earned is
available for withdrawal

2 Discuss the role and functions of Financial Market (2017)

ANS Financial markets refer broadly to any marketplace where the trading
of securities occurs, including the stock market, bond market, forex market, and
derivatives market, among others. Financial Market refers to a marketplace,
where creation and trading of financial assets, such as shares, debentures, bonds,
derivatives, currencies, etc.
Roles and Functions of Financial Market

1.Price Determination

2 Funds Mobilization
3 Liquidity
4 Risk sharing
5 Easy Access
6 Reduction in Transaction Costs and Provision of the Information
7 Capital Formation

MANASA H
Asst Professor, Dept of Management EWCM
3 What is book building? Explain the steps involved in book building (2017)

ANS Book building is the process by which an underwriter attempts to

determine the price at which an initial public offering (IPO) will be offered.The
process of price discovery involves generating and recording investor demand for
shares before arriving at an issue price.

Book building is the de facto mechanism by which companies price their IPOs and
is highly recommended by all the major stock exchanges as the most efficient way
to price securities

Process of Book Building

1. The Issuer who is planning an offer nominates lead merchant banker(s) as ‘book
runners’.

2. The Issuer specifies the number of securities to be issued and the price band for
the bids.

3. The Issuer also appoints syndicate members with whom orders are to be placed
by the investors.

4. The syndicate members put the orders into an ‘electronic book’. This process is
called ‘bidding’ and is similar to open auction.

5. The book normally remains open for a period of 5 days.

6. Bids have to be entered within the specified price band.

7. Bids can be revised by the bidders before the book closes.

8. On the close of the book building period, the book runners evaluate the bids on
the basis of the demand at various price levels.

9. The book runners and the Issuer decide the final price at which the securities
shall be issued.
MANASA H
Asst Professor, Dept of Management EWCM
10. Generally, the number of shares is fixed; the issue size gets frozen based on the
final price per share.

4 What is Money Market? Explain the different types of money market

instruments (2017,2019)
ANS Money Market’ is used to define a market where short-term financial
assets with a maturity up to one year are traded. In other words, the money market
is a mechanism which facilitate the lending and borrowing of instruments which
are generally for a duration of less than a year. High liquidity and short maturity
are typical features which are traded in the money market.
Money Market Instruments
• Call Money Market
• Treasury Bills
• Commercial Papers
• Certificate of Deposit
• Commercial Bills
• Reserve Repos

5 Explain the constituents of financial market (2018,2020)

ANS

MANASA H
Asst Professor, Dept of Management EWCM
 Financial market

Capital Market Money Market

1.Call Money Market

2.Treasury Bills
Primary Market Secondary Market 3.Commercial Papers
4. Certificate of
Deposite
5. Commercial Paper
6. Reserve Repos

6 Explain the various methods adopted by corporate entities for marketing

the securities in the new issues market (2018)
ANS
1. Companies Issuing Share & Debenture
2. SEBI ( Regulator )
3. RBI ( Regulator & issuer of money market on behalf of central govt )
4. Commercial Bank
5. Stock Exchange
6. Insurance Companies
7. Investor
8. Marchant Bank

MANASA H
Asst Professor, Dept of Management EWCM
 7 What is capital market? Explain different instruments of capital market
(2019)
ANS Capital Market, is used to mean the market for long term investments,
that have explicit or implicit claims to capital. Long term investments refers to
those investments whose lock-in period is greater than one year.

1. Equity Share / ordinary share:

(a) Initial Public Offer ( IPO)

Reasons for IPO:

 Funding of Project, Expansion Plan
 Enhance corporate images

(b) Subsequent Issue

(c) Right Issue
(d) Private Placement
(e) Preferential Allotment
2Preference Shares
3 Debentures/ Bonds

8 What are objectives of money market? Explain the sub markets operating in
a typical money market (2020)
ANS Money Market’ is used to define a market where short-term financial
assets with a maturity up to one year are traded. In other words, the money market
is a mechanism which facilitate the lending and borrowing of instruments which
are generally for a duration of less than a year. High liquidity and short maturity
are typical features which are traded in the money market.
Objectives of Money Market
1. Highly Organized Banking system
2. Financing industry
3. Financing Trade

MANASA H
Asst Professor, Dept of Management EWCM
 4. Uniformity interest rate
5. Encourages economic growth
6. Helps to government
7. Proper allocation of resources
8. Profitability Investments
9. International Attractions
10.Effective implementation of Monetary Policy
Sub markets operating in a typical money market
• Call Money Market
• Treasury Bills
• Commercial Papers
• Certificate of Deposit
• Commercial Bills
• Reserve Repos

MANASA H
Asst Professor, Dept of Management EWCM
 MODULE – 6
STOCK EXCHANGE

1.Discuss the role and functions of stock Exchange (2016,2018,2019) / Explain

the distinctive features of stock markets in India.(2017)
ANS A stock exchange is a market place where financial securities issued by the
companies are brought and sold. Stock exchange is an organized market for buying
and selling corporate and other securities. Here securities are purchased and sold
out as per certain well defined rules and regulation.
Features/ Functions/Roles of Stock Exchange
1. Ensure Liquidity of Capital
2.Continuous Market for Securities
3.Evaluation of Securities:
4.Mobilising Surplus Savings
5.Helpful in Raising New Capital
6.Safety in Dealings
7.Listing of Securities:
8.Platform for Public Debt
9.Clearing House of Business Information
10 Facilitates Healthy Speculations
11 Serves as Economic Barometer

2.What are the services provided by a stock exchange? Explain the distinctive
features of stock markets in India.(2017)
ANS
A Services to the Investors
1. Investment guide
2. Liquidity of investment
3. Safety of investment due to fair dealings
4. Better use of capital
5. Protection from bad deliveries
6. The high collateral value of listed securities

MANASA H
Asst Professor, Dept of Management EWCM
 B Services to the Corporate Sector
1. The wide market for new securities
2.Increasing goodwill of the company
3.Assist in the development of companies
4.Transfer of securities at suitable prices
5.Creation of investors confidence
6.Knowledge about future investment
7.Encouragement to efficient companies

C Functions / Services to the Society

1.Capital formation
2.Utilizing scarce capital resources for productive purposes

3.What is listing? Explain different types of Listing (2019)

ANS The admission of the security of a public limited company on a
recognized stock exchange for trading are called as listing. Listing of securities is
undertaken with the primary objectives of providing profitability, liquidity and
transferability of securities
Types of Listing of Securities
1 Initial listing
2 Listing for public Issue
3 Listing for Rights Issue
4 Listing of Bonus shares
5 Listing for merger or amalgamation

4.What are the steps in securities trading?/ steps in trading in stock exchange
ANS
1. Selection of a broker
2. Opening Demat Account with Depository

3. Placing the Order

4. Executing the Order

5. Settlement

 On the spot settlement

MANASA H
Asst Professor, Dept of Management EWCM
  Forward settlement

5.Discuss the regulatory frame work of stock exchanges in India(2020)

ANS The four main legislation governing the securities are
 The SEBI act 1992, which establishes SEBI to protect investors and
develop and regulates securities market
 The Companies Act of 1956, which sets out the code of conduct for the
corporate sector in relation to issue, allotment and transfer of securities
disclosures to be made to the public issues
 The Securities Contract Regulation Act 1956 which provides for
regulation of transactions in securities through control over stock exchange
 The Depository Act of 1996 which provided for electronic maintenance
and transfer of ownership and Demat Securities

Governing Body of the Stock Exchange

The governing body of the stock exchange consist of 13 members of
which 6 members of the stock exchange are elected by the members of the
stock exchange.
 Central government nominates not more than 3 members
 The board nominates 3 public Representatives
 SEBI nominates persons not exceeding 3
 Stock exchange appoints 1 executives directors
 One third of the elected members retire at annual general meetings.

MANASA H
Asst Professor, Dept of Management EWCM