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 This chapter will help the readers to:
◦ Define the Meaning of Financial Services
◦ Understand the Features of Financial Services
◦ Learn about the Challenges Faced by the Financial
Service Industry
◦ Illustrate the Types of Financial Services

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 Because of innovation in finance, the financial

products and services have become one of

the significant contributors to economic

development.

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 A precise definition of financial services is given
in section 65(10) of the Finance Act 1994. As per
the act, if a banking company or a financial
institution or a non-banking financial company
(NBFC) provides the following services, then
these services are financial services.
◦ Leasing and hire purchase
◦ Credit card services
◦ Asset management services (mutual funds, etc.)
◦ FOREX broking
◦ Portfolio management
◦ Venture capital and so on…

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 Intangible
 Short Life
 Indivisibility
 Importance of Information
 Dynamic

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 Lack of awareness
 Lack of qualified personnel for financial
service industry
 Specialized Services. vs diversified services
 Lack of research skills and non-availability of
data

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 Fund-based services involves funds of financial institutions.
Under this category, the following types of financial services are
included:
a. Lease financing
b. Hire-purchase
c. Factoring
d. Forfaiting
e. Venture capital
f. Consumer credit
g. Insurance services
h. Housing finance
i. Mutual funds
j. Participating in money market
k. Underwriting
l. Bills discounting

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 In such types of financial services, funds of
financial institutions are not involved, but some
fees/commission is paid on receiving such
services. Financial service providers receive
fees/commission for providing such services.
Under this category, the following types of financial
services are included:
a. Credit rating
b. Securitization
c. Loan syndication
d. Merger and acquisition
e. Merchant banking and issue management
f. Advisory/consultancy services
g. Loan syndication
h. Portfolio management

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 The efficiency of financial service providers directly affects
the channelization of savings and investments in the country.
 Majority of the financial institutions can be categorized into
banking and non-banking financial companies.
 Financial services are known for their features like intangible,
short life, importance of information, and dynamic.
 Most of the financial services are divided into fund based and
non-fund based services. The fund based services may
include, lease financing, hire-purchase, factoring, forfaiting,
venture capital, consumer credit, and insurance services, etc.
And non-fund based services may include, credit rating,
securitization, loan syndication, merger and acquisition and
other advisory and consultancy services.

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