Financial Services

Non-Fund based activities:

 Financial intermediaries provide services on the basis of non-fund activities
also. This can the basis of non-fund activities also. This can be called 'fee
based' activity. Today be called 'fee based' activity. Today customers,
whether individual or corporate, customers, whether individual or
corporate, are not satisfied with mere provisions of are not satisfied with
mere provisions of finance. They expect more from financial finance. They
expect more from financial services companies. Hence a wide variety
of services companies. Hence a wide variety of services, are being
provided under this head.
 Fund based activiteies:
 Fund based income comes mainly from interest spread (thedifference between the interest earned and
interest paid), leasedifference between the interest earned and interest paid), leaserentals, income from
investments in capital market and realrentals, income from investments in capital market and realestate.
On the other hand, fee based income has its sourcesestate. On the other hand, fee based income has its
sources
 inin
 merchant banking, advisory services, custodial services, loanmerchant banking, advisory services,
custodial services, loansyndication, etc. In fact, a major part of the income is earnedsyndication, etc. In
fact, a major part of the income is earnedthrough fund-based activities. At the same time, it involves
athrough fund-based activities. At the same time, it involves alarge share of expenditure also in the form
of interest andlarge share of expenditure also in the form of interest andbrokerage. In recent times, a
number of private financialbrokerage. In recent times, a number of private financialcompanies have
started accepting deposits by offering a verycompanies have started accepting deposits by offering a
veryhigh rate of interest. When the costhigh rate of interest. When the cost
 of of
 deposit resources goesdeposit resources goesup, tin" (ending rate should also go up. It means that
suchup, tin" (ending rate should also go up. It means that suchcompanies have to compromise the
quality of its investments.companies have to compromise the quality of its inve
Fee based finacial services

 Fee based financial services are those services wherein financial

institutions operate in specialized fields to earn a substantial income
in the form of fees or dividends or brokerage on operations.
The Major fee based financial
services
 Credit Cards
 Debit Cards
 Smart Cards
 ATM
 Safe Lockers
 Check
 Demand Drafts
 Bancassurance
 Significance & Utility of FS:
 The significance of FS lies in:
1. Channelizing the funds for economic growth & development of country
2. Implementing monetary and debt management policies of govt.
 Its utility lies in the following:
1. FS form a major part of GDP.
2. It ensures there is no shortage of funds for productive ventures.
3. IT reduces cost of transaction and borrowing by providing adequate
financial structure and system.
4. It helps in making good financial decisions.
5. It aids in allocation of risk and helps to minimize risk.
6. It aids in financial deepening and broadening.
7. It generates employment.
8. It links entrepreneurs to investors and business organizations to lending
institutions.
Conclusion

 The financial service industry in India consists of various Financial

Institutions (FIs) such as finance companies, commercial banks,
securities funds and investment banks, mutual funds and insurance
companies, etc. The basic function of these financial institutions
involves channelizing public money in a profitable manner by
bearing sufficient risk and in turn distributing profits by the way of
interest and dividends to the investors. In the economy, FIs may be
categorized in different groups but all of them face major kind of
common risks such as liquidity risk, interest rate risk due to mismatch
between its asset and liabilities, credit risk in the form of not honoring
contract by counterparty, operational risk arising due to carrying
business, external and internal frauds, etc.