50914617 financial services ppt

7/30/2019 50914617 Financial Services Ppt

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Financial System

Existence of a well organized financialsystem

Promotes the well being and standard ofliving of the people of a country

Money and monetary assets

Mobilize the saving

Promotes investment


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Financial System of any country consistsof financial markets, financial

intermediation and financial instrumentsor financial products

Suppliers of funds(Mainly households)Flow of financial services

Incomes , and financial

claims

Seekers of funds(Mainly business firms

and government)

Flow of funds (savings)


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Indian Financial System

Un-Organized

OrganizedMoney lenders

Local bankers

Traders

Landlords

Pawn brokers

Regulators

Financial Institutions

Financial Markets

Financial services

Financial Instruments


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Organized Indian Financial System

Money MarketInstrument

Capital MarketInstrument

Forex

Market

Capital

Market

Money

Market

Credit

Market

Primary Market

FinancialInstruments FinancialMarkets FinancialIntermediaries

Secondary Market

Regulators

1.MoF

2.SEBI

3.RBI

4.IRDA


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Indian Capital Market

Market Instruments Intermediaries

Primary Secondary

Equity DebtHybrid

Regulator

Brokers

Investment BankersStock ExchangesUnderwriters

SEBI

Players

Corporate IntermediariesCRA Banks/FI FDI /FIIIndividual


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Why Capital Markets Exist

Capital markets facilitate the transfer of capital (i.e.financial) assets from one owner to another.

They provide liquidity.

Liquidity refers to how easily an asset can betransferred without loss of value.

A side benefit of capital markets is that thetransaction price provides a measure of the value of

the asset.


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Role of Capital Markets

Mobilization of Savings & acceleration of CapitalFormation

Promotion of Industrial Growth

Raising of long term Capital

Ready & Continuous Markets

Proper Channelisation of Funds

Provision of a variety of Services


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Capital Market Instruments

Derivative

Market1.ExchangeTraded

2.Future & Option

a. Index

b. Stock

Equity Debt

Primary

Market1.Public

Issue

2. Private

Placement

a. Domestic Market

b. International Market

Secondary

Market1.NSE

2.BSE

3.OTCEI

4.ISE

5.RSE

Private

CorporateDept.

PSU Bond

Market

Govt.

Securities

Market

Primary Segment Secondary Segment


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Factors contributing to growth of Indian Capital Market

Growth of underwriting business

Setting up of SEBI

Mutual Funds

Credit Rating Agencies


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Indian Capital Market deficiencies

Lack of transparency

Physical settlementVariety of manipulative practices

Institutional deficiencies

Insider trading


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Money Market

Market for short-term money and financial assetsthat are near substitutes for money.

Short-Term means generally period upto one yearand near substitutes to money is used to denote anyfinancial asset which can be quickly converted intomoney with minimum transaction cost


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Money Market

It is a place for Large Institutions and governmentto manage their short-term cash needs

It is a subsection of the Fixed Income Market

It specializes in very short-term debt securities

They are also called as Cash Investments


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Defects of Money Market

Lack of Integration

Lack of Rational Interest Rates structure Absence of an organized bill market

Shortage of funds in the Money Market

Seasonal Stringency of funds and fluctuations inInterest rates

Inadequate banking facilities


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Money Market Instruments

Treasury Bills

Commercial Paper

Certificate of Deposit

Commercial Bills Term Money

1. Primary Segment2.Secondary Segment

Call Money Market


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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 formoney. The term short-term means generally a period up toone year and near substitutes to money is used to denote anyfinancial asset which can be quickly converted into money

with minimum transaction cost.

Some of the important money market instruments are brieflydiscussed below;

1. Call/Notice Money2. Treasury Bills3. Term Money4. Certificate of Deposit5. Commercial Papers
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1. Call Money Market

Loan disbursed by commercial banks

1 day 7 days

Bank can recall the loan at its

maturity

Usually advanced to bill brokers & stock exchange brokers.

2. Term Money

Term Money market for deposits of maturity beyond 14 daysis referred to as the term money market. The entryrestrictions are the same as those for Call/Notice Moneyexcept that, as per existing regulations, the specified entitiesare not allowed to lend beyond 14 days.


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3. Treasury Bills.

Government Paper Securities

Duration of 91 days

Promissory note of the government to pay a specifiedsum after a specified period


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4. Certificate of Deposits

Certificates of Deposit (CDs) is a negotiable money market instrumentand issued in dematerialized form or as a Usance Promissory Note, forfunds deposited at a bank or other eligible financial institution for aspecified time period.

Guidelines for issue of CDs are presently governed by various directivesissued 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, termdeposits, commercial papers and interoperate deposits should notexceed 100 per cent of its net owned funds, as per the latest auditedbalance sheet.


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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 aninstrument.

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 thecompany, as per the latest audited balance sheet, is not less than Rs. 4crore; (b) the working capital (fund-based) limit of the company fromthe banking system is not less than Rs.4 crore and (c) the borrowalaccount of the company is classified as a Standard Asset by thefinancing bank/s. The minimum maturity period of CP is 7 days.


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The capital market generally consists of the following long

term period i.e., more than one year period, financialinstruments; In the equity segment Equity shares,preference shares, convertible preference shares, non-convertible preference shares etc and in the debt segmentdebentures, zero coupon bonds, deep discount bonds etc.


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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


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International CapitalMarkets

Development attributed to following factors:

investors need to avoid taxes in their own countryand to ensure protection against depreciating home

currencies. emergence of new technologies in the area of

financial services, development and deregulation offinancial markets


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Euro Bonds

These are the bonds that are issued outside thecountry 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


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Foreign Bonds

Bonds floated in the domestic markets denominatedin the domestic currency by the non-resident.

Yankee Bonds

Samurai Bonds Bulldog Bonds

Shibosai Bonds


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Yankee bonds

These are US dollar denominated issues by theforeign borrowers in the US markets.

Features

Regulated by the SEC. Requires more disclosure thanthat 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


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Samurai Bonds

Yen denominated bonds issued in the Japanesemarkets by the non- Japanese companies.

Features

Maturity: 3-20 years Borrowers in order of priority sovereigns,

supranational and their entities, high quality privatecorporations having some kind of Japanese trade

links.


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Bull Dog Bonds

Sterling denominated foreign bonds floated in theUK market.

Features:

Maturity 5 for short maturities 25 for longmaturities.

Subscribed by the long-term institutional investors-pension funds, life insurance Cos

Bonds offered by placing or offer for sale process willhave to be listed on the London SE


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Shibosai Bonds

Privately placed bonds issued in the Japanesemarket

Features

Offered to institutional investors, including banksthe issues eligibility, coupon rate, etc governed bythe Japans MOF guidelines

Pricing done based on base rate and spread which

depends on the rating of Co or country.


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Forex Markets

Foreign Exchange Market: Deals with transactions in currenciesother 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


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Equity Market

2. Secondary Market

Securities already issued in the primary market are tradedin the secondary market. Provides liquidity to the securitiesheld by the investors.

Provides liquidity to the securities held by the

investors.

Operates through stock exchanges that regulate the tradingactivities in this market.


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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


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Financial Institution


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Financial Institution

Financial Institutions

Industrial Development Bank of India (IDBI)

Industrial Finance Corporation of India (IFCI )

Industrial Investment Bank of India (IIBI)

Export and Import Bank of India

State Financial Corporations

State Industrial Development Corporations


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Non-banking financial institution

Non-Banking Financial Companies

Investment Trusts or Investment Companies: Close endorganizations, having fixed amount of authorized capitalprovides 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.


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Hire Purchase Finance Companies

Lease Finance Companies

Housing Finance Companies

National Housing Bank : Wholly owned by subsidiary ofRBI, Aim is to promote housing finance Institution atlocal & regional levels, It refinance housing loans toscheduled commercial & co operative banks, housingfinance companies etc.

Venture Capital Funding Companies


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DEVELOPMENT FINANCE INSTITUTION

All India Financial Institutions

IFCI: Industrial Finance Corporation of India

The IFCI, Indias first DFL, was established on 1 July 1948

IFCI principal activities can be categorised into

- Financing

- Promotional activities


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FINANCING ACTIVITIES

Project Activities

Financial Services

Corporate advisory Services

Corporate advisory Services to Foreign Investors


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PROMOTIONAL ACTIVITIES

Played a key role in the development of cooperatives in the sugar andtextile 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 andinstitutions.

It has developed many institutions like

Management Development institute Investment and credit rating agency

Tourism finance corporation of India

Rashtriya Gramin Vikas Nidhi


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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 theemerging 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 andoperational areas

It has strengthened its risk management techniques and is putting inefforts 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


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INDUSTRIAL DEVELOPMENT BANK OF INDIA

Established in 1964 by Parliament as a wholly owned subsidiary of theRBI

In 1976, the banks ownership was transferred to the Government ofIndia

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)


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IDBI has undertaken several initiatives to reposition itself as a universalBank:-

In April 2001, IDBI appointed Boston consulting Group India PrivateLimited (BCG) as consultant to draw up a road map for conversion intoa universal bank

Formation of high level risk management committee to develop overallrisk management policy

The bank has constituted a credit risk management group to evaluatecredit 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 andfinancial institutions


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IDBI-SERVICES

IDBI provides Merchant banking and wide array of corporate advisoryservices 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 anddivestment of equity

the bank also offers a number of Forex related services on acommission basis including opening of letters of credit and remittance

of foreign currency on behalf of its assisted companies for import ofits goods and services


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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 purchasebases

It was renamed as industrial investment bank of India & broughtunder companies act 1956 since March 17 1997.

It finances new projects , modernization work , balancing equipmentneeds , correcting imbalance in current Assets , relieving strains oncash resources , repayment of pressing liabilities and other activities.


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IDFC

Conceived as an institution to facilitate the flow of private finance tocommercially 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-businessinfrastructure.

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.


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SIDCS

Established under the companies act 1956, as wholly ownedundertakings of the state governments with the specific objective ofpromoting and developing medium and large industries in therespective 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 includeTechnical guidance, assistance in plant location and coordination with

other agencies.


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EXIM BANK

Established in 1982, is a wholly government owned financial institutionsetup for the purpose of financing, facilitating and promoting Indiasforeign trade.

Its financing services include a range of fund and non-fund basedprograms 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.


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SFC

It is a state level development bank setup under theSFCs act, 1951, for the development of small andmedium scale industries in their respective states.

It aims at bringing about balanced regionaldevelopment by wider dispersal of industries andgenerating larger employment opportunities.

It includes composite loan scheme, scheme for

women entrepreneurs, modernization scheme,equipment finance scheme etc.


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SIDBI

It offer a chain of financial product covering microfinance, business,incubation, venture capital etc.

It also provides support services such as training,market information and advise for enhancing theinherent strength of small scale units.


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Products And Services of SIDBI

Direct finance scheme.

Bills finance scheme.

Re-finance scheme.

International finance scheme. Marketing finance and development schemes.

SIDBI foundation for micro-credit.

Other schemes. Promotional and development activities.

Fixed deposit/bond.


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Financial Regulators


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Financial Regulators

Securities and Exchange Board of India (SEBI)

Reserve Bank of India

Ministry of Finance

IRDA

Security Exchange Board of India


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Security Exchange Board of India(SEBI)

Securities and Exchange Board of India(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


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Functions Of SEBI

Regulates Capital Market.

Checks Trading of securities.

Checks the malpractices in securities market.


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Functions Of SEBI

It enhances investor's knowledge on market byproviding education.

It regulates the stockbrokers and sub-brokers.

To promote Research and Investigation

Obj ti f SEBI


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Objectives of SEBI

It tries to develop the securities market.

Promotes Investors Interest.

Makes rules and regulations for the securitiesmarket.


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R B k f I di


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Reserve Bank of India

Established on April 1, 1935 in accordance with theprovisions of the RBI Act, 1934.

The Central Office of the Reserve Bank has been in

Mumbai.

It acts as the apex monetary authority of the country.

F ti Of RBI


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Functions Of RBIMonetary Authority:

Formulation and Implementation of monetarypolicies.

Maintaining price stability and ensuring adequateflow 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.


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Regulator and supervisor of the financial system:

Prescribes broad parameters of banking operations Maintain public confidence, protect depositors' interest

and provide cost-effective banking services.

Authority On Foreign Exchange:

Manages the Foreign Exchange Management Act, 1999. Facilitate external trade, payment, promote orderly

development and maintenance of foreign exchangemarket.

Functions Of RBI


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Developmental role:

Performs a wide range of promotional functions tosupport national objectives.

Related Functions:

Banker to the Government: performs merchant bankingfunction for the central and the state governments.

Maintains banking accounts of all scheduled banks.

Functions Of RBI

M t M


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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 iscurrently at 5.0 per cent.

Obj ti Of M F


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Objectives Of MoF

Reorientation of the economy Macro economic stability

To Increase competitive efficiency in the

operations

To remove structural rigidities and inefficiencies

To attain a balance between the goals of financial

stability & integrated & efficient markets

R d ti


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Recommendations

Reduce the level of state ownership in banking

Lift restrictions on foreign ownership of banks

Spur the development of the corporate-bondmarket

Strengthen legal protections

R d ti


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Recommendations

Deregulate the insurance industry

Drop proposed limits on pension reforms

Increase consumer ownership of mutual-fundproducts

Introduce a gold deposit scheme

R d ti


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Recommendations

Speed up the development of electronic payments.

Separate the RBI's regulatory and central-bankfunctions

Lift the remaining capital account controls

Phase out statutory priority lending andrestrictions on asset allocation

IRDA


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IRDA

Agent Registration

Portal

Designated

Person

(Ins. Co.)

Service Provider

-----------------------

1.Care-Site

2.Tech Support

Ins. Co.(Development

Officer)

I I I

EXAM

IRDA

Agent TrainingInstitute

Agents

IRDA Function


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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


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50914617 financial services ppt

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