Contents in Brief

1. Financial Markets and Financial Services:

An Introduction 1-14

2. Capital Market 15-35

3. Primary Market 36-84

4. Participants in the Primary Market 85-108

5. Legislations and Regulators in the Capital Market 109-119

6. Secondary Market 120-137

7. Operators in the Secondary Market 138-155

8. Stock Exchanges 156-181

9. Bombay Stock Exchange and National Stock

Exchange of India 182-196

10. Over the Counter Exchange of India 197-205

11. Stock Market Indices 206-220

12. Derivatives Market 221-248

13. Money Market 249-274

14. Corporate Debt Market 275-293

15. Government Securities Market 294-313

16. Securities and Exchange Board of India 314-338

17. Credit Rating 339-355

18. Factoring and Forfeiting 356-378

x Financial Markets and Financial Services in India

19. Discounting of Bills 379-387

20. SecuritisationofDebt 388-410

21. Credit Information Bureaus 411-428

Bibliography 429-438

Index 439-446

Contents in Detail

Conversion Table vAbout the Book viiAbout the Authors viiiContents in Brief ix-xContents in Detail - xi-xxxiiiPreface xxxiv-xxxviiAbbreviations/Acronyms xxxviii-xlii

1. Financial Markets and Financial Services:An Introduction 1-14

1.1 Financial Markets1.1.1 Classification of Financial Market1.1.2 Factors Affecting Financial Market

1.2 Financial Services1.2.1 Kinds of Financial Services

2. Capital Market 15-352.1 Meaning of Capital Market2.2 Functions of Capital Market2.3 Capital Market Segments2.4 Basic Capital Market Instruments

2.4.1 Equity Securities2.4.2 Preference Shares

2.5 Debt Securities2.5.1 Debentures

2.6 Bonds2.6.1 Indentures and Covenants2.6.2 Types of Bonds

2.7 Advantages of Corporate Bonds2.8 Disadvantages of Corporate Bonds

3. Primary Market 36-843.1 Introduction3.2 Characteristics of Primary Market3.3 Primary and Secondary Markets

xii Financial Markets and Financial Services in India

3.4 Kinds of Issues3.5 Public Issue

3.5.1 Initial Public Offer (IPO)3.5.2 Further Public Offer (FPO)3.5.3 Difference between IPO and FPO

3.6 Rights Issue3.7 Bonus Issue3.8 Private Placement

3.8.1 Preferential Allotment3.8.2 Qualified Institutional Placement

3.9 Issue of Shares in the Primary Market3.10 Entry Norms for Unlisted Companies Making a Public Issue

(IPO)3.11 Alternative Routes to Companies not Satisfying any of the

above Conditions3.11.1 First Alternative Route3.11.2 Second Alternative Route

3.12 Guidelines for Public Issue of Shares by Already ListedCompanies

3.13 Alternative Route3.14 Exemptions of Eligibility Conditions for Issue of Shares3.15 General Conditions Governing the Issue of Shares in the

Primary Market3.16 Pricing of Equity Shares

3.16.1 Types of Pricing3.16.2 Fixing of Face Value of Shares for Public Issue/Rights

Issue3.16.3 Issue of Shares at a Premium3.16.4 Issue of Shares at a Discount

3.17 Promoters Contribution3.17.1 Lock-in Period of Promoters Contribution3.17.2 Securities Ineligible for Computation of Promoters

Contributions3.17.3 Exemption from Promoters Contribution

3.18 Pre-Issue Duties of a Company in Respect of Issue of Shares3.18.1 Drafting Memorandum of Understanding and

Allocation of Responsibilities3.18.2 Exercise of Due Diligence3.18.3 Filing Offer Document to the SEBI

Contents xiii

3.18.4 Payment of Requisite Fees to the Board3.18.5 Submission of Undertaking to SEBI3.18.6 Filing of Due Diligence Certificate3.18.7 Despatch of Issue Material3.18.8 Agreement with Depositories3.18.9 Mandatory Collection Centres3.18.10 Authorized Collection Agents3.18.11 Appointment of Compliance Officer3.18.12 Minimum Number of Applications for Shares3.18.13 Minimum Application Money3.18.14 Minimum Subscription3.18.15 Period of Issue Open for Subscription3.18.16 Basis of Allotment of Shares in Case of

Oversubscription3.18.17 Net Offer to the Public3.18.18 Reservation of Securities to Small Individual

Applicants3.18.19 Reservation of Securities to Small Individual

Applicants3.18.20 Reservation of Securities to other Categories3.18.21 Firm Allotment3.18.22 Green Shoe Option3.18.23 Guidelines on Advertisement in Connection with

Capital Issues3.18.24 Post Issue Advertisements

3.19 Rights Issue3.20 Bonus Issue

3.20.1 SEBI Guidelines on Issue of Bonus Shares3.21 Private Placement

3.21.1 SEBI guidelines for Preferential Allotment of Shares3.22 Prospectus

3.22.1 Red Herring Prospectus3.22.2 Abridged Prospectus3.22.3 Offer Document3.22.4 Placement Document3.22.5 Need for a Prospectus3.22.6 Contents of Prospectus

3.23 Book Building3.23.1 Definition of Book Building

xiv Financial Markets and Financial Services in India

3.23.2 Procedure in Book Building Process3.23.3 Bidding Procedure3.23.4 Advantages of Book Building

3.24 Stock Invest Scheme3.25 Issue of Sweat Equity3.26 Employees Stock Option Scheme

3.26.1 Guidelines on Employee Stock Option Scheme3.27 Employees Stock Purchase Scheme3.28 Buy Back of Securities

3.28.1 Sources for Buy Back of Shares3.28.2 Objectives of Buy Back of Shares3.28.3 General Conditions to be satisfied for Buy Back of

Securities3.28.4 SEBI Guidelines for Buy Back of Securities3.28.5 Buy Back from Existing Holders through Tender Offer3.28.6 Buy Back from Open Market through Book Building

Process3.28.7 Buy Back through Stock Exchange3.28.8 From Odd-lot holders

4. Participants in the Primary Market 85-1084.1 Introduction4.2 Merchant Bankers4.3 Bankers to an Issue

4.3.1 Grant of Registration as Bankers to the Issue4.3.2 Payment of Fees4.3.3 Agreement with the Issuer Company4.3.4 Redressal of Grievances4.3.5 Collection Centres4.3.6 Duties of Bankers to the Issue4.3.7 Code of Conduct for the Bankers to an Issue

4.4 Registrar to an Issue4.4.1 Functions of Registrar to an Issue4.4.2 Registration of Registrar to an Issue4.4.3 Grant of Registration as Bankers to the Issue4.4.4 Fee for Registration4.4.5 Agreement with the Issuer Company4.4.6 Appointment of Compliance Officer4.4.7 Duties of Registrar to an Issue

Contents xv

4.4.8 Code of Conduct for Registrar to the Issue4.5 Underwriters to the Issue

4.5.1 Registration of Underwriters4.5.2 Consideration of Application for Registration4.5.3 Payment of Fees4.5.4 Types of Underwriting4.5.6 Underwriting Obligations4.5.7 Code of Conduct for the Underwriters4.5.8 Benefits of Underwriting

4.6 Investment Banks4.7 Depositories

4.7.1 Meaning of Depository4.7.2 Definition of Depository

% 4.7.3 Types of Institutions Eligible for Registration asDepositories

4.7.4 Grant of Registration as Depository4.7.5 Services Provided by Depositories4.7.6 Securities that can be Converted into Dematerialized

Form4.7.7 Depository Participant4.7.8 Types of Institutions Eligible to Act as Depository

Participant4.7.9 Grant of Registration as Depository Participant4.7.10 Dematerialization4.7.11 Depositories in India4.7.12 Advantages of Dematerialization4.7.13 Disadvantages of Dematerialization

4.8 Portfolio Managers4.9 Custodians

5. Legislations and Regulators in the Capital Market 109-1195.1 Introduction5.2 Important Legislations Governing Indian Securities Market

5.2.1 Indian Companies Act, 19565.2.2 Securities Contracts (Regulation) Act, 19565.2.3 Securities and Exchange Board of India Act, 19925.2.4 Depositories Act, 1996

5.3 Regulators in Indian Securities Market5.3.1 Securities and Exchange Board of India

xvi Financial Markets and Financial Services in India

5.3.2 Reserve Bank of India5.3.3 Department of Company Affairs5.3.4 Securities Appellate Tribunal

6. Secondary Market 120-1376.1 Introduction6.2 Securities Dealt in the Secondary Market6.3 Listing of Securities6.4 Objectives of Listing6.5 Acts and Regulations Governing Listing6.6 Companies Act, 1956 Regarding Listing6.7 SEBI Guidelines to Newly Listed Companies6.8 SEBI Guidelines to Listed Companies6.9 Application for Listing6.10 Norms Stipulated by Stock Exchange for Listing

6.10.1 Additional Requirements to be fulfilled6.11 Listing Agreement6.12 Deposit of Security Amount in the Stock Exchange6.13 Allotment of Shares6.14 Trading Permission6.15 Fees Levied by the Stock Exchange for Listing of Securities

6.15.1 Fees Levied by National Stock Exchange6.15.2 Fees Levied by Bombay Stock Exchange

6.16 Central Listing Authority6.17 Listing of Securities Issued on Preferential Allotment Basis or

Under Employees Stock Option Scheme6.18 Issuers Registered Outside India6.19 Consequences of Non-Compliance by Issuer6.20 Delisting of Securities

6.20.1 Voluntary Delisting of Securities6.20.2 Compulsory Delisting of Securities6.20.3 Liquidation or Merger

6.21 Re-admission to Dealings on the Exchange6.22 Trading in Government Securities6.23 Benefits of Listing to Companies6.24 Benefits to thclrivestors6.25 Disadvantages of Listing6.26 Classification of Listed Securities

6.26.1 Cleared Securities

Contents xvii

6.26.2 Non-cleared Securities6.27 Types of Transactions in Stock Exchanges

6.27.1 Spot Delivery Transactions6.27.2 Forward Transactions

7. Operators in the Secondary Market 138-1557.1 Introduction7.2 Membership in Recognized Stock Exchanges7.3 Conditions for Eligibility to Become a Member

7.3.1 Qualification for Members of an Exchange7.3.2 Experience of Members

7.4 Companies Registered Under Companies Act, 19567.5 Procedure for Registration as Stock Brokers7.6 Conditions for Grant of Certificate to Stockbroker7.7 Registration Fees7.8 Capital Adequacy Norms

7.8.1 Basic Minimum Capital7.8.2 Additional Capital

7.9 Code of Conduct for Stockbrokers7.10 Penalties for Default in Case of Stock Brokers7.11 Permissible Activities of Stock Brokers ,7.12 Sub-Broker

7.12.1 Eligibility Criteria for Registration as a Sub-broker7.12.2 Procedure for Registration7.12.3 Registration Fees7.12.4 Code of Conduct for Sub-Brokers

7.13 Types of Members in Stock Exchange7.13.1 Brokers7.13.2 Jobbers7.13.3 Distinction between Brokers and Jobbers7.13.4 Arbitrageur7.13.5 Market Makers7.13.6 Taravaniwala7.13.7 Badliwalas

7.14 Non-members in Stock Exchanges7.14.1 Remisier7.14.2 Authorized Clerk

7.15 Classification of Buyers and Sellers in a Stock Exchange7.15.1 Investors

xviii Financial Markets and Financial Services in India

7.15.2 Speculators7.16 Kinds of Speculators

7.16.1 Bull7.16.2 Bear7.16.3 Stag7.16.4 Lame Duck

7.17 Clearing and Settlement Systems7.18 Trading and Settlement Process

7.18.1 Clearing House7.18.2 Clearing Corporation7.18.3 Clearing Members7.18.4 Custodians7.18.5 Clearing Banks7.18.6 Depositories

7.19 Settlement Cycle7.19.1 Rolling Settlement

8. Stock Exchanges 156-1818.1 Introduction8.2 History of Stock Exchange x

8.3 History of Indian Stock Exchanges8.4 Meaning of Stock Exchange8.5 Definition of Stock Exchange8.6 Characteristics of a Stock Exchange8.7 Objectives of Stock Exchange8.8 Functions of Stock Exchange8.9 Securities Contracts Regulations Act, 19568.10 Role of SEBI in Stock Exchange

8.10.1 Powers of SEBI in Stock Exchanges8.10.2 Powers Delegated by the Central Government to SEBI

8.11 Application for Recognition as Stock Exchange8.12 Grant of Recognition to Stock Exchange8.13 Withdrawal of Recognition8.14 Power to Suspend Business of Recognized Stock Exchange8.15 Power of Stock Exchanges to Make Byelaws8.16 Power of Stock Exchanges to Make Rules8.17 Submission of Annual Returns to the Central Government8.18 Benefits of Stock Exchanges

8.18.1 Benefits to Companies

Contents xix

8.18.2 Benefits to Investors8.18.3 Benefits to the Community

8.19 Limitations of Stock Exchanges8.20 Procedure of Trading

8.20.1 Different Types of Order8.20.2 Margin Levied by Stock Exchange8.20.3 Averaging

8.21 Demutualization of Stock Exchanges8.22 Stock Market Manipulations

8.22.1 Insider Trading8.22.2 Front Running8.22.3 Circular Trading8.22.4 Inside Information8.22.5 Price Rigging8.22.6 Wash Sales8.22.7 Arbitrage8.22.8 Kerb Deals8.22.9 Concerning

8.23 Prohibition of Fraudulent and Unfair Trade Practices8.24 Unfair Trade Practices8.25 Market Halt/Circuit Breaker8.26 Circuit Filter8.27 Stock Exchanges in India

9. Bombay Stock Exchange and National Stock Exchange 182-196of India

9.1 Introduction9.2 Bombay Stock Exchange

9.2.1 Board of Directors9.2.2 Membership in BSE9.2.3 Conditions for Eligibility for Becoming a Member

9.3 Monitoring Business of Members9.4 On-Line Surveillance System9.5 Capital for BSE Membership

9.5.1 Base Minimum Capital9.5.2 Trade Guarantee Fund9.5.3 Additional Capital

9.6 Classification of Securities

xx Financial Markets and Financial Services in India

9.7 BSE Index9.8 Compulsory Rolling Settlement9.9 National Stock Exchange of India

9.9.1 Promoters of NSE9.10 Objectives of NSE9.11 Management of NSE9.12 Screen Based Trading System9.13 Membership in NSE

9.13.1 Eligibility Criteria for Trading Membership9.13.2 Conditions for Membership9.13.3 Education and Experience9.13.4 Trading Membership in Wholesale Debt Market

(WDM)9.13.5 Trading Membership in Capital Market and Futures and

Options Market9.13.6 Trading Membership in Capital Market, Futures and

Options and Wholesale Debt Market9.14 Circuit Breakers

9.14.1 Index-Based Circuit Breakers9.15 Price Bands9.16 NSE Index9.17 Subsidiaries of NSE

9.17.1 National Securities Clearing Corporation Ltd.(NSCCL)

9.17.2 NSE IT Ltd.9.17.3 India Index Services and Products Ltd. (IISL)9.17.4 National Securities Depository Ltd. (NSDL)9.17.5 DotEx International Limited

10. Over the Counter Exchange of India 197-20510.1 Introduction10.2 Meaning of OTCEI10.3 Reasons for the Formation of OTCEI10.4 Establishment of OTCEI10.5 Promoters of OTCEI10.6 Specialties of Over-the-Counter Exchange of India10.7 Membership of OTCEI10.8 Participants/Intermediaries in OTC Market10.9 Securities Traded on the OTCEI

Contents xxi

10.9.1 Listed Securities10.9.2 Permitted Securities10.9.3 Initiated Debentures

10.10 Requirements for Listing on OTCEI10.11 Guidelines for Listing OTCEI Issues10.12 OTCEI's Trading in Unlisted Securities10.13 Market Makers10.14 Types of Market Making

10.14.1 Compulsory Market Making10.14.2 Additional Market Making10.14.3 Voluntary Market Making

10.15 Quotes10.15.1 Standard Quotes10.15.2 Non-Standard Quotes

10.16 Benefits to Companies for Listing in OTCEI10.17 Benefits to Investors

11. Stock Market Indices 206-22011.1 Introduction11.2 Significance of Index Movement11.3 Uses of Stock Index11.4 Disadvantages of Stock Index11.5 Types of Index

11.5.1 Broad Market Index11.5.2 Specialized Index

11.6 Determinants of Stock Index11.7 Different Methodologies for Calculation of Stock Indices

11.7.1 Market Capitalization Methodology11.7.2 Free-Float Market Capitalization Methodology

11.8 Stock Indices of Bombay Stock Exchange11.8.1 SENSEX11.8.2 SENSEX-Criteria for the Selection of Scrips11.8.3 SENSEX Calculation Methodology11.8.4 Dollex Series of BSE Indices11.8.5 BSE-100 Index11.8.6 BSE-200 Index11.8.7 BSE-500 Index11.8.8 BSE Mid-Cap and BSE Small-Cap Index11.8.9 Sectoral Indices of BSE

xxii Financial Markets and Financial Services in India

11.8.10 BSE Fast Moving Consumer Goods (FMCG)11.8.11 BSE Capital Goods11.8.12 BSE Consumer Durables11.8.13 BSE Healthcare11.8.14 BSE Capital Goods, BSE Consumer Durables, BSE IT11.8.15 BSE BANKEX11.8.16 BSE Auto11.8.17 BSE Metal11.8.18 BSE Oil and Gas11.8.19 BSE Realty11.8.20 BSE Power

11.9 Indices of National Stock Exchange of India '11.9.1 S&PCNX NIFTY11.9.2 S&P CNX Nifty Junior11.9.3 S&PCNX 10011.9.4 S&P CNX 500 Equity Index11.9.5 S&P Nifty Midcap 5011.9.6 S&P CNX Midcap11.9.7 S&P CNX Defty11.9.8 Sectoral Indices of NSE11.9.9 CNX MNC Index11.9.10 CNX PSE Index11.9.11 CNX IT Index11.9.12 CNX FMCG Index11.9.13 CNX Service Sector Index11.9.14 CNX Bank Nifty11.9.15 S&P CNX Industry Indices11.9.16 CNX Energy Index11.9.17 CNX Pharma Index11.9.18 CNX Infrastructure Index11.9.19 CNX PSU BANK Index11.9.20 CNX Realty Index

12. Derivatives Market 221-24812.1. Introduction12.2 Meaning of Derivatives12.3 Definition12.4 Derivative Instruments12.5 Type of Underlying

Contents xxiii

12.6 Basics of Derivatives12.7 Financial Derivatives12.8 History of Derivatives12.9 Development of Derivatives Market in India12.10 Functions of Derivatives Market12.11 Factors Driving the Growth of Financial Derivatives12.12 Benefits of Derivatives12.13 Disadvantages of Derivatives12.14 Types of Derivative Contracts

12.14.1 Forward Contracts12.14.2 Futures Contracts12.14.3 Options12.14.4 Types of Options

12.15 Participants in the Derivatives Market12.15.1 Hedgers12.15.2 Speculators12.15.3 Arbitrageurs

12.16 Structure of Derivative Markets in India12.17 Types of Derivative Market

12.17.1 Exchange Traded Derivatives Market12.17.2 Over the Counter Derivative Market

12.18 Membership in the Equity Derivatives Market12.18.1 Trading Member12.18.2 Clearing Member12.18.3 Self-clearing Member12.18.4 Professional Clearing Member

12.19 Derivative Instruments Available in NSE12.20 BSE Derivative Products

12.20.1 Index12.20.2 Bond Index12.20.3 Volatility Index12.20.4 Index Futures12.20.5 Index Option12.20.6 Stock Futures12.20.7 Stock Options12.20.8 Weekly Options12.20.9 Mini Derivatives

12.21 Requirements for Membership of Equity DerivativesExchange/Clearing Corporation

xxiv Financial Markets and Financial Services in India

12.22 Conditions Stipulated by SEBI on the Regulation ofSales Practices

12.23 Eligibility Criteria for Stocks on which DerivativesTrading may be Permitted

12.24 Discontinuance/Exit of Futures and Options Contracts onStocks

12.25 SEBI Guidelines for Derivative Exchange/Segment and itsClearing Corporation12.25.1 For Derivative Exchange/Segment12.25.2 For Clearing Corporation/House

12.26 Margining System in the Equity Derivatives Market12.26.1 Client Margins

12.27 Measures Specified by SEBI to Protect the Rights of Investorin Derivatives Market

12.28 Currency Futures12.29 Eligibility Criteria for Setting up of Currency Futures

Segment in a Recognized Stock Exchange12.30 Credit Derivatives12.31 Multi-commodity Exchange12.32 Commodity Derivatives

13. Money Market 249-27413.1 Introduction13.2 Definition of Money Market13.3 Features of Money Market13.4 Difference between Capital Market and Money Market13.5 Similarities of Money Market and Capital Market13.6 Constituents of Money Market13.7 Structure of Money Market

13.7.1 Money Market Segments13.7.2 Money Market Institutions13.7.3 Money Market Instruments13.7.4 Certificate of Deposits13.7.5 Features of Certificates of Deposits13.7.6 Issue Size of CDs13.7.7 Issue of Duplicate Certificates13.7.8 Advantages of Certificate of Deposit13.7.9 Commercial Paper13.7.10 Purpose of Introduction of Commercial Paper

Contents xxv

13.7.11 Borrowers of Commercial Paper13.7.12 Buyers of Commercial Paper13.7.13 Features of Commercial Paper13.7.14 Procedure for the Issue of Commercial Paper13.7.15 Requirements for Issuing Commercial Paper13.7.16 Repo and Reverse Repo13.7.17 Features of Repo13.7.18 Instruments used in Repo Market13.7.19 Participants in the Repo and Reverse Repo Market13.7.20 Benefits of Repo13.7.21 Types of Repo13.7.22 Inter Corporate Deposits13.7.23 Participation Certificates13.7.24 Commercial Bills13.7.25 Derivative Usance Promissory Notes13.7.26 Money Market Mutual Funds13.7.27 Treasury Bills

13.8 Shortcomings of Indian Money Market13.9 Reforms in Indian Money Market

14. Corporate Debt Market 275-29314.1 Introduction14.2 Meaning of Debt Securities14.3 Segments of Debt Markets

14.3.1 Government Securities14.3.2 Corporate Securities Market14.3.3 Public Sector Bonds

14.4. Investors in Debt securities/Market14.5 Benefits of Investing in Debt Instruments14.6 Types of Debt Securities

14.6.1 Bonds14.6.2 Debentures14.6.3 Certificate of Deposit14.6.4 Commercial Paper14.6.5 Treasury Bills

14.7 Corporate Debt Market14.7.1 Guidelines to the Companies for Issuing Debt

Securities14.7.2 General Conditions for Issuing Debt Securities

xxvi Financial Markets and Financial Services in India

14.7.3 Other Conditions14.7.4 Disclosures in the Offer Documents14.7.5 Additional Disclosures in Offer Document14.7.6 Filing of Draft Offer Document14.7.7 Mode of Disclosure of Offer Document14.7.8 Advertisements for Public Issues14.7.9 Abridged Prospectus and Application Forms14.7.10 Price Discovery through Book Building

14.8 Minimum Subscription14.9 Underwriting14.10 Requirement of Credit Rating of Debt Instruments14.11 Creation of Charge14.12 Debenture Trustee14.13 Trust Deed

14.13.1 Duties of the Debenture Trustees14.13.2 Fee for Registration as Debenture Trustee14.13.3 Code of Conduct of Debenture Trustees

14.14 Creation of Debenture Redemption Reserve14.15 Distribution of Dividends14.16 Listing of Debt Securities14.17 Conditions for Listing of Debt Securities Issued on Private

Placement Basis14.18 Allotment of Debt Securities14.19 Conditions for Continuous Listing of Debt Securities14.20 Clearing Corporation of India Ltd.

15. Government Securities Market 294-31315.1 Introduction15.2 Meaning of Government Securities15.3 Types of Government Securities15.4 Meaning of Gilt Edged Securities15.5 Issuers of Government Securities15.6 Investors in Government Securities15.7 Features of Government Securities15.8 Regulators in Government Securities Market

15.8.1 Reserve Bank of India15.8.2 Securities and Exchange Board of India

15.9 Segments of Government Securities Market15.9.1 Wholesale Market Segment

Contents xxvii

15.9.2 Middle Market segment15.9.3 Retail Market Segment

15.10 Advantages of Government securities15.11 Instruments in Government Securities Market

15.11.1 Treasury Bills15.11.2 Dated Securities or Government Bonds

15.12 State Development Loans15.13 Any other security created and issued by the Government15.14 Types of Auctions in Government Securities

15.14.1 Yield Based Auction15.14.2 Price Based Auction15.14.3 Multiple Price Based or French Auction15.14.4 Uniform Price Based or Dutch Acution

15.15 Private Placement of Government Securities15.15.1 On-tap Issue

15.16 Issue of Securities in Conversion of Maturing TreasuryBills/Dated Securities

15.17 Retail Issue of Government Securities15.18 Trading of Government Securities in Secondary Market15.19 Demeterialization of Debt Securities15.20 Clearing and Settlement15.21 Important Intermediaries in the Government Securities

Market15.21.1 Primary Dealers15.21.2 Satellite Dealers15.21.3 Subsidiary General Account15.21.4 Constituent Subsidiary General Ledger Account15.21.5 Features of Constituent Subsidiary General Ledger

Account15.21.6 Advantages of Opening Constituent Subsidiary

General Ledger Account15.22 Securities Trading Corporation of India Ltd.

15.22.1 Activities of STCI15.23 Recent Developments in the Government Securities

Market

16. Securities and Exchange Board of India 314-33816.1 Introduction16.2 Objectives of SEBI

xxviii Financial Markets and Financial Services in India

16.3 Powers and Functions of SEBI16.4 Regulatory Jurisdiction of SEBI16.5 Powers of Civil court to SEBI16.6 More Powers of SEBI16.7 Management of SEBI16.8 Removal of Members from Office16.9 Departments in SEBI16.10 Divisions in SEBI

16.10.1 Division of Foreign Institutional Investors (FIIs) andCustodians

16.10.2 Division of Collective Investment Scheme16.10.3 Division of Funds16.10.4 Division of Registration of Market Intermediaries16.10.5 Division of Issues and Listing16.10.6 Division of Corporate Restructuring16.10.7 Division of Investor Assistance and Education16.10.8 Other Divisions

16.11 Efforts towards Investors' Education16.12 Investors' Associations16.13 Investor Grievances Redressal and Guidance16.14 Investor Complaints16.15 SEBI Meeting16.16 Regulations on Provisions of Companies Act16.17 Powers to Issue Directions16.18 Powers Delegated to SEBI under SCR Act16.19 Registration of Intermediaries16.20 Financial Instruments Controlled by SEBI16.21 Penalties Provided under SEBI Act

16.21.1 Penalty for Failure to Furnish Information andReturns

16.21.2 Penalty for Failure by any Person to Enter intoAgreement with Clients

16.21.3 Penalty for Failure to Redress Investors' Grievances16.21.4 Penalty for Defaults in case of Collective Investment

Scheme16.21.5 Penalty for Failure to Observe Rules and Regulations

by an Asset Management Company16.21.6 Penalty for Default in Case of Stock Brokers16.21.7 Penalty for Insider Trading

Contents xxix

16.21.8 Penalty for Non-disclosure of Acquisition of Sharesand Takeovers

16.22 Power of Adjudication16.23 Accounts and Audit16.24 SEBI and Capital Market16.25 SEBI and Primary Market Reforms16.26 SEBI and Secondary Market Reforms16.27 Securities Appellate Tribunal

16.27.1 Appeal to the Securities Appellate Tribunal16.27.2 Powers of Securities Appellate Tribunal16.27.3 Right to Legal Representation16.27.4 Penalties16.27.5 Power to Adjudicate16.27.6 Factors to be taken into Account by Adjudicating

Officer

17. Credit Rating 339-35517.1 Introduction17.2 Meaning of Credit Rating17.3 Objectives of Credit Rating17.4 Credit Rating Agency17.5 Difference between Credit Rating Agency and a Credit Bureau17.6 Types of Credit Rating17.7 Mandatory Rating17.8 Regulators of Credit Rating Agencies17.9 Registration of Credit Rating Agencies

17.9.1 Conditions to be fulfilled for the Grant of Certificate ofRegistration

17.10 Code of Conduct for Credit Rating Agencies17.11 Rating Process17.12 Validity Period of Rating17.13 Change of Ratings17.14 Procedure for Review of Ratings17.15 Benefits of Credit Rating

17.15.1 Benefits to the Issuer/Borrower17.15.2 Benefits to Investors17.15.3 Benefits to the Brokers and Financial Intermediaries17.15.4 Benefits to the Country/Government

17.16 Credit Rating Symbols in India

xxx Financial Markets and Financial Services in India

17.16.1 AAA-Highest Safety17.16.2 AA-High Safety17.16.3 A-Adequate Safety17.16.4 BBB- Moderate Safety17.16.5 BB-Inadequate Safety17.16.6 Other Rating Symbols

17.17 Credit Rating Agencies in India17.17.1 Credit Rating Information. Services of India Ltd.17.17.2 Investment Information and Credit Rating Agency of

India (ICRA)17.17.3 Credit Analysis and Research (CARE)17.17.4 ONICRA Credit Rating Agency of India Limited17.17.5 Fitch Ratings India Pvt. Ltd;17.17.6 SME Rating Agency of India Limited17.17.7 Limitations of Credit Rating

18. Factoring and Forfeiting 356-37818.1 Introduction18.2 Meaning of Factoring18.3 Definition of Factoring18.4 History of Factoring18.5 Factoring Services in India18.6 RBI Guidelines for Factoring Services by Commercial Banks18.7 Need for Factoring18.8 Services Rendered by Factors18.9 Parties to the Factoring Contract18.10 Mechanism of Factoring18.11 Cost of Factoring Services

18.11.1 Service Charge18.11.2 Discount Charges

18.12 Factoring Contract18.13 Important Characteristics of Factoring Services18.14 Differences between Factoring and Bank Loan18.15 Functions of a Factor

18.15.1 Provision of Credit Management Service18.15.2 Provision of finance18.15.3 Collection of Client's Debt18.15.4 Provision of Maintenance of Accounts18.15.5 Protection against Credit Risk

Contents xxxi

18.15.6 Provision of Advisory Services18.15.7 Provision of Expertise

18.16 Procedures in Factoring18.17 Types of Factoring

18.17.1 Full Service Factoring18.17.2 Recourse Factoring18.17.3 Advance Factoring18.17.4 Maturity Factoring18.17.5 Disclosed Factoring18.17.6 Undisclosed Factoring18.17.7 Domestic Factoring18.17.8 International Factoring/Export Factoring18.17.9 Invoice Factoring18.17.10 Agency Factoring18.17.11 Limited Factoring

18.18 Advantages/Benefits of Factoring to Clients18.19 Disadvantages of Factoring18.20 Forfeiting18.21 Meaning and Definition of Forfeiting18.22 Instruments Used in Forfeiting18.23 Differences between Factoring and Forfeiting18.24 Parties to Forfeiting18.25 Characteristics of Forfeiting Transaction18.26 Mechanism of Forfeiting18.27 Cost of Forfeiting Services18.28 Advantages of Forfeiting18.29 Forfeiting Services in India

19. Discounting of Bills 379-38719.1 Introduction19.2 Meaning of bills of exchange19.3 Definition19.4 Parties to a Bill of Exchange19.5 Acceptance of a Bill19.6 Characteristics of a Bill of Exchange19.7 Mechanism in Bills Discounting19.8 Historical Perspective of Commercial Bill19.9 Developments in Commercial Bill Market in India19.10 Bill Market Scheme for Exporters

xxxii Financial Markets and Financial Services in India

19.11 Reasons for the Development of Bill Market19.12 Differences between Bills Discounting and Factoring

20. Securitisation of Debt 388-41020.1 Introduction20.2 Meaning of Securitisation20.3 Definition20.4 Origin and History of Securitisation20.5 Securitisation in India20.6 Legal Status Given to Securitisation20.7 Institutions Allowed to Securitize Assets20.8 Securitisable Assets20.9 Important Players in a Securitisation Process

20.9.1 Originator20.9.2 Special Purpose Vehicle20.9.3 Investors20.9.4 Obligor20.9.5 Credit Rating Agency20.9.6 Servicer20.9.7 Trustee20.9.8 Investment Bankers20.9.9 Underwriters20.9.10 Backup Servicer

20.10 Features of Securitisation Transaction20.11 Steps in Securitisation Process20.12 Working of Securitization Process

20.12.1 Origination of Assets20.12.2 Transfer of Assets20.12.3 Pooling and Servicing Agreement20.12.4 Formation of a Special Purpose Vehicle20.12.5 Appointment of Investment Bankers/Underwriters20.12.6 Rating of Securities20.12.7 Appointment of Servicer

20.13 Types of Securitisation20.13.1 Asset Backed Securitization20.13.2 Mortgage Backed Securitization

20.14 Types of Securities20.14.1 Pass through Certificates20.14.2 Pay Through Certificates

Contents xxxiii

20.15 Credit Enhancement20.15.1 External Credit Enhancements20.15.2 Internal Credit Enhancements

20.16 Advantages of Securitisation20.16.1 Advantages to the Originator

20.17 Disadvantages to Issuer20.18 Advantages to the Investors20.19 Differences between Factoring and Securitisation20.20 Shortcomings Faced by Indian Securitised Markets

21. Credit Information Bureaus 411-42821.1 Introduction21.2 Meaning of Credit Information Bureau21.3 Definition of Credit Information Bureau21.4 Original of Credit Information Bureaus21.5 Development of Credit Information Bureau in Asian Countries21.6 Credit Information Services in India21.7 Credit Information21.8 Collection and Dissemination of Credit Information during

1990s21.9 Setting Up of Credit Information Bureau in India21.10 Credit Information Bureau (India) Ltd. (CIBIL)21.11 Coverage of Credit Institutions21.12 Legal Obligation of banks and FIs21.13 Working of Credit Information Bureaus21.14 Advantages of Credit Information Bureau

21.14.1 Advantages to Lending Institutions21.14.2 Advantages to Borrowers21.14.3 Disadvantages to Borrowers

21.15 Recent Trends21.15.1 Experian Credit Information Co. of India Pvt. Ltd.21.15.2 Equifax Credit Information Services Pvt. Ltd.

Bibliography 429-438

Index 439-446