Financial Services

Financial Services

The primary operations of banks include:
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Keeping money safe while also allowing withdrawals when needed Issuance of checkbooks so that bills can be paid and other kinds of payments can be delivered by post Provision of loans and mortgage loans (typically loans to purchase a home, property or business) Issuance of credit cards Allow financial transactions at branches or by using Automatic Teller Machines (ATMs)

Facilitation of standing orders and direct debits, so payments for bills can be made automatically  Provide overdraft agreements for the temporary advancement of the Bank's own money to meet monthly spending commitments of a customer in their current account.
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1990 there has been an upsurge in the financial services provided by banks & FIs.  Efficiency of financial system largely depends upon quality & variety of FS.  Services offered by banking & financial companies are called FS.

Management of Financial Services
 Banking
 AMC-

& financial companies include both AMCs & LMCs.
Leasing Companies, MFs, Issue/Portfolio Managers, Merchant Bankers.  LMC-BILL Discounting & Acceptance Houses.(SBI DFHI)

Meaning of Financial Services
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The term “Financial Services” in a broad sense means “mobilizing and allocating savings”. Thus, it includes all activities involved in the transformation of saving into investment . The „financial service‟ can also be called „financial intermediation‟ Financial intermediation is a process by which funds are mobilized from a large number of savers and make them available to all those who are in need of it and particularly to corporate customers

Objective/Functions of Financial Services
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Fund Raising: Through various Financial Instrument. Funds Deployment: Finance Mix (Bills Discounting, factoring of debtors, short -term money market fund) Specialized services: Credit rating, VC Financing, Lease financing, MF, Credit cards, Housing finance, Regulation: SEBI, RBI, GOI, Dept. of Banking & Insurance Economic growth: Mobilizing Savings & productive use

CLASSIFICATION OF FINANCIAL SERVICES INDUSTRY
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The financial intermediaries in India can be traditionally classified into two :
Capital Market intermediaries and Money market intermediaries .

SCOPE OF FINANCIAL SERVICES
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Financial services cover a wide range of activities. The financial intermediaries have been rendering a wide range of services encompassing both capital and money market activities. They can be grouped under two heads
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Fund based activities and Non-fund based activities .

Fund based activities
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Underwriting of or investment in shares, debentures, bonds etc. of new issues (Primary market activities) Dealing in secondary market activities . Participating in money market instruments like commercial papers, certificate of deposits, treasury bills, discounting of bills etc. Involving in equipment leasing, hire purchase, venture capital, seed capital etc. Dealing in foreign exchange market activities.

Non-fund based activities
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Managing the capital issues, i.e. management of pre-issue and post issue activities relating to the capital issue in accordance with the SEBI guidelines and thus enabling the promoters to market their issues . Making arrangements for the placement of capital and debt instruments with investment institutions . Arrangement of funds from financial institutions for the clients project cost or his working capital requirements . Assisting in the process of getting all Government and other clearances .

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Corporate Counseling Project Management Loans Indication Management of Capital Issue Portfolio Management Leasing Acting as Trustees to the debentureholders

Guiding corporate customers in capital restructuring
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Merger and Acquisition Structuring the financial collaboration/joint ventures Rehabilitating and reconstructing sick companies

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Undertaking services relating to the capital market such as
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Clearing Services, Registration and transfers, Safe-custody of securities, Collection of income on securities

CAUSES FOR FINANCIAL INNOVATION
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Low Profitability Keen competition Economic liberalization Improved Communication technology Customer Service Global impact Investor awareness

Characteristics of Financial Services
Intangibility  Customer Orientation  Inseparability  Perish ability  Dynamism
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Growth of Financial Services in india
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Merchant banking Era: 1960-80 MB era.
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Insurance, leasing companies began their journey.

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Investment Companies Era:
Various investment institutions & banks established. UTI,LIC,GIC 1970 LIC Nationalized.
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Continued….
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Depository Era: Promoting the concept of paperless trading of shares & bonds.
In 1997-98 budget separate segment to deal with trading of gilts.  Introduction of Book-building.  Online trading introduced by BSE.  Computerization of NSE.
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Continued….
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Legislative Era:
FERA has been replaced by FEMA.  Amendment in Indian Companies Act, Income tax act.
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Foreign Institutional Investor(FIIs) Era:
FIIs are permitted to operate in Indian Capital market.  Funds are flowed to India through GDR & ADR.
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Financial Services SectorProblems
Lack of Expertise :  Inadequate Accommodation :  Inadequate Technology: Lack of networking facility.  Inadequate Quality Service: More fees.  Captive Organization.-(subsidiary of large CB)  Restricted scope for operation. (venture capital).  Limited Innovation.
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