Introduction to financial services

30 to 40 % growth in service industry after 1990

Contribute more than 60 of GDP in Indian economy Provide employment ore than 50 % of work force

Attract more FDI

One third of total export

Contribution of service sector

Year e Growth of GDP at factor cost 7.5 9.5 9.7 9 6.7 Agricultur e Industry Services 2004-2005 2005-2006 06-07 07-08 08-09 00 1.2 .8 .9 .3 1.7 1.6 2.1 1.4 .5 5.8 6.7 6.9 6.7 5.9

The services that are financial in nature are known as financial services It includes all activities involved in transformation of savings in to investment. It is also called financial intermediation

Features of FS

Customer oriented Intangible in nature It is inseparable from the providers It is dynamic in nature Perishable Dominance of human elements Direct sales Fluctuation in demand Information based Required qualified labor

Importance of financial services

Economic growth
Promotion of savings capital formation

Provision of liquidity
Financial intermediaries Contribution to GDP Contribution to employment

Classification of financial services

Fund Based services 1. Leasing 2. Hire purchase 3. Bill discounting 4. Venture capital 5. Housing finance 6. Insurance 7. Factoring

Fee based services 1. Issue management 2. Merchant banking 3. Portfolio management 4. Corporate counseling 5. Loan syndication 6. Mergers and acquisition 7. Capital restructuring 8. Credit rating 9. Stock broking

Financial services and promotion of industries

Industrial promotion through merchant banking

activities Working capital financing through factoring services Equipment financing through leasing Financial resources through mutual fund Risk capital by venture capital Risk management by derivatives Assess credit worthiness through credit rating Long term fund by development banks Industrial development through specialized services

Innovative financial instruments