Q1. Differenciate between Primary and Secondary Markets?

ANSWER:
The financial market is a world where new securities are issued to the public regularly. It
is a world full of varied financial products and services, tailored to the need of every
individual from all income brackets. These financial products are bought and sold on
the capital market, which is divided into primary market and secondary market.

Primary Market:

The primary market is also known as new issues market. Here, the transaction is conducted
between the issuer and the buyer. In short, the primary market creates new securities and
offers them to the public.

For instance, Initial Public Offering (IPO) is an offering of the primary market where a private
company decides to sell stocks to the public for the first time. An important point to remember
here is that in the primary market, securities are directly purchased from the issuer.

Secondary Market:

In secondary market, the securities issued in the primary market are bought and sold. Here, you
can buy a share directly from a seller and the stock exchange or broker acts as an intermediary
between two parties.

The secondary market is actually formed by another layer of investors who deal with primary
market investor to buy and sell financial securities such as bonds, futures and stocks. These
dealings happen in the proverbial stock exchange.

National Stock Exchange (NSE) and New York Stock Exchange (NYSE) are some popular stock
exchanges. Majorly, the trade happens between investors without any involvement with the
company that issued the securities in the primary market.

Key Differences Between Primary Market and Secondary Market

The points given below are noteworthy, as far as the difference between primary market and
secondary market is concerned:

1. The securities are formerly issued in a market known as Primary Market, which is then listed on
a recognised stock exchange for trading, which is known as a secondary market.
2. The prices in the primary market are fixed while the prices vary in the secondary market
depending upon the demand and supply of the securities traded.
3. Primary market provides financing to new companies and also to old companies for their
expansion and diversification. On the contrary, secondary market does not provide financing to
companies, as they are not involved in the transaction.
4. At the primary market, the investor can purchase shares directly from the company. Unlike
Secondary Market, when investors buy and sell the stocks and bonds among themselves.
5. Investment bankers do the selling of securities in case of Primary Market. Conversely, brokers
act as intermediaries while trading is done in the secondary market.
6. In the primary market, security can be sold only once, whereas it can be done an infinite
number of times in case of a secondary market.
7. The amount received from the securities are income of the company, but same is the income of
investors when it is the case of a secondary market.
8. The primary market is rooted in a particular place and has no geographical presence, as it has
no organisational setup. Conversely, Secondary market is present physically, as stock exchnage,
which is situated in a particular geographical area.

Q6. Write a detailed note on the objectives, functions and contribution of IDBI.
ANSWER:
IDBI Bank is an Indian government-owned financial service company, formerly known
as Industrial Development Bank of India, headquartered in Mumbai, India. It was
established in 1964 by an Act of Parliament to provide credit and other financial
facilities for the development of the fledgling Indian industry.

It is currently 10th largest development bank in the world in terms of reach, with 3350 ATMs,
1853 branches, including one overseas branch at Dubai, and 1382 centers. It is one of 27
commercial banks owned by the Government of India.
The Bank has an aggregate balance sheet size of INR 3.74 trillion as on 31 March 2016.
Objectives

The main objectives of IDBI is to serve as the apex institution for term finance for industry in
India. Its objectives include:

 Co-ordination, regulation and supervision of the working of other financial institutions

such as IFCI , ICICI, UTI, LIC, Commercial Banks and SFCs.
 Supplementing the resources of other financial institutions and there by widening the
scope of their assistance.
 Planning, promotion and development of key industries
and diversification of industrial growth.
 Devising and enforcing a system of industrial growth that conforms to national
priorities.
Functions of IDBI:

The main functions of IDBI are discussed below:

(i) To provide financial assistance to industrial enterprises.

(ii) To promote institutions engaged in industrial development.

(iii) To provide technical and administrative assistance for promotion management or

expansion of industry.

(iv) To undertake market and investment research and surveys in connection with development
of industry.

IDBI Assistance:

The IDBI provides financial assistance either directly or through some specified financial

institutions:
(i) Direct Assistance:

The IDBI grants loans and advances to industrial concerns. There is no restriction on the upper

or lower limits for assistance to any concern itself. The bank guarantees loans raised by

industrial concerns in the open market from the State Co-operative Banks, the Scheduled
Banks, the Industrial Finance Corporation of India (IFCI) and other ‘notified’ financial
institutions.

(ii) Indirect Assistance:

The IDBI can refinance term loans to industrial concerns repayable within 3 to 25 years given by

the IFCI, the State Financial Corporation and some other financial institutions and to SIDCs

(State Industrial Development Corporations), Commercial banks and Cooperative banks which

extend term loans not exceeding 10 years to industrial concerns. IDBI subscribes to the shares
and bonds of the financial institutions and thereby provide supplementary resources.
Developmental Activities of IDBI:
(1) Promotional Activities:

In fulfillment of its developmental role, the bank continues to perform a wide range of

promotional activities relating to developmental programmes for new entrepreneurs,

consultancy services for small and medium enterprises and programmes designed for
accredited voluntary agencies for the economic upliftment of the underprivileged.

These include entrepreneurship development, self-employment and wage employment in the

industrial sector for the weaker sections of society through voluntary agencies, support to

Science and Technology Entrepreneurs’ Parks, Energy Conservation, Common Quality Testing
Centers for small industries.

(2) Technical Consultancy Organisations:

With a view to making available at a reasonable cost, consultancy and advisory services to

entrepreneurs, particularly to new and small entrepreneurs, IDBI, in collaboration with other

All-India Financial Institutions, has set up a network of Technical Consultancy Organisations

(TCOs) covering the entire country. TCOs offer diversified services to small and medium

enterprises in the selection, formulation and appraisal of projects, their implementation and
review.

(3) Entrepreneurship Development Institute:

Realising that entrepreneurship development is the key to industrial development; IDBI played

a prime role in setting up of the Entrepreneurship Development Institute of India for fostering

entrepreneurship in the country. It has also established similar institutes in Bihar, Orissa,

Madhya Pradesh and Uttar Pradesh. IDBI also extends financial support to various organisations
in conducting studies or surveys of relevance to industrial development.

Q8. State the role objectives of financial institutions in India?

 ANSWER:
The financial institutions are:
1. Reserve Bank of India
2. Commercial Banks
3. Universal Banks
4. Life Insurance Corporation (LIC)
5. General Insurance Corporation (GIC)
6. Unit Trust of India
7. Mutual Funds
8. Investment Companies.
The following are the objectives of financial institutions:

1. Rapid Industrial growth:

Industrial sector is the dynamic sector of the Indian economy. This sector contributes to the
generation of employment and income in the country. Funds are provided by the development banks
to start a new business venture, expansion and diversification of the business in new sector etc.

These funds are utilised to achieve several objectives that leads to accelerate industries and economic
growth. Development banking supports the programmes of industrialisation of the country, by
promoting entrepreneurial activities.

2. Encouraging entrepreneurs:

Industrialisation helps in curbing economic and social problems thereby making economies
progress. Emerging entrepreneurs are encouraged to give shape to their ideas. Development bank
helps those entrepreneurs by providing funds for commencing new business.

Government has recognised the importance of entrepreneurs in the industrial development and thus
providing number of facilities and incentives to motivate them for undertaking industrial projects.

3. Balanced regional development:

There has been always an issue related to regional disparities. Development bank helps in curbing
these regional disparities by providing funds to the entrepreneurs at low rate of interest if the
organisation is planned in the backward areas. This would lead to the development of all areas
thereby making balanced regional development.

4. Filling gaps:

It is not possible for the commercial banks to fulfill all financial needs of all the customers. Absence
of organised capital market, absence of adequate facilities for financing industries arise the problem
of slow development of industrialisation. Such development banks can fulfill the credit gap. They
provide long- term funds for industries where gestation period may be longer.
5. Helps government:

Government formulates financial policies with the help of development banks. They also help in
implementing these policies. For example, NABARD bank is set up as an apex development bank for
extending support to the rural areas. It helps the government in matters relating to the rural
development, offers training and research facilities for banks working in the field of rural
development, and acts as a regulator for co-operative banks and RRB's.

Functions The main functions of I.F.I. are as under:-

i ) Granting loans and advances for the establishment, expansion, diversification and modernization of industries in
corporate and co-operative sectors.

ii) Guaranteeing loans raised by industrial concerns in the capital market, both in rupees and foreign currencies.

iii) Subscribing or underwriting the issue of shares and debentures by industries. Such investment can be held up to 7
years.

iv) Guaranteeing credit purchase of capital goods, imported as well as purchased within the country.

v) Providing assistance, under the soft loans scheme, to selected industries such as cement, cotton textiles, jute,
engineering goods, etc.

vi) Providing technical, legal, marketing and administrative assistance to any industrial concern for the promotion,
management and expansion of the industrial concern.

vii) Providing equipment (imported or indigenous) to the existing industrial concerns on lease under its ‘equipment
leasing scheme’.

viii) Procuring and reselling equipment to eligible existing industrial concerns in corporate or co-operative sectors.

ix) Rendering merchant banking services to industrial concerns.

Case Detail :
Case Study # Lendingkart to offer its credit risk analytics software to financial institutions
Lendingkart, an online lender to small and medium enterprises (SMEs), will offer its credit risk
analytics software as a service for other financial institutions in 2017, and aim to double its
reach in the next six months, a top company executive said.
“We plan to offer our analytics technology to other NBFCs (non-banking financial companies)
and financial institutions sometime in 2017,” said Lendingkart’s co-founder Harshvardhan Lunia
in a telephonic interview. “We aim to increase our reach across various credit product,
geography and customer segments by monetizing our data analytics and credit scoring
platform, which other lenders can use to evaluate the credit worthiness of the borrowers...Also,
it will help us to disburse more loans without increasing our book size thus, increasing returns
of assets for us,” Lunia added in an email response.
Since its inception in 2014, the online NBFC, Lendingkart Finance Ltd has disbursed 7,000 loans
to SMEs in over 450 cities. The company expects this number to cross 10,000 covering over 800
cities in next six months. Lendingkart Finance and Lendingkart Technologies Pvt. Ltd are part of
the Lendingkart Group. Lendingkart Technologies has built analytics software to evaluate
borrowers’ credit worthiness.
Founded by Lunia and Mukul Sachan, Lendingkart underwrites working capital loans online to
SMEs, which have an annual turnover of Rs12 lakh to Rs1-1.5 crore. On an average, these SMEs
are lent Rs5.5-6 lakh at an annualized interest rate ranging between 16% to 24%, for a duration
of six to 12 months. Lendingkart claims to have a loan application approval rate of 22-23%. The
credit risk analytics technology analyses the borrower or an SME on the basis of over 2200
variables and data points, which includes industry type, business cash-flows and transactions,
income tax return filings of the business, its previous loan and repayment records, among
others. This is the technology that Lendingkart plans to share with other financial institutions.
Lunia explains there are two possible ways in which it could monetize this service. “Using our
(risk analytics) technology, we could co-lend with other financial institution in cases where
SMEs have larger (capital) needs. The other way is that we charge (the financial institutions) for
using our technology,” he said. However, Lunia added that it is too soon to forecast how much
revenue Lendingkart will earn from its technology.
Lendingkart, which has 350 employees across offices in Ahmedabad, Bengaluru and Mumbai,
has raised over $40 million from Betelsmann India Investment, Darrin Capital Management and
Mayfield India, among other investors. The fintech company competes with Bengaluru-based
Capital Float (Zen Lefin Pvt. Ltd), Instakash Technlogies Pvt. Ltd, Neogrowth Credit Pvt. Ltd,
IndiaLends (GC Web Ventures Pvt. Ltd), among others.
In May, Capital Float raised $25 million (Rs170 crore) in an investment round led by US-based
Creation Investments. In August, Mumbai-based NeoGrowth raised Rs15 crore from Frontier
Investments Group and IndiaLends raised about Rs6.5 crore from DSG Consumer Partners,
Siddharth Parekh and other angel investors.

1. What the case is all about? Provide detail in your words?

ANSWER:
Case study is about Lendingkart which is an online moneylender. Lendingkart Finance
and Lendingkart Technologies Pvt. Ltd are part of the Lendingkart Group. It offer
services to small and medium endeavors (SMEs),Lendingkart, will offer its risk analytics
software as an administration for other monetary establishments in 2017.Company
developed analytics investigation programming to assess borrowers & credit
worthiness. The he credit risk analytics technology examine the borrower or a SME on
the premise of more than 2200 factors and information focuses, which incorporates
industry sort, business money streams and exchanges, pay expense form filings of the
business, its past advance and reimbursement records, among others. This is the
innovation that Lendingkart arrangements to impart to other budgetary establishments.
It has 350 employees across offices in Ahmadabad, Bengaluru and Mumbai. Company
has market opportunity as Lendingkart Finance Ltd has disbursed 7,000 loans to SMEs in
over 450 cities. The company expects this number to cross 10,000 covering over 800
cities in next six months. Lendingkart claims to have a loan application approval rate of
22-23%.The credit goes to technology.
 2. Do you believe such software really help improving financial institutions? If Yes, How?
ANSWER:
Yea…in two ways, it can help. The credit risk analytics technology analyses the borrower
or an SME on the basis of over 2200 variables and data points and check the credit
worthiness of borrower. These variables are based on industry type, business cash-flows
and transactions, income tax return filings of the business, its previous loan and
repayment records.

3. What two different possible ways are suggested by Lunia to monetize the given service?
ANSWER:
Company can lend technology by two ways

1. Co-lend with other financial institution in cases where SMEs have larger (capital)
needs.
2. Charging a fee from the financial institutions for using technology.

1. The advance value of LIC policy is linked with ………….. Value.

B. Surrender

2. SBI's new training initiative "Strategic Training Unit" is located at ……….

A Hyderabad

3. The portion of total deposits of a commercial bank which it has to keep with RBI in the
form of cash reserves in termed as

A CRR

4. SBI's Archieve Center is located at

D. Kolkatta

5. Chalpathi Rao committee was meant for restructuring of ……………. Banks.

C. Regional Rural

6. Real Time Gross Settlement (RTGS) is managed by

B. RBI

7. 1st August of every year is observed as

B. KYC Fraud Prevention Day

 8. Dalal Street is located in………………. City.

B. Mumbai

9. CDSL stands for Central …………………… Services Limited of India.

B. Depository

10. On which of the following banks the Reserve Bank of India depends?

D. Commercial

11. A diff swap is also known as a quanto swap.

A. TRUE

12. NEFT and RTGS are……………….. Systems.

C. Banking

13……………. Investores are high worth individuals who provide seed capital for start-ups in
return for a minority share in business.

B Angel

14. The eurocurrency market is small, relative to national markets.

B. FALSE

15. A major part of the eurocurrency market is interbank activity true.

A TRUE

16. An agreement to exchange fixed interest rate payments on a loan for floating interest rate
payments is an ………………...rate swap.

D Interest

17. A ………………..is a bank deposit held in a country that does not issue that currency in which
the deposit is denominated.

C. Euro-currency

Financial Institution

18. Currency swaps have expanded less rapidly than interest rate swaps because they require
…………... capital backing under the Basle rules.
B. Higher

19. Very popular form of Investments, called mutual funds fall under which sector of economy?

B Capital

20. ICICI, HDFC, and Yes bank are form of ………………… types of banks

A Private

21. Treasury biils are used for ……………….. Type of requirments.

B. Short

22. In term of PMLA, records of cash transaction of Rs 10 lacs and suspicious transaction are
required to be maintained for a period of ……… Years.

A5

23. DEMAT is an instrument of …………….. Market Sector.

C Capital Market

24. The New Industrial Policy of India came in which year………….

C. 1991

25. The eurocurrency market is principally concerned with…………….term lending False

B Short

26. Monetary policy of India is launched by………………. In India?

B RBI

27. Supporters of the portfolio approach to the eurocurrency argument argue that the growth
of the eurocurrency market has not been ………….. because the eurobanks cannot create credit.

C inflationary

28. A …………………….. is a bond issued outside of the country in the currency of which it is
denominated.

A Euro-bond
29. Short-termism' describes a concentration by firms on …………………..-term profits.

Short

Medium

Annual

Long

30. Problems arose in the 1990s in the newly emerging markets because losses in one market
frequently cause ………….. to become temporarily risk averse.

B Investors

31. Safes are less safe for banks than are most other derivatives.

A FALSE

32. A ……………….coupon swap is a combination of an interest rate swap and a fixed rate
currency swap.

B. Currency

33. Floating rate eurobonds become popular when interest rates are very ……………………

B Volatile

34. The default risk on futures is greater than on swaps.

A FALSE

35. It is possible to combine a zero coupon bond with an interest rate swap to produce a diff
swap.

C FALSE

36. ………………. Bill is a bill of exchange without any consideration, or quid pro quo.

B Accomodation

37. BSE stands for ……………….. Stock exchange.

B Bombay
38. Comment on the statement: The small implied changes in expected interest rates suggest
that the market felt that interest rates had reached a peak.

B FALSE

39. ………….. Is the simultaneous purchase and sale transactions in a security or a commodity,
undertaken in different markets to profit from price differences.

C Arbitrage

40. Which is not an instrument of money market?

B MMMFs