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A non-banking finance company may be defined as an institution which mobilizes the
savings of the community and diverts them for financing different activities. A bank also
performs similar type of activities. Then what is the differesnce between bank and non-
banking finance company? The difference can be seen from two points of views.

Firstly, from the legal point of view, bank may be defined as an institution which is
governed by the Banking Regulation Act, 1949.

Secondly, a more practical definition of a bank may be that it is an institution which
accepts, short and long-term deposits up to an unlimited extent, and money can be
withdrawn by drawing a cheque on any accounts maintained with it.

A non-banking financial intermediary does not fulfill any of these two criteria. The
activities of non-banking companies are similar to those of banks and they are often
referred to as Para banking institutions. Such intermediaries cover a wide range of
institution differing in their main activities and the services they offer, the one essential
feature being the same, viz., mobilization of the savings of the public and their utilization
for financing various types of economic activities.

Non-banking financial companies (NBFCs) are fast emerging as an important segment
of Indian financial system. It is an heterogeneous group of institutions (other than
commercial and co-operative banks) performing financial intermediation in a variety of
ways, like accepting deposits, making loans and advances, leasing, hire purchase, etc.
They raise funds from the public, directly or indirectly, and lend them to ultimate
spenders. They advance loans to the various wholesale and retail traders, small-scale
industries and self-employed persons. Thus, they have broadened and diversified the
range of products and services offered by a financial sector. Gradually, they are being
recognized as complementary to the banking sector due to their customer-oriented
services; simplified procedures; attractive rates of return on deposits; flexibility and

timeliness in meeting the credit needs of specified sectors. This registration authorises it to conduct its business as an NBFC. If the bank is satisfied that the conditions enumerated in the RBI Act. Under the Act. (iii) such other non-banking institution or class of such institutions. minus accumulated losses.e. with the previous approval of the Central Government and by notification in the Official Gazette. in excess of 10% of the owned funds. Only those NBFCs holding a valid Certificate of Registration can accept/hold public deposits. as issued by the bank. subsidiaries/ companies in the same group. including hire-purchase and lease finance made to. and (ii) the book value of debentures/bonds/ outstanding loans and advances. The term 'NOF' means. 1956 and desirous of commencing business of non-banking financial institution. 1934 (Chapter III B) and the directions issued by it under the Act. 1934 are fulfilled. The registration process involves submission of an application by the company in the prescribed format along with the necessary documents for RBI's consideration. it is mandatory for a NBFC to get itself registered with the RBI as a deposit taking company. a company incorporated under the Companies Act. 1998. and deposits with. 1999). as the bank may. For the registration with the RBI. should have a minimum net owned fund (NOF) of Rs 25 lakh (raised to Rs 200 lakh w. deferred revenue expenditure and other intangible assets) less. a 'non-banking financial company' is defined as:. under any scheme of arrangement or in any other manner. it issues a 'Certificate of Registration' to the company. The NBFCs accepting public deposits should comply with the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions. (ii) a non banking institution which is a company and which has as its principal business the receiving of deposits. owned funds (paid-up capital and free reserves. Some of the important regulations relating to acceptance of deposits by the NBFCs are:- y They are allowed to accept/renew public deposits for a minimum period of 12 .f April 21. or lending in any manner. The working and operations of NBFCs are regulated by the Reserve Bank of India (RBI) within the framework of the Reserve Bank of India Act.(i) a financial institution which is a company. (i) investments in shares of subsidiaries/companies in the same group/ all other NBFCs. As per the RBI Act. etc. specify.

ICICI. SFCs. Investment companies. y They cannot offer gifts/incentives or any other additional benefit to the depositors. the financial intermediation is being conducted by a wide range of financial institutions including the banks. 2. They help to bridge the credit gaps in several sectors which the traditional institutions like commercial banks are unable to fulfill. y Their deposits are not insured. . In the structure of Indian financial systems. etc. 3. Nidhis or Mutual benefit finance companies. y They cannot accept deposits repayable on demand. But. In Indian economy today. months and maximum period of 60 months. the non-banking financial companies have emerged as substantial contributors to the Indian economic growth by having access to certain deposit segments and catering to the specialized credit requirements of certain classes of borrowers. y The repayment of deposits by NBFCs is not guaranteed by RBI. they play a key role in the direction of savings and investment. That segment of the institutions which consists of financial companies other than bank is called non-banking sector. Hire-purchase finance companies. Depending on the nature of their major activity. 4. This classification does not include the public sector non-banking financial institutions like LIC. the non-banking financial intermediaries may be classified into the following four categories: 1. y They should have minimum investment grade credit rating. the Reserve Bank of India has classified them in several categories for the purpose of exercising control over them. In recent times. y They cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. Chit fund companies.


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With a view to organize them effectively. since. but not less than 10% per annum. the regular inflow of funds out of the assets purchased. 1972. 1972. According to Section 7 of the Hire Purchase Act. the borrower is able to repay out of future earnings. In fact. the Banking Commission has made the following suggestions: . the statutory charges shall be calculated at the rate of 30% per annum or on such lower rate as may be fixed by the Central Government in consultation with the Reserve Bank. Hire-purchase or installment credit is needed by transport operators. far in excess of the flat rate indicated. The Hire- purchase companies charge a flat rate which is calculated on the entire amount of advance and not on the diminishing balance basis. viz.c  Hire Purchase Finance Company means company is carrying on as its business the hire purchase transactions or the financing or the financing of such transactions. was enacted to control and regulate this type of finances. farmers and professionals needing equipment who find it difficult to offer security to the lending institutions. There are a large number of individuals and partnership doing this business. This Act puts limitation on hire-purchase charges and also imposes restrictions on owner's right to recover possession of goods otherwise than through court. The true rate of interest is therefore. a major share of the hire purchase goes to the automobile industry. the goods themselves serve a security because they remain the property of the lender until the loan has been repaid.. The recovery problem does not arise in most cases. Some of them are well organised and some of them are very small and financially weak. It is a less risky business since the goods purchased on hire purchase basis themselves serve as securities till the last installment of the loan is paid. In this form of credit. A Hire Purchase Act.

besides granting hire purchase finances. there is much scope for these companies to expand further. ? c  c . Hire-Purchase credit in India is given by institution in the organized sector like commercial banks. They also accept deposits from public by offering attractive rates of interest. there has been a rapid growth in the number of such companies. must be made applicable to hire purchase finance companies also. 3) Further. Still. they must be classified into two viz. which are applicable to banking companies. approved and non-approved categories and those which come under the approved category must be made eligible to get refinance facilities from the banking systems and the credit guarantee scheme may be extended to their lending operations. there is a considerable demand for hire purchase credit and hence. hire-purchase companies and State Finance Corporations as well as in the non-organised sector consisting of a large number of firms and individual. In recent years.. through a different rate. 2) The equity debt ratio and the liquidity ratio. 1) Licensing procedure should be extended to hire purchase finance companies and small companies and all companies doing this business must be compelled to obtain a license from the controlling authority.

An investment company may also be called as an investment trust. it gives its investors the investment company. there is also investment counsel. which is carrying on as its principal business the acquisition of securities. they cannot do this. The principle aim of an investment company is to protect the small investors by collecting their small savings and investing them on diversified securities so that risk may be spread. But. the investment company has formed for the collective investment of money subscribed by many investor particularly small investors. As individual. Besides. It helps the investors to select a sound and liquid . An investment counsel company engages itself purely in the giving investment advice alone.c cc Investment Company means any company.

investment trust companies are popular. They have a healthy influence on the stock market by discouraging speculative dealings. These investments trusts promote business stability in the economy by keeping the capital market active and busy. Investments Companies are of two types of investment companies in India: 1] Management Investment Companies and 2] Unit Trusts. Small investors are protected by providing the much needed diversification of investments. It generally purchases the shares of the same company in order to have a control over it rather than purchasing shares of different promoting and holding company business besides financing. _ ??  ? . there is a holding company which essentially buys shares and stocks mainly for the purpose of exercising control over another institution. In India. They channelize the savings of the productive ventures. They render expert investment advice and manage the investment portfolio of their clients. Some of them undertake underwriting. Again.

The management companies are divided into two groups such as Closed-ended companies and Open-ended companies. These types of companies also give their security holders the right to redeem if they so desire. Close ended investment companies are those who have fixed capital and they are not committed to a continuous offering of new issues. ? ??   Unit Trust is an investment company which is designed to pool the savings of small investors by selling their units and employ the savings in corporate securities as well as other securities in order to earn safe and fair returns on such . However. Open-ended investment companies are those who continuously and regularly offer shares and securities to the public. Shareholders of those companies do not have right to redeem their securities. the securities of such companies can be bought and sold in the open market as and when they are issued by operating companies.   Management investment companies are discretionary trusts who enjoy wide discreationary powers on the choice of the composition of their investment portfolios. There is no limit to their capital.

Unit holders are issued certificates which represent their interest in the property of the trusts. The trusts whose investment portfolio remains fixed are called Fixed Unit The management of the trusts does not have any power to substitute securities from time to time.Fixed and Flexible. The unit holders are the owners and they have real interest in shares and securities of the trusts. Therefore. Flexible Unit Trusts permit their management to change the portfolio as well as securities in the portfolio to suit the changing conditions. There are two categories of Unit Trusts. The constitutions of the Trust Fund is flexible and changes due to addition or sale of unit from time to time c . The securities selected remain in the portfolio for a long time. The Unit Trusts also buyback their units at a price which is closely related to the market price of the securities. These trusts calculate and declare the Net Asset Values (NAV) from time to time for the knowledge of the investors. these trusts are not much popular in India. The purpose of these companies is to enable the small investors to have an interest in a large spread of investments coupled with experienced selection and supervision with safety and security.

c  A chit fund is a financing agency which collects subscriptions from a group of persons and distributes the same to each member of the find. . a ? Total subscription of all members goes in turn to one member who is determined by lot. Such institutions have their origin and are more popular in South India. One of the oldest forms of indigenous financial institution in India is chit fund also known as kuries. There are no deductions from the total subscription funds and each member gets his/her chance. The word chit means a written note on a small piece of paper. Chit funds may be broadly classified into the following three categories: 1.

  ? All the members subscribe a fixed amount every month to the common pool. or b) Auctioned to the lowest bidder. The draws are held after regular intervals. 2. In case of auction to the lowest bidder. à? Prize chit is just like a lottery. the difference between the total subscription and the amount of the bid is distributed to all the members after deducting the necessary expenses. A member who gets the chit once is not entitled to getting it again but has to go on paying his periodical subscriptions. The same types of view were expressed by the Banking Commission. In this report submitted by CBI to the Govt. the CBI suggested enactment of uniform legislation throughout the country. In case the amount is distributed by allotment of lots. The amount collected through subscription of member is distributed to members whose number is selected by taking out a lottery after specified period of time. ? c    c cc  . At the time of draw the total monthly subscription is either: a) Allotted by drawing lots. Thus. The number of members of a group and the number of draws are equal. The Central Bureau of Investigation in its report on the working of chit funds had observed that a substantial portion of the contributions made by subscribers to chit funds were diverted or misused. a fixed amount of discount is deducted for meeting the expenses of conducting the chit. each member in turn gets a chance to claim the chit. in 1967. 3.

the .c  Nidhis or Mutual Benefit Finance Companies are one of the oldest forms of non- financial companies. the Nidhis inculcate the idea of thrift and savings among the middle and lower class people. Nidhis help in encouraging people to save more. Some of the important objectives of Nidhis are to enable the members to save money. to invest their savings and to secure loans at favorable rates of interest. They work on the principles of complete mutuality of interest and are generally well-managed. Because.

Mutual Benefit Financial Company means any company which is notified by the Central Government under Sec. ? c  c c ccccc   . redemption of old debts. Generally it is registered with only nominal shares (value often being Re. which do not come within the purview of commercial bank's lending.Government has granted certain concessions under Section 620A of the Companies Act.. for the construction and repairs of houses etc. It receives deposits from its member and lends only to members against tangible securities. Loans are given for marriages.620A of the Companies Act 1956.1 only).

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unit certificates. subscription etc.   The primary function of non-banking financial institution is to receive deposits from the public in various ways such as issue of debentures. Hence. savings certificates.  ??. deposits of non-banking companies comprise of money received from the public by way of deposits or a loan or in any other form.


Non- banking companies provide financial assistance in various forms-hire purchase finance. Another equally important function is lending of money. leasing finance. ?  ?. consumption finance. and finance for social activities and so on. Easy and timely finance is available and generally those customers who have been denied of bank finance approach these companies and enjoy the credit facilities extended by them.


?  . These companies also invest their surplus money on various outlets. In the case of investment companies. their main function is to invest on principle securities and pass on the benefits to small investors.

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?   ?The NBFCs play a positive role in accessing certain deposits segments. It is found that nearly 98 percent of the deposits received by them are at the rate of 13 percent and above. They offer attractive schemes to suit the needs of different classes of customers and attract the idle money by offering attractive rates of interest too. These companies encourage savings and promote thrift among public.  ?à.



specialist forex operations. merchant banking etc.? "?  ??#? NBFCs offer and timely credit to those who are in need of it. & ?  ? ?. counseling. The NBFCs are accessible to all. are being provided by them apart from their traditional services. ?$? ??  %?NBFCs provide a financial supermarket to customers by offering a variety of services. Most of these companies reduce risk through this diversification process. They are very keen in scanning for diversification activities. A variety of services like mutual funds. they provide loans even for meeting unusual expenses like marriage and other religious functions. They do not follow much formalities and procedures. Moreover.

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  NBFCs mobilize the small savings of the public and direct them to productive ventures. ' ?(. Industrialists are able to carry on their production with lesser capital since the capital intensive equipment are supplied to them by leasing companies.

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subscriptions. Generally. chits. etc. unit certificates. ?   ?! NBFCs encourage thrift and develop savings habit among people by receiving deposits from the public in various forms convenient to them. they mobilize the savings the savings of the people through the issue of debentures. & ?à. savings certificates.


NBFCs. particularly Housing Finance Companies . ? When commercial banks are generally reluctant to enter into the field of housing finance.

provide housing finance on convenient terms and thereby they play a significant role in fulfilling one of the basic requirements of the mankind. ' ? ?? ?.

these NBFCs increases the standard of living of the people. & ?à. an impetus has been given to the transport operators. Increased transport facilities facilitates the movement of goods from one place to another and this availability of all kinds of goods. Above all. in turn.?  People with limited means are not able to enjoy the consumer durable goods. increases the standard of living of the people. By providing consumer goods on easy installments basis.




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they have a healthy influence on the stock market. particularly investment companies provide expert advice in investment of funds as well as for supervising investment. They render invaluable services to investors particularly to small ones by choosing the right type of securities which will give the maximum yield.   cc ccc . Thus. they do not indulge in speculative activities. They also promote the growth of enterprises only. They are interested in price stability and thus. They provide protection to small investors by providing the much needed diversification of investment. Thus. they promote business stability in the economy by keeping the capital market active and busy. they contribute positively to the economic development of any country. Moreover. ?NBFCs play an expanded role so as accelerate the pace of growth of the financial market and to provide a wider choice to investors. Most of them work on the principle of providing a good return on savings while reducing the risk through diversification. ) ??  ?  These companies.

. Hence. NBFCs are called Para banks.c  Commercial banks and non-banking companies are both financial intermediaries receiving deposits from public and lending them or investing them as the case may be according to circumstances. But there are some vital differences between them. They are: 1] Cheque can be issued against bank deposit whereas no such facility is available in the case of NBFCs.

etc.2] The commercial banks can manufacture credit out of the raw material of deposits by creating claims against themselves. But. deposit insurance coverage facilities.    . Hence. hire purchase companies specialize in consumer loans and housing finance companies specialize in housing finance alone. bills discounting etc. are held by commercial banks whereas the asset of NBFCs are more or less specialized in nature. overdrafts. they are re-deposited with banks. Though the NBFCs are competing with the commercial banks in tapping the savings of the public in the form of deposits. the commercial banks offer lesser rate of interest and also charge lesser rate of interest than that of the NBFCs. refinancing facilities. it is vital that these two sectors must work hand in hand with each other in the Indian financial system. 3] Commercial banks are able to enjoy certain facilities like rediscounting facilities. the volume of business done by these NBFCs is small. cash credits. In one way or other. 5] Commercial banks are subjected to strict supervision and control of the RBI where as the NBFCs are more or less completely free from the RBI's control. When compared to banks. most of the deposits of these companies find their way ultimately to the commercial banks. NBFCs cannot create credit as commercial banks do. they have limited capacity to create credit. 6] A variety of assets in the form of loans of various types. These facilities are not extended to NBFCs. Besides. So. For instance. 4] Generally. They can lend only out the resources on hand. some NBFCs do keep a certain percentage of their deposits with the nationalized banks.

E-banking services include Automated Teller Machines (ATMs). phone banking. Banking divisions have to be IT based. smart cards. speedy and boundary less due to the impact of E-Revolution. E-banking is more of a science than art. the practice of banking has undergone a significant transformation due to the adoption of E-banking. including the Internet. E-banking is knowledge based and mostly scientific in using electronic devices of the computer revolution. . Electronic Funds Transfer at point of sale (EFTPoS). Modern banking is more information based. banking has to be E-banking in the new century. Modern banks have to be well- versed in Information Technology its users and applications. interactive communication channels. or obtain information on financial products and services through a public or private network. E-banking implies performing basic banking transaction by customers round the clock globally through Electronic Media. internet banking. stored value cards. When most business and commercial enterprises tend to become internetworking organizations. E-banking includes the systems that enable financial institution customers. with the spread of digital economy. Thus. individuals or businesses. c   c  cc  E-banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic. transact business. home banking. shared ATM networks. to access accounts.

c   cc The following are the advantages of the E-banking: _ ?.


there are no restricted office hours for E-banking.%?!% E-Banking facilities performing of basic banking transactions by customers round the clock globally. World-wide 24 hours and 7 days a week banking services are made possible.  ? . In fact.

?. ?%?E-banking increases the customers convenience. Customers can get drafts at their door steps through e-mail call. Thus. E-banking facilitates home banking. Customers can perform basic banking transactions by simply sitting at their office or at home through PC or LAPTOP. No personal visit to the branch is required.


' ?à. The cost of transactions through internet banking is much less than any other traditional mode. ?!% The operational costs have come down to technology adoption.

consequently can lead to higher profits via handling a larger number of customers accounts. Banks can also offer many cash management products for existing customers without any additional cost. & ?.!?!%?The increased speed of response to customers requirement under E-banking vis-à-vis branch banking can enhance customer satisfaction and.


) ?+?% E-banking opens a new vista for providing efficient. . Banks can have access to a greater number of potential customers without the commitment costs of physically opening branches. Moreover. E-banking allows the possibility of improved quality and an enlarge range of services being made available to customers. Hence. requirements of staff at the banks get reduced to a great extent. ?!%?Brick and Mortar structure of banking gets converted into Click and Portal banking. economic and quality service to the customers. there is much saving on the cost of infrastructure.

it adds conveniences to the entire banking services apart from widening the range of services. instant credit. immediate payment of utility bills. Thus. would be made possible under E-banking. instant transfer of funds etc. EDI etc. it increases the customers convenience to a greater extent and facilitates better customer retention.„ ?a ?!% The increased speed of response to customers requirements under E-banking will lead to greater customer satisfaction and handling a larger number of transactions at a lesser time. In brief.  c   cc The following are the disadvantages of E-banking: _ ?%?. ?a ?% E-banking creates strong basic infrastructure for the banks to embark upon many cash management products and to venture in the new fields like E- commerce. .

they can go to one of these sites and purchase items without proving who they are. If someone gets your credit card. there are still the dangers of someone getting a hold of your personal and financial information. Also. Even with the improvements with data encryption. some sites don't have the capabilities to prove authentic transactions.  ? ??!?. All they need is your name and credit card number which is already printed on the card.?  The biggest disadvantage of e-commerce is the issue of security.

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either due to the lack of knowledge or trust. as in the case of e-commerce. ?Electronic commerce is also characterized by some technological and inherent limitations which has restricted the number of people using this revolutionary system. Many people have . One important disadvantage of e-commerce is that the Internet has still not touched the lives of a great number of people. Some people simply refuse to trust the authenticity of completely impersonal business transactions. A large number of people do not use the Internet for any kind of financial transaction.

reservations regarding the requirement to disclose personal and private information for security concerns. ?-.

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  Another limitation of e-commerce is that it is not suitable for perishable commodities like food items. However. People prefer to shop in the conventional way than to use e-commerce for purchasing food products. returning the product and getting a refund can be even more troublesome and time consuming than purchasing. So e- commerce is not suitable for such business sectors. The time period required for delivering physical products can also be quite significant in case of e-commerce. in case if you are not satisfied with a particular product.           . A lot of phone calls and e-mails may be required till you get your desired products.

the complete list of I-banks is . foreign exchange. Citigroup's Global Corporate Investment Bank.   ?!%?is a particular form of banking which finances capital requirements of an enterprise. acquisitions. JPMorgan Chase and Lehman Brothers. The biggest investment banks include Goldman Sachs.g. Capital essentially means money. An   ?!% is a financial institution that raises capital. Credit Suisse First Boston. commodity. These securities can come in the form of stocks or bonds. Investment banking assists as it performs IPOs. Morgan Stanley. private placement and bond offerings. acts as broker and carries through mergers and acquisitions. fixed income. as well as providing advice on transactions such as mergers and acquisitions. debt) and insuring bonds (e. trades in securities and manages corporate mergers and acquisitions. c  ccc  Investment banking or I-banking is the term used to describe of raising capital for companies and advising them on financing and mergers alternatives. Companies need cash in order to grow and expand their businesses. investment banks sell securities to public investors in order to raise this cash. A majority of investment banks offer strategic advisory services for mergers. selling credit default swaps). such as the trading of derivatives. and equity securities. Ofcource. among others. Merrill Lynch. Investment banks profit from companies and governments by raising money through issuing and selling securities in capital markets (both equity. divestiture or other financial services for clients.

the epicenter of the I-banking universe. Brokers from these firms cover every major city in the U. . guarantee by standby underwriting or best efforts selling and foreign exchange management . It is important to realize that investment banking and brokerage go hand-in-hand..more extensive. but that brokers are one small cog in the investment banking wheel. The breakdown of an investment bank includes the following areas:  Corporate Finance (equity)  Corporate Finance (debt)  Mergers and Acquisitions (M&A)  Equity sales  Fixed Income Sales  Syndicate (equity)  Syndicate (debt)  Equity Trading  Fixed Income Trading  Equity Research  Fixed Income Research c  c c  ccc Investment banks have multilateral functions to perform. Other services include acting as intermediaries in trading for clients. but the firms listed above compete for the biggest deals both in the U.S. Some of the most important functions of investment banking can be jot down as follows: 1] Investment banking help public and private corporations in issuing securities in the primary market. Brokers sell securities and manage the portfolios of "retail" (or individual) investors. the headquarters of every one of these firms is in New Work City. and worldwide.S.

HIRE-PURCHASE and FACTORING. LOAN SYNDICATION and advisory assistance. 4] Small firms providing services of investment banking are called boutiques.2] Investment banking provides financial advice to investors and serves them by assisting in purchasing securities. managing financial assets and trading securities. advising for mergers and acquisitions. providing technical analysis or program trading. bill DISCOUNTING. However the dividing lines between the two fraternal twins have become flimsy with loans and securities becoming almost substitutable ways of raising funds. ACCEPTANCE and fee-based services such as security issues management. Examples include the CASH CREDIT facility. non-fund based services involve the issuance of LETTERS OF CREDIT. These mainly specialize in bond trading. The following are the fund based services: _ ?. equipment leasing. BANK GUARANTEES. In contrast.  c    Fund-based this term is used to describe financial assistance that involves disbursement of funds. 3] Investment banking differs from commercial banking in the sense that they don't accept deposits and grant retail loans.

receivables financing. Commercial Bank offers corporations Working Capital Finance to meet their operating expenses. either by direct funding or by issuing letter of credit.%? ? A firm's working capital is the money available to meet current obligations (those due in less than a year) and to acquire earning assets.  a. purchasing inventory.

?? The bank can structure low cost credit Programmes and cash flow financing to meet your specific short-term cash requirements. The loans are .

structured to enhance your profitability by scheduling the repayment to match the cash flow available to repay the debt. ?? .

D.P. We consider two types of bills facility viz. D. Bill discounting is a short tenure financing instrument for companies willing to discount their purchase / sales bills to get funds for the short run and as for the investors in them.A.e. These are customized to suit your requirement for short-term finance.e. where documents are delivered on payment. ' ?(/ . from the date of sale to the date of receipt of payment there on.Bills and where the documents are delivered on acceptance i. i. it is a good instrument to park their spare funds for a very short duration.Bills.

Term lending. But it was thought necessary that commercial banks should also start term lending because of their close association with customers and as well-organised network of branches throughout the country. debt. These products are structured for both long and short tenor with exit options at intervals for both parties. and equity. and warehousing of goods meant for export. packing. the only source of term loans to business and industry were the specialised financial institutions set up for this purpose.? Banks offer short-term working capital finance both at the pre- shipment and post-shipment stages Pre-shipment finance facility provides liquidity for procuring raw materials. Post-shipment finance is a credit facility extended from the date of shipment of goods till the realisation of the export proceeds. & ?a? Structured Finance?describes any "non-standard" way of raising money. . ) ?? In the last few years. unavailable or too expensive. transporting. These tailor-made securities go beyond "standard" securities like conventional loans. processing. The reason to structure a more advanced security may be that conventional securities may be unattractive. So far. which is also known as development banking is gradually developing in India. popularly known as term loans. Indian banks have started giving medium and long-term loans advances. and a significant change is noticeable in the whole pattern of industrial financing. debentures.

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      _ ? ?. Insurance Companies etc. Multinational Companies). The product is aimed at providing Term Loan to owners of commercial / residential properties who have let them out to reputed companies (Commercial. Further. which can yield higher returns for themselves.?01 Lease rental discounting offers immediate liquidity. This will give a source to accelerate the rotation of their funds. Banks. Software. The actual discounted amount will be determined after taking into account factors like rent receivables during the unexpired period of tenancy. Financial Institutions. to lessors/ property owners who have leased out their properties. against commercial property. These receivables can be clubbed and discounted at attractive rates. tax deducted at source and other. the funds could also be deployed for expansion of their business activities. Industrial. on lease basis thus having fixed rent receivables. The property owners can then utilize these funds for any purpose including meeting business and personal needs for generating further assets.

? A banker issues personal as well as commercial letters of credit. and bill drawn by his creditor can be accepted by the bank or any of its branches. money can be promptly paid out to a customer or to his agent. These enable the customers to profit by the superior credit of the bank. Thus. agencies or correspondents.  ?2.

The commercial community receives facilities for its dealing with foreign nationals.?(/ The banks also deal in foreign exchange transactions. the business in foreign exchange is handled by ordinary commercial banks. however. there is a group . a bank has sometimes to arrange for the transport. A freight and insurance department. therefore. In assisting foreign trade by discounting foreign bills of exchange. In. In most foreign countries.a fact which is also a profitable business for a banker. insurance and warehousing of goods. India. is a common feature of many commercial banks.

etc. arrangement of foreign currency loans. Now some of the other banks also provide this service. Merchant banking comprises many non- banking type of services rendered by banks to the industrial and business houses. Preparation of feasibility reports. help in negotiating joint ventures abroad and advice about Government regulations etc. ' ?. which handle the business in foreign exchange. foreign collaboration. tax benefit.. ??% Indian banks have started new line of activity in recent years and this is known as merchant banking. help in the procurement of letters of intent and other statutory permissions. Some of these services provided by the Merchant banking departments of banks include counseling about new projects relating to location.of specialised institution known as exchange banks. State Bank of India was the first in the country to start merchant banking services. appraisal of working capital requirements.

the amount to be transferred and the name of the branch where the account is maintained. . Banks generally issue Demand Drafts. This act of banks is known as transfer of money. Money Orders or other such instruments for transferring the money. banks also carry money from one corner of the globe to another.?  Besides lending and depositing money. Banker's Cheque. & ??   Banks provide the facility of sending money through mail transfer to any place where the bank has a branch and the person has a account in any other branch of the same bank. This activity is termed as remittance business. This is a type of Telegraphic Transfer or Tele Cash Orders. his/her account number. For this purposes the sender shall have to furnish details like the name of the beneficiary.

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4] Fund Based Services and Fee Based Services. 3] Investment Banking.  1] Non-Banking Financial Companies. . 2] E-Banking.

  c  Vijay Dave 6 Ashish Gamlot 7 Amar Gowda 9 Varsha Parab 35 Jyoti Patil 38 Kaustabh Jaitapkar 47 .

Nidhis or Mutual Benefits Finance Companies 6 Commercial Banks v/s NBFCs 7 Functions of NBFCs 8 Services Rendered by NBFCs 9 .1. Particulars 1 Introduction ± Non-Banking Financial Companies 2 Types. E-Banking: Introduction 10 Advantages of E-banking 11 Disadvantages of E-banking 12 Investment Banking. Chit Fund Companies 5 4. Hire Purchase Finance Companies 3 2. c  Sr no.Introduction 13 Functions of Investment Banking 14 Fund Based Services 15 Fee Based Services 16 Bibliography  . Investment Companies 4 3.


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com/index.P. Law and Practice: Gorgon-Natarajan 3] Investment Banking: Vauslt 3] http://www.% ?? 1] Banking Theory and Practice: Dr.asp 2] http://ecommerce.Srivastava.!  ?? 1] 4] http://ask.cornell. 2] Banking Theory.ilr.