NARAYANZANTYECOLLEGEOF

COMMERCE
Bi
chol
i
m-Goa

Name:
MissRama.
V.Sar
desai
Cl
ass:
M.COM –I
Rol
lNo:
1017
Subj
ect:Fundament
alsofFi
nanci
al
Serv
ices
Topic:Cl
assi
fi
cat
ionofFi
nanci
al
Serv
ices
Submi
tt
edby
:Mi
ssRama.
V.Sar
desai
Academi
cYear
:2018-
19
CONTENTS
Sr
.N Ti
tt
les Pag Remar
k
o e s
No.

1. Fi
nanci
alSer
vices

a) FundbasedFi
nanci
al
Ser
vices
i
. Fact
ori
ng

i
i
. Leasi
ng

i
i
i. Hi
repur
chase

i
v. Vent
ureCapi
tal

v
. Housi
ngFi
nance

v
i. Mut
ual
Funds

b) FeeBasedFi
nanci
alSer
vices
i
. Mer
chantBanki
ng

i
i
. Cr
edi
tRat
ingcompany

i
i
i. Under
wri
ti
ng

i
v. Por
tfol
i
oManagement
Ser
vices
v
. St
ockBr
oki
ng

2. Concl
usi
on

3. Ref
erences
 Fi
nanci
alSer
vices:
I
ntr
oduct
ion:
Fi
nanci
alSer
vicescanbedef
inedas“
thepr
oduct
sandser
vicesof
fer
edby
i
nst
it
uti
onsl
i
kebanksofv
ari
ouski
ndsf
ort
hef
aci
l
itat
ionofv
ari
ousf
inanci
al
t
ransact
ions and ot
herr
elat
ed act
ivi
ti
es i
nthe wor
ld off
inance l
i
ke l
oans,
i
nsur
ance,cr
edi
tcar
ds,i
nvest
mentoppor
tuni
ti
esandmoneymanagementas
wel
laspr
ovi
dingi
nfor
mat
ionont
hest
ockmar
ketandot
heri
ssuesl
i
kemar
ket
t
rends”
.

Fi
nanci
alSer
vicesi
sani
mpor
tantcomponentoff
inanci
alsy
stem.Fi
nanci
al
ser
vices 
aret
he 
economi
c ser
vices 
prov
ided by t
he f
inance i
ndust
ry,whi
ch
encompassesabr
oadr
angeof
 busi
nesses 
thatmanagemoney
,incl
udi
ng 
credi
t
uni
ons,
 
banks, i
nsur
ance and 
credi
t-
car
d compani
es,
account
ancy
 compani
es,
 
consumer
-f
inance 
compani
es,
 
stock
br
oker
ages,
 
inv
est
ment f
unds,i
ndi
vi
dualmanager
s and some 
gov
ernment
-
sponsor
ed ent
erpr
ises.  
Financi
alser
vices compani
es ar
e pr
esenti
n al
l
economi
cal
l
y dev
eloped geogr
aphi
clocat
ions and t
end t
o cl
ust
eri
nlocal
,
nat
ional
,regi
onal
andi
nter
nat
ional
 
financi
alcent
ers.

Fi
nanci
alser
vicesi
sconcer
ned wi
tht
hedesi
gn and del
i
ver
yofadv
iceand
f
inanci
alpr
oduct
stoi
ndi
vi
dual
sandbusi
nesseswi
thi
nthear
easofbanki
ng
r
elat
ed i
nst
it
uti
ons ,per
sonalf
inanci
alpl
anni
ng,i
nvest
ment,
realest
ates,
i
nsur
anceandsoon.

Thesear
ethet
ypesoff
ir
mscompr
isi
ngoft
he mar
ket
s,t
hatpr
ovi
desav
ari
ety
ofmoneyandi
nvest
mentr
elat
edser
vices.Fi
nanci
alser
vicesar
ethel
argest
mar
ketr
esour
ces wi
thi
nthe wor
ld,i
nter
ms ofear
nings.The successf
ul
f
unct
ioni
ng ofany f
inanci
alsy
stems depends upon t
he r
ange off
inanci
al
ser
vicesof
fer
edbyv
endor
sofser
vices.Fi
nanci
alser
vicesar
ever
yimpor
tantas
i
thel
psi
neconomi
cgr
owt
h,pr
omot
ionofsav
ings,
capi
talf
ormat
ion,
prov
isi
onof
l
i
qui
dit
y,cr
eat
esempl
oymentoppor
tuni
ti
eset
c.

I
ndi
ahasadi
ver
sif
iedf
inanci
alsect
orunder
goi
ngr
api
dexpansi
on,
bot
hint
erms
ofst
ronggr
owt
hofexi
sti
ngf
inanci
alser
vicesf
ir
msandnewent
it
iesent
eri
ngt
he
mar
ket
.Thesect
orcompr
isescommer
cialbanks,i
nsur
ancecompani
es,non-
banki
ngf
inanci
alcompani
es,co-
oper
ati
ves,pensi
onf
unds,mut
ualf
undsand
ot
hersmal
l
erf
inanci
alent
it
ies.Thebanki
ngr
egul
atorhasal
l
owednew ent
it
ies
suchaspay
ment
sbankst
obecr
eat
edr
ecent
lyt
her
ebyaddi
ngt
othet
ypesof
ent
it
ies oper
ati
ng i
nthe sect
or.Howev
er,t
he f
inanci
alsect
ori
nIndi
ais
pr
edomi
nant
lyabanki
ngsect
orwi
thcommer
cialbanksaccount
ingf
ormor
e
t
han64percentoft
het
otal
asset
shel
dbyt
hef
inanci
alsy
stem.

Ther
ear
etwoTy
pesorcl
assi
fi
cat
ionoff
inanci
alser
vices:

Fund Based Fi
nanci
alSer
vices and Fee Based Fi
nanci
al
Ser
vices

FundBasedFi
nanci
alSer
vices:
FundBasedf
inanci
alser
vicesi
sspeci
ali
zedmet
hodofpr
ovi
dingst
ruct
ured
wor
kingcapi
talandt
erml
oanst
hatar
esecur
edbyaccountr
ecei
vabl
es,
i
nvent
ory
,machi
ner
y,equi
pment
sandr
eal
est
ates.
Fundbasedf
inanci
alser
vicesar
efi
nanci
ngmet
hodt
hati
sdr
ivenbyt
he
asset
ssuchasaccountr
ecei
vabl
es,
i
nvent
ori
esandf
ixedasset
ssuchas
pl
antandmachi
ner
y.I
tisanef
fi
cientwayt
ofi
nanceanexpandi
ngal
ongwi
th
sal
es.I
tgener
atesnewbusi
ness.I
tal
soper
mit
sbor
rower
stot
akeadv
ant
age
ofpur
chasedi
scount
sbecausecashi
srecei
vedi
mmedi
atel
yuponsal
es,
per
mit
ti
ngpr
omptpay
mentt
osuppl
i
ersandt
her
ebyear
ningt
hecompanya
goodenoughr
eput
ati
ont
oreducet
hecostofpur
chases.
Fundbasedf
inanci
alser
vicesi
ncl
udesFact
ori
ng,l
easi
ng,hi
repur
chase,
v
ent
urecapi
tal
,Housi
ngf
inance,
insur
ance,
mut
ual
fundset
c.
 Thesear
ethef
oll
owi
ngFundbasedf
inanci
alser
vices:
1.Fact
ori
ng
2.Leasi
ng
3.Hi
rePur
chase
4.Vent
ureCapi
tal
5.Housi
ngFi
nance
6.Mut
ual
Funds

1.Fact
ori
ng:

Accor
dingt
oRober
tJohnsons,
“Fact
ori
ngi
saser
vicei
nvol
vi
ngt
hepur
chasebya
f
inanci
alor
gani
zat
ion,cal
l
edaf
act
orofr
ecei
vabl
eownedbymanuf
act
urer
sand
di
str
ibut
orsbyt
hei
rcust
omer
swi
tht
hef
act
orassumi
ngf
ullcr
edi
tandcol
l
ect
ion
r
esponsi
bil
i
ties.

Fact
ori
ng i
samet
hod bywhi
ch abusi
nessent
erpr
isecan obt
ain cash f
or
i
nvoi
cessentt
ocust
omer
sinr
espectofsuppl
yofgoodsandser
vices.Fact
ori
ng
i
sacont
inuousar
rangementbet
weenaf
inanci
ali
nst
it
uti
on[
thef
act
or]orf
act
or
f
ir
m andacompany [
thecl
i
ent
]whi
chsel
l
sgoods/
ser
vicest
otr
ade
cust
omer
soncr
edi
tbasi
s.I
nthi
sthesel
l
err
ecei
ves80% ormor
epay
menti
n
adv
ancef
rom t
hef
act
oront
hesel
l
ingt
her
ecei
vabl
esf
rom buy
erst
ohi
m.Thehe
r
ecei
vest
hebal
ancepay
mentf
rom t
hef
act
oraf
terdeduct
ionoft
hef
act
ors
ser
vices char
ges et
c.I
tincl
udes f
ees,make good f
ordebt
s,exchange,
commi
ssi
onwi
l
lbemi
nus.

Mechani
sm off
act
ori
ng:

i
)Anagr
eementi
sent
eredi
ntobet
weent
hesel
l
ingf
ir
m andt
hef
act
orf
ir
m.The
agr
eement pr
ovi
dest
hebasi
sandt
hescopeoft
heunder
standi
ngr
eachedbet
ween
t
het
wof
orr
ender
ingf
act
orser
vices.
i
i
)Thesal
esdocument
sshoul
dcont
aint
hei
nst
ruct
ionst
omakepay
ment
s
di
rect
lyt
othef
act
orwhoi
sassi
gnedt
hej
obofcol
l
ect
ionofr
ecei
vabl
es.
i
i
i)Whent
hepay
menti
srecei
vedbyt
hef
act
or,
theaccountoft
hesel
l
ingf
ir
mis
cr
edi
tedbyt
hef
act
oraf
terdeduct
ingi
tsf
ees,
char
ges,
int
erestet
c.asagr
eed.
i
v)Thef
act
ormaypr
ovi
deadv
ancef
inancet
othesel
l
ingf
ir
mift
hecondi
ti
ons
oft
heagr
eementsor
equi
re.
Ty
pesofFact
ori
ngar
e:
Recour
seandNonRecour
se,
Adv
anceandMat
uri
tyFact
ori
ng
Conv
ent
ional
orFul
lFact
ori
ng,
Discl
osedandundi
scl
osed
Domest
icandcr
ossbor
derori
nter
nat
ional
fact
ori
ng
2.Leasi
ng :

Leasi
ng can be def
ined as“ A Tr
ansact
ion i
n whi
ch a par
ty owi
ng an
asset
s[owner
/l
essor]pr
ovi
dest
heasset
sforuseov
eracer
tai
nper
iodoft
ime
anot
her[
user
/l
essee]f
oraconsi
der
ati
oni
nthef
orm ofper
iodi
cpay
ment
scal
l
ed
r
ent
alswi
thawi
thoutaf
urt
herpay
mentcal
l
edpr
emi
um”
.
Leasi
ngi
sanar
rangementbet
weenl
easi
ngcompanyorl
essorandl
esseet
heuser
.The
r
ent
als ar
e pr
edet
ermi
ned and pay
abl
e atf
ixed i
nter
val
s oft
ime as permut
ual
conv ence.The
eni r
e ar
eleasi
ng compani
es who pr
ovi
des cost
ly machi
ner
y,
equi
pment
set
c.

Leasei
sasour
ceoff
inancei
snor
mal
l
yof
fer
ed byl
easi
ng compani
esf
or
moder
nizat
ionofbusi
ness,pur
chaseofcost
lymachi
nescar
sandasset
swhi
ch
ar
enotf
inancedbybankorf
inanci
ali
nst
it
uti
ons.Ther
ear
etwot
ypeofmai
n
l
easeFi
nanci
alandoper
ati
ngl
ease.
Inf
inanci
all
easei
sa l
ongt
erml
easewi
tha
non-cancel
l
abl
ecl
ause,i
nthi
sthel
esseesel
ect
stheasset
sandal
sobear
sthe
r
iskofobsol
escenceand t
o payr
ent
als.I
tal
so popul
ari
nIndi
a,hi
ghcost
equi
pment
s such as of
fi
ce equi
pment
s,di
esel
,gener
ator
s,machi
ne t
ool
s,
cont
ainer
s,l
ocomot
ives,et
car
eleasedunderf
inanci
all
ease.
Andoper
ati
ng
l
easei
sshor
tter
m orser
vicel
easewi
thacancel
l
abl
ecl
ause,l
easer
ent
alsar
e
hi
gher
,int
hist
hel
essorbear
sther
iskofobsol
escenceandmai
ntenance.Thi
s
 t
ype ofl
ease i
s sui
tabl
efori
tems l
i
ke comput
ers,copy machi
nes,of
fi
ce
equi
pment
s,v
ehi
cles,et
cwhi
char
esensi
ti
vet
oobsol
escenceandwher
ethe
l
esseei
sint
erest
edi
nti
dingov
ert
empor
arypr
obl
ems.

Leasesar
ethel
egalandbi
ndi
ngcont
ract
sthatsetf
ort
hthet
ermsofr
ent
al
agr
eement
sin r
ealest
ate.I
faper
sonwi
shest
orentanapar
tmentorot
her
r
esi
dent
ialpr
oper
ty,f
orexampl
e,t
hel
easepr
epar
edbyt
hel
andl
orddescr
ibest
he
mont
hlyr
entamount
,wheni
tisdueeachmont
h,whathappensi
fthel
esseef
ail
stopay
hi
srent
,howmuchofa 
secur
it
ydeposi
ts 
i
srequi
red,t
hedur
ati
onoft
hel
ease,whet
her
t
hel
esseei
sal
l
owedt
okeeppet
sont
hepr
emi
ses,
howmanyoccupant
scanl
i
vei
nthe
uni
tandanyot
heressent
iali
nfor
mat
ion.The 
l
andl
ordr
equi
rest
het
enantt
osi
gnt
he
l
ease,t
her
eby agr
eei
ng t
oit
ster
ms bef
ore occupy
ing t
he pr
oper
ty.
 Leases f
or
commer
cialpr
oper
ti
es,
ont
heot
herhand,
areusual
l
y negot
iat
edi
naccor
dancewi
tht
he
speci
fi
clessee 
andt
ypi
cal
l
y r
unf
rom onet
o10y
ear
s.
Ot
herTy
pesofLeasi
ng:
Fi
nanci
alLease,
Oper
ati
ngLease,
 
Lev
eragedandnon-
lev
eragedl
eases,Conv
eyance
t
ypel
ease,Sal
eandl
easeback,Ful
landnonpay
-outl
ease,
Speci
ali
zedser
vicel
ease,
Netandnon-
netl
ease,
Sal
esai
dlease,Cr
ossbor
derl
ease,
Taxor
ient
edl
ease,I
mpor
t
Lease,
Int
ernat
ional
leaseet
c.

3.Hi
rePur
chase:
Thehi
repur
chaseact1972def
ineshi
repur
chase i
s“anagr
eementunderwhi
ch
goodsar
elentonhi
reandunderwhi
cht
hehi
rerhasanopt
iont
opur
chaset
hem
i
naccor
dancewi
tht
het
ermsofagr
eement
”.

I
nhi
repur
chaset
heownerofgoodsdel
i
ver
sthegoodst
othebuy
er,
whoagr
ees
t
omakeper
iodi
calpay
mentashi
rechar
ges.
Theowner
shi
pofgoodsr
emai
ns
wi
tht
hesel
l
erbutt
hepossessi
onofgoodsr
est
swi
tht
hehi
rer
.Hecanuset
he
goodsf
orhi
sper
sonalusebuti
snotal
l
owedt
osel
lgoodsunl
esst
hepay
menti
s
done.

Ont
hef
ullpay
mentofhi
rechar
gest
hebuy
erget
sopt
ionofpur
chasi
ngt
he
 goods.
Hir
epur
chasemet
hod i
sused f
orbuy
ing cost
lygoods,machi
ner
y,
equi
pment
sev
enconsumer
scanbuyconsumerdur
abl
egoods.

Themai
nfeat
uresofahi
repur
chaseagr
eementar
easbel
ow:
1.Thepay
menti
stobemadebyt
hehi
rer(
buy
er)t
othehi
ree,usual
l
ythev
endor
,in
i
nst
all
ment
sov
eraspeci
fi
edper
iodoft
ime.

2.Thepossessi
onoft
hegoodsi
str
ansf
err
edt
othebuy
eri
mmedi
atel
y.

3.Thepr
oper
tyi
nthegoodsr
emai
nswi
tht
hev
endor(
hir
ee)t
il
lthel
asti
nst
all
menti
s
pai
d.Theowner
shi
ppassest
othebuy
er(
hir
er)whenhepay
sal
li
nst
all
ment
s.

4.TheHi
reeort
hev
endorcanr
epossesst
hegoodsi
ncaseofdef
aul
tandt
reatt
he
amountr
ecei
vedbywayofi
nst
all
ment
sashi
rechar
gedf
ort
hatper
iod.

5.Thei
nst
all
ment
sinhi
repur
chasei
ncl
udei
nter
estaswel
lasr
epay
ment
sofpr
inci
pal
.

6.Usual
l
y,t
hehi
reechar
gesi
nter
estonf
latr
ate.

Legal
Posi
ti
onofHi
rePur
chase:
TheHi
rePur
chaseAct
,1972def
inesahi
repur
chaseagr
eementasanagr
eementunder
whi
chgoodsar
eletonhi
reandunderwhi
cht
hehi
rerhasanopt
iont
opur
chaset
hem i
n
accor
dancewi
tht
het
ermsoft
heagr
eementandi
ncl
udesanagr
eementunderwhi
ch:
(
i)Possessi
onofgoodsi
sdel
i
ver
edbyt
heownert
her
eof
ftoaper
sononacondi
ti
on
t
hatsuchper
sonpay
stheagr
eedamounti
nper
iodi
cpay
ment
s,and(
ii
)Thepr
oper
tyi
n
t
hegoodsi
stopasst
osuchper
sonont
hepay
mentoft
hel
astofsuchi
nst
all
ment
s,
and

(
ii
i)Suchper
sonhasar
ightt
oter
minat
etheagr
eementatanyt
imebef
oret
hepr
oper
ty
sopasses.
”Sect
ion3oft
heActpr
ovi
dest
hatev
eryhi
repur
chaseagr
eementmustbei
n
wr
it
ingandsi
gnedbyal
lpar
ti
est
her
eto.

Ri
ght
sofHi
rer
:
I
naddi
ti
ont
otheusualr
ightoft
ermi
nat
ingt
heagr
eementatanyt
imebef
oret
he
pr
oper
typassest
ohi
m andr
etur
ningt
hegoodst
othehi
ree,t
heHi
rePur
chaseAct
,
1972haspr
ovi
dedt
hef
oll
owi
ngr
ight
stot
hehi
rer
:
(
i)Thehi
ree(
vendor
)cannott
ermi
nat
ethehi
repur
chaseagr
eementf
ordef
aul
tin
pay
mentofhi
reorduet
oanun-aut
hor
izedactorbr
eachofexpr
essedcondi
ti
ons
unl
essanot
icei
nwr
it
ingi
nthi
sregar
disgi
vent
othehi
rer
.Theper
iodofnot
icewi
l
lbe
oneweekwher
ethehi
rei
spay
abl
eweekl
yorl
esst
hant
hati
nter
valandt
woweeksi
n
ot
hercases.

(
ii
)Ther
ightt
orepossesst
hegoodswi
l
lnotexi
stunl
esssanct
ionedbyt
heCour
tint
he
f
oll
owi
ngcases:

(
a)Wher
ethehi
repur
chasespr
icei
slesst
hanRs.15,
000,
onehal
foft
hehi
repur
chase
pr
icehasbeenpai
d

(
b)Wher
ethehi
repur
chasei
snotl
esst
hanRs.15,
000,t
hreef
our
thofhi
re-
pur
chase
pr
icehasbeenpai
d.
 4.Vent
ureCapi
tal
:

TheNat
ionalVent
ureCapi
talAssoci
ati
ondef
inesVent
urecapi
talas“
Money
pr
ovi
ded bypr
ofessi
onal
swho i
nvestal
ongsi
de managementi
nyoung and
r
api
dlygr
owi
ngcompani
est
hathav
ethepot
ent
ialt
odev
elopi
ntosi
gni
fi
cant
economi
ccont
ri
but
ors.
”

I
nVent
urecapi
talt
hef
inancei
spr
ovi
dedt
ofi
rmsusi
nghi
ght
echnol
ogyand
pr
oject
swhi
char
eri
skyi
nnat
ure.I
tpr
ovi
desf
inancet
osmal
l
,mi
ddl
efi
rmsand
al
so t
o publ
i
c and pr
ivat
e sect
ors.The v
ent
ure capi
tal
i
sti
nvest
sin new
compani
es.I
tassi
stsnewent
repr
eneur
sinear
lyst
agesofpr
oject
sint
hef
orm of
equi
ty,l
ongt
erml
oanorconv
ert
ibl
edebt
.It
spur
posei
snott
omakepr
ofi
tsbut
capi
talappr
eci
ati
on.Thev
ent
urecapi
tali
nvest
menti
smadewhenav
ent
ure
capi
tal
i
stbuy
sshar
esofsucha companyandbecomesaf
inanci
alpar
tneri
n
t
hebusi
ness.Vent
ureCapi
tali
nvest
menti
sal
sor
efer
redt
ori
skcapi
talorpat
ient
r
iskcapi
tal
,asi
tincl
udest
her
iskofl
osi
ngt
hemoneyi
fthev
ent
uredoesn’
t
succeedandt
akesmedi
um t
olongt
erm per
iodf
ort
hei
nvest
ment
stof
ruct
if
y.
Vent
ureCapi
talt
ypi
cal
l
ycomesf
rom i
nst
it
uti
onali
nvest
orsandhi
ghnetwor
th
i
ndi
vi
dual
sandi
spool
edt
oget
herbydedi
cat
edi
nvest
mentf
ir
ms.

I
tist
hemoneypr
ovi
dedbyanout
sidei
nvest
ort
ofi
nanceanew,gr
owi
ng,or
t
roubl
edbusi
ness.Thev
ent
urecapi
tal
i
stpr
ovi
dest
hef
undi
ngknowi
ngt
hatt
her
e’sa
si
gni
fi
cantr
iskassoci
atedwi
tht
hecompany
’sf
utur
epr
ofi
tsandcashf
low.Capi
tali
s
i
nvest
edi
nexchangef
oranequi
tyst
akei
nthebusi
nessr
athert
hangi
venasal
oan.

Vent
ureCapi
tali
sthemostsui
tabl
eopt
ionf
orf
undi
ngacost
lycapi
talsour
cef
or
compani
esandmostf
orbusi
nesseshav
ingl
argeup-
fr
ontcapi
talr
equi
rement
swhi
ch
hav
enoot
hercheapal
ter
nat
iv  
es.Sof
twar
eandot
heri
ntel
l
ect
ualpr
oper
ty 
aregener
all
y
t
hemostcommoncaseswhosev
aluei
sunpr
oven.Thati
swhy
;Vent
urecapi
talf
undi
ng
i
smostwi
despr
eadi
nthef
ast
-gr
owi
ngt
echnol
ogyandbi
otechnol
ogyf
iel
ds.
 Ty
pesofv
ent
urecapi
tal
:

Seedmoney
:Lowl
evel
financi
ngf
orpr
ovi
ngandf
ruct
if
yinganewi
dea.

St
art
-up:New f
ir
msneedi
ngf
undsf
orexpensesr
elat
edwi
thmar
ket
ingand
pr
oductdev
elopment
.

Fi
rst
-Round:
Manuf
act
uri
ngandear
lysal
esf
undi
ng.

Second-
Round:Oper
ati
onalcapi
talgi
venf
orear
lyst
agecompani
eswhi
char
e
sel
l
ingpr
oduct
s,butnotr
etur
ningapr
ofi
t.

Thi
rd-
Round:Al
so known as Mezzani
ne f
inanci
ng,t
hisi
sthe money f
or
expandi
nganewl
ybenef
ici
alcompany
.

Four
th-
Round:Al
socal
l
edbr
idgef
inanci
ng,
4thr
oundi
spr
oposedf
orf
inanci
ng
t
he"
goi
ngpubl
i
c"pr
ocess.

Exampl
esofVent
ureCapi
tal
:
1. Kohl
ber
gKr
avi
sandRober
ts(
KKR)
,oneoft
het
op-
ti
eral
ter
nat
ivei
nvest
ment
asset i
nthewor
ld,hasent
eredi
ntoadef
ini
ti
veagr
eementt
oinv
estUSD150
mi
l
li
on(
Rs962cr
ore)i
nMumbai
-basedl
i
stedpol
yest
ermakerJBFI
ndust
ri
esLt
d.
Thef
ir
m wi
l
lacqui
re20%st
akei
nJBFI
ndust
ri
esandwi
l
lal
soi
nvesti
nzer
o-coupon
compul
sor
il
yconv
ert
ibl
epr
efer
enceshar
eswi
th14.
5%v
oti
ngr
ight
sini
tsSi
ngapor
e
-
basedwhol
l
yownedsubsi
diar
yJBFGl
obalPv
t.Lt
d.Thef
undi
ngpr
ovi
dedbyKKR
wi
l
lhel
pJBFcompl
etet
heongoi
ngpr
oject
s.

2. Pepper
fry
,Indi
a’
slar
gestf
urni
tur
ee-
mar
ket
place,
hasr
aisedUSD100mi
l
li
oni
n
af
reshr
oundoff
undi
ngl
edbyGol
dmanSachsandZodi
acTechnol
ogyFund.
Pepperf
rywi
l
luset
hef
undst
oexpandi
tsf
oot
pri
nti
nTi
erI
IIandTi
erI
Vci
ti
esby
addi
ngt
oit
sgr
owi
ngf
leetofdel
i
ver
yvehi
cles.I
twi
l
lal
soopennew di
str
ibut
ion
cent
resandexpandi
tscar
pent
erandassembl
yser
vicenet
wor
k.Thi
sist
hel
argest
quant
um ofi
nvest
mentr
aisedbyasect
orf
ocusede-
commer
cepl
ayeri
nIndi
a.
 5.Housi
ngFi
nance:
“
Housi
ngFi
nancei
swhatal
l
owsf
orpr
oduct
ionandconsumpt
ionofhousi
ng.
I
tref
erst
othemoneyweuset
obui
l
dandmai
ntai
nthenat
ion’
shousi
ng
st
ock.Buti
tal
sor
efer
stot
hemoneyweneedt
opayf
ori
t,i
nthef
orm of
r
ent
s,mor
tgagel
oansandr
epay
ment
s.”

Housi
ngf
inancer
efer
stopr
ovi
dingf
inancet
oani
ndi
vi
dualoragr
oupof
i
ndi
vi
dual
sforofhouse/
flatconst
ruct
ionorr
elat
edact
ivi
ti
esofhouseet
c.

Housi
ngl
oani
sext
endedbywayoft
erml
oans,
foranumberofy
ear
s[5-
20]atacer
tai
n
r
ateofi
nter
est&agai
nstsomesecur
it
y.
Adv
ant
agesofHousi
ngFi
nance:
1.Amongt
hef
inanci
alser
vices,housi
ngf
inancecr
eat
esempl
oyment
,bot
hdi
rect
ly
andi
ndi
rect
ly.
2.I
ndust
ri
es such as cement
,br
ick manuf
act
uri
ng,sani
tar
ypr
oduct
s,el
ect
ri
cal
f
it
ti
ngsandgl
assi
ndust
ri
esexper
iencemor
edemandduet
ohouseconst
ruct
ion.
3.Rur
alhousi
ngdev
elopsnotonl
yrur
alar
easbutpr
event
smi
grat
ionofl
abort
o
ur
banar
eas.
4.Housi
ngf
inancehel
psi
ncr
eat
ionofmor
ehouseswhi
chr
esul
tsi
nbui
l
dingup
mor
einf
rast
ruct
uref
aci
l
iti
es,suchasr
oads,el
ect
ri
cit
ygener
ati
on,dr
inki
ngwat
er
f
aci
l
iti
es,
etc.
5.Fact
ori
es ori
ndust
ri
alest
abl
i
shment
s cr
eat
etownshi
ps by pr
ovi
ding mor
e
housi
ngf
aci
l
iti
est
othei
rempl
oyees.Housi
ngf
inancet
her
ebyr
educescongest
ion
i
nur
banar
eas.
6.Duet
ohousi
ngf
inance,
ther
eisav
ert
icalexpansi
onandr
ebui
l
dingofdi
l
api
dat
ed
housesandr
emodel
i
ngoft
heexi
sti
nghouses.
7.Housi
ngf
aci
l
iti
esnotonl
yimpr
ove,t
heyal
sor
efl
ectt
hecul
tur
eoft
hecount
ry.
Chandi
gar
hci
tyi
sanexampl
eformoder
nhousi
ngwhi
chhasbeenbui
l
tbya
Fr
enchar
chi
tect
.
8.Nonconv
ent
ionalener
gyget
spopul
ari
zedduet
omoder
nhousi
ngf
aci
l
iti
eswhi
ch
ar
eoneoft
hemaj
orbenef
it
sofhousi
ngf
inance.
 
TypesHousi
ngFi
nance:
1.HomePur
chaseLoans:HomePur
chaseLoansar
ethebasi
chomel
oany
oucanopt
f
orpur
chasi
ngnewhome.Thi
sty
peofHomeLoani
sof
fer
edbyal
lki
ndsofBanks
andHFCs.
2.HomeConst
ruct
ionLoans:HomeConst
ruct
ionLoansar
eespeci
all
ymeantf
ort
he
const
ruct
ionofanewhome.For
mal
i
tyofav
ail
i
ngt
hisl
oanhasal
i
ttl
edi
ff
erentf
rom
t
henor
malHousi
ngLoan.Thepl
otonwhi
cht
heconst
ruct
ioni
sbei
nger
ect
edi
s
pur
chasedwi
thi
naper
iodofoney
ear
,thecostoft
hepl
oti
sthenal
soi
ncl
udedas
t
hecomponentf
ort
hev
aluat
ionoft
otal
costoft
hepr
oper
ty.
3. 
HomeExt
ensi
onLoans:HomeExt
ensi
onLoansi
sof
fer
edf
ormeet
ingt
heoper
ati
ng
costofal
ter
ati
ont
oanexi
sti
ngbui
l
ding.Ext
ensi
onher
emeansaddi
ti
onofanext
ra
r
oom et
c.
4.
 HomeConv
ersi
onLoans:HomeConv
ersi
onLoansar
eof
fer
edt
othosewhowant
f
inancef
ort
hepur
chaseofanot
herhomebyconv
ert
ingt
heal
readyexi
sti
nghomeand
onwhi
chl
oani
sal
readysanct
ioned.Thr
ought
hisl
oan,t
heexi
sti
ngl
oani
str
ansf
err
ed
t
othenew homei
ncl
udi
ngt
heext
raamountr
equi
redandt
her
eisnoneedf
orpr
e-
pay
mentoft
hepr
evi
ousl
oan.
5.LandPur
chaseLoans:LandPur
chaseLoanscanbeav
ail
edf
orpur
chasi
ngl
andf
or
bot
hhomeconst
ruct
ionaswel
lasi
nvest
mentpur
poses.
6.St
ampDut
yLoans:St
ampDut
yLoansi
sof
fer
edf
ort
hepay
mentofst
ampdut
yint
he
t
ransact
ionoft
hepr
oper
ty
7.
 Br
idgeLoans:Br
idgeLoansar
eof
fer
edf
orsel
l
ingt
heexi
sti
nghomeandpur
chasi
ng
ofanot
her
.Thebr
idgel
oanassi
stsi
nthef
inanceofnewhome,
unt
ilabuy
eri
sfoundf
or
t
heol
dhome.
8.
 Bal
ance-
Transf
erLoans:Bal
anceTr
ansf
eroft
hel
oani
sthet
ransf
eroft
hebal
anceof
anexi
sti
nghomel
oanatahi
gherr
ateofi
nter
est(
ROI
)toei
thert
hesamecompanyor
anot
her
.
9.Re-
fi
nanceLoans:Ref
inancel
oansar
eav
ail
edwhenal
oanf
rom anor
gani
zat
ionata
par
ti
cul
arROIi
sdr
oppi
ngl
eadi
ngt
oal
oss.Thent
heopt
ionofswapoft
hel
oancanbe
av
ail
ed.Onecanav
ailt
hisf
rom ei
thert
hesameHFIorot
heratt
hecur
rentr
atesof
i
nter
est
.
10.NRIHomeLoans:NRIHomeLoansar
emeantf
orNon-
Resi
dentI
ndi
answhowi
sht
o
bui
l
dorbuyahomeorf
lat
.
6.Mut
ual
Funds:

Amut
ualf
undi
sani
nvest
mentsecur
it
ythatenabl
esi
nvest
orst
opoolt
hei
rmoney
t
oget
heri
nto onepr
ofessi
onal
l
ymanaged i
nvest
ment
.Mut
ualf
undscan i
nvesti
n
st
ocks,bonds,cashoracombi
nat
ionoft
hoseasset
s.Theunder
lyi
ng 
secur
it
yty
pes,
cal
l
ed 
hol
dings,
combi
net
ofor
m onemut
ual
fund,
alsocal
l
eda 
por
tfol
i
o.

I
nsi
mpl
ert
erms,mut
ualf
undsar
eli
kebasket
s.Eachbaskethol
dscer
tai
nty
pesof
st
ocks,
bondsorabl
endofst
ocksandbondst
ocombi
nef
oronemut
ualf
undpor
tfol
i
o.
Mut
ualf
undi
sapoolofmoneyf
rom numer
ousi
nvest
orswhowi
sht
osav
eormake
money
.Inv
est
ingi
nmut
ualf
undscanbeal
oteasi
ert
hanbuy
ingandsel
l
ingi
ndi
vi
dual
s
st
ocksandbondsony
ourown.I
nvest
orscansel
lthei
rshar
eswhent
heywant
.

Themut
ualf
undi
ndust
ryhasenj
oyedsubst
ant
ialgr
owt
hint
ermsoft
heasset
sunder
managementaswel
last
hei
nvest
ors’account
s.Ofmanyr
easonst
hatcont
ri
but
edt
o
t
hegr
owt
hofmut
ualf
undi
ndust
ry,
thef
undament
alonei
sthei
ncr
easi
ngcompl
exi
tyof
moder
ninv
est
ment
.

Thenumberofsecur
it
iesav
ail
abl
efori
nvest
menthasi
ncr
easedsubst
ant
ial
l
y.The
v
ari
edandi
nter
rel
atedf
orcesi
nfl
uencet
hepr
icesoft
hesecur
it
ies,andt
het
echni
cal
andanal
yti
cal
studyofsecur
it
ies’
val
uemadei
tdi
ff
icul
tfort
hemanofsmal
lmeansand
l
i
mit
edknowl
edget
omakesoundandpr
ofi
tabl
einv
est
mentde¬ci
sions.

Ty
pesofmut
ual
fundschemes:

1.Open-
endedFund/Scheme:
Anopen-
endedf
undorschemei
sonet
hati
sav
ail
abl
eforsubscr
ipt
ionandr
epur
chase
onacont
inuousbasi
s.Theseschemesdonothav
eaf
ixedmat
uri
typer
iod.I
nvest
ors
canconv
eni
ent
lybuyandsel
luni
tsatNetAssetVal
ue(
NAV)r
elat
edpr
iceswhi
char
e
decl
aredonadai
l
ybasi
s.Thekeyf
eat
ureofopen-
endschemesi
sli
qui
dit
y.

2.Cl
ose-
endedFund/Scheme:
Acl
ose-
endedf
undorschemehasast
ipul
atedmat
uri
typer
iode.
g.5-
7year
s.Thef
und
i
sopenf
orsubscr
ipt
iononl
ydur
ingaspeci
fi
edper
iodatt
het
imeofl
aunchoft
he
scheme.I
nvest
orscani
nvesti
ntheschemeatt
het
imeoft
hei
nit
ialpubl
i
cissueand
t
her
eaf
tert
heycanbuyorsel
ltheuni
tsoft
heschemeont
hest
ockexchangeswher
e
t
heuni
tsar
eli
sted.I
nor
dert
opr
ovi
deanexi
trout
etot
hei
nvest
ors,
somecl
ose-
ended
f
undsgi
veanopt
ionofsel
l
ingbackt
heuni
tst
othemut
ualf
undt
hroughper
iodi
c
r
epur
chaseatNAVr
elat
edpr
ices.SEBIRegul
ati
onsst
ipul
atet
hatatl
eastoneoft
het
wo
exi
trout
esi
spr
ovi
dedt
othei
nvest
ori
.e.ei
therr
epur
chasef
aci
l
ityort
hroughl
i
sti
ngon
st
ockexchanges.Thesemut
ual
fundsschemesdi
scl
oseNAVgener
all
yonweekl
ybasi
s.

Schemesaccor
dingt
oInv
est
mentObj
ect
ive:
A schemecanal
sobecl
assi
fi
edasgr
owt
hscheme,i
ncomescheme,orbal
anced
schemeconsi
der
ingi
tsi
nvest
mentobj
ect
ive.Suchschemesmaybeopen-
endedor
cl
ose-
endedschemesasdescr
ibedear
li
er.Suchschemesmaybecl
assi
fi
edmai
nlyas
f
oll
ows:

3.Gr
owt
h/Equi
tyOr
ient
edScheme:
Theai
m ofgr
owt
hfundsi
stopr
ovi
decapi
talappr
eci
ati
onov
ert
hemedi
um t
olong-
t
erm.Suchschemesnor
mal
l
yinv
estamaj
orpar
toft
hei
rcor
pusi
nequi
ti
es.Suchf
unds
hav
ecompar
ati
vel
yhi
ghr
isks.Theseschemespr
ovi
dedi
ff
erentopt
ionst
othei
nvest
ors
l
i
kedi
vi
dendopt
ion,capi
talappr
eci
ati
on,et
c.andt
hei
nvest
orsmaychooseanopt
ion
dependi
ng on t
hei
rpr
efer
ences.The i
nvest
ors musti
ndi
cat
ethe opt
ion i
nthe
appl
i
cat
ionf
orm.Themut
ualf
undsal
soal
l
owt
hei
nvest
orst
ochanget
heopt
ionsata
l
aterdat
e.Gr
owt
hschemesar
egoodf
ori
nvest
orshav
ingal
ong-
ter
m out
lookseeki
ng
appr
eci
ati
onov
eraper
iodoft
ime.
4.I
ncome/DebtOr
ient
edScheme:
Theai
m ofi
ncomef
undsi
stopr
ovi
der
egul
arandst
eadyi
ncomet
oinv
est
ors.Such
schemes gener
all
yinv
esti
nfi
xed i
ncome secur
it
ies such as bonds,cor
por
ate
debent
ures,
Gov
ernmentsecur
it
iesandmoneymar
keti
nst
rument
s.Suchf
undsar
eless
r
isky compar
ed t
o equi
ty schemes.These f
unds ar
e notaf
fect
ed because of
f
luct
uat
ionsi
nequi
tymar
ket
s.Howev
er,oppor
tuni
ti
esofcapi
talappr
eci
ati
onar
eal
so
l
i
mit
edi
nsuchf
unds.TheNAVsofsuchf
undsar
eaf
fect
edbecauseofchangei
n
i
nter
estr
atesi
nthecount
ry.I
fthei
nter
estr
atesf
all
,NAVsofsuchf
undsar
eli
kel
yto
i
ncr
easei
ntheshor
trunandv
icev
ersa.Howev
er,l
ongt
ermi
nvest
orsmaynotbot
her
aboutt
hesef
luct
uat
ions.

5.Bal
ancedFund:
Theai
m ofbal
ancedf
undsi
stopr
ovi
debot
hgr
owt
handr
egul
ari
ncomeassuch
schemesi
nvestbot
hinequi
ti
esandf
ixedi
ncomesecur
it
iesi
nthepr
opor
ti
oni
ndi
cat
ed
i
nthei
rof
ferdocument
s.Thesear
eappr
opr
iat
efori
nvest
orsl
ooki
ngf
ormoder
ate
gr
owt
h.Theygener
all
yinv
est40-
60%i
nequi
tyanddebti
nst
rument
s.Thesef
undsar
e
al
soaf
fect
edbecauseoff
luct
uat
ionsi
nshar
epr
icesi
nthest
ockmar
ket
s.Howev
er,
NAVsofsuchf
undsar
eli
kel
ytobel
essv
olat
il
ecompar
edt
opur
eequi
tyf
unds.

6.MoneyMar
ketorLi
qui
dFund:
These f
unds ar
e al
so i
ncome f
unds and t
hei
rai
m i
sto pr
ovi
de easy l
i
qui
dit
y,
pr
eser
vat
ionofcapi
tal
andmoder
atei
ncome.Theseschemesi
nvestexcl
usi
vel
yinsaf
er
shor
t-
ter
minst
rument
ssuchast
reasur
ybi
l
ls,
cer
ti
fi
cat
esofdeposi
t,commer
cialpaper
and i
nter
-bankcal
lmoney
,gov
ernmentsecur
it
ies,et
c.Ret
urnson t
heseschemes
f
luct
uat
e much l
ess compar
ed t
o ot
herf
unds.These f
unds ar
e appr
opr
iat
efor
cor
por
ateandi
ndi
vi
duali
nvest
orsasameanst
opar
kthei
rsur
plusf
undsf
orshor
t
per
iods.

7.Gi
l
tFund:
Thesef
undsi
nvestexcl
usi
vel
yingov
ernmentsecur
it
ies.Gov
ernmentsecur
it
ieshav
eno
def
aul
tri
sk.NAVsoft
heseschemesal
sof
luct
uat
eduet
ochangei
nint
erestr
atesand
ot
hereconomi
cfact
orsasi
sthecasewi
thi
ncomeordebtor
ient
edschemes.

8.I
ndexFunds:

I
ndexFundsr
epl
i
cat
ethepor
tfol
i
oofapar
ti
cul
ari
ndexsuchast
heBSESensi
ti
vei
ndex,
S&PNSE50i
ndex(
Nif
ty)
,et
ctheseschemesi
nvesti
nthesecur
it
iesi
nthesamewei
ght
agecompr
isi
ngofani
ndex.NAVsofsuchschemeswoul
dri
seorf
alli
naccor
dance
wi
tht
her
iseorf
all
int
hei
ndex
,thoughnotexact
lybyt
hesameper
cent
ageduet
osome
f
act
orsknownas"
tr
acki
nger
ror
"int
echni
calt
erms.Necessar
ydi
scl
osur
esi
nthi
s
r
egar
dar
emadei
ntheof
ferdocumentoft
hemut
ual
fundscheme.
 

2.FeeBasedFi
nanci
alSer
vices:
Feebasedf
inanci
alser
vicesar
ethoseser
viceswher
einf
inanci
ali
nst
it
uti
ons
oper
atei
nspeci
ali
zedf
iel
dst
oear
nasubst
ant
iali
ncomei
nthef
orm off
eesor
di
vi
dends.

Thesear
ethef
oll
owi
ngFeeBasedFi
nanci
alSer
vices:
1.Mer
chantBanki
ng
2.Cr
edi
tRat
ingAgenci
es
3.Under
wri
ti
ngOfShar
es
4.Por
tfol
i
oManagementSer
vices
5.Shar
eBr
oki
ng
1.Mer
chantBanki
ng:

Mer
chantBanki
ngmaybedef
inedasaki
ndoff
inanci
ali
nst
it
uti
onst
hatpr
ovi
des
av
ari
etyofser
vicessuchasi
nvest
mentbanki
ng,managementofcust
omer
’s
secur
it
ies,
por
tfol
i
os,
insur
ance,
accept
anceofbi
l
ls,
etc.
Thusamer
chantbanki
s
ani
nst
it
uti
onwhi
chembr
acesawi
der
angeofact
ivi
ti
esandser
vices.Mer
chant
banki
ngor
igi
nat
edi
nEngl
andandact
sasaf
inanci
alengi
neerasi
tser
ves
ser
vicesf
oropt
imum ut
il
izat
ionofr
esour
ces.

Mer
chantbanki
ng can be def
ined as a ski
l
l-
ori
ent
ed pr
ofessi
onalser
vice
pr
ovi
dedbymer
chantbankst
othei
rcl
i
ent
s,concer
ningt
hei
rfi
nanci
alneeds,f
or
adequat
econsi
der
ati
on,i
nthef
orm off
ee.Mer
chantbanksar
easpeci
ali
sti
n
i
nter
nat
ional
tradeandt
hus,
excel
int
ransact
ingwi
thl
argeent
erpr
ises.I
tof
fer
sa
r
angeoff
inanci
alandconsul
tancyser
vices,
tot
hecust
omer
s,

Whi
char
erel
atedt
o:

1.Mar
ket
ingandunder
wri
ti
ngoft
henewi
ssue.

2.Mer
gerandacqui
sit
ionr
elat
edser
vices.

3.Adv
isor
yser
vices,
forr
aisi
ngf
unds.

4.Managementofcust
omersecur
it
y.

5.Pr
ojectpr
omot
ionandpr
ojectf
inance.

6.I
nvest
mentbanki
ng

7.Por
tfol
i
oSer
vices

8.I
nsur
anceSer
vices.

Mer
chantbanki
nghel
psi
nrei
nfor
cingt
heeconomi
cdev
elopmentoft
hecount
ry,by
act
ingasasour
ceoff
undsandi
nfor
mat
iont
othebusi
nessent
it
ies.
 Me
rch
ant
Ban
ker
:

Anyper
soni
ndul
gedi
nissuemanagementbusi
nessbymaki
ngar
rangement
swi
th
r
espect t
o t
rade and subscr
ipt
ion of secur
it
ies or by pl
ayi
ng t
he r
ole of
manager
/consul
tantorbypr
ovi
dingadv
isor
yser
vices,i
sknownasamer
chantbanker
.
Theact
ivi
ti
escar
ri
edoutbymer
chantbanker
sar
e:

 Pr
ivat
epl
acementofsecur
it
ies.

 Managi
ngpubl
i
cissueofsecur
it
ies

 Sat
ell
i
tedeal
ershi
pofgov
ernmentsecur
it
ies

 Managementofi
nter
nat
ional
off
eri
ngsl
i
keDeposi
tor
yRecei
pts,
bonds,
etc.

 Sy
ndi
cat
ionofr
upeet
erml
oans

 St
ockbr
oki
ng

 I
nter
nat
ional
financi
aladv
isor
yser
vices.

I
nIndi
a,t
he f
unct
ions oft
he mer
chantbanker
s ar
e gov
erned bySecur
it
ies and
ExchangeF
unc
ti
onsof
Mer
cha
ntBa
nki
ngOr
gan
iza
ti
on

1.Por
tfol
ioManagement
:Mer
chantbankspr
ovi
deadv
isor
yser
vicest
othei
nst
it
uti
onal
i
nvest
ors,
onaccountofi
nvest
mentdeci
sions.Theyt
radei
nsecur
it
ies,
onbehal
foft
he
cl
i
ent
s,wi
tht
heai
m ofpr
ovi
dingt
hem por
tfol
i
omanagementser
vices.
2.Rai
singf
undsf
orcl
ient
s:Mer
chantbanki
ngor
gani
zat
ionassi
stt
hecl
i
ent
sinr
aisi
ng
f
undsf
rom t
hedomest
icandi
nter
nat
ionalmar
ket
,byi
ssui
ngsecur
it
iesl
i
keshar
es,
debent
ures,et
c.,whi
chcanbedepl
oyedf
orst
art
inganew pr
ojectorbusi
nessor
expansi
onact
ivi
ti
es.
3.Pr
omot
ionalAct
ivi
ti
es:Oneoft
hemosti
mpor
tantact
ivi
ti
esofmer
chantbanki
ngi
sthe
pr
omot
ionofbusi
nessent
erpr
ise,dur
ingi
tsi
nit
ialst
age,r
ightf
rom concei
vi
ngt
hei
dea
t
oobt
aini
nggov
ernmentappr
oval
.Ther
eissomeor
gani
zat
ion,whi
chev
enpr
ovi
des
f
inanci
alandt
echni
cal
assi
stancet
othebusi
nessent
erpr
ise.
4.LoanSy
ndi
cat
ion:LoanSy
ndi
cat
ionmeansser
vicepr
ovi
dedbyt
hemer
chantbanker
s,
 i
nrai
singcr
edi
tfr
om banksandf
inanci
ali
nst
it
uti
ons,t
ofi
nancet
hepr
ojectcostor
wor
kingcapi
tal
oft
hecl
i
ent
’spr
oject
,al
sot
ermedaspr
ojectf
inanceser
vice.
5.Leasi
ngSer
vices:Mer
chantbanki
ngor
gani
zat
ionsr
ender
sleasi
ngser
vicest
othei
r
cust
omer
s.Ther
e ar
e some banks whi
ch mai
ntai
nvent
ure capi
talf
unds t
o hel
p
ent
repr
eneur
s.

Mer
chantBanki
nghel
psi
ncoor
dinat
ingt
heoper
ati
onsofi
nter
medi
ari
es,wi
thr
espect
t
othei
ssueofshar
esl
i
ker
egi
str
ar,adv
ert
isi
ngagency
,banker
s,under
wri
ter
s,br
oker
s,
pr
int
ersandsoon.Fur
ther
,itensur
escompl
i
ancewi
tht
her
ulesandr
egul
ati
ons,oft
he
capi
tal
mar
ket
.

2.Cr
edi
tRat
ing:

Accor
dingt
oCRI
SIL“
Credi
trat
ingi
sanunbi
asedandi
ndependentopi
nionast
o
i
ssuer
’s capaci
tyt
o meeti
tsf
inanci
alobl
i
gat
ions.I
tdoes notconst
it
utea
r
ecommendat
iont
obuy
/sel
lorhol
dapar
ti
cul
arsecur
it
y”.I
tisanopi
nionont
he
f
utur
eabi
l
ityandl
egalobl
i
gat
ionofani
ssuert
omaket
imel
ypay
ment
sofpr
inci
pal
andi
nter
estonaspeci
fi
cincomesecur
it
y.

Acr
edi
trat
ingagency(
CRA)i
sacompanyt
hatr
atesdebt
orsont
hebasi
soft
hei
r
abi
l
ityt
opaybackt
hei
rint
erest
sandl
oanamountont
imeandt
hepr
obabi
l
ityof
t
hem def
aul
ti
ng.Theseagenci
esmayal
soanal
yzet
hecr
edi
twor
thi
nessofdebt
i
ssuer
s and pr
ovi
de cr
edi
trat
ings t
o onl
y or
gani
zat
ions and noti
ndi
vi
dual
s
consumer
s.Theassessedent
it
iesmaybecompani
es,speci
alpur
poseent
it
ies,
st
ategov
ernment
s,l
ocalgov
ernment
albodi
es,non-
prof
itor
gani
zat
ionsandev
en
count
ri
es.I
ndi
vi
dualcust
omer
sar
erat
edbyspeci
ali
zedagenci
esknownascr
edi
t
bur
eaust
hat
 pr
ovi
deacr
edi
tscor
e t
oev
erycust
omerbasedonhi
s/herf
inanci
al
hi
stor
y.Cr
edi
trat
ingagenci
esi
nIndi
adonothav
eadi
stantpast
.Theycamei
nto
exi
stencei
nthesecondhal
foft
he1980s.Asofnow,t
her
ear
esi
x 
credi
trat
ing
agenci
esr
egi
ster
edunderSEBI
 namel
y,CRI
SIL,I
CRA,CARE,SMERA,Fi
tchI
ndi
aand
 Br
ickwor
kRat
ings.Rat
ingspr
ovi
dedbyt
heseagenci
esdet
ermi
net
henat
ureand
i
ntegr
alsoft
hel
oan.Hi
ghert
hecr
edi
trat
ing,l
oweri
sther
ateofi
nter
estof
fer
edt
o
t
heor
gani
zat
ion.

Acr
edi
trat
ingmeasur
escr
edi
twor
thi
ness,
ort
heabi
l
ityt
opaybackal
oan.I
taf
fect
s
t
hei
nter
estr
ateappl
i
edt
oloans-i
nter
estr
atesv
arydependi
ngont
her
iskoft
he
i
nvest
ment
.Al
ow-
rat
edsecur
it
yhasahi
ghi
nter
estr
ate,i
nor
dert
oat
tr
actbuy
erst
o
t
hishi
gh-
ri
ski
nvest
ment
.Conv
ersel
y,ahi
ghl
y-
rat
edsecur
it
y(car
ryi
ngaAAAr
ati
ng,l
i
ke
amuni
cipalbondwhi
chi
sbackedbyst
abl
egov
ernmentagenci
es)hasal
oweri
nter
est
r
ate,becausei
tisal
ow-
ri
ski
nvest
ment
.Thesel
ow-
ri
skbondsar
eav
ail
abl
etoawi
de
r
angeofi
nvest
ors,wher
eashi
gh-
ri
skbondscat
ert
oanar
row i
nvest
ingdemogr
aphi
c.
Compani
est
hati
ssuecr
edi
tscor
esf
ori
ndi
vi
dual
sar
eusual
l
ycal
l
ed 
credi
tbur
eaus 
and
ar
edi
sti
nctf
rom cor
por
ater
ati
ngsagenci
es.

3.Under
wri
ti
ngOfShar
es:

Under
wri
ti
ngi
s“t
hepr
ocessbywhi
ch 
i
nvest
mentbanker
s r
aisei
nvest
mentcapi
tal
f
rom i
nvest
orsonbehal
fofcor
por
ati
onsandgov
ernment
sthatar
eissui
ngei
therequi
ty
ordebtsecur
it
ies”
.Thewor
d"under
wri
ter
"or
igi
nat
edf
rom t
hepr
act
iceofhav
ingeach
r
isk-
takerwr
it
ehi
snameundert
het
otalamountofr
iskhewaswi
l
li
ngt
oacceptata
speci
fi
edpr
emi
um.Thi
scent
uri
es-
oldpr
act
icecont
inues,i
naway
,as 
new i
ssues 
are
usual
l
ybr
oughtt
omar
ketbyanunder
wri
ti
ngsy
ndi
cat
e,i
nwhi
cheachf
ir
mtakest
he
r
esponsi
bil
i
ty,
aswel
last
her
isk,
ofsel
l
ing.
Under
wri
ti
ngi
sanagr
eementwher
ebyt
heunder
wri
ter
sensur
est
hatt
hecompanyt
hat
i
ncaset
heshar
esanddebent
uresof
fer
edt
othepubl
i
c,ar
enotsubscr
ibedbyt
he
publ
i
ctot
heext
ent
,thebal
anceofshar
esanddebent
ureswi
l
lbet
akenupbyt
he
under
wri
ter
s.The f
ir
ms orper
sons who ar
e engaged i
n under
wri
ti
ng ar
e cal
l
ed
Under
wri
ter
s.Thecommi
ssi
onpay
abl
etounder
wri
ter
sforunder
wri
ti
ngi
sknownas
under
wri
ti
ngCommi
ssi
on.
Accor
dingt
otheCompani
esAct
,whenaper
sonagr
eest
otakeupshar
esspeci
fi
edi
n
t
heunder
wri
ti
ngagr
eementwhent
hepubl
i
corot
her
sfai
l
edt
osubscr
ibef
ort
hem,i
tis
cal
l
edunder
wri
ti
ngagr
eement
.Fort
hispur
pose,
theunder
wri
terwhoguar
ant
eesf
ort
he
sal
eofshar
esi
sgi
venacommi
ssi
on.

Whent
hepubl
i
ctowhom t
heshar
esofi
ssuef
ailt
osubscr
ibe,
iti
stheunder
wri
terwho
hast
osubscr
ibeupt
othel
i
mithehasagr
eed.Lat
eron,whent
hemar
keti
mpr
oveshe
mayof
floadt
heshar
esbysel
l
ingt
hem t
othepubl
i
c.Thus,t
heunder
wri
termakesa
pr
omi
set
ogett
heunder
wri
tt
eni
ssuesubscr
ibedei
therbyhi
m orbyot
her
s.

Accor
dingt
oIndi
anCompani
esActev
erypubl
i
cli
mit
edcompanymustr
aisemi
nimum
capi
talandi
fitf
ail
stor
aisewi
thi
n60day
sfr
om t
hedat
eofi
ssueofpr
ospect
us,t
he
di
rect
orsshoul
dret
urnt
hemoneyt
othepubl
i
c.I
fther
etur
nisdel
ayedbymor
ethan78
day
s,t
hecompanyhast
opayi
nter
estont
her
efundamount
.

Theper
sonsr
esponsi
blef
ori
ssui
ngshar
esi
nthecompany
,knownas 
i s,
ssuer hav
ethe
opt
ionofdeci
dingf
ort
heunder
wri
ti
ngofshar
es.I
fthei
ssuei
snotunder
wri
tt
en,t
her
e
i
sapossi
bil
i
tyoft
hei
ssueei
ti
ngundersubscr
ibedandev
eni
f90% ofmi
nimum
subscr
ipt
ioni
snotr
ecei
ved,t
hemoneyhast
ober
efundedi
nful
l
.Hence,t
her
eisan
ur
gentneedont
hepar
toft
hei
ssuer
,toseekt
heassi
stanceofunder
wri
ter
sfora
successf
ulcompl
eti
onofi
ssueofshar
es.

4.Por
tfol
i
oManagementSer
vices:

Por
tfol
i
omanagementser
vicei
sat
ail
ormadepr
ofessi
onalser
viceof
fer
edt
ocat
ert
he
i
nvest
ment
sobj
ect
iveofdi
ff
erenti
nvest
orcl
asses.
Thei
nvest
mentsol
uti
onpr
ovi
dedby
PMScat
erst
oni
chesegmentofcl
i
ent
s.Thecl
i
ent
scanbei
ndi
vi
dual
sori
nst
it
uti
ons
ent
it
ieswi
thhi
ghnetwor
th.Por
tfol
i
oManageri
saper
sonwhounder
standshi
scl
i
ent
’s
i
nvest
mentneeds and suggest
s a sui
tabl
einv
est
mentmi
xto meethi
s cl
i
ent
’s
i
nvest
mentobj
ect
ives.Thi
stai
l
or-
madei
nvest
mentpl
ani
srecommendedkeepi
ngi
n
mi
ndt
he 
ri
sk-
ret
urn 
bal
ance.
 
Por
tf o management
ol
i  i
ncl
udes a r
ange ofpr
ofessi
onalser
vices t
o manage an
i
ndi
vi
dual
'
sandcompany
'ssecur
it
ies,
suchas 
stocks 
and 
bonds,
andot
herasset
s,such
as 
real est
ate.
  The management i
s execut
ed i
n accor
dance wi
th a
speci
fi
c i
nvest
ment
 goal
andi
nvest
mentpr
ofi
l
eandt
akesi
ntoconsi
der
ati
ont
hel
evel
of
r
isk,
 
div
ersi
fi
cat
ion,per
iodofi
nvest
mentand 
mat
uri
ty 
(i
.e.whent
her
etur
nsar
eneeded
ordesi
red)t
hatt
hei
nvest
orseeks.
Incasesofsophi
sti
cat
edpor
tfol
i
omanagement
,
ser
vicesmayi
ncl
uder
esear
ch,f
inanci
alanal
ysi
s,and 
asset
 val
uat
ion,moni
tor
ingand
r
epor
ti
ng.
The f
ee f
or por
tfol
i
o management ser
vices can v
ary wi
del
y among
managementcompani
es.
 In 
ter
ms 
ofst
ruct
ure,f
ees may i
ncl
ude an asset
-based
managementf
ee,whi
ch i
s cal
cul
ated on t
he 
basi
s oft
he assetv
aluat
ion att
he
begi
nni
ngoft
heser
vice.
 Si
ncet
hisf
eei
sguar
ant
eedt
othemanager
,iti
sty
pical
l
ya
l
oweramount
. Al
ter
nat
ivel
y,t
hef
eemaybet
iedt
opr
ofi
tsear
nedbyt
he 
por
tfol
i
o
manager
 f
ort
heowner
. I
nsuchcases,
ther
isk-
basedf
eei
susual
l
ymuchhi
gher
.

TheKeyEl
ement
sofPor
tfol
i
oManagement
:

AssetAl
l
ocat
ion:Thekeyt
oef
fect
ivepor
tfol
i
omanagementi
sthel
ong-
ter
m mi
xof
asset
s.Assetal
l
ocat
ioni
sbasedont
heunder
standi
ngt
hatdi
ff
erentt
ypesofasset
sdo
notmov
einconcer
t,andsomear
emor
evol
ati
l
ethanot
her
s.Assetal
l
ocat
ionseekst
o
opt
imi
zet
her
isk/
ret
urnpr
ofi
l
eofani
nvest
orbyi
nvest
ingi
nami
xofasset
sthathav
e
l
owcor
rel
ati
ont
oeachot
her
.Inv
est
orswi
thamor
eaggr
essi
vepr
ofi
l
ecanwei
ghtt
hei
r
por
tfol
i
otowar
dmor
evol
ati
l
einv
est
ment
s.I
nvest
orswi
thamor
econser
vat
ivepr
ofi
l
e
canwei
ghtt
hei
rpor
tfol
i
otowar
dmor
est
abl
einv
est
ment
s.

Di
ver
sif
icat
ion:Theonl
ycer
tai
ntyi
ninv
est
ingi
siti
simpossi
blet
oconsi
stent
lypr
edi
ct
t
hewi
nner
sandl
oser
s,sot
hepr
udentappr
oachi
stocr
eat
eabasketofi
nvest
ment
s
t
hatpr
ovi
debr
oadexposur
ewi
thi
nanassetcl
ass.Di
ver
sif
icat
ioni
sthespr
eadi
ngof
r
iskandr
ewar
dwi
thi
nanassetcl
ass.Becausei
tisdi
ff
icul
ttoknow whi
chpar
ti
cul
ar
subsetofanassetcl
assorsect
ori
sli
kel
ytoout
per
for
m anot
her
,di
ver
sif
icat
ionseeks
t
ocapt
uret
her
etur
nsofal
loft
hesect
orsov
ert
imebutwi
thl
essv
olat
il
it
yatanyone
t
ime.Pr
operdi
ver
sif
icat
iont
akespl
aceacr
ossdi
ff
erentcl
assesofsecur
it
ies,
sect
orsof
t
heeconomyandgeogr
aphi
cal
regi
ons.

Rebal
anci
ng:Thi
sisamet
hodusedt
oret
urnapor
tfol
i
otoi
tsor
igi
nalt
argetal
l
ocat
ion
atannuali
nter
val
s.I
tisi
mpor
tantf
orr
etai
ningt
heassetmi
xthatbestr
efl
ect
san
i
nvest
or’
sri
sk/
ret
urnpr
ofi
l
e.Ot
her
wise,t
hemov
ement
soft
hemar
ket
scoul
dexpose
t
hepor
tfol
i
otogr
eat
err
iskorr
educedr
etur
noppor
tuni
ti
es.Forexampl
e,apor
tfol
i
othat
st
art
s outwi
th a 70% equi
tyand 30% f
ixed-
income al
l
ocat
ion coul
d,t
hrough an
ext
endedmar
ketr
all
y,shi
ftt
oan80/
20al
l
ocat
iont
hatexposest
hepor
tfol
i
otomor
e
r
iskt
hant
hei
nvest
orcant
oler
ate.Rebal
anci
ngal
mostal
way
sent
ail
sthesal
eofhi
gh-
pr
iced/
low-
val
uesecur
it
iesandt
her
edepl
oymentoft
hepr
oceedsi
ntol
ow-
pri
ced/
high-
v
alueorout
-of
-f
avorsecur
it
ies.Theannuali
ter
ati
onofr
ebal
anci
ngenabl
esi
nvest
orst
o
capt
uregai
nsandexpandt
heoppor
tuni
tyf
orgr
owt
hinhi
ghpot
ent
ialsect
orswhi
l
e
keepi
ngt
hepor
tfol
i
oal
i
gnedwi
tht
hei
nvest
or’
sri
sk/
ret
urnpr
ofi
l
e.

5.St
ockBr
oki
ng:

“
Stockbr
oki
ngi
saser
vicewhi
chgi
vesr
etai
landi
nst
it
uti
onali
nvest
orst
heoppor
tuni
ty
t
obuyandsel
lequi
ti
es.
”Thi
sispr
imar
il
ydonebyopeni
ngademat
eaccount
.Ifdone
t
hroughabr
oker
,heopensaaccount
,hel
pingt
ooper
atet
hroughonl
i
nest
ockbr
oki
ng
f
aci
l
ity
.

St
ockbr
oker
sbuyandsel
lshar
esonbehal
foft
hei
rcl
i
ent
.

Ther
e ar
e sev
eraldi
ff
erentl
evel
s ofser
vice a st
ockbr
okercan pr
ovi
de,t
hough,
dependantonhowmuchcont
rol
thecl
i
entwant
sov
erwhi
chshar
est
heyt
rade:

1.Execut
ion-
onl
y 
stockbr
oker
swi
l
lcompl
eteor
der
sont
hei
rcl
i
ent
'sbehal
f,butdonot
of
feranyadv
ice

2.
Adv
isor
y st
ockbr
oker
swi
l
lof
feradv
iceonwher
etot
rade,butonl
ytr
adeonor
der
s
submi
tt
edbycl
i
ent
s

3.Di
scr
eti
onar
y st
ockbr
oker
swi
l
ltr
adeonbehal
foft
hei
rcl
i
ent
s,execut
ing t
rades
wi
thoutt
hei
rinput

 
Mostst
ockbr
oker
swi
l
ltr
adeshar
esbot
h onexchange 
and 
overt
hecount
er,
dependant
onwher
etheycanf
indt
hebestpr
iceandl
i
qui
dit
y.They
'l
lchar
gecommi
ssi
onsf
or
execut
ingt
rades,
oraf
eef
orr
etai
ningt
hei
rser
vices 
—orsomet
imesbot
h.

I
tusedt
obet
hatonl
ytheweal
thycoul
daf
for
dhi
ri
ngabr
okert
ohav
eaccesst
o
t
he 
stockmar
ket
.Howev
er,adv
ancesi
ntechnol
ogy
,suchast
hei
nter
net
,gav
eri
se
t
o di
scountbr
oker
s t
hatal
l
owedsmal
linv
est
orst
otr
adet
hest
ockmar
ket
satasmal
l
f
ee.Becauseofdi
scountbr
oker
s,near
lyany
bodycanaf
for
dtoi
nvesti
nthest
ock
mar
ket
,ev
en i
ndi
vi
dual
s who ar
e based ov
erseas.A r
ecentdev
elopmenti
sthe
i
ntr
oduct
ionof
 r
oboadv
iser
s,al
gor
it
hmi
cinv
est
mentmanagementcar
ri
edoutv
iaweb
ormobi
l
eappi
nter
facewi
thmi
nimalhumani
nter
act
ion,f
orl
i
ttl
etonoongoi
ngcost
.
Onedownsi
det
othesedi
scountpl
atf
ormsi
sthel
ackofper
sonal
i
zedser
vice.

Concl
usi
on:
SoIconcl
udet
hatf
inanci
alser
vicei
soneoft
hei
mpor
tantcomponent
soff
inanci
al
sy
stem.I
tal
sohel
psi
neconomi
cgr
owt
hofacount
ryandi
tal
soexpandsact
ivi
ti
esof
f
inanci
almar
ket
s.Fi
nanci
alser
vicesi
nabr
oadsenseasi
nmobi
l
izi
ngandal
l
ocat
ing
sav
ings.
thusi
tincl
udesal
lact
ivi
ti
esi
nvol
vedi
nthet
ransf
ormat
ionofsav
ingi
nto
i
nvest
ment
s.
Ref
erences:

Books:

Fi
nanci
alser
vices9thedi
ti
onbyMYKhan

Busi
nessFi
nancebyN.
GKal
eandM.Ahmed

Fi
nanci
alMar
ket
sandSer
vicesbyE.Gor
donandK.Nat
araj
an

I
nter
net
:

ht
tps:
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deshar
e.net
>Swat
ir
awat
7

ht
tps:
//www.
sli
deshar
e.net
>sat
aydeept
hi

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il
aloswal
mf.
com

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a.com