Course: Banking and Financial

Services
TOPIC: Overview of Banking and Financial Services
Unit 1
Ms. Vidya Sarat
Banking Structure in India
Commercial Banks: Meaning, Role and Functions
ROLE OF COMMERCIAL BANKS
 What is the business Model of Banks?
Banks Give loans, earn interest (revenue).
Accept deposits, pay interest (cost).
Earned interest minus paid interest is profit.
• How banks ensure profit?
Interest earned on loans should be more than interest paid on deposits.This income is called “Interest Income”.
• Banks also make money from the other sources like:
Distribution of mutual funds.
Distribution if insurance schemes.
Offering wealth management services.
Treasury operations (buying/selling debt securities) Etc.
By providing these services, banks charge a nominal fees.
Income earned from other source is called “Other Income”.
• Consider a hypothetical bank locker.
• In this bank locker, money comes in when people keep money in banks.
• How people keep money in banks?
• Savings account (@3.5% p.a)., Fixed Deposits (@7.5% p.a).
• On these deposits, banks has to pay interest as shown above. So this is all
about expense.
• How money is earned by banks?nBy issuing loan to public/business?
As banks has liquid funds available in locker, it can use it for giving loans.,
How much interest is charged by banks on loans?
• Home loan: 8.5% p.a.
• Car loan: 9.25% p.a.
• Personal loan: 12-15% p.a.
• Credit Card loan: 39.5% p.a.
• What does it mean? It means, banks pay “lower” interest rate on deposits
and charge “higher” interest on loans.
• This difference in interest rates between loans and deposits is called as
interest spread.
In Indian banking terms, statutory
liquidity ratio (SLR) refers to the
minimum reserve requirement that needs
to be maintained by commercial banks in
the nation. This term is used by the
Indian government. The word 'statutory'
indicates that it is mandatorily and
legally required. Every bank should have
a portion of its Net Demand and Time
Liabilities (NDTL) in cash, gold, or other
liquid securities. The Statutory Liquidity
Ratio (SLR) is the proportion of these
liquid securities that a bank must
maintain. The Reserve Bank of India
(RBI) can raise this percentage by up to
40%.
RECENT TRENDS IN BANKING

• The banking and financial services

industry is turning its focus toward
innovation to prepare for a future that will
be increasingly driven by technology
• Key trends driving these innovations
include ongoing digital transformation,
collaboration with FinTech, and the
increasing role of artificial intelligence and
robotics
• Banks and financial institutions should re-
define themselves as agile technology
companies as customer preferences,
demographics and lifestyles change
FURTHER REFERENCES
• STRUCTURE OF BANKS IN INDIA-https://pendulumedu.com/general-awareness/banking-system-in-
india-and-types-of-banks
• ROLE OF COMMERCIAL BANKS IN ECONOMIC DEVOLOPMENT- https://www.bbalectures.com/role-
of-commercial-banks-in-economic-development/
• https://www.civilsdaily.com/banking-in-india-definition-functions-and-types-of-banks/
• BUSINESS MODEL OF BANKS -https://getmoneyrich.com/business-model-of-
banks/#:~:text=Give%20loans%2C%20earn%20interest%20(revenue,minus%20paid%20interest%20is%20pr
ofit.
• RECENT TRENDS IN BANKING - https://www.wns.com/perspectives/articles/articledetail/35/top-trends-in-
banking-and-financial-services
• TYPES OF LOANS -https://www.msmex.in/learn/different-types-of-bank-loans-in-india/
 Unit 2-Sources of Bank Funds and Use of Bank Funds
Bank Liabilities - Deposits, Non - Deposit Sources - Pricing Deposit Services
Use of Bank Funds - The Lending Function - Credit Process- Mortgage lending
Financial Appraisal for Credit Decisions - Fund Based - Non - Fund Based,
Asset Based Lending - Loan Pricing and Customer Profitability analysis
Prof.Vidya Sarat
• How does capital keep banks safe?
• Capital acts like a financial
cushion against losses. When, for
example, many borrowers are
suddenly unable to pay back their
loans, or some of the bank’s
investments fall in value, the bank
will make a loss and without a
capital cushion might even go
bankrupt. However, if it has a
solid capital base, it will use it to
absorb the loss and continue to
operate and serve its customers.
• How does capital keep banks safe?
• Capital acts like a financial cushion
against losses. When, for example,
many borrowers are suddenly unable
to pay back their loans, or some of the
bank’s investments fall in value, the
bank will make a loss and without a
capital cushion might even go
bankrupt. However, if it has a solid
capital base, it will use it to absorb the
loss and continue to operate and
serve its customers.
• What Is Bank Capital?
• Bank capital is the difference between a bank's
assets and its liabilities, and it represents the
net worth of the bank or its equity value to
investors. The asset portion of a bank's capital
includes cash, government securities, and
interest-earning loans (e.g., mortgages, letters
of credit, and inter-bank loans). The liabilities
section of a bank's capital includes loan-loss
reserves and any debt it owes. A bank's capital
can be thought of as the margin to which
creditors are covered if the bank would
liquidate its assets.
• How Bank Capital Works
• Bank capital represents the value of a bank's equity instruments
that can absorb losses and have the lowest priority in payments if
the bank liquidates. While bank capital can be defined as the
difference between a bank's assets and liabilities, national
authorities have their own definition of regulatory capital.
• The main banking regulatory framework consists of international
standards enacted by the Basel Committee on Banking
Supervision through international accords of Basel I, Basel II, and
Basel III. These standards provide a definition of the regulatory
bank capital that market and banking regulators closely monitor.
• Because banks serve an important role in the economy by
collecting savings and channeling them to productive uses
through loans, the banking industry and the definition of bank
capital are heavily regulated. While each country can have its own
requirements, the most recent international banking regulatory
accord of Basel III provides a framework for defining regulatory
bank capital.
How much capital do banks need to hold?
In European banking supervision, the capital requirements for
a bank consist of three main elements:

minimum capital requirements, known as Pillar 1 requirements

an additional capital requirement, known as the Pillar 2
requirement
buffer requirements
Bank Credit Analysis
• Verifying and determining the creditworthiness of a potential client by looking at their financial state, credit reports, and business
cash flows
• What is Bank Credit Analysis?
• In bank credit analysis, banks consider and evaluate every loan application based on merits. They check the creditworthiness of
every individual or entity to determine the level of risk that they subject themself by lending to an entity or individual.Clients with a
high level of risk are less desirable since they present with a high likelihood of defaulting on their loan obligations. Low-risk
clients are more likely to get their loan applications approved since the lender considers them creditworthy.

• Summary
• Bank credit analysis involves verifying and determining the creditworthiness of a potential client by looking at their financial state,
credit reports, and business cash flows.
• The goal of credit analysis is to determine the level of default risk that a client presents to the company and the losses that the
bank will suffer if the client defaults.
• The risk level that a client presents determines whether the bank will approve or reject the loan application, and if approved, the
amount to be awarded.
How It Works
• Information Gathering
• The Creditworthiness of a Borrower
• Credit Security(collaterals)
• What is a Credit Rating?
• A credit rating is an opinion of a
particular credit agency regarding the
ability and willingness an entity
(government, business, or individual) to
fulfill its financial obligations in
completeness and within the
established due dates. A credit rating
also signifies the likelihood a debtor will
default. It is also representative of the
credit risk carried by a debt instrument
– whether a loan or a bond issuance.
• A credit rating is, however, not an assurance or guarantee of a kind of financial
performance by a certain instrument of debt or a specific debtor. The opinions
provided by a credit agency do not replace those of a financial advisor or portfolio
manager.

• Who Evaluates Credit Ratings?

• A credit agency evaluates the credit rating of a debtor by analyzing the qualitative
and quantitative attributes of the entity in question. The information may be
sourced from internal information provided by the entity, such as audited financial
statements, annual reports, as well as external information such as analyst
reports, published news articles, overall industry analysis, and projections.
• Types of Credit Ratings Each credit agency uses its own terminology to determine credit ratings. That said, the notations are strikingly
similar among the three credit agencies. Ratings are bracketed into two groups:
• investment grade and speculative grade.
• Investment grade ratings mean the investment is considered solid by the rating agency, and the issuer is likely to honor the terms of
repayment. Such investments are typically less competitively priced in comparison to speculative grade investments.
• Speculative grade investments are high risk and, therefore, offer higher interest rates to reflect the quality of the investments.
• Users of Credit Ratings
• Credit ratings are used by investors, intermediaries such as investment banks, issuers of debt, and businesses and corporations.
• Both institutional and individual investors use credit ratings to assess the risk related to investing in a specific issuance, ideally in the context
of their entire portfolio.
• Intermediaries such as investment bankers utilize credit ratings to evaluate credit risk and further derive pricing of debt issues.
• Debt issuers such as corporations, governments, municipalities, etc., use credit ratings as an independent evaluation of their
creditworthiness and credit risk associated with their debt issuance. The ratings can, to some extent, provide prospective investors with an
idea of the quality of the instrument and what kind of interest rate they should be expecting from it.
• Businesses and corporations that are looking to evaluate the risk involved with a certain counterparty transaction also use credit ratings.
They can help entities that are looking to participate in partnerships or ventures with other businesses evaluate the viability of the
proposition.
• Individual credit scores are calculated by credit bureaus such as
Experian, Equifax, and TransUnion on a three-digit numerical
scale using a form of Fair Isaac Corporation (FICO) credit
scoring. Credit ratings for companies and governments are
calculated by a credit rating agency such as S&P Global,
Moody’s, or Fitch Ratings. These rating agencies are paid by
the entity seeking a credit rating for itself or one of its debt
issues.
IMPORTANCE OF CREDIT RATING
• Credit Score
• A credit rating is used to determine an entity’s creditworthiness,
wherein an entity could be an individual, a business, a corporation or
a sovereign country. In case of a loan, the rating is used to establish
whether a loan should be rendered in the first place. If the process
goes further, it helps in deciding the term of the loan such as dates of
repayment, interest rate, etc.

• In the case of bond issuance, the credit rating indicates the

worthiness of the corporation or sovereign country’s ability to repay
the bond payments in due time. It helps the investor evaluate whether
to invest in the bond or not.

• A credit score, however, is strictly for indicating an individual’s

personal credit health. It indicates the individual’s ability to undertake
a certain load and his or her ability to honor the terms and conditions
of the loan, including the interest rate and dates of repayment. A credit
score for individuals is used by banks, credit card companies, and
other lending institutions that serve individuals.
FINANCIAL APPRAISAL FOR CREDIT DECISIONS
FUND BASED AND NON FUND BASED
LENDING
ASSET BASED LENDING
Loan pricing
Loan pricing is the process of
determining the interest rate for granting
a loan, typically as an interest spread
(margin ) over the base rate , conducted
by the bookrunners . The pricing of
syndicated loans requires arrangers to
evaluate the credit risk inherent in the
loans and to gauge lender appetite for
that risk.
• The loan price is the interest rate
the borrowers must pay to the
bank and the amount
borrowed(principal). The
price/interest rate is determined
by the true cost of the loan to the
bank(base rate)plus profit/risk
premium for the bank's services
and acceptance of risk.
The price/interest rate is determined by the
true cost of the loan to the bank(base rate)plus
profit/risk premium for the bank’s services and
acceptance of risk. The components of the true
cost of a loan are:
• Interest expense,
• Administrative cost, and
• Cost of capital
Price of the loan(Interest Rate Charge) =
Base Rate + Risk Premium.
• These three components add up to the bank’s base rate. The risk is
the measurable possibility of losing or not gaining the value. The
primary risk of making a loan is repayment risk, which is the
measurable possibility that a borrower will not repay the obligation as
agreed.
• A good lending decision minimizes repayment risk. The prices a
borrower must pay to the bank for assessing and accepting this risk is
called the risk premium.
• Since the past performance of a sector, industry, or company is a
strong indicator of future performance, risk premiums are generally
based on the historical quantifiable amount of losses in that category.
• Price of the loan(Interest Rate Charge) = Base Rate + Risk
Premium.
• Loan pricing is not an exact science- it gets adjusted by various
qualitative and qualitative variables affecting demand for and supply
of funds. These are several methods of calculating loan prices.
Customer Profitability Formula
• To calculate CPA, you need the annual profit per customer, and the total duration a customer stays with your
business.
Annual profit = (Total revenue generated by the customer in a year) – (Total expenses incurred to serve the
customer in a year)
• The total revenue can be generated by the following sources that you need to include:
• Recurring revenue
• Upgrades to the higher plans
• Cross-buying relevant products
And, expenses can be incurred from the following sources which also you need to consider:
• Cost of customer service
• Maintaining a customer success team
• Loyalty perks
• Operational cost
Finally, when you have the annual profit, the customer profitability analysis calculation goes like this:
• CPA = (Annual profit) x (no. of years customer stays with company)
FURTHER REFRENCES
• CREDIT APPRAISAL LINK- https://navi.com/blog/credit-
appraisal/
• FUND BASED AND NON FND BASED LENDING
https://regularbanking.com/fund-based-and-non-fund-based-
facility/
• CUSTOMER PROFITABILITY ANALYSIS
https://www.smartkarrot.com/resources/blog/customer-
profitability-analysis/
Retail Banking
Unit – 3
Prof.Vidya Sarat
• Wholesale banking refers to the banking services offered by banks to larger
customers. The customers are various entities and the list is given below.
• Mortgage banks
• Commercial Banks
• Large Corporations
• Mid-sized Companies
• Real Estate Developers and Investors
• Institutional Customers
• Government agencies
Wholesale Banking includes currency conversions and large-scale transactions.
Wholesale banking is also called corporate banking or commercial banking, as
opposed to retail banking which involves small customers like individuals.
• Wholesale Banking Services Some of the major banks in India,
• Specialised Finance. involved in Wholesale Banking are
• Loan Syndications. given below-
• Structured Transactions. State Bank of India (SBI)
ICICI
• Securitisation.
IDBI Bank
• Credit Structuring.
Punjab National Bank
• Public Sector Infrastructure financing. Bank of Baroda
Central Bank of India
Bank of India, etc.
Retail Banking Functions
Retail banks primarily serve the following functions:
• Savings or Deposits: Accept the surplus from the
individual customers as saving and pay interest.
• Credit Offerings: Retail banks offer credit to individual
customers as loans and earns interest.
• Money Management: Retail Banks offer a variety of
services to its customers to easily manage and
transact their money like ATMs, Cards, UPI, Online
transfers, etc.
Retail Banking Types
• Regional Rural Banks: Provide banking and financial services to different rural and low developed regions to serve
lower- and middle-class people in rural regions of the country with the primary objective of development of a
specific area like agriculture, small industry, trades, or other small-scale business in these areas.
• Private Banks: Provide banking and financial services in urban areas to serve the individuals belonging to medium
to high-income groups located in urban areas and are termed as private banks. These banks provide wealth
management services along with basic banking services.
• Postal Savings Banks (Post Offices): National Postal System also offers basic banking services like savings, deposits,
and withdrawals in some regions of the country and are termed as Postal Saving Banks.
Commonly Offered Products and Services
Retail bank deals with individual customers or the general public by providing basic banking services mentioned below but
not limited to:
• Savings Account: Bank accounts offered with the primary purpose of saving the surplus amount with a limited number of
transactions, usually offered with debit / ATM card to make easy transactions.
• Current Account: These accounts are usually offered to business individuals who need a high number of transactions.
Usually, no interest is paid on these accounts.
• Cards: A variety of cards are being offered including debit cards, credit cards, prepaid cards, and travel cards to allow
bank’s customer’s easy access to money.
• Certificates of deposit (CDs): This is also termed as time deposits where customers deposit money for a fixed duration of
time to get better returns than a savings account. A penalty is applied in case withdrawal is needed before the maturity
time.
• Home Loans (purchase and resale): – Loans are offered to customers to purchase a new house or resale.
• Auto Loans: – Loans are offered to buy a vehicle like a car, jeep, or light motor vehicle (LMVs).
• Personal loans – Unsecured loans are offered to the customers based on their credit ratings.
• Overdraft – An additional credit is offered to the customers to allow them to withdraw money even with no balance in the
account.
• Safe deposit lockers – A safe personal box or locker is provided to keep valuables at the bank’s secure place.
Technology Based Channels
Image result for - Kiosk New Development in Retail banking
Kiosk banking allows users to access traditional banking functions such as
deposits and withdrawals, as well as transfer money between accounts
and check their balances, all from the convenience of a kiosk.

Kiosk banking was introduced by the Reserve Bank of India(RBI) to

facilitate primary banking services to the poor and low-income group
localities at a reasonable cost without the need for visiting the bank.
KIOSK is ‘Kommunikasjon Integrert Offentlig Service Kontor’.

It is an initiative to benefit the poor section of the society who usually are
daily wage earners, who cannot maintain a minimum balance in bank
accounts, who cannot travel long distances to avail banking facilities since
it’s difficult to find banks next door in villages and remote areas.
Small Finance Banks
Small Finance Banks
Corporate Banking
Unit – 4
Prof.Vidya Sarat
• Is Corporate Banking Different From Investment Banking?
• Yes, corporate banking is different from investment banking. Corporate
banking involves providing corporations with a variety of financial services.
Corporate banking is a long-term relationship that involves traditional
banking, risk management, and financing services to corporations. Investment
banking, on the other hand, is transactional, and assists corporations with
one-time transactions, such as an initial public offering (IPO) or a merger or
acquisition.
• For example, corporate banking often involves a long-term relationship
between the financial institution and the client, while investment banking is
often transactional.
Video link
https://youtu.be/fn7WNxyaBA0
Rural Banking and Microfinance
Unit – 5
Prof.Vidya Sarat
MICRO FINANCING
Rural Banking
PRODUCTS OF RURAL BANKING
PRODUCTS :AGRI CREDITS
PRODUCTS :AGRI CREDITS
PRODUCTS :FINANCIAL INCLUSION
PRODUCTS :FINANCING MSE
PRODUCTS:DEPOSITS
RURAL FINANCE
REFINANCE FUNCTION
DIRECT RE FINANCE FUNCTIONS
DEVOLOPMENT AREAS
DEVOLOPMENT -FINANCIAL INCLUSION
 • SUPERVISION
R&D
CHALLENGES
Private Banking and Wealth
Management
Unit – 6
Prof.Vidya Sarat G
• What Is Private Banking?
• Private banking consists of personalized financial services and products offered to the
high-net-worth individual (HNWI) clients of a retail bank or other financial institution. It
includes a wide range of wealth management services, and all provided under one roof.
Services include investing and portfolio management, tax services, insurance, and trust
and estate planning.

• While private banking is aimed at an exclusive clientele, consumer banks and brokerages
of every size offer it. This offering is usually through special departments, dubbed
"private banking" or "wealth management" divisions.
• Private banking is an enhanced offering for the high-net-worth individual
(HNWI) clients of a financial institution.
• Private banking consists of personalized financial and investment services and
products from a dedicated personal banker.
• Private banking clients typically receive discounts or preferential pricing on
financial products.
• However, the range of products and investment expertise offered by a private
bank may be limited compared to other providers.
• How Private Banking Works
• Private banking includes common financial services like checking and savings accounts, but with a
more personalized approach: A "relationship manager" or "private banker" is assigned to each
customer to handle all matters. The private banker handles everything from involved tasks, like
arranging a jumbo mortgage, to the mundane like paying bills. However, private banking goes
beyond CDs and safe deposit boxes to address a client's entire financial situation. Specialized
services include investment strategy and financial planning advice, portfolio management,
customized financing options, retirement planning, and passing wealth on to future generations.

• While an individual may be able to conduct some private banking with $50,000 or less in
investable assets, most financial institutions set a benchmark of six figures' worth of assets, and
some exclusive entities only accept clients with at least $1 million to invest.
• Advantages of Private Banking
• Private banking offers clients a variety of perks, privileges, and personalized service, which has become an
increasingly prized commodity in an automated, digitized banking world. However, there are advantages to both
the private bank clients as well as the banks themselves.
• Privacy
• Privacy is the primary benefit of private banking. Customer dealings and services provided typically remain
anonymous. Private banks often provide HNWIs with tailored proprietary solutions, which are kept confidential to
prevent competitors from luring a prominent customer with a similar solution.
• Preferential Pricing
• Private banking clients typically receive discounted or preferential pricing on products and services. For example,
they may receive special terms or prime interest rates on mortgages, specialized loans, or lines of credit (LOC).
Their savings or money market accounts might generate higher interest rates and be free of fees and overdraft
charges. Also, customers who operate import-export ventures or do business overseas might receive more
favorable foreign exchange rates on their transactions.
• Alternative Investments
• If they are managing a client's investments, private banks often provide the client with extensive resources and opportunities not available
to the average retail investor. For example, an HNWI may be given access to an exclusive hedge fund or a private equity partnership or some
other alternative investment.
• One-Stop-Shop
• In addition to the customized products, there is the convenience of consolidated services—everything under one financial roof. Private
banking clients received enhanced services from their private banker that acts as a liaison with all of the other departments within the bank
to ensure that the client receives the best possible product offerings and service.
• Assets and Fees for Banks
• The bank or brokerage firm benefits from having the clients' funds add to their overall assets under management (AUM). Even at
discounted rates, the private bank's management fees for portfolio management and interest on loans underwritten can be substantial.
• In an environment where interest rates in the U.S. have remained low, banks have been unable to charge higher loan rates to grow their
profits. As a result, fee income has become an increasingly important financial metric in helping banks diversify their revenue stream. Banks
have made strides in expanding beyond traditional banking products, such as loans and deposits, to more service-oriented and fee-based
offerings like private banking.
• Pros
• One-stop shopping for financial affairs
• Concierge services and dedicated employees
• Favorable rates, discounted charges
• Perks and privileges

• Cons
• Less institutional expertise
• Options limited to proprietary products
• High staff turnover
• Possible conflict-of-interest for employees
• Disadvantages of Private Banking
• Although there are many advantages to private banking, drawbacks do exist to this exclusivity.
• Bank Employee Turnover
• Employee turnover rates at banks tend to be high, even in the elite private banking divisions. There may also be some concern over conflicts of
interest and loyalty: The private banker is compensated by the financial institution, not the client—in contrast to an independent money
manager.
• Limited Product Offerings
• In terms of investments, a client might be limited to the bank's proprietary products. Also, while the various legal, tax, and investment services
offered by the bank are doubtlessly competent, they may not be as creative or as expert as those offered by other professionals that specialize
in various types of investments. For example, small regional banks might provide stellar service that beats out the larger institutions. However,
the investment choices at a smaller, regional bank might be far less than a major player such as JPMorgan Chase & Company (JPM).
• Regulatory Constraints for Banks
• Private banks have dealt with a restrictive regulatory environment since the global financial crisis of 2008. The Dodd-Frank Wall Street Reform
and Consumer Protection Act, along with other legislation passed in the U.S. and around the world, has resulted in a higher level of
transparency and accountability. There are more stringent licensing requirements for private banking professionals that help ensure customers
are appropriately advised about their finances.
Real World Example of Private Banking
UBS, Merrill Lynch, Wells Fargo, Morgan Stanley, Citibank, and Credit Suisse are all examples of financial institutions with substantial private
banking operations.
 WHO ARE HIGH NET WORTH INDIVIDUALS
• High Net Worth Individuals
• HNIs or high net-worth individuals (HNIs) belong to the financial services sector where a class of individuals has an investible surplus of more than Rs
5 crore, below this threshold. Such investors are categorised as retail as they are measured by their net worth in the financial industry.
• Net worth is an amount by which assets exceed liabilities.
• Generally, HNIs are widely defined as people whose investible assets such as bonds and stocks exceed a certain amount. A high-net-worth individual
is a person who owns liquid assets including money held in brokerage accounts or banks, and excluding assets like a primary residence, durable
goods or collectibles.
• HNIs are always in high demand by private wealth managers because it takes a good amount of work to preserve and maintain such assets. The
more liquid assets held by an individual, the more appealing an HNI becomes to wealth managers, given they earn money equal to a percentage of
the total assets they manage.
• What is an investible surplus?
• The extra amount of money that an individual has for investment in appreciating assets is known as 'investible surplus'. In fact, investible surplus
does not include investments made in real estate and excludes any assets acquired without the expectation of getting returns from it. For example, a
person's residence, personal assets, cars or farmhouse, cannot be considered under the ambit of investible surplus.
• Basically, if an individual has a house worth Rs 5 crore, bank fixed deposits worth Rs 1 crore, and a car worth Rs 50 lakh, then he or she is not an HNI.
Even though his or her overall net-worth including the house and bank deposits is more than Rs 6 crore, but the investible surplus is only the Rs 1
crore fixed deposit.
• Types of HNIs
• High-net-worth individuals (HNWIs): Investors who own liquid assets
valued between Rs 5 lakh and Rs 5 crore
• Very-high-net-worth individuals (VHNWIs): Investors who possess
liquid assets valued between Rs 5 crore and Rs 25 crore
• Ultra-high-net-worth individuals (UHNWIs): Investors who own more
than Rs 25 crore in liquid assets
 Non Resident Indians & Their
Accounts with Indian Banks
• Indian Banks mainly offer three types of
NRI bank accounts:
• Non-Residency Ordinary (NRO) Account
• Non-Resident External (NRE) Account
• Foreign Currency Non-Resident (FCNR) Fixed Deposit Account

• NRO Account
• NRO account is maintained in Indian rupees. NRI can open an NRO
account in the form of savings, current or fixed/recurring deposits
account. One important aspect of this account is that the funds in this
account are non-repatriable. You cannot transfer funds from this
account to an NRE account or any account holder abroad. Any transfer
of funds from this account needs RBI’s prior permission. It can be held
jointly with residents or with NRI. The NRIs can convert an NRO
account into a regular resident account after returning to India and
becoming an Indian citizen. Interest earned on NRO accounts is fully
taxable. You can use an NRI account only for payments within India in
rupees.
• NRE Account
• NRE account is a rupee account maintained with a bank. You can open an NRE account in the form of savings, current or fixed/recurring
deposits. Money from NRE accounts is freely repatriable. Hence, funds from this account are freely transferable to any other account. You
can also transfer funds to NRO accounts without restrictions. Similarly, you can receive the money transferred from another NRE account or
remitted from abroad in this account. Interest earned on an NRE account is tax-exempt in the hands of an NRI.
• To deposit all foreign exchange, the banks first convert it to Indian rupees at the buying rate, and withdrawal in foreign currency is allowed.
The Indian rupees in the account are converted to the same at the selling rates. However, the account holder shall bear the conversion loss.
The NRIs can convert an NRE account into a regular resident account after returning to India and becoming an Indian citizen.

• FCNR Fixed Deposit Account

• You can open an FCNR account only in the form of term deposits with maturity ranging from one to five years. You can maintain this account
in any freely convertible currency, mainly U.S. Dollar, Pound Sterling, etc. However, you cannot deposit the amount in Indian currency in this
account. The account balances, i.e. the principal and interest earned, can be transferred outside India in the same currency the account is
maintained or any other convertible currency. The entire deposit amount, principal and interest, is exempt from tax.
Wealth Management
• Wealth provides you with money that can be used to realize your
financial and personal goals. It aids you to sustain life and remain in
good stead even when you are no longer employed. Wealth can get
eroded, i.e., reduce in value, over time, if parked on the wrong
avenues. Proper wealth management can help plan your money
better so that it continues to grow.

• Wealth Management – Definition

• Wealth management is a part of financial services that assists you in
managing your money and provides you with advisory services.

• Wealth management includes comprehensive guidance on finance,

taxation, estate and legal. Your wealth manager can be your single
point of contact who will collaborate with accountants, estate
managers, and tax experts to design a holistic wealth plan.
Constituents of Wealth Management
• https://youtu.be/ZyryCIkcotw
WEALTH MGT
• https://youtu.be/OY0GsP1qarc
ASSET MGT VS WEALTH MGT
Financial Planning refers to that systematic approach through
which individuals develop a comprehensive plan to manage
their expenditures and fulfill financial goals. It helps people
organize their expenses and savings, and plan for a better
future.

Types of Financial planning

• Cash Flow Planning:
• Cash Flow refers to inflow and outflow of money. For better financial planning, one should keep a check on his income and expenses. Cash flow
planning is a process where individuals calculate their present and future expenditures and strategize accordingly to achieve their financial goals.
Cash flow planning ensures that an individual has appropriate savings in case of emergencies. Therefore, this should be the first step in one’s financial
planning. An individual also gets to know how much disposable income remains for investment and other avenues after necessary expenditures are
taken care of.

• Investment Planning
• Investment Planning is a process of identifying one’s goals in life and correspondingly prioritizing them. In the long run, if
you want to accumulate a good corpus of wealth, it is extremely important to invest in different financial instruments early
in your life. These financial instruments could be equities, debt securities, mutual funds, fixed deposits, a small savings
scheme, etc. Long term investment in some specific savings vehicles like mutual funds, yields good returns at maturity
because of the compounding effect.

• Insurance Planning
• This is one of the most important aspects of financial planning because most of the problems in life come unannounced. It
is better to secure oneself from these unpredictable risks and mitigate them in any way possible.Life and health insurance
should be the topmost priorities out of a list of insurance coverages a person can get. Apart from this, one should also look
for auto and home insurance. Taking up good insurance policy immunes an individual from any financial impact that a
particular mishappening could lead to.
• Tax Planning Tax minimization and proper tax-planning should be everyone’s priority if one wants to expand his/her
wealth. You can invest in various tax-saving instruments to minimize your taxable income. This will help you in two ways,
one, you would gain returns on your investment and two, you will benefit from tax deductions and tax exemptions. There
are many tax savings schemes started by the Government of India to facilitate investment in these schemes. This helps in
the development of the economy as well as that of the financial markets.
• Real Estate Planning Real Estate Investment has long been considered as a low-risk investment with high returns. An
individual could carefully analyse the market prices and the growth potential of the concerned place of investment, to
invest in real estate properties.Ten years down the line, an individual will surely benefit from the real estate investment.
Also, in case of the untimely death of the guardian, a real estate property would act as a safety net for the heirs.

• Children’s Future Planning Every parent wishes to raise their children responsibly with a bright and successful future. In
today’s world, doing that requires a hefty sum of money because of rising education costs and related expenses. Parents
should plan for their children’s future beforehand and strive to achieve the set financial goal in time. This is imperative for
securing their growing years and gives them a stable base of assets to begin their journey.
• Retirement Planning
• Every individual aspires to have a peaceful retirement without worrying about his/her finances. Financial independence is
one of the key factors in why people plan their retirement in advance.One should start saving for retirement as soon as
s/he starts earning. It is crucial to have enough money post-retirement so that you can relax and enjoy the best phase of
your life.
• A Financial Advisor is a finance
professional who provides
consulting and advice about an
individual’s or entity’s finances.
Financial advisors can help
individuals and companies reach
their financial goals sooner by
providing their clients with
strategies and ways to create
more wealth, reduce costs, or
eliminate debts.
Fee Based Services
Unit – 7
Prof.Vidya Sarat
factoring
Title of the Unit
Unit – xx
Speaker’s Name
Unit 9: Life and Non-Life
Insurance Products
Prof.Vidya Sarat
Credit Cards
Unit – 10
Prof. Vidya Sarat G
Credit cards impose the condition that cardholders pay
back the borrowed money, plus any applicable interest,
as well as any additional agreed-upon charges, either in
full by the billing date or over time.
In addition to the standard credit line, the credit card
issuer may also grant a separate cash line of
credit (LOC) to cardholders, enabling them to borrow
money in the form of cash advances that can be
accessed through bank tellers, ATMs, or credit card
convenience checks. Such cash advances typically have
different terms, such as no grace period and
higher interest rates, compared with those transactions
that access the main credit line. Issuers customarily
preset borrowing limits based on an individual’s credit
rating. A vast majority of businesses let the customer
make purchases with credit cards, which remain one of
today’s most popular payment methodologies for
buying consumer goods and services.
• Understanding Credit Cards
• Credit cards typically charge a higher annual percentage rate (APR) vs.
other forms of consumer loans. Interest charges on any unpaid balances
charged to the card are typically imposed approximately one month after a
purchase is made (except in cases where there is a 0% APR introductory
offer in place for an initial period of time after account opening), unless
previous unpaid balances had been carried forward from a previous
month—in which case there is no grace period granted for new charges.
• By law, credit card issuers must offer a grace period of at least 21 days
before interest on purchases can begin to accrue.1 That’s why paying off
balances before the grace period expires is a good practice when possible.
• Types of Credit Cards
• Most major credit cards—which include Visa, Mastercard, Discover, and American
Express—are issued by banks, credit unions, or other financial institutions. Many credit
cards attract customers by offering incentives such as airline miles, hotel room rentals,
gift certificates to major retailers, and cash back on purchases. These types of credit
cards are generally referred to as rewards credit cards.
• To generate customer loyalty, many national retailers issue branded versions of credit
cards, with the store’s name emblazoned on the face of the cards. Although it’s typically
easier for consumers to qualify for a store credit card than for a major credit card, store
cards may be used only to make purchases from the issuing retailers, which may offer
cardholders perks such as special discounts, promotional notices, or special sales. Some
large retailers also offer co-branded major Visa or Mastercard credit cards that can be
used anywhere, not just in retailer stores.
Types Of Credit Cards
Our needs and wants are constantly inflating
and with that, the alternatives to satisfy those
needs are also increasing. Whether you’re
looking for a smartphone with a good camera
or a credit card which serves to your purpose,
all such facilities are now a click away.
Financial institutions offer various types of
credit cards to its users. Whatever your need
might be, there’s always a credit card to help
you out. From travel benefits to cashback to
the lifestyle, they have got it all covered. And if
used wisely they can also improve your credit
score. Just stay away from credit mistakes like
defaulting on payments or only paying the
minimum amount due. There are several
types of credit cards which offer droves of
benefits, divided to cater to different
individuals with diverse interest.
• Balance Transfer Credit Cards-
• The first credit card in our credit cards types list is a balance credit card. A balance
transfer credit card enables a person to transfer amount from a high-interest card to
a lower one and helps to pay-off debts easily. A credit card balance transfer can come
handy, to pay off any outstanding amount and get out of the huge burden of debt.
There are several other benefits of using a balance transfer card like-
• –> Savings on interest- It’s a no-brainer that you’ll be saving more on a balance
transfer, as compared to other cards. You’re basically transferring your outstanding
amount from a high-interest credit card to a lower one.
• –> Quick processing- The processing of such cards is pretty quick and won’t eat up
your much time.
• –> Multiple transfers- You can transfer your outstanding balance from multiple cards
to a relatively newer one. Hence, consolidating all your debts
• Rewards Credit Cards-
• As the name suggests, reward credit cards are those which provides rewards on your
credit purchases. They are widely popular because of their rewards services system.
A cardholder can earn reward points from purchases made from both offline and
online sources. You can earn these reward points as welcome gifts, renewal bonus
etc. Whenever someone makes a purchase, these reward points are added and can
be redeemed later to get discounts or cash back on purchases.
• Some of the most popular reward credit cards are-
• –> Citibank reward credit cards
• –> Simply Click SBI card
• –> Citi cashback credit card
• –> American Express Gold card
• Charged Credit Cards-
• A charged card is a type of card which provides a payment
method enabling the holder of the card to make purchases,
which are later paid by the card issuer; to whom the funds are to
be paid later on. These cards are generally offered to borrowers
with great financial habits and record. American Express is the
primary issuer of charge cards. Unlike a credit card, a charge card
doesn’t have any credit limit, as they don’t extend the credit
before the monthly payment date. All the late payments are
subject to a fee, charge restrictions, or cancellation of the card.
•
• Auto/Fuel Credit Cards-
• Such credit card offers great benefits for gas purchases or refueling.
The card also helps in saving a decent sum of money with its cashback
offers and fuel surcharge waivers. If you’re into a transport business
and spend heavily on fuel charges then this card will help save money
on your purchases. The benefits of such cards are doubled with extra
rewards and offer on travel, shopping etc.
• Some of the credit cards offering this service are-
• –> IndianOil CITI Platinum Credit Card
• –> RBL Titanium Delight Credit Card
• –> HDFC Bank Regalia First Credit Card
• Business Credit Cards-
• These cards are meant or offered to business establishments, corporates meant specifically for business
purposes. Such cards help a business owner to efficiently manage the both personal and business finance. The
card also provides hefty rewards and benefits to the user. A company can avail benefits like fuel surcharge
waivers, airport lounge access, rewards program, hotel accommodations, travel deals and several other benefits.
• Some of the business cards are-
• –> Yes Bank First Business Credit Card
• –> Yes Prosperity Business Credit Card
•
• Cashback Credit Cards-
• As the name itself suggests, these cards provide cashback on the credit purchase bills. A cashback can be earned
through paying bills, booking movie tickets, retail purchases, grocery bs, dining bills etc. They have many other
benefits too like fuel surcharge waivers, shopping privileges, rewards program etc.
•
• Some of the cashback cards offered are-
• –> CITI Cash Back Credit Card
• –> Simply Click SBI Credit Card
• –> ICICI Bank Platinum Chip Credit Card
• –> HDFC Money Back Credit Card
•
• Co-branded Credit Cards-
• These credit cards are in association with a financial institution,a travel aggregator, or a retail brand. All the
privileges and benefits are merged into a single co-branded card, and hence doubling-down the benefits
provided to the customers. A bank basically ties-up with a merchant, so that they can expand their customer
base through the merchant’s clientele too. A co-branded card has several benefits like holiday or hotel
accommodation privileges, rebates, discounts on clothing and food item, discount on movie tickets, cheap
airfares etcetera.

• Some of the co-branded cards are-

• –> IRCTC SBI Platinum Credit Card

• –> Yatra SBI Credit Card

• –> Air India SBI Signature Credit Card

• –> Mumbai Metro SBI Credit Card

• Contactless Credit Cards-
• A Contactless credit card consists of a contactless or seamless payment through the
card at a merchant’s place by simply tapping their cards at the POS terminal. These
cards do not require any PIN number to make a payment and are completely secure.
Just like any other credit card, they too have certain benefits like discounts, cash
rewards, reward points, welcome gifts, airport lounge access etc.
• For instance, SBI Styleup contactless card is one such credit card.
•
• Lifestyle cards-
• We have come a long way since our civilization began at the hands of our ancestors.
We’ve come so far from that primitive stone age and are continuously improving. All
this happened because of our never-ending wants from ourselves or mother nature.
Moreover, to pick apace with our changing financial habits and lifestyle, banks have
designed some specific lifestyle cards to adapt to the changing consumer needs. Also,
most lifestyle credit cards carry golfing privileges, shopping privileges, dining, travel
and other benefits. Customers can also earn bonus and accelerated rewards points
with such cards on their purchases.
•
• Credit Cards for Women-
• In an era, where women are stepping up to their rights and coming
toe to toe in this men dominated society. It’s no surprise that banks
are introducing special cards for such strong figures and giving
them extra support. These cards are exclusively designed for a
modern age woman who wants to reap out benefits while saving on
their purchases. Also, these cards provide benefits on shopping and
cashback offers. Apart from this, a cardholder also gets benefits like
fuel surcharge waiver, insurance etc.
• Some of these cards are-
• –> HDFC Bank Solitaire Credit Card
• –> Citibank Rewards Credit Card
• –> ICICI Bank Coral Credit Card
•
• Entertainment Cards-
• If you’re bitten by the entertainment bug and can’t stop yourself to feed your entertainment needs every weekend then
entertainment cards are here to help. Designed specifically to give entertainment offers to the cardholder like discounts on tickets
bookings for events, shows, concerts, and offers like buy 1 get 1 free on movie tickets these cards have it all covered for you.
Cardholders can also earn reward points on these transactions and redeem them for several other benefits.

• Some of the cards are-

• –> Kotak PVR Platinum Credit Card

• –> Kotak PVR Gold Movies Credit Card

• –> HDFC Titanium Times Credit Card

• Gold credit cards-
• A gold card is meant for people in the higher income group and with a good credit
score. Some features of a Gold credit card are-
• Cash withdrawal limit is high
• –> High credit limit
• –> Cashback offers
• –> Rewards program
• –> Travel Insurance
• Some of these cards are-
• –> The American Express Gold Card
• –> Kotak PVR Gold Card
• Platinum credit cards-
• These cards are among the list of popular credit cards because of their benefits and privileges. They also offer
benefits like dining, shopping and entertainment offers. The annual joining fee for the card is little higher, as
compared to other credit cards.
• Some of these cards are-
• –> Jet Airways American Express Platinum Credit Card
• –> RBL Platinum Delight Card
• –> RBL Platinum Maxima Card
• –> ICICI Bank Platinum Chip Credit Card
• –> Jetprivilege Hdfc Bank Platinum Credit Cards
• –> Kotak Essentia Platinum Credit Card
• –> Kotak Delight Platinum Credit Card
• –> ICICI Ferrari Platinum Credit Card
• Prepaid credit cards-
• They enable a user to pre-loan money in the account and use that
money to make purchases. Although these cards do not offer a line of
credit on their purchases, customers can still enjoy several privileges
and benefits provided by such cards.
•
• Silver credit cards-
• The salaried professionals can procure this type of credit card if they
have a good credit score. Such cards have a low membership fee and
also offers benefits like zero interest rate for the initial 6 to 9 months,
on balance transfer.
• Travel credit cards-
• Travel credit cards are becoming widely acceptable and popular, because of their attractive
rewards and benefits. These cards offer a wide range of benefits on cards both, domestically
and internationally. Also, banks ties-up with an airline company or a travel company to provide
valuable offers to its customers. Customers can also earn reward points, which can later be
converted into Airmiles; to be redeemed later. These reward points can also be used to reap
benefits like upgrading seats, discounts on flight tickets etc.
• Some of the travel credit cards are-
• –> IRCTC SBI Platinum Card
• –> Air India SBI Platinum Card
• –> Air India SBI Signature Credit Card
• –> SBI Yatra Credit Card
• –> American Express Platinum Travel Card
• –> ICICI Jet Sapphiro Credit Card
• –> ICICI Jet Coral Credit Card
• –> Citi Premier Plus Credit Card
• –> ICICI Jet Rubyx Credit Card
Credit Card Marketing
• Credit card and financial services marketing target key demographics
with relevant content on the right channel. Credit card marketing
campaigns may encourage consumers to open a new account,
transfer a balance, or take advantage of special offers. Unlike general
marketing plans, bank marketing must consider financial risks and
regulations, making it critical for institutions to pinpoint and reach the
appropriate audience.
•
• Financial marketing professionals can achieve campaign goals by
highlighting the right balance of online and in-person products to a
segmented audience. Yet, the pandemic upended consumer behavior,
requiring marketers to reassess channels and product differentiators.
• The Bureau of Consumer Financial Protection stated, "over 175 million Americans
hold at least one credit card." However, "revolving consumer credit fell more than
$120 billion (11%) in 2020" and nearly 3% more "between December 2020 and
April 2021," according to the Board of Governors of the Federal Reserve
System. Several factors affected usage and repayment, including pandemic-
related lockdowns and stimulus funds.
•
• Revolving consumer credit began to recover in 2021, but inflation and rising
interest rates continue to influence behaviors. Credit card marketing
professionals can stay abreast of the latest trends by building strategies on core
principles and leveraging technology to connect with current and potential
clients.
marketing strategies for credit cards
• Put relevant content on the right channels: Promote credit card sales and
financial products by identifying the appropriate platforms, developing
content that resonates with the target audience, and selecting the best
timing.
• Build flexibility into credit card marketing plans: Changing consumer
motivations, expectations, and behaviors can make a credit card campaign
ineffective. Collect data and generate insights to overcome economic
and generational marketing differences.
• Highlight key differentiators: The benefits of financial products vary by
generation, income level, and more. Create compelling campaigns by
personalizing your approach when discussing key differentiators.
• Credit Card Marketing Strategies
• According to the American Banking Association (ABA), "the credit card market is
highly competitive." Consumers have many options and are flooded with offers,
making it imperative for local finance companies to lean into what makes their
financial services and products different. Moreover, amid stiff competition and
economic uncertainty, institutions should leverage big data and data visualization
tools to understand and reach their target audiences.
• Understanding Digital Marketing for Banks
• Investing in Seasonal Credit Card Campaigns
• Leveraging Big Data and Automation
• Using AI-Enabled Marketing as a Strategy
• Credit Card Customer Acquisition
• Personalize Credit Card Campaigns to Reach Consumers Efficiently
• READ THE BELOW ARTICLE
• https://www.mni.com/blog/credit-card-
marketing#:~:text=Base%20your%20marketing%20strategies%20for,and%20select
ing%20the%20best%20timing
 Credit Card Pricing Models
• When your business
accepts credit card
payments, your overall
processing costs will
depend partly on
the credit card pricing
model used by your
payment processor or
merchant service provider.
• 3 common payment
processing models:
1. flat-rate pricing
2. tiered pricing, and
3. interchange-plus pricing.
Flat rate pricing
• Flat rate pricing is the credit card processing price model that
gives merchants a fixed percentage fee and fixed transaction fee
for each transaction. The price is typically 2.9% and $0.30 per
transaction.
• When merchants are on flat rate pricing, the type of credit card used will not
impact the cost. Each credit card category has their own interchange price, which
is the fee that banks charge that gets passed on to merchants. You don’t need to
worry about the different credit card fees with flat fee pricing, so the pricing is
predictable. There is some peace of mind you get flat rate pricing.
• Flat fee pricing offers simplicity, but you should be aware that there is a cost for
this simplicity. Typically a merchant could have lower fees if on a different pricing
structure. Generally, the only way flat fee pricing is cheaper than interchange plus
pricing is when the average transaction size is really low such as less than $5 per
transaction. That would be for merchants like quick serve stores.
•.
Tiered Pricing

In general, tiered-pricing plans typically categorize credit and debit card

transactions into three possible tiers or “buckets”—qualified, mid-
qualified, and non-qualified—and apply different markups for each.
Qualified transactions have the cheapest rates, and they apply mainly to
card-present debit card and non-rewards credit card transactions.
Mid-qualified transactions are more expensive (though the rate
increases depend on the payment processor), and they mainly apply to
membership rewards cards, manually-keyed transactions, and card-not-
present transactions.
Non-qualified transactions have the highest rates. High-rewards cards,
international cards, and corporate cards fall into the category of non-
qualified transactions.
Most merchants are caught up in some sort of tiered plan, simply
because credit card salespeople tend to use tiered models as a way to
look smart and helpful—while ultimately screwing the living crap out of
your business.
Interchange Plus Pricing (aka Cost Plus)
in Payment Processing
• The interchange fee is the underlying cost that banks charge merchants
for the use of credit cards. Different types of credit cards have different
fees. For example, a high end black credit card or infinite privilege has a
much higher interchange fee than a basic credit card. The interchange
fee is an important thing to understand in order to minimize your costs.
You can review some of the interchange rates by card type.
• With the interchange plus pricing model, the fee changes based on the
type of credit card you are processing, however the markup stays the
same for each transaction. This means when a basic credit card is used,
you’ll pay very low fees. If high end cards are used, you’ll pay higher
fees. This give merchants the change to optimize fees to get
the cheapest credit card processing possible.
• It’s important to understand that the majority of credit cards processed
in North America are closer to the basic credit cards and therefore have
low interchange rates. This means the chances are high that your
interchange rates are low.
• Is Interchange Plus Pricing Better?
• Interchange plus pricing is by far the cheaper option for
most businesses as it allows merchants to take
advantage of changing interchange rates. Flat rate
payment processors bake the fluctuations of interchange rates into
their fees, so you’ll generally be paying more with flat free pricing.
• The only times that we would generally say that you should look at
flat fee providers with 2.7%+ fees is if your average transaction size is
less than $5 or you are processing less than $5,000 per month.
Factors affecting credit card lending
• 1. Economy
• 2. Regulations
• 3. Consumer behavior
• 4. Credit risk
• 5. Digital transformation

• https://news.cuna.org/articles/115029-factors-affecting-credit-card-
lending-in-2019
CREDIT CARD CO BRANDING
• What is a co brand credit card?
• A co-branded card is the result
of a partnership between a
merchant, network and issuer.
For a merchant, a co-brand
product can have several
benefits including but not limited
to: increasing sales, attracting
new customers and delivering
value to your most loyal
customers.
• 1. Revenue Sharing on Credit Card Fees
• Reports from the Federal Reserve reveal that credit cards continue to
be highly profitable products. Banks receive revenue from multiple
sources -- interest charges, membership fees, foreign transaction fees
and more -- from both their cardmembers and the merchants who
accept the bank’s cards as payment. We all tend to be more familiar
with the first revenue source. Less known, but just as significant, are
the fees from merchants. On average, the issuing bank collects 2% of
each transaction in which their card is used.
• With co-branded credit cards, the banks and the brands are able to
design various monetization schemes to split the revenue sources
described above. For example, J.P. Morgan Chase, whom Starbucks
partnered with, writes that they "[make] incentive payments to the
partners based on new account originations, sales volumes and the
cost of the partners’ marketing activities and awards."
• 2. Strengthening Loyalty Programs
• A 2016 report by The Nielsen Company found that "67% of consumers
shop more frequently and spend more at retailers with loyalty programs."
Co-branded credit cards supercharge these loyalty programs by extending
them beyond the store. Not only can customers earn points for shopping
with the issuing brand but anywhere else they take their card.
• This arrangement has the power to benefit both the company and its
customers. The brand involved is encouraging their users to be return
customers. In turn, so long as they have a point balance, cardholders will
be incentivized to come back; it's a form of positive reinforcement.
• 3. Access To Better Customer Data
• The programs also allow brands access to troves of cardmember shopping data, which
issuers are allowed to share with affiliates and nonaffiliated third parties, provided the
credit card user doesn't opt out of that disclosure (a right provided to them by the
Gramm-Leach-Bliley Act of 1999). For the business, the additional information can
provide invaluable insight into how, and how much, their customers are spending.
Intimate knowledge of your customer can provide insights into potential new products,
services or pricing structures.
• In the Starbucks example, the company says it was already examining credit card data as
part of its market research. "We look at a lot of different sources of data [including a]
variety of industry studies, credit card data, and other research to track comps in the
away-from-home restaurant industry," Johnson said. With a co-branded credit card, they
can potentially begin looking at more targeted data from their customers.
• 4. Marketing/Branding
• The final benefit of launching a credit card is perhaps the most subtle —
that of better branding. Having a credit card, especially one with allure to
those who own it, can make your brand a bigger part of a customer's life. In
today's competitive credit card market, there’s a constant effort to be the
top-of-wallet card. We found that the best cards offer consumers
between $250 and $700 in rewards per year and serve to further promote
your brand, sometimes even before anyone even uses the card. A case in
point was Uber’s launch of its first credit card with Barclaycard late last
month. The card’s benefits were so good that multiple media outlets wrote
about it, including CNN, USA Today and Forbes -- a week before the card
was actually available.
Investments & Investment
products
Unit – 11
Prof. Vidya Sarat G
Unit 12: International Banking
and Foreign Exchange Market
Prof Vidya Sarat
Unit 13: Mutual Funds
Unit 13
Prof.Vidya Sarat
•
What is Portfolio Management Service?
• Portfolio Management Service (PMS) is a facility offered by a portfolio manager with the intent to achieve the required rate
of return within the desired level of risk. An investment portfolio can be a mix of stocks, fixed income, commodities, real
estate, other structured products, and cash. A portfolio manager is a licensed investment professional who specializes in
analyzing the investment objectives of the investor and has a vast knowledge of the various instruments in the market. The
portfolio manager is better positioned to make informed decisions for investments in securities as opposed to a layman.

• PMS is a customized service offered to High Net-worth Individuals (HNI) clients. The service is tailored as per the investor’s
return requirements and the ability and willingness to assume the risk. An Investment Policy Statement (IPS) is drafted by a
PMS to understand the financial position and needs of the client. The portfolio manager ensures that the return
requirements coincide with the risk profile. Before executing the optimum portfolio, PMS also studies the various
constraints such as time horizon, tax applicability, liquidity, and other unique considerations of the client.
What are the types of Portfolio Management
Services?
• Active Portfolio Management: This form of portfolio management aims at beating the performance of a market index such as Nifty.
An active portfolio manager will take different positions than that of the tracking index, actively buy and sell securities as per
institutional research to create more returns than the index. However, to generate an excess return, the strategy undertakes a
higher level of risk.
• Passive Portfolio Management: Such a PMS strategy aims to mimic the performance of an index by investing in the same securities
with similar weights. This is known as indexing or index investing. The transaction costs, resulting from securities turnover, are low
as compared to active management as the portfolio churning is at a minimum. However, incurring transaction costs leads to an
overall return being lower than the tracking index. The returns of the portfolio are pegged to the market returns. Therefore, the
variance in returns is low.
• Discretionary Portfolio Management: The portfolio manager is given complete control of the portfolio and is free to adopt any
strategy which is suitable to the IPS. Such PMS demand higher involvement for decision making justifying higher fees associated
with discretionary portfolio management. This is the best option for clients with limited time and knowledge of investing
• Non-discretionary Portfolio Management: The PMS will only suggest investment ideas while the investor will be responsible for
choosing the recommendation and timing. This employs PMS in an advisory capacity as the final call rests with the investor instead
of the portfolio manager.
 Portfolio Management Process?
• The portfolio management process is the means through which the portfolio manager defines the
investment objectives of the investor, translates them into achievable goals, allocates assets to achieve those
goals, monitor the returns and rebalance the portfolio for any mismmatch in the risk and return profile of
the portfolio. The 3 steps of the portfolio management process are:

• Planning: Planning the first step of portfolio management and involves the making of the Investor Policy
Statement (IPS). Investor policy statement defines the willingness and the ability to take risk from the
investors point of view. It also sets the objectives of the investors in terms of their risk and return keeping in
mind the IPS of the individuals.
• Execution: Execution is the second step and involves allocation of the investment corpus to various asset
classes and various products within the asset classes to match the risk-return profile stated in the IPS.
• Feedback: In the third and final step of portfolio management, the portfolio manager monitors the
performance of the portfolio and makes changes to the assets wherever they are falling short of their
expected returns. Rebalancing of the portfolio might be done to achieve better returns or the portfolio
might stay as it is if it is performing as per expectation.
What features to look for in a PMS?
• PMSes have model portfolios that they furnish when soliciting clients. The PMS model portfolio may be assessed fora track
record of company selection and overall performance against the market index.
• The performance of the portfolio is solely dependent on the manager’s ability to outperform the market. Therefore, a
crucial aspect of selecting PMS is conducting due diligence of the portfolio manager. A portfolio manager’s educational
background and experience ultimately point to the competency and expertise that they bring to the fund.
• The investment strategy is another parameter that can give PMS an upper hand over other schemes available in the
market. It makes sense for the investor to understand the strategy before committing funds. If the strategies are complex,
the viability of such strategies over the long-term should be outlined transparently.
• The fee arrangement of the PMS based on the performance of the manager should serve a win-win situation. The profit-
sharing of returns is typically 20 percent. Fees charged for the management of the fund should not be over industry
standards, which is in the range of 1 to 3 percent. A hurdle rate clause ensures profit sharing with the manager only if the
performance of the fund beats the minimum required hurdle rate.
• Customer support and transparency are valued by investors, especially for discretionary portfolios. PMSes appraising
portfolio performance frequently benefits from customer engagement and establish a long-standing agreement.
• https://youtu.be/fboOQ98dxBY
• https://youtu.be/C4FgPG6ABsM
• https://youtu.be/_p3-sVHulmM
• https://youtu.be/LTF0eT7wsR8
• https://youtu.be/yFBBNCCT96k
• https://youtu.be/wKSe1Rr-xW0
• FURTHER STUDY MATERIAL FOR MUTUAL FUNDS TYPES
• https://www.amfiindia.com/investor-corner/knowledge-
center/types-of-mutual-fund-schemes.html
Merchant Banking
Unit – 14
Prof.Vidya Sarat
 Characteristics of Merchant Banking
• High proportion of decision makers as a
percentage of total staff
• Quick decision process
• High density of information
• Intense contact with the environment
• Loose organizational structure
• Concentration of short and medium term
engagements
• Emphasis on fee and commission income
• Innovative instead of repetitive operations
• Sophisticated services on a national and
international level
• Low rate of profit distribution
• High liquidity ratio
Significance of MBs
Types of Merchant Banking
• Public Sector Merchant Banks
• Commercial Banks (public)
• National Financial Institutions
• State Financial Institutions

• Private Sector Merchant Banks

• Foreign Banks
• Indian Private Banks
• Leasing Banks
• Finance and investment companies
Scope for Merchant Banking in India
examples
Functions of Merchant Bankers

• Corporate Counseling
• Project Counseling
• Pre-Investment Studies
• Capital Restructuring Services
• Credit Syndication
• Issue Management and Underwriting
• Portfolio Management
• Working Capital Finance
• Acceptance Credit and Bills Discounting
• Merger and Acquisition
• Venture Capital Financing
• Lease Financing
• Foreign Currency Financing
• Brokering Fixed Deposits
• Mutual Funds
• https://www.businessmanagementideas.com/financial-
management/merchant-banking/top-12-functions-performed-by-
merchant-bankers/4172
• https://www.slideshare.net/gimmba/17159027-merchant-
banking-basics-by-saylee
• https://investortonight.com/blog/merchant-banking/
Marketing of banking services
Unit – 15
vidya Sarat