MODULE I :

INTRODUCTION TO FINANCIAL SERVICES

Meaning – Types- Fund Based Financial

Services- Fee Based Financial Services-
Introduction to Merchant Banking
Services in India- Role and Functions of
Merchant Bankers
(15 Hours)

CHAPTER 1
INTRODUCT ION TO
FINANCIAL SERVICES

1. INTRODUCTION
The Indian inancial services industry has undergone a metamorphosis since1990. Before its emergence
the commercial banks and other inancial institutions dominated the ield and they met the inancial
needs of the Indian industry. It was only after the economic liberalisation that the inancial service sector
gained some prominence. Now this sector has developed into an industry. In fact, one of the world’s
largest industries today is the inancial services industry. Financial service is an essential segment of
inancial system. Financial services are the foundation of a modern economy. The inancial service sector
is indispensable for the prosperity of a nation.

2. MEANING OF FINANCIAL SERVICE

Financial services refer to services provided by the inance industry. The inance industry
consists of a broad range of organisations that deal with the management of money. These organisations
include banks, credit card companies, insurance companies, consumer inance companies, stock
brokers, investment funds and some government sponsored enterprises.
Financial services may be de ined as the products and services offered by inancial institutions
for the facilitation of various inancial transactions and other related activities. Financial services can
also be called inancial intermediation. Financial intermediation is a process by which funds are
mobilised from a large number of savers and make them available to all those who are in need of it and
particularly to corporate customers. There are various institutions which render inancial services. Some
of the institutions are banks, investment companies, accounting irms, inancial institutions, merchant
banks, leasing companies, venture capital companies, factoring companies, mutual funds etc. These
institutions provide variety of services to corporate enterprises. Such services are called inancial
services.
Thus, services rendered by inancial service organisations to industrial enterprises and to
ultimate consumer markets are called inancial services. These are the services and facilities required
for the smooth operation of the inancial markets. In short, services provided by inancial intermediaries
are called inancial services.
1
3. TYPES OF FINANCIAL SERVICES
Financial service institutions render a wide variety of services to meet the requirements of individual
users. These services may be summarized as below:
(A) FUND BASED SERVICES
1. Venture capital
2. Equipment leasing or lease inancing
3. Factoring
4. Forfeiting
5. Hire purchase
6. Underwriting
7. Bill discounting.
8. Insurance services
9. Housing inance
10. Mutual fund

(B) NON-FUND / FEE BASED SERVICES

1. Merchant banking
2. Securitisation of Debt
3. Credit rating
4. Merger and acquisition services
5. Loan syndication
6. Project advisory services
Project advisory services starts from the conceptualization of the project.
They help the client at every stage of project setting up till the implementation of
the project and monitoring during implementation.
7. Portfolio management services
Portfolio Management Service (PMS) is s a professional service where
quali ied and experienced portfolio managers backed by a research team manage
equity portfolios on behalf of clients instead of clients managing themselves. It is
a facility offered by a portfolio manager with the intent to achieve the required
rate of return.
8. Capital restructuring services
9. Debenture trusteeship
10. Custodian services
A inancial institution that holds customers' securities for safekeeping
to prevent them from being stolen or lost. The custodian may hold stocks, bonds,
or other assets in electronic or physical form on behalf of its customers.
11. Stock broking services
A stockbroker is a inancial professional who buys and sells stocks at
the direction of clients. He will execute orders in the market on behalf of
clients.

Assignment 1:
Prepare an essay about various types of inancial services, covering each and every heading in two or
three sentences.