Definition of Financial Services

As per section 65(10) of the Finance Act, 1994, ―banking and financial services‖ means the following services provided by a banking company or a financial institution including a non banking financial company, namely; (i) financial leasing services including equipment leasing and hire-purchase by a body corporate; (ii) credit card services; (iii) merchant banking services; (iv) securities and foreign exchange (forex) broking; (v) asset management including portfolio management, all forms of fund management, pension fund management, custodial depository and trust services, but does not include cash management; (vi) advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisition and advice on corporate restructuring and strategy; and vii) provision and transfer of information and data processing. Financial services can be defined as the products and services offered by institutions like banks of various kinds for the facilitation of various financial transactions and other related activities in the world of finance like loans, insurance, credit cards, investment opportunities and money management as well as providing information on the stock market and other issues like market trends Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, investment funds and some government sponsored enterprises. Functions of financial services 1. 2. 3. 4. Facilitating transactions (exchange of goods and services) in the economy. Mobilizing savings (for which the outlets would otherwise be much more limited). Allocating capital funds (notably to finance productive investment). Monitoring managers (so that the funds allocated will be spent as envisaged).

5. Transforming risk (reducing it through aggregation and enabling it to be carried by those more willing to bear it).

Characterstics and Features of Financial Services i) Customer-Specific: Financial services are usually customer focused. The firms providing these services, study the needs of their customers in detail before deciding their financial strategy, giving due regard to costs, liquidity and maturity considerations. Financial services firms continuously remain in touch with their customers, so that they can design products which can cater to the specific needs of their customers. The providers of financial services constantly carry out market surveys, so they can offer new products much ahead of need and impending legislation. Newer technologies are being used to introduce innovative, customer friendly products and services which clearly indicate that the concentration of the providers of financial services is on generating firm/customer specific services. ii) Intangibility: In a highly competitive global environment brand image is very crucial. Unless the financial institutions providing financial products and services have good image, enjoying the confidence of their clients, they may not be successful. Thus institutions have to focus on the quality and innovativeness of their services to build up their credibility. iii) Concomitant: Production of financial services and supply of these services have to be concomitant. Both these functions i.e. production of new and innovative financial services and supplying of these services are to be performed simultaneously. iv) Tendency to Perish: Unlike any other service, financial services do tend to perish and hence cannot be stored. They have to be supplied as required by the customers. Hence financial institutions have to ensure a proper synchronization of demand and supply. v) People based services: Marketing of financial services has to be people intensive and hence it‘s subjected to variability of performance or quality of service. The personnel in financial services organisation need to be selected on the basis of their suitability and trained properly, so that they can perform their activities efficiently and effectively. vi) Market Dynamics: The market dynamics depends to a great extent, on socioeconomic changes such as disposable income, standard of living and educational changes related to the various classes of customers. Therefore financial services have to be constantly redefined and refined taking into consideration the market dynamics. The institutions providing financial services, while evolving new services could be proactive in visualising in advance what the market wants, or being reactive to the needs and wants of their customers. Scope of Financial Services Financial services cover a wide range of activities. They can be broadly classified into two, namely: i. ii. Traditional. Activities Modern activities.

However. the financial intermediaries have been rendering a wide range of services encompassing both capital and money market activities. Fund based activities: The traditional services which come under fund based activities are the following:       Underwriting or investment in shares. 1. Fund based activities and 2. Participating in money market instruments like commercial Papers. They include:     Managing the capital issue — i. In view of the importance. management of pre-issue and post-issue activities relating to the capital issue in accordance with the SEBI guidelines and thus enabling the promoters to market their issue. of new issues (primary market activities). etc. bonds. Most of them are in the nature of non-fund based activity. are being provided under this head. Hence a wide variety of services. ii. Traditional Activities Traditionally.e. . Modern Activities Beside the above traditional services. seed capital. Dealing in foreign exchange market activities. debentures. They expect more from financial services companies.i. whether individual or corporate. venture capital. This can be called ‗fee based‘ activity. are not satisfied with mere provisions of finance. hire purchase. viz. treasury bills. Non fund based activities Non fund based activities Financial intermediaries provide services on the basis of non-fund activities also. Assisting in the process of getting all Government and other clearances. Dealing in secondary market activities. Non-fund based activities.  Rendering project advisory services right from the preparation of the project report till the raising of funds for starting the project with necessary Government approvals. They can be grouped under two heads. Making arrangements for the placement of capital and debt instruments with investment institutions. Today customers. these activities have been in brief under the head ‗New financial products and services‘. Involving in equipment leasing. certificate of deposits. Arrangement of funds from financial institutions for the clients‘ project cost or his working capital requirements. the financial intermediaries render innumerable services in recent times. discounting of bills etc. some of the modern services provided by them are given in brief hereunder.

perishability as regards to time and reversal of a service. resources skills and or experience to offer a balanced satisfaction of client need while at the same time remaining relevant and functional in an economy. which deal with the management of money and other factors that relate to the flow of money in an economy. Following the above discussion. Undertaking services relating to the capital market. and political risk by using swaps and other derivative products. it is important therefore to first understand what finance is. A service is an equivalent of an economic good that is intangible. 3)Safe custody of securities. Promoting credit rating agencies for the purpose of rating companies which want to go public by the issue of debt instrument. Structuring the financial collaborations / joint ventures by identifying suitable joint venture partners and preparing joint venture agreements. 2)Registration and transfers. For instance. Guiding the clients in the minimization of the cost of debt and in the determination of the optimum debt-equity mix. how the resources are acquired and investments. Rehabilitating and restructuring sick companies through appropriate scheme of reconstruction and facilitating the implementation of the scheme. The person or firm offering the service boosts the ability. Recommending suitable changes in the management structure and management style with a view to achieving better results.portfolio of large Public Sector Corporations. management of resources. Advising the clients on the questions of selecting the best source of funds taking into consideration the quantum of funds required. Acting as trustees to the debenture holders. It is a branch of economics whose main goals relate to allocation of resources. Undertaking risk management services like insurance services. Hedging of risks due to exchange rate risk. The concept of finance considers time. such as 1)Clearing services. inseparability. economic risk. Managing In. the phrase "financial services” has been commonly used especially concerning money issues. interest rate risk. Finance relates to raising of money through issuance and sale of debt or equity. the concept of intangibility also referred to as insubstantiality. Guiding corporate customers in capital restructuring. their cost. simultaneity and variability which refers to the distinctiveness or uniqueness of a given financial service. To clarify on this. What Is The Definition Of Financial Services? From time immemorial. finance implies interacting with matters that deal with money and the markets.             Planning for M&A and assisting for their smooth carry out. money and risk and how they relate or interrelate. lending period etc. 4)Collection of income on securities. Financial services therefore are those services that are offered by the institutions. buy-hack options etc. it can be correctly put that a financial service refers to those facilities . In general. For better understanding of its meaning. a service and the financial service provider possess various characteristics that make the service distinct.

The result was the merger of many organizations offering the above mentioned services under one banner giving rise to a new type of banking popularly known as Commercial Banking and a number of organizations like Citibank came into existence purely as service providers. private equity. investment funds and some government . banks. VISA (Credit Card) 10. Financial services are many. credit unions. The Finance services industry though a highly profitable Industry with respect to earnings does not count for a large share of the market and also employs a lesser number of people as compared to some of the other Industries. stock brokerage firms. Among these organizations are credit unions. checking accounts. leasing. insurance companies.such as savings accounts. money transfers. confirming among others that are offered by players or organizations in the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Standard Chartered 4. intermediation venture capital conglomerates as well as both private and public equity. HSBC 3. Citigroup 5. credit card companies. ING (Investment) 8. Blurtit Answer Financial services can be defined as the products and services offered by institutions like banks of various kinds for the facilitation of various financial transactions and other related activities in the world of finance like loans. Allianz (Insurance) Financial services Financial services refer to services provided by the finance industry. Other well known financial services include debt resolution. These players include banks. wide and varied hence many institutions or organizations are involved in offering them. American Express (Credit Card) 9. Merrill Lynch 6. investment opportunities and money management as well as providing information on the stock market and other issues like market trends. insurance firms. and foreign exchange among others. credit cards. stock brokerages. Morgan Stanley 7. Citibank 2. consumer finance companies. insurance. The Gramm-Leach-Bliley Act enacted in the late 1990s brought the term financial services into prominence when it repealed earlier laws which forbade a bank or any financial institution from venturing into fields like insurance and investment. The above directly implies that financial services in general relate to all those issues which affect the circulation of money and how they interrelate. Some of the major service providers and commercial banks in this field are: 1.

Provide internet banking system to facilitate the customers to view and operate their respective accounts through internet.Insurance brokers shop for insurance (generally corporate property and casualty insurance) on behalf of customers. As of 2004. and mortgage loans (typically loans to purchase a home. commercial loans. helps businesses raise money from other firms in the form of bonds (debt) or stock (equity). so payments for bills can be made automatically Provide overdraft agreements for the temporary advancement of the Bank's own money to meet monthly spending commitments of a customer in their current account. the financial services industry represented 20% of the market capitalization of the S&P 500 in the United States. Provide Charge card advances of the Bank's own money for customers wishing to settle credit advances monthly. Provide a check guaranteed by the Bank itself and prepaid by the customer.[1] Banks Main article: Bank A "commercial bank" is what is commonly referred to as simply a "bank".sponsored enterprises. [edit] Banking services The primary operations of banks include:               Keeping money safe while also allowing withdrawals when needed Issuance of checkbooks so that bills can be paid and other kinds of payments can be delivered by post Provide personal loans. instead of lending money directly to a business.Companies which provide credit card machine and payment networks call themselves "merchant card providers". property or business) Issuance of credit cards and processing of credit card transactions and billing Issuance of debit cards for use as a substitute for checks Allow financial transactions at branches or by using Automatic Teller Machines (ATMs) Provide wire transfers of funds and Electronic fund transfers between banks Facilitation of standing orders and direct debits. [edit] Insurance Main article: Insurance  Insurance brokerage ." a type of financial services entity which. such as a cashier's check or certified check. Notary service for financial and other documents Credit card machine services and networks . The term "commercial" is used to distinguish it from an "investment bank. Recently a number of websites have been created to .

A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital. The most successful private equity funds can generate returns significantly higher than provided by the equity markets Venture capital is a type of private equity capital typically provided by professional. life insurance. such as large companies. Activities include insurance and annuities. outside investors to new.e. general insurance. This debt can be accrued in various ways including but not limited to personal loans.An angel investor or angel (known as a business angel or informal investor in Europe). which usually take controlling equity stakes in businesses that are either private. high-potential-growth companies in the interest of taking the company to an IPO or trade sale of the business.g. but do not want to file bankruptcy and wish to payoff their debts owed. Primarily internet-based companies are often referred to as discount brokerages. Full service and private client firms primarily assist and execute trades for clients with large amounts of capital to invest. Angel investment . bad things don't always happen at the same time.These services involve stock brokers (private client services) and discount brokers. Private equity . Stock brokers assist investors in buying or selling shares. credit cards or in some cases merchant accounts.A financial services conglomerate is a financial services firm that is active in more than one sector of the financial services market e. A key rationale for the existence of such businesses is the existence of diversification benefits that are present when different types of businesses are aggregated i. retail banking. health insurance. Underwriters may also offer similar commercial lines of coverage for businesses. wholesale banking. to protect them from catastrophic losses. insurance brokers. etc. These can include debt consolidation. investment banking. economic capital for a conglomerate is usually substantially less than economic capital is for the sum of its parts. These brokerages primarily target individual investors. wealthy individuals. . Reinsurance . There are many services/companies that can assist with this. Conglomerates . As a consequence.Personal lines insurance underwriters actually underwrite insurance for individuals.Private equity funds are typically closed-end funds. retirement insurance. usually in exchange for convertible debt or ownership equity. debt settlement and refinancing. Debt resolution is a consumer service that assists individuals that have too much debt to pay off as requested. Private equity funds often use leveraged buyouts (LBOs) to acquire the firms in which they invest. health insurance. or taken private once acquired.[6] Insurance underwriting . is an affluent individual who provides capital for a business start-up. causing controversy within the industry. although many now have branch offices to assist clients. and stock brokers. and investment management funds. asset management. life insurance. Other financial services       Intermediation or advisory services . and property & casualty insurance.Reinsurance is insurance sold to insurers themselves.  give consumers basic price comparisons for services such as insurance. a service still offered primarily through agents.

i would continue to share more knowledge on this. However. It is an evaluation made by a credit rating agency of the debt issuers likelihood of default. a bank or any NBFC. the transaction goes through a specific medium.[1] Credit ratings are determined by credit ratings agencies. specifically.Depository When u buy shares or sell the shares. credit scores have also been used to adjust insurance premiums. Credit scores are the output of mathematical algorithms that assign numerical values to information in an individual's credit report. determine employment eligibility. NSDL (National Securities Depository Ltd) & CDSL ( Central Depository Services Ltd. as a factor considered in obtaining security clearances and establish the amount of a utility or leasing deposit. . credit rating agencies use their judgment and experience in determining what public and private information should be considered in giving a rating to a particular company or government. Right now there are 2 depository companies. Like banks. Credit rating A credit rating evaluates the credit worthiness of an issuer of specific types of debt. debt issued by a business enterprise such as a corporation or a government.BSE and few others. even the depository service providers have a clearing house where at the end of the day all the buying n selling settlements takes place between buyers n sellers through stock brokers. Depository is a company which holds the shares you purchase. It can be a stock broker. The depository is linked with Exchange boards like NSE. There are few other interesting points i would like to discuss regarding depository participants and depository services providers. The credit report contains information regarding the financial history and current assets and liabilities of an individual. The credit rating represents the credit rating agency's evaluation of qualitative and quantitative information for a company or government.) And a depository participant is an institution which acts as an agent between an investor and Depository servie provider. including non-public information obtained by the credit rating agencies analysts. Credit ratings are not based on mathematical formulas. in recent years. Instead. A bank or credit card company will use the credit score to estimate the probability that the individual will pay back loan or will pay back charges on a credit card. Credit ratings are often confused with credit scores. The Depository Services provider settles the trade or transactions u make in stock markets. If the readers here show good response. The credit rating is used by individuals and entities that purchase the bonds issued by companies and governments to determine the likelihood that the government will pay its bond obligations.

The sale of the receivables essentially transfers ownership of the receivables to the factor.[1][2] not the firm‘s credit worthiness. There are three principal parts to the factoring transaction. based on the agency's analysis of the entity's history and analysis of long term economic prospects. the factor obtains the right to receive the payments made by the debtor for the invoice amount and must bear the loss if the debtor does not pay the invoice amount. and then won the lottery on Tuesday.) the reserve. and the factor.[3] while factoring is a Financial Transaction that involves the Sale of any portion of the firm's Receivables.A poor credit rating indicates a credit rating agency's opinion that the company or government has a high risk of defaulting. For example. The receivable is essentially a financial asset associated with the debtor's liability to pay money owed to the seller (usually for work performed or goods sold). factoring is not a loan – it is the purchase of a financial asset (the receivable). the cost associated with the transaction which is deducted from the reserve prior to it being paid back the seller. whereas invoice discounting is borrowing where the receivable is used as collateral. A poor credit score indicates that in the past. The seller then sells one or more of its invoices (the receivables) at a discount to the third party. other individuals with similar credit reports defaulted on loans at a high rate. to obtain cash. invoices) to a third party (called a factor) at a discount in exchange for immediate money with which to finance continued business. the debtor. his credit score would remain 400 on Tuesday because his credit report does not take into account his improved future prospects. Factoring Factoring is a financial transaction whereby a business job sells its accounts receivable (i. Secondly.factoring is the sale of receivables.[2][1] Accordingly. otherwise the seller could potentially risk further advances from the factor.) the fee. The credit score does not take into account future prospects or changed circumstances. as well as interest based on how long the factor must wait to receive payments from the debtor. a percentage of the invoice face value that is paid to the seller upon submission.[4] The three parties directly involved are: the one who sells the receivable. Factoring differs from a bank loan in three main ways. the account debtor is notified of the sale of the receivable. the seller should never collect the payments made by the account debtor.e. indicating the factor obtains all of the rights and risks associated with the receivables. if an individual received a credit score of 400 on Monday because he had a history of defaults.. and the factor bills the debtor and makes all collections. [5] The factor also estimates the amount that may not be collected due to non-payment. b. a. the remainder of the total invoice amount held until the payment by the account debtor is made and c.[2][1] Factoring is a word often misused synonymously with invoice discounting[citation needed] . First. Finally. the specialized financial organization (aka the factor). It is different from forfaiting only in the sense that forfaiting is a transaction-based operation involving exporters in which the firm sells one of its transactions.) the advance. a bank loan involves two parties whereas factoring involves three. Usually. and makes accommodation for this when determining the amount that will be . Critical to the factoring transaction. Sometimes the factor charges the seller a service charge. the emphasis is on the value of the receivables (essentially a financial asset).

After collecting the details about the importer. Introduction Forfeiting and factoring are services in international market given to an exporter or seller. under the Generally Accepted Accounting Principles receivables are considered sold when the buyer has "no recourse.[7] Otherwise. The factor's overall profit is the difference between the price it paid for the invoice and the money received from the debtor. forfeiter estimates risk involved in it and then quotes the discount rate. By buying these receivables. Export takes place against documents guaranteed by the importer‘s bank and discounts the bill with the forfeiter and presents the same to the importer for payment on due date. less the amount lost due to non-payment. with the receivables used as collateral. In international trade. The basic difference between the forfeiting and factoring is that forfeiting is a long term receivables (over 90 days up to 5 years) while factoring is a shorttermed receivables (within 90 days) and is more related to receivables against commodity sales. The exporter then quotes a contract price to the overseas buyer by loading the discount rate and commitment fee on the sales price of the goods to be exported and sign a contract with the forfeiter. How forfeiting Works in International Trade The exporter and importer negotiate according to the proposed export sales contract. Documentary Requirements ."[6] or when the financial transaction is substantially a transfer of all of the rights associated with the receivables and the seller's monetary liability under any "recourse" provision is well established at the time of the sale. which means to surrender ones right on something to someone else. Then the exporter approaches the forfeiter to ascertain the terms of forfeiting.[2] In the United States. Definition of Forfeiting The terms forfeiting is originated from a old French word ‗forfait‘.given to the seller. Its main objective is to provide smooth cash flow to the sellers. and other necessary documents.  Foreifting and Factoring. the forfeiter frees the exporter from credit and the risk of not receiving the payment from the importer. forfeiting may be defined as the purchasing of an exporter‘s receivables at a discount price by paying cash. the financial transaction is treated as a loan.

Increased trade opportunity : With forfeiting. such as interest rate risk. if any is to be certified only with reference to the FOB value of the exports stated on the shipping bill. Reduced administration cost : By using forfeiting . Advance tax refund: Through forfeiting the exporter can make the verification of export and get tax refund in advance just after financing. he will be exempted from the responsibility to repay the debt. normally included in the "Analysis of Export Value "on the shipping bill. the forfeiting transaction is to be reflected in the following documents associated with an export transaction in the manner suggested below:   Invoice : Forfeiting discount. credit risk. as a result. currency risk. Shipping Bill and GR form : Details of the forfeiting costs are to be included along with the other details. Risk reduction : forfeiting business enables the exporter to transfer various risk resulted from deferred payments. interest payable by the exporter for the entire period of credit involved and deducted by the forfaiter from the amount paid to the exporter against the availised promissory notes or bills of exchange. as against 8085% in case of other discounting products. Improved cash flow : Receivables become current cash in flow and its is beneficial to the exporters to improve financial status and liquidation ability so as to heighten further the funds raising capability. 2. needs not be shown separately instead. Lower credit administration and credit follow up. the export is able to grant credit to his buyers freely. Bank gain fee based income. commitment fees. such FOB price. etc. payable by the exporter to the forfeiter ‗for latter‘s‘ commitment to execute a specific forfeiting transaction at a firm discount rate with in a specified time. Discount fee. . Commitment fee.In case of Indian exporters availing forfeiting facility. Benefits to Exporter       100 per cent financing : Without recourse and not occupying exporter's credit line That is to say once the exporter obtains the financed fund. which enable the client to gain 100% finance. The relative costs. Forfeiting The forfeiting typically involves the following cost elements: 1. The claim for duty drawback. and political risk to the forfeiting bank. stated on the invoice. be more competitive in the market. Benefits to Banks Forfeiting provides the banks following benefits:    Banks can offer a novel product range to clients. the exporter will spare from the management of the receivables. commission insurance. are reduced greatly. these could be built into the FOB price. and thus.

Here. 5. . A merchant bank also provides advisory on corporate matters to the firms they lend to. Disclosed Factoring In disclosed factoring. 6. a financial institution which is usually a bank buys the accounts receivable of a company usually a client and then pays up to 80% of the amount immediately on agreement. The normal period of factoring is 90150 days and rarely exceeds more than 150 days. In this case. Cost of factoring is always equal to finance cost plus operating cost. Disclosed 2. Nonrecourse factoring: In nonrecourse factoring. 3. Credit rating is not mandatory. 4. factoring against medical insurance. client‘s customers are aware of the factoring agreement. It is costly. client's customers are not notified of the factoring arrangement. Examples includes factoring against goods purchased. Client has to pay the amount to the factor irrespective of whether customer has paid or not. Undisclosed In undisclosed factoring.Definition of Factoring Definition of factoring is very simple and can be defined as the conversion of credit sales into cash. Disclosed factoring is of two types: Recourse factoring: The client collects the money from the customer but in case customer don‘t pay the amount on maturity then the client is responsible to pay the amount to the factor. 2. Characteristics of Factoring 1. Balance amount is paid to client at the end of the credit period or when the customer pays the factor whichever comes first. 2. Merchant bank A merchant bank is a financial institution which provides capital to companies in the form of share ownership instead of loans. factoring for construction services etc. Different Types of Factoring 1. The advantage of nonrecourse factoring is that continuous factoring will eliminate the need for credit and collection departments in the organization. Undisclosed 1. It is offered at a low rate of interest and is in very common use. factor undertakes to collect the debts from the customer. The remaining amount is paid to the client when the customer pays the debt. It is a method of offbalance sheet financing. Factoring is not possible in case of bad debts.

Commercial banking may also be seen as distinct from retail banking. that is the leasing by a tenant in possession to a sub-tenant. It is a bank that provides transactional. including destroy it or hand over possession of the property to a tenant. The consideration for the lease is called rent. a freehold owner of property is at liberty to do what they want with their property. periodic. savings. Few banks today restrict their activities to such a narrow scope. according to the US Federal Deposit Insurance Corporation (acronym FDIC). tax deductible payments. and money market accounts and that accepts time deposits. However. the strict separation of investment and commercial banking never applied. A gross lease is when the tenant pays a flat rental amount and the landlord pays for all property charges regularly incurred by the ownership from lawnmowers and washing machines to handbags and jewellry. if the owner has surrendered possession to another (the tenant) then any interference with the quiet enjoyment of the property by the tenant in lawful possession is unlawful.[1] Under normal circumstances. though the terminology would be different.[1] After the implementation of the Glass–Steagall Act. some use the term "commercial bank" to refer to a bank or a division of a bank primarily dealing with deposits and loans from corporations or large businesses.S. and can be for a fixed or an indefinite period of time (called the term of the lease). Leasing Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual. . Historically. Many banks offer both commercial and retail banking services. Similar principles apply to real property as well as to personal property.Today. As the two no longer have to be under separate ownership under U. whereas investment banks were limited to capital market activities. which involves the provision of financial services direct to consumers. law. Commercial bank A commercial bank (or business bank) is a type of financial institution and intermediary. The lessee is the receiver of the services or the assets under the lease contract and the lessor is the owner of the assets. the U. hence the name "merchant". In some other jurisdictions. Similar principles apply to sub-leasing. merchant banks' original purpose was to facilitate and/or finance production and trade of commodities. The relationship between the tenant and the landlord is called a tenancy.S. The right to sub-lease can be expressly prohibited by the main lease."[1] Both commercial banks and investment banks may engage in merchant banking activities. Congress required that banks engage only in banking activities. "the term merchant banking is generally understood to mean negotiated private equity investment by financial institutions in the unregistered securities of either privately or publicly held companies.

the buyer may then exercise an option to buy the goods at a predetermined price (usually a nominal sum) or return the goods to the owner. Hire purchase differs from a mortgage and similar forms of lien-secured credit in that the socalled buyer who has the use of the goods is not the legal owner during the term of the hirepurchase contract. It is also called closed-end leasing.. In view of the above. The need for HP is reduced when consumers have collateral or other forms of credit readily available. Any manufacturing defects found during these period and the same shall be replaced or rectified free of cost by us . one who pledges oneself as surety for the fulfillment of a condition./Invoice No. Guarantee Guarantee is an undertaking for the fulfillment of a promise or a condition.. And guarantor means a person giving a guarantee or security. in this persons usually agree to pay for goods in parts or a percentage at a time. in sales and service of goods both guarantee/warranty is used and is demanded by the buyer from the suppliers. So warranty is an assurance given as to the quality of the goods. whichever is earlier. In other words. It was developed in the United Kingdom and can now be found in China. a vendor protection not available with unsecured-consumer-credit systems.. the owner may repossess the goods. dated. Jamaica and New Zealand. In cases where a buyer cannot afford to pay the asked price for an item of property as a lump sum but can afford to pay a percentage as a deposit. a surety. or. one to whom authority is granted. or a real estate transaction. Warrantor means one who warrants or guarantees.. a authority to the quality. HP is frequently advantageous to consumers because it spreads the cost of expensive items over an extended time period.. has been guaranteed/warranted for satisfactory performance for a period of 12 months from the date of commissioning or 18 months from the date of supply against any manufacturing defects. In Canada and the United States. So guaranteed means secured by an undertaking. Business consumers may find the different balance sheet and taxation treatment of hire-purchased goods beneficial to their taxable income.. Japan.Hire purchase Hire purchase (abbreviated HP) is the legal term for a contract. a hire-purchase contract allows the buyer to hire the goods for a monthly rent. Australia. India. If the buyer defaults in paying the installments. Warrantee means a person to whom a thing is guaranteed by a warrant. When a sum equal to the original full price plus interest has been paid in equal installments. other analogous practices are described as closed-end leasing or rent to own. For example: The material supplied by us under our DC No. It tends to involve a third party who will step in and make necessary payments if the main person obtaining . a hire purchase is termed an installment plan. Malaysia. one who authorizes. A guarantee agreement is usually made during a loan.

perhaps their parents or a sibling. So for example. under Article 3 of the Uniform Commercial Code. It is advisable to consider entering into a guarantee agreement with due caution if the person one is guaranteeing will be unlikely to meet his or her financial obligations. such a party may be able to assert defenses to the enforcement of an instrument not available to the maker of the instrument. or sometimes co-signer. In most common law jurisdictions. and the government will be responsible for attempting to collect the debt from the student. in finance. The situation in which a surety is most typically required is when the ability of the primary obligor or principal to perform its obligations under a contract is in question. If the student defaults for any reason. allowing the surety to "step into the shoes of" the principal and use his (the surety's) contractual rights to recover the cost of making payment or performing on the principal's behalf. the parent or sibling must make them. People with poor credit may be involved in a guarantee agreement for the purposes of purchasing a car or renting a home. Many jurisdictions have abolished this distinction. the law will usually give the surety a right of subrogation. If the person cannot meet his financial obligation. Often they use someone with good credit. Often. a person who signs a negotiable instrument as a surety is termed an accommodation party. the bank lending the money will get its money from the government. If the surety is required to pay or perform due to the principal's failure to do so. the financial obligation is transferred to the guarantor. or when there is some public or private interest which requires protection from the consequences of the principal's default or delinquency. Surety A surety or guarantee. In the United States. . a contract of suretyship is subject to the statute of frauds (or its equivalent local laws) and is only enforceable if recorded in writing and signed by the surety and the principal. as co-signers so a guarantee agreement can be made. This is a bit of a double-edged blade. They assert that the government guarantees repayment of a loan. if a person does not make rent payments. student loans are part of a guarantee agreement.a loan or renting a property cannot make payments. even in the absence of an express agreement to that effect between the surety and the principal. Traditionally a guarantee was distinguished from a surety in that the surety's liability was joint and primary with the principal. is a promise by one party (the guarantor) to assume responsibility for the debt obligation of a borrower if that borrower defaults. The person or company that provides this promise. whereas the guarantee's liability was ancillary and derivative. is also known as a surety or guarantor. The third party is called the guarantor.

Portfolios may be held by individual investors and/or managed by financial professionals. time frame and investment objectives. or credit). investment house) uses to assess the eligibility of a customer to receive their products (equity capital.[1] Definition The term portfolio refers to any collection of financial assets such as stocks. hedge fund. mortgage. financial institution or individual. In fact it is quite the opposite. which is not based on the credit history of the borrower.[1][2] Portfolio (finance) Portfolio is a financial term denoting a collection of investments held by an investment company. would literally write their names under the risk information that was written on a Lloyd's slip created for this purpose. who would accept some of the risk on a given venture (historically a sea voyage with associated risks of shipwreck) in exchange for a premium. The dollar amount of each asset may influence the risk/reward ratio of the portfolio and is referred to as the asset allocation of the portfolio. It is a generally accepted principle that a portfolio is designed according to the investor's risk tolerance. insurer. this loan is based on the credit standing of the person who will guarantee the payment of the loan in case the borrower defaults. hedge funds. bonds and cash. Having a guarantor will address the lender‘s concern. . [2] Underwriting Underwriting refers to the process that a large financial service provider (bank. Guarantor loans open a unique type of unsecured loan. The name derives from the Lloyd's of London insurance market. insurance. Whenever a credit rating reduces and becomes poor it will not be very easy to obtain even a high rate bad credit loan.In the United Kingdom the idea of a loan with a guarantor has been popularised over the last 3 years. banks and other financial institutions. Certain circumstances lead to a reduction of credit rating. and is a great way to regain the lost credibility in terms of obtaining credit. Financial bankers.

In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies. According to the National Venture Capital Association 11% of private sector jobs come from venture backed companies and venture backed revenue accounts for 21% of US GDP. Warburg & Co.[4] . IT. in 1938. Rockefeller helped finance the creation of both Eastern Air Lines and Douglas Aircraft and the Rockefeller family had vast holdings in a variety of companies. etc. venture capitalists usually get significant control over company decisions. The Vanderbilts. Every year there are nearly 2 million businesses created in the USA. with investments in both leveraged buyouts and venture capital. which usually have a novel technology or business model in high technology industries. such as an IPO or trade sale of the company. Warburg founded E. (ARDC) and J. and used as a proxy measure of innovation within an economic sector or geography. but not all private equity is venture capital. Whitneys.H. Rockefellers. The venture capital fund makes money by owning equity in the companies it invests in.[3] History A venture may be defined as a project prospective of converted into a process with an adequate assumed risk and investment.Venture capital Venture capital (VC) is financial capital provided to early-stage. Venture capital is also associated with job creation (accounting for 21% of US GDP). in addition to a significant portion of the company's ownership (and consequently value). and Warburgs were notable investors in private companies in the first half of the century. Laurance S.[2] the knowledge economy.M. The typical venture capital investment occurs after the seed funding round as growth funding round (also referred as Series A round) in the interest of generating a return through an eventual realization event. and only 600800 get venture capital funding. With few exceptions. venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering. Whitney & Company. In 1938. software. money orders (originally known as "development capital") were primarily the domain of wealthy individuals and families. high-potential. Venture capital is a subset of private equity. It was not until after World War II that what is considered today to be true private equity investments began to emerge marked by the founding of the first two venture capital firms in 1946: American Research and Development Corporation. private equity in the first half of the 20th century was the domain of wealthy individuals and families. Eric M. Therefore all venture capital is private equity. high risk. growth startup companies.[1] In addition to angel investing and other seed funding options. which would ultimately become Warburg Pincus. [edit] Origins of modern private equity Before World War II. such as biotechnology.

ARDC was founded by Georges Doriot. J. VCs also take a role in managing entrepreneurial companies at an early stage. Doriot merged ARDC with Textron after having invested in over 150 companies. A core skill within VC is the ability to identify novel technologies that have the potential to generate high commercial returns at an early stage. to encourage private sector investments in businesses run by soldiers who were returning from World War II. the predecessor of Flagship Ventures (founded in 1982 by James Morgan). J. Venture capital firms typically comprise small teams with technology backgrounds (scientists. A venture capital fund refers to a pooled investment vehicle (often an LP or LLC) that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans. Whitney & Company continues to make investments in leveraged buyout transactions and raised $750 million for its sixth institutional private equity fund in 2005. and thereby potentially realizing much higher rates of returns.[6] ARDC is credited with the first trick when its 1957 investment of $70. By far Whitney's most famous investment was in Florida Foods Corporation. and these venture capitalists are expected to bring managerial and technical expertise as well as capital to their investments. The company developed an innovative method for delivering nutrition to American soldiers. which typically invest in companies with proven revenue). ARDC's significance was primarily that it was the first institutional private equity investment firm that raised capital from sources other than wealthy families although it had several notable investment successes as well. most venture capital investments are done in a pool format.[8] ARDC continued investing until 1971 with the retirement of Doriot. with Ralph Flanders and Karl Compton (former president of MIT).[7] Former employees of ARDC went on and established several prominent venture capital firms including Greylock Partners (founded in 1965 by Charlie Waite and Bill Elfers) and Morgan. Venture capital firms and funds Venture capitalists A venture capitalist (also known as a VC) is a person or investment firm that makes venture investments.000 in Digital Equipment Corporation (DEC) would be valued at over $355 million after the company's initial public offering in 1968 (representing a return of over 1200 times on its investment and an annualized rate of return of 101%). Whitney had been investing since the 1930s.H. Holland Ventures. By definition. thus adding skills as well as capital (thereby differentiating VC from buy-out private equity. which later came to be known as Minute Maid orange juice and was sold to The Coca-Cola Company in 1960. As a consequence. the "father of venture capitalism"[5] (former dean of Harvard Business School and founder of INSEAD).H. Inherent in realizing abnormally high rates of returns is the risk of losing all of one's investment in a given startup company. In 1972. where several investors combine their investments into one large fund that invests in many . founding Pioneer Pictures in 1933 and acquiring a 15% interest in Technicolor Corporation with his cousin Cornelius Vanderbilt Whitney. Whitney & Company was founded by John Hay Whitney and his partner Benno Schmidt. researchers) or those with business training or deep industry experience.

The tables in this section are derived from the Expenditure and Food Survey (EFS). loan charges in respect of moneys borrowed for the provision or improvement of local authority housing accommodation mainly under Part II of the Housing Act 1985 b.different startup companies. topics can be obtained from Communities and Local Government. accommodation type. as is detailed information on income. rebates and allowances received. number of bedrooms. home improvements. It collects data from 7. sex and marital status is recorded for each household member and in addition certain housing topics are recorded: housing tenure. Expenditure and income on housing from Housing Revenue Account Each local authority is required by statute to keep a Housing Revenue Account in which are recorded the annual revenue income and expenditure in respect of dwellings and other property provided under Part II of the Housing Act 1985 . housing repairs The main items of income are: . London SW1E 5DU. The main items of expenditure are: a. of which some 6.000 households per annum in Great Britain.000 are in England. the investors are spreading out their risk to many different investments versus taking the chance of putting all of their money in one Notes and definitions for housing finance and household expenditure For definition of a dwelling. By investing in the pool format. Results from the EFS are published annually in the ONS report Family Spending. and housing related. Housing Analysis Surveys Division. Zone 2/J2. Each individual aged 16 or over in responding households is asked to keep diary records of daily expenditure for two weeks. is conducted by the Office for National Statistics. Personal information such as age. Unpublished results on housing. Simplified diaries are kept by children aged between 7 and 15. for example. central heating. Information about regular items such as rent and mortgage payments are obtained from a household interview along with retrospective information on certain large infrequent expenditures. supervision and management c. Information is also collected on housing benefits. type of dwelling. This continuous survey of household expenditure. tenure and general definition of a household see Definition of general housing terms. previously known as the Family Expenditure Survey. number of rooms. Eland House.

Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. has evolved as a discrete field of study and practice. in exchange for payment. investment and interest income from the sale of dwellings Figures of expenditure and income for each authority are collected annually by Communities and Local Government in housing subsidy claim forms. In order to be insurable. with the fee being dependent upon the frequency and severity of the event occurring. rents (excluding rates and water charges) b. Insurance In law and economics. called the premium. the risk insured against must meet certain characteristics in order to be an insurable risk. The insured entities are therefore protected from risk for a fee. Insurance is defined as the equitable transfer of the risk of a loss. uncertain loss. or policyholder. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage.a. an insured. Exchequer housing subsidies c. from one entity to another. but individual entities can also self-insure through saving money for possible future losses. called the insurance policy. An insurer is a company selling the insurance. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract. which details the conditions and circumstances under which the insured will be financially compensated. the practice of appraising and controlling risk. Securitization . Insurance is a commercial enterprise and a major part of the financial services industry. is the person or entity buying the insurance policy. Risk management.[1] Mortgage-backed security A mortgage-backed security (MBS) is an asset-backed security that represents a claim on the cash flows from mortgage loans through a process known as securitization. insurance is a form of risk management primarily used to hedge against the risk of a contingent.

the most common securitzation trusts are Fannie Mae and Freddie Mac.[6] In 1968 Fannie Mae was split into the current . In the United States. such as apartment buildings. but buys limited numbers of mortgage notes. Mortgage loans (mortgage notes) are purchased from banks and other lenders and assigned to a trust 2. also securitize mortgages.S. a U. to create a liquid secondary market in these mortgages and thereby free the loan originators to originate more loans. government-sponsored enterprise backed by the full faith and credit of the U. government.[5] In 1938. and is highly dependent on the jurisdiction within which the process is conducted. retail or office properties. and therefore presents risk to MBS investors. Real Estate Mortgage Investment Conduits (REMICs) and the Real Estate Investment Trusts (REITs). The trust securitizes the pools by issuing mortgage-backed securities While a residential mortgage-backed security (RMBS) is secured by single-family or two to four family real estate. government-sponsored enterprises.[4] The FHA helped develop and standardize the fixed rate mortgage as an alternative to the balloon payment mortgage by insuring them. known as "private-label" mortgage securities. guarantees its investors receive timely payments.S. a commercial mortgage-backed security (CMBS) is secured by commercial and multifamily properties. These securitization trusts include government-sponsored enterprises and private entities which may offer credit enhancement features to mitigate the risk of prepayment and default associated with these mortgages. acquisition. and/or rehabilitation of residential properties. or "pools" 3. primarily by buying FHA-insured mortgages.Mortgage-backed Security Issuances 1990-2009 The process of securitization is complicated. Some private institutions. the monthly cash flow of an MBS is not known in advance. the government also created the government-sponsored corporation Federal National Mortgage Association (FNMA).[1][2] Issuances of private-label mortgage-backed securities increased dramatically from 2001 to 2007.[3] History [edit] United States government After the Great Depression. U. Ginnie Mae. and then ended abruptly in 2008 when real estate markets began to falter. such as Investment Banks. and helped the mortgage design garner usage. as a part of the New Deal the federal government of the United States created the Federal Housing Administration (FHA) with the National Housing Act of 1934 to assist in the construction. The basics are: 1. schools. A CMBS is usually structured as a different type of security than an RMBS. industrial properties and other commercial sites. colloquially known as Fannie Mae. The trust assembles these loans into collections. Since residential mortgages in the United States have the option to pay more than the required monthly payment (curtailment) or to pay off the loan in its entirety (prepayment).S. hotels.

Services provided A transaction on a stock exchange must be made between two members of the exchange—an ordinary person may not walk into the New York Stock Exchange (for example).[10] In 1960 the government enacted the Real Estate Investment Trust Act of 1960 to allow the creation of the real estate investment trust (REIT) to encourage real estate investment.[11] and in 1984 the government passed the Secondary Mortgage Market Enhancement Act (SMMEA) to improve the marketability of such securities.[7] Ginnie Mae does not invest in private mortgages. In 1977 Bank of America issued the first private label passthrough.Fannie Mae and the Government National Mortgage Association (GNMA). with the full faith and credit of the United States government. composed primarily of private mortgages. to support the FHA-insured mortgages.[8] In 1971 Freddie Mac issued its first mortgage passthrough.e. Recovery and Enforcement Act of 1989 (FIRREA). or FmHA. called a mortgage-backed security. to perform a similar role to Fannie Mae.[8] In 1981 Fannie Mae issued its first mortgage passthrough. colloquially known as Ginnie Mae.[13][14] Stock broker A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors. .[11] The Tax Reform Act of 1986 allowed the creation of the tax-free Real Estate Mortgage Investment Conduit (REMIC) special purpose vehicle for the express purpose of issuing passthroughs. VA. There are three types of stockbroking service. and created the Federal Home Loan Mortgage Corporation (FHLMC). i. A broker may be employed by a brokerage firm. called a participation certificate. encouraging loan origination. which dramatically changed the savings and loan industry and its federal regulation. colloquially known as Freddie Mac.[7] In 1970. as well as Veterans Administration (VA) and Farmers Home Administration (FmHA) insured mortgages. the federal government authorized Fannie Mae to purchase private mortgages.[9] In 1983 Freddie Mac issued the first collateralized mortgage obligation. [edit] Securitization Ginnie Mae guaranteed the first mortgage passthrough security of an approved lender in 1968. and ask to trade stock. those not insured by the FHA. Such an exchange must be done through a broker.[12] The Tax Reform Act significantly contributed to the savings and loan crisis of the 1980s that resulted in the Financial Institutions Reform.

Debit Card. The various Plastic cards include ATM cards. Plastic money There has been a growth on electronic payment due to the shift in technology. Co-branded cards. where the stockbroker ascertains the client's investment objectives and then makes all dealing decisions on the client's behalf.In some banks upto last ten transactions * Balance enquiry * Stop Payment instructions * Transfer of funds between acounts * Requisition of Cheque books.drafts etc.   Execution-only. where the broker advises the client on which shares to buy and sell. Smart Card.They have built vast network of Member Establishments so that customers can use the cards worldwide for their debit and credit purchases.the total amount charged is instantly reduced from the bank balance of the account holder. but leaves the final decision to the investor. Discretionary dealing. growing access to internet among the customers and convenient modes of delivery and payment.It can perform both cash and non-cash transactions in secured environment.ATM cum Debit Card. * Bill payments ( electricity bills. When a debit card is issued to make the payment.Master Card and VISA are global non-profit organizations who promote the growth of the card business throughout the world. -ATM Cash Transactions includes deposits and withdrawals -Non cash transactions incude * Providing Mini Statement of last five transactions. . Plastic money also known as Plastic cards acts as a vital tool for every day transaction of people today. which means that the broker will only carry out the client's instructions to buy or sell.Credit Cards. add on cards and so on.They check the balance and deduct the amount from the bank balance online.This card is useful to make payment from Member Establishments (ME) who have arrangements with the card issuing bank or agency. All credit and debit cards are affiliated to two major issuers-VISA and Master Card.Telephone bills etc) Debit Card: The bank issues debit card only if the person has an account in the bank. ATM Cards Automated Teller machine (ATM) cards is capable of doing variety of functions. Charge Cards. Advisory dealing.

These cards are not acceptable at many outlets.Debit Cum ATM Card: This is most common nowadays. Credit Cards: This card enables the client to obtain goods or services from the various shops having arrangement with the issuing agency even if there is no balance in his/her savings or current account. the client is not declared as a defaulter if he misses to pay by due date. AMEX (American Express) and Diners Club card are well known branded charge cards. . But wide variety of special privileges are enjoyed by the AMEX card holders and Diners Club Cardholders.a limit of the credit will be fixed by the bank for the amount of purchases to be made by the customer based on the net worth of the customer. This is most useful to pay for small purchases for example in Fairs..The credit card holder has to make payment for the dues before the due date.If it is failed to be done.Currently. No identification. But in case of Credit cards.The bank assumes that the loan will be repaid by the customers at later date.signature or payment authorization is required for using this card.But.When a card is used. These care are typically meant for the high income group categories and companies.a late fee is levied in the next billing statements of the credit card holder. Affinity Card: The card issuer has a tie up with popular organizations and institutions which are often non-profit organizations like Stanchart Cricket Cards or City WWF card.This is two in one card.They have their own merchant establishments and tie ups and does not depend on the network of Master card or VISA. Normally. this product is available in very developed countries like US. Charge Cards: A Charge card has all features of credit shops etc. The exact amount of purchase is deducted from smart card during payment.then the client is likely to be considered as a defaulter and he has to pay a steep late payment charges. Otherwise late payment fee is levied in the next billing statement. Smart Cards: A smart Card contains an electronic chip which is used to store Cash. a certain percentage is contributed to the organization or institution by the card issuer.The same debit card can be used to draw cash from the ATM and also make payment to the shops for purchases. after using the charge card the entire payments of the bills has to be made by the due date.In such case.

The new electronic payment and settlement act should follow the strict norms for banks and merchants to make secure payments and prevent money laundering as the transactions through plastic money will be increasing and increasing in the near future. Children or other family members of the original card holder. an issuing bank permits two add on cards per credit card.the Indian mode of payment has shifted from currency to electronic mode.when they pay for the fuel using petro helps to identify the user of the credit card and is considered to be safer.Photo Card: When a Photo is imprinted on the card. Co-branded credit cards like IOC-Citi bank and HPCL-ICICI bank are the co-branded petro cards avaiable in the market. Petro Card: Some Petroleum companies allow customers to pay for the fuel through electronic medium. All expenses incurred on add on card are billed to the primary card holder. secured and speedy mode of transaction. Global Card: Global cards can be used as credit cards instead of cash and traveler cheques while traveling abroad to foreign countries for business or personal reasons. Today. parents. . Add On Cards: It is a privilege offered to the spouse.Normally. In many cases.Photo card can also be used as identity card.This is due to the high money valued transactions and more risk involvement.It is convenient.It offers a scheme of gifting the points to the customers.

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