FINANCIAL SERVICES 

Services that are financial in nature. Part of financial system consisting of financial institutions, markets, instruments etc. The ³Financial Services´ can also be called ³Financial Intermediation´. Financial Intermediation is a process by which funds are mobilized from a large no of savers and make them available to those who are in need of it and particularly to corporate customers.   

FEATURES OF FINANCIAL SERVICES 
Intangible

in nature. from the provider. 

Inseparable  Customer  Dynamic

centric.

in nature 

Credibility

of partners is very important in them.

Functions of Financial Services
1.

Mobilization of Funds. Effective employment of funds. Provision of need based services Provision of regulated services Enhancement of economic development.

2.

3.

4.

5.

TYPES OF FINANCIAL SERVICES
Financial Services

Fund or Assets Based services

Fee-Based Advisory Services
5

FUND BASED FINANCIAL SERVICES financing  Hire purchase finance & customer Credit  Factoring and Forfeiting  Bill Discounting  Housing Finance  Insurance Services  Venture Capital Financing  Lease 6 .

FEEFEE-BASED FINANCIAL SERVICES Banking  Credit Rating  Stock Brokerage  Portfolio Management  Merchant 7 .

Life Insurance < 15% The Indian Financial Services sector has yet to tap India¶s true potential .INDIA & THE FINANCIAL SERVICES SECTOR     Fast growing economy Large population & young demographics Fast growing aspirations High rate of savings  FINANCIAL SIMPLETON safety over returns seeking reassurance from a Trusted face  LOW  PENETRATION 55% of savings lying in bank deposits  Household penetration in Mutual Funds < 5%.

However it is not the largest category in terms of revenue or number of employees. .MARKET SHARE     The financial services industry constitutes the largest group of companies in the world in terms of earnings and equity market cap. It is also a slow growing and extremely fragmented industry. only having a 3 % US Market share. with the LARGEST COMPANY (CITIGROUP).

banks. banks.  FINANCIAL SERVICE PROVIDERS ± Financial institutions. . SEBI. mutual fund and merchant bankers. financial institutions. corporate entities. leasing and factoring companies and mutual funds. insurance. Department of Banking and Insurance of the Central Government etc. Department of Finance. non-banking nonfinancial institutions.CONSTITUENTS OF FINANCIAL SERVICE SECTOR  MARKET PARTICIPANTS ± Individuals.  REGULATORY BODIES ± RBI.

TYPES OF FINANCIAL SERVICES FINANCIAL SERVICES BANKS INVESTMENT SERVICES INSURANCE ADVISORY SERVICES Stock brokers (private client services) and discount brokers ‡ Private banking ‡ Investment Banking ‡ Merchant Banking ‡ Mutual Fund ‡ Asset Management ‡ Insurance Brokerage .

Banks are important players in financial markets and offer services such as investment funds and loans. .BANKS  A bank is a financial institution that accepts deposits and channels those deposits into lending activities. Banks primarily provide financial services to customers while enriching investors.

BANKING CHANNELS Banks offer many different channels to access their banking and other services: Branch  ATM  Telephone banking  Online banking  Mobile banking  Video banking  .

TYPES OF BANKS On the basis of functions they can be divided as : 1) Central Bank ( which is the RBI in India) 2) Commercial banks  Public Sector  Private Sector .

. It is also called the Central Bank.CENTRAL BANK  All types of Banks in India are regulated and the activities monitored by a standard bank called the Reserve Bank of India that stands at the apex of the banking structure. as major banking decisions are taken at this level. The other types of banks in India are placed below this bank in the hierarchy.

. and money market accounts and that accepts time deposits. A commercial bank is one that will work with businesses.COMMERCIAL BANKS A commercial bank is a type of financial intermediary that provides savings accounts. Commercial banks will handle the banking needs for large and small businesses.

distribution or brokerage  .  internet banking  issuing bank drafts and bank cheques  accepting money on term deposit  lending money by way of overdraft. and includes: issue of banknotes.The COMMERCIAL ROLE of banks is not limited to banking. installment loan or otherwise  acting as a 'financial supermarket' for the sale.

and from one branch to another branch of the bank.  Providing consumer finance for individuals by way of loans  Educational loans to students  .Undertaking safe custody of valuables  Providing customers with facilities of foreign exchange dealings  Transferring money from one account to another.  Providing reports on the credit worthiness of customers.

The term "private" refers to the customer service being rendered on a more personal basis than in mass-market retail banking. The objective of private bankers is to provide a more personalized level of service to wealthy clients than is available to typical customers at a commercial bank. . usually via massdedicated bank advisers.PRIVATE BANKING    Private banking is a term for banking. investment and other financial services provided by banks to private individuals investing sizable assets.

PUBLIC SECTOR BANKS  All government owned banks fall in this variety. Besides the Reserve Bank of India. . all comprises of the public sector banks. the State Bank of India and its associate banks and about 20 nationalized banks. Many of the regional rural banks that are funded by the government banks can also be clubbed in this.

installment loan or otherwise  acting as a 'financial supermarket' for the sale. and includes: issue of banknotes  processing of payments by way of internet banking or other means. products. unit trusts and similar financial products.The commercial role of banks is not limited to banking. with or without advice. distribution or brokerage.  issuing bank drafts and bank cheques  accepting money on term deposit  lending money by way of overdraft. of insurance.  .

where clients can purchase and sell foreign currency banknotes  WIRE TRANSFER .banking transactions are done in foreign currency  .FOREIGN EXCHANGE SERVICES Foreign exchange services are provided by many banks around the world.where clients can send funds to international banks abroad FOREIGN CURRENCY BANKING .  CURRENCY EXCHANGE .

INVESTMENT BANK  Investment banking is a particular form of banking which finances capital requirements of enterprises. acts as broker and carries through mergers and acquisitions. Investment banks offer security to both corporations issuing securities and investors buying securities. Investment banking assists as it performs IPOs.  .

FUNCTIONS OF INVESTMENT BANKING:      Investment banks have multilateral functions to perform. Issuing securities in the primary market. . Acting as intermediaries in trading for clients. Providing financial advice Investment banking differ from commercial banking in the sense that they don't accept deposits and grant retail loans. Selling and foreign exchange management.

including in relation to mergers and acquisitions. Both merchant banks and investment banks provide fee based corporate advisory services.MERCHANT BANKING  It is a financial institution primarily engaged in offering financial services and advice to corporations and to wealthy individuals.   . The Chief Distinction between an investment bank and a merchant bank is that a merchant bank invests its own capital in a client company whereas an investment bank purely distributes (and trades) the securities of that company in its capital raising role.

The income earned through these investments and the capital appreciation realized are shared by its units holder in proportion to the number of units hold by them.MUTUAL FUNDS  A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. securities.   . cost. The money thus collected is then invested in capital market instruments such as shares. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified. professionally managed basket of securities at a relatively low cost. them. goal. debentures an other securities.

THE FLOW CHART BELOW DESCRIBES BROADLY THE WORKING OF A MUTUAL FUND: .

MUTUAL FUNDS INDUSTRY IN INDIA FIRST PHASE . The first scheme launched by UTI was Unit Scheme 1964.1964-87 1964Unit Trust of India (UTI) was established on 1963 by an Act of Parliament.   . It was set up by the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the deIndustrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI.

Also. under which all mutual funds. Bank of Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990.   Third Phase . nonfunds. except UTI were to be registered and governed. The end of 1993 marked Rs. SBI Mutual Fund was the first followed by Canbank Mutual Fund (Dec 87).004 as assets under management. Bank of India (Jun 90). Indian Bank Mutual Fund (Nov 89). Punjab National Bank Mutual Fund (Aug 89).Second Phase . a new era started in the Indian mutual fund industry. 1993 was the year in which the first Mutual Fund Regulations came into being. giving the Indian investors a wider choice of fund families.1993-2003 1993  Entry of Private Sector Funds With the entry of private sector funds in 1993.47.1987-1993 (Entry of Public Sector 1987Funds) Entry of non-UTI mutual funds. .

BOB and LIC. Fourth Phase . The industry now functions under the SEBI (Mutual Fund) Regulations 1996. PNB.835 crores (as on January 2003).  . The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29. The second is the UTI Mutual Fund Ltd. sponsored by SBI.since February 2003   UTI was bifurcated into two separate entities.

com .GROWTH IN ASSETS UNDER MANAGEMENT Source: indiamart.

MUTUAL FUNDS COMPANIES IN INDIA  ABN AMRO Mutual fund  Birla Sun Life Insurance Fund  Bank of Baroda Mutual Fund  HDFC Mutual fund  HSBC Mutual Fund .

is a form of risk management primarily used to hedge against the risk of a contingent loss. the Life Insurance Companies Act and the Provident Fund Act were passed to regulate the insurance business. In the year 1912. Insurance.INSURANCE  Insurance. Insurance in India has its history dating back until 1818.   . in law and economics. when Oriental Life Insurance Company was started in Kolkata to cater to the needs of European community loss.

making the insurance sector a booming market. the largest life-insurance company in lifeIndia is still owned by the government.   . New India Assurance. then government has also allowed FDI up to 26%. However. which were headquartered in each of the four metropolitan cities Insurance Regulatory and Development Authority Act in 1999. All the companies were amalgamated into National Insurance. Oriental Insurance and United India Insurance. de-regulating the insurance sector and deallowing private companies Since 1999. The General Insurance Business Act of 1972 was enacted.

Ltd  ICICI Prudential Life Insurance Co. Ltd. Lt.and many others... . where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individual's death or other event. India Pvt.  Aviva Life Insurance Co. such as terminal illness or critical illness. Ltd  HDFC Standard life Insurance Co.  Some of the famous life insurance companies in India are:  Life Insurance Corporation of India  Bajaj Allianz Life Insurance Company Limited  Birla Sun Life Insurance Co.TYPES OF INSURANCE LIFE INSURANCE:  Life insurance or life assurance is a contract between the policy owner and the insurer.

business related. Ltd. Ltd. ltd IFFCO TOKIO General Insurance Co.       . natural incidents.GENERAL INSURANCE: It is a non-life insurance mainly concerned with nonprotecting the policyholder from loss or damage caused by specific risks This insurance type involves insuring the risks associated with the general life such as automobiles. etc. Future Generali India Insurance Company Limited Bajaj Allianz General Insurance Co. commercial and residential properties. Ltd. Reliance General Insurance Co.  SOME OF THE FAMOUS COMPANIES ARE: TATA AIG General Insurance Co. ICICI Lombard General Insurance Co. Ltd.

INVESTMENT SERVICES  Asset management fund management  Hedge .

soBANKING³.. The term ASSET MANAGEMENT is often used to refer to the investment management of collective investments. Investment managers who specialize in advisory or discretionary management on behalf of (normally wealthy) private investors may often refer to their services as wealth management or portfolio management often within the context of so-called PRIVATE BANKING³. . pension funds. .   INVESTMENT MANAGEMENT is the professional management of various securities (shares. real estate).g.g. Investors may be institutions (insurance companies. mutual funds or exchange-traded exchangefunds) funds) . corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e. investment goals for the benefit of the investors. bonds and other securities) and assets (e. (not investments. to meet specified estate). necessarily) whilst the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors.

asset selection. stock selection. Investment management is a large and important global industry in its own right responsible for caretaking of trillions of dollars. The provision of 'investment management services' includes elements of financial statement analysis. euro.  . Fund manager (or investment adviser in the United States) refers to both a firm that provides investment management services and an individual who directs fund management decisions. Coming under the remit of financial services many of the world's largest companies are at least in part investment managers and employ millions of staff and create billions in revenue. pounds and yen. plan implementation and ongoing monitoring of investments. analysis.

the term "hedge fund" has also come to be applied to certain funds that do not hedge their investments. commodities. derivatives. with the expectation of increasing the return on their investment. and that. debt and shares. However. Hedge funds. A HEDGE FUND is an investment fund open to a limited range of investors that undertakes a wider range of investment and trading activities than long-only investment funds. invest in a broad range of investments including shares. in longgeneral. hedge funds often seek to hedge some of the risks inherent in their investments using a variety of methods.  . As the name implies. Every hedge fund has its own investment strategy that determines the type of investments and the methods of investment it undertakes. and in particular to funds using short selling and other "hedging" methods to increase rather than reduce risk. most notably short selling and derivatives. manager. Many people consider the fund created in 1949 by Alfred Winslow Jones to be the first hedge fund. commodities. pays a performance fee to its investment manager. as a class.

the use of derivatives and leverage. debt. typically include restrictions on short selling. Hedge leverage. Light regulation along with the performance fees are the distinctive characteristics of hedge funds. and on the leverage. In most jurisdictions hedge funds are open only to a limited range of professional or wealthy investors that meet certain criteria set by regulators. liquidity of interests in the fund. and the gross assets of the fund will usually be higher still due to leverage. The NET ASSET VALUE of a hedge fund can run into many billions of dollars. but in exchange are exempt from many regulations that govern ordinary investment funds. These regulations funds. funds dominate certain specialty markets such as trading within derivatives with high-yield ratings and highdistressed debt.  . fee structures.

CONCEPT OF HEDGE FUND  ³A hedge fund is a fund which invest in almost any opportunity in any market where it foresees impressive gains at reduced risk´ .

LEVERAGE: Borrowing money for investment purposes. etc. spinexiting of bankruptcy proceedings.    . hostile takeover.STRATEGIES OF HEDGE FUND  SHORTSHORT-SELLING: Sale of a security that you do not own. at a reduced cost. ARBITRAGE: Simultaneous buying and selling of a financial instrument in different markets to profit from the difference between the prices Investing In Anticipation Of A Specific Event . spin-off.merger transaction. with the anticipation of purchasing it in the future.

STRATEGIES OF HEDGE FUND CONT.  Investing In Deeply Discounted Securities .of companies about to enter or exit financial distress or bankruptcy. often below liquidation value.benefit from being non-correlated nonto the direction of equity markets HEDGING: Buying/selling a security to offset a potential loss on an investment   . Many of the strategies used by hedge fundsfunds.

INVESTORS CLASS IN HEDGE FUND  Pension fund  Endowment  Insurance companies  Private companies  High net-worth individual net individual .

Significantly reduces individual fund and manager risk.BENEFITS OF A HEDGE FUND Provides an investment portfolio with lower levels of risk and can deliver returns uncorrelated with the performance of the stock market. Delivers more stable returns under most market conditions due to the fund-of-fund fund-ofmanager¶s ability and understanding of the various hedge strategies. . Eliminates the need for time-consuming due timediligence otherwise required for making hedge fund investment decisions.

Allows access to a broader spectrum of leading hedge funds that may otherwise be unavailable due to high minimum investment requirements. managed by many of the world¶s premier investment professionals. for a relatively modest investment. . Is an ideal way to gain access to a wide variety of hedge fund strategies. Allows for easier administration of widely diversified investments across a large variety of hedge funds. contd«.Benefits of a Hedge Fund of Funds contd«.

MAJOR PLAYERS GLOBAL ± JP Morgan Chase ± Bank of America ± HSBC ± Citigroup ± Deutsche Bank ± Goldman Sachs ± Morgan Stanley ± Merrill Lynch ± BNP Paribas INDIAN ± SBI ± ICICI ± PNB ± HDFC ± Bank of Baroda ± Corporation Bank ± IDBI ± UTI .

obtains the appropriate signatures. a single person. To broker a deal is to communicate with both the buyer and seller as to acceptable price on anything sold or purchased. or the brokerage firm completes any necessary legal paperwork. A broker.STOCK BROKERAGES A brokerage is a firm that acts as an intermediary between a purchaser and a seller. . and collects money from the purchaser to give to the seller.

. Smith Barney and Morgan Stanley.THE HISTORY OF STOCK BROKERAGE FIRMS  Stock brokerage firms began back in the 11th century with French and Chinese trading markets.  Early American stock brokerage firms were started by companies like Merrill Lynch.

TYPES There are primarily two types of stock brokerage firms. based on their mode of operation ± ‡ Online Stock Brokerage Firms ‡ Off Line stock brokerage firms. .

that an investor needs to follow before enlisting the services of a particular stock brokerage firm. It is not advisable to trust a stock brokerage without having done some research on them beforehand. . Normally these testimonials are available on the websites of these companies. They may also read the testimonials of satisfied customers of that particular stock brokerage firm.STOCK BROKERAGE FIRMS PROCEDURES There are certain steps. The investors need to thoroughly go through the website of the stock brokerage firm they are looking to do business with.

THE FOLLOWING IS THE LIST OF STOCK BROKER FIRMS IN INDIA ICICI Direct India bulls Share khan Religare Motilal Oswal Securities HDFC Securities Reliance Money Geojit Networth Stock Broking Kotak Securities Limited (NSBL) Angel Trade UTI Securities Ltd (UTISEL) .

regional firms.‡Brokerage firm stocks have changed character greatly in the last 30 years as trading barriers like the Glass Steagel Act have fallen and emphasis on trading profits has risen. . and money management and private equity firms. ‡Brokerage firm stock trades in three subsets: the major brokerage firms.

Normally these testimonials are available on the websites of these companies. It is not advisable to trust a stock brokerage without having done some research on them beforehand. The investors need to thoroughly go through the website of the stock brokerage firm they are looking to do business with. .STOCK BROKERAGE FIRMS PROCEDURES There are certain steps. that an investor needs to follow before enlisting the services of a particular stock brokerage firm. They may also read the testimonials of satisfied customers of that particular stock brokerage firm.

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