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Introduction
to
BFSI
Financial Services
Prof. Shweta Anand
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F in a n c ia l S y s te m

F in a n c ia l In s titu tio n s F In a n c ia l M a rk e ts F ia n a n c ia l In s tru m e n ts F in a n c ia l S e r v ic e s

R e g u la to ry P rim a ry S e c o n d a ry D e b t In s tru m e n ts M a rk e t S u p p o rtin g S y s te m s : C u s to d ia l & D e p o s ito ry

T ra d in g , B ro k in g , S e ttle m e n t S e rv ic e s

C r e d it R a tin g F a c to rin g a n d F o rfie tin g

In te r m e d ia ry E q u ity In s tru m e n ts

O rg a n iz e d U n o rg a n iz e d
R is k M a n a g e m e n t W e a lth M a n a g e m e n t
D e riv e d In s tru m e n ts
B a n k in g
C a p ita l M a rk e ts M o n e y M a rk e ts D e riv e d M a rk e ts
N o n - B a n k in g
M e rc h a n t B a n k in g M u tu a l F u n d s
N o n - In te rm e d ia ry
S y s te m s In s tr u m e n ts
In s u ra n c e In v e s te m e n t B a n k in g
O th e rs T ra d in g & S e ttle m e n t P ric e D e te rm in a tio n L e a s in g
P ro c e s s H ir e P u r c h a s e
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F in a n c ia l S y s t e m

F in a n c ia l In s t it u t io n s F I n a n c ia l M a r k e ts F ia n a n c ia l I n s t r u m e n ts F in a n c ia l S e r v ic e s

R e g u la t o ry

I n t e r m e d ia r y

B a n k in g N o n - B a n k in g

N o n - In t e r m e d ia r y

O th e rs
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F in a n c i a l S y s t e m

F in a n c ia l In s t it u t io n s F I n a n c ia l M a r k e t s F ia n a n c ia l I n s t r u m e n ts F i n a n c i a l S e r v ic e s

P r im a r y S e c o n d a ry

O r g a n iz e d U n o r g a n iz e d

C a p it a l M a r k e ts M o n e y M a r k e ts D e r iv e d M a r k e ts

S y s te m s In s tr u m e n ts

T r a d in g & S e t t le m e n t P r ic e D e t e r m in a t io n
P ro c e s s
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F in a n c ia l S y s t e m

F in a n c ia l In s t it u t io n s F I n a n c ia l M a r k e ts F ia n a n c ia l I n s t r u m e n ts F in a n c ia l S e r v ic e s

D e b t I n s t r u m e n ts

E q u it y I n s t r u m e n t s

H y b r id I n s t r u m e n ts

D e r iv e d I n s t r u m e n ts

F in a n c ia l In s t it u t io n s F I n a n c ia l M a r k e ts
M a r k e t S u p p o r t in g S y s t e m s :
T r a d in g , B ro k in g ,
C le a r in g ,
S e t t le m e n t
R is k M a n a g e m e n t
In s u ra n c e
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F in a n c ia l S y s t e m
F in a n c ia l S e r v ic e s F ia n a n c ia l I n s t r u m e n ts
C u s t o d ia l & D e p o s it o ry C r e d it R a t in g F a c t o r in g a n d F o r fie t in g
S e r v ic e s
W e a lt h M a n a g e m e n t M e r c h a n t B a n k in g M u tu a l F u n d s
C o n s u lt a n c y : L e a s in g H ir e P u r c h a s e
I n v e s t e m e n t B a n k in g
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Financial System :
Classification by Financial
Institutions
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F in a n c ia l S y s t e m

F in a n c ia l In s t it u t io n s F I n a n c ia l M a r k e ts F ia n a n c ia l I n s t r u m e n ts F in a n c ia l S e r v ic e s

R e g u la t o ry

I n t e r m e d ia r y

B a n k in g N o n - B a n k in g

N o n - In t e r m e d ia r y

O th e rs
 Regulatory Financial 9

Institutions
 The regulatory bodies in USA
 Securities Exchange Commision SEC and
 Federal Bank FED
 The regulatory bodies in Italy
 Commissione Nazionale per le Societa e la Borsa
 Bank of Italy BOI
 The regulatory bodies in Saudi Arabia
 SAMA Saudi Arabian Monetary Agency (Central Bank – handles
both the Banking and Financial Markets)
 The regulatory bodies in Jamaica
 Financial Services Commission (FSC)
 Bank of Jamaica (BOJ)
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Indian Regulatory FI – An
Example
 SEBI Securities and Exchange Board of India regulates
 Capital Market and Brokers
 Derived Markets
 Mutual Funds
 Venture Capital Funds
 RBI Reserve Bank of India regulates
 Commercial Banks
 NBFC’s Non Banking Finance Companies
 Primary Dealers
 Financial Institutions (LIC, GIC,IDBI, UTI, EXIM Bank)
 Link between the two
 RBI has a officer on the SEBI Board of Director
Banks :Intermediary Financial 11

Institutions
 Consumer Banking/ Retail Banking
 Domestic and NRI transaction Account
• Eg. Current Account, Savings Account, NRE Account
Related products and services :ATM, Debit Card, Phone Banking,
Internet Banking, Extended Banking, Any branch Banking, Door
step Banking, Investment Advisory Services, Priority Banking
 Products offered on the Asset Side
• Credit Card, Housing , Car, Consumer, Personal Loans, Credit Line
 Wholesale Banking
 Offered to corporate houses/institutions
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Non Banking :Intermediary

Financial Institutions
 Mutual Funds
 UTI, Morgan Stanley, Alliance, Sun F& C
 Insurance Companies
 LIC, GIC, Tata AIG, Aviva (Dabur CGU), Max NewYork
Life,
 NBFC
 GE Capital, Standard Chartered Finance, Karvy
Consultants, Om Kotak Mahindra,
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Non Intermediary (Global)

Financial Institutions
 Bank of International Settlement
Central Bank to all central banks.

 IFC International Financial Corporation

IFC's source of funds is the total of paid in capital and retained
earnings. It can also raise funds in the international capital markets.
Lends to Developing Nations.
 IMF International Monetary Fund
Member countries contribute money to the Fund which, in turn, lends
money to Developing Members who face severe Balance Of
Payments problems.
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Others
 Non Banking Financial Services Providers
 Custodial and Depository Services Providers (E.g..
SHCIL Stock Holding Corporation of India Ltd, NSDL,
CDSL)
 Credit Rating Agencies (E.g. Moody’s CRISIL, ICRA,
CARE)
 Investment Banks - including Merchant Banks
(E.g. Merrill Lynch, Goldman Sacs, UBS Warburg,
Karvy Consultants)
 Leasing and Hire Purchase Companies (E.g.IL &FS,
Hertz ,Wheelz)
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Financial System:
Classification by Financial
Markets
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F in a n c ia l S y s t e m

F in a n c ia l In s t it u t io n s F I n a n c ia l M a r k e ts F ia n a n c ia l I n s t r u m e n ts F in a n c ia l S e r v ic e s

P r im a r y S e c o n d a ry

U n o r g a n iz e d O r g a n iz e d

C a p it a l M a r k e ts M o n e y M a r k e ts D e r iv e d M a r k e ts

S y s te m s In s tr u m e n ts

T r a d in g & S e t t le m e n t P r ic e D e t e r m in a t io n
P ro c e s s
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Financial Market Segmentation

A financial market can be defined as a market in

which financial assets are created or
transferred
 Primary Market
 Financial products are created in this market
 Secondary Market
 Existing financial products are traded in this Market
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Primary Markets
 IPO Initial Public Offerings
 Shares
 Bonds
 Debentures
 NFO New Fund Offering
 Mutual Fund Units
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Secondary Markets
The Stock Exchange
 NYSE – New York Stock Exchange
 NASDAQ -The term "Nasdaq" used to be
capitalized "NASDAQ" as an acronym for National
Association of Securities Dealers Automated
Quotation. The acronym is no longer used and
Nasdaq is now a proper noun.

 NSE – National Stock Exchange (1992)

 BSE – Bombay Stock Exchange (1875)
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Financial Market Segmentation

Financial Market can be classified as Organized or

Unorganized based on the weather it is regulated or not.
 Organized Market – Regulator sets up norms and
controls the Market and Market Player.
 Stock Exchange NSE, BSE, NYSE
 Mutual Funds
 Venture Funds
 Banking and NBFC’s
 Unorganized Market
 Pawn Broker
 Sahukar
 Money Lender
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Organized Financial Market

The financial market can also be classified based on

the term and valuation basis of the financial assets.
These are :
 Money Market (OTC Market)
 products dealt are of short-term maturity (less than a year)
 Capital Market (Shares and Debt Segment)
 products dealt are of long-term maturity (> a year)
 Derived Market (F& O Segment, OTC Market)
 these products dealt derive their value from the Money
Market and Capital Market based Financial products
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Organized Financial Market

The various segments on the Stock Exchange are :

 Debt Market Segment

 Bonds, Treasury Bills/Bonds/Notes

 Stock/Share Market Segment

 Shares, Debentures, ETF, Close Ended Mutual Funds

 Derived Market Futures and Options (F&O) Segment

 Index F & O
 Industry F & O
 Stock F& O
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Index
 BSE - Sensex
 NSE - S&P Nifty
 NYSE – Dow Jones DJIA
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Financial System:
Classification by Financial
products
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F in a n c ia l S y s t e m

F in a n c ia l In s t it u t io n s F I n a n c ia l M a r k e ts F ia n a n c ia l I n s t r u m e n ts F in a n c ia l S e r v ic e s

D e b t I n s t r u m e n ts

E q u it y I n s t r u m e n t s

H y b r id I n s t r u m e n ts

D e r iv e d I n s t r u m e n ts

Financial products
 Equity products  Debt products
 Shares/ Stocks
• Ordinary/ Common
• Preference
• Convertible Preference
 ADR’s/GDR’s
 Hybrid products
 Convertible Debentures
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 Bonds – Corp/Govt/ Muncipal
 Debentures – Corporate
bonds.
 Fixed Deposit/Cert of Deposit
 Commercial Paper CP
 Treasury Bill T-Bill
 Govt. Securities G-Sec
 Repo, Term Repo, Rev Repo
 FCCB’s
 Forwards, Futures, Options 30

and Swaps are Derivatives

since they are settled in the
future.
 Exchange based derivatives  OTC Traded derivatives
 Equity based derivatives • Swaps
• Stock Futures and – Currency Swap
Options – Interest Rate Swaps
• Index Futures and – Credit Default Swaps
Options – Swaptions
 Fixed Income • Forward Rate Agreements
Derivatives • Exotic options
• Interest Rate Futures
• Interest Rate Options
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Mutual Funds:
 Equity focused MF  Debt focused MF
 Equity Based Mutual  MMMF
Funds  Liquid fund
 Index Mutual Funds  G Sec Fund
 Sectoral Funds  Debt Fund
 Dual segment based MF  MF focused on Physical assets
 Balanced Mutual Fund  Real Estate funds
 Gold Fund
 Art fund
 Wine fund
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Financial System :
Classification by Financial
Services
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Financial System

Financial Institutions FInancial Markets Financial Services Fianancial Instruments

Market Supporting Environments :Custodial & Depository Credit Rating Factoring and Forfieting
Trading, Broking, Services
Clearing,
Settlement

Risk Management Wealth Management Merchant Banking Mutual Funds

Hedge Funds

Insurance Consultancy : Leasing Market

and Facilitation
Investement Banking
Hire Purchase
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Services
 Regulatory Environment – provided by the market regulator
 Trading Environment, Price Determination Mechanism –
provided by the Stock Exchange
 Clearing and Settlement Environment – provided by the Stock
Exchange
 Brokerage Environment (Terminal / Web based)
 Dealer Environment – provided by Dealers
 Custodial Environment – provided by Service providers
 Depository Environment - provided by the Depository and
Depository Participants
 Stock Lending – provided by authorized stock lenders
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Financial Services
 Credit Rating Environment
 Risk Management
 Wealth Management
 Mutual Funds and Hedge Funds
 Factoring and Forfaiting
 Research and Analysis Departments
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Financial Services cont..

 Merchant Banking (IPO management within
Investment Banking)
 Lead Management,
 Underwriting
 Private Placement
 Book Building
 Registry and STA Environment
 Foreign Currency Issue Management
• Foreign Currency Convertible Bonds (FCCBs)
• Global Depository Receipts (GDRs)
• American Depository Receipts (ADRs)
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Financial Services cont…

 Investment Banking Consultancy
 Financing Strategies
 Corporate Restructuring
 Venture Capital
 Merger and Acquisition Management
 Loan Syndication Services
 The process of involving numerous different lenders in
providing various portions of a loan.
 Insurance Services (Life, Non Life)
 Leasing (Operating Lease, Financial Lease)
 Hire Purchase
 Venture/Angel Funding and Private Equity Funding
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Thank You