SCOPE OF FINANCIAL

SERVICES

BY
SUCHETHA
12397099
Financial services cover a wide range of activities.
They can be broadly classified into namely :

 Traditional Activities
 Modern activities.
TRADITIONAL ACTIVITIES
 Traditional approach Evolved during the
1920’s and 1930’s known as ‘Corporation Finance
’Traditionally, the financial intermediaries have
been rendering a wide range of services
encompassing both capital and money market
activities. They can be grouped under two heads,
viz.
 a. Fund based activities and
 h. Non-fund based activities.
 FUND BASED ACTIVITIES

• In fund based business, money in the form of

cash is involved in the transaction. Major part of
the income is earned through fund based
activities. Fund based income comes from interest
spread
• firm raises funds through  debt, equity, deposits
and the bank invests the funds in securities or
lends to those who are in need of capital.
under fund based activities are the following

 Underwriting or investment in shares,

debentures, bonds of new issues (primary market
activities )
 Dealing in secondary market activities.
 Participating in money market instruments like
commercial papers, certificate of deposits,
treasury bills, discounting of bills .
 Involving in equipment leasing, hire purchase,
venture capital.
 Dealing in foreign exchange market activities.
fund based services include:
 Leasing
 Hire Purchase
 Bill Discounting
 Housing Finance
 Factoring .
 LEASING
 A lease transaction is a commercial arrangement
whereby an equipment owner or Manufacturer
conveys to the equipment user the right to use the
equipment in return for a rental.
 In other words, lease is a contract between the owner
of an asset (the lessor) and its user (the lessee) for
the right to use the asset during a specified period in
return for a mutually agreed periodic payment (the
lease rentals).
 HIRE PURCHASE
 A system by which a buyer pays for a thing in regular
installments while enjoying the use of it. During the
repayment period, ownership (title) of the item does
not pass to the buyer. Upon the full payment of
the loan, the title passes to the buyer.
 A method of buying an article by making regular
payments for it over several months or years. The
article only belongs to the person who is buying it
when all the payments have been made
 BILLS DISCOUNTING
 Bills discounting is nothing but a type of Credit
Facility extended by the Bank.
 While discounting a bill , banks buy the bill before it is
due and credit the value of the bill after a discount
charge to the customer's account.
 There are two types of bill discounting
 Import Bill Discount is a kind of short-term finance
offered by the bank to the importer according to his
demand upon receiving the bills under the letter of
credit and the import collection items. 
 Export Bill Discounting is financing of money in
transit supplied by the bank.
 HOUSING FINANCE
 Housing finance is what allows for the production and
consumption of housing.
 It refers to the money we use to build and maintain
the nation’s housing stock.
 But it also refers to the money we need to pay for it,
in the form of rents, mortgage loans and
repayments.”
FACTORING
 Factoring is a financial transaction whereby
a business sells its accounts
receivable (i.e., invoices) to a third party
(called a factor) at a discount in exchange of
immediate money.
 Factoring is not a loan, Factoring is a short-
term solution.
 most companies factor for two years or
less.
 NON FUND BASED ACTIVITIES
 Financial intermediaries provide services on the
basis of non-fund activities also. This can be called
'fee based' activity. Today customers, whether
individual or corporate, are not satisfied with mere
provisions of finance. They expect more from
financial services companies. Hence a wide variety
of services, are being provided under this head. fee
based business no money is directly involved but
the subscribing bank or financial institution
provide financial service to the customer taking
probable risk and takes fee as a service charge.
 Managing the capital issues ( management of pre-
issue and post issue activities in accordance with
the SEBI guidelines)
 Making arrangements for the placement of capital
and debt instruments with investment institutions.
 Arrangement of funds from financial institutions
for the clients project cost or his working capital
requirements.
 Assisting in the process of getting all government
and other clearances.
 fee based / advisory services include:
 Merchant banking
 Corporate Counseling
 Loan Syndication
 Credit Rating
MERCHANT BANKING
 A merchant banker is a financial intermediary who
helps to transfer capital from those who possess it
to those who need it.
 Merchant banking includes a wide range of
activities such as management of customer
securities, portfolio management, project
counseling and appraisal, underwriting of shares
and debentures.
CORPORATE ADVISORY
SERVICES
 Merchant bankers offer customized solutions to their
clients financial problems.
 Financial structuring includes determining the right
debt-equity ratio and gearing ratio for the client, the
appropriate capital structure theory is also framed.
 Merchant bankers also explore the refinancing
alternatives of the client, and evaluate cheaper sources
of funds. Another area of advice is rehabilitation and
turnaround management. In case of sick units, merchant
bankers may design a revival package in coordination
with banks and financial institutions. Risk management
is another area where advice from a merchant banker is
sought. He advises the client on different strategies and
suggests the appropriate strategy.
LOAN SYNDICATION
 It refers to a loan arranged by a bank called lead
manager for a borrower who is usually a large
corporate customer or a government department.
 It also enables the members of the syndicate to
share the credit risk associated with a particular
loan among themselves
CREDIT RATING
 ◦Evaluates the credit worthiness of a debtor,
especially a business (company) or a government
◦ It is an evaluation made by a credit rating
agency of the debtors ability to pay back the debt
and the likelihood of default . Some credit rating
agencies; ICRA, CRISIL.
CASE
 The client is a privately held financial services
conglomerate, offering mutual funds, life insurance and
investment management services. The client manages
a multitude of funds for millions of customers
worldwide. It employs more than 30,000 professionals
and has offices in 70 US cities and in about 20 other
countries.
 The client was working with an inventory of over 300
applications. However, there was no clear mapping
between a business function and the technology
applications that supported it. Even the technology
spending for each business function was not known.
This had led to a complete lack of clarity on Total
Cost of Ownership (TCO) for these applications.
 Each business unit wanted better data availability and
lower cost of maintaining IT infrastructure. But in the
absence of application rationalization, which helps to
reduce application diversity, the client found itself
dealing with rising costs of supporting diverse, disparate
and even obsolete applications. In addition, application
data management became a burdensome task.
 The client clearly needed to make some strategic
decisions about its inventory - which applications were
worth enhancing, which needed to be decommissioned
and which ones should be put on life-support.
Unfortunately, this decision making was hampered by
the lack of clear and quantifiable financial information.
To rectify this situation, the client decided to partner
with Infosys on an application rationalization exercise
that would help it align its application portfolio to its
strategic IT objectives.
SOLUTION
 First, it developed a business architecture and mapped
this back to the existing applications.
 Next, it worked to identify costs for each application. It
used the data gathered through interviews to allocate
appropriate costs to each business function. To do this,
the team used existing financial data to identify the
client's current costs for each application.
 The third step was to study each application in depth and
identify key characteristics and functionality details,
based on which the final evaluation and prioritization of
the entire applications set would be made.
 Finally, the team built and delivered a portfolio
rationalization strategy for the client. The team provided
a rationalization roadmap, clearly identifying the
applications to be retained and to be decommissioned. It
also provided an action plan for the retained applications.
It also helped the client to prioritize the decommissioning
exercise and helped to put it on the agenda at 'top
management' level.
THANK YOU