BANKING-AND-INSURANCE slideshow presentation

FINANCIAL MARKETS
SYBBI
SEMESTER-III
Academic Year-20-21

MODULES
• INDIAN FINANCIAL SYSTEM
• FINANCIAL MARKETS IN INDIA
• COMMODITY MARKET
• DERIVATIVES MARKET

INDIAN FINANCIAL SYSTEM
A) Introduction, Meaning, Functions of financial system,
Indian financial system from financial neutrality to financial activism and
from financial volatility to financial stability, Role of Government in
financial development
B) Structure of Indian Financial System – Banking & Non-Banking Financial
Institutions, Organized and Unorganized Financial Markets, Financial
Assets/Instruments, Fund based & Fee Based Financial Services.

OVERVIEW AND STRUCTURE OF INDIAN
FINANCIAL SYSTEM
• The financial system enables lenders and borrowers to
exchange funds.
• India has a financial system that is controlled by independent
regulators in the sectors of insurance, banking, capital
markets and various services sectors.
• The financial system of an economy provides the way to
collect money from the people who have it and distribute it to
those who can use it best.
• So, the efficient allocation of economic resources is achieved
by a financial system that distributes money to those people
and for those purposes that will yield the best returns.

• The financial system is composed of the products and services
provided by financial institutions, which includes banks,
insurance companies, pension funds, organized exchanges,
and the many other companies that serve to facilitate
economic transactions.
• Virtually all economic transactions are effected by one or
more of these financial institutions.
• They create financial instruments, such as stocks and bonds,
pay interest on deposits, lend money to creditworthy
borrowers, and create and maintain the payment systems of
modern economies.

OBJECTIVES
These financial products and services are based on the following
fundamental objectives of any modern financial system:
I. To provide a payment system
II. To give time value to money
III. To offer products and services to reduce financial risk or to compensate
risk-taking for desirable objectives
IV. To collect and disperse information that allows the most efficient
allocation of economic resources
V. To create and maintain financial markets that provide prices, which
indicates how well investments are performing, determines the
subsequent allocation of resources, and to maintain economic stability in
the markets

FUNCTIONS AND ROLE OF FINANCIAL
SYSTEM
1. Pooling of Funds
2. Capital Formation
3. Facilitates Payment
4. Provides Liquidity
5. Short and Long Term Needs
6. Risk Function
7. Better Decisions
8. Finances Government Needs
9. Economic Development

1.Pooling of Funds
In a financial system, the Savings of people are transferred from households to
business organizations. With these production increases and better goods are
manufactured, which increases the standard of living of people.
2. Capital Formation
Business require finance. These are made available through banks, households and
different financial institutions. They mobilize savings which leads to Capital Formation.
3. Facilitates Payment
The financial system offers convenient modes of payment for goods and services. New
methods of payments like credit cards, debit cards, cheques, etc. facilitates quick and
easy transactions.
4. Provides Liquidity
In financial system, liquidity means the ability to convert into cash. The financial
market provides the investors the opportunity to liquidate their investments, which
are in instruments like shares, debentures, bonds, etc. Price is determined on the daily
basis according to the operations of the market force of demand and supply.
5. Short and Long Term Needs
The financial market takes into account the various needs of different individuals and
organizations. This facilitates optimum use of finances for productive purposes.

6. Risk Function
The financial markets provide protection against life, health and income risks.
Risk Management is an essential component of a growing economy.
7. Better Decisions
Financial Markets provide information about the market and various financial
assets. This helps the investors to compare different investment options and
choose the best one. It helps in decision making in choosing portfolio
allocations of their wealth.
8. Finances Government Needs
Government needs huge amount of money for the development of defense
infrastructure. It also requires finance for social welfare activities, public
health, education, etc. This is supplied to them by financial markets.
9. Economic Development
India is a mixed economy. The Government intervenes in the financial system
to influence macro-economic variables like interest rate or inflation. Thus,
credits can be made available to corporate at a cheaper rate. This leads to
economic development of the nation.

MONEY MARKET
• The money market refers to trading in short-term debt
investments.
• At the wholesale level, it involves large-volume trades
between institutions and traders.
• At the retail level, it includes money market mutual
funds bought by individual investors and money
market accounts opened by bank customers.
• In all of these cases, the money market is characterized
by a high degree of safety and relatively low rates of
return.

• The money market involves the purchase and
sale of large volumes of very short-term debt
products, such as overnight reserves or
commercial paper.
• An individual may invest in the money market by
purchasing a money market mutual fund, buying
a Treasury bill, or opening a money market
account at a bank.
• Money market investments are characterized by
safety and liquidity, with money market fund
shares

• The money market is one of the pillars of the global
financial system.
• It involves overnight swaps of vast amounts of money
between banks and the government.
• The majority of money market transactions are
wholesale transactions that take place between
financial institutions and companies.
• Institutions that participate in the money market
include banks that lend to one another and to large
companies and time deposit markets.
• Some of those wholesale transactions eventually make
their way into the hands of consumers as components
of money market mutual funds and other investments.

CAPITAL MARKET
• Capital markets are venues where savings and
investments are channeled between the suppliers who
have capital and those who are in need of capital.
• The entities that have capital include retail
and institutional investors while those who seek
capital are businesses, governments, and people.
• Capital markets are composed of primary and
secondary markets.
• The most common capital markets are the stock
market and the bond market.

• Capital markets refer to the places where
savings and investments are moved between
suppliers of capital and those who are in need
of capital.
• Capital markets consist of the primary market,
where new securities are issued and sold, and
the secondary market, where already-issued
securities are traded between investors.
• The most common capital markets are the
stock market and the bond market.

• These venues may include the stock market, the bond
market, and the currency and foreign exchange
markets.
• Most markets are concentrated in major financial
centers like NSE BSE, Commodities exchanges
• Capital markets are composed of the suppliers and
users of funds.
• Suppliers include households and the institutions
serving them—pension funds, life insurance
companies, charitable foundations, and non-financial
companies—that generate cash beyond their needs
for investment.

• Capital markets are used to sell financial
products such as equities and debt securities.
Equities are stocks, which are ownership shares
in a company. Debt securities, such as bonds,
• These markets are divided into two different
categories:
Primary markets —where new equity stock and
bond issues are sold to investors
Secondary markets- which trade existing
securities.

FUNCTIONS OF FINANCIAL SYSTEM
• Saving Function
• Wealth function
• Liquidity function
• Transferring resources across time and space
• Economic development
• Payment function
• Risk function

AGENCIES PROVIDING OF FINANCIAL
SERVIES
• Banks
• Insurance
• Mutual Funds
• Merchant banking
• Venture capital
• Factoring
• Forfeiting

FUND BASED SERVICES
• LEASING
• HIRE PURCHASE
• VENTURE CAPITAL
• SEED CAPITAL
• FACTORING
• FORFAITING
• CREDIT FINANCANCING
• HOUSING FINANCE
• MUTUAL FUND

NON-FUND BASED ACTIVITIES(FEES BASED ACTIVITIES)
• MERCHANT BANKING
• CREDIT RATING
• LOAN SYNDICATION
• PORTFOLIO MANAGEMENT
• MERGER AND ACQUISITION
• STOCK BROKING
• CUSTODIAN SERVICES
• CAPITAL RESTRUCTURING
• ISSUE MANAGEMENT

CHALLENGES FACED BY FINANCIAL SERVICE
INDUSTRY
• Increasing competition
• Regulatory compliance
• Cultural shift
• Changing business models
• Rising expectation
• Customer retention
• Changing technology
• Continuous innovation
• Sensitive customer

FINANCIAL INNOVATION
• Financial innovation is the process of creating new
financial products, services, or processes.
• Financial innovation has come via advances over
time in financial instruments and payment systems
used in the lending and borrowing of funds.
• These changes – which include updates in
technology, risk transfer, and credit
and equity generation – have increased available
credit for borrowers and given banks new and less
costly ways to raise equity capital.

• Financial innovation is the act of creating new
financial instruments as well as new financial
technologies, institutions, and markets.
• Recent financial innovations include hedge
funds, private equity, derivatives, retail-
structured products, exchange-traded funds.
• The shadow banking system has spawned an
array of financial innovations
including mortgage-backed securities products
and collateralized debt obligations (CDOs).

• There are 3 categories of innovation: institutional,
product, and process.
• Institutional innovations relate to the creation of new
types of financial firms such as specialist credit card
firms like Capital One, electronic trading platforms.
• Product innovation relates to new products such
as derivatives, securitization, and foreign currency
mortgages.
• Process innovations relate to new ways of doing
financial business, including online
banking and telephone banking.

TYPES OF FINANCIAL INNOVATION
• Financial system /Institutional Innovation
• Process Innovation
• Product Innovation

CHARACTERISTICS OF FINANCIAL SERVICES
• Intangibility
• Customer orientation
• Inseparability
• Perishability
• Dynamics

CHAPTER 2 FINANCIAL MARKETS AND
REGULATORY FRAMWORK
• Classification of Financial Markets
• Organized Market
• Unorganized Market
• Capital Market
• Money Market
• Primary Market
• Secondary Market

MONEY MARKET INSTRUMENTS
Promissory Note:
• A promissory note is one of the earliest type of bills. It is a financial
instrument with a written promise by one party, to pay to another
party, a definite sum of money by demand or at a specified future
date, although it falls in due for payment after 90 days within three
days of grace.
Bills of exchange or commercial bills
• The bills of exchange can be compared to the promissory note; besides
it is drawn by the creditor and is accepted by the bank of the debater.
The bill of exchange can be discounted by the creditor with a bank or a
broker. Additionally, there is a foreign bill of exchange which becomes
due for payment from the date of acceptance. However, the remaining
procedure is the same for the internal bills of exchange.

Treasury Bills (T-Bills)
• The Treasury bills are issued by the Central Government and
known to be one of the safest money market instruments
available. Besides, they carry zero risk, so the returns are not
attractive. Also, they come with different maturity periods like 1
year, 6 months or 3 months and are also circulated by primary and
secondary markets. The central government issues them at a
lesser price than their face-value.
• The difference of maturity value of the instrument and the buying
price of the bill, which is decided with the help of bidding done via
auctions, is basically the interest earned by the buyer.
• There are three types of treasury bills issued by the Government
of India currently that is through auctions which are 91-day, 182-
day and 364-day treasury bills.

• Call and Notice Money
• Call and Notice Money exist in the market. With respect to Call
Money, the funds are borrowed and lent for one day, whereas
in the Notice Market, they are borrowed and lent up to 14
days, without any collateral security. The commercial banks
and cooperative banks borrow and lend funds in this market.
However, the all-India financial institutions and mutual funds
only participate as lenders of funds.
• Inter-bank Term Market
• The inter-bank term market is for the cooperative and
commercial banks in India who borrow and lend funds for a
period of over 14 days and up to 90 days. This is done without
any collateral security at the rates determined by markets.

Commercial Papers (CPs)
• Commercial papers can be compared to an unsecured short-term promissory note which is
issued by top rated companies with a purpose of raising capital to meet requirements directly
from the market.
• They usually have a fixed maturity period which can range anywhere from 1 day up to 270
days.
• They offer higher returns as compared to treasury bills. They are automatically not as secure
in comparison. Also, Commercial papers are traded actively in secondary market.
Certificate of Deposits ( CD’s )
• This functions as a deposit receipt for money which is deposited with a financial organization
or bank. The Certificate of Deposit is different from a Fixed Deposit receipt in two ways. i.
Certificate of deposits are issued only of the sum of money is huge. ii. Certificate of deposit is
freely negotiable.
• The RBI first announced in 1989 that the Certificate of Investments have become the most
preferred choice of organization in terms of investments as they carry low risk which
providing high interest rates than the Treasury bills and term deposits.
• CD’s are also issued at discounted price like the Treasury bills and they range between a span
of 7 days up to 1 year.
• The Certificate of Deposit issued by banks range from 3 months, 6 months and 12 months.
• Note: CD’s can be issued to individuals (except minors), companies, corporations, funds, non–
resident Indians, etc.

Repurchase Agreements (Repo)
• Repo’s are also known as Reverse Repo or as Repo.
They are loans of short duration which are agreed
by buyers and sellers for the purpose of selling and
repurchasing.
• However, these transactions can be carried out
between RBI approved parties.
• Note: Transactions can only be permitted between
securities approved by RBI like the central or state
government securities, treasury bills, central or
state government securities, and PSU bonds.

DISTINGUSH BETWEEN CAPITAL MARKET
AND MONEY MARKET

REGULATORY FRAMEWORK OF FINANCIAL
MARKETS
• Financial market, financial institutions, financial
instruments and financial services all are regulated
by regulators like ministry of finance, the company
law board, RBI, SEBI, IRDA, Department of Economic
Affairs, Department of Company Affairs etc.
• The two major regulatory and promotional
institutions in India are RBI and SEBI
• RBI- control banks
• SEBI- Controls Financial Institutions

RESERVE BANK OF INDIA
• The Reserve Bank of India is the central bank of our
country
• The RBI is the apex financial institution of the
country's financial system entrusted with the task
of control, supervision, promotion, development
and planning
• RBI came into existence on 1st
April, 1935 as per the
Reserve Bank of India Act, 1935. but it nationalized
by the government after independence

• RBI is the queen bee of the Indian financial
system which influences the commercial
banks management in more than one way
• The RBI influences the management of
commercial banks through its various policies,
directions and regulations

ROLE OF RESERVE BANK OF INDIA
• RBI plays various roles as per the requirement of
economic situation
1. To manage adequate money and credit in the
country
2. To maintain the stability of rupee internally and
externally
3. Balanced and well managed banking
development in the country
4. To develop well organized money market

• To provide adequate agriculture credit
• To manage public debt
• To seek international monetary co-operation
• Centralization of cash reserves of commercial
banks
• To set up Government banks

FUNCTIONS OF RBI
• Traditional Functions
• Supervisory functions
• Promotional Role

TRADITIONAL FUNCTIONS/MONETARY
FUNCTIONS
• Currency issue
• Bankers bank
• Custodian of foreign exchange reserves
• Bank of central clearance, settlement and
transfer
• Lender of last resort
• Controller of credit

SUPERVISORY FUNCTIONS
• Granting license to banks
• Functions of inspection and enquiry
• Controls the non banking financial
corporations

PROMOTIONAL ROLE
• Promotion of Banking habits
• Provide Refinance for export promotion
• Facilities for agriculture
• Facilitates to small scale industries
• Provisions of training
• Collection of data
• Publication of the reports

FINANCIAL INFRASTRUCTURES REGULATED
BY RBI
• Real Time Gross Settlement (RTGS)
• Securities Settlement System (SSS)
• Clearing Corporation of India ltd. (CCIL)

SECURITIES EXCHANGE BOARD OF
INDIA(SEBI)
• SEBI is the nodal agency to control the capital
market and other related issues in India
• It is administrative body established in 1988 and
was given statutory recognition in January 1992
under the SEBI Act, 1992which came into force
on January 30,1992
• SEBI has been has been active role in the Indian
capital market to attain the objectives
enshrined in the SEBI Act,1992

OBJECTIVES OF SEBI
• To provide a degree of protection to the investors and
safeguard their rights and to ensure that there is a steady
flow of funds in the market
• To promote fair market dealings by the issuer of securities
and ensure a market where they can raise funds at a
relatively low cost
• To regulate and develop a code of conduct for the financial
intermediaries and to make them competitive and
professional
• To provide for the matters connecting with or incidental to
the above

COMPOSITION OF SEBI:
• The Board of Securities & Exchange Board of India (SEBI) is
comprised of 9 members, excluding the Chairman. It is
managed by its members, in the following manner:
• A Chairman is nominated by the Union Government.
• 2 members of SEBI, are officers from the Union Ministry
of Finance.
• 1 member of SEBI, is from the Reserve Bank of India.
• There are 3 whole-time members, who are nominated by the
Government of India.
• There are 2 Part-time members, who are also nominated by
the Government of India.

THE FUNCTIONS OF SEBI:
• The regulatory jurisdiction of SEBI extends over corporates(in the issuance of
capital and transfer of securities), in addition to all the intermediaries and
individuals associated with the securities market. SEBI performs the
following functions to meet its objectives. These functions involve protective
measures, Developmental activity and regulatory functions.
• Registering and stock exchanges, merchant banks, mutual funds,
underwriers, registrars to the issues, Brokers, Sub-brokers, transfer
agents,etc.
• Levying various fees and other charges(as 1% of the issue amount of every
company issuing shares kept by it as a caution money in the concerned stock
exchange where the company is enlisted).
• Promoting the knowledge in investor education.
• It conducts audit and Inspections of stock exchanges and their various
intermediaries.

• It in involved in performing other concerned functions as may be
prescribed to it from time to time.
• It Regulates the business in stock exchanges and other securities
markets in the economy.It prohibits Insider Trading by keeping a
check when insiders of a company buy securities of that company.
• It takes strict action against insider trading.An Insider is any individual
who is connected with the company like its directors or promoters,
etc. These ‘insiders’ possess sensitive information which has potential
to affect the prices of the securities in the market. However, you
would point out that such information is not available to common
people, while the insiders can take advantage of this information to
make profit. This is known as Insider Trading.
• It is involved in registering and regulating the working of players in
stock exchanges like stock brokers, sub-brokers, market makers, etc.
• It Promotes as well as regulates the self-regulatory organizations also.

• SEBI prohibits the fraudulent and unfair trade practices
in the securities market.
• SEBI is also interested in calling for information,
undertaking inspections, conducting audits and inquiries
of the stock exchanges, intermediaries, self – regulatory
organizations, mutual funds and other persons
associated with the securities market in the country.
• It keeps a check on Price-rigging by fraud investors. Price
rigging is basically manipulation of the prices of
securities for inflating or deflating the market price of
securities. Such practices are harmful for the
performance of market at large.

INSURANCE REGULATORY AND
DEVELOPMENT AUTHORITY
• Insurance Regulatory and Development Authority is an autonomous apex statutory
body which regulates and develops the insurance industry in India
• It was constituted by a parliament of India act called Insurance Regulatory and
Development Authority Act,1999 and duly passed by the government of India
• The agency operates its headquarters at Hyderabad, Telangana where it shifted
from Delhi in 2001
• Promote and ensure orderly growth of the insurance business and re-insurance
business
• IRDA issue the applicant a certificate of registration, renew, modify, withdraw,
suspend or cancel such registration and protect the interest of the policy holders in
matters concerning assigning of policy, nomination by policy holders, insurable
interest, settlement of insurance claim, surrender value of policy and other terms
and conditions of contract of insurance
• It regulates investment of funds by insurance companies regulating maintenance
of margin of solvency.

FUNCTIONS OF IRDA
Section 14 of IRDA Act,1999 lays down the duties and functions of IRDA:
• It issues the registration certificates to insurance companies and regulates them.
• It protects the interest of policy holders.
• It provides license to insurance intermediaries such as agents and brokers after
specifying the required qualifications and set norms/code of conduct for them.
• It promotes and regulates the professional organisations related with insurance
business to promote efficiency in insurance sector.
• It regulates and supervise the premium rates and terms of insurance covers.
• It specifies the conditions and manners, according to which the insurance companies
and other intermediaries have to make their financial reports.
• It regulates the investment of policyholder's funds by insurance companies.
• It also ensures the maintenance of solvency margin (company's ability to pay out
claims) by insurance companies.

PENSION FUND REGULATORY AND
DEVELOPMENT AUTHORITY
• Pension fund regulatory is a pension related authority which was
established in the year 23rd
August 2003.by the Indian
Government
• It is authorized by the Finance Ministry and it helps in promoting
income security of old age by regulating and also developing
pension funds
• This group can also help in protecting the interest rate of the
subscribers, associated with the schemes of pension money
along with the related matters
• PFRDA is also responsible for the appointment of different
intermediate agencies like pension fund managers, NPS bank and
more

CHAPTER 3
INTERMEDIARIES V/S NON
INTERMEDIARIES
• INTRODUCTION AND DEFINATION OF INTERMEDIARIES
• ROLE OF INTERMEDIARIES IN FINANCIAL MARKET
• FINANCIAL INTERMEDIARIES IN CAPITAL MARKET
• THE FUNCTIONS OF INTERMEDIARIES
• FINANCIAL INTERMEDIARIES
• BANKING INTERMEDIARIES
• NON-BANKING INTERMEDIARIES

INTRODUCTION
• INTERMEDIARIES IN CAPITAL MARKET
• Merchant Banker
• Registrar to an issue
• Banker
• Underwriter
• Brokers

FUNCTIONS OF INTERMEDIATION
• Providing safekeeping accounting, and
payments mechanisms for resources
• Providing liquidity
• Diversifying risk
• Collecting and processing information

FINANCIAL INTERMEDIARIES
• BANKING
 RBI
 Commercial Bank
 Co-operative banks
 Foreign banks
 RRB
• NON BANKING
 Insurance
 Mutual Funds
 Factoring
 Depository

Reserve Bank of India
• The RBI is the central bank of our country. The Reserve Bank of
India is the apex financial institution of the country’s financial
system
• RBI came into existence on 1st
April 1935 as per the Reserve
Bank of India Act, 1935. but the bank was nationalized by the
government after Independence
• It becomes public sector bank from 1st
January 1949.
• RBI influences the management of management of commercial
banks through its various policies, directions and regulations
• The fundamental object of the RBI is to discharge purely central
banking functions in the Indian Money Market

COMMERCIAL BANK
• Commercial banks are those banks which accomplish all kinds of banking
functions such as accepting deposits, advancing loans, credit creation, and
agency function
• Commercial banks mainly engaged in deposit and lending activities to
private and corporate clients in wholesale and retail banking
FEATURES OF COMMERCIAL BANK
• It operates for profit
• It accepts deposits from the general public and extends loans to the
households, firms, and government
• Withdrawal by means of an instrument, whether a cheque or otherwise
• Large part of deposits are demand deposits withdrawable and
transferable
• Need to maintain the reserves with RBI

CO-OPERATIVE BANKS
• Co-operative banks are a part of the set of institutions, which are
engaged in financing rural and agriculture development
• Cooperative banks were assigned the important role of delivering
of fruits of economic planning at viewed grass root level
• Cooperative banking is retail and commercial banking organized
on a cooperative basis. Cooperative banking institutions take
deposits and lend money in most parts of the world.
• Cooperative banking, as discussed here, includes retail banking
carried out by credit unions, mutual savings banks, building
societies and cooperatives, as well as commercial banking
services provided by mutual organizations (such as cooperative
federations) to cooperative businesses.

FOREIGN BANK
• A foreign bank branch is a type of foreign bank that is
obligated to follow the regulations of both the home
and host countries.
• Banks often open a foreign branch to provide more
services to their multinational corporate clients.
• Foreign bank branches tend to be more effective in
countries with high taxes and nations where it is easy
for international firms to enter the market.
• Foreign bank branches may face special difficulties
during an economic or political crisis.

RRB
• Regional Rural Banks (RRBs) are Indian Scheduled Commercial Banks (Government Banks)
operating at regional level in different States of India.
• They have been created with a view of serving primarily the rural areas of India with basic
banking and financial services.
• However, RRBs may have branches set up for urban operations and their area of operation may
include urban areas too.
• The area of operation of RRBs is limited to the area as notified by Government of India covering
one or more districts in the State.
• RRBs also perform a variety of different functions. RRBs perform various functions in following
heads:
• Providing banking facilities to rural and semi-urban areas.
• Carrying out government operations like disbursement of wages of workers, distribution of
pensions etc.
• Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile banking,
internet banking, UPI etc.
• Small financial banks.

NON BANKING INTERMEDIARIES
INSURANCE
• Insurance is a way of reducing your potential financial loss or hardship
• It can help cover the cost of unexpected events such as theft, illness or
property damage
• It can also provide with financial payment upon death
• Several insurance provide comprehensive coverage with affordable
premiums
• Premiums are periodical payment and different insurance offer
miscellaneous premium options
• The periodical insurance premiums are planned according to the total
insurance amount
• Insurance is used as an effective tool of risk management

FEATURES OF INSURANCE
• Pooling of losses
• Payment of fortuitous losses
• Risk transfer
• Indemnification
• Co-operative device
• Value of risk
• Payment of contingency

NEED AND PURPOSE OF INSURANCE
• INDIVIDUAL
1. Insurance provide security and safety
2. Insurance afford peace of mind
3. Insurance eliminates dependency
4. Life insurance encourages saving
5. Life insurance fulfills the needs of a person
 Family need
 Old age needs
 Special need
• Need for education
• Marriage
• Insurance needs for settlement

• BUSINESS
1. Uncertainty of business losses is reduced
2. Business efficiency is increased with insurance
3. Enhancement of credit
4. Business continuation
5. Welfare of employee
• SOCIETY
1. Wealth of the society is protected
2. Economic growth of the country
3. Reduction in inflation

MUTUAL FUND
• Mutual fund is a collective investment vehicle
• It is a pool of investors money invested according to
pre-specified investment objectives.
• The benefit from the investment of pooled money
accrue to those that contribute to the pool
• There is thus mutuality in the contribution and the
benefit
• A mutual fund is an investment vehicle that permits
several investors to pool their resources in order to
purchase stocks, bonds, and other securities

TYPES OF MUTUAL FUNDS
• BY SRTUCTURE
1. Open ended funds
2. Close ended funds
3. Interval funds
• BY INVESTMENT OBJECTIVES
1. Growth funds
2. Income funds
3. Balanced funds
4. Money Market Mutual Fund
• OTHER SCHEMES
1. Tax savings
2. Special Funds
3. Index funds
4. Sectoral funds
5. Exchange Traded funds
6. Gold Exchange funds

FACTORING
Factor
(Bank)
Client
(Business)
Debtors
(Receivables)
80%
20%

TYPES OF FACTORING
• Disclosed factoring
• Undisclosed Factoring
• Recourse Factoring
• Non-Recourse Factoring

PARTIES INVOLVED IN FACTORING
• BUYER (CUSTOMER)
• SELLER (CLIENT)
• FACTOR (BANK/ FINANCIAL INSTITUTION)

DEPOSITORY
• NSDL (NATIONAL SECURITIES DEPOSITORY
LIMITED)
• CDSL ( CENTRAL DEPOSTIORY SERVICES
LIMITED)

NATIONAL HOUSING BANK
• Set up in July 9, 1988 under the National
Housing Bank Act, 1987.
• Wholly owned by RBI
• Head office in Delhi
• The vision of NHB is “ Promoting inclusive
expansion with stability in Housing finance
maeket”

LEASING
• BENEFITS/ADVANTAGES
1. Convenience in case of short term need
2. No risk of technological obsolesce
3. Efficient Maintenance services
4. Low administrative and transaction cost
5. Debt-Equity ratio remains unchanged
6. Benefit of tax shield

DISADVANTAGES OF LEASING
• No Benefit of Residual value
• High cost leasing
• No benefit of ownership
• Not flexible
• Chances of disputes

TYPES OF LEASING
• Operating lease/ Service lease
• Financial lease
• Ordinary lease
• Leveraged lease
• Domestic and International lease

HIRE PURCHASE
• Hirer ( User) make cash down payment seller
( Hiree) of say, 20-25% of the cost of the asset
• The balance of the cost price of the asset with
interest thereon is payable in equated monthly
installments
• Sometimes, in place of cash down payment a
fixed deposit is required to be made with seller
and the entire amount of the cost is recovered
through EMIs

• Each installment comprises of the cost of asset
and interest – Flat interest rate, Effective
interest rate
• The hirer is entitled t terminate the hire
purchase contract by giving due notice to the
seller ( Hiree)
• After payment of last installment hirer
becomes the owner and if he fails to make all
installments hiree can take the possession of
the asset

VENTURE CAPITAL
• Venture capital is a form of “ risk capital”
• The capital that is invested in a project,
business where there is a considerable
element of risk relating to the future creation
of profit and cashflow

STAGES OF VENTURE CAPITAL FINANCING
• INVESTMENT PROCESS
• PRELIMINARY SCREENING
• NEGOTIATING INVESTMENT
• APPROVALS AND INVESTMENT COMPLETED

UNIT II
FINANCIAL MARKETS IN INDIA
CHAPTER 4
INDIAN MONEY MARKET

CHARACTERISTICS OF MONEY MARKET
• It is a market for short term instruments and that are
close substitutes to money
• It is fundamentally an over the phone market
• It is a wholesale market for short term debt instruments
• It eases effective implementation of monetary policy of
RBI
• Transactions are completed without the help of brokers
• It creates link between the RBI and commercial banks
• The players in the money market are RBI, commercial
banks, and companies

IMPORTANCE OF MONEY MARKET
• It is basically an over the phone market
• It is a wholesale market for short term debt
instruments
• It is not a single market but collection of
markets for several instruments
• It facilitates effective implementation of
monetary policy of a central bank of a country
• Transactions are made without brokers

• It establishes the link between RBI and
commercial banks
• The players in the money market are RBI,
Commercial banks, and companies
• There is lack of integration between various
sub markets as well as various institutions and
agencies
• There is lack coordination between co-
operative banks and commercial banks

CHAPTER 5
INDIAN CAPITAL MARKET

FACTORS RESPONSIBLE FOR THE GROWTH OF
CAPITAL MARKET
• Growth of Multinational
• Growth of financial institutions
• Merchant banking services
• General awareness
• Growing population
• Legislative measures
• Growth of Underwriting service
• Public confidence

ROLE OF CAPITAL MARKET
• Mobilization of savings
• Capital formation
• Integrates different parts of the financial system
• Promotion of stock market
• Foreign capital
• Economic welfare
• Innovation

CAPITAL MARKET INSRTUMENTS
1. EQUITY SHARE
2. DEBT ( LOAN INSTRUMENTS)
• Corporate debt
• Bond
• Government debt
3. MUTUAL FUND

DISTINGUSH BETWEEN EQUITY MARKET AND
DEBT MARKET
• MEANING
• INSTRUMENTS
• VOTING RIGHTS
• FUTURE CLAIM
• ASSOCIATION OF RISK
• RETURNS
• NATURE OF HOLDING

FEATURES OF STOCK MARKET
• It is an organized market
• It could be incorporated or non-incorporated
• It is an open market for the buying and selling
of securities
• Only listing securities can be allocated on a
stock exchange
• It works under established rules and
regulations

FUNCTIONS OF STOCK EXCHANGES
• Liquidity
• Continues market for securities
• Mobilization of saving
• Capital formation
• Safeguard of the investors

BENEFITS OF STOCK EXCHANGE
• TO THE INVESTOR
• TO THE COMPANIES
• BENEFIT TO COMMUNITY AND NATION

LISTING OF SECURITIES
• BENEFIT TO THE COMPANY
Continues market
Goodwill
Liquidity
Companies can easily raise capital
• BENEFIT TO THE INVESTORS
It provides safety and security

PLAYERS IN STOCK MARKET
• BEARS
• BULLS
• STAGS

MEMBERS IN A STOCK EXCHANGE
• Jobber
• Commission broker
• Tarawaniwalas- Are like jobbers
• Sub broker
• Arbitrageurs
• Authorized clerks

MAJOR STOCK EXCHANGES IN INDIA
• BOMBAY STOCK EXCHANGE
• NATIONAL STOCK EXCHANGE

FUNDAMENTAL ANALYSIS
• Economic analysis
• Industry analysis
• Company analysis
• Net profit margin
• Book value per share
• Current ratio
• Debt ratio
• Inventory turnover
• Stock price valuation

TECHNICAL ANALYSIS
• OPEN
• HIGH
• LOW
• CLOSE
• VOLUME
• OPEN INTEREST
• BID
• ASK

METHODS OF TECHNICAL ANALYSIS
• LINE CHART
• BAR CHART
• CANLESTICK CHART
• VOLUME BAR CHART
• RESISTENCE AND SUPPORT

CHAPTER 7
INDIAN EQUITY MARKET
• PRIMARY MARKET
PLAYERS IN PRIMARY MARKET
1. MERHCNANT BANKER
2. REGISTRAR TO THE ISSUE
3. BANKER
4. BROKER
5. UNDERWRITER

METHODS OF RAISING FUND IN PRIMARY
MARKET
• PUBLIC ISSUE
• OFFER FOR SALE
• PRIVATE PLACEMENT
• RIGHT ISSUE
• TENDER METHOD
• BONUS SHARES

PROSPECTUS
• RED HERRING PROSPECTUS
• ABRIDGED PROSPECTUS
SWEAT EQUITY
SWEAT EQUITY MEANS SUCH EQUITY SHARES
ISSUED TO ITS DIRECTORS OR EMPLOYEES AT A
DISCOUNT OR FOR CONSIDERATION
ESOP (EMPLOYEE STOCK OWNERSHIP PLAN)
RIGHT ISSUE

CHAPTER 8
INDIAN DEBT MARKET
ADVANTAGES OF DEBT INSTRUMENT
1. Fixed and periodic receipt like interest
2. Capital is preserved
3. These instruments are more secured
4. Investment in government bonds is more risk
free
5. Lower volatility
6. Diversity of instruments like index bonds

TYPES
• MONEY MARKET INSTRUMENTS
1. Treasury bills
2. Certificate of deposits
3. Commercial paper
• Government securities
1. Cash Management Bills
2. Dated Government securities
3. State Development loans
4. Special securities
• Corporate Bonds

INTEREST RATE BOND
• FIXED RATE BOND
• FLOATING RATE BOND
• ZERO COUPON BOND
• CAPITAL INDEXED BOND
• BOND WITH CALL/PUT OPTION

UNIT3
CHAPTER 9
COMMODITY MARKET
REGULATORY FRMEWORKOF FRAMEWORK OF
COMMODITIES MARKET
1. CENTRAL GOVERNMENT
2. FORWARD MARKET COMMISSION
3. EXCHANGES

MAIN PLAYERS OF COMMODITIES MARKETS
• SPECULATORS
• HEDGERS
• ARBITRAGERS

COMMODITY EXCHANGES IN INDIA
• MULTI COMMODITIES EXCHANGE
• NATIONAL COMODITIES AND DERIVATIVES
EXCHANGE
• NATIONAL MULTI COMMODITY EXCHANGE
• INDIAN COMMODITY EXCHANGE

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