1 / 85

FM302-MANAGEMENT OF FINANCIAL SERVICES

FM302-MANAGEMENT OF FINANCIAL SERVICES. Mr.LALIT TANK Asst. Professors, MBA Department, Bhagawan Mahavir College of Management, Surat Email id: lalittank@gmail.com. FINANCE SPECILIZATION. COURSE CONTENTS. Module No.1 Introduction to Indian Financial system

cara-cardenas
Télécharger la présentation

FM302-MANAGEMENT OF FINANCIAL SERVICES

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. FM302-MANAGEMENT OF FINANCIAL SERVICES Mr.LALIT TANK Asst. Professors, MBA Department, Bhagawan Mahavir College of Management, Surat Email id: lalittank@gmail.com FINANCE SPECILIZATION

  2. COURSE CONTENTS Module No.1 • Introduction to Indian Financial system • Reserve bank and financial system. • structure of banking and non-banking companies. • Introduction to different markets- Capital, Money,Primary,Secondary Markets. Module No.2 • Asset/Fund based financial services • Leasing, hire purchase

  3. Module No.3 • Consumer credit, factoring and forfeiting , Bill discounting, Housing finance, Insurance services, venture capital financing, Mutual fund services Module No.4 • Merchant banking services : • all services related to issue management Module No.5 • Credit rating, Stock broking, depositories, custodial services and short selling and securities lending and borrowing services, Credit cards.

  4. CHAPTER -1 INTRODUCTION TO INDIAN FINANCIAL SYSTEM

  5. INDIAN FINANCIAL SYSTEM •  The economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and household sector.  While performing their activities these units will be placed in a surplus/deficit/balanced budgetary situations.

  6. Constituents of a Financial System

  7. Financial System • An institutional framework existing in a country to enable financial transactions. • Three main parts • Financial assets (loans, deposits, bonds, equities, etc.) • Financial institutions (banks, mutual funds, insurance companies, etc.) • Financial markets (money market, capital market, forex market, etc.) • Regulation is another aspect of the financial system (RBI, SEBI, IRDA, FMC)

  8. Financial assets/Instruments • Enable channelizing funds from surplus units to deficit units • There are instruments for savers such as deposits, equities, mutual fund units, etc. • There are instruments for borrowers such as loans, overdrafts, etc. • Like businesses, governments too raise funds through issuing of bonds, Treasury bills, etc. • Instruments like PPF, KVP, etc. are available to savers who wish to lend money to the government

  9. Financial Institutions • Includes institutions and mechanisms which • Affect generation of savings by the community • Mobilization of savings • Effective distribution of savings • Institutions are banks, insurance companies, mutual funds- promote/ mobilize savings • Individual investors, industrial and trading companies- borrowers

  10. Financial Markets • Money Market- for short-term funds (less than a year) • Organised (Banks) • Unorganised (money lenders, chit funds, etc.) • Capital Market- for long-term funds • Primary Issues Market • Stock Market • Bond Market

  11. Function of the Financial System • Prevision of liquidity liquidity refers to cash or money and other assets which can be converted into cash readily without loss of value and time. • Mobilization of savings

  12. Weaknesses of India financial system • Lack of co-ordination between different financial institutions. • Monopolistic market structures -LIC in life insurance -UTI in mutual fund • Dominance of development banks in industrial financing • Inactive and erratic capital market • Imprudent financial practice

  13. Reserve Bank of India (RBI)

  14. Establishment of RBI The reserve bank of India was established on April 1,1935 in accordance with the provisions of the reserve bank of India Act, 1934. The central office of the reserve bank was initially in Calcutta but was permanently moved to Mumbai in 1937. the central office is where the governor sits and where policies are formulated.

  15. Objectives of RBI • To maintain the internal value of the nation’s currency. • To preserve the external value of the currency • To secure reasonable price stability. • To promote economic growth with rising levels of employment, out and real income

  16. Functions of a RBI • Monetary policy functions • Currency issue and management • Maintaining value of currency • Anchor economic growth expectation • Monetary regulation and management • Regulation of interest rates • Financial sector regulation and supervision • Exchange management and control • Credit control • Liquidity management • Clearing and settlement • Development of financial market • Policy oriented research • Collection of data and publication of reports • Institution building

  17. Role of the Reserve Bank of India • Banker to the government • Banker to the banks • Bank’s supervision • Monetary regulation and management • Foreign exchange and management • Promotional functions

  18. Supervisory/regulatory function of RBI • Licensing of banks • Approval of capital, reserves and liquid assets of banks • Branch licensing policy • Inspection of banks • Control over management • Audit • Credit information service • Deposit insurance • Training and banking education

  19. RBI –ORGANISATION STRUCTURE

  20. Introduction to different Markets • Capital Market, Money Market, • Primary Market, Secondary Market

  21. Money Market • The market for dealing with financial assets and sec. which have a maturity period of up to one year. • RBI defines the money market as “A market for short term financial assets that are close substitutes for money, facilitates the exchange of money for new financial claims in primary market as also for financial claims, already issued, in the secondary market”

  22. Money Market Instruments • Money market instruments are those which have maturity period of less than one year. • The most active part of the money market is the market for overnight call and term money between banks and institutions and repo transactions • Call money/repo are very short-term money market products

  23. Money Market Instruments • Certificates of Deposit • Commercial Paper • Inter-bank participation certificates • Inter-bank term money • Treasury Bills • Bill rediscounting • Call/notice/term money • CBLO (Collateralized Borrowing and Lending Obligation) • Market Repo

  24. Features of a money market • Market purely for short –term funds or financial assets • Its deals with financial assets having maturity period up to one year. • it deals with those assets which can be convert in to cash readily without loss and mini transaction cost • Transaction have to be conducted without the help of brokers

  25. Objectives of money market • To provide a parking place to employ short-term surplus • To provide room for overcoming short-term deficits. • To enable the central bank to influence and regulate liquidity in the economy through its intervention in this market. • To provide reasonable access to the users of short-term funds to meet requirements.

  26. Characteristics of a Developed Money Market • Highly organized banking system • Presence of a central bank • Availability of proper credit instrument • Existence of sub-brokers • Sufficient resources • Existence of secondary markets • Demand and supply of funds

  27. Importance of Money Market • Development of money market • Development of capital market • Smooth functioning of commercial banks • Effective central bank control • Formulation of suitable monetary policy • Non-inflation source of finance to government

  28. Composition of Money Market The money market consist of following sub market. • Call money market • Commercial bills market • Acceptance market • Treasury bill market

  29. Call money market The call money market refers to the market for extremely short period loans, say one day to fourteen days. These loans are repayable on demand at the option of either the lender or the borrower.

  30. Advantages of call money market • High liquidity • High profitability • Maintenance of statutory reserve ration (SRR) • Safe and cheap • Assistance to central bank operation

  31. Drawbacks of call money market • Uneven development • Lack of integration • Volatility in call money rates

  32. Commercial bills market or discount Market • Definition “An instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to ,or the order of certain person or to the bearer of the instrument”.

  33. Types of bills Many types of bills are in circulation in a bill market • Demand bills are also called sight bills. these bills are payable immediately as soon as they are presented to the drawer no time of payment is specified and hence they are payable at sight. • Documentary bill when bills have to be accompanied by document of title to goods like railway receipt, lorry receipt, bill of lading etc.the bills are called doc.bills.

  34. Inland and foreign bills inland bills are those drawn upon a person resident in India and are payable in India. foreign bills are drawn outside India and they may be payable either in India or outside India. • Export bills and import bills export bills are those drawn by Indian exporters on imports outside India and importer bills are drawn on Indian importers in India by exporters outside India. • Indigenous bills indigenous bills are those drawn and accepted according to native custom or usage of trade.

  35. Advantages of Commercial bills market • Liquidity • Self-liquidating and negotiable asset • Certainty of payment • Ideal investment • Simple legal remedy • High and quick yield • Easy central bank control

  36. Drawbacks of Commercial bills market • Absence of bill culture • Absence of rediscounting among banks • Stamps duty • Absence of secondary market • Difficulty in ascertaining genuine trade bills • Limited foreign trade • Absence of acceptance service • Attitude of banks

  37. Treasury bill market A treasury bill nothing but a promissory note issued by the Govt. under discount for a specified period stated therein. the govt.promises to pay the specified amount mentioned therein to the bearer of the instrument on the due date. T.B are issued only by the RBI on behalf of the govt. TB are issued for meeting temporary govt. deficits.

  38. Types of Treasury bill • There are two types of TB ordinary treasury bills are issued to the public and other financial institution for meeting the short term financial requirements of the central govt. ad hocs treasury are always issued in favor of the RBI only.

  39. Importance of TB • Safety • Liquidity • Ideal short-term investment • Ideal fund management • Statutory liquidity • Source of sort term funds • Non-inflationary monetary tool • Hedging facility Defects of TB • poor yield • absence of competitive bids • absence of active trading

  40. Commercial papers (CP) • A Cp Is an unsecured promissory note issued with a fixed maturity by a company approved by RBI, negotiable by endorsement and delivery, issued in bearer form and issued at such discount on the face value as may be determined by the issuing co. • Short-term borrowings by corporate, financial institutions, primary dealers from the money market • Can be issued in the physical form (Usance Promissory Note) or demat form • Introduced in 1990 • When issued in physical form are negotiable by endorsement and delivery and hence, highly flexible • Issued subject to minimum of Rs. 5 lacs and in the multiple of Rs. 5 lacs after that • Maturity is 7 days to 1 year • Unsecured and backed by credit rating of the issuing company • Issued at discount to the face value

  41. Certificate of deposit CD are short term deposits instruments issued by bank and financial institutions t raise large sums of money. • Repo instrument. Repurchase transaction the borrower parts with securities to the lender with an agreement to repurchase them at the end of the fixed period at a specified price. • At the end of the period the borrower will repurchase the securities at the predetermined price.

  42. Capital Markets What is Capital Market It is an organized market mechanism for effective and efficient transfer of money capital or financial resources from the investing class to the entrepreneur class in the private and public sector of the economy. Capital market for long term funds. The capital market provides long term debt and equity finance for govt. and corporate. Capital market facilitates the dispersion of business ownership and reallocation of financial resources among corporate and industries.

  43. Dimensions of capital market • The capital market is directly responsible for the following activities. • Mobilization or concentration of national saving for economic development. • Mobilization and import of foreign capital and foreign investment capital plus skill to fill up the deficit in the required financial resources to maintain the expected rate of economic growth. • Productive utilization of resources • Directing the flow to funds of high yields and also strive for balanced and diversified industrialization.

  44. Capital market mechanism Demand for funds Middlemen Supply of funds • Capital Market • Stock exchange • New issue market • Finance and investment corp. • Individuals • Institutions • Government • Individuals • Institutions • Government • Entrepreneurs • Borrowers • Clearing house for long term or permanent finance • Investors • Lenders • Sellers of money capital • Buyers of money capital

  45. Capital Market Structure Non-Marketable Securities Marketable Securities New Issues Market players –original Govt. securities Bank Deposits Deposits with Companies Corporate securities Stock market intermediaries Loans and advances of banks and FIs. PSUs Bonds New Issues Market players –for Issues UTI Mutual Funds POC and deposits

  46. Special features of the Indian capital market • Greater reliance on debt instrument as against equity and in particular borrowing from financial institution. • Issues of debenture, particularly convertible debentures with automatic or compulsory from conversion into equity without the normal option given to investors. • Avoidance of underwriting by some cos. Reduce. • Fast growth of mutual funds and subsidiaries of banks for financial services.

  47. Capital market instruments • Equity shares • Preference shares • Non-voting equity shares • Cumulative convertible preference shares • Company fixed deposits • Debentures/ bonds • Global depository receipts

  48. Structure of Capital Markets

More Related