Professional Documents
Culture Documents
FUND BASED SERVICES TYPES: 1) Underwriting or investment in shares 2) Treasury Bills 3) Discounting of Bills 4) Involvement in equipment leasing, venture capital 5) Term Loans 6) Overdraft facilities
NON-FUND BASED SERVICES: These are also called as fee based services. This service does not involve a huge risk compared to the fund based services. But requires a lot of expertise. Examples of non-fund based services are: 1) Investment banking services 2) Merchant Banking activities 3) Insurance Business 4) Project counseling 5) Mergers & Amalgamations 6) Rehabilitation of sick units.
PURPOSE OF INNOVATION
1) CREDIT CONTROL: Credit Control is an important tool used by Reserve Bank of India, to control the demand and supply of money in the economy. It is basically used to achieve the objective of Inflation or Deflation and also used to boost the economy. 2) LIQUIDITY MANAGEMENT: Activities within a financial institution to ensure that holdings of liquid assets (e.g. cash, bank deposits and other financial assets) are sufficient to if they fall due to unexpected transactions or so on. 3) SATISFYING OTHER OBJECTIVES LIKE RETAINING MANAGEMENT CONTROL: This is nothing but basically used to determine or compare the performance with the pre-determined standards, plans or objectives. So in order to satisfy the objective, the performance should be almost near or as to the same of the determined standards.
4) TREASURY MANAGEMENT: Treasury management (or treasury operations) includes management of an enterprise's holdings with the ultimate goal of maximizing the firm's liquidity.
Ex: When bonds are once released in the market, people subscribe to them and the proceeds are utilized to finance infrastructure projects across the nation. 5) Commercial Paper: Commercial papers are promissory notes that are unsecured and issued by companies and financial institutions. Commercial Papers yields higher denominations as compared to the Treasury Bills and the Certificate of Deposit. The maturity period of Commercial Papers is a maximum of 9 months. These securities are actively traded in secondary market. 6) Certificate of Deposit: A certificate or deposit is a short-term borrowing note, like a promissory note, in the form of a certificate. It enables the bearer to receive interest. The returns are higher but even risk is also involved. The funds cannot be withdrawn on demand, but it can be liquidated on payment of a penalty. 7) ADR / GDR : (American Depository Receipt & Global Depository
Receipt)
a. These are the instruments in the nature of depository receipt or certificates. b. These instruments are negotiable and they are publicly traded. c. ADR are listed on American Stock Exchange and GDR are listed on Global Stock Exchange other than American Stock Exchange.
8) Inter-Bank Participation :
NEW FINANCIAL SERVICES OFFERED BY BANKS: 1) Financial Advising: Customers have asked for financial institutions
for advice, particularly when it comes to savings and investing of funds. For this, Banks have come with wide range of financial advisory services to help prepare financial plans for individuals & provide consulting about market opportunities at home & abroad.
2) Managing Cash: Over the years, financial institutions have found that
some of the services they provide for themselves are valuable for their customers. One of the most prominent among them is Cash Management Services, which is a financial intermediary agrees to handle cash collections and disbursements for a business firm and to invest any temporary cash in interest bearing assets until cash is needed to pay bills.
For ex: Barclays & Duetsche Bank. They offer merchant banking services to large corporations. These consists of temporary purchase of corporate stock in the aid of starting a new business venture or in supporting the expansion of existing company. Hence, a merchant banker becomes a temporary stock holder and bears the risk that the stock purchased may decline. TRADITIONAL MARKET INSTRUMENTS: 1) Money Market: The major purpose of financial markets is to transfer funds from lenders to borrowers. Money market means market where money or its equivalent can be traded. The most common money market instruments are Treasury Bills, Certificate of Deposits, Commercial Papers, Repurchase Agreements and Banker's Acceptance. 2) DEBT MARKET INSTRUMENTS: Government Securities Market (G-Sec Market): It consists of central and state government securities. It means that, loans are being taken by the central and state government. Bond Market: It consists of Financial Institutions bonds, corporate bonds and debentures. These bonds are issued to meet financial requirements. The return in debt market is fixed and is almost risk free that is assured returns.
3) CAPITAL MARKET INSTRUMENTS: A Capital market is a market for securities, where business enterprises and government can raise long term funds.