INTRODUCTION

Financial services constitute an important component of the financial system. Financial services are regarded as the 4th element of the financial system. Services that are offered by financial companies are called financial services. In general, all types of activities, which are of a financial nature could be brought under the term financial services. The term financial services in a broad sense means mobilizing and allocating savings. Thus it includes all activities involved in the transformation of savings into investment. It includes all activities involved in the transformation of SAVINGS into INVESTMENTS.

CLASSIFICATION OF FINANCIAL SERVICES

Financial Services are classified into wholesale /corporate and retail Financial Services. These are further classified into ASSET/FUND BASED FS and NON FUND/FEE BASED FS FUND BASED FINANCIAL SERVICES:- When financial services are used for creating asset or are supported by asset where the funds are transformed into asset, they are known as fund based financial services. NON FUND BASED FINANCIAL SERVICES: - Non fund based financial services do not create immediate funds; they enable the creation of funds through their services for which they charge a fee.

FUND BASED CORPORATE FINANCIAL SERVICES:1. LEASING: A lease is an agreement under which a company or a firm acquires a right to

make use of a capital asset like machinery, on payment of a prescribed fee called rental charges.
2. HIRE PURCHASE: Hire Purchase is an agreement under which goods are let on hire

and under which the hirer has an option to purchase them in accordance with the terms of agreement.
3. MORTGAGE LOANS: Mortgage Loan is a financing arrangement in which a lender

extends finance for acquisition of real estate against the security of the real estate purchased out of the loan.
4. WORKING CAPITAL FINANCE: - It is that part of business which finances day to day

operations. Current assets represents the gross working capital.Net working capital is arrived at by deducting the current liabilities from the current assets.
5. FACTORING:- Factoring refers to the process of managing the sales register of a client

by a financial services company. The entire responsibility of collecting the book debts passes on to the factor.
6. FORFAITING: Forfeiting is a technique by which a forfeiter (financing agency)

discounts an export bill ready cash to the exporter who can concentrate on the exports front without bothering collection of bills.

is an unsecured money market instrument introduced in the Indian Money Market in 1990. CP is issued in the form of a promissory note and issued through private placement . 8. CERTIFICATE OF DEPOSIT:-It is another avenue for the corporate bodies to invest Their short-term surplus funds and reasonably good returns. It helps the firm to utilize Their unutilized balances in the current account and earn interest on it. 9. BANK DEPOSIT SCHEME:-Commercial banks offer traditionally two types of accounts to the corporate bodies. These accounts are known as current account deposit or fixed or term deposit accounts. 10. BONDS & DEBENTURES: - It is a part of fixed income investments, it is just an organizations IOU; i.e., a promise to repay a sum of money at a certain interest rate and over a certain period of time.

7. COMMERCIAL PAPER:-It

FUND BASED RETAIL FINANCIAL SERVICES

1. PERSONAL FINIANCE: - It represents credit facilities extended by banks and financial institutions to the individual customer. Generally type of finance extended under this are loans for purchase of shares. 2. CONSUMER FINANCE:-It is extended by banks to acquire consumer durables such as fridge, TV, furniture, etc. The primary security is the item purchased out of the Loan. 3. HOUSING FINANCE: - They are given as direct and indirect loans. Direct loans are given to the individuals or a group of individuals. Indirect loans are term loans granted to housing finance institutions, housing board, etc. 4. RESIDENTIAL MORTGAGE BACKED SECURITIES: - The transaction in housing finance sector can be classified into Primary and secondary residential mortgage market. Primary market comprises of primary lenders who provide housing loans to borrowers. Secondary market is securitization of housing loan installments. 5. REVERSE MORTGAGE: - It is the mortgage loan facility to the senior citizen (over 62 years), who are not eligible for any form of mortgage loan. The senior citizen

who own a house but do not have adequate income to meet their needs can apply for this loan. 6. EDUCATIONAL LOAN: - They are extended with the aim to provide financial support from the banking system to deserving students for pursuing higher education in India and abroad. 7. AUTOMOBILE LOAN: - Banks are extending credit for purchase of new two/four wheeler for personal/professional use. Bank finance is also available for purchase of used cars less than 3 years old. 8. DISCOUNTING/PURCHASE OF CHEQUES: - Banks are extending credit to customers by discounting/purchasing of outstation cheques. Many times the customers may receive cheques drawn on places outside their place of domicile. Generally they deposit these cheques for collection and credit to their account maintained with the banks. 9. DEPOSIT SCHEME: - Banks provide various deposit schemes for keeping the savings of people. Banks have to comply with the Know your Customer (KYC) norms introduced by RBI while opening and allowing operations in the accounts. 10. CHITTIES & NIDHIS: - Chits are financial instrument organized by individuals, firms, and companies. Monthly subscriptions collected from all the members are pooled together to form the fund. The chit amount will be offered to the member who bids the maximum. 11. Mutual Funds: A mutual fund refers to a fund raised by a financial service company by pooling the savings of the public. It is invested in a diversified portfolio with a view to spreading and minimizing the risk. The fund provides investment avenues for small investors who cannot participate in the equities of big companies. It ensures low risk, steady returns, high liquidity and better capitalization in the long run.

 FEE BASED CORPORATE FINANCIAL SERVICES

1. Merchant Banking: A merchant banker is a financial intermediary who helps to transfer capital from those who possess it to those who need it. 2. GUARANTEE: - A guarantee is a contract between the issuing bank and the client in which the bank undertakes to meet the claims put forward by the client against the customer on behalf of whom the guarantee is issued. 3. LETTER OF CREDIT: - A letter of credit is a written undertaking issued by the buyers bank (opening bank) to the seller (beneficiary) to reimburse the cost of goods and services supplied to the buyer by the seller against production of documents stipulated therein within a specific time, at a specified place and up to a specified amount, to a specified bank provided the documents submitted are in strict conformity with the terms and conditions of LC. 4. BILLS OF CO-ACCEPTANCE FACILITY: - Buyers of capital goods may need finance for payment of the cost to the seller. A common source of finance is term loan from bank. But, a term loan attracts not only interest but also immediate cash payment towards margin. 5. CREDIT INSURANCE: - It is recovery of loans and advances provided by agencies to provide protection to the financing institutions against default by their borrowers on payment of an upfront premium. 6. CREDIT SYNDICATION: - It is an arrangement between two or more lending institutions to provide a borrower a credit facility using common loan documentation. 7. CORPORATE RESTRUCTURING: - It is the process of dismantling & rebuilding of areas within an organization which does not contribute to the growth or some new set of assets and liabilities are added to the existing pool and hence need the special attention to the top management. 8. CREDIT RATING: - This is a services provided to lenders & and investors about the potential default of a financial instruments issued by a borrower. When a request for rating is received the rating agency will assign task to a rating team who will visit the institution and hold discussions with the concerned officials. 9. ELECTRONIC FUND TRANSFER:- The term Electronic Fund Transfer means any transfer of funds , other than transaction in paper form , which is initiated through

an electronic terminal, computer or magnetic tape, so as to order, instruct or authorize a financial institution to debit or credit an account. It is a mechanism where the paper instruments are replaced by electronic form. 10. CERTIFICATION SERVICE: - Banks issue various certificates to the customers for various purposes like bank certificate for exports, solvency certificate, certificate for inward remittances, certificate for income tax purpose, etc. 11. VENTURE CAPITAL FINANCE: - It is referred to as financing of new ideas or technologies. It has been regarded as early stage finance of relatively small, rapidly growing companies, the risk element is high but high growth can also be expected. It is usually in form of equity contribution.

FEE BASED RETAIL FINANCIAL SERVICES

1. PERSONAL TAX COUNSELLING: - According to income tax 1961, every individual whose annual taxable income exceeds the specified limit should pay income tax and file the annual return in prescribed format. 2. CREDIT CARD, DEBIT CARD & SMART CARD:Credit card can be used for paying goods and services, obtaining cash, and revolving credit. Debit card can be used as substitute for cash and cheques to pay for everyday items such as groceries, restaurant meals, and department store purchases. The holder does not have to carry cash or cheques. Smart card is a plastic card embedded with a computer chip that stores and transacts data between users. 3. BARTER CARDS: - Barter card enable trading in commodities without cash outlay. With the introduction of modern system of trading where credit instruments are used for payment and settlement, the barter form of trade was on the verge of extinction. 4. ATM: - It enables the customer to withdraw money from his account without visiting the bank. This service helps the ATM customer to withdraw money even when the banks are closed.

5. FOREIGN INWARD REMITTANCE: - The foreign inward remittance involves transaction in foreign currency. There is no restriction as far as inward remittances are concerned, provided these remittances are received through an authorized dealer in foreign exchange. 6. FOREIGN OUTWARD REMITTANCE: - Authorized dealer are permitted in foreign exchange to undertake such transactions on behalf of their customers on production of documentary evidence. 7. FUND TRANSFER FACILITIES: - Fund transfer facilities provided by banks are cheques, drafts, mail transfers and telegraphic transfers. 8. SAFE DEPOSIT LOCKERS: - It is a facility provided by bank to their customers to keep their valuable like jewellery, title deeds, etc. 9. SAFE-CUSTODY FACILITIES: - Banks are providing facility to keep valuables like documents, title deeds, etc. The customer has to pay a charge for this facility. 10. CERTIFICATION: - Banks issue various certificates for various purposes for which they earn commission. 11. PORTFOLIO MANAGEMENT: - It is service offered by financial institutions to individuals for management of investment. Banks, NBFCs, and broking firms are providing portfolio management services to individuals. 12. BANASSURANCE: - It is a combination of banking and insurance. It is rather a package of banking and insurance product. Banks were not allowed to enter into insurance business till 2000. In April, 2000, RBI permits the banks to enter into the insurance sector.