Professional Documents
Culture Documents
FINANCIAL SERVICE
SUBMITTED TO:
UNIVERSITY OF MUMBAI
BY
DIVYA P WAGHMARE.
T.Y.BBI (SEMESTER V)
CERTIFICATE
This is to certify that, DIVYA P WAGHMARE of T.Y.B.B.I Semester
V (2014-15),Seat no:
FINANCIAL SERVICE
under the guidance of Prof. SUJEET SINGH.
PLACE :- KALYAN
DATE :-
(Signature of Principal)
(Signature of Coordinator)
(Signature of External)
GUIDE CERTIFICATE
WAGHMARE
of TYBBI Seat No. has completed the project on
FINANCIAL SERVICE
for the academic year 2014-2015. The information submitted is true &
original to the best of my knowledge.
Place :- Kalyan .
Date :-
(Signature of Project
Guide)
DECLARATION
2015.
Signature of student
(DIVYA P WAGHMARE)
Seat No:
ACKNOWLEDEMENT
5
Life is so short that we forget to thank those people who help us in tackling various
hurdles in our life. But I take my privilege in conveying heartiest gratitude to all those
people, whose help enabled me to complete the project.
It gives me pleasure and satisfaction to state that this presentation is not a solo effort;
so many people have contributed their bit to it. It is very difficult to individualize their
gratefulness here, to all whose contributions have blossomed into this presentation.
My foremost gratitude and thanks exist for Prof. SUJEET SINGH who has guided,
assisted or provided me with information or otherwise helped me obtain statistics &
facts.
I also express my grateful thanks to respondents for giving their valuable time to
make this project to success.
Last but not the least; I would like to pay our gratitude to my PARENTS, without
their help and blessing I cant take a single step in right direction.
INDEX
SR NO.
CONTENTS
PAGE NO.
6
1.
INTRODUCTION
09
2.
HISTORY
12
3.
STRUCTURE
15
4.
FEATURES
18
5.
BANKING SERVICES
21
6.
INSURANCE
26
7.
30
8.
CLASSIFICATION
39
9.
45
10.
47
11.
VARIOUS
SERVICES
OF
FINANACIAL 49
SERVICES IN MARKETING
12.
13.
CASE STUDY
55
14.
CONCLUSION
58
15.
BIBLOGRAPHY
59
FINANCIAL SERVICES
CHAPTER 1
INTRODUCTION
8
insurance
companies,
consumer
finance
companies,
stock
CHAPTER 2
HISTORY OF FINANCIAL SERVICES
11
The Indian financial services industry has undergone a drastic change in 1990.
During the late seventies and eighties, the Indian financial services industry
was dominated by commercial banks and other financial institutions which
cater to the requirements of the Indian industry. Infact the capital market has
played a secondary role. The economic Liberlization has brought in a
complete transformation in the Indian financial services industry. Prior to the
economic liberalization, the Indian financial sector was characterized by so
many factors which retarded the growth of financial services sector.
13
CHAPTER 3
STRUCTURE OF FINANCIAL SYSTEM
14
The financial system implies a set of complex and closely connected institutions,
agents, practices and markets. The following is a typical structure of financial system
in any economy.
FINANCIAL SYSTEM
FINANCIAL
INSTITUTIO
NS
FINANCIA
L
MARKETS
FINANCIAL
INSTRUMENT
S
FINANCIAL
SERVICES
FINANCIAL INSTITUTIONS
Financial institutions are business organizations who act as mobilizes and depositories
of savings, and suppliers of credit or finance. These institutions provide various
financial services to the business organizations and common people. Financial
institutions can be divided into banking and non banking institutions. Banking
institutions deal is financial assets such as deposits, loans, and securities etc
institutions deal in real assets such as machinery, equipments, stock of goods and real
estate. Their activities may be general or special institutions none. These financial
participate in the economy s payment mechanism by providing transaction services,
money supply and credit.
FINANCIAL MARKETS
Financial markets are the centers which provide facilities for buying and selling of
financial claims and services. the participants in the financial markets are financial
institutions, brokers, dealers, borrowers and investors. They are interlinked by the
15
laws, contracts, and communication networks. Financial markets can be divided into
two parts. The primary markets which deals in new financial claims or instruments. it
is also called as new issue market. The secondary market deals in securities which are
already issued but the companies and investors in providing liquidity however, stock
exchanges are both primary and secondary markets segments , units and insurance
policies deposits. Differ from each the financial instruments other in respect of their
investments characteristics. The important characteristics are liquidity, transferability,
volatility, maturity, risk, and return.
FINANCIAL SERVICES
A financial service is any kind of service of a financial nature offered by a financial
service provider. All banking and insurance related services are included in this
concept. These services are intangible and invisible. There should Financial markets
are also classified as capital markets and money market. The money market deals in
the short term claims with maturity period of less than a year and capital markets
deals in long term claims or securities. The capital market is co extensive not only
with the stock market but it is much wider than the stock market. The financial
markets may be classified as organized or unorganized, formals or informal and
domestic or foreign markets.
FINANCIAL INSTRUMENTS
Financial instruments are claims to the payment of money in future or a periodic
interval. For e.g. the important financial instruments are shares, debentures, bonds,
fixed deposits etc. regular payment in the form of interest or dividend is paid by the
16
company to the investors. Directly to the ultimate savers such as equity shares,
debentures secondary instruments are issued by intermediaries to the ultimate savers
as bank e proximity between the service provider and the consumer in order to
complete a service transaction. These services cover a wide range of economic
activities. Financial services have developed to meet the needs of companies. Banking
and insurance are traditional financial services. The modern financial services include
over the counter services. Share transfer, pledging of shares, mutual funds, factoring,
discounting, venture capital and credit cards. Financial services have started long back
in western countries. In India, these services have started long back in western
countries. in India, these services have started during 1980s. These services play a
significant role in the changed business services.
CHAPTER 4
FEATURE OF FINANCIAL INSTRUMENT:
Membership management member :
Membership registration
17
Membership exit
Membership transfer
Financial management :
Account payable
Fixed assets
Reporting system :
Deregulatory reports e.g. central bank user customized reports service
managementfosa (front office services activits) on-the-counter transactions
(banking services) such as savings deposits, withdrawals, loans repayment,
salary payments teller functions tellers, head tellers, cash drawer and strong
room cash management bosa (back office services activities) behind the scene
activities such as salary processing, loans processing, journals processing, etc
company jointly create one of the largest industries of the world. There are a
number of financial services companies in the world.
Some of these companies are the following:
Bank
Insurance company
Conglomerates
private banks and many more. There are some banks that work for the capital
markets only. Banks provide a number of financial services to the clients.
These services include depository services, lending services, credit card
facilities and many more.
A "commercial bank" is what is commonly referred to as simply a "bank". The term
"commercial" is used to distinguish it from an "investment bank", a type of financial
services entity which, instead of lending money directly to a business, helps
businesses raise money from other firms in the form of bonds (debt) or stock (equity).
CHAPTER 5
BANKING SERVICES
The primary operations of banks include:
Issuance of checkbooks so that bills can be paid and other kinds of payments
can be delivered by post
20
Provide personal loans, commercial loans, and mortgage loans (typically loans
to purchase a home, property or business)
Issuance of credit cards and processing of credit card transactions and billing
Provide wire transfers of funds and Electronic fund transfers between banks
Facilitation of standing orders and direct debits, so payments for bills can be
made automatically
Provide Charge card advances of the Bank's own money for customers
wishing to settle credit advances monthly.
Provide a check guaranteed by the Bank itself and prepaid by the customer,
such as a cashier's check or certified check.
Capital market bank - bank that underwrite debt and equity, assist company deals
(advisory services, underwriting and advisory fees), and restructure debt into
structured
finance products.
Bank cards -
cards
and
bank is the
largest
issuer
of
bank cards.
Credit
card
and
machine
services
networks
Companies which provide credit card machine and payment networks call themselves
"merchant card providers".
BANK CARDS
Bank cards include both credit cards and debit cards . In India ICICI bank is
the largest issuer of bank cards :
American express
Master card
Visa
22
State-owned banks are now offering services like Internet banking and personalized
cheque books, and evaluation of loan proposals within a specific period. Many such
banks run processing centers and back offices. The State Bank of India has even
introduced two-faced ATMs.
Whereas, the Indian Bank has introduced wealth management services for its high net
worth (HNI) clients providing various types of financial advisory and wealth
management services.
2004, the Bank has over 110 million customers worldwide with assets over
US$1,154 billion. HSBC Bank has about 10,000 offices in 76 countries and
territories in Europe, the Asia Pacific region, the Americas, the Middle East
and Africa.
CHAPTER 6
INSURANCE
cover a number of risks that are related to an individual's life, property and
many more. These services are not only designed to provide security but at
the same time there are a number of insurance plans that are designed to
provide regular income to the clients. The insurance policies can be divided in
several types like general insurance, life insurance, commercial insurances
and a lot more.
Insurance brokerage - Insurance brokers shop for insurance (generally
corporate property and casualty insurance) on behalf of customers. Recently a number
of websites have been created to give consumers basic price comparisons for services
such as insurance, causing controversy within the industry.
Insurance underwriting - Personal lines insurance underwriters actually underwrite
insurance for individuals, a service still offered primarily through agents, insurance
brokers, and stock brokers. Underwriters may also offer similar commercial lines of
coverage for businesses. Activities include insurance and annuities, life insurance,
retirement insurance, health insurance, and property & casualty insurance.
Reinsurance - Reinsurance is insurance sold to insurers themselves, to protect them
The
general
insurance sector is
likely to grow at a
in 2008, compared
to 13 per cent in
non-life
insurers
collected a total of
as premium in April
2008.
Life Insurance Corporation (LIC) is bullish on growth and is targetting business in
excess of US$ 59.14 billion by 201112.
The government is planning to ease restrictions on foreign investments in insurance,
banking and pensions, and allow foreign direct investment (FDI) of 49 per cent from
the present 26 per cent.
INSURANCE UNDERWRITING
Personal lines insurance underwriters actually underwrite insurance for
individuals, a service still offered primarily through agents, insurance
27
brokers, and stock brokers. Underwriters may also offer similar commercial
lines of coverage for businesses. Activities include insurance and annuities,
life insurance, retirement insurance, health insurance, and property & casualty
insurance. Some Well Known Insurers Includes:
A. GOVT. COMPANIES IN GENERAL INSURANCE IN INDIA
Tata aig
CHAPTER 7
OTHER FINANCIAL SERVICES
Intermediation or advisory services - These services involve stock brokers (private
client services) and discount brokers. Stock brokers assist investors in buying or
selling shares. Primarily internet-based companies are often referred to as discount
brokerages, although many now have branch offices to assist clients. These
brokerages primarily target individual investors. Full service and private client firms
primarily assist execute trades and execute trades for clients with large amounts of
capital to invest, such as large companies, wealthy individuals, and investment
management funds.
Private equity - Private equity funds are typically closed-end funds, which usually
take controlling equity stakes in businesses that are either private, or taken private
29
once acquired. Private equity funds often use leveraged buyouts (LBOs) to acquire the
firms in which they invest. The most successful private equity funds can generate
returns significantly higher than provided by the equity markets
Venture capital - Venture capital is a type of private equity capital typically provided
by professional, outside investors to new, high-potential-growth companies in the
interest of taking the company to an IPO or trade sale of the business.
Angel
investment - An angel
investor or
angel
business
angel
investor in
Europe), is an affluent
individual
a business
start-up,
exchange
(known
or
as
informal
usually
in
STOCK MARKETS
30
Fund raisinng by India Inc through initial public offers (IPOs) rose by a whopping 62
per cent since the beginning of 2008 to 29 May, 2008 to US$ 4.2 billion, against US$
2.6 billion during the same period in 2006, according to global deal data provider,
Dealogic. Significantly, fund mobilisation during the first quarter of 2008 was the
second highest for a quarter in the Indian capital's history.
In recent months, the Indian stock market has slowed down due to the global
economic turmoil. However, expectations of it rebounding soon are also high.
Further, according to global consultancy firm, Deloitte Haskins & Sells, the Indian
economy and capital markets are expected to witness a turnaround within six to nine
months.
According to the initial public offering (IPO) estimates for 2009, by Thomson
Reuters study, India Inc is likely to raise four times the proceeds it garnered from the
primary market in 2008. As per the study, India Inc is targetting to raise a massive
US$ 15.28 billion through public issues.
Furthermore, SEBI will be making it easier for companies to raise money from the
stock market, by relaxing eligibility rules to facilitate faster raising of funds from
existing shareholders. Presently, only companies having had a market capitalisation of
above US$ 1.97 billion in the last one year are entitled to this route. SEBI plans to
bring down this figure.
31
PRIVATE
EQUITY
Among the most common investment strategies in private equity include leveraged
buyouts, venture capital, growth capital, distressed investments and mezzanine
capital. In a typical leveraged buyout transaction, the private equity firm buys
majority control of an existing or mature firm. This is distinct from a venture capital
or growth capital investment, in which the private equity firm typically invests in
young or emerging companies, and rarely obtain majority control.
According to a report by global research firm Preqin, private equity investments are
likely to perk up in the second-half of 2009 and fuel the global economic recovery.
"With approximately US$ 1 trillion of dry powder (term used to denote capital
available for deals) available, private equity is poised to play a major role in the
coming economic recovery," the report revealed.
Private equity (PE) players see are bullish on investing in India as a profitable
destination, expecting the inflows to be around US$ 5 billion-US$ 8 billion in the
coming year.
Industry experts feel that long-term investing in India is a profitable option.
According to a survey by Deloitte during the last six months, sectors driven by
domestic consumption and infrastructure are expected to witness a lot of activity.
Sandeep Gill, managing director of Deloitte corporate finance, said, "We have
observed two key points, the competitive environment for investment opportunities
for PE houses is expected to ease during 2009, as smaller PE firms and hedge funds
exit the market. Second, the volume of PE deals in the market will be dependent on
how quickly promoters are willing to accept lower valuations."
The total number of PE deals during the first five months of 2008 stood at 170, with
an announced value of US$ 6.39 billion as against 159 deals amounting to US$ 4.97
billion during the corresponding period in 2008. India is among the top 10 countries
in terms of value of private equity deals across the world, according to the global deal
tracking firm, Zephyr. The sector is going to see a flurry of activity and investments in
the coming months.
33
Many companies have ambitious plans to enter the private equity (PE) business and
raise funds.
Indivision India Partners is planning to raise another fund-Indivision II, with a corpus
in excess of US$ 425 million raised through Indivision I.
Other bigwigs planning fund raisings are the Tata and Aditya Birla groups with plans
to raise US$ 350 million and US$ 250 million, respectively. In August 2008, Reliance
Capital had announced setting up a US$ 1 billion PE fund.
Private equity firm, Actis has raised a US$ 2.9 billion private equity fund Actis
Emerging Markets 3 (AEM3) for the emerging markets of China, India, Africa, Latin
America and South-east Asia. The fund will be pumping in US$ 1 billion as
investments in India over the next 3-4 years.
US-based Apollo Management, with an asset base of more than US$ 20 billion, will
be soon setting up shop in India. The PE firm has plans to spend around US$ 800
million in investments in Indian and the US markets.
Tata Capital Ltd is planning to float a US$ 350 million private equity (PE) fund.
MUTUAL FUNDS
34
To improve
government
restriction
and
the
capital
market,
the
is
on
profit-making Navratna
mini-Ratna
undertakings
public
sector
mutual funds.
Life Insurance Corporation of India (LIC) has put in over US$ 2.75 billion into liquid
funds of different fund houses. The amount was more than three times its similar
investments made in 2008.
Looking ahead, the Indian mutual funds market is estimated to grow at a CAGR of 18
per cent in the next five years, with the country's mutual funds assets expected to
more than double to US$ 298.73 billion by 2012, according to a report by US-based
financial services research and consulting firm, Cerulli Associates.
36
HSBC
Markets
an affiliate
is
and
the
owns
75
percent
can
stake.
Preferred
shares
be
considered
Attributing
or the other is partially a subjective decision but will also take into account the
specific features of the preferred shares.
When used to calculate a company's financial leverage, the debt usually includes only
the Long Term Debt (LTD). Quoted ratios can even exclude the current portion of the
LTD. The composition of equity and debt and its influence on the value of the firm is
much debated and also described in the Modigliani-Miller theorem.
Financial analysts and stock market quotes will generally not include other types of
liabilities, such as accounts payable, although some will make adjustments to include
or exclude certain items from the formal financial statements. Adjustments are
sometimes also made to, for example, exclude intangible assets, and this will affect
the formal equity; debt to equity (dequity) will therefore also be affected.
Financial economists and academic papers will usually refer to all liabilities as debt,
and the statement that equity plus liabilities equals assets is therefore an accounting
identity (it is, by definition, true). Other definitions of debt to equity may not respect
this accounting identity, and should be carefully compared.
Due to the high volatility in the equity markets, Indian investors are choosing debt
market and mutual funds over equities.
37
According to an ASSOCHAM report, around US$ 333.27 million was invested in the
debt market against US$ 249.89 million in equities, as on the third week of June 2008.
The report revealed that investors favoured corporate bonds, particularly debentures
issued by leading companies. The debt market in India included segments like
government securities, corporate bond market, PSU (public sector undertaking)
bonds, and fixed deposits among others.
According to a report by Goldman Sachs, with insurance, mutual funds and pension
sector experiencing rapid growth, India's debt market is estimated to grow four-fold,
from about US$ 400 billion (45 per cent of GDP) in 2006 to about US$ 1.5 trillion
(about 55 per cent of GDP) by 2016.
Significantly, the non-government sector is expected to grow from US$ 100 billion in
2006 to US$ 575 billion in 2016, increasing its share in GDP from 10 per cent to 22
per cent.
CHAPTER 8
CLASSIFICATION OF FINANCIAL SERVICES INDUSTRY
38
part of all planning and policy decisions. This has helped them to keep in tune
with the changing times and changing customer needs. Accordingly, many
innovative financial instruments have come into the financial market in recent
times.
SOME OF THEM HAVE BEEN BRIEFLY DISCUSSED BELOW:
COMMERCIAL PAPER
TREASURY BILL
CERTIFICATE OF DEPOSIT
BILLS OF EXCHANGE
PROMISSORY NOTE
COMMERCIAL PAPER
A commercial paper is a short term negotiable money market instrument. It
has the character of an unsecured promissory note with a fixed maturity of 3
to 6 months. Banking and non-banking companies can issue this for raising
their short term debt. It also carries an attractive rate of interest. Commercial
papers are sold at a discount from their face value and redeemed at their face
value. Since its denomination is very high. It is suitable only to institutional
investors and companies.
40
TREASURY BILL
A treasury bill is also a money market instrument issued by the central
government. It is also issued at a discount and redeemed at par. Recently, the
government has come out with the short term treasury bills of 182 days bills
and 364 days bills.
CERTIFICATE OF DEPOSIT
PROMISSORY NOTE
A promissory note is a written promise by the maker to pay money to the payee. Bank
note is frequently transferred as a promissory note, a promissory note made by a bank
and payable to bearer on demand. A maker of a promissory note promises to
unconditionally pay the payee (beneficiary) a specific amount on a specified date.
A promissory note is an unconditional promise to pay a specific amount to bearer or
to the order of a named person, on demand or on a specified date.
A negotiable promissory note is unconditional promise in writing made by one person
to another, signed by the maker, engaging to pay on demand, or at fixed or
determinable future time, sum certain in money to order or to bearer. (see Sec.194)
A promissory note, briefly stated, is a promise to pay a sum of money.Original parties
to a promissory note. There are originally two parties in a promissory note. The one
who makes the promise and signs the instrument is called the "maker" and the party to
whom the promise is made or the instrument is payable is called the "payee"
BILLS OF EXCHANGE
A bill of exchange or "draft" is a written order by the drawer to the drawee to pay
money to the payee. A common type of bill of exchange is the cheque (check in
American English), defined as a bill of exchange drawn on a banker and payable on
demand. Bills of exchange are used primarily in international trade, and are written
orders by one person to his bank to pay the bearer a specific sum on a specific date.
42
Prior to the advent of paper currency, bills of exchange were a common means of
exchange. They are not used as often today.
A bill of exchange is an unconditional order in writing addressed by one person to
another, signed by the person giving it, requiring the person to whom it is addressed to
pay on demand or at fixed or determinable future time a sum certain in money to
order or to bearer. (Sec.126)
It is essentially an order made by one person to another to pay money to a third
person.
A bill of exchange requires in its inception three parties--the drawer, the drawee, and
the payee.
The person who draws the bill is called the drawer. He gives the order to pay money
to third party. The party upon whom the bill is drawn is called the drawee. He is the
person to whom the bill is addressed and who is ordered to pay. he becomes an
acceptor when he indicates his willingness to pay the bill. (Sec.62) The party in
whose favor the bill is drawn or is payable is called the payee.
The parties need not all be distinct persons. Thus, the drawer may draw on himself
payable to his own order.
A bill of exchange may be endorsed by the payee in favour of a third party, who may
in turn endorse it to a fourth, and so on indefinitely. The "holder in due course" may
claim the amount of the bill against the drawee and all previous endorsers, regardless
of any counterclaims that may have disabled the previous payee or endorser from
doing so. This is what is meant by saying that a bill is negotiable.
In some cases a bill is marked "not negotiable". In that case it can still be transferred
to a third party, but the third party can have no better right than the transferor.
CONGLOMERATES
43
A financial services
conglomerate
financial
services
of
insurance,
insurance,
management,
health
retail
the
is
banking,
financial
asset
wholesale
banking, investment banking, etc. A key rationale for the existence of such
businesses is the existence of diversification benefits that are present when
different types of businesses are aggregated i.e. bad things don't always
happen at the same time. As a consequence, economic capital for a
conglomerate is usually substantially less than economic capital is for the sum
of its parts.
CHAPTER 9
FUNDAMENTALS OF FINANCIAL SERVICE SECTOR
44
CHAPTER 10
CAUSES FOR FINANCIAL INNOVATION
FOLLOWING ARE THE CAUSES OF FINANCIAL INNOVATIONS:
46
Economic Liberalization
Investor Awareness
Low Profitability
Customer Service
Keen Competition
Global Impact
ECONOMIC LIBERALISATION
Reform of the financial sector constitutes the most important component of
Indias programmed towards economic liberalization. The recent economic
liberalization measures have opened the door to foreign competitors to enter
into our domestic market.
INVESTOR AWARENESS
With a growing awareness amongst the investing public, there has been a
distinct shift from investing the savings in physical assets like gold, silver,
land, etc. to financial assets like shares, debentures, mutual funds, etc.
LOW PROFITABILITY
The profitability of the major financial intermediary, namely the banks has
been very much affected to recent times. There is a decline in the profitability
of traditional banking products.
47
CUSTOMER SERVICE
Now-a-days the customers expectations are very great. They want newer
products at lower cost or at lower credit risk to replace the existing one.
KEEN COMPETITION
The entry of many financial intermediaries in the financial sector market has
led to severe competition among themselves. This keen competition has paved
the way for the entry of varied nature of innovative financial products so as to
meet the varied requirements of the investors .
GLOBAL IMPACT
Many of the providers and users of capital have changed their roles all over
the world.
CHAPTER 11
VARIOUS ELEMENTS OF FINANCIAL SERVICES
MARKETING:
48
Product Planning
Pricing Policy
Branding
Customer Service
Distribution Policy
Promotion Policy Market Segmentation
PRODUCT PLANNING
The financial companies should aim at creating new generic products as per
the needs of the customers. Attractive schemes have to be created with
efficient delivery in order to optimize customer satisfaction. It is always
better to bring modification in the existing products by adding some new
features and elimination of outdated products.
In the competitive market, the task of selling a product is tougher since the
core products are the same. This necessitates product differentiation. There
should be different products in the arrays of the company, so that the company
can cater to the needs of the different groups of investors or customers.
In order to design and develop new products one should take the help of
market research to asses the needs of the customers, availability of existing
product and future growth in demand.
49
PRICING POLICY
The potential customers generally frame their investment strategies in the
background of pricing decisions. The prices take different dimension
depending upon the type of financial services. The price of financial services
is always linked with returns.For an insurance company the price means the
premium, for the banks it is the net asset value. However, while deciding
pricing, incentives, brokerage and agency commission is also to be decided in
advance because the expenses towards these items will affect the ultimate
returns to the investors. After all in all cases only the competitive price and
the promised return catch the sentiment of the customers.
BRANDING
Brand name very often signifies the market segments, inherent benefits and
investment objectives and also the customers loyalty. This process consists of
product name, designing brand policy like individual family or corporate
brand.
CUSTOMER SERVICES
Marketing of services is significantly influenced by the quality of service and
interpersonal relationship between the customers and service organizations. In
order to motivate the potential customers, the service should be offered in the
best possible manner. In the competitive world of financial services, market
orientation of product and customer orientation of service are the two key
factors. Prompt and timely service as per the needs of customer would make
difference. The personal touch in services has shown a positive result in the
recent times. The quality of services offered in turn helps to develop loyalty
among the customers. Services can be provided either directly by the
company through the service the service department or through intermediaries
like registrars or external agencies. Customers are involved in a very real
50
relationship with the company and even one weak link can significantly
damage their trust.
MARKET SEGMENTATION
The financial service industries are expected to satisfy both rural and urban
customers, small and large-scale entrepreneurs, high and low earning
customers, retail and institutional customers. The segmentation of market
based on the changing needs of customers is considered to be the most
appropriate solution. Identification of market segment is crucial to take
further action regarding promotion and distribution of the product. Market
segment will be identified in the basis of nature of the product, direct and
indirect benefits of the product on the one hand and behavior or attitude of the
customers, etc.
DISTRIBUTION POLICY
The determination of proper channel for selling the product is also a key issue
in the marketing of financial products. Before launching a product, there
should be a clear-cut idea about the channel of distribution of the product so
as to make it accessible to the ultimate customers. The channels which
directly link to the cudtomers or through the intermediaries like agents,
brokers, franchisees should be determined based on the internal marketing
strength of the organization.
PROMOTION POLICY
The promotion of sale may be through advertisement, road shows,
personal
finance shows, contest, etc. the various promotional tools used by the major
players are personal and impersonal promotions
51
CHAPTER 12
EMERGING FUNCTIONS IN MARKETING OF FINANCIAL
SERVICES
The following are the emerging functions of financial service industries and
having greater significance in this competitive market.
52
Product Development
Channel Management
Appraisal Management
Branch Management
Brand Management
PRODUCT MANAGEMENT
To monitor profitability for each product line. To Asses the potential of retail
asset business based on market feedback and to enhance existing products and
develop new products.
CHANNEL MANAGEMENT
To identify third-party agencies such as direct sales agents, verification
agencies and to finalize terms and conditions, responsibilities and pricing of
each agency. To monitor the performance of these agencies on an ongoing
basis and ensure a high-quality channel operation.
APPRAISAL MANAGEMENT
To scrutinize and recommend and approval or rejection of retail loan
proposals received from branches by way of credit scoring system and sound
judgment.
To build the retail asset business in liaison with direct selling agents and branch head
in order to achieve the business targets for the region. To identify and recommend
suitable third-party agencies for marketing, collection and verification of operations
as well as to ensure quality of credit portfolio and flow-up default cases.
BRANCH MANAGEMENT
To achieve the business target of the branch with a predominantly retail
business.
BRAND MANAGEMENT
To develop strong brand name for the product and corporate image for the
company through various innovative devices.
Todays financial services industry requires new strategies to survive and
continue to operate. They have to adopt new marketing strategies and tactics
which will enable them to capture the maximum opportunities with lowest
risk in order to enable them to survive and to meet the tough competition from
global players of the domestic and foreign origin.
CASE STUDIES
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ICICI BANK
I have a account with ICICI bank because its our salary account, and we are
kind of forced to use ICICI Bank. And since we have a salary account, we get
a decent service. But yes, the credit card department, and the call centre sucks
big time. Thats my personal experience.
They put you on hold for 5 to 10 mins. (just imagine listening to the same
junk music/tone/adverts continuously), and then there is no guarantee that you
will get to speak to someone or your problem would be solved. Infact, today I
was put on hold for around 7 mins, and after that the call as abruptly
disconnected! Next time I call the call center, I get to speak to a totally new
person, and start from scrap describing the problem. The people at the call
center just promise to do things, and nothing actually happens. If it happens,
then you are really your luck.
Hope K V Kamath reads this
My
advice to all - Avoid ICICI as far as possible. Many people predict that
the bank would collapse in a few years from now. Have an account with any
nationalized bank.
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HSBC BANK
HSBC bank recovery agents bash up 58-year-old professor
Two days back RBI had put on its website guidelines for the banks recovery
agents and in it has warned the banks about strict actions would be taken
against them and even penalize the license of the bank but it seems still the
warning is falling on deaf ears. Again an incident of unruliness by recovery
agent of the bank has come into limelight. It is HSBC bank in news. This time
the victim is a professor of a reputed engineering college, Prof J.S. Kalra. He
has charged a multinational bank which allegedly sent a pack of intimidating
loan recovery agents to hound him. Kalra had taken a loan of Rs 4.5 lakh to
buy a Santro from the Noida branch of HSBC last year. The incident took
place in September but the 58-year-old professor. He is hopeful of justice,
encouraged by the recent strict guidelines issued by the RBI against banks
intimidating customers to recover loan. Even the Finance Minister Pranab
Mukherjee too has iterated that strictest action will be taken against banks
stooping to strong-arm methods.Prof J.S. Kalra of the Delhi College of
Engineering has filed his complaint against the bank. In his complaint he told
the police that the agents abused and beat him up outside the Indraprashta
University campus in north Delhi for delaying monthly installments of a loan.
They did not care to stop even after he told them that he was a heart patient
and that he had developed chest pain. They even threatened to kill me,
Kalra said in his complaint. Police have registered a case of criminal
intimidation against the loan recovery agents, allegedly hired by HSBC bank.
Devesh Chandra Srivasatava, deputy commissioner of police (north) told the
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press They got into Kalras car and refused to leave till he paid the loan
installments immediately. They hurled abuses, and beat him up. When they
saw Kalra developing heart problem, they left him
BIBLIOGRAPHY
58
WWW.HSBC.CO.IN
WWW.ICICI.COM
WWW.GOOGLE.COM
WWW.WIKIPEDIA.COM
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