INDIAN FINANCIAL INSTITUTIONS AND MARKETS

UNIT 1: BASICS OF INDIAN FINANCIAL SYSTEMS

Introduction:
The economic development of any Country depends upon the existence of a well-organized
financial system. When the system functions properly, it channelizes funds from savers 5to
investors. By increasing productivity, the financial system helps super economic growth and
raise the standard of living. The financial system is possibly the most important institutional and
functional vehicle for economic transformation. Finance is a bridge between the present and the
future and whether it is mobilization of savings or their efficient, effective and equitable
allocation for investment, it is the success with which the financial system performs its functions
that sets the pace for the achievement of broader national objectives.
Financial system is a concept derived from the wide concept of finance. The financial system is a
system that allows the transfer of money between savers and investors. It plays an important role
in global, national, regional, institutional and individual areas. This states the healthy and
soundness of financial status from global to individual.

Meaning:
The term financial system is a set of interrelated activities or services working together to
achieve some predetermined purpose or goal. It includes different markets, the institutions,
instruments, services and mechanisms which influence the generation of savings, capital
formation and growth.
In simple, financial system refers to all the securities, intermediaries and markets that exist to
make transfers from savers to borrowers possible.

Definitions:
1. In the words of Dr.S.Gurusamy, in his book Financial Services and Systems defined the
term financial system as “a set of complex and closely interconnected financial
institutions, markets, instruments, services, practices and transactions.”
2. Prof.S.B.Gupta defines the financial system as “a set of institutional arrangements
through which financial surpluses available in the economy are mobilized”.
3. Van Horne has defined the financial system as “the purpose of financial markets to
allocate savings efficiently in an economy to ultimate users withers for investment in real
assets or for consumption”.
4. According to Robinson, the primary function of the system is “to provide a link between
savings and investment for the creation of new wealth and permit portfolio adjustment in
the composition of the existing wealth”.
Features/Characteristics/Role of Financial System:
1. It plays a vital role in the economic development of a country.
2. It encourages both savings and investments.
3. It helps in lowering the transaction costs and increase returns. This will motivate people
to save more.
4. It links both savers and investors.
5. It helps in mobilizing and allocating the savings efficiently and effectively.
6. It plays a crucial role in economic development through saving-investment process. This
savings-investment process is called capital formation. So, financial system helps in
capital formation.
7. It helps in bringing investments.
8. It facilitates expansion of financial markets.
9. It helps in allocation of funds.
10. It is a set of inter-related activities or services.
11. It creates a bridge between investors and companies.
12. It helps in fiscal discipline and control of the economy.
13. It brings accountability for investors.
14. It helps to monitor corporate performance.
15. It provides a mechanism for managing uncertainty and controlling rish.
16. It helps in promoting the process of financial deepening and broadening. Financial
deepening means increasing financial assets as a percentage of GDP and financial
broadening means building an increasing number and variety of participants and
instruments.
17. It allows transfer of money between savers and borrowers.
18. It is applicable at global, regional and firm level.
19. It includes financial institutions, markets, instruments, services, practices and
transactions.
20. The main objective is to formulate capital, investment and profit generation.
Objectives of Financial System:
The primary objectives of a financial system are concerned to formulate capital, facilitate
investment and profit generation. These objectives are also the significance or importance of
financial system in an economy. The major and primary objectives of a financial system are as
follows:
1. To mobilize the Savings: The financial system begins its operations by the mobilizing of
savings from the small saving community. It collects the funds by offering different
schemes which attract the investors’ i.e., savers to fund their savings in different
institutions, services, securities etc.
2. To distribute the savings for the industrial investment: The purpose of mobilizing the
fund from the saving community is to invest them in different industries. Thereby it
meets the fund requirement of industrial sector. Hence it helps in the growth of industrial
sector.
3. To stimulate capital formation: The objective of supporting the industries is not ended
with sanctioning of fund to them. Further, it makes them to formulate the capital out of
their earnings for the further capital requirement and industrial investment.
4. To accelerate the pace of economic growth: The ultimate aim of the financial institutions
is to support the process of economic growth of a nation. Directing the saving fund to the
industrial capital need, motivating them for capital formation support the acceleration of
the process of economic growth.

Functions of Financial System:

The following are the functions performed by the financial system of a nation. These are
the aggregate functions performed by the sub classes of financial system viz. financial
markets, financial institutions and financial services.
1. Provision of Liquidity: The provision of liquidity is one of the primary functions of
financial system. It states the ability of meeting the obligations as and when they are
required. In other words, it states the ability of converting the assets into liquid cash
without any loss.
2. Mobilization of savings: Savings are done by millions of people. But amount saved
are of no use unless they are mobilized into financial assets, whether currency, bank
deposits, post office savings deposits, life insurance policies, mutual funds bonds or
equity shares. It is the function of financial institutions, a sub division of financial
system to mobilize the savings from the saver or investment group.
3. Small Savings to big investment: Financial system acts as an intermediary in
transforming the mobilized fund of savings to the big investments. It channelizes
small savings fund received from the savings group to the industries to investments.
4. Maturity Transformation function: It is also one of the intermediary functions of
financial system. The financial institutions receive the saving fund from the
depositors for a particular tenure and lend the same fund to the required people on
term basis.
5. Risk Transformation function: The financial system also does a function of risk
transformation. The small savers are usually risk averse, who doesn’t want to invest
their small saving fund in the risky ventures. Hence the financial institutions take the
responsibility of transforming their risk in investing their funds in profitable and safe
venture by bearing the risk.
6. Payment function: The financial system offers a very convenient mode of payment
for goods and services. The cheque system and credit card system are the easiest
methods of payment in the economy. The cost and time of transactions are
considerably reduced. The payment mechanism is now being increasingly made
through electronic means.
7. Poding of funds: A financial system provides a mechanism for pooling of funds to
invest in large scale enterprises.
8. Monitor Corporate performance: A financial system not only helps in selecting the
projects to be funded but also motivates the various stakeholders of the financial
system to monitor the performance of the investment.
9. Provide price related information: Financial markets provide information which
enables the investors to make an informed decision about whether to buy, sell or hold
a financial asset. This information dissemination facilitates valuation of financial
assets.
10. Information function: Financial markets disseminate information for enabling
participants to develop informed opinion about investment, disinvestment,
reinvestment or holding a particular asset.
11. Transfer function: A financial system provides a mechanism for the transfer of
resources across geographic boundaries.
12. Reformatory function: A financial system, undertakes the functions of developing,
introducing innovative financial assets/instruments. Services and practices and
restructuring the existing assets, services etc., to cater to the emerging needs of
borrowers and investors. I.e. financial engineering and reengineering.
13. Other functions: It assists in the selection of projects to be financed and also reviews
performance of such projects periodically. It also promotes the process of capital
formation by bringing together the supply of savings and the demand for investible
funds.
 Types of financial system:
The Indian financial system can be broadly classified into two types i.e.
 Formal (organized) financial system: This is also known as organized financial
system because it comes under the purview of Ministry of Finance (MOF),
Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), and
regulatory bodies. Formal financial system consists of four sub-systems. These
are:
o Financial Institutions.
o Financial Markets.
o Financial Instruments.
o Financial Services.
 Informal (unorganized) financial system: The informal financial system consists
of individual money lenders, groups of persons operating as associations,
partnership firms consisting of local brokers’ pawn brokers and non-banking
financial intermediaries such as finance, investment and chit fund companies.
These people have a system and they have their own rules on how they should
function in their day-to-day activities.
However, the formal financial system is always preferable because it is
systematic, transparent and offers numerous benefits.

Structure/classification/components/constituents of Indian Financial

System:
Financial structure refers to shape, components and their order in the financial system. The
formal Indian financial system consists of financial Institutions, financial market, financial
instruments and financial services.

There are four components of Indian financial system as shown in the chart. They
are:
 Financial Institutions.
 Financial Markets.
 Financial Instruments.

 Financial Services.

FINANCIAL INSTITUTIONS:
Meaning: Financial Institutions are business organizations serving as a link between savers
and investors and so help in the credit allocation process.
In simple, Financial Institutions are the institutions which offer financial services for its clients
or members. The most probable service is financial intermediation. The institutions include
banks, trust, companies, insurance companies and investment dealers.

Definition: Financial institution is defined as “an establishment that focuses on dealing with
financial transactions, such as investment, loans and deposits.”
In other words, the financial institution is an organization which may be either profit or
non-profit, that takes money from clients and places it in any of a variety of investment vehicles
for the benefit of both the client and the organization.

Salient feature of Financial Institutions:

An understanding of the above meaning and definition provides the following salient features of
financial institutions:
 It is an institution as well as intermediary.
 It channelizes savings fund into investment fund.
 It creates financial assets such as deposits, loans, securities etc.
 It includes banking and non-banking institutions.
 It includes both organized and unorganized institutions.
 Established with a clear operating function.
 Regulated by the government and regulating authority.
 It accepts deposits.
 It provides commercial loans, real estate loans and mortgage loans.
 Financial institutions keep money flowing through the economy among consumers,
businesses and government.

Classification of Financial Institutions:

The financial institutions are classified into term lending institutions, refinance institutions,
investment institutions and state level institutions. These are also to be classified into banking
and non-banking institutions.

Banking Institutions:
These are the type of financial institutions which involve in accepting public deposits and
lending the same to the needy customers. These are fundamentally established to earn profit,
 secondarily to safeguard the interest of the members. The banking institutions ensure that
deposits accumulated from people are productively utilized.
The following are the types of banking institutions which are running their business in India.
A) Commercial banks: These are also called as business banks. The following are the types
of commercial banks.
i. Public sector.
ii. Private sector.
iii. Regional Rural Banks (RRB`s)
iv. Foreign banks.
B) Cooperative Banks: These are established to safeguard the interest of its members. These
are organized on a co-operative basis, accept deposits and lend money to the required
members.

Non-banking Institutions:
These are the financial institutions that provide banking services without meeting the legal
definition of a bank. The non-banking financial institutions also mobilize financial resources
directly or indirectly from the people. They lend the financial resources mobilized.
The non-banking institutions are classified into organized and unorganized financial
institutions. The following are examples of non-banking institutions:
i. Provident and pension fund.
ii. Small Saving organization.
iii. Life Insurance Corporation (LIC).
iv. General Insurance Corporation (GIC).
v. Unit Trust of India (UTI).
vi. Mutual funds.
vii. Investment Trust, etc.
Non-banking financial institutions can also be categorized as investment companies housing
companies, leasing companies, hire purchase companies, specialized financial institutions
(EXIM Bank), Investment Institutions, State level institutions etc.

Importance of Financial Institutions:

Financial institutions are the key institutions which provide fund for economic activities. There
are many advantages for having sound and healthy financial institutions in a country. The
importance of FI is as follows:
 Provide funds: financial institutions provide funds for the investment and industrial
activities.
 Infrastructural facilities: financial institutions also offer basic infrastructural facilities
needed for the development and promotion of lucrative ventures. Infrastructural facilities
involve development of industrial estates tech parks, road and water etc.
 Promotional activities: promotional activities are undertaken by the financial institutions
to mobilize the funds, reduce the risk of selling financial securities, arrangement of
working and long term capital of the business.
 Development of backward areas: apart from the financial activities, financial
institutions also take some social responsibilities of developing the backward areas at free
of cost by offering credit facilities, free education, employment creation etc.
 Planned development: financial institutions initiate all planned developments in the
view of economic growth of the state. All planned developments are coordinated with the
government plan and social welfare.
 Accelerating industrialization: since the financial institutions are established to earn the
profit and safeguard interest of its members, they accelerate the industrialization to
contribute industrial growth. They support industries by granting finance, project
development and consultancy.
 Employment generation: channelizing the funds for investment, building of
infrastructural facilities, and acceleration of industries generates employment to the
educated and qualified people of the state.

Functions of Financial Institutions:

The functions of financial institutions are classified into primary functions and secondary
functions.

Primary functions: these are the basic functions of financial institutions which come in
the respective group of institutions like banks, co-operative societies, insurance industries
etc. the primary functions are as follows:
 Accepting deposits: most of the financial institutions viz, commercial banks,
cooperative societies etc., accept deposits from the public. They offer different
schemes to mobilize public deposits from the customers. For the accepted deposits,
financial institutions give return in the form of interest on deposit tenure basis.
 Providing commercial loans: accepted deposits are used for commercial lending
operations in the form of loans, advances, cash credits, bill discounting etc., these
fetch good return to the financial institutions.
  Providing Real estate loans: the financial institutions also provide loans and
advances for real estate industries to purchase sit, build premises, construction of
industrial and residential parks.
 Providing mortgage loans: the financial institutions also provide loans to the needy
group on mortgage of properties and collateral securities. For example, Gold loan,
property loan etc. where gold and properties are mortgaged to avail the loan.
 Issuing share certificates: financial institutions also undertake the job of issuing
share certificates of any established corporate to its share-holders. It also constitutes
accepting shares investment money from the investors and issuing them certificates
on behalf of the companies.

Secondary Functions: these are the additional functions performed by the financial
institutions along with the above primary functions. Secondary functions are as follow:
 Act as an intermediary: financial institutions act as an intermediary in between the
savings community and industrialist. They receive the public deposit at a lower rate of
interest and lend the same fund to the needy group at higher rate of interest. The
difference amount of interest is the profit for their intermediary work.
 Facilitate the flow of money: they also facilitate the flow/channelize the money to the
investment activities. Financial institutions are the interlinked path stones to make
smooth flow o fund from small savers to giant business ventures.

FINANCIAL MARKETS:
Financial markets are another component of financial system. Efficient financial markets are
essential for speedy economic development. The vibrant financial market enhances the efficiency
of capital formation. It facilitates the flow of savings into investment. Financial markets are the
backbone of the economy. This is because they provide monetary Support for the growth of the
economy.
Financial markets refer to any market place where buyers and sellers participate in trading of
assets such as shares, bonds, currencies, and other financial instruments.
A financial market may be further divided into capital market and money market. The capital
market deals in long term securities having maturity period of more than one year. The money
market deals with short term debt instruments having maturity period of less than one year.

Financial markets are the essential players in the economic development of a nation. They
function as facilitating originations in the savings-investment process and act as an effective part
of a financial system.
Financial markets facilitate easy and quick liquidity of funds. Due to advancement in internet
and technology, financial markets through demat/online accounts ensure speedy conversion of
assets (securities) in to cash and vice versa.

The individuals, financial institutions, corporations and government trade in this market either
directly or indirectly through brokers and dealers.

DEFINITIONS:
A) Financial market is defined as a market for the exchange of capital and credit, including
the money markets and the capital markets.

B) Financial market refers to a market place, where creation and trading of financial assets
such as shares, debentures, bonds, derivatives, currencies, etc. take place. It plays a
crucial role in allocating limited resources, in the country`s economy. It acts as an
intermediary between the savers and investors by mobilizing funds between them.

CLASSIFICATION OF FINANCIAL MARKETS:

The financial markets in India are classified into two broad categories, viz. unorganized markets
and organized markets.

 UNORGANIZED FINANCIAL MAREKTS: these are comprised with private money

lenders, pawn brokers, indigenous bankers, traders etc. they lend money to the public
from their own funds. The operations and activities of these people are not regulated by
the Reserve Bank of India or by any other controlling authority. But still the Reserve
Bank of India is trying to fold them to the class of organized financial markets through its
strategies.

 ORGANIZED FINANCIAL MARKETS: these are the markets strictly controlled and
regulated by Reserve Bank of India and other regulating authorities. They follow high
degree of institutionalization and instrumentalization. The organized financial markets
are further classified into capital market and money market.

CAPITAL MARKET: Capital market is one of the significant aspects of every

financial market. Broadly speaking the capital market is a market for financial assets which
have a long or indefinite maturity. The capital market instruments mature for the period
above one year. It is also called as long term securities market.

It is an institutional arrangement to borrow and lend money for a longer period of time. It
consists of financial institutions like IDBI, ICICI, UTI, LIC etc.

These institutions play the role of lenders in the capital market. Business units and corporates
are the borrowers in the capital market.
MONEY MARKET: money market is an organized financial market. It plays an
important role in the Indian financial system. Money market is a market where money or its
equivalent can be traded. It does not actually deal in cash or money. It actually deals with
near money substitutes like trade bills, promissory notes and government papers drawn for a
short period not exceeding one year. The very feature of these instruments is they can be
converted into cash readily without any loss and at low transaction cost.

This market consists of financial institutions and dealers in money or credit who wish to
generate liquidity. Hence, money market is a market where short term obligations such as
treasury bills, commercial papers and bankers acceptances are bought and sold.

FINANCIAL INSTRUMENTS/ASSETS:
In any financial transaction, these should be a creation or transfer of financial asset. Hence,
the basic product of any financial system is the financial asset. A financial asset is one which
is used for production or consumption or for further creation of assets.

One must know the distinction between financial assets and physical assets. Physical assets
are not useful for further production of goods or for earning incomes. For instance, if a
building is bought for residential purpose, it becomes a physical asset. If the same is bought
for hiring it becomes a financial asset.

Financial instruments are also called as financial assets/securities. Financial assets are the
intangible assets which receive value due to contractual transactions.

Financial assets/instruments indicate a claim on the settlement of principal or payment of a

regular amount of by means of interest or dividend. Equity shares, debentures, bonds etc., are
some examples.

Financial assets like deposits banks, companies and post offices, insurance policies, NSCS,
provident funds and pension funds are not tradable. Financial assets like equity shares and
debentures, or government securities and bonds are tradable.

The financial instruments that are used for raising capital through the capital market are
known as capital market instruments. These include equity shares, preference shares,
warrants, debentures and bonds. These securities have a maturity period of more than one
year.

The financial instruments that are used for raising and supplying money in a short period not
exceeding one year through money market are called money market instruments. Examples
are treasury bills, commercial paper, call money, short notice money, certificate of deposits,
commercial bills, money market mutual funds.
Hybrid instruments are those instruments which have both the features of equity and
debentures. Examples are convertible debentures, warrants etc.

DEFINITION: Financial assets are defined as “an asset that derives value because of
contractual claim.”

Financial assets represent claims for the payment of a sum of money sometime in the
future
(repayment of principal) and / or a payment in the form of interest or dividend.

CHARACTERISTICS OF FINANCIAL INSTRUMENTS: the

important characteristics of financial instruments are as follows:

 Liquidity: financial instruments provide liquidity. These can be easily and quickly
converted into cash.

 Marketing: financial instruments facilitate easy trading on the market. They have a
ready market.

 Collateral value: financial instruments can be pledged for getting loans.

 Transferability: financial instruments can be transferred from one person to another.

 Maturity period: the maturity period of financial instruments may be short term,
medium term or long term.

 Transaction cost: financial instruments involve buying and selling cost. The buying
and selling costs are called transaction costs.

 Risk: financial instruments carry risk. Equity based instruments are riskier in
comparison to debt based instruments because the payment of dividend is uncertain.
A company may not declare dividend in a particular year.

 Future trading: financial instruments facilitate future trading so as to cover risks

arising out of price fluctuations, interest rate fluctuations etc.

CLASSIFICATION OF FINANCIAL INSTRUMENTS:

Financial instruments are classified into term financial instruments and type financial
instruments.

Term financial instruments: these are the tradable financial assets and exchanged
on term basis. These are again classified into short term, medium term and long term
securities.
  Short term securities: this sub category comprises securities with maturity of
one year or less.

 Medium term securities: basis for classifying securities under this sub category
depends on practices applied in financial markets of the given Country. Normally,
this sub-category includes securities with maturity from 1 to 5 years.

 Long term securities: this sub-category comprises securities with maturity

longer than those of short and medium term securities.

Type based securities: under this classification financial securities are classified into
primary, secondary and innovative securities.

 Primary instruments/securities: primary securities are defined as a financial

instrument whose value is not derived from that of another instrument, but instead
is determined directly by the market.” These are issued by non-financial
institutions. The examples for the primary instruments are equity shares,
preference shares and debentures.

 Secondary instruments/securities: a primary security is an instrument issued

directly by the financial institutions to an investor. For example, when you are
investing in a mutual fund, you are investing in a secondary security. Some other
examples for primary securities are mutual fund, money market funds,
commercial paper, and certificate of deposits.

 Innovative instruments: these are the financial innovative instruments to suit the
need of co-operates and investors group. For example, Derivatives, securitized
assets, foreign currency mortgages and so on.

FINANCIAL SERVICES:
Financial service refers to services which are financial in nature offered by financial
industries to its customer. Its objective is to intermediate and facilitate financial
transactions of individuals and institutional investors.

In other words Financial Services are the products or services offered by institutions like
banks, credit card companies, insurance companies, stock brokerage companies etc.

Financial services are also called as financial intermediation. Financial intermediation is a

process of mobilization of surplus of people and allocation of mobilized fund to various
needy groups (industries, companies, business people, individuals etc.) for economic
development.
Financial Services is concerned with the design and delivery of financial instruments, advisory
services to individuals and businesses with in the area of banking and related institutions,
personal financial planning, leasing, investment, assets, insurance etc. these financial services are
essential for the creation of new business, expansion of existing industries and economic growth.

DEFINITION: “Financial Services can be defined as the products and services offered by
institutions like banks of various kinds for the facilitation of various financial transactions and
other related activities in the world of financial like loans, insurance, credit cards, investment
opportunities and money management as well as providing information on the stock market and
other issues like market trends.”

Financial services help with borrowing selling and purchasing securities, lending and investing,
making and allowing payments and settlements and taking care of risk exposures in financial
markets. These range from the leasing companies, mutual fund houses, merchant bankers,
portfolio managers, and bill discounting and acceptance houses. The financial services like credit
rating, venture capital financial, mutual funds, merchant banking, depository services, book
building etc.

Financial institutions and financial markets help in the working of the financial system by means
of financial instruments. To be able to carry out the jobs given, they need several services of
financial nature. Therefore, financial services are considered as one of the component of the
financial system.

IMPORTANT TYPES OF FINANCIAL SERVICES:

There are so many financial services that the financial market offers. The most important ones
are as follows:

BANKING SERVICES: the primary operations of banks include:

 Keeping money safe while allowing withdrawals when needed.

 Issuance of cheque books.

 Provide personal loans, commercial loans and mortgage loans.

 Issuance of credit cards and processing of credit card transactions and billing.

 Issuance of debit cards for use as a substitute for cheques.

 Allow financial transactions at branches or at Automatic Teller Machines (ATMs)

 Provide Electronic fund transfers between banks.

  Facilitation of standing orders and direct debits, so payments can be made
automatically.

 Provide overdraft agreements.

 Notary service for financial and other documents.

 Provide wealth management and tax planning services.

 Provide credit card machine services and networks for business entities.

Foreign Exchange Services: Foreign exchange services are provided by many banks
around the world. Foreign exchange services include:

 Currency Exchange: Clients can purchase and sell foreign currency bank notes.

 Wire Transfer: Clients can send funds to international banks abroad.

 Foreign Currency Banking: The transactions are done in foreign currency.

Investment Services:
 Asset Management: The term usually given to describe companies which run collective
investment funds.

 Hedge fund management: Hedge funds often employ the services “prime brokerage”
divisions at major investment banks to execute their trades.

 Custody Services: Custody services and securities processing is a kind of “back-office”

notes administration for financial services.

Insurance Services: It deals with the selling of insurance policies, brokerages, insurance
underwriting or the reinsurance.

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.

 Private Equity: Private equity funds are typically closed-end funds, which usually take
controlling equity stakes in business that are either private or taken private once acquired.
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; is an affluent individual who provides

capital for a business start-up, usually in exchange for convertible debt or ownership
equity. A small but increasing number of angel investors organize themselves into angel
groups or angel networks to share research and pool their investment capital.

CLASSIFICATION OF FINANCIAL SERVICES:

Financial Services are classified into Fund Based Services and Fee Based Services, which are as
follows:

Fund Based Services: Fund based or asset based financial services are those services
which are rendered for commission basis or for ascertain amount of interest.

 Leasing: it refers to a written agreement between lessor and lessee where lessor allows
lessee to use his property for specified period of time or rent is called lease.

 Factoring: factoring is a facility provided by factor (financial institution) to its clients

(company), whereas factor purchase debts and receivable accounts of the clients at
discount rates and offers immediate cash. This facility is called as factoring. It is also
called as account receivable finance.

 Bills Discounting: trading or selling bills to financial institution prior to its maturity
period for discount rate is called discounting bill of exchange. The rate of discount
depends on the time left before the bill mature and risk attached to it.

 Venture Capital: venture capital is a way of financial by investor to companies for its
start-up and to promote project. Investor joins entrepreneurs as co-promoter and share
risk and returns

 Loan: loan is an oral or written agreement between lender and borrower for temporary
transfer of property (cash) from lender to borrower where borrower promises to return the
same property for cash along with pre-determined interest as per the agreement.

 Housing Finance: housing finance is a finance facility provided by housing finance

company on acquisition or construction of houses, which includes acquisition or
development of land in connection therewith.

 Hire Purchase: hire purchase system is a method of selling goods on credit where
purchaser is allowed to purchase goods and allow him to pay the amount in installment
 basis and the title of the goods transferred from seller to buyer at the end of financial
installment.

Fee Based Services: fees based financial services are those which are paid for a flat fee
rather than commission. Those services are known as fees based services are as follows:

 Portfolio management: portfolio management is a method of managing and allocating

funds on various known as portfolio alternatives to reduce the uncertainty is known as
portfolio management.

 Loan Syndication: loan syndication is the process where large number of lenders
contributes amount and grant loans to company or any project and share risk and returns
of the same.

 Corporate Counseling: corporate counseling refers to a set of activities performed to

ensure the efficient running of a corporate enterprise and to improve the performance.

 Foreign Collaboration: foreign collaboration is an alliance in corporate to carry on

agreed task collectively with the participation of resident and non-resident entities.