Professional Documents
Culture Documents
EXECUTIVE SUMMARY
1
FINANCIAL MARKETS & SERVICES
INDEX
CHAPTER
NO. NAME OF THE TOPIC PAGE NO.
1 FINANCIAL MARKETS
2 MONEY MARKET
3 NEW ISSUE MARKET
4 SECURITIES & EXCHANGE BOARD OF INDIA
5 FINANCIAL SERVICES
6 MERCHANT BANKING
7 HIRE PURCHASE &LEASING
8 VENTURE CAPITAL
9 MUTUAL FUNDS
10 DISCOUNTING, FACTORING & FORFEITING
11 SECURITISATION OF DEBT
12 DERIVATIVES
13 CREDIT RATING
14 CREDIT CARDS
15 CASE STUDY OF IFCI
16 BIBLIOGRAPHY
CHAPTER NO. 1
FINANCIAL MARKETS
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FINANCIAL MARKETS & SERVICES
Organised Markets :-In the organised markets, there are standardised rules
and regulations governing their financial dealings. There is also a high degree
of institutionalisation and instrumentalisation. These markets are subject to
strict supervision and control by the RBI or other regulatory bodies.
These organised markets can be further classified into two. They are:
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FINANCIAL MARKETS & SERVICES
Capital Market
The capital market is a market for financial assets which have a long or
indefinite maturity. Generally, it deals with long term securities which have a
maturity period of above one year. Capital market may be further divided into
three namely:
(i) Industrial securities market
(ii) Government securities market and
(iii) Long term loans market
Primary Market
Primary market is a market for new issues or new financial claims.
Hence, it is also called New Issue market. The primary market deals with
those securities which are issued to the public for the first time. In the primary
market, borrowers exchange new financial securities for long term funds.
Thus, primary market facilitates capital formation.
There are three ways by which a company may raise capital in a primary
market. They are:
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FINANCIAL MARKETS & SERVICES
market by supplying long term loans to corporate customers. Long term loans
market may further be classified into:
I. Term loans market
II. Mortgages market
III. Financial guarantees market.
Term Loans Market
In India, many industrial financing institutions have been created by the
Government both at the national and regional levels to supply long term and
medium term loans to corporate customers directly as well as indirectly. These
development banks dominate the industrial finance in India. Institutions like
IDBt IFCt ICICI, and other state financial corporations crone under this
category. These institutions meet the growing and varied long-term financial
requirements of industries by supplying long-term loans. They also help in
identifying investment opportunities, encourage new entrepreneurs and support
modernisation efforts.
Mortgages Market
The mortgages market refers to those centers which supply mortgage
loan mainly to individual customers. A mortgage loan is a loan against the
security of immovable property like real estate. The transfer of interest in a
specific immovable property to secure a loan is called mortgage. This
mortgage may be equitable mortgage or legal one. Again it may be a first
charge or second charge. Equitable mortgage is created by a mere deposit of
title deeds to properties as security whereas in the case of a legal mortgage the
title in the property is legally transferred to the lender by the borrower. Legal
mortgage is less risky.
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FINANCIAL MARKETS & SERVICES
(i) The capital market serves as an important source for the productive use
of the economy's savings. It mobilises the savings of the people for further
investment and thus avoids their wastage in unproductive uses.
(ii) It provides incentives to saving and facilitates capital formation by
offering suitable rates of interest as the price of capital.
(iii) It provides an avenue for investors, particularly the household sector to
invest in financial assets which are more productive than physical assets.
CHAPTOR NO. 2
MONEY MARKET
Money market is a market for short-term loans or financial assets. It is a
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FINANCIAL MARKETS & SERVICES
market for the lending and borrowing of short term funds. As the name implies,
it does not actually deal in cash or money. But it actually deals with near
substitutes for money or near money like trade bills, promissory notes and
Government papers drawn for a short period not exceeding one year. These
short term instruments can be converted into cash readily without any loss and
at low transaction cost.
Money market is the centre for dealing mainly· in short-term money assets.
It meets the short-term requirements of borrowers and provides liquidity or cash
to lenders. It is the place where short-term surplus funds at the disposal of
financial institutions and individuals are borrowed by individuals, institutions
and also the Government.
Definition :
According to Geottery Crowther, “The money market is the collective
name given to the various firms and institutions that deal in the various grades
of near money.”
(iii) It deals with only those assets which can be converted into cash readily
without loss arid with minimum transaction cost.
(iv) Generally transactions take place through phone i.e., oral communication.
Relevant documents and written communications can be exchanged
subsequently. There is no formal place like stock exchange as in the case
of a capital market.
(v) Transactions have to be conducted without the help of brokers.
(vi) It is not a single homogeneous market. It comprises of several
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FINANCIAL MARKETS & SERVICES
(vii) The components of a money market are the Central Bank, Commercial
Banks, Non-banking financial companies, discount houses and
acceptance houses. Commercial banks generally play a dominant role in
this market.
Objectives
(iii) To enable the Central Bank to influence and regulate liquidity in the
economy through its intervention in this market.
(iv) To provide a reasonable access to users of short-term funds to meet
their requirements quickly, adequately and at reasonable costs.
The call money market refers to the market for extremely short period
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loans, say one day to fourteen days. These loans are repayable on demand at
the option of either the lender or the borrower. As stated earlier, these loans
are given to brokers and dealers in stock exchange. Similarly, banks with
'surplus funds' lend to other banks with 'deficit funds' in the call money
market. Thus, it provides an equilibrating mechanism for evening out short
term surpluses and deficits. Moreover, commercial banks can quickly borrow
from the call market to meet their statutory liquidity requirements. They can
also maximise their profits easily by investing their surplus funds in the call
market during the period when call rates are high and volatile.
Borrowers and lenders in a call market contact each other over telephone.
Hence, it is basically over-the-telephone market. After negotiations over the
phone, the borrowers and lenders arrive at a deal specifying the amount of
loan and the rate of interest. After the deal is over, the lender issues FBL
cheque in favour of the borrower. The borrower in turn issues call money
borrowing receipt. When the loan is repaid with interest, the lender returns the
duly discharged receipt.
Advantages :
In India, commercial banks play a dominant role in the call loan market.
They used to borrow and lend among themselves and such loans are called
inter-bank loans. They are very popular in India. So many advantages are
available to commercial banks. They are as follows :
i) High Liquidity
ii) High Profitability
iii) Maintenance of SLR
iv) Safe and Cheap
v) Assistance to Central Bank Operations.
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FINANCIAL MARKETS & SERVICES
Definition
Section 5 of the Negotiable Instruments Act defines a bill of exchange as
follows:
Types of Bills
Many types of bills are in circulation in a bill market. They can be broadly
classified as follows:
Demand and Usance Bills: Demand bills are otherwise called sight bills.
These bills are payable immediately as soon as they are presented to the
drawee. No time of payment is specified and hence they are payable at sight.
Usance bills are called time bills. These bills are payable immediately
after the expiry of time period mentioned in the bills. The period varies
according to the established trade custom or usage prevailing in the country.
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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. They may be drawn
upon a person resident in India also. Foreign bills have their origin outside
India. They also include bills drawn in India but made payable outside India.
Indigenous Bills
Indigenous bills are those drawn and accepted according to native
custom or usage of trade. These bills are popular among indigenous bankers
only. In India, they are called 'hundis'. The hundis are known by various
names such as 'Shahjog', 'Namjog', 'Jokhani', 'Termainjog', 'Darshani',
'Dhanijog' and so on.
If bills do not arise out of genuine trade transactions, they are called
accommodation bills. They are known as 'kite bills' or 'wind bills'. Two parties
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FINANCIAL MARKETS & SERVICES
draw bills on each other purely for the purpose of mutual financial
accommodation. These bills are discounted with bankers and the proceeds are
shared among themselves. On the due dates, they are paid.
From the operations point of view, the bill market can be classified into
two viz.
(i) Discount market
(ii) Acceptance market
Discount Market
Discount market refers to the market where short-term genuine trade bills
are discounted by financial intermediaries like commercial banks. When
credit sales are effected, the seller draws a bill on the buyer who accepts it
promising to pay the specified sum at the specified period. The seller has to
wait until the maturity of the bill for getting payment. But, the presence of a
bill market enables him to get payment immediately.
Acceptance Market
The 1952 Bill Market Scheme remained a partial success. It was criticised
that it did not develop a good bill market in India. The scheme appears to be a
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device for extending credit for banks during busy seasons. It is not based on
genuine trade bills but on the conversion of loans and advances by scheduled
banks into usance bills.
The Raheja Committee set in motion the introduction of a new bill market.
The report brought out the abuses of cash credit system and suggested the use
of bill financing and for the supervision of the end use of funds lent by
commercial banks.
(i) All eligible scheduled banks are eligible to offer bills of exchange for
rediscount.
(ii) The bills of exchange should be a genuine trade bill and should have
arisen out of the sale of goods. Accommodation bills are not eligible
for this purpose.
(iii) The bill should not have a maturity time of more than 120 days and
when it is offered to the Reserve Bank for rediscount its maturity
should not exceed 90 days.
(iv) The bill should have at least two good signatures, one of which should
be that of a licensed scheduled bank.
(v) The minimum amount of bill should be Rs. 5,000 and on one occasion,
the value of bill offered for rediscount should not be less than Rs.
50,000.
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FINANCIAL MARKETS & SERVICES
the bills. To avoid delays and reduce the work involved in physically
delivering and redelivering the bills to and from the bank, it was decided to
dispense with the actual lodgement of bills, each of the face value of Rs. 2
lakhs and below.
The minimum amount of a bill eligible for rediscount with the Bank was
reduced to Rs. 1,000. The facility which was available only in Mumbai,
Kolkata, Chennai and New Delhi, was extended to Kanpur and Bangalore.
In April, 1972, the bills drawn on and accepted by the Industrial Credit
and Investment Corporation of India Limited on behalf of the purchasers were
covered by the scheme provided they are presented to the Reserve Bank by an
eligible scheduled bank.
The Reserve Bank has been making constant efforts for the orderly
development of a bill market. However, it will take a long time to have a bill
market of the type found in advanced countries.
Just like commercial bills which represent commercial debt, treasury bills
represent short-term borrowings of the Government. Treasury bill market
refers to the market where treasury bills are bought and sold. Treasury bills are
very popular and enjoy a higher degree of liquidity since they are issued by the
Government.
Treasury bills are issued only by the RBI on behalf of the Government.
Treasury bills are issued for meeting temporary Government deficits. The
treasury bill rate or the rate of discount is fixed by the RBI from time-to -time.
It is the lowest one in the entire structure of interest rates in the country
because of short-term maturity and high degree of liquidity and security.
In India, there are two types of treasury bills viz., (i) ordinary or regular
and (ii) 'ad hoc' known as 'ad hoes'. Ordinary treasury bills are issued to the
public and other financial institutions for meeting the short-term financial
requirements of the Central Government. These bills are freely marketable and
they can be bought and sold at any time and they have secondary market also.
On the other hand 'ad hocs' are always issued in favour of the RBI only.
They are not sold through tender or auction. They are purchased by the RBI on
tap and the RBI is authorised to issue currency notes against them. They are
not marketable in India. However, the holders of these bills can always sell
them back to the RBI. Ad hocs serve the Government in the following ways:
(i) They replenish cash balances of the Central Government. Just like State
Governments get advance (ways and means advances) from the RBt the
Central Government can raise finance through these ad hocs.
(ii) They also provide an investment medium for investing the temporary
surpluses of State Governments, Semi-Government departments and
foreign central banks.
On the basis of periodicity, treasury bills may be classified into three.
They are:
(i) 91 days treasury bills,
(ii) 182 days treasury bills, and
(iii) 364 days treasury bills.
Ninety one days treasury bills are issued at a fixed discount rate of 4% as
well as through auctions. 364 days bills do not carry any fixed rate. The
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discount rate on these bills are quoted in auction by the participants and
accepted by the authorities. Such a rate is called cut off rate. In the same way,
the rate is fixed for 91 days treasury bills sold through auction. 91 days
Treasury bills (tap basis) can be rediscounted with the RBI at any time after 14
days of their purchase. Before 14 days a penal rate is charged.
CHAPTER NO. 3
NEW ISSUE MARKET
MEANING
The industrial securities market in India consists of New Issue Market and
Stock Exchange. The new issue market deals with the new securities which
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were not previously available to the investing public, i.e., the securities that are
offered to the investing public for the first time. The market, therefore, makes
available a new block of securities for public subscription. In otherwords, new
issue market deals with raising of fresh capital by companies either for cash or
for consideration other than cash.
The new issue market encompasses all institutions dealing in fresh claim.
These claims may be in the form of equity shares, preference shares,
debentures, rights issues, deposits etc. All financial institutions which
contribute, underwrite and directly subscribe to the securities are part of new
issue market.
1. Market where firms go to the public for the first time through initial public
offering (IPQ).
2. Market where firms which are already trading raise additional capital
through seasoned equity offering (SEa).
The main function of a new issue market can be divided into a triple
Service functions:
1. Origination
2. Underwriting
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3. Distribution
Origination
Origination refers to the work of investigation, analysis and processing
of new project proposals. Origination starts before an issue is actually floated
in the market. There are two aspects in this function:
(i) A careful study of the technical, economic and financial viability to
ensure soundness of the project. This is a preliminary investigation undertaken
by the sponsors of the issue.
(ii) Advisory services which improve the quality of capital issues and ensure
its success.
The advisory services include:
(a) Type of Issue. This refers to the kind of securities to be issued
whether equity share, preference share, debenture or convertible
debenture.
(b) Magnitude of issue
(c) Time of floating an issue
(d) Pricing of an issue - whether shares are to be issued at par or at
premium.
(e) Methods of issue
(f) Technique of selling the securities
The function of origination is done by merchant bankers who may be
commercial banks, all India financial institutions or private firms. Initially this
service was provided by specialised division of commercial banks. At present,
financial institutions and private firms also perform this service. Though this
service is highly important, the success of the issue depends, to a large extent,
on the efficiency of the market.
The origination itself does not guarantee the success of the issue.
Underwriting, a specialised service is required in this regard.
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The various methods which are used in the floatation of securities in the
new issue market are:
(i) Public issues
(ii) Offer for sale
(iii) Placement
(iv) Rights issues
Public Issues
Under this method, the issuing company directly offers to the general
public/institutions a fixed number of shares at a stated price through a
document called prospectus. This is the most common method followed by
joint stock companies to raise capital through the issue of securities. The
prospectus must state the following:
1. Name of the company
2. Address of the registered office of the company
3. Existing and proposed activities
4. Location of the industry
5. Names of Directors
6. Authorised and proposed issue capital to the public
7. Dates of opening and closing the subscription list
8. Minimum subscription
9. Names of brokers/underwriters/bankers/managers and registrars to the
issue.
10. A statement by the company that it will apply to stock exchange for
quotations of its shares.
According to the Companies Act, 1956 every application form must be
accompanied by a prospectus. Now, it is no longer necessary to furnish of the
prospectus along with every application form as per the Companies
Amendment Act, 1988. Now, an abridged prospectus, is being annexed to every
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Placement
Under this method, the Issue Houses or brokers buy the securities
outright with the intention of placing them with their clients afterwards. Here
the brokers act as almost wholesalers selling them in retail to the public. The
brokers would make profit in the process of reselling to the public. The Issue
Houses or brokers maintain their own list of clients and through customer
contact sell the securities. There is no need for a formal prospectus as well as
underwriting agreement.
Rights Issue
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FINANCIAL MARKETS & SERVICES
shares or debentures are offered to the existing share capital would depend
upon the requirement of capital. The rights themselves are transferable and
saleable in the market.
Advantages
3. It prevents the directors from issuing new shares in their own name or to
their relatives at a lower price and get controlling right.
CHAPTER NO.4
SECURITIES AND EXCHANGE BOARD OF INDIA(SEBI):
CHAPTER NO. 5
FINANCIAL SERVICES
Introduction
The Indian Financial services industry has undergone a metamorphosis
since 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
played a secondary role only. The economic liberalisation h a s brought in a
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FINANCIAL MARKETS & SERVICES
Prior to the economic liberalisation, the Indian financial service sector was
characterised by so many factors which retarded the growth of this sector.
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CHAPTOR NO. 7
HIRE PURCHASE & LEASING
Meaning :
Hire purchase is a method of selling goods. In a hire purchase transaction
the goods are let out on hire by a finance company (creditor) to 'If hire purchase
customer (hirer). The buyer is required to pay an agreed amount in periodical
installments during a given period. The ownership ~le property remains with
creditor and passes onto hirer on the payment of last installment.
FEATURES OF HIRE PURCHASE AGREEMENT
1. Under hire purchase system, the buyer takes possession of goods
immediately and agrees to pay the total hire purchase price in
installments.
2. Each installment is treated as hire charges.
3. The ownership of the goods passes from buyer to seller on the payment of
the installment.
4. In case the buyer makes any default in the payment of any installment the
seller has right to reposses the goods from the buyer and forfeit the
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follows:
1. First, the lessee has to decide the asset required and select supplier. He
has to decide about the design specifications, the price, warranties, terms of
delivery, servicing etc.
2. The lessee, then enters into a lease agreement with the lessor. The lease
agreement contains the terms and conditions of the lease such as,
(a) The basic lease period during which the lease is irrecoverable.
(b) The timing and amount of periodical rental payments during the lease
period.
(c) Details of any option to renew the lease or to purchase the asset at the
end of the period.
(d) Details regarding payment of cost of maintenance and repairs, taxes,
insurance and other expenses.
3. After the lease agreement is signed the lessor contacts the manufacturer
and requests him to supply the asset to the lessee. The lessor makes
payment to the manufacturer after the asset has been delivered & accepted by
the lessee.
CHAPTOR NO. 8
VENTURE CAPITAL
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6. Once the venture has reached the full potential the venture capitalist
disinvests his holdings either to the promoters or in the market. The
basic objective of investment is not profit but capital appreciation at the
time of disinvestment.
7. Venture capital is not just injection of money but also an input needed
to set-up the firm, design its marketing strategy organise and manage
it.
8. Investment is usually made in small and medium scale enterprises.
Disinvest Mechanism
The objective of venture capitalist s to sell of the investment mace him
at substantial capital gains. The disinvestment options available in
developed countries are:
(i) Promoter's buy back
(ii) Public issue
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(3) Fledging Stage - Additional Finance: In the third stage, the firm -.as
made some headway and entered the stage of manufacturing a product but
faces teething problems. It may not be able to generate adequate funds and so
additional round of financing is provided to develop the marketing
infrastructure.
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3. The investors do not have any means to ensure that the affairs of the
business are conducted prudently. The venture fund having
representatives on the Board of directors of the Company would
overcome it.
II. A dvantages to Promoters
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CHAPTER NO.9
MUTUAL FUNDS
INTRODUCTION
Of late, mutual funds have become a hot favourite of millions of people all
over the world. The driving force of mutual funds is the 'safety of principal'
guaranteed, plus the added advantage of capital appreciation together with the
income earned in the form of interest or dividend. People prefer Mutual Funds
to bank deposits, life insurance and even bonds because with a little money,
they can get into the investment game. One can own a string of blue chips like
ITC TISCO, Reliance etc., through mutual funds. Thus, mutual funds act as a
gateway to enter into big companies hitherto inaccessible to an ordinary
investor with his small investment
DEFINITION
1993 defines a mutual fund as "a fund established in the form of a trust by a
sponsor, to raise monies by the trustees through the sale of units to the public,
under one or more schemes, for investing in securities in accordance with
these regulations".
Thus, mutual funds are corporations which pool funds by selling their
own shares and reduce risk by diversification.
TYPES OF FUNDS/CLASSIFICATION OF FUNDS
Mutual fund schemes can broadly be classified into many types as given on
next page:
Under this scheme, the corpus of the fund and its duration are prefixed. In
other words, the corpus of the fund and the number of units are determined in
advance. Once the subscription reaches the pre-detennined levee the entry of
investors is closed. After the expiry of the fixed period, the entire corpus is
disinvested and the proceeds are distributed to the various unit holders in
proportion to their holding. Thus, the fund ceases to be a fund, after the final
distribution.
(B) Open-ended Funds
It is just the opposite of close-ended funds. Under this scheme, the size of
the fund and/ or the period of the fund is not pre-determined. The investors are
free to buy and sell any number of units at any point of time For instance, the
unit scheme (1964) of the Unit Trust of India is an open ended one, both in
terms of period and target amount. Anybody can buy this unit at any time and
sell it also at any time at his discretion.
(A) Income Funds: As the very name suggests, this Fund aims at generating
and distributing regular income to the members on a periodical basis. It
concentrates more on the distribution of regular income and it also sees that
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the average return is higher than that of the income from bank deposits.
(B) Pure Growth Funds (Growth Oriented Funds) : Unlike the Income
Funds, Growth Funds concentrate mainly on long run gains, i.e., capital
appreciation. They do not offer regular income and they aim at capital
appreciation in the long run. Hence, they have been described as "Nest Eggs"
investments.
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(F) Taxation Funds: A taxation fund is basically a growth oriented fund. But,
it offers tax rebates to the investors either in the domestic or foreign capital
market. It is suitable to salaried people who want to enjoy tax rebates
particularly during the month of February and March. An investor is entitled
to get 20% rebate in Income Tax for investments made under this fund subject
to a maximum investment of Rs. 10,000/- per annum. The Tax Saving
Magnum of SBI Capital Market Limited is the best example for the domestic
type. UTI's US $60 million India Fund, based in the USA, is an example for
the foreign type.
CHAPTOR NO.10
DISCOUNTING FACTORING AND FORFAITING
DISCOUNTING
Generally, a trade bill arises out of a genuine credit trade transaction. The
supplier of goods draws a bill on the purchaser for the invoice price of the goods
sold on credit. It is drawn for a short period of 3 to 6 months and in some cases
for 9 months. The buyer of goods accepts the same and binds himself liable to
pay the amount on the due date. In such a case, the supplier of goods has to wait
for the expiry of the bill to get back the cost of the goods sold. It involves
locking up of his working capital which is very much needed for the smooth
running of the business or for carrying on the normal production process. It is
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It is for these reasons, the Reserve Bank of India has been trying its best to
develop a good bill market in India. The Reserve Bank of India introduced a
Bill Market Scheme as early as 1952 itself and thereafter, with some
modifications. It has lowered the effective rate of interest on bill finance by 1
% below the cash credit rate. Despite many efforts of the Reserve Bank of
India to promote and develop a good bill market, bill financing forms barely
5% of the total credit extended by banks. The latest step of the Reserve Bank
of India to promote the bill market is the launching of the factoring service
organisations.
FACTORING
MEANING
The word 'Factor' has been derived from the Latin word'Facere' which
means 'to make or to do'. In other words, it means 'to get things done'.
According to the Webster Dictionary 'Factor' is an agent, as a banking or
insurance company, engaged in financing the operations of certain companies
or in financing wholesale or retail trade sales, through the purchase of account
receivables. As the dictionary rightly points out, factoring is nothing but
financing through purchase of account receivables.
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DEFINITION
TYPES Of FACTORING
The type of factoring services varies on the basis of the nature of
transactions between the client and the factor, the nature and volume of client's
business, the nature of factor's security etc. In general, the factoring services
can be classified as follows :
(i) Full service factoring or without recourse factoring
(ii) With Recourse Factoring
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FORFAITING
Forfeiting is another source of financing against receivables like
factoring. This technique is mostly employed to help an exporter for
financing goods exported on a medium term deferred basis.
The term 'a forfait' is a French word denoting 'to give something 'give up
one's rights' or 'relinquish rights to something'. In fact, under forfaiting
scheme, the exporter gives up his right to receive payments in future under
an export bill for immediate cash payments by the forfaitor. This right to
receive payment on the due date passes on to the forfaitor since, the exporter
has already surrendered his right to the forfaitor. Thus the exporter is able to
get 100% of the amount of the bill minus discount charges immediately and
get the benefits of cash sale. Thus, it is a unique medium which can convert
a credit sale into a cash sale for an exporter. The entire responsibility of
recovering the amount from the importer rests with the forfaitor. Forfeiting
is done without any recourse to the exporter, i.e. in case the importer makes
a default, the forfaitor cannot go back to the exporter for the recovery of the
money.
Definition
Forfeiting has been defined as “the non – resource purchase by a bank
or any other financial institution, of receivables arising from an export of
goods and services.”
Benefits of Forfeiting :
i) Profitable and Liquid
ii) Simple and Flexible
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CHAPTOR NO. 11
SECURITISATION OF DEBT
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ongoing process in the sense that assets are converted into securities,
securities into cash, cash into assets into securities and so on. 1
"A carefully structured process whereby loans and other receivable are
packaged, underwritten and sold in the form of asset backed securities.”
Yet another simple definition is as follows:
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CHAPTOR NO.12
DERIVATIVES
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CHAPTOR NO. 13
CREDIT RATING
MEANING :-To understand the meaning of credit rating, let us look at some
definitions offered by well known rating agencies.
Moodys' : "Ratings are designed exclusively for the purpose of grading bonds
according to their investment qualities".
Australian Ratings: "A Corporate Credit rating provides lenders with a simple
system of gradation by which the relative capacities of companies to make timely
repayment of interest and principal on a particular type of debt can be Iloted" .
Superior Information
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d. Investors Protection
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CHAPTER NO. 14
CREDIT CARD
1) Credit Card
2) Charge Card
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3) In - Store Card
2. Business Cards
3. Smart Cards
4. Debit Cards
5. ATM Card
6. Virtual Card
There are three parties to a credit card - the card holder - the issuer and
the member establishments.
1. Issuer: The banks or other card issuing organisations.
credit card issuer who accept credit cards. The member establishments
may be a business enterprise dealing in goods and services such as
retail outlets, departmental stores, restaurants, hotels, hospitals, travel
agencies, petrol bunks, etc.
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CHAPTER NO. 15
CASE STUDY ON IFCI
The Industrial Finance Corporation of India (IFCI) was established on 1st July,
1948 under Industrial Finance Corporation Act, 1948 as the first development
financial institution in the country to make the medium & long term finance more
readily available to industrial concerns in India. IFCI is the first financial institution
to be converted into a public limited company.
“CORPORATE CREDO”
Being a leader in the Indian Financial Sector, consistent with its role as
a Development Finance Institution, providing total solutions at competitive cost, with
Core strengths in long term lending and related advisory activities by :
Developing long term relationship with creditworthy corporate and institutional
client.
Entering other business to capitalize on emerging opportunities.
Increasing operational flexibility.
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CONCLUSION :
IFCI has cumulative sanctioned Rs. 47,425 crore and disbursed
Rs. 35,514 crore till end March, 1999, with Outstandings at Rs. 22,532
crore. The share of non- performing assets stood higher at 21 per cent.
As a result, IFCI’s return on average networth stood at 1.5 per cent in
1998-99, as compared to 25.6 per cent in 1995-96. Necessitated by increasing
completion, IFCI envisages a gradual shift towards operating as a universal
bank with a major focus on corporate banking, emphasizing on a few select
and sunrise industries having strong potential for growth.
BIBLIOGRAPHY
BOOKS
• INDIAN FINANCIAL SYSTEM & DEVELOPMENT
By VASANT DESAI
• INDIAN FINANCIAL SYSTEM
By ADITI A. ABHYANKAR
• INDIAN BANKING & FINANCIAL SYSTEM
By B.P. GUPTA
• MANAGEMENT OF FINANCIAL SERVICES
By B.S. BHATIA & G.S.BATRA
WEBSITES
• www.yahoo.com
• www.ibm.com
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• www.target.com
• www.vfmarkets.com
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