1. Chapter 1 FINANCIAL SERVICES
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

2. Learning Goals: Provide an overview of the financial system
Explain the nature financial services offered.
Review the role of financial services in the economy
Capture the contemporary developments in the financial sector
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

3. Introduction Financial Services Industry :Largest in the world
Has undergone turbulent times in the recent years
Banking ,Financial Services ,and Insurance (BFSI) sectors play a greater role
Real sector needs the services of FS sector; contribution of services sector to the GDP of the country is high
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

4. Financial Services: Concept
Services: Hospitality, Tourism, Health Services, Education, BFSI
Financial services are intermediary services in the financial market place.
Financial services are provided by the banks and financial institutions in the financial system
Contd…
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

5. Financial Services: Concept
Project financing, bridge finance, portfolio management, wealth management, foreign exchange advisory, risk management are some of the services
Financial services in a financial supermarket
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

6. Nature of Financial services
Intangibility
Inseparability
Heterogeneity
Perishability
Advisory
Marketing of financial services
Techno savvy
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

7. Indian Financial System
Commercial Banks
Insurance companies
NBFCs
Mutual Funds
Housing Finance Companies
Financial Institutions
Regulators,FinancialMarkets,Financial Instruments.
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

8. Functions of the Financial System
Mobilising Savings
Storing wealth
Providing Liquidity
Payment and settlement mechanism
Credit provider
Risk management
Policy Implementation
Information provider
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

9. Growth of Financial Services: Key Factors
Financial Reforms
Opening up of Insurance sector
Growth of Capital market
Changes in the NBFC sector
Corporate Restructuring
Regulatory reforms
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

10. Trends in the Financial sector
Financial reforms
Financial crises
Financial engineering
Financial convergence
Financial Inclusion
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

11. INTERNATIONAL FINANCE WORKING CAPITAL FINANCE
Counselling for new projects
Project Appraisals
Structuring of issues
Portfolio Management
Trading in units. Bonds, Debentures etc.,
Mergers & Acquisitions
Drafting prospectus/Letter of Offer, Application Form, Memorandum etc.
Underwriting and Sub-Underwriting Arrangement
Arrangement of Bridge Finance
Marketing support
Private Placement
Strategic publicity
Loan syndication
Management of public/Right issues
Advisory services for joint ventures
Arrangements of foreign, technical and financial collaborations
Portfolio management services for NRIs
Assistance to exporters in market information, factoring and other forms of finance
Liaison with international institutions for capital market products
Loans for consumer Durables
Vehicle Finance
Equipment Finance for Professionals
Leasing
Sale & Lease-Back
Vendor Leasing
Hire-Purchase
Sales Aid Lease
Bill Discounting
Inter-Corporate Deposits
Short Term Loans
MERCHANT BANKING
INTERNATIONAL FINANCE
RETAIL FINANCE
EQUIPMENT FINANCE
WORKING CAPITAL FINANCE
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

12. Institutional Framework of Indian Financial System
BANKING SECTOR
Commercial Banks
Cooperative Banks
BROADER FINANCIAL SECTOR
Term Lending Institutions
Investment Institutions
State level Institutions
Other Institutions
NBFCs.
(Based on RBI Report on Currency &Finance)
Contd…
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

13. CAPITAL MARKETS Equity Mutual Funds
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

14. “Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

15. Trends Financial reforms Narasimham Committee
Banking, Financial Institutions,
Capital market,Money Market
As a result of the Committee’s recommendation: SEBI was made a statutory body and the SEBI Act was passed in The Capital Issues Control Act was repealed and a free pricing era started SEBI issued guidelines for each of the market intermediary and made the market micro structures ready for a more transparent and orderly growth of the market.
Contd…
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

16. Global Depository receipts (GDRs) were launched in 1992 and investment norms for NRIs and the Overseas Corporate Bodies were also prescribed.
Foreign Institutional Investors (FIIs) were permitted to invest in the Indian capital market.
Money Market Mutual Funds (MMMFs), new money market instruments like Commercial papers (CPs), 14 day T-Bills, repos were introduced.
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

17. Financial Engineering
Creative application of financial technologies to solve financial problems or to exploit financial opportunities / to add value
Introduction or design of new financial instruments or structured finance solutions
CDS, CDOs
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

18. FINANCIAL TURBULENCE IN 2007-2008
U.S. Sub prime crisis surfaces Mid 2007
Bear Stearns Collapses June 2007
JP Morgan buys Bear Stearns March 2008
Fannie Mae & Freddie Mac taken over by US Treasury September 6, 2008
Contd…
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

19. Bank of America (BoA) agrees to acquire Merill Lynch.
BoA refuses to buy Lehman Brothers September 15, 2008
Federal Reserve agrees to lend AIG $85 billion in return for control of the group September 16, 2008
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

20. Financial Convergence and Financial Inclusion
All under one roof model / financial super market model / one stop finance shoppe
Financial Inclusion
Ensuring access to financial services and timely and adequate credit to vulnerable sections of the society at affordable cost
credit to all ‘bankable’people; insurance to all ‘insurable’ people
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.

21. Contribution of Services Sector to the GDP
“Financial Services” by R Shanmugham
Copyright  2009 Wiley India Pvt. Ltd. All rights reserved.