FINANCIAL SERVICES

MEANING OF FINANCIAL
SERVICES
All types of financial activities are
considered financial services
Mobilizing of and allocating savings into
investible channels
Transformation of savings into investment.
Very important for industrial developments
Funds mobilized from savers used by
corporate customers
Financial service = Financial intermediation

Different service providers

1.
2.
3.
4.
5.

Financial service providers are only

intermediary.
Financial institutions
Commercial banks
Merchant or investment bank
Brokerage house
Advisors

Classification of financial services

Financial intermediaries
Capital market intermediaries Lending institutions , Investing intuitions
Long term funds

Money market intermediaries

Commercial banks, Co-operative banks

short term funds

Non-Banking financial institutions

Specialized financial services to industry, society, traders
Housing finance
Leasing : An attractive source of long-term finance
Mutual fund helps investment in primary, secondary and
debt market.
Venture capital
Depositories = bank for securities, electronic data form.
Factoring : purchase of book debts of clients
Fortfaiting : exporter surrenders export receivables to
forfaiting agency. French word meaning surrender of
rights.

Scope of Financial Services

Traditional activities
Financial intermediaries rendering services of
capital and money market activities
1. Fund based and
2. Non fund based activities
Modern Activities
Financial intermediaries rendering various
activities

Fund based activities

Dealing in foreign exchange markets
Dealing in primary market, investment in
shares, bonds, debentures etc
Dealing in secondary market activities
Participating in money market instruments
like commercial paper, certificate of
deposits , treasury bills, discounting of bills
Dealing in equipment leasing, hire
purchase, venture capital, seed capital

Non Fund based activities

Arranging funds for clients project cost or for
working capital.
placement of capital and debt instruments with
investment institutions
Managing capital issues ( post and pre issues)
Assistance in getting government and other
clearances

Modern Activities
Managing portfolio of large public sector companies
Planning for mergers and acquisitions smoothly
Project advisory service - starting the project, preparing
reports, raising funds, getting government approval
Capital restructuring for corporate customers
Restructuring management structure and management
style to achieve better results
Undertaking services : clearing services, registration and
transfers, safe-custody of securities, collection of income
on securities
Undertaking risk management services , insurance
services, buy back options etc.

Factors affecting financial services

Gender issues
Age factor
Legal identity
Limited literacy
Place of living
Social and cultural barriers
Level of income
Types of occupation
Cumbersome procedures
Wrongful assessment
Lack of opportunities
Attractiveness of the product
Bias of financial institutions
Employment barriers
Owning assets

Financial Intermediaries
Institution, collects savings and uses the
funds to purchase ownership and debt
claims.
Higher degree of Safety and liquidity
Basic function is to satisfy the portfolio of
lenders and borrowers
Allocating scarce savings among most
productive investment

Categories of Financial
Intermediaries
Banking ( central bank, commercial banks, cooperative banks, savings bank)
Depository organisation ( mutual funds, credit
unions
Insurance organisation ( Life insurance, general
insurance, postal insurance, pension funds,
provident funds
Development banks
Non banking finace companies
Financial markets
Other financial intermediaries