Cover
Half-title Page
Title Page
Copyright Page
Contents
Preface
Chapter 1. Financial Services – An Overview
Financial Services—Concept
Financial Services—Objectives/Functions
Financial Services—Characteristics
Financial Services Market—Concept
Financial Services Market—Constituents
Growth of Financial Services in India
Merchant Banking Era
Investment Companies Era
Modern Services Era
Depository Era
Legislative Era
Foreign Institutional Investors (FIIs) Era
Financial Services Sector—Problems
Review Questions
Chapter 2. Financial Services Environment
The Forces
Employment and Unemployment
Inflation and Deflation
Trade Cycles
Stagflation
Economic Growth
Exchange Rate and Balance of Payments
Deregulatory Measures
Technological Changes
Enhanced Competition
Global Portfolio Preferences
Players in Financial Markets
Households
Business Firms
Financial Firms
Governments
External Agencies
Interest Rate Determination
Meaning
Features
Determining the Rate of Interest
Macroeconomic Aggregates in India
Real Sector Policies
Fiscal Policies
Agriculture Policy
Policy on Manufacturing, Infrastructure and Services
Trade Policies
Export and Import (EXIM) Policy
Policies for External Capital Flows
Fiscal Policy
Tax Measures
Structural Reforms
Goods and Services Tax (GST)
Demonetization
Review Questions
Chapter 3. Merchant Banking
Definition
Merchant Bankers
Functions
Corporate Counselling
Project Counselling
Pre-investment Studies
Capital Restructuring Services
Credit Syndication
Issue Management and Underwriting
Portfolio Management
Working Capital Finance
Acceptance Credit and Bill Discounting
Mergers and Acquisition
Venture Financing
Lease Financing
Foreign Currency Financing
Brokering Fixed Deposits
Mutual Funds
Relief to Sick Industries
Project Appraisal
Merchant Bankers’ Code of Conduct
SEBI Guidelines
Operational Guidelines
Review Questions
Chapter 4. Public Issue Management
Meaning
Functions
Categories of Securities Issue
Public Issue of Securities
Rights Issue
Private Placement
Mechanics of Public Issue Management
Issue Manager
Requirements
Categories of Issue Managers
Role of Issue Manager
Activities Involved in Public Issue Management
Pre Issue Activities
Post Issue Activities
Marketing of Issue
Need
Steps
Public Issue Proposal — Factors
Pricing of Issues
CCI Model
Safety Net Scheme
Law Relating to Issue Management
SEBI Rules and Regulations
Review Questions
Chapter 5. New Issues Market (NIM)
NIM and Secondary Markets—An Interface
Services of NIM
Transfer Function
NIM Vs Secondary Market
Methods of Marketing Securities
Pure Prospectus Method
Offer for Sale Method
Private Placement Method
Initial Public Offer (IPO) Method
Rights Issue Method
Bonus Issue Method
SEBI Guidelines
Rights Issue Vs Bonus Issue
Book-building Method
Advantages of Book-Building
Stock Option or Employees Stock Option Scheme (ESOP)
Bought-Out Deals
Bought-Out Deals Vs Private Placements
Review Questions
Chapter 6. Underwriting of Securities
Meaning
Types
Firm Underwriting
Sub-Underwriting
Joint Underwriting
Syndicate Underwriting
Underwriter
Underwriting Agreement
Benefits/Functions
Mechanics of Underwriting
Indian Scenario
Underwriting Agencies
Private Agencies
Investment Companies
Commercial Banks
Development Finance Institutions (DFIs)
Obstacles
SEBI Guidelines
Variants of Underwriting
Offer for Sale
Bought-Out Deals (BODs)
Private Placement
Grey Market
Review Questions
Chapter 7. Capital Market
Meaning
Money Market
Characteristics
Functions
Allocation Function
Liquidity Function
Other Functions
Indian Capital Market — Evolution and Growth
Infrastructure Stage
New Issues Stage
The SEBI Stage
Structural Transformation
Constituents of Indian Capital Market
Gilt-Edged Market
Industrial Securities Market
Primary Market
Modes of Raising Capital
Secondary Market
New Financial Institutions
Venture Fund Institutions
Mutual Funds
Factoring Institutions
Credit Rating Institutions
Over-The-Counter Exchange of India (OTCEI)
National Stock Exchange of India Limited (NSEI)
National Clearance and Depository System (NCDS)
National Securities Depositories Limited (NSDL)
Stock Holding Corporation of India Limited (SHCIL)
New Financial Instruments
Commercial Paper (CP)
Certificate of Deposit (CD)
Secured Premium Notes (SPN) with Attached Warrant
Non-Convertible Debenture (NCD) with Detachable Equity Warrants
Zero Coupon Bonds
Zero Interest Fully Convertible Debentures (FCD)
Deep Discount Bonds
Stock Invest
Equity Shares with Detachable Warrants
Equipref Shares
Preference Shares with Warrants Attached
Euro Issues
Non-Voting Right Shares
Other Innovative Instruments
Measures of Investor Protection
SCRA
Review Questions
Chapter 8. Stock Exchange
History of Stock Exchanges
Meaning
Definition
Functions/Services/Features/Role
Stock Exchange and Commodity Exchange Distinguished
Stock Exchange Traders
Remisiers
Authorized Clerks
Brokers and Jobbers
Tarawaniwalas
Dealers
Weaknesses
Regulation of Stock Exchanges
Regulatory Structure
Steps in Stock Trading
Mechanics of Settlement
Types
Counter Party Default
Settlement Guarantee Mechanism
Depository
Need
Stock Trading System
Auction Trading System
Dealer Trading System
Hybrid Trading
Margin Trading
Specialists
Functions of Specialists
Market-Makers
Broker-Dealer
Recent Developments
Over-The-Counter Market System
National Stock Market System (NSMS)
National Stock Exchange (NSE)
Stock Holding Corporation of India Limited (SHCIL)
National Clearance and Depository System (NCDS)
Securities Trading Corporation of India (STCI)
Corporatization and Demutualization
Review Questions
Chapter 9. SEBI - Function and Working
Genesis
Features of the SEBI Bill
Objectives
Management
Powers and Functions
Under the SEBI Act
Under the SCRA
Registration of Intermediaries
Directions from Government
Power to Make Rules
Power to Make Regulations
Power to Adjudicate
Regulatory Role
Role and Relevance
Credible Regulatory Structure
Market Surveillance
Disclosure Standards
Best Governing Practices
Building Investor Confidence
Global Outlook
Review Questions
Chapter 10. Leasing
Meaning
Characteristics of Lease
Types of Lease
Financial Lease
Operating Lease
Cross-border Leasing
Japanese Cross-border Leasing
International Leasing
Financial Lease Vs Operating Lease
Test for Financial Lease
Myths About Leasing
Participants
Lessors
Lessees
Lease Brokers
Lease Financiers
Leasing Process
Services of Lessor
Comprehensive Package
Advantages of Leasing
Advantages to Lessor
Advantages to Lessee
Limitations of Lease Financing
Review Questions
Chapter 11. Accounting for Lease
Meaning of Lease
Financial Lease
Operating Lease
Accounting and Reporting for Financial Lease – Books of the Lessor
Adjustment in Balance Sheet
Important Computations
Accounting and Reporting for Financial Lease – Books of the Lessee
Accounting and Reporting for Operating Lease – Books of the Lessor
Implicit Rate of Interest
Review Questions
Chapter 12. Hire Purchase
Meaning
Rights of Hirer
Right of Protection
Right of Notice
Right of Repossession
Right of Statement
Right to Excess Amount
Rate of Interest
Add-on Rate of Interest
Flat Rate of Interest
Effective Rate of Interest
Lease Financing Vs Hire Purchase Financing
Accounting for Hire purchase
Methods of Interest Calculation
Effective Rate of Interest (ERI)
Sum-of-Years Digits Method
Straight-Line Method
Method of Reporting
Disclosure in Hirer Books
Disclosure in Hire Vendor Books
Lease Vs Hire Purchase Evaluation
Solution
Review Questions
Chapter 13. Factoring and Forfaiting
Meaning
Definition
Mechanism
Characteristics
Factoring and Off-balance Sheet Financing
Types of Factoring
Domestic Factoring
Export Factoring
Cross-border Factoring
Modus Operandi
Full-Service Factoring
With Recourse Factoring
Without Recourse Factoring
Advance and Maturity Factoring
Bank Participation Factoring
Collection/Maturing Factoring
Advantages of Factoring
Disadvantages of Factoring
Factoring—Players
The Buyer
The Seller
The Factor
Functions of a Factor
Sales Ledger Administration
Provision of Collection Facility
Financing Trade Debts
Credit Control and Protection
Advisory Services
Factoring Cost
Commission
Interest Charges
Line of Credit—Methods
Objective Method
Subjective Method
Factoring Vs Bills Discounting
RBI Guidelines for Factoring
Prior Approval
Subsidiaries
Exclusive Business
Investment Limit
RBI Clearance
Reporting
Factoring—Indian Scenario
Operational Profile of Indian Factoring
Domestic Factoring
Export Factoring
Operational Problems in Indian Factoring
Forfaiting
Definition
Characteristics
Modus Operandi
Advantages of Forfaiting
Factoring Vs Forfaiting
Forfaiting – Indian Scenario
Review Questions
Chapter 14. Consumer Finance
Meaning
Types
Mechanics of Consumer Financing
Sources of Consumer Finance
Traders
Commercial Banks
Credit Card Institutions
Non-Banking Finance Companies (NBFCs)
Credit Unions
Middlemen
Other Sources
Modes of Consumer Finance
Demand for Consumer Finance—Factors
Consumer Financing—Practice in India
Products Covered
Terms of Finance
Pricing of Consumer Finance
Marketing Consumer Finance
Consumer Finance Insurance
Consumer Credit Scoring
Dunham Greenberg Formula
Specific Fixed Formula
Machinery Risk Formula
Case for Consumer Finance
Case against Consumer Finance
Boom in Consumer Financing
Hire Purchase System (HPS)
Definition
Characteristics
Hire Purchase Agreement
Advantages of Hire Purchase System
Disadvantages of Hire Purchase System
Hire Purchase Cost
Eligibility
Instalment Credit System (ICS)
Definition
Features
Hire Purchase System Vs Instalment Credit System
Review Questions
Chapter 15. Venture Capital
Meaning
Definition
Rationale
Features
Methods of Evaluation
Conventional Method
First Chicago Method
Revenue Multiplier Method
Origin and Growth of Venture Capital
USA
UK
Europe
Japan and Asia
Taiwan
Israel
India
Venture Capital and Other Funds
Venture Capital and Development Capital
Venture Capital, Seed Capital and Risk Capital
Venture Capital and National Equity Fund for Small Entrepreneur
Stages of Venture Capital Financing
Seed Capital
Start-up Financing
Early-stage Financing
Follow-on Financing
Expansion Financing
Replacement Financing
Turnaround Financing
Management Buy-Outs (MBOs)
Management Buy-Ins
Mezzanine Finance
Analyzing Venture Capital Proposals—Criteria
Fundamental Analysis
Financial Analysis
Portfolio Analysis
Divestment Analysis
Buy-Outs
Advantages
Precautions
Types
Management Buy-Outs
Shareholder Buy-Outs
Receivership Buy-Outs
Financial Sources
Investment Nurturing
Definition
Objectives
Elements
Styles of Venture Financing
Hands-on Nurturing
Hands-off Nurturing
Hands-Holding Nurturing
Nurturing Methods
Personal Discussions
Plant Visits
Feedback
Periodic Reports
Commissioned Studies
Compensation
Forms of Organization
Limited Partnership
Investment Company
Investment Trust
Offshore Investment Company
Offshore Unit Trust
Small Business Investment Company
Exit Mechanism
Methods of Exit
Review Questions
Chapter 16. Mutual Funds
Definition
Features/Role/Benefits
Products/Schemes
Operational Classification
Return-Based Classification
Investment-Based Classification
Mechanics of Mutual Fund Operations
Mutual Funds in India
Managing Mutual Funds in India
The Sponsor
The Trustees
The Custodians
Asset Management Company (AMC)
SEBI requirements of AMC
Track Record
Reputation
Expertise
Operational Autonomy
Contribution
Functions of AMC
Registrars and Transfer Agents
Fund Accountants
Lead Managers
Investment Advisors
Legal Advisors
Auditors
Underwriters
Working Mechanism of AMC
Creating Fund Manager
Research and Planning
Creating Dealers
Portfolio Management Process in Mutual Funds
Setting Investment Goal
Identifying Specific Securities
Portfolio Designing
Portfolio Revision
Operational Efficiency of Mutual Funds
Net Return
Net Asset Value (NAV)
Load
Disclosures
Voting Right to Investors
Investors’ Protection
Evaluating Mutual Funds
Treynor Model
Sharpe Model
Mutual Fund Holders’ Account
Regular Account
Accumulation Account
Withdrawal Account
Causes for Poor Performance of Mutual Funds
Review Questions
Chapter 17. Credit Rating
Impetus
Origin
Definition
Features
Advantages
To Investors
To Issuers
To Intermediaries
To Regulators
Credit Rating System—Growth Factors
Credibility and Independence
Capital Market Mechanism
Disclosure Requirements
Credit Education
Creation of Debt Market
Global Credit Rating Agencies
Moody’s Investors Service (Moody’s)
Standard and Poor’s Corporation (S&P)
Duff and Phelps Credit Rating Co (DCR)
Japan Credit Rating Agency (JCR)
IBCA Limited
Thomson Bank Watch
Domestic Credit Rating Agencies
CRISIL
ICRA
CARE
Credit Rating Symbols
CRISIL (Credit Rating and Information Services of India Limited)
CRISIL Fixed Deposit Rating Symbols
CRISIL Ratings for Short-Term Instruments
Credit Rating Process
Rating Framework—Major Factors
Business Factors
Financial Factors
Equity Grading
The Need
Equity Grading by ICRA—Methodology
Equity Grading Process by ICRA
Credit Rating—Drawbacks
Review Questions
Chapter 18. Insurance - An Overview
Definition
Basic Principles of Insurance
Reinsurance
Life Insurance
Meaning
Policies
General Insurance
Meaning
Types
Fire Insurance
Marine Insurance
Policies
Other Insurances
Liability Insurance
Concept of Insurance Services
Health Insurance
Meaning
Health Insurance Policy
Health Insurance Plan
Employer Sponsored Plans
Government Sponsored Plans
Need for Health Insurance
Motor Insurance
Meaning
Nature
Property Accident Aspect
Personal Accident Aspect
Rural Insurance
Meaning
Potential
Delivery Channels
Annuity
Definition
Features
Types
Fixed Annuity
Types of Fixed Annuity
Variable Annuity
Equity-Indexed Annuity
Review Questions
Chapter 19. Insurance - Regulatory Framework
The Insurance Act
Insurance Regulatory and Development Authority of India (IRDAI )
Composition
Duties
Powers and Functions
Constitution
Composition of Authority
Tenure of Office
Administrative Powers
Meeting of Authority
Grants by Central Government
The Fund
Accounts and Audit
Powers of Central Government
Superceding Powers
Insurance Advisory Committee
Power to Make Regulations
Major Amendments to Insurance Act
The First Schedule
Capital Requirements
Divesting Excess Shareholding
Conditions of Investment
Rural or Social Sector
Investigation and Inspection
Insurance Agents, Intermediaries and Surveyors
Insurance Agents
Issue of Licence to Intermediary
Surveyors
Review questions
Chapter 20. Pension Plan
Concept of Pension
Meaning
Definition
Pension Fund
Pension System
Meaning
Types
Objectives/Features of Pension Fund
Insurance Against Infirmness
Socio-economic Justification
Employee’s Right
Balance of Interest
Types of Pension Fund
Based on Generic
Features/Benefits
Limitations
Features/Benefits
Drawbacks
Defined Benefit Plan Vs Defined Contribution Plan
Based on Funding Nature
Based on Sponsors
Private Pension Fund
Public Pension Fund
Taft Hartley Pension Plan
Individual Pension Plan
Other Categories
Voluntary Pension Fund
Mandatory Pension Fund
Income Smoothing Pension Fund
Redistributive Pension Fund
Insured Pension Fund
Non-Insured Pension Fund
Qualified Pension Fund
Hybrid Pension Fund
Cash Balance Pension Fund
Features
Functions/Benefits of Pension Fund
Peaceful Retired Living
Income Opportunity
Cushion Against Volatile Income
Fair Determination of Income
Low Risk Option
Professional Management
Tax Advantage
Planned Retirement
Voluntary Offer
Confidence
Regular Income
Less Risk
Protection Against Longevity Risk
Financial ‘Myopia’
Poverty Alleviation
Social Solidarity
Pension Fund-Growth Factors
Growth in Income
Longer Life Expectancy
Tax Advantage
Pension Fund Vs Mutual Fund
Chilean Model
Pension Investment Policy
Investment Factors
Investment Constraints
Investment Pattern
Pension Structure
Pillar I
Pillar II
Pillar III
Multi-Pillar System
Pension Risks
Social Security
Models
Theories
Pension Financing
Financing Mode
Actuarial Valuations
Projecting Pensions
Present Value Technique
Review Questions
Chapter 21. Non-Banking Financial Companies (NBFCs)
Meaning
Nbfc Entities
Registration
Principle Business of Nbfc s
NBFCs Registered with RBI
NBFCs not Registered with RBI
Structure of Nbfcs
Supervision of Nbfcs
ALM System for NBFCs
Regulatory Framework – As Regards NBFCs
The Need
Banks & NBFCs – A Regulatory Interface
Regulations Governing NBFCs
RBI Measures on NBFCs
Depositor Protection
Web Project
Entry into Insurance Business
Rationalization of Returns
Focus on Large NBFCs
Residuary Non-Banking Companies (RNBCs)
Review Questions
Chapter 22. Securitization and SARFAESI Act, 2002
Securitization
Meaning
Receivable-Generating Assets
Securitized Assets
Cash Flow from Securitized Assets
Parties and participants in Securitization
Securitization Process
Types of Securitization
Benefits of securitization
Benefits to Originator
Benefits to Investors
Limitations of securitization
SARFAESI Act, 2002
Definition
Purpose
CERSAI
The Background
Recovery Mechanism
Major Provisions
Review Questions
Index