Indian Financial System 2e
Author(s): Dr S Gurusamy
Subject(s): Management
ISBN 9789393665683
 Published Date
  Pages 644

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Description

This book presents a conceptual framework on major categories of the Financial System including Financial Services, Financial Markets and Stock Exchange. Designed as an essential textbook for a course on Indian Financial System, this provides up-to-date information and covers topics such as merchant Banking, Micro-Finance, Factoring, Leasing, Venture Capital and Insurance Services.

Cover Page
Halftitle Page
Title Page
Copyright Page
Table of Contents
Preface
1. Financial System-An Overview
Financial System
Features
Constituents
Financial Institutions
Financial Services
Financial Markets
Financial Instruments
Summary
Key Terms and Concepts
Review Questions
2. Indian Financial System
Framework
Department of Banking Supervision (DBS)
Supervisory Role
Department of Non-banking Supervision (DNBS)
Supervisory Process
Board for Financial Supervision (BFS)
Advisory Council to BFS
Sub Committee (Audit) to BFS
Supervisory Jurisdiction
Other Measures
Transparency and Disclosure
Internal Controls and Housekeeping in Banks
Effective Banking Supervision—Core Principles
Summary
Key Terms and Concepts
Review Questions
3. Global Financial System
Genesis
Essential Considerations
Summary
Key Terms and Concepts
Review Questions
4. Prospectus
Contents
Prospectus for the Public Offer
Regular Prospectus
Abridged Prospectus
Prospectus for Rights Issue
Disclosures in Prospectus
Disclosures in Abridged Prospectus and Letter of Offer
Deemed Prospectus
Statement in Lieu of Prospectus
Misstatements in Prospectus
Types of Prospectus
Summary
Key Terms and Concepts
Review Questions
Further Readings
5. Financial Services~An Overview
Genesis
Financial Services—Concept
Financial Services—Objectives/Functions
Financial Services—Characteristics
Financial Services Market—Concept
Financial Services Market—Constituents
Growth of Financial Services in India
Financial Services Sector—Problems
Regulatory Framework
Summary
Key Terms and Concepts
Review Questions
Further Readings
6. Credit Cards
Genesis
Origin and History
Features of Modern Credit Card
Facilities and Services
Classification of Credit Cards
Innovative Cards
Credit Card Cycle
Bank Card Associations
Credit Card Structure
Validity and Renewal
Credit Cards and E-commerce
Credit Card Frauds
Credit Information Bureau (CIB)
Future Outlook
Benefits of Credit Cards
Drawbacks of Credit Cards
The Indian Scenario
Summary
Key Terms and Concepts
Review Questions
Further Readings
7. Debit Cards
Genesis
Concept
Mechanism
Promotion and Progress
Dangers of Debit Cards
Liability for Fraud
Consumer Protection
Precautions
The Indian Scenario
Summary
Key Terms and Concepts
Review Questions
Further Readings
8. Credit Rating
Genesis
Impetus
Origin
Definition of Credit Rating
Features
Advantages
The Credit Rating System—Growth Factors
Major Issues
Global Credit Rating Agencies
Domestic Credit Rating Agencies
Credit Rating—Regulatory Framework
Credit Rating Symbols
Rating Framework—Major Factors
Equity Grading
Equity Grading Process by ICRA
Summary
Key Terms and Concepts
Review Questions
Further Readings
9. Hire Purchase Finance
Definition
Rights of Hirer
Rate of Interest
Lease Financing vs. Hire Purchase Financing
Accounting for Hire Purchase
Methods of Interest Calculation
Method of Reporting
Lease vs. Hire Purchase Evaluation
Summary
Key Terms and Concepts
Review Questions
Further Readings
10. Insurance Services
Definition
Basic Principles of Insurance
Reinsurance
Life Insurance
General Insurance
Types
Fire Insurance
Marine Insurance
Other Insurances
Liability Insurance
Concept of Insurance Services
Profile of Insurance Service Providers
General Insurers
Life Insurers
Life Insurance Corporation of India (LIC)
HDFC Standard Life Insurance Company
Group Products
Max New York Life Insurance Company
ICICI Prudential Life Insurance Company
Tata AIG
SBI Life Insurance Company
ING Vysya Life Insurance
Allianz Bajaj Life Insurance Company
Royal Sundaram
Regulatory Framework
The Insurance Act
Insurance Regulatory and Development Authority (IRDA)
Insurance Advisory Committee
Power to Make Regulations
Major Amendments to Insurance Act
The First Schedule
Insurance Agents, Intermediaries and Surveyors
Summary
Key Terms and Concepts
Review Questions
Further Readings
11. Factoring and Forfaiting
Genesis
Definition
Mechanism
Characteristics
Factoring and Off-balance Sheet Financing
Types of Factoring
Legal Aspects of Factoring
Advantages of Factoring
Disadvantages of Factoring
Factoring—Players
Functions of a Factor
Factoring Cost
Line of Credit—Methods
RBI Guidelines for Factoring
Factoring—Indian Scenario
Major Factoring Firms
SBI Factors and Commercial Services
Operational Profile of Indian Factoring
Operational Problems in Indian Factoring
Factoring—A Cost-benefit Analysis
Methods of Evaluation
Steps in Evaluation
Alternative Steps
Forfeiting
Forfaiting—Indian Scenario
Summary
Key Terms and Concepts
Review Questions
Further Readings
Annexure
12. Leasing—An Overview
Definition
Characteristics of Lease
Types of Lease
Financial Lease vs. Operating Lease
Test for Financial Lease
Myths about Leasing
Participants
The Leasing Process
Services of Lessor
Advantages of Leasing
Limitations of Lease Financing
Tax Aspects of Leasing
Implications for Lessor— Depreciation Tax Shield
Implications for Lessee
Tax Planning Aspects
Financial Implications
Implications under Sales Tax
Funding Aspects of Leasing
Maximum Permissible Bank Finance
Types of Finance
Summary
Key Terms and Concepts
Review Questions
Further Readings
13. Lease Evaluation
Definition of Lease
Loan Repayment Schedule
Lease Evaluation—Advantage to Lessor
Lease Evaluation—Advantage to Lessee
Evaluating Independent Lease Option as Advantage to Lessee
Summary
Key Terms and Concepts
Review Questions
Practical Questions
Further Readings
14. Merchant Banking
Genesis
Definition
Functions
Merchant Bankers' Code of Conduct
Regulatory Framework
Offer by Unlisted Companies—Guidelines
Terms of Issue
Summary
Key Terms and Concepts
Review Questions
Further Readings
15. Mutual Funds
Genesis
Definition
Products/Schemes
Mutual Funds in India
Managing Mutual Funds in India
SEBI's requirements of AMC
Functions of AMC
Working Mechanism of AMC
Portfolio Management Process in Mutual Funds
Operational Efficiency of Mutual Funds
Evaluating Mutual Funds
Mutual Fund Holders' Account
Causes for Poor Performance of Mutual Funds
Unit Trust of India
Regulatory Structure of Mutual Funds
RBI Guidelines
UTI Guidelines
SEBI (Mutual Funds) Regulations, 1996
SEBI Schedules
Fifth Schedule—Code of Conduct
Seventh Schedule—Restrictions on Investments
Eighth Schedule—Investment Valuation Norms
New Regulations, 1999
Association of Mutual Funds Industry (AMFI)
Summary
Key Terms and Concepts
Review Questions
Further Readings
16. Public Issue Management
Concept
Functions
Categories of Securities Issue
Issue Manager
Role of Issue Manager
Activities Involved in Public Issue Management
Marketing of Issue
Public Issue Proposal—Factors
Pricing of Issues
Law Relating to Issue Management
Summary
Key Terms and Concepts
Review Questions
Further Readings
17. Securitization
Genesis
Definition
Meaning of Security
Pass Through Certificates
Features of Securitization
Need for Securitization
Special Purpose Vehicle (SPV)
Asset Securitization—Mechanism
Purposes
Asset Characteristics
Applications of Securitization
Securitization—Benefits
Economic Functions of Securitization
Global Scenario
Indian Scenario
Limitations
Securitization and Financial Disintermediation
Change in the Function of Intermediation
Capital Markets and Securitization
Securitization and Structured Finance
Securitization as a Risk Management Tool
Securitization and Credit Derivatives
Summary
Key Terms and Concepts
Review Questions
Further Readings
18. Book-Building
Concept
Characteristics
The Process
Allocation Procedure
Case 1—Initial Public Offer (IPO) Issue
Case II—Additional Issue by Listed Company
Case III—Offer by Unlisted Company
Reverse Book-building
Summary
Key Terms and Concepts
Review Questions
Further Reading
19. Venture Capital in India
Venture Capital—An Overview
Meaning
Definition
Rationale
Features
Stages of Venture Capital Financing
Venture Capital in India
Critical Factors
Objectives/Benefits of Venture Capital Funds
Venture Capital Funds in India—A Profile
Organization Structure
Registration of Venture Capital Fund (VCF)
Application for Registration
Grant of Certificate of Registration
Summary
Key Terms and Concepts
Review Questions
Further Readings
20. Infrastructure Financing Services
Genesis
Definition
Sectors
Financing Options
Financing Instruments
Infrastructure Financing—Issues in India
RBI Guidelines
Recent Developments
Summary
Key Terms and Concepts
Review Questions
Further Readings
21. Housing Finance Services
Genesis
Housing
Housing Finance
Models of Housing Projects
Housing Finance in India—Major Issues
Housing Finance in India—Growth Factors
Housing Finance Assistance—Factors
Housing Finance Institutions in India
Advisory Services
Summary
Key Terms and Concepts
Review Questions
Further Readings
22. Micro Financial Services
Micro Finance—Meaning
Micro Finance—Definition
Micro Finance Institution
Micro Financial Services
Scope of Micro Finance
Features of Micro Finance
Demand for Micro Finance
Micro Finance Program
Micro Credit Experiment—Global Scene
Micro Finance and Risk Management
Poverty Reduction
Micro Financial Service Providers
Approaches of Micro Financing
Task Force on Micro Finance
Micro Finance Programmes
Summary
Key Terms and Concepts
Review Questions
Further Readings
23. Financial Markets—An Overview
Meaning
Definition
Location
Role
Functions
Constituents
Financial Instruments
Capital Market Instruments
Indian Money and Capital Markets
Global Financial Markets
Summary
Key Terms and Concepts
Review Questions
Further Readings
24. Call Money Market
Meaning
Features
Benefits
Indian Call Money Market—A Profile
Nature of Dealings
Participants
Mode of Operation
Location
Call Money Rates
Summary
Key Terms and Concepts
Review Questions
Further Readings
25. Commercial Paper Market
Meaning
Features
Satellite Dealers (SDs)
Summary
Key Terms and Concepts
Review Questions
Further Reading
26. Commercial Bill Market
Meaning
Importance
Developed Bill Market
Shortcomings of Indian Bill Market
Growth of Commercial Bill Market in India
Bill Market Scheme, 1952
The Study Group, 1970
Bill Market Scheme, 1970
IDBI Bill Rediscounting Scheme
General Reasons for Failure of Bill Market Scheme
Blues of Bills Discounting
Revitalizing Bill Market
Derivative Usance Bills
RBI's Directives
Summary
Key Terms and Concepts
Review Questions
Further Readings
27. Certificate of Deposit (CD) Market
Meaning of CD Market
Features
Time Deposit vs. Certificate of Deposit
Profile
The Launch
Yield
Role of DFHI
Role of Banks
Summary
Key Terms and Concepts
Review Questions
Further Readings
28. Treasury Bills Market
Meaning
Treasury Bills (TBs)
General Features
Features of Indian TBs
Benefits
Summary
Key Terms and Concepts
Review Questions
Further Readings
29. Government or Gilt-edged Securities Market
Genesis
Government Securities—Meaning
Government Securities Market—Meaning
Government Securities—Features
Ready Forward Contracts (Repos)
Repo Accounting
Government Bonds
Dealers in Government Bonds
Importance of Gilt-edged Market
Gilt-edged Market—Criticisms
General Terms and Conditions Applicable to Government Securities
Government Securities Market and Monetary Policy
Gilt-edged Market—Reform Measures
Guidelines for Banks
Retail Trading of Government Securities on the Stock Exchanges
Summary
Key Terms and Concepts
Review Questions
Further Readings
30. Capital Market Instruments
Genesis
Meaning
Types
Preference Shares
Equity Shares
Non-Voting Equity Shares
Convertible Cumulative Preference Shares (CCPS)
Company Fixed Deposits
Warrants
Debentures and Bonds
Global Debt Instruments
Summary
Key Terms and Concepts
Review Questions
Further Readings
31. New Issues Market (NIM)—Conceptual Framework
Meaning
NIM and Secondary Markets—An Interface
Services of NIM
NIM vs. Secondary Market
Methods of Marketing Securities
SEBI Guidelines for Listed and Unlisted Companies
Intermediaries in NIM
Merchant Bankers/Lead Managers
Underwriters
Bankers to an Issue
Brokers to an Issue
Registrars to an Issue and Share Transfer Agents
Debenture Trustees
Summary
Key Terms and Concepts
Review Questions
Further Readings
32. Foreign Exchange Market
Meaning
Characteristics
Constituents
Participants
Transactions
Rates and Quotations
Foreign Exchange Risk
Risk Management Tools
Swaps
Mechanics of Currency Trading
Management of Exchange Rates
Indian Foreign Exchange Market
Currency Options
Exchange Rate Management
Summary
Key Terms and Concepts
Review Questions
Further Readings
33. Derivatives Market
Genesis
Meaning of Derivatives
Growth of Derivatives Market—Factors
Handicaps of Derivatives Market
Functions of Derivatives Market
Categories of Derivatives
Futures and Options—Participants
General Functions of Dealers
Benefits of Derivatives
Risks in Derivatives Market
Capital Standards for Derivatives
Regulating Derivatives Market
Advent of Derivatives Market in India
Summary
Key Terms and Concepts
Review Questions
Further Readings
34. Financial Institutions-An Overview
Meaning
Special Characteristics
Broad Categories
Money Market institutions
Capital Market Institutions
Indian Financial Institutions—A Profile
Co-operative Banking Institutions—An Overview
Indian Scenario
Meaning and Definition of Co-operative Banks
Features
Co-operative Banks vs. Commercial Banks
Structure
Summary
Key Terms and ConceptsReview Questions
Further Readings
35. Non-Banking Financial Institutions (NBFIs)
Registration
Principal Business of NBFCs
Structure of NBFCs
Supervision of NBFCs
RBI Measures for NBFCs
Task Force on NBFCs
Role of BFS
Other Measures
RBI Directions on Acceptance of Public Deposits
Special Provisions
Summary
Key Terms and Concepts
Review Questions
Further Reading
36. Stock Exchange-Regulatory Framework
Genesis
The Factors
The Regulatory Framework
Under the SEBI Act
Under the BSCC Act
Under the Defence of India Rule
Under the Capital Issues Control Act, 1947
Under the Securities Contracts (Regulation) Act, 1956
Under the Securities Contracts (Regulation) Rules, 1957
Under the Companies Act, 1956
Committees on Regulatory Framework
Summary
Key Terms and Concepts
Review Questions
37. Indian Stock Exchanges—A Profile
The Bombay Stock Exchange (BSE)
BOLT (BSE-On-Line-Trading)
For New Companies
For Companies Listed on Other Stock Exchanges
For Companies Delisted already and Seeking Relisting of this Exchange
Safety of Market
Opportunities for Foreign Investors
Shortages and Objections
Derivatives Trading
Calcutta Stock Exchange
The National Stock Exchange ofIndia Limited (NSE)
Summary
Key Terms and Concepts
Review Questions
38. Listing
Listing—Meaning
Security Listing—Meaning
Security—Meaning
Stock Exchange—Meaning
Recognized Stock Exchange
Listing—Characteristics
Listing—Legal Provisions
Listing—Steps
Listing—Legal Significance
Refusal of Listing
SEBI Powers
Listing and Corporate Governance
Listing—Particulars to be Furnished
Listing Agreement—Meaning
Listing Agreement—Features
Stock Exchange Powers
Listing—Benefits
Consequences of Non-listing
New Entry Norms for Unlisted Companies
Listing—Suspension / Withdrawal
Summary
Key Terms and Concepts
Review Questions
Further Readings
39. Internet Stock Trading
Genesis
Meaning
Features
Current Scenario
Internet Trading—Alternatives
Internet Trading—Some Issues
Regulating Internet Stock Trading
IPOs on the Internet—Indian Experience
e-lPO Prospectus
E-commerce Act and Internet Stock Trading
Summary
Key Terms and Concepts
Review Questions
40. Stock Index Futures
Genesis
Derivatives Contract
Futures Contract
Stock Index
Stock Index Futures (SIF)
Features of SIF
Trading in SIF
Squaring off
Pricing SIF
Benefits of SIF
Hedging using SIF
Short Hedge
Long Hedge
Speculation using SIF
Summary
Key Terms and Concepts
Review Questions
Further Readings
Bibliography
Index

Dr. Gurusamy is currently Professor and Head, Department of Commerce, University of Madras, Chennai.

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