FMS

UNIT-I: : Introduction to Financial System and Financial Services

Meaning, Features, Functions and Classification. Financial Services- Concept, Meaning, Scope,
Growing importance of financial services in financial system–Classification–Traditional and
Modern view–Fund based and non fund based services–Financial engineering–Need for
innovation–New financial products and services–An overview of Indian financial services sector
scenario and Challenges facing Financial Service

Meaning, Features, Functions and Classification. Financial Services-

Introduction:
Financial service is part of financial system that provides different types of finance through various credit
instruments, financial products and services. In financial instruments, we come across cheques, bills,
promissory notes, debt instruments, letter of credit, etc.
In financial products, we come across different types of mutual funds. Extending various types of
investment opportunities. In addition, there are also products such as credit cards, debit cards, etc.
In services we have leasing, factoring, hire purchase finance etc., through which various types of assets
can be acquired either for ownership or on lease. There are different types of leases as well as factoring
too. Thus, financial services enable the user to obtain any asset on credit, according to his convenience
and at a reasonable interest rate.
Importance of Financial services
It is the presence of financial services that enables a country to improve its economic condition whereby
there is more production in all the sectors leading to economic growth.
The benefit of economic growth is reflected on the people in the form of economic prosperity wherein
the individual enjoys higher standard of living. It is here the financial services enable an individual to
acquire or obtain various consumer products through hire purchase. In the process, there are a number
of financial institutions which also earn profits. The presence of these financial institutions promote
investment, production, saving etc. Hence, we can bring out the importance of financial services in the
following points:
Importance of Financial Services 
Vibrant Capital Market.
• Expands activities of financial markets.
• Benefits of Government.  Economic Development.

MBA-FINANCIAL SYSTEM &SERVICES

FMS

• Economic Growth.
• Ensures Greater Yield.
• Maximizes Returns.
• Minimizes Risks.
• Promotes Savings.
• Promotes Investments.
• Balanced Regional Development.
• Promotion of Domestic & Foreign Trade.
1. Promoting investment
The presence of financial services creates more demand for products and the producer, in order to meet
the demand from the consumer goes for more investment. At this stage, the financial services comes to
the rescue of the investor such as merchant banker through the new issue market, enabling the producer
to raise capital.
The stock market helps in mobilizing more funds by the investor. Investments from abroad is attracted.
Factoring and leasing companies, both domestic and foreign enable the producer not only to sell the
products but also to acquire modern machinery/technology for further production.
2. Promoting savings
Financial services such as mutual funds provide ample opportunity for different types of saving. In fact,
different types of investment options are made available for the convenience of pensioners as well as
aged people so that they can be assured of a reasonable return on investment without much risks.
For people interested in the growth of their savings, various reinvestment opportunities are provided.
The laws enacted by the government regulate the working of various financial services in such a way that
the interests of the public who save through these financial institutions are highly protected.
Financial Services offered by various financial institutions 
Factoring.
• Leasing.
• Forfeiting.
• Hire Purchase Finance.
• Credit card.
• Merchant Banking.
• Book Building.
• Asset Liability Management.
• Housing Finance.
• Portfolio Finance.

MBA-FINANCIAL SYSTEM &SERVICES

FMS

• Underwriting.  Credit Rating.

• Interest & Credit Swap.
• Mutual Fund.
3. Minimizing the risks
The risks of both financial services as well as producers are minimized by the presence of insurance
companies. Various types of risks are covered which not only offer protection from the fluctuating
business conditions but also from risks caused by natural calamities. Insurance is not only a source of
finance but also a source of savings, besides minimizing the risks. Taking this aspect into account, the
government has not only privatized the life insurance but also set up a regulatory authority for the
insurance companies known as IRDA, 1999 (Insurance Regulatory and Development Authority) .
4. Maximizing the Returns
The presence of financial services enables businessmen to maximize their returns. This is possible due to
the availability of credit at a reasonable rate. Producers can avail various types of credit facilities for
acquiring assets. In certain cases, they can even go for leasing of certain assets of very high value.
Factoring companies enable the seller as well as producer to increase their turnover which also increases
the profit. Even under stiff competition, the producers will be in a position to sell their products at a low
margin. With a higher turnover of stocks, they are able to maximize their return.
5. Ensures greater Yield
As seen already, there is a subtle difference between return and yield. It is the yield which attracts more
producers to enter the market and increase their production to meet the demands of the consumer. The
financial services enable the producer to not only earn more profits but also maximize their wealth.
Financial services enhance their goodwill and induce them to go in for diversification. The stock market
and the different types of derivative market provide ample opportunities to get a higher yield for the
investor.
6. Economic growth
The development of all the sectors is essential for the development of the economy. The financial
services ensure equal distribution of funds to all the three sectors namely, primary, secondary and
tertiary so that activities are spread over in a balanced manner in all the three sectors. This brings in a
balanced growth of the economy as a result of which employment opportunities are improved.
The tertiary or service sector not only grows and this growth is an important sign of development of any
economy. In a well developed country, service sector plays a major role and it contributes more to the
economy than the other two sectors.

MBA-FINANCIAL SYSTEM &SERVICES

FMS

7. Economic development Financial services enable the consumers to obtain different types of products
and services by which they can improve their standard of living. Purchase of car, house and other
essential as well as luxurious items is made possible through hire purchase, leasing and housing
finance companies. Thus, the consumer is compelled to save while he enjoys the benefits of the assets
which he has acquired with the help of financial services. 8. Benefit to Government
The presence of financial services enables the government to raise both short-term and long-term funds
to meet both revenue and capital expenditure. Through the money market, government raises short
term funds by the issue of Treasury Bills. These are purchased by commercial banks from out of their
depositors’ money.
In addition to this, the government is able to raise long-term funds by the sale of government securities
in the securities market which forms apart of financial market. Even foreign exchange requirements of
the government can be met in the foreign exchange market. The most important benefit for any
government is the raising of finance without offering any security. In this way, the financial services are a
big boon to the government.
9. Expands activities of Financial Institutions
The presence of financial services enables financial institutions to not only raise finance but also get an
opportunity to disburse their funds in the most profitable manner. Mutual funds, factoring, credit cards,
hire purchase finance are some of the services which get financed by financial institutions.
The financial institutions are in a position to expand their activities and thus diversify the use of their
funds for various activities. This ensures economic dynamism.

10. Capital Market

One of the barometers of any economy is the presence of a vibrant capital market. If there is hectic
activity in the capital market, then it is an indication of the presence of a positive economic condition.
The financial services ensure that all the companies are able to acquire adequate funds to boost
production and to reap more profits eventually.
In the absence of financial services, there will be paucity of funds which will adversely affect the working
of companies and will only result in a negative growth of the capital market. When the capital market is
more active, funds from foreign countries also flow in. Hence, the changes in capital market is mainly
due to the availability of financial services.

MBA-FINANCIAL SYSTEM &SERVICES

FMS

11. Promotion of Domestic and Foreign Trade

Financial services ensure promotion of domestic as well as foreign trade. The presence of factoring and
forfeiting companies ensures increasing sale of goods in the domestic market and export of goods in the
foreign market. Banking and insurance services further contribute to step up such promotional activities.
12. Balanced Regional development
The government monitors the growth of economy and regions that remain backward economically are
given fiscal and monetary benefits through tax and cheaper credit by which more investment is
promoted. This generates more production, employment, income, demand and ultimately increase in
prices. The producers will earn more profits and can expand their activities further. So, the presence of
financial services helps backward regions to develop and catch up with the rest of the country that has
developed already.

Classification–Traditional and Modern view–Fund based and non fund based services–
Financial services a wide range of activities. They can be broadly classified into two.
1. Traditional activates
2. Modern activates
Traditional Activates: Financial intermediates have been rendering a wide range of services
encompassing both capital and money marketing activities. They can be grouped under 2 categories. a.
Fun based activities
b. Non fun based activates
a. Fund based services
Working Capital Financing:
A firm's working capital is the money available to meet current obligations (those due in less than a year)
and to acquire earning assets. Chinatrust Commercial Bank offers corporations Working Capital Finance
to meet their operating expenses, purchasing inventory, receivables financing, either by direct funding or
by issuing letter of credit.
Key Benefits
• Funded facilities, i.e. the bank provides funding and assistance to actually purchase business
assets or to meet business expenses.
• Non-Funded facilities, i.e. the bank can issue letters of credit or can give a guarantee on behalf of
the customer to the suppliers, Government Departments for the procurement of goods and
services on credit.

MBA-FINANCIAL SYSTEM &SERVICES

FMS

• Available in both Indian as well as Foreign currency.

Short Term Financing
The bank can structure low cost credit programmes and cash flow financing to meet your specific
shortterm cash requirements. The loans are structured to enhance your profitability by scheduling the
repayment to match the cash flow available to repay the debt.
Bill Discounting
Bill discounting is a short tenure financing instrument for companies willing to discount their
purchase / sales bills to get funds for the short run and as for the investors in them. These are
customized to suit your requirement for short-term finance, from the date of sale to the date of
receipt of payment there on. We consider two types of bills facility viz. where documents are delivered
on payment, i.e. D/P Bills and where the documents are delivered against acceptance i.e. D/A Bills.
Export credit
We offer short-term working capital finance both at the pre-shipment and post-shipment
stages .Preshipment finance facility provides liquidity for procuring raw materials, processing, packing,
transporting, meant for export.
Post-shipment finance is a credit facility extended from the date of shipment of goods till the
realization of the export proceeds. The different types of post-shipment advances include:
• Export bills purchased/discounted
• Export bills negotiated (against letter of credit)
• Advances against bills sent on collection basis
• Advances against exports on consignment basis
• Exporters have the option of availing Post-Shipment finance either in rupees or in foreign
currency.
Structured finance
Structured Finance describes any "non-standard" way of raising money. These tailor-made securities go
beyond "standard" securities like conventional loans, debentures, debt, and equity. The reason to
structure a more advanced security may be that conventional securities may be unattractive, unavailable
or too expensive. These products are structured for both long and short tenor with exit options at
intervals for both parties.
● Term Lending
CTCB offers very competitive rates for term financing. We also provide advisory services to companies for
syndication of the term loans to a wide spectrum of financial institutions.
Under Term Finance, China trust Commercial Bank, offers the following:

MBA-FINANCIAL SYSTEM &SERVICES

FMS

• Fund Based Finance for capital expenditure acquisition of fixed assets towards starting or
expanding a business to swap with high cost existing debt from other bank / financial institution
• Non-Fund Based Finance in the form of Deferred Payment Guarantee for acquisition of fixed
assets towards starting / expanding a business or industrial unit.
b. Non-Fund Based Services Letters Of Credit
Letter of credit is a legal document issued by a buyer’s bank that upon presentation of required
documents payment would be made. Usually confirmed by the seller's bank, protection is given to
the seller that payment will be made if the goods are shipped correctly, following the conditions laid
down when the LC is opened or based on subsequent amendments and protection is given to the
buyer that the goods will be shipped before payment is made.
The LC facility can be granted to the importers after assessing their requirement/ credit worthiness/
financial strength and other parameters being to the satisfaction of the Bank.
China trust Commercial Bank can extend Import financing through Letters of Credit, which are well
accepted globally and are supported by a strong trade finance set-up. We are direct members of
SWIFT and have correspondent banking arrangements with many banks worldwide.
Bank Guarantees
Bank Guarantee is a contract to perform the promise or discharge the liability of a third person in case
of his default. China trust Commercial Bank sanctions Bank Guarantee limit to facilitate issue of
guarantees on behalf of its clients. Various types of guarantees offered are – financial, performance,
bid bond, tenders, customs, etc. Our guarantees are accepted by all government agencies including
Customs, Excise, Insurance Companies, Shipping Companies, all Capital Market Agencies such as NSE,
BSE, ASE, CSE etc. and all major corporates.
Collection Of Documents
We have a full-fledged trade finance set-up catering to all your trade related requirements, which
offers you the following advantages:
1. Better turnaround time through timely processing of your documents
2. Facilitating faster payments
3. Lower cost
4. Excellent trade support
5. Arrangement of credit reports of overseas parties
Specialized advice on international trade related issues as well as technical issues such as Exchange
Control requirements, RBI reporting, latest circulars and latest international developments.

MBA-FINANCIAL SYSTEM &SERVICES

FMS

2. Modern Activities
Beside the above traditional services, the financial intermediaries render innumerable services in recent
times. Most of them are in the nature of non-fund based activity. In view of the importance, these
activities have been in brief under the head 'New financial products and services'. However, some of the
modern services provided by them are given in brief hereunder.
I. Rendering project advisory services right from the preparation of the project report rill the
raising of funds for starting the project with necessary Government approvals.
II. Planning for M&A and assisting for their smooth carry out.
III. Guiding corporate customers in capital restructuring IV. Acting as trustees to the debenture
holders.
V. Recommending suitable changes in the management structure and management style with a
view to achieving better results.
VI. Structuring the financial collaborations / joint ventures by identifying suitable joint venture
partners and preparing joint venture agreements,
VII. Rehabilitating and restructuring sick companies through appropriate scheme of reconstruction
and facilitating the implementation of the scheme.
VIII. Hedging of risks due to exchange rate risk, interest rate risk, economic risk, and political risk by
using swaps and other derivative products.
IX. Managing [In- portfolio of large Public Sector Corporations.
X. Undertaking risk management services like insurance services, buy-hack options etc.
XI. Advising the clients on the questions of selecting the best source of funds taking into
consideration the quantum of funds required, their cost, lending period etc.
XII. Guiding the clients in the minimization of the cost of debt and in the determination of the
optimum debt-equity mix.
XIII. Undertaking services relating to the capital market, such as
a. Clearing services
b. Registration and transfers,
c. Safe custody of securities
d. Collection of income on securities
XIV. Promoting credit rating agencies for the purpose of rating companies which want to go public
by the issue of debt instrument;*.

MBA-FINANCIAL SYSTEM &SERVICES

FMS

Financial engineering
Financial engineering is a multidisciplinary field involving financial theory, methods of engineering, tools
of mathematics and the practice of programming. It has also been defined as the application of technical
methods, especially from mathematical finance and computational finance, in the practice of finance.
Despite its name, financial engineering does not belong to any of the fields in traditional professional
engineering even though many financial engineers have studied engineering beforehand and many
universities offering a postgraduate degree in this field require applicants to have a background in
engineering as well. In the United States, the Accreditation Board for Engineering and Technology(ABET)
does not accredit financial engineering degrees. In the United States, financial engineering programs are
accredited by the International Association of Quantitative Finance.
Financial engineering draws on tools from applied mathematics, computer science, statistics and
economic theory. In the broadest sense, anyone who uses technical tools in finance could be called a
financial engineer, for example any computer programmer in a bank or any statistician in a government
economic bureau. However, most practitioners restrict the term to someone educated in the full range of
tools of modern finance and whose work is informed by financial theory. It is sometimes restricted even
further, to cover only those originating new financial products and strategies. Financial engineering plays
a key role in the customer-driven derivatives business which encompasses quantitative modelling and
programming, trading and risk managing derivative products in compliance with the regulations and
Basel capital/liquidity requirements.
Why does financial innovation occur?
Economic theory has much to say about what types of securities should exist, and why some may not
exist (why some markets should be "incomplete") but little to say about why new types of securities
should come into existence.
One interpretation of the Modigliani-Miller theorem is that taxes and regulation are the only reasons for
investors to care what kinds of securities firms issue, whether debt, equity, or something else. The
theorem states that the structure of a firm's liabilities should have no bearing on its net worth (absent
taxes, etc.). The securities may trade at different prices depending on their composition, but they must
ultimately add up to the same value.
Furthermore, there should be little demand for specific types of securities. The capital asset pricing
model, first developed by Jack L. Treynor and William F. Sharpe, suggests that investors should fully
diversify and their portfolios should be a mixture of the "market" and a risk-free investment. Investors
with different risk/return goals can use leverage to increase the ratio of the market return to the risk-free
return in their portfolios. However, Richard Roll argued that this model was incorrect, because investors

MBA-FINANCIAL SYSTEM &SERVICES

FMS

cannot invest in the entire market. This implies there should be demand for instruments that open up
new types of investment opportunities (since this gets investors closer to being able to buy the entire
market), but not for instruments that merely repackage existing risks (since investors already have as
much exposure to those risks in their portfolio).
If the world existed as the Arrow-Debreu model posits, then there would be no need for financial
innovation. The Arrow-Debreu model assumes that investors are able to purchase securities that pay off
if and only if a certain state of the world occurs. Investors can then combine these securities to create
portfolios that have whatever payoff they desire. The fundamental theorem of finance states that the
price of assembling such a portfolio will be equal to its expected value under the appropriate risk-neutral
measure.
Historical examples of financial innovation
Examples of spanning the market
Some types of financial instrument became prominent after macroeconomic conditions forced investors
to be more aware of the need to hedge certain types of risk.
• The development of interest rate swaps in the early 1980s after interest rates skyrocketed.
• The development of credit default swaps in the early 2000s after the recession beginning in 2001
led to the highest corporate-bond default rate in 2002 since the Great Depression.
Examples of mathematical innovation
• The market in options exploded after the development of the Black–Scholes model in 1973.
• The development of the CDO was heavily influenced by the popularization of the copula
technique (Li 2000).
• Flash trading exists since 2000 at the Chicago Board Options Exchange and 2006 in the stock
market. In July 2010, Direct Edge became a U.S. Futures Exchange. Nasdaq and Bats Exchange,
Inc created their own flash market in early 2009.
Futures, options, and many other types of derivatives have been around for centuries: the Japanese rice
futures market started trading around 1730. However, recent decades have seen an explosion use of
derivatives and mathematically complicated securitization techniques. MacKenzie (2006) argues from a
sociological point of view that mathematical formulas actually change the way that economic agents use
and price assets. Economists, rather than acting as a camera taking an objective picture of the way the
world works, actively change behavior by providing formulas that let dispersed agents agree on prices for
new assets.

Examples of innovation to avoid taxes and regulation

MBA-FINANCIAL SYSTEM &SERVICES

FMS

Miller (1986) places great emphasis on the role of taxes and government regulation in stimulating
financial innovation. Modigliani and Miller (1958) explicitly considered taxes as a reason to prefer one
type of security over another, despite that corporations and investors should be indifferent to capital
structure in a fraction less world. The development of checking accounts at U.S. banks was in order to
avoid punitive taxes on state bank notes that were part of the National Banking Act.
Some investors use total return swaps to convert dividends into capital gains, which are taxed at a lower
rate.[1]

Many times, regulators have explicitly discouraged or outlawed trading in certain types of financial
securities. In the United States, gambling is mostly illegal, and it can be difficult to tell whether financial
contracts are illegal gambling instruments or legitimate tools for investment and risk-sharing. The
Commodity Futures Trading Commission is in charge of making this determination. The difficulty that the
Chicago Board of Trade faced in attempting to trade futures on stocks and stock indexes is described in
Melamed (1996).
In the United States, Regulation Q drove several types of financial innovation to get around its interest
rate ceilings, including euro dollars and NOW accounts.
The role of technology in financial innovation
Some types of financial innovation are driven by improvements in computer and telecommunication
technology. For example, Paul Volcker suggested that for most people, the creation of the ATM was a
greater financial innovation than asset-backed securitization.[2] Other types of financial innovation
affecting the payments system include credit and debit cards and online payment systems like PayPal.
These types of innovations are notable because they reduce transaction costs. Households need to keep
lower cash balances—if the economy exhibits cash-in-advance constraints then these kinds of financial
innovations can contribute to greater efficiency. Alvarez and Lippi (2009), using data on Italian
households' use of debit cards, find that ownership of an ATM card results in benefits worth €17
annually. These types of innovations may also affect monetary policy by reducing real household
balances. Especially with the increased popularity of online banking, households are able to keep greater
percentages of their wealth in non-cash instruments. In a special edition of 'International Finance'
devoted to the interaction of electronic commerce and central banking, Goodhart (2000) and Woodford
(2000) express confidence in the ability of a central bank to maintain its policy goals by affecting the
short-term interest rate even if electronic money has eliminated the demand for central bank liabilities,
while Friedman (2000) is less sanguine.
An overview of Indian financial services sector scenario

MBA-FINANCIAL SYSTEM &SERVICES

FMS

• The Indian economy is in the process of rapid transformation. Reforms ate taking place in every
field / part of economy. Hence financial services sector is also witnessing changes. The present scenario
can be explained in following terms Conservatism to dynamism
• The main objective of the financial sector reforms is to promote an efficient, competitive and
diversified financial system in the country. This is very essential to raise the allocate efficiency of available
savings, increase the return on investment and thus to promote (he accelerated growth of the economy
as a whole. At present numerous new Fls have started functioning with a view to extending multifarious
services to the investing public in the area of financial services Emergence of Primary Equity Market
• The capital markets, which were very sluggish, have become a very popular source of raising
finance. The number of stock exchanges in the country has gone up from 9 in 1980 to 22 in 1994. After
the lowering of bank interest rates, capital markets have become a very popular mode of channelizing
the saving of medium class people. Concept of credit rating
• The investment decisions of the investors have been based on factors like name recognition of
the company, operations of the group, market sentiments, reputation of the promoters etc. now grading
from an independent agency would help the investors in his portfolio management and thus, equity
grading is going to play a significant role in investment decision making. Process of globalization
• The process of globalization has paved the way for the entry of innovative and sophisticated
products into our country. Since the government is very keen in removing all obstacles that stand in the
way of inflow of foreign capital, the potentialities for the introduction of innovative, international
financial products in India are very great. Moreover, our country is likely to enter the full convertibility
era soon. Process of liberalization
• Our government has initiated many steps to reform the financial services industry. The
government has already switched over to free pricing of issues .the interest have been deregulated. The
private sector has been permitted to participate in banking and mutual funds and the public sector
undertakings are being privatized. SEBI has liberalized many stringent conditions so as to boost the
capital and money market.

Financial engineering–

Need for innovation–New financial products and services–

MBA-FINANCIAL SYSTEM &SERVICES

FMS

An overview of Indian financial services sector scenario and Challenges facing Financial Service

India’s diverse and comprehensive financial services industry is

growing rapidly, owing to demand drivers (higher disposable
incomes, customized financial solutions, etc.) and supply drivers
(new service providers in existing markets, new financial
solutions and products, etc.). The Indian financial services
industry comprises several key subsegments. These include, but are
not limited to- mutual funds, pension funds, insurance companies,
stock-brokers, wealth managers, financial advisory companies, and
commercial banks- ranging from small domestic players to large
multinational companies. The services are provided to a diverse
client base- including individuals, private businesses and public
organizations.
10 Types of Financial Services:
1. Banking
2. Professional Advisory
3. Wealth Management
4. Mutual Funds
5. Insurance
6. Stock Market
7. Treasury/Debt Instruments
8. Tax/Audit Consulting
9. Capital Restructuring
10. Portfolio Management
These financial services are explained below:
1. Banking
The banking industry is the backbone of India’s financial services
industry. The country has several public sector (27), private sector
(21), foreign (49), regional rural (56) and urban/rural cooperative

MBA-FINANCIAL SYSTEM &SERVICES

FMS

(95,000+) banks. The financial services offered in this segment

include:
 Individual Banking (checking accounts, savings accounts,
debit/credit cards, etc.)
 Business Banking (merchant services, checking accounts and
savings accounts for businesses, treasury services, etc.)
 Loans (business loans, personal loans, home loans, automobile
loans, working-capital loans, etc.)
The banking sector is regulated by the Reserve Bank of India (RBI),
which monitors and maintains the segment’s liquidity, capitalization,
and financial health.
2. Professional Advisory
India has a strong presence of professional financial advisory service
providers, which offer individuals and businesses a wide portfolio of
services, including investment due diligence, M&A advisory,
valuation, real-estate consulting, risk consulting, taxation consulting.
These offerings are made by a range of providers, including
individual domestic consultants to large multi-national
organizations.
3. Wealth Management
Financial services offered within this segment include managing and
investing customers’ wealth across various financial instruments-
including debt, equity, mutual funds, insurance products, derivatives,
structured products, commodities, and real estate, based on the
clients’ financial goals, risk profile and time horizons.
4. Mutual Funds
Mutual fund service providers offer professional investment services
across funds that are composed of different asset classes, primarily
debt and equity-linked assets. The buy-in for mutual fund solutions is

MBA-FINANCIAL SYSTEM &SERVICES

FMS

generally lower compared to the stock market and debt products.

These products are very popular in India as they generally have
lower risks, tax benefits, stable returns and properties of
diversification. The mutual funds segment has witnessed double-digit
growth in assets under management over the last five years, owing
to its popularity as a low-risk wealth multiplier.
5. Insurance
Financial services offerings in this segment are primarily offered
across two categories:
 General Insurance (automotive, home, medical, fire, travel,
etc.)
 Life Insurance (term-life, money-back, unit-linked, pension
plans, etc.)
Insurance solutions enable individuals and organizations to
safeguard against unforeseen circumstances and accidents. Payouts
for these products vary across the nature of the product, time
horizons, customer risk assessment, premiums, and several other
key qualitative and quantitative aspects. In India, there is a strong
presence of insurance providers across life insurance (24) and
general insurance (39) categories. The insurance market is regulated
by the Insurance Regulatory and Development Authority of India
(IRDAI).
6. Stock Market
The stock market segment includes investment solutions for
customers in Indian stock markets (National Stock Exchange and
Bombay Stock Exchange), across various equity-linked products. The
returns for customers are based on capital appreciation – growth in
the value of the equity solution and/or dividends – and payouts made
by companies to its investors.

MBA-FINANCIAL SYSTEM &SERVICES

FMS

7. Treasury/Debt Instruments
Services offered in this segment include investments into
government and private organization bonds (debt). The issuer of the
bonds (borrower) offers fixed payments (interest) and principal
repayment to the investor at the end of the investment period. The
types of instruments in this segment include listed bonds, non-
convertible debentures, capital-gain bonds, GoI savings bonds, tax-
free bonds, etc.
8. Tax/Audit Consulting
This segment includes a large portfolio of financial services within
the tax and auditing domain. This services domain can be
segmented based on individual and business clients. They include:
 Tax – Individual (determining tax liability, filing tax-returns, tax-
savings advisory, etc.)
 Tax – Business (determining tax liability, transfer pricing
analysis and structuring, GST registrations, tax compliance
advisory, etc.)
In the auditing segment, service providers offer solutions including
statutory audits, internal audits, service tax audits, tax audits,
process/transaction audits, risk audits, stock audits, etc. These
services are essential to ensure the smooth operation of business
entities from a qualitative and quantitative perspective, as well as to
mitigate risk. You can read more about taxation in India.
9. Capital Restructuring
These services are offered primarily to organizations and involve the
restructuring of capital structure (debt and equity) to bolster
profitability or respond to crises such as bankruptcy, volatile
markets, liquidity crunch or hostile takeovers. The types of financial

MBA-FINANCIAL SYSTEM &SERVICES

FMS

solutions in this segment typically include structured transactions,

lender negotiations, accelerated M&A and capital raising.
10. Portfolio Management
This segment includes a highly specialized and customized range of
solutions that enables clients to reach their financial goals through
portfolio managers who analyze and optimize investments for clients
across a wide range of assets (debt, equity, insurance, real estate,
etc.). These services are broadly targeted at HNIs and are
discretionary (investment only at the discretion of fund manager with
no client intervention) and non-discretionary (decisions made with
client intervention).

MBA-FINANCIAL SYSTEM &SERVICES