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MS-46

MS-46. Management Of Financial Services. Block 1. Financial system, Markets And Services. Financial System. Financial system is a set of complex and closely connected or intermixed instructions,agents,practices,markets, transactions,claims and liabilities in the economy.

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MS-46

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  1. MS-46 Management Of Financial Services

  2. Block 1 Financial system, Markets And Services | | <document classification>

  3. Financial System Financial system is a set of complex and closely connected or intermixed instructions,agents,practices,markets, transactions,claims and liabilities in the economy | | <document classification>

  4. The financial system comprises of four major components. These are 1) Financial Institutions 2) Financial Markets 3) Financial Instruments 4) Financial Services | | <document classification>

  5. 1) Financial Institutions: These are institutions which mobilise and transfer the savings or funds from surplus units to deficit units. 2) Financial Markets: This is a place or mechanism where funds or savings are transferred from surplus units to deficit units. 3) Financial Instruments: the commodities that are traded or dealt in a financial market are financial assets or securities or financial instruments. | | <document classification>

  6. 4) Financial Services: Financial services include the services offered by both types of companies Asset Management Companies and Liability Management Companies | | <document classification>

  7. ROLE OF FINANCIAL MARKETS | | <document classification>

  8. CLASSIFICATION OF FINANCIAL MARKETS | | <document classification>

  9. SECURITIES MARKETS a) Government Securities b) Industrial Securities The Government securities are issued by Central Government, State Governments and local govt. which includes the authorities like Municipalities, Autonomous Institutions like; Port Trusts, Improvement Trusts Agencies like; IDBI, IFCI, SFCs. SIDCs, Housing Boards | | <document classification>

  10. The instruments of raising funds in the industrial securities market are bonds,debentures, preference shares and equity shares. • The securities market, is divided into primary or new issue market and secondary market. The new issues of government and private corporate sectors are floated in the primary market. The secondary market provides liquidity to the outstanding securities or existing securities | | <document classification>

  11. Over the Counter Exchange of India (OTCEI) It was incorporated in 1990 under companies act 1956. Over The Counter (OTC) market is an informally organised group of brokers and dealers. The Over the Counter market is a negotiated market, because prices are settled through individual bargaining between buyers and sellers. | | <document classification>

  12. GLOBALISATION OF FINANCIAL MARKETS 1) deregulation or liberalisation of markets and the activities of market participants in key financial centers of the world; 2) technological advances for monitoring world markets, executing orders, and analyzing financial opportunities; and 3) increased institutionalisation of financial markets | | <document classification>

  13. CLASSIFICATION OF GLOBAL FINANCIALMARKETS | | <document classification>

  14. FINANCIAL MARKETS ANDINSTITUTIONS | | <document classification>

  15. FINANCIAL SERVICES • financial services are services that ensure the smooth flow of financial activities in the economy. • Financial services sector is regulated by the Securities and Exchange Board of India(SEBI), Reserve Bank of India and the Department of Banking and Insurance,Government of India, through legislations | | <document classification>

  16. CHARACTERISTICS OF FINANCIAL SERVICES i) Customer-Specific ii) Intangibility iii) Concomitant iv) Tendency to Perish v) People based services vi) Market Dynamics | | <document classification>

  17. EVOLUTION OF FINANCIAL SERVICES IN INDIA • The Stage of Infancy • Modern Financial Services • The Third Flush • New Financial Instruments | | <document classification>

  18. TYPES OF FINANCIAL SERVICES • Fee Based Services • Fee based financial services are those services wherein financial institutions operate in specialised fields to earn a substantial income a) Issue Management b) Corporate Advisory Services c) Credit Rating d) Mutual Funds e) Asset Securitisation | | <document classification>

  19. IMPACT OF TECHNOLOGY From the Service Providers View • Cost Saving • Product Development • Marketing Tool • Delivery channel • Decision-making Aid • Globalisation | | <document classification>

  20. From Customers View • Accessibility • Convenience • Speedier Settlement of Transaction | | <document classification>

  21. MANAGEMENT OF RISK INFINANCIAL SERVICES • EXTERNAL RISK a) Institutions Providing Direct Finance b) Insurance Services c) Stock Broking Services d) Leasing and Hire Purchase e) Institutions Offering Fee Based Services • INTERNAL RISK a) Institutions Providing Direct Finance b) Insurance Service | | <document classification>

  22. c) Stock Broking Service d) Leasing and Hire Purchase e) Institutions Offering Fee Based Services TYPES OF RISK • Credit Risk • Asset-Liability Gap Risk • Due-Diligence Risk • Interest Rate Risk • Market Risk • Currency Risk | | <document classification>

  23. MANAGEMENT OF RISK • Managing Credit Risk • Managing Asset-Liability Gap Risk • Managing Due-diligence Risk • Managing Interest Rate Risk • Managing Market Risk • Managing Currency Risk | | <document classification>

  24. REGULATORY FRAMEWORK | | <document classification>

  25. Block 2 Financial market operations And Services | | <document classification>

  26. Stock exchange:Functions and Organisation Stock exchange is the place where buying and selling of securities take place . Market is divided into two • Short term and • long term capital market | | <document classification>

  27. Primary Market It is the segment in which new issues are made Three ways of new issue • Public issue • Right issue • Private placement | | <document classification>

  28. Steps of public issue • Appointment of underwriter • Appointment of bankers • Appointment of Registrars • Appointment of the Brokers to the Issue • Filing of Prospectus with the Registrar of Companies • Printing and Dispatch of Application forms • Filing of Initial Listing Application | | <document classification>

  29. Statutory Announcement • Processing of Applications • Establishing the Liability of the Underwriter • Allotment of Shares • Listing of the Issue | | <document classification>

  30. Rights Issue • Selling of securities to the existing shareholders in the portion of their current holding. Private Placement • Sale of securities by public limited company • Securities are placed with Institutional investors, Mutual funds or other Financial Institutions | | <document classification>

  31. BROKING AND TRADING IN EQUITY • Stock Brokers are intermediary between buyers and sellers of securities | | <document classification>

  32. DIFFERENT TYPES OF DEBT INSTRUMENTS • Fixed and Floating Rate Instruments • Debt Instruments with Call and Put Option • Zero Interest Debt Instruments • Convertible Debt Instrument Convertible Debt Instrument • The Government Securities are issued on the basis of liquidity conditions in the market, Government borrowing programme and expectations of the market. | | <document classification>

  33. Types of Government Securities i) Treasury Bill of 91 day, 182 day and 364 day ii) Government of India dated securities iii) State Government securities Secondary market Govt. securities are negotiated between banks, PDs, MFs. RBI has introduced NDS. | | <document classification>

  34. Corporate Debt Securities Market • Commercial papers • Certificate of Deposits • Bonds issued by PSUs • Bonds issued by Financial Institution • Corporate Debentures | | <document classification>

  35. Depositories • Depository system is a scrip based system • It is an institution which maintains an electronic record of ownership Constituents • Depository • Depository Participants • Registrars • Investors | | <document classification>

  36. Depository Account • Dematerialisation (Demat) | | <document classification>

  37. Rematerialisation (Remat) | | <document classification>

  38. Fungibility • Delivery vs. Payment • SWITCHING OVER TO DEPOSITORY • Appointing DP • Request for ‘Demat’ • Approach the Company or Registrar of Transfer • Confirmation of Demat • Crediting the Client’s Account | | <document classification>

  39. Block 3 Fee Based Services | | <document classification>

  40. ISSUE MANAGEMENT • Issue management refers to managing issues of corporate securities like equity • shares, preference shares and debentures or bonds. Issuing securities can be done in three ways • Public Issue • Right Issue • Private Placement | | <document classification>

  41. SELECTING A PUBLIC ISSUE PROPOSAL • Background of the Promoters/Management • Company Profile • Project Profile • Capital Market Position | | <document classification>

  42. PUBLIC ISSUE MANAGEMENT Pre-Issue Activities 1) Memorandum of Understanding 2) Obtaining Appraisal Note 3) Appointment of Other Intermediaries 4) Inter-se Allocation of Responsibilities 5) Preparing Prospectus 6) Submission of Draft Offer Documents 7) Launching of a Public Issue | | <document classification>

  43. Post-Issue Activities • Finalisation of Basis of Allotment (BOA) • Despatch of Share Certificates • Issue of Advertisement in Newspapers • Post-issue Obligations • Post-issue Monitoring Reports | | <document classification>

  44. Post-issue Monitoring Reports • Necessity for Aggressive Sales Campaign • Packaging and Marketing the Issue • Launching Marketing Campaign • Brokers’ and Investors’ Conferences • Timing of the Issue | | <document classification>

  45. CORPORATE ADVISORY SERVICES Making of Public Issue and Issue Management • 1) Corporate Restructuring • 2) Project Counselling and Pre-Investment Studies • 4) Capital Structuring and Restructuring • 5) Loan Syndication • 6) Liaison with Foreign Collaborators and making preparation for Joint Ventures • 7) Raising Foreign Currency Loans Euro issues, FCCB’s etc • 8) Mergers and Acquisitions • 9) Making Valuation & Revaluation of Assets • 10) Consultancy for Rehabilitation of Sick Industrial units | | <document classification>

  46. CREDIT RATING • Credit rating may be defined as an expression, through use of symbols, of opinion about the quality of credit of the issuer of debt securities BENEFITS OF CREDIT RATING • Benefits to Investors • Safeguards against Bankruptcy • Recognition of Risk • Credibility of Issuer • Rating Facilitates Quick Investment decisions | | <document classification>

  47. No Need to Depend on Investment Advisors or Professionals • Choice of Investment • Benefits of Rating Surveillance Benefits of Credit Rating to Issuer Company • Lower Cost of Borrowing • Wider Audience for Borrowing • Rating as Marketing Tool • Self Discipline by Companies • Reduction of Cost in Public Issues • Motivation for Growth | | <document classification>

  48. LIMITATIONS OF CREDIT RATING • Biased Rating and Misrepresentations • Static study • Concealment of material information • Rating is no guarantee for soundness of the company • Down grade | | <document classification>

  49. RATING PROCESS | | <document classification>

  50. REGULATION OF CREDIT RATING AGENCIES • Registration of Credit Rating Agencies • Promoter of Credit Rating Agency and Eligibility Criteria | | <document classification>

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