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The Indian Financial System: Markets, Institutions and Services, 3rd Edition

Book Description

The Indian Financial System: Markets, Institutions and Services is a comprehensive reference book about the financial system. This book is meant for students, professionals, and academicians. It seeks to help the readers hold their own in the modern business scenario. The book is divided into five units. The first unit introduces the economy and the financial system. The second unit covers various concepts of financial markets such as the capital market, the derivatives market, and the debt market. Unit III discusses financial institutions and topics like insurance and mutual funds. The fourth unit focuses on concepts like investment banking, credit rating, housing finance, and micro-finance. The fifth and final chapter discusses financial regulation. Four new chapters, several case studies, chapter summaries, multiple choice questions, and review questions are some of the highlights of this edition. This edition, the third edition, also introduces new concepts like foreign currency exchangeable bonds, auction-based building method, and anchor investors. The content reflects changes in the financial system up to July 2010.

Table of Contents

  1. Cover
  2. Title Page
  3. Contents
  4. Dedication
  5. Preface
  6. Part I - Financial System
    1. 1 - The Financial System: An Introduction
      1. Introduction
        1. Formal and Informal Financial Sectors
        2. The Indian Financial System
      2. Components of the Formal Financial System
        1. Financial Institutions
        2. Financial Markets
        3. Financial Instruments
        4. Financial Services
        5. Interaction among Financial System Components
      3. Functions of a Financial System
      4. Key Elements of a Well-Functioning Financial System
      5. Financial System Designs
      6. Nature and Role of Financial Institutions (Intermediaries) and Financial Markets
        1. Financial Markets
        2. Money Market and Capital Market
        3. Primary Capital Market and Secondary Capital Market
        4. Characteristics of Financial Markets
        5. Functions of Financial Markets
      7. Key Terms
      8. Summary
      9. Review Questions
      10. References
    2. 2 - The Financial System and the Economy
      1. Introduction
        1. Types of Economic Units
      2. A Macro-economic Framework Analysis for Exploring the Role of the Financial System in the Economy
      3. National Income Accounts
        1. Classification of the Indian Economy
      4. Flow of Funds Accounts
        1. Flow of Funds-based Indicators of Financial Development
      5. Trends in Saving and Investment
        1. Why Study Saving and Investment
        2. Saving and Investment in India
        3. Household Sector Financial Saving
        4. Saving and Investment in the Long Run
        5. Conclusion
      6. Relationship between the Financial System and Economic Growth: Some Theoretical and Empirical Evidence
        1. Empirical Research Evidence on Relationship between the Financial System and Economic Growth
      7. Key Terms
      8. Summary
      9. Review Questions
      10. References
    3. 3 - Reforms in the Financial System
      1. Background
      2. Indian Financial System in the Pre-reforms Period
      3. Objectives of Financial System Reforms
        1. Financial Efficiency, Stability, and Integration
        2. Conclusion
      4. Key Terms
      5. Summary
      6. Review Questions
      7. References
  7. Part II - Financial Markets
    1. 4 - The Money Market
      1. Introduction
        1. Functions of the Money Market
        2. Benefits of an Efficient Money Market
        3. The Indian Money Market
        4. Role of the Reserve Bank of India in the Money Market
        5. Steps to Develop the Money Market in India
        6. Money Market Centres
      2. Money Market Instruments
      3. Treasury Bills
        1. Features of T-Bills
        2. Types of T-Bills
        3. Importance of T-Bills
        4. Development of the T-Bills Market
        5. Participants in the T-Bills Market
        6. Sale of T-Bills
        7. Types of Auctions
        8. 91-Day T-Bills
        9. Size of the 91-Day T-Bills Market
        10. Competitive Bids and Non-competitive Bids
        11. 364-Day T-Bills
        12. Size of the 364-Day T-Bills Market
        13. 182-Day T-Bills
        14. 14-Day T-Bills
        15. Size of the 14-Day T-Bills Market
        16. Implicit Yield at Cut-off Prices
        17. Conclusion 58
      4. Commercial Paper
        1. The Process for Issuing a CP
        2. Guidelines Relating to CPs
        3. Summary of Guidelines for Issuance of a CP
        4. Stamp Duty on CP
        5. Size of the CP Market
        6. Secondary Market in CPs
        7. Factors Inhibiting the Growth of the CP Market
        8. Commercial Paper: A Comparative Position
      5. Commercial Bills
        1. Types of Commercial Bills
        2. Features of Commercial Bills
        3. Measures to Develop the Bills Market
        4. Size of the Commercial Bills Market
      6. Certificates of Deposit
        1. Measures to Develop the CD Market
        2. Guidelines for Issue of Certificates of Deposit (CDs)
        3. Secondary Market for CDs
        4. Size of the CD Market
        5. Factors Inhibiting the Growth of CDs
        6. Comparison of Certificates of Deposit and Commercial Papers
      7. Call/Notice Money Market
        1. Introduction
        2. Why Call Money
        3. Participants in the Call Money Market
        4. Reporting of Call/Notice Money Transactions
        5. Role of the Reserve Bank in the Call Money Market
        6. Link between the Call Money Market and Other Financial Markets
        7. Call Rate
        8. Mibor
        9. Call Rates Volatility
        10. Factors Influencing Call Money Market Rate
        11. Measures for Curbing High Volatility
        12. Steps to Convert the Call Money Market into a Pure Inter-bank Market
        13. Term Money Market
      8. Collateralised Borrowing and Lending Obligation (CBLO)
      9. Link between the Money Market and the Monetary Policy in India
      10. Tools for Managing Liquidity in the Money Market
        1. Reserve Requirements
        2. Interest Rates
        3. Bank Rate
        4. Refinance from the Reserve Bank
        5. Repos
      11. Money Market Derivatives
        1. Interest Rate Swap
        2. Plain Vanilla Interest Rate Swaps
        3. Applications of Interest Rate Swaps
        4. Forward Rate Agreements
        5. Plain Vanilla Forward Rate Agreements
        6. Participants in the IRS/FRA Market
        7. Guidelines Relating to IRSs/FRAs
        8. Introduction of New Derivative Instruments
      12. An Overview of the Money Market
      13. Key Terms
      14. Summary
      15. Review Questions
      16. References
    2. 5 - The Capital Market
      1. Introduction
        1. Functions of a Capital Market
        2. Primary Capital Market and Secondary Capital Market
      2. History of the Indian Capital Market
        1. A Brief History of the Rise of Equity Trading in India
      3. Capital Market Scams
        1. Introduction
        2. The 1991–92 Securities Scam (The Harshad Mehta Scam)
        3. The 2001 Scam (Ketan Parekh Scam)
        4. Comparison of the Harshad Mehta Scam and the Ketan Parekh Scam
        5. Conclusion
      4. Reforms in the Capital Market
        1. The Primary Capital Market
        2. Secondary Capital Market
      5. Key Terms
      6. Summary
      7. Review Questions
      8. References
    3. 6 - The Primary Market
      1. Introduction
        1. Intermediaries to an Issue
      2. Free Pricing Regime
      3. Book Building—A New Issue Mechanism in India
        1. The Book Building Process
        2. Bidding Process
        3. Determination of Price
        4. Registering of Prospectus with Registrar of Companies
        5. Applications Supported by Blocked Amount (ASBA) Process
        6. Allotment/Allocation in Book Built Issue
        7. Anchor Investor
        8. Benefits of Book Building Method
        9. Limitations of the Book Building Method
        10. Auction-based Book Building
        11. Reverse Book Building
        12. Conclusion
      4. Green-Shoe Option
      5. On-Line IPOs
      6. Primary Issues
        1. Public Issue
        2. Rights Issue
        3. Indian Depository Receipts (IDRs)
        4. Private Placement Market
        5. Preferential Issue
        6. Qualified Institutions Placement (QIP)
      7. Resource Mobilisation from the Primary Market
        1. Non-government Public Limited Companies (Private Sector)
        2. Mega Issues Floated by Non-government Public Limited Companies
        3. Absorption of Private Capital Issues
      8. Banks and Financial Institutions in the Public Sector
      9. Mutual Funds
      10. Resource Mobilisation from International Markets
        1. Factors Leading to an Increase in the Popularity of International Markets
        2. Global Depository Receipts (GDRs)
        3. American Depository Receipts (ADRs)
        4. Organising Euro Issues
        5. Guidelines Relating to International Issues
        6. Resources Raised through Euro Issues
        7. External Commercial Borrowings (ECBs)
        8. Foreign Currency Convertible Bonds (FCCBs)
        9. Foreign Currency Exchangeable Bonds (FCEBs)
        10. End-use of FCEB Proceeds
        11. Issuing Company
        12. Promoter Group Companies
        13. Parking of FCEB Proceeds Abroad
        14. Conclusion
      11. Key Terms
      12. Summary
      13. Review Questions
      14. References
    4. 7 - Disinvestment of Public Sector Undertakings
      1. Introduction
        1. Disinvestment
      2. Disinvestment Machinery
      3. The PSU Sell-off Methods
        1. Strategic Sales Techniques
      4. Proceeds Realised from Disinvestment
        1. PSU Disinvestment: Summary of Receipts from Disinvestment: 1991–92 to 30–9–2009
      5. Evaluating the Disinvestment Programme
      6. Disinvestment of PSUs in Different Countries
        1. Conclusion
      7. Key Terms
      8. Summary
      9. Review Questions
      10. References
    5. 8 - The Secondary Market
      1. Introduction
        1. Functions of the Secondary Market
        2. Development of the Stock Market in India
      2. Post-reforms Market Scenario
        1. Regulation of Stock Exchanges
      3. Organisation, Management and Membership of Stock Exchanges
        1. Demutualisation of Stock Exchanges
      4. Listing of Securities
        1. Central Listing Authority
        2. The SEBI (Central Listing Authority) Regulations, 2003
      5. Risk Management
        1. Trading Rules and Regulations
        2. Circuit Breakers
      6. Trading Arrangements
        1. Trading and Settlement
        2. Dematerialisation of Securities
      7. Internet Trading
      8. Stock Market Index
        1. Methodologies for Calculating the Index
        2. Global Stock Market Indices
        3. Major Indices in India
      9. Stock Exchanges
        1. The Bombay Stock Exchange
        2. BSE Milestones
        3. Carry Forward Deals, or Badla
        4. Badla Mechanism
        5. Advantages
        6. Listing Categories
        7. BSE Indices
        8. Trends in Turnover on the BSE
        9. Conclusion
      10. The National Stock Exchange of India
        1. Membership Pattern on the NSE
        2. Indices
        3. National Securities Clearing Corporation Limited
        4. Margin Requirements
        5. Capital Market Segment of the NSE
        6. Conclusion
      11. The over the Counter Exchange of India (OTCEI)
        1. Trading Documents on the OTCEI
        2. Advantages of OTCEI
        3. Steps to Improve Turnover on the OTCEI
        4. Conclusion
      12. The Inter-Connected Stock Exchange of India Ltd
      13. Regional Stock Exchanges
        1. Indonext
      14. Measures to Boost Liquidity in the Secondary Market
        1. Investment by Foreign Institutional Investors in the Indian Stock Market
        2. Depositories
        3. Buy Back of Shares
        4. Conclusion
      15. Market Making System
        1. Stock Lending and Borrowing (SLB)
        2. Conclusion
        3. Rolling Settlement
        4. Rolling Settlement
        5. Conclusion
        6. Straight through Processing (STP)
        7. Margin Trading
        8. Conclusion
      16. Impact of Reforms and Measures on Secondary Market Activities
        1. Conclusion
      17. Key Terms
      18. Summary
      19. Review Questions
      20. References
    6. 9 - The Derivatives Market
      1. Introduction
        1. Economic Benefits of Derivatives
        2. Derivatives Defined under the Securities Contracts (Regulation) Act, 1956
        3. History of Derivatives Trading
        4. Types of Financial Derivatives
        5. Distinctive Features of the Derivatives Market
        6. Exchange-traded versus OTC Derivatives Markets
        7. Traders in Derivatives Market
      2. Forwards and Futures
        1. Forward Contracts
        2. Futures Contracts
        3. Need for Futures Markets
        4. Futures Terminology
        5. Role of Clearing House/Corporation
        6. Pricing Futures
      3. Futures Trading Strategies
        1. Hedging with Index Futures
        2. Strategies for Speculation
        3. Arbitrage Strategies
      4. Options
        1. Types of Options
        2. Salient Features of Options
        3. Margins Applicable on Options
        4. Options Terminology
        5. Comparing Futures and Options
        6. Benefits of Options
        7. Pay-off Profile of Call Options
        8. Pay-off Profile of Put Options
        9. Pricing Options
        10. Assumptions Underlying the Black–Scholes Option Pricing Model
      5. Options Trading Strategies
        1. Option Spreads
        2. Volatility Trading
        3. Arbitrage with Options
        4. Hedging with Options
      6. Derivatives Market in India
        1. Derivatives Market at the NSE
      7. Derivatives Trading in India
        1. Stock Index Options
        2. Conclusion
      8. Key Terms
      9. Summary
      10. Review Questions
      11. References
    7. 10 - The Debt Market
      1. Introduction
        1. History of the Indian Debt Market
        2. Link between the Money Market and the Debt Market
        3. Characteristics of the Debt Market
        4. Participants in the Debt Market
        5. Types of Instruments Traded in the Debt Market
        6. Dematerialisation of Debt Securities
        7. Primary and Secondary Segments of Debt Market
      2. The Private Corporate Debt Market
        1. Regulatory Agencies Responsible for Regulating Different Segments of the Corporate Debt Market
        2. Regulations on Issue and Listing of Debt Securities
        3. The Primary Market for Corporate Debt
        4. The Secondary Market for Corporate Debt
        5. SEBI Regulations Relating to Trading of Debt Securities
        6. Measures to Promote the Corporate Debt Market
      3. The Public Sector Undertaking Bond Market
        1. Secondary Market in PSU Bonds
      4. The Government Securities Market
        1. Introduction
        2. Importance of the Government Securities Market (GSM)
        3. Issuers, Investors, and Types of Government Securities
        4. Government Securities Market in the Pre-1991 Period
        5. Objectives of Reforms in the Government Securities Market
        6. Some Policy Measures Undertaken in the 1990s
        7. Strips in the Government Securities Market
        8. Retailing of Government Securities
        9. ‘When-issued’ Market in Government Securities
        10. The System of Ways and Means Advances (WMA) for the Centre
        11. What is Ways and Means Advances?
        12. Advantages of WMA
        13. WMA Limits
        14. Primary and Secondary Market Segments of the Government Securities Market
        15. Government Dated Securities
        16. Ownership Pattern of Central and State Government Securities
        17. Tools for Managing Liquidity in the Government Securities Market
        18. Infrastructure Development of the Government Securities Market
        19. Conclusion
        20. Measures to Strengthen the Government Securities Market Infrastructure
        21. Impact of Reforms in the Government Securities Market
        22. Relative Size of Financial Markets in India
        23. Conclusion
      5. Key Terms
      6. Summary
      7. Review Questions
      8. References
    8. 11 - New Financial Instruments
      1. Introduction
        1. What is a New Financial Instrument?
        2. Reasons for Innovations in Financial Instruments
      2. New Financial Instruments
        1. Floating Rate Bonds
        2. Zero Interest Bonds
        3. Deep Discount Bonds (DDBs)
        4. Revolving Underwriting Finance Facility (RUFF)
        5. Auction Rated Debentures (ARDs)
        6. Secured Premium Notes (SPNs) with Detachable Warrants
        7. Non-convertible Debentures (NCDs) with Detachable Equity Warrants
        8. Secured Zero Interest Partly Convertible Debentures with Detachable and Separately Tradable Warrants
        9. Fully Convertible Debentures (FCDs) with Interest (Optional)
        10. Domestic Convertible Bonds
        11. Differential Shares
        12. Securitised Paper
        13. Collateralised Debt Obligations (CDO)
        14. Inverse Float Bonds
        15. Perpetual Bonds
        16. Municipal Bonds
        17. Conclusion
      3. Key Terms
      4. Summary
      5. Review Questions
      6. References
  8. Part III - Financial Institutions
    1. 12 - Development Financial Institutions
      1. Introduction
      2. Evolution of Development Banks
        1. Development Financial Institutions in India
      3. Changing Role of Development Financial Institutions
        1. Universal Banking
      4. Policy Measures Relating to Development Financial Institutions
        1. Policy Measures
      5. Industrial Finance Corporation of India Limited
        1. Financing Activities
        2. Developmental and Promotional Activities of IFCI
        3. Steps Taken for Revival
        4. Conclusion
      6. The Small Industries Development Bank of India
        1. Financial Products Offered by SIDBI
        2. Subsidiaries
        3. Resources Raised by SIDBI
        4. Conclusion
      7. Infrastructure Development Finance Company Limited
        1. Capitalisation of IDFC
      8. Subsidiary Companies
        1. Institutional Positioning of IDFC
        2. IDFC's Operations
        3. Conclusion
      9. The Export-Import Bank of India
        1. Objectives
        2. Exim Bank—Business Profile
        3. Performance and Contribution
        4. Conclusion
      10. National Bank for Agriculture and Rural Development
        1. Nabard's Mission
        2. Functions of Nabard
        3. Promotion and Development
        4. Refinance
        5. Credit
        6. Direct Credit
        7. Rural Infrastructure Development Fund
        8. Thrust Areas of Nabard
        9. Participation in New Ventures
        10. Amendments to the Nabard Act, 1981
        11. NABARD as a Consultant
        12. NABARD as a Supervisor
        13. Institutional Development
        14. Conclusion
      11. Key Terms
      12. Summary
      13. Review Questions
      14. References
    2. 13 - Banking and Non-Banking Institutions
      1. Banking Institutions
      2. Functions of Bank
        1. Deposits
        2. Credit Creation
        3. Lending of Funds
        4. Ancilliary Functions
        5. Regulation of Banks in India
      3. Development of Banking in India
      4. Scheduled Commercial Banks
        1. Public Sector Banks
        2. Nationalised Banks
        3. Private Sector Banks
        4. Foreign Banks in India
        5. Branches of Indian Banks Abroad
        6. Setting up of Off-shore Banking Units
        7. Mobilisation, Lending and Investment of Funds
      5. Investments of Banks
        1. Investments in SLR Securities
        2. Investments in Non-SLR Securities
      6. Reforms in the Banking Sector
        1. Banking Sector Reforms
        2. Capital Adequacy
        3. Asset Quality
        4. Systems and Methods
        5. Industry Structure
        6. Regulation and Supervision
        7. Legal Amendments
        8. Technology in Banking
        9. Payment and Settlement System
        10. Diversification in Bank Operations
        11. Consolidation in Banking
        12. Equity Capital Raised by Public Sector Banks
        13. Risk Management in Banks
        14. Steps in Risk Management Process
        15. Risk Management Tools
        16. Asset Liability Management (ALM)
        17. ALM Guidelines
      7. Stress Testing
        1. Guidelines for Stress Testing
        2. Remedial Actions
        3. Prudential Regulation
        4. Regulatory Capital and Economic Capital
        5. The Basel Capital Accord
        6. Implementation of Basel Norms in India
        7. Pillar 1
        8. Pillar 2
        9. Pillar 3
        10. Capital Adequacy Norms
        11. RBI Guidelines on Capital Adequacy
        12. Elements of Tier 1 Capital
        13. Elements of Tier 2 Capital
        14. Capital Charge for Credit Risk
        15. Capital Charge for Market Risk
        16. General Market Risk
        17. Measurement of Capital Charge for Equity Risk
        18. Measurement of Capital Charge for Foreign Exchange Risk
        19. Capital Charge for Operational Risk
        20. Example
        21. Solution
        22. Computation of Risk Weighted Assets
        23. Risk Weighted Assets for Credit Risk
        24. Risk Weighted Assets for Market Risk (Trading Book)
        25. Regional Rural Banks
        26. Local Area Banks
        27. Conclusion
      8. Cooperative Banking
        1. Urban Cooperative Banks
        2. Supervision and Inspection of UCBs
        3. Investments in Non-SLR Securities by UCBs
        4. Placement of Deposits with Other Banks by UCBs
        5. Classification of Capital Funds
        6. Asset Classification and Provisioning Norms
        7. Guidelines for Merger of UCBs (Having Negative Net Worth) with DICGC Support
        8. Rural Cooperative Banks
        9. Conclusion
      9. Non-banking Financial Companies
        1. Types of NBFCs
        2. Growth of NBFCs
        3. Regulation of NBFCs
        4. Overview of Regulation of NBFCs
        5. Regulatory Norms and Directions for NBFCs
        6. A. Important Statutory Provisions of Chapter IIIB of the RBI Act as Applicable to NBFCs
        7. B. Directions Applicable to NBFCs
        8. Supervision
        9. Role of Board for Financial Supervision in Monitoring NBFCs
        10. Conclusion
      10. Key Terms
      11. Summary
      12. Review Questions
    3. 14 - Management of Non-Performing Assets by Banks
      1. Introduction
      2. Tools Available to Banks to Manage their NPAS
        1. One Time Settlement/Compromise Scheme
        2. Lok Adalats
        3. Debt Recovery Tribunals
        4. Corporate Debt Restructuring (CDR)
        5. Willful Defaulters
        6. Sarfaesi Act
        7. Asset Reconstruction Companies
      3. Cibil
        1. Conclusion
      4. Key Terms
      5. Summary
      6. Review Questions
      7. Annexure 14.1 Prudential Norms on Income Recognition, Asset Classification, and Provisioning pertaining to Advances
    4. 15 - Mutual Funds
      1. Introduction
        1. Benefits of Mutual Funds
      2. History of Mutual Funds
        1. Growth of Mutual Funds in India
      3. Mutual Fund Concepts
      4. Mutual Fund Investors and Organisation of a Mutual Fund
        1. Sponsor
        2. Mutual Funds as Trusts
        3. Asset Management Company
        4. Other Administrative Entities
        5. Role of Intermediaries in the Indian Mutual Fund Industry
        6. Types of Mutual Fund Schemes
        7. Functional Classification of Mutual Funds
        8. Portfolio Classification
        9. Investment Classification
        10. Geographical Classification
      5. Equity Funds
        1. Diversified Equity Funds
        2. Value Funds
        3. Special Funds
        4. Sectoral Funds
        5. Derivatives Arbitrage Funds
        6. Tax Saving Schemes
        7. Fund-of-Funds
        8. Quant Funds
      6. Debt Funds
      7. Other Funds
      8. Risk and Return in Mutual Funds
        1. Returns from Mutual Funds
        2. Equity-oriented Schemes
        3. Debt-oriented Schemes
        4. How to Invest in a Scheme of Mutual Fund?
      9. SEBI Guidelines Relating to Mutual Funds
        1. Mutual Fund Schemes
        2. Investment Objective
        3. Pricing of Units
        4. Investment by Schemes
        5. Disclosure Requirements
        6. Reporting Requirement
        7. Existing Schemes
        8. Other Aspects
        9. Overseas Investments by Mutual Funds
      10. The Association of Mutual Funds in India
        1. Objectives of AMFI
      11. Unit Trust of India
        1. UTI's Associates
        2. Promotion of Institutions
      12. US-64
      13. Growth and Performance of Mutual Funds in India
        1. Conclusion
    5. 16 - Insurance
      1. Introduction
        1. Role of Insurance in Economic Growth
        2. Principles of Insurance
      2. Origin and Development of Insurance
        1. History of Insurance in India
      3. Opening of the Insurance Sector
      4. Insurance Regulatory and Development Authority
      5. Insurance Regulatory and Development Authority
        1. Mission Statement of the IRDA
        2. Duties, Powers, and Functions of the IRDA
        3. Operations of the IRDA
        4. Policy Holder's Grievances Redressal System
        5. Policy Holder's Grievances Redressal System
        6. Business to be Done by an Insurer in the Rural Sector
        7. Rural and Social Sector Obligations for New Entrants
      6. Insurance Intermediaries
        1. Agents
        2. Surveyors and Loss Assessors
        3. Brokers
        4. Third Party Administrators
        5. Bancassurance
      7. Risk Management
      8. General Insurance
        1. General Insurance Products
        2. Development of General Insurance
        3. Tariff Advisory Commitee
        4. De-tariffing in Non-life Insurance
        5. General Insurance Council
        6. Pattern of Investments
        7. Approved Investments for General Business
        8. Exposure/Prudential Norms
        9. Rural and Social Sector Obligations for New Entrants
        10. Maintenance of Solvency Margins of General Insurers
        11. Non-life Insurance Industry
        12. Conclusion
      9. Health Insurance
        1. Health Insurance Policies
        2. Conclusion
      10. Reinsurance
        1. Types of Reinsurance
        2. Reinsurance Business in Life and General Insurance
        3. Life Insurance-Reinsurance Regulations, 2000
        4. Non-life Reinsurance Regulations
      11. General Insurance Corporation of India
        1. Operations of GIC
        2. Conclusion
      12. Life Insurance
        1. Benefits of Life Insurance
        2. Life Insurance Products
        3. New Players in the Life Insurance Market
        4. Changing Trends in Life Insurance
        5. Investments
        6. Maintenance of Solvency Margins of Insurers
        7. Life Insurance Council
      13. Life Insurance Corporation (LIC) of India
        1. LIC Subsidiaries
        2. LIC Products
        3. Achievements of LIC
      14. The Life Insurance Industry
      15. Micro Insurance
        1. Micro Insurance Distribution
        2. Micro Insurance Regulation
        3. Future of Micro Insurance
        4. Conclusion
      16. Key Terms
      17. Review Questions
  9. Part IV - Financial Services
    1. 17 - Investment Banking
      1. Introduction
      2. Functions of Investment Banks
      3. Types of Investment Banks
      4. Investment-banking Services
        1. (I) Fund-raising Services
        2. (II) Advisory Services
      5. Merchant-banking Services
      6. SEBI (Merchant Banker) Regulations, 1992
        1. Appointment of Lead Merchant Bankers
        2. Responsibilities of Lead Managers
        3. Acquisition of Shares Prohibited
        4. Information to the Board
        5. Disclosures to the SEBI
        6. Appointment of Compliance Officer
      7. Pre-issue Obligations
        1. Documents to be Submitted along with the Offer Document by the Lead Manager
        2. Undertaking
        3. List of Promoters' Group and Other Details
        4. Appointment of Intermediaries
        5. Appointment of Other Intermediaries
        6. Underwriting
        7. Offer Document to be Made Public
        8. No-complaint Certificate
        9. Mandatory-collection Centres
        10. Authorised Collection Agents
        11. Abridged Prospectus
        12. Agreements with Depositories
      8. Post-issue Obligations
        1. Post-issue Monitoring Reports
        2. Redressal of Investor Grievances
        3. Coordination with Intermediaries
        4. Underwriters
        5. Bankers to an Issue
        6. Post-issue Advertisements
        7. Basis of Allotment
        8. Proportionate-allotment Procedure
        9. Other Responsibilities
      9. Changing Landscape of Investment Banking
      10. Key Terms
      11. Summary
      12. Review Questions
      13. References
    2. 18 - Depositories and Custodians
      1. The Depository System
        1. Need for Setting-up a Depository in India
        2. Difference between a Demat Share and a Physical Share
        3. Benefits of a Depository System
      2. Cost Comparison for Trading in Physical and Demat Segments
        1. The Move on to a Depository System in India
        2. The Depository Process
        3. Trading/Settlement of Demat Securities
      3. The National Securities Depository Limited
        1. Business Partners of the NSDL
      4. The Central Depository Services (India) Limited
      5. Comparison of Charges at the NSDL and the CDSL and Growth of Demat Accounts
        1. Growth in Demat Accounts
      6. Custodians
      7. The Stock Holding Corporation of India Limited
        1. New Products Introduced by the SHCIL
      8. Key Terms
      9. Summary
      10. Review Questions
      11. References
    3. 19 - Credit Rating
      1. Introduction
        1. The Importance of Credit Rating
        2. Origin of the Concept of Credit Rating
      2. The Growth of the Credit Rating Industry in India
        1. Rating Methodology
        2. Rating Symbols
        3. SEBI Regulations for Credit Rating Agencies
        4. Rating Process
        5. Default Studies
        6. Dealing with Conflict of Interest
        7. Obligations in Respect of Rating of Structured Finance Products
        8. Unsolicited Credit Ratings
        9. Disclosures
        10. Shareholding
        11. Compliance Status of IOSCO Code of Conduct
      3. Credit Rating Agencies in India
        1. Crisil Limited (Formerly the Credit Rating Information Services of India Limited)
        2. ICRA Limited (Formerly Investment Information and Credit Rating Agency of India Limited)
        3. Credit Analysis and Research Limited (CARE) Ratings
        4. Fitch Ratings India Private Limited
        5. Brickwork Ratings
      4. Rating Agencies for SMEs
      5. IPO Grading by Credit Rating Agencies
        1. Limitations of Credit Rating in India
        2. Conclusion
      6. Key Terms
      7. Summary
      8. Review Questions
      9. References
    4. 20 - Factoring and Forfaiting
      1. Introduction
      2. Factoring
        1. The Origin of Factoring
        2. Types of Factoring
        3. Factoring Mechanism
        4. Factoring Charges
        5. Legal Aspects of Factoring
        6. Advantages of Factoring
        7. Comparison of Factoring with Bills Discounting and Cash Credit
        8. International Factoring
        9. International Factoring Charges
        10. Factor Chain International
        11. Factoring in India
        12. Factors Inhibiting the Growth of Factoring in India
      3. Forfaiting
        1. Origin of Forfaiting
        2. Characteristics of a Forfaiting Transaction
        3. Need for Forfaiting
        4. Benefits of Forfaiting
        5. Flow Chart of a Forfaiting Transaction
        6. Pricing of a Forfaiting Transaction
        7. Difference between Forfaiting and Factoring
        8. Growth of Forfaiting in India
        9. Conclusion
      4. Key Terms
      5. Summary
      6. Review Questions
      7. References
    5. 21 - Housing Finance
      1. Introduction
      2. Role of Housing and Housing Finance in the Economy
      3. Evolution of Housing and Housing Finance in India
      4. Policy Initiatives and Measures to Develop Housing Sector in India
      5. Housing-finance Institutions (HFIS)
        1. Scheduled Commercial Banks (SCBs)
        2. Scheduled Cooperative Banks
        3. Regional Rural Banks (RRBs)
        4. Agriculture and Rural Development Banks (ARDBs)
        5. Housing-finance Companies (HFCs)
        6. The National Cooperative Housing Federation of India (NCHF)
        7. Apex-cooperative Housing-finance Societies (ACHFS)
      6. Types of Housing Loans
      7. Risk Management by HFCs
      8. Marketing Strategies of HFCs
      9. National Housing Bank
        1. Role of NHB in Housing Finance
        2. Various Initiatives Undertaken by NHB for the Development of Housing in India
        3. Prudential Norms for the Housing-finance Sector
      10. Residential Mortgage-backed Securitisation
        1. Benefits of Securitisation
      11. Reverse-mortgage Loan (RML)
      12. Benefits of RML
      13. Housing-finance Industry: Issues and Future Outlook
      14. Key Terms
      15. Summary
      16. Review Questions
      17. References
    6. 22 - Leasing and Hire Purchase
      1. Introduction to Lease Financing
        1. Leasing and Economic Growth
        2. Leasing in India
      2. Lease Structure
        1. Rights, Obligations and Responsibilities of the Lessor
        2. Rights, Obligations and Responsibilities of the Lessee
      3. Types of Leases
        1. Advantages and Disadvantages of Leasing
        2. Accounting for Lease in the Book of Lessee
        3. Accounting for Lease in the Book of Lessor
        4. Legal Aspect of Leasing
        5. Taxation Aspect of Leasing
      4. Hire Purchase
        1. Essentials of Hire Purchase
        2. Difference between Lease and Hire Purchase
        3. Accounting for Hire Purchase
        4. Legal Aspects of Hire Purchase
        5. Taxation Aspect of Hire Purchase
      5. Instalment Purchase
        1. Difference between Instalment Purchase and Hire Purchase
        2. Conclusion
      6. Key Terms
      7. Summary
      8. Review Questions
      9. References
    7. 23 - Financial Inclusion and Microfinance
      1. Introduction to Financial Inclusion
        1. Evidences of Financial Exclusion
        2. Benefits of Financial Inclusion
        3. Process of Financial Inclusion
        4. Various Initiatives Undertaken for Financial Inclusion
        5. Conclusion
      2. Microfinance
        1. Microfinance: The Paradigm
        2. NGOs and SHGs
        3. Microfinance Delivery Mechanisms
      3. Resources for Supporting Microfinance
        1. Microfinance Development Fund (MFDF)
        2. Collaboration with External Agencies
        3. The Micro Financial Sector (Development and Regulations) Bill, 2007
        4. The Positive Side of Microfinance
        5. The Downside of Microfinance
        6. Future of Microfinance
      4. Key Terms
      5. Summary
      6. Review Questions
      7. References
  10. Part V - Financial Regulation
    1. 24 - Financial Regulation
      1. Regulation of the Capital Market
      2. The Securities and Exchange Board of India (SEBI)
        1. Management of the SEBI under the SEBI Act, 1992
        2. Powers and Functions of the SEBI
        3. Regulations, Guidelines, and Schemes Issued by the SEBI
        4. Regulation of the Securities Market
        5. Supervision of Securities Market
        6. Inspection of Mutual Funds
        7. Self Regulatory Organisations (SROs)
        8. Investor Protection Measures
        9. Investors' Education
        10. Investors' Grievances Redressal
        11. Investors' Associations
        12. Achievements of the SEBI
        13. Future Plans
        14. Conclusion
      3. The Reserve Bank of India
        1. Objectives of the Reserve Bank
        2. Organisation of the Reserve Bank
        3. Subsidiaries
        4. Legal Framework
        5. Main Functions of the RBI
        6. Role of the Reserve Bank of India
        7. Conclusion
      4. Key Terms
      5. Summary
      6. Review Questions
      7. References
  11. Acknowledgements
  12. Copyright