Foreign Banks are those banks which has its headquartersin another country but has branches in other countries.
Such banks are supposedto follow all the rules and regulations of the country in which it isoperating. It includes Royal bank of Scotland, Citi Bank, etc… Apart from theownership, all these banks provide equally better service and they have almostthe same rate of interest. Regional Rural Banks or RRBs are local small levelbanks operating in all the states of the country.
The main aim of RRB is toserve the rural areas which has basic banking and financial services. They havebeen formed to cater the needs of weak and poorer sections of the society. RRBsare regulated by the National Bank for Agriculture and Rural Development(NABARD).Cooperative Banks in India are registered under theCo-operative Societies Act. It is a bank that holds deposits, provides loansand various financial services to the cooperatives and member owned organizations.They mainly serve small industry and self employed workersNon-banking institutions are the purveyors of creditin the country.
They does not have a full banking license and they are notsupervised by any banking regulatory agency. All the non-banking institutionsin the country are regulated by the Reserve Bank as in the case of bankinginstitutions.Non-banking institutions can be divided intoNon-banking Finance Companies and Development Finance Institutions. Accordingto The Reserve Bank of India (RBI), “A Non-Banking Financial Company (NBFC) is acompany registered under the Companies Act, 1956 engaged in the business ofloans and advances, acquisition of shares/stocks/bonds/debentures/securitiesissued by Government or local authority or other marketable securities.” Theycan provide services like accepting deposits and lending money, but they do nothave a banking license and they cannot issue cheques to its customers. They canprovide services in money markets, underwriting, etc… Mutual fund is a professionally managed investmentfund that pools money from the investors and invests them in securities likeshares, bonds and other money market instruments by a professionally managedfund manager who is specialized in the work. They generate revenue from thefunds and it is passed back to investors.
It is an ideal investment for peoplewho wants to invest money but does not have much information about investing. Insurance is an agreement or a contract where theinsurer undertakes to provide guarantee to pay a certain sum of money to theinsurer in the case of any unforeseen events or for any uncertain financialloss, as mentioned in the insurance contract. The insured pays a certain sum ofmoney known as premium to the insurer for the service provided. Financial Markets: It is amarketplace where traders buy and sell assets such as equities, bonds,currencies, etc… It can be divided into capital market and money market.Capital market deals in long term securities over one year. Capital market aremarkets for selling and buying equity and debt instruments.
It channelizesavings and investment between suppliers of capital. It channel the wealth ofsavers to those who can it invest it productively. Capital market can bedivided into equity market and debt market. Equity market includes Public issues,Private placement, National Stock Exchange, Bombay Stock Exchange, Derivativesmarket, etc… Money market deals with short term securities of less than oneyear. They are short term instruments of high liquidity which are issued by theGovernments, financial institutions and large corporations. It involvesTreasury bills, call money market, Commercial bills, Commercial papers,certificates of deposit and Term money.
Financial Markets can be either organized markets orunorganized markets. Organized Markets are markets where all the transactionsare regulated by the rules and regulations of a particular exchange that dealsin trading. Unorganized Markets include the financial transactions that takesplace outside a regulated exchange. It usually includes moneylenders andunregulated non-banking financial intermediaries. Financial Instruments:These are monetary contracts between parties. It is a document such ascurrency, share or bond that has a monetary value or represents a legallybinding agreement between two or more parties.
It is a contract which resultsin a financial asset for one company and liability for another. It can be shortterm, medium term and long term. Short term instruments are those with maturityof less than one year. Medium term instruments involves maturity period of upto 10 years. Long term refers to those instruments which last for than shortand medium term deposits. Financial instruments are of two types; primarysecurities and secondary securities. Primary securities can be equity, preference,debt and various other instruments.
Secondary securities can be time deposits,mutual funds, and insurance policies. Financial Services: These are theeconomic services provided by the finance industry which involves designing anddelivering financial instruments and services to various parties. It plays animportant role in the economy by moving funds from those with excess funds tothose who need it. Efficiency of a financial system depends on the quality andvariety of financial services provided by the intermediaries. FinancialServices are not generally limited to deposit taking or giving out loans, butthey are also present in the field of distribution of financial products. FinancialServices in the country are regulated by The Reserve Bank of India, Securities andExchange Board of India (SEBI) and other regulatory bodies. Some of the majorplayers of financial services in the country are SBI Capital Markets, Bajaj Capital,Birla Global Finance, L&T Finance Ltd etc… Some of the main servicesprovided by them includes Depositories, credit rating, factoring, merchantbanking, leasing, hire purchase, portfolio management and underwriting.
Financial services include fund based and fee based services.Fund based involves provision of funds against assets, bank deposits,etc…
It involves underwriting,factoring, insurance services, mutual funds, etc… Fee based involves renderingthe services for which the financial intermediary charges a fee or acommission. It includes stock broking, merchant banking, credit rating, etc…