Description
about bbi
FINANCIAL SERVICES OFFERED BY BANK AFTER LPG A Project report submitted in partial fulfillment of the requirement for the award of the degree of
‘BANKING AND INSURANCE’
Mumbai University Submitted by: GROUP NO.7 SEMESTER: V NAME OF MEMBERS SURAJ SAHU SUPRIYA SANDEEP SALVE TRUPTI SATAV VISHAL SAWARDEKAR 33 34 35 ROLL NO. 31 32
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Banking in India
Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 49,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5%. PRODUCTS AND SERVICES OFFERED BY SBI: Personal Banking
• • • • •
SBI SBI SBI SBI SBI
Term Deposits SBI Loan For Pensioners Recurring Deposits Loan Against Mortgage Of Property Housing Loan, loan Against Shares & Debentures Car Loan Rent Plus Scheme Educational Loan Midi-Plus Scheme
Other Services
• • • • • • • • • • • • •
Agriculture/Rural Banking NRI Services ATM Services Demat Services Corporate Banking Internet Banking Mobile Banking International Banking Safe Deposit Locker RBIEFT E-Pay E-Rail Broking Services • Gift Cheques
FINANCIAL SERVICES Financial service is a service offered by a financial service supplier to its clients. It means mobilizing and allocating savings and all activities in the transformation of savings into investments.
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Definition: “The term financial service means mobilizing resources i.e. savings into investments.” Financial services are classified into two types A. Fund based activities B. Fees based activities Major Financial Services Offered By Banks after LPG Today, the importance of financial services is gaining momentum all over the world. As a result of innovations, new instruments and products are emerging in market. The market includes Capital Market and Money Market. As a result, sophistication and innovations have appeared in the area of financial intermediations. Some are briefly discussed:
? Merchant Banking ? Loan Syndication
and
allocating
? Leasing ? Project Finance
? Hire Purchase ? Mutual Fund
? Factoring
? Venture Capital
? Securitization
? Derivatives ? Working Capital Finance
1. Merchant Banking It is a new financial service covers wide range of services towards corporate. It refers to an organization that underwrites corporate securities and advices on issues like corporate mergers of commercial ventures. It may be a bank, corporate body, a firm or a proprietory concern. Thus, in short it means a non fund based financial service.
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Merchant banking is defined as “an institution which covers wide range of activities such as management of customer services, portfolio management, credit syndication, councelling etc. Merchant Banking in India The merchant banking services were offered along with traditional banking services. In the middle of 80’s the Banking Regulation Act was amended permitting commercial banks to offer wide range of financial services through subsidiary rule. SBI was the first Indian bank to set up a merchant banking division in1972. Merchant banking in India have grown in a very short period. Its activity became very attractive to the banks, consultant firms and share brokers. So, merchant banker is like an intermediary answerable to the investors for proper appraisal of the project. In 1986, SBI had set up a separate associate called SBI Capital Market Ltd. which is the biggest merchant banker in India. Now in current market scenario SBI and ICICI are emerging as the leaders in merchant banking business as compare to foreign banks. Services Provided By Merchant Bankers: a)Corporate councelling b)Project councelling c) Issue management d)Portfolio management
e) Advisory services relating to mergers, acquisition, etc.
f) Working capital management
g) Structure finance to corporate clients a) Corporate Councelling:
Corporate councelling means advising to a Corporate Units by the Merchant Banker to ensure better corporate performance in terms of image building among investors, steady growth through good working and appreciation in market value of its equity shares. It covers the entire field of merchant banking activities such as project councelling, capital restructuring, project management, public issue management, loan syndication. Here, they give opinions and suggestions to their clients and help taking action to solve their problems.
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b) Project Councelling: Project councelling us a very important and lucrative merchant banking service. It covers development of an idea into project, preparation of project report, estimation of cost of the project and deciding upon the means of finance and techno-economic appraisal of projects for capital issue/financing etc. The fees charged for project report preparation/appraisal ranges between 0.25% to 2% of the total project cost and it depends upon the total size and complexity of project. c) Issue Management: Management if issue involves marketing of corporate securities i.e. equity shares, preference shares, debentures, bonds etc. merchant bank act as a intermediary whose main job is to transfer capital from those who owns it to those who needs it. It involves pre issue and post issue management.
d) Portfolio Management:
SBI offers an integrated end to end customized asset management solution for institution by understanding the client needs in terms of risk and returns and providing assets portfolio recommendation. Portfolio management refers to maintaining proper combination of securities in a manner that gives maximum return with minimum risk. In other words it refers to investment in different kinds of securities such as shares, debentures or bonds issued by different companies and securities issued by the government. As every investor is prudent and interested in safety, liquidity and profitability of his investment, the expert guidance is given by merchant bankers as portfolio manager.
e) Advisory Services Relating to Mergers, Takeovers etc.:
Merchant banker is the middleman between in setting the negotiation between the offeror and offeree in case of mergers, acquisition and takeover. Merger is a combination of two or more companies into a single company where one survive and other lose their existence. Takeover is the purchase by one company acquiring, controlling interest in share capital of other company.
f) Working Capital Management:
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Merchant banker advise on combination of long term and short term fund. They assists on bill discounting, placement of commercial paper, corporate deposits etc. they act as an intermediary. 2. Loan Syndication Loan syndication refers to the services rendered by an organization in arranging and procuring credit from financial institutions, banks, other lending and investment companies for financing the project or meeting working capital requirements. In other words it is a loan arranged by a bank called lead manager for the borrower who is usually a large corporate customer government department. Since, a single bank cannot provide such a huge sum as a loan, number of banks come together and form a syndicate. The SBI leverages its vast network of relationships to arrange syndicated credit products for corporate clients and industrial projects. With its rich experience and strong reputation, SBI’s syndication desk can assemble large loan packages involving a ring of reputed financial entities, domestic and international, that match the large credit requirements of infrastructure projects. 3. LEASING The SBI’s has deployed a dedicated Strategic Business Unit for lease financing that is richly experienced in arranging lease contracts for procuring expensive equipment for your project or plant. At SBI, we arrange lease agreements as stand alone contracts or as part of a structured package. A lease is an agreement under which a company or a firm acquires a right to make use of capital equipment to other on a payment of prescribed fees called rental charges. However the lessor remains the owner of the equipment. Now a days, commercial banks have also been permitted to carry out this business. Definition: According to James C. Van Horne, “Lease is a contract whereby the owner of an asset i.e. lessor grants to another party i.e. lessee the exclusive right to use the asset usually for an agreed period of time in return for a payment of rent.” Types of Lease: There are five types of lease financing provided by SBI:
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a) b) c) d) e)
Financial Lease Operating Lease Sale and Lease Back Leverage Lease Cross-Border Lease
4. PROJECT FINANCE The SBI has formed a dedicated Project Finance Strategic Business Unit to assess credit proposals from and extend term loans for large industrial and infrastructure projects. In general, project finance covers greenfield industrial projects, capacity expansion at existing manufacturing units, construction ventures or other infrastructure projects. Capital intensive business expansion and diversification as well as replacement of equipment may be financed through the project term loans. 5. HIRE PURCHASE Hire purchase means buying goods on credit, with the goods themselves being security for the loan. You usually pay a deposit of some of the purchase price and borrow the rest. You don't own the goods until you've paid the final installment. Hire-purchase agreements must comply with the Hire Purchase Act 1971. Whenever interest is charged on the deal, the sale must also comply with the Credit Contracts Act 1981. Shops usually arrange their hire-purchase deals using outside finance companies and your payments go to the finance company not the shop. In this report we use the term "seller" to mean either the shop or the finance company, whichever is relevant. Definition: A system for purchasing merchandise, such as cars or furniture, in which the buyer takes possession of the merchandise on payment of a deposit and completes the purchase by paying a series of regular installments while the seller retains ownership until the final installment is paid. 6. MUTUAL FUND:
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Mutual funds are the most important among newer capital market institution. Several public sector banks and financial institution have set up mutual fund on tax-exempt basis, virtually on the same footing as UTI. Their main function is to mobilize the savings of the general public and invest them in stock market securities such as government securities, gold market and real estate. There was even diversification of saving of middle classes from banks to mutual funds.
Definition: According to SEBI mutual fund is defined as, “A fund established in the form of trust by a sponsor to raise money through same of units to the public, under one or more schemes, for investing in securities in accordance with regulation.” SBI Mutual Fund (SBI MF) SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country with an investor base of over 5.8 million. With over 20 years of rich experience in fund management, SBI MF brings forward its expertise in consistently delivering value to its investors. SBI MF draws its strength from India's Largest Bank State Bank of India .SBI Mutual Fund is India’s largest bank sponsored mutual fund.
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SBI offers different types of Mutual Fund schemes to the investors. a)Schemes according to Maturity Period: I. II. Open-ended Fund Close-ended Fund b)Fund according to Investment Objective: I. II. III. IV. Growth / Equity Oriented Scheme Income / Debt Oriented Scheme Balanced Fund Money Market or Liquid Fund V. Gilt Fund VI. Index Funds 7. SECURITIZATION: Securitization is a structured finance process that distributes risk by aggregating assets in a pool (often by selling assets to a special purpose entity), and then issuing new securities backed by the assets and their cash flows. The securities are sold to investors who share the risk and reward from those assets. Securitization is similar to a sale of a profitable business ("spinning off") into a separate entity. The previous owner trades its ownership of that unit, and all the profit and loss that might come in the future, for present cash. The buyers invest in the success and/or failure of the unit, and receive a premium (usually in the form of interest) for doing so. In most securitized investment structures, the investors' rights to receive cash flows are divided into "tranches": senior tranche investors lower their risk of default in return for lower interest payments, while junior tranche investors assume a higher risk in return for higher interest. Benefits to the investor: From an investor's perspective, securitization offers an alternative investment medium, which, for a given rating level, usually offers a safer investment avenue and higher risk-adjusted returns compared to equivalent rated bank or corporate debt. DERIVATIVES: Derivative is a bilateral contract or payment exchange agreement whose value is derived from the value of an underlying asset like interest rate, exchange rate, equity and other indices. There are two simple blocks called Forward and Option for every derivative transaction. It is a financial contract with a value linked to the
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expected future price movements of the asset it is linked to - such as a share or a currency. There are many kinds of derivatives, with the most notable being swaps, futures, and options. However, since a derivative can be placed on any sort of security, the scope of all derivatives possible is nearly endless. Thus, the real definition of a derivative is an agreement between two parties that is contingent on a future outcome of the underlying. 8. FACTORING: SBI Bank's Factoring performs an important trade finance service by helping you convert your receivables into cash - thus helping you tide over constraints of cash flow and working capital. Factoring relies on the financial strength, creditworthiness of your customers. Your account receivables in the form of invoices and bills are purchased by ICICI Bank at a discount. Thus, the onus of collection too falls on ICICI Bank and you can focus your attention and effort on the growth of your business. Services • Domestic factoring - discounting of non-LC backed domestic invoices/ bills • Export factoring - discounting of non-LC backed export invoices/bills. Benefits • Flexible financial solution • Improves your cash flow • Improves your credit rating • Reduces your credit risk • Funding based on creditworthiness of your customers • Improves supplier discounts • Releases working capital for other business needs • Shifts your focus from your cash flows to the growth of your business • Efficient management of your receivables. OFFSHORE BANKING
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State Bank of India Opens India's First Offshore Banking Unit State Bank of India has opened the first Offshore Banking Unit (OBU) in India at the SEEPZ Special Economic Zone, New Bank Building, Andheri (East) Mumbai 400,096 on 17th July 2003 - another landmark in the history of India's Financial Sector. The OBU will be deemed as an overseas branch of the Bank and undertake the following activities : 1. Raise funds in convertible foreign currency as deposits and borrowings from Non Residents sources. 2. Transact in foreign exchange with residents in India who are eligible to enter into or undertake such transactions in terms of various Rules and Regulations as framed under Foreign Exchange Management Act, 1999. 3. Open foreign currency accounts abroad as well as with other OBUs in India 4. Trade in foreign currencies in the overseas market and also with banks in India where both legs of the transactions are denominated in foreign currencies. 5. Provide customized loan and liability products for the benefit of clients 6. Maintain Special Rupee account with an Authorised Dealer in India out of the convertible foreign exchange resources for meeting local expenses
7. Buy Rupees from an Authorised Dealer in India to fund the Special Rupee Account.
Working Capital Finance: SBI offers working capital finance to meet the entire range of shortterm fund requirements that arise within a corporate day-to-day operational cycle. The SBI working capital loans can help your company in financing inventories, managing internal cash flows, supporting supply chains, funding production and marketing operations, providing cash support to business expansion and carrying current assets. Corporate Term Loan The SBI corporate term loans can support your company in funding
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ongoing business expansion, repaying high cost debt, technology up gradation, R&D expenditure, leveraging specific cash streams that accrue into your company, implementing early retirement schemes and supplementing working capital. Corporate term loans can be structured under the FCNR (B) scheme as well, with the option of switching the currency denomination at the end of interest periods. This will help you take advantage of global interest rate trends vis-à-vis domestic rates to minimize your debt cost. The bank’s corporate term loans are generally available for tenors from three to five years, synchronized with your specific needs. SBI Life Insurance Company Limited SBI Life Insurance is a joint venture life insurance company between State Bank of India (SBI), the largest state-owned banking and financial services company in India, and BNP Paribas Assurance. SBI owns 74% of the total capital and BNP Paribas Assurance the remaining 26%. SBI Life Insurance has an authorized capital of Rs. 2,000 crores and a paid up capital of Rs 1,000 crores. When government of India opened life insurance sector to private companies, SBI started SBI Life as a joint venture with BNP Paribas in 2001. While in it's initial stage it's business was mainly from bancassurance channel, now it is developing its own Agency team for selling it's life insurance products.
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Declaration
WE the students of
Dnyanasadhana College, Thane
. T.Y.
BANKNG AND INSURANCE (SEMESTER Vth) herby declare that we have completed this project on “Financial services of banks after LPG” in the academic year 2010-2011. The information submitted is true and original to the best of my knowledge.
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Acknowledgement
WE take this opportunity with great pleasure to present before you this project on “Financial
services of banks after LPG”
which is a result of cooperation, hard work and good wishes of many people. WE would like to thank my with deep sense Our project guide
Miss.Shraddha Bhoome
for her kind appreciation, friendly
guidance, constant encouragement, involvement in my project work and for her valued guidance throughout my study.
We are also thankful to Mr. V. B. Joshi ( C.R.O.) who has provided us the valuable information about the new financial products and services. We owe the debt to our
Principal Mr. G.B. Vishe
for giving Us an
opportunity to present a creative outcome in form of a project. We express our sincere thanks to the library staff who have provided us right information and study material at the right time. No words can adequately express our debt of gratitude to all our BBI friends for their continuous support while the work was in process. We must also put on record my gratitude to my Institute DNYANASADHANA COLLEGE for all that We learnt as a student. We also wish to thank my Family Members whose efforts and creativity helped me in giving the final structure to the project.
Lastly needless to say We are am also thankful to all those seen and unseen hands and minds, which have been of direct or indirect, help in the completion of my project.
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BIBILOGRAPHY
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doc_527601688.doc
about bbi
FINANCIAL SERVICES OFFERED BY BANK AFTER LPG A Project report submitted in partial fulfillment of the requirement for the award of the degree of
‘BANKING AND INSURANCE’
Mumbai University Submitted by: GROUP NO.7 SEMESTER: V NAME OF MEMBERS SURAJ SAHU SUPRIYA SANDEEP SALVE TRUPTI SATAV VISHAL SAWARDEKAR 33 34 35 ROLL NO. 31 32
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Banking in India
Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 49,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5%. PRODUCTS AND SERVICES OFFERED BY SBI: Personal Banking
• • • • •
SBI SBI SBI SBI SBI
Term Deposits SBI Loan For Pensioners Recurring Deposits Loan Against Mortgage Of Property Housing Loan, loan Against Shares & Debentures Car Loan Rent Plus Scheme Educational Loan Midi-Plus Scheme
Other Services
• • • • • • • • • • • • •
Agriculture/Rural Banking NRI Services ATM Services Demat Services Corporate Banking Internet Banking Mobile Banking International Banking Safe Deposit Locker RBIEFT E-Pay E-Rail Broking Services • Gift Cheques
FINANCIAL SERVICES Financial service is a service offered by a financial service supplier to its clients. It means mobilizing and allocating savings and all activities in the transformation of savings into investments.
Page | 2
Page |3
Definition: “The term financial service means mobilizing resources i.e. savings into investments.” Financial services are classified into two types A. Fund based activities B. Fees based activities Major Financial Services Offered By Banks after LPG Today, the importance of financial services is gaining momentum all over the world. As a result of innovations, new instruments and products are emerging in market. The market includes Capital Market and Money Market. As a result, sophistication and innovations have appeared in the area of financial intermediations. Some are briefly discussed:
? Merchant Banking ? Loan Syndication
and
allocating
? Leasing ? Project Finance
? Hire Purchase ? Mutual Fund
? Factoring
? Venture Capital
? Securitization
? Derivatives ? Working Capital Finance
1. Merchant Banking It is a new financial service covers wide range of services towards corporate. It refers to an organization that underwrites corporate securities and advices on issues like corporate mergers of commercial ventures. It may be a bank, corporate body, a firm or a proprietory concern. Thus, in short it means a non fund based financial service.
Page | 3
Page |4
Merchant banking is defined as “an institution which covers wide range of activities such as management of customer services, portfolio management, credit syndication, councelling etc. Merchant Banking in India The merchant banking services were offered along with traditional banking services. In the middle of 80’s the Banking Regulation Act was amended permitting commercial banks to offer wide range of financial services through subsidiary rule. SBI was the first Indian bank to set up a merchant banking division in1972. Merchant banking in India have grown in a very short period. Its activity became very attractive to the banks, consultant firms and share brokers. So, merchant banker is like an intermediary answerable to the investors for proper appraisal of the project. In 1986, SBI had set up a separate associate called SBI Capital Market Ltd. which is the biggest merchant banker in India. Now in current market scenario SBI and ICICI are emerging as the leaders in merchant banking business as compare to foreign banks. Services Provided By Merchant Bankers: a)Corporate councelling b)Project councelling c) Issue management d)Portfolio management
e) Advisory services relating to mergers, acquisition, etc.
f) Working capital management
g) Structure finance to corporate clients a) Corporate Councelling:
Corporate councelling means advising to a Corporate Units by the Merchant Banker to ensure better corporate performance in terms of image building among investors, steady growth through good working and appreciation in market value of its equity shares. It covers the entire field of merchant banking activities such as project councelling, capital restructuring, project management, public issue management, loan syndication. Here, they give opinions and suggestions to their clients and help taking action to solve their problems.
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b) Project Councelling: Project councelling us a very important and lucrative merchant banking service. It covers development of an idea into project, preparation of project report, estimation of cost of the project and deciding upon the means of finance and techno-economic appraisal of projects for capital issue/financing etc. The fees charged for project report preparation/appraisal ranges between 0.25% to 2% of the total project cost and it depends upon the total size and complexity of project. c) Issue Management: Management if issue involves marketing of corporate securities i.e. equity shares, preference shares, debentures, bonds etc. merchant bank act as a intermediary whose main job is to transfer capital from those who owns it to those who needs it. It involves pre issue and post issue management.
d) Portfolio Management:
SBI offers an integrated end to end customized asset management solution for institution by understanding the client needs in terms of risk and returns and providing assets portfolio recommendation. Portfolio management refers to maintaining proper combination of securities in a manner that gives maximum return with minimum risk. In other words it refers to investment in different kinds of securities such as shares, debentures or bonds issued by different companies and securities issued by the government. As every investor is prudent and interested in safety, liquidity and profitability of his investment, the expert guidance is given by merchant bankers as portfolio manager.
e) Advisory Services Relating to Mergers, Takeovers etc.:
Merchant banker is the middleman between in setting the negotiation between the offeror and offeree in case of mergers, acquisition and takeover. Merger is a combination of two or more companies into a single company where one survive and other lose their existence. Takeover is the purchase by one company acquiring, controlling interest in share capital of other company.
f) Working Capital Management:
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Merchant banker advise on combination of long term and short term fund. They assists on bill discounting, placement of commercial paper, corporate deposits etc. they act as an intermediary. 2. Loan Syndication Loan syndication refers to the services rendered by an organization in arranging and procuring credit from financial institutions, banks, other lending and investment companies for financing the project or meeting working capital requirements. In other words it is a loan arranged by a bank called lead manager for the borrower who is usually a large corporate customer government department. Since, a single bank cannot provide such a huge sum as a loan, number of banks come together and form a syndicate. The SBI leverages its vast network of relationships to arrange syndicated credit products for corporate clients and industrial projects. With its rich experience and strong reputation, SBI’s syndication desk can assemble large loan packages involving a ring of reputed financial entities, domestic and international, that match the large credit requirements of infrastructure projects. 3. LEASING The SBI’s has deployed a dedicated Strategic Business Unit for lease financing that is richly experienced in arranging lease contracts for procuring expensive equipment for your project or plant. At SBI, we arrange lease agreements as stand alone contracts or as part of a structured package. A lease is an agreement under which a company or a firm acquires a right to make use of capital equipment to other on a payment of prescribed fees called rental charges. However the lessor remains the owner of the equipment. Now a days, commercial banks have also been permitted to carry out this business. Definition: According to James C. Van Horne, “Lease is a contract whereby the owner of an asset i.e. lessor grants to another party i.e. lessee the exclusive right to use the asset usually for an agreed period of time in return for a payment of rent.” Types of Lease: There are five types of lease financing provided by SBI:
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a) b) c) d) e)
Financial Lease Operating Lease Sale and Lease Back Leverage Lease Cross-Border Lease
4. PROJECT FINANCE The SBI has formed a dedicated Project Finance Strategic Business Unit to assess credit proposals from and extend term loans for large industrial and infrastructure projects. In general, project finance covers greenfield industrial projects, capacity expansion at existing manufacturing units, construction ventures or other infrastructure projects. Capital intensive business expansion and diversification as well as replacement of equipment may be financed through the project term loans. 5. HIRE PURCHASE Hire purchase means buying goods on credit, with the goods themselves being security for the loan. You usually pay a deposit of some of the purchase price and borrow the rest. You don't own the goods until you've paid the final installment. Hire-purchase agreements must comply with the Hire Purchase Act 1971. Whenever interest is charged on the deal, the sale must also comply with the Credit Contracts Act 1981. Shops usually arrange their hire-purchase deals using outside finance companies and your payments go to the finance company not the shop. In this report we use the term "seller" to mean either the shop or the finance company, whichever is relevant. Definition: A system for purchasing merchandise, such as cars or furniture, in which the buyer takes possession of the merchandise on payment of a deposit and completes the purchase by paying a series of regular installments while the seller retains ownership until the final installment is paid. 6. MUTUAL FUND:
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Mutual funds are the most important among newer capital market institution. Several public sector banks and financial institution have set up mutual fund on tax-exempt basis, virtually on the same footing as UTI. Their main function is to mobilize the savings of the general public and invest them in stock market securities such as government securities, gold market and real estate. There was even diversification of saving of middle classes from banks to mutual funds.
Definition: According to SEBI mutual fund is defined as, “A fund established in the form of trust by a sponsor to raise money through same of units to the public, under one or more schemes, for investing in securities in accordance with regulation.” SBI Mutual Fund (SBI MF) SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country with an investor base of over 5.8 million. With over 20 years of rich experience in fund management, SBI MF brings forward its expertise in consistently delivering value to its investors. SBI MF draws its strength from India's Largest Bank State Bank of India .SBI Mutual Fund is India’s largest bank sponsored mutual fund.
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SBI offers different types of Mutual Fund schemes to the investors. a)Schemes according to Maturity Period: I. II. Open-ended Fund Close-ended Fund b)Fund according to Investment Objective: I. II. III. IV. Growth / Equity Oriented Scheme Income / Debt Oriented Scheme Balanced Fund Money Market or Liquid Fund V. Gilt Fund VI. Index Funds 7. SECURITIZATION: Securitization is a structured finance process that distributes risk by aggregating assets in a pool (often by selling assets to a special purpose entity), and then issuing new securities backed by the assets and their cash flows. The securities are sold to investors who share the risk and reward from those assets. Securitization is similar to a sale of a profitable business ("spinning off") into a separate entity. The previous owner trades its ownership of that unit, and all the profit and loss that might come in the future, for present cash. The buyers invest in the success and/or failure of the unit, and receive a premium (usually in the form of interest) for doing so. In most securitized investment structures, the investors' rights to receive cash flows are divided into "tranches": senior tranche investors lower their risk of default in return for lower interest payments, while junior tranche investors assume a higher risk in return for higher interest. Benefits to the investor: From an investor's perspective, securitization offers an alternative investment medium, which, for a given rating level, usually offers a safer investment avenue and higher risk-adjusted returns compared to equivalent rated bank or corporate debt. DERIVATIVES: Derivative is a bilateral contract or payment exchange agreement whose value is derived from the value of an underlying asset like interest rate, exchange rate, equity and other indices. There are two simple blocks called Forward and Option for every derivative transaction. It is a financial contract with a value linked to the
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expected future price movements of the asset it is linked to - such as a share or a currency. There are many kinds of derivatives, with the most notable being swaps, futures, and options. However, since a derivative can be placed on any sort of security, the scope of all derivatives possible is nearly endless. Thus, the real definition of a derivative is an agreement between two parties that is contingent on a future outcome of the underlying. 8. FACTORING: SBI Bank's Factoring performs an important trade finance service by helping you convert your receivables into cash - thus helping you tide over constraints of cash flow and working capital. Factoring relies on the financial strength, creditworthiness of your customers. Your account receivables in the form of invoices and bills are purchased by ICICI Bank at a discount. Thus, the onus of collection too falls on ICICI Bank and you can focus your attention and effort on the growth of your business. Services • Domestic factoring - discounting of non-LC backed domestic invoices/ bills • Export factoring - discounting of non-LC backed export invoices/bills. Benefits • Flexible financial solution • Improves your cash flow • Improves your credit rating • Reduces your credit risk • Funding based on creditworthiness of your customers • Improves supplier discounts • Releases working capital for other business needs • Shifts your focus from your cash flows to the growth of your business • Efficient management of your receivables. OFFSHORE BANKING
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State Bank of India Opens India's First Offshore Banking Unit State Bank of India has opened the first Offshore Banking Unit (OBU) in India at the SEEPZ Special Economic Zone, New Bank Building, Andheri (East) Mumbai 400,096 on 17th July 2003 - another landmark in the history of India's Financial Sector. The OBU will be deemed as an overseas branch of the Bank and undertake the following activities : 1. Raise funds in convertible foreign currency as deposits and borrowings from Non Residents sources. 2. Transact in foreign exchange with residents in India who are eligible to enter into or undertake such transactions in terms of various Rules and Regulations as framed under Foreign Exchange Management Act, 1999. 3. Open foreign currency accounts abroad as well as with other OBUs in India 4. Trade in foreign currencies in the overseas market and also with banks in India where both legs of the transactions are denominated in foreign currencies. 5. Provide customized loan and liability products for the benefit of clients 6. Maintain Special Rupee account with an Authorised Dealer in India out of the convertible foreign exchange resources for meeting local expenses
7. Buy Rupees from an Authorised Dealer in India to fund the Special Rupee Account.
Working Capital Finance: SBI offers working capital finance to meet the entire range of shortterm fund requirements that arise within a corporate day-to-day operational cycle. The SBI working capital loans can help your company in financing inventories, managing internal cash flows, supporting supply chains, funding production and marketing operations, providing cash support to business expansion and carrying current assets. Corporate Term Loan The SBI corporate term loans can support your company in funding
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ongoing business expansion, repaying high cost debt, technology up gradation, R&D expenditure, leveraging specific cash streams that accrue into your company, implementing early retirement schemes and supplementing working capital. Corporate term loans can be structured under the FCNR (B) scheme as well, with the option of switching the currency denomination at the end of interest periods. This will help you take advantage of global interest rate trends vis-à-vis domestic rates to minimize your debt cost. The bank’s corporate term loans are generally available for tenors from three to five years, synchronized with your specific needs. SBI Life Insurance Company Limited SBI Life Insurance is a joint venture life insurance company between State Bank of India (SBI), the largest state-owned banking and financial services company in India, and BNP Paribas Assurance. SBI owns 74% of the total capital and BNP Paribas Assurance the remaining 26%. SBI Life Insurance has an authorized capital of Rs. 2,000 crores and a paid up capital of Rs 1,000 crores. When government of India opened life insurance sector to private companies, SBI started SBI Life as a joint venture with BNP Paribas in 2001. While in it's initial stage it's business was mainly from bancassurance channel, now it is developing its own Agency team for selling it's life insurance products.
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Declaration
WE the students of
Dnyanasadhana College, Thane
. T.Y.
BANKNG AND INSURANCE (SEMESTER Vth) herby declare that we have completed this project on “Financial services of banks after LPG” in the academic year 2010-2011. The information submitted is true and original to the best of my knowledge.
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Acknowledgement
WE take this opportunity with great pleasure to present before you this project on “Financial
services of banks after LPG”
which is a result of cooperation, hard work and good wishes of many people. WE would like to thank my with deep sense Our project guide
Miss.Shraddha Bhoome
for her kind appreciation, friendly
guidance, constant encouragement, involvement in my project work and for her valued guidance throughout my study.
We are also thankful to Mr. V. B. Joshi ( C.R.O.) who has provided us the valuable information about the new financial products and services. We owe the debt to our
Principal Mr. G.B. Vishe
for giving Us an
opportunity to present a creative outcome in form of a project. We express our sincere thanks to the library staff who have provided us right information and study material at the right time. No words can adequately express our debt of gratitude to all our BBI friends for their continuous support while the work was in process. We must also put on record my gratitude to my Institute DNYANASADHANA COLLEGE for all that We learnt as a student. We also wish to thank my Family Members whose efforts and creativity helped me in giving the final structure to the project.
Lastly needless to say We are am also thankful to all those seen and unseen hands and minds, which have been of direct or indirect, help in the completion of my project.
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BIBILOGRAPHY
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doc_527601688.doc