Banking and Inurance

7/31/2019 Banking and Inurance

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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 ROLL NO.

SURAJ SAHU 31

SUPRIYA 32

SANDEEP SALVE 33

TRUPTI SATAV 34

VISHAL SAWARDEKAR 35


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Banking in India

Currently, India has 96 scheduled commercial banks (SCBs) - 27public sector banks (that is with the Government of India holding a

stake), 31 private banks (these do not have government stake; theymay be publicly listed and traded on stock exchanges) and 38 foreignbanks. They have a combined network of over 53,000 branches and49,000 ATMs. According to a report by ICRA Limited, a rating agency,the public sector banks hold over 75 percent of total assets of thebanking industry, with the private and foreign banks holding 18.2%and 6.5%.

PRODUCTS AND SERVICES OFFERED BY SBI :

Personal Banking

SBI Term Deposits SBI Loan For Pensioners

SBI Recurring Deposits Loan Against Mortgage Of Property

SBI Housing Loan, loan Against Shares & Debentures

SBI Car Loan Rent Plus Scheme

SBI 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 allactivities in the transformation of savings into investments.

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Definition:

The term financial service means mobilizing and allocatingresources i.e. savings into investments.

Financial services are classified into two types

A. Fund based activitiesB. 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 haveappeared in the area of financial intermediations. Some are briefly

discussed:

Merchant Banking

Loan Syndication

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 basedfinancial 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 80s 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 theirproblems.

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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 ofsecurities 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 arrangesyndicated credit products for corporate clients and industrialprojects.

With its rich experience and strong reputation, SBIs syndication deskcan assemble large loan packages involving a ring of reputedfinancial entities, domestic and international, that match the largecredit requirements of infrastructure projects.

3. LEASING

The SBIs has deployed a dedicated Strategic Business Unit for leasefinancing that is richly experienced in arranging lease contracts forprocuring expensive equipment for your project or plant. At SBI, wearrange lease agreements as stand alone contracts or as part of astructured package.

A lease is an agreement under which a company or a firm acquires aright to make use of capital equipment to other on a payment ofprescribed fees called rental charges. However the lessor remains theowner 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 theowner of an asset i.e. lessor grants to another party i.e. lessee theexclusive right to use the asset usually for an agreed period of timein return for a payment of rent.Types of Lease:

There are five types of lease financing provided by SBI:

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a) Financial Lease

b) Operating Lease

c) Sale and Lease Back

d) Leverage Leasee) Cross-Border Lease

4. PROJECT FINANCE

The SBI has formed a dedicated Project Finance Strategic BusinessUnit to assess credit proposals from and extend term loans for largeindustrial and infrastructure projects.

In general, project finance covers greenfield industrial projects,capacity expansion at existing manufacturing units, constructionventures or other infrastructure projects. Capital intensive businessexpansion and diversification as well as replacement of equipmentmay be financed through the project term loans.

5. HIRE PURCHASE

Hire purchase means buying goods on credit, with the goodsthemselves being security for the loan. You usually pay a deposit of

some of the purchase price and borrow the rest. You don't own thegoods until you've paid the final installment.

Hire-purchase agreements must comply with the Hire Purchase Act1971. Whenever interest is charged on the deal, the sale must alsocomply with the Credit Contracts Act 1981.

Shops usually arrange their hire-purchase deals using outside financecompanies and your payments go to the finance company not theshop.

In this report we use the term "seller" to mean either the shop or thefinance company, whichever is relevant.

Definition:

A system for purchasing merchandise, such as cars or furniture, inwhich the buyer takes possession of the merchandise on payment ofa deposit and completes the purchase by paying a series of regularinstallments while the seller retains ownership until the finalinstallment is paid.

6. MUTUAL FUND:

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Mutual funds are the most important among newer capital marketinstitution. Several public sector banks and financial institution haveset up mutual fund on tax-exempt basis, virtually on the same footingas UTI. Their main function is to mobilize the savings of the generalpublic and invest them in stock market securities such as

government securities, gold market and real estate. There was evendiversification of saving of middle classes from banks to mutualfunds.

Definition:

According to SEBI mutual fund is defined as, A fund established inthe form of trust by a sponsor to raise money through same of unitsto 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 inthe country with an investor base of over 5.8 million. With over20 years of rich experience in fund management, SBI MF bringsforward its expertise in consistently delivering value to itsinvestors.

SBI MF draws its strength from India's Largest Bank State Bank of

India .SBI Mutual Fund is Indias largest bank sponsored mutualfund.

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SBI offers different types of Mutual Fund schemes to the investors.

a)Schemes according to Maturity Period:

I. Open-ended Fund

II. Close-ended Fund

b)Fund according to Investment Objective:

I. Growth / Equity Oriented SchemeII. Income / Debt Oriented SchemeIII. Balanced FundIV. Money Market or Liquid FundV. Gilt Fund

VI. Index Funds7. SECURITIZATION:

Securitization is a structured finance process that distributes risk byaggregating assets in a pool (often by selling assets to a specialpurpose entity), and then issuing new securities backed by the assetsand their cash flows. The securities are sold to investors who sharethe risk and reward from those assets.

Securitization is similar to a sale of a profitable business ("spinningoff") into a separate entity. The previous owner trades its ownershipof 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 ofthe unit, and receive a premium (usually in the form of interest) fordoing so. In most securitized investment structures, the investors'rights to receive cash flows are divided into "tranches": seniortranche investors lower their risk of default in return for lowerinterest payments, while junior tranche investors assume a higherrisk in return for higher interest.

Benefits to the investor:

From an investor's perspective, securitization offers an alternativeinvestment medium, which, for a given rating level, usually offers asafer investment avenue and higher risk-adjusted returns comparedto 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 derivativetransaction. 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 aderivative 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 yourcustomers. 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 andundertake the following activities :

1. Raise funds in convertible foreign currency as deposits andborrowings from Non Residents sources.

2. Transact in foreign exchange with residents in India who areeligible to enter into or undertake such transactions in terms ofvarious Rules and Regulations as framed under Foreign ExchangeManagement Act, 1999.

3. Open foreign currency accounts abroad as well as with other OBUsin India

4. Trade in foreign currencies in the overseas market and also withbanks in India where both legs of the transactions are denominatedin foreign currencies.

5. Provide customized loan and liability products for the benefit ofclients

6. Maintain Special Rupee account with an Authorised Dealer in Indiaout of the convertible foreign exchange resources for meeting localexpenses

7. Buy Rupees from an Authorised Dealer in India to fund the SpecialRupee Account.

Working Capital Finance:SBI offers working capital finance to meet the entire range of short-term fund requirements that arise within a corporate day-to-dayoperational cycle.

The SBI working capital loans can help your company in financinginventories, managing internal cash flows, supporting supply chains,funding production and marketing operations, providing cash supportto 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 upgradation, R&D expenditure, leveraging specific cash streams thataccrue into your company, implementing early retirement schemesand supplementing working capital.

Corporate term loans can be structured under the FCNR (B) schemeas well, with the option of switching the currency denomination at theend of interest periods. This will help you take advantage of globalinterest rate trends vis--vis domestic rates to minimize your debtcost.

The banks corporate term loans are generally available for tenorsfrom three to five years, synchronized with your specific needs.

SBI Life Insurance Company Limited

SBI Life Insurance is a joint venture life insurance companybetween State Bank of India (SBI), the largest state-ownedbankingand financial services company in India, and BNP Paribas Assurance.SBI owns 74% of the total capital and BNP Paribas Assurance theremaining 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 privatecompanies, SBI started SBI Life as a joint venture with BNP Paribas in2001. While in it's initial stage it's business was mainly frombancassurance channel, now it is developing its own Agency team forselling 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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Documents

Banking and Inurance