Course Name:

Financial Institutions
Table of Contents
Chapter 1: Introduction to Finance ................................................................................................. 3
Financial Services ................................................................................................................. 4
Financial Markets .................................................................................................................. 5
Financial Instruments ........................................................................................................... 5
Chapter 2: ........................................................................................................................................ 7
Major Types of Financial Institutions? ............................................................................................ 7
KEY TAKEAWAYS .............................................................................................................. 7
1. Central Banks ..................................................................................................................... 7
2. Retail and Commercial Banks ........................................................................................ 8
3. Internet Banks .................................................................................................................... 8
4. Credit Unions ...................................................................................................................... 8
5. Savings and Loan Associations .................................................................................... 8
6. Investment Banks .............................................................................................................. 9
7. Brokerage Firms ................................................................................................................ 9
8. Insurance Companies ....................................................................................................... 9
9. Mortgage Companies ........................................................................................................ 9
What Is the Main Difference Between a Bank and Other Financial Institutions?10
What Is a Financial Intermediary? ................................................................................... 10
How Do Banks Make Money? ........................................................................................... 10
Chapter 3: ...................................................................................................................................... 11
Financial Intermediary................................................................................................................... 11
What Is a Financial Intermediary? ................................................................................... 11
KEY TAKEAWAYS ............................................................................................................ 11
How a Financial Intermediary Works .............................................................................. 11
Types of Financial Intermediaries ................................................................................... 12
Benefits of Financial Intermediaries ............................................................................... 12
Example of a Financial Intermediary .............................................................................. 12
Chapter 4: Non-deposit intermediaries: investment vehicles ...................................................... 14
1. Insurance Companies: .................................................................................................... 14
2. Trust Companies/Pension Funds: ............................................................................... 15
3. Brokerage Houses: .......................................................................................................... 15
4. Loan Companies: ............................................................................................................. 15
 5. Currency Exchanges: ..................................................................................................... 16
6. Mutual Funds: ................................................................................................................... 16
7. Hedge Funds: .................................................................................................................... 17
8. Investment Banks: ........................................................................................................... 18
Chapter 5: Quasi-financial intermediaries..................................................................................... 19

Chapter 1: Introduction to Finance

Finance is a system that involves the exchange of funds between
the borrowers and the lenders and investors. It operates at
various levels from firms to global to national levels. Thus, there
are many complexities involved in it related to markets,
institutions, etc. An introduction to finance will provide a basic
idea of how the finance sector in general works

In the finance system, credit, money, and finance are used as a

medium for various exchanges. So, they work as a known value
for which the services and goods are exchanged.

Thus, in modern systems, banks financial instruments, financial

markets, and services are included. Also, this system allows for
the funds invested, allocated, and moved within a smooth process.

There are various components of financial systems. They are:

Financial institutions include banks and other nonfinance banking
institutions. It is a company that is engaged in the business of
dealing with monetary and financial transactions like loans,
deposits, and investments.

It comprises various banking operations like trusting the

companies, brokerage firms, insurance companies, and dealers. A
bank is a financial institution that is legally allowed to borrow and
lend money.

Along with these banks also provides financial services like an

exchange of currency, wealth management, and safe deposits.
Generally, banks are categorized into 2 types. Investment banks
and commercial banks. While non-banking financial institution or
NBFCs do not have a banking license.

Furthermore, they are not supervised by any national or

international regulatory body. NBFCs generally function services
such as risk management, market borrowing, investment, etc.

Financial Services
The economic services that are provided by financial institutions
and covers a broader aspect of money like managing money,
banks, credit cards, debit cards are called financial services.

Also, the other financial services that are offered by the

institutions are consumer finance, stock brokerage, investment
funds, and many more.
Financial Markets
Financial markets consist of 2 types of market, primary market,
and the secondary market. This is a broad term used to describe a
marketplace where equities, currencies, and bonds are traded. So,
in the primary market, the exchange for the government,
companies, are done by the new companies. Thus, this is done
through equity-based or debt-based securities.

Also, this process is facilitated by the investment banks that have

set a beginning price and are overseeing a sale for its investors.
Once the sale is completed, it is further overseen by the secondary
market.

The secondary market comes after the primary market. Also, this
is a marketplace where investors buy and sells the securities that
are already owned by them.

Financial Instruments
Financial instruments are the assets which can be traded in the
market. They can also be a form of package which is traded. Most
financial instruments provide an efficient flow to facilitate the
transfer of capital.

Thus, this asset can be of any form from cash to a contractual right
to receive and deliver the cash. They are usually monetary
contracts between the two firms. Also, these instruments can be
modified, traded, or settled.

The cash instruments are the instruments whose value is directly

determined by the market. They can also be securities which are
tradable and transferable.
This includes deposits and loans. While for derivative instruments,
the value is derived from more than one underlying commodity,
currency, precious metals, bonds stocks, etc.
Chapter 2:
Major Types of Financial Institutions?
In today's financial services marketplace, a financial institution exists to
provide a wide variety of deposit, lending, and investment products to
individuals, businesses, or both. While some financial institutions focus
on providing services and accounts for the general public, others are
more likely to serve only certain consumers with more specialized
offerings.

To know which financial institution is most appropriate for serving a

specific need, it is important to understand the difference between the
types of institutions and the purposes they serve.

KEY TAKEAWAYS

 There are nine major types of financial institutions that provide a

variety of services from mortgage loans to investment vehicles.
 As financialization continues to permeate our lives, it is
increasingly likely that you will have an account or product offered
by several of these types.
 Nowadays, an increasing number of financial institutions operate
online, which in some instances may reduce some of their
services fees.
 The major categories of financial institutions include central
banks, retail and commercial banks, internet banks, credit unions,
savings, and loans associations, investment banks, investment
companies, brokerage firms, insurance companies, and mortgage
companies.
 Here we take a look at these, from central banks to neighborhood
banks and everything in between.
1. Central Banks
Central banks are the financial institutions responsible for the oversight
and management of all other banks. In the United States, the central
bank is the Federal Reserve Bank, which is responsible for conducting
monetary policy and supervision and regulation of financial
institutions.1
Individual consumers do not have direct contact with a central bank;
instead, large financial institutions work directly with the Federal
Reserve Bank to provide products and services to the general public.

2. Retail and Commercial Banks

Traditionally, retail banks offered products to individual consumers
while commercial banks worked directly with businesses. Currently, the
majority of large banks offer deposit accounts, lending, and limited
financial advice to both demographics.

Products offered at retail and commercial banks include checking and

savings accounts, certificates of deposit (CDs), personal and mortgage
loans, credit cards, and business banking accounts.

3. Internet Banks
A newer entrant to the financial institution market is internet banks,
which work similarly to retail banks. Internet banks offer the same
products and services as conventional banks, but they do so through
online platforms instead of brick-and-mortar locations.

Under internet banks, there are two categories: digital banks and neo-
banks. Digital banks are online-only platforms affiliated with traditional
banks. However, neobanks are pure digital native banks with no
affiliation to any bank but themselves.2

4. Credit Unions
A credit union is a type of financial institution providing traditional
banking services and is created, owned, and operated by its members.

In the recent past credit unions used to serve a specific demographic

per their field of membership, such as teachers or members of the
military. Nowadays, however, they have loosened the restrictions on
membership and are open to the general public.

Credit unions are not publicly traded and only need to make enough
money to continue daily operations. That's why they can afford to
provide better rates to their customers than commercial banks.

5. Savings and Loan Associations

Financial institutions that are mutually owned by their customers and
provide no more than 20% of total lending to businesses fall under the
category of savings and loan associations. They provide individual
consumers with checking and accounts, personal loans, and home
mortgages.

Unlike commercial banks, most of these institutions are community-

based and privately owned, although some may also be publicly traded.
The members pay dues that are pooled together, which allows better
rates on banking products.

6. Investment Banks
Investment banks are financial institutions that provide services and act
as an intermediary in complex transactions, for instance, when a
startup is preparing for an initial public offering (IPO), or in merges.
They can also act as a broker or financial adviser for large institutional
clients such as pension funds.

Investment banks do not take deposits; instead, they help individuals,

businesses and governments raise capital through the issuance
of securities. Investment companies, traditionally known as mutual fund
companies, pool funds from individuals and institutional investors to
provide them access to the broader securities market.

Global investment banks include JPMorgan Chase, Goldman Sachs,

Morgan Stanley, Citigroup, Bank of America, Credit Suisse, and
Deutsche Bank. Robo-advisors are the new breed of such companies,
enabled by mobile technology to support investment services more
cost-effectively and provide broader access to investing by the public.

7. Brokerage Firms
Brokerage firms assist individuals and institutions in buying and selling
securities among available investors. Customers of brokerage firms can
place trades of stocks, bonds, mutual funds, exchange-traded
funds (ETFs), and some alternative investments.

8. Insurance Companies
Financial institutions that help individuals transfer the risk of loss are
known as insurance companies. Individuals and businesses use
insurance companies to protect against financial loss due to death,
disability, accidents, property damage, and other misfortunes.

9. Mortgage Companies
Financial institutions specialized in originating or funding mortgage
loans are mortgage companies. While most mortgage companies serve
the individual consumer market, some specialize in lending options for
commercial real estate only.

Mortgage companies focus exclusively on originating loans and seek

funding from financial institutions that provide the capital for the
mortgages.

Many mortgage companies today operate online or have limited branch

locations, which allows for lower mortgage costs and fees.

What Is the Main Difference Between a Bank and Other Financial

Institutions?
The main difference between banks and non-banking other financial
institutions is that the latter cannot accept deposits into savings and
demand deposit accounts, whereas these are the core business for
banks.

What Is a Financial Intermediary?

A financial intermediary is an entity that acts as the middleman
between two parties generally banks or funds, in a financial transaction.
A financial intermediary may lower the cost of doing business.

How Do Banks Make Money?

Commercial banks make money from a variety of fees and by earning
interest from loans such as mortgages, auto loans, business loans, and
personal loans. Customer deposits provide banks with the capital to
make these loans.
Chapter 3:
Financial Intermediary
What Is a Financial Intermediary?
A financial intermediary is an entity that acts as
the middleman between two parties in a financial transaction, such as
a commercial bank, investment bank, mutual fund, or pension fund.
Financial intermediaries offer a number of benefits to the average
consumer, including safety, liquidity, and economies of scale involved
in banking and asset management. Although in certain areas, such as
investing, advances in technology threaten to eliminate the financial
intermediary, disintermediation is much less of a threat in other areas of
finance, including banking and insurance.

KEY TAKEAWAYS

 Financial intermediaries serve as middlemen for financial

transactions, generally between banks or funds.
 These intermediaries help create efficient markets and lower the
cost of doing business.
 Intermediaries can provide leasing or factoring services, but do
not accept deposits from the public.
 Financial intermediaries offer the benefit of pooling risk, reducing
cost, and providing economies of scale, among others.
How a Financial Intermediary Works
A non-bank financial intermediary does not accept deposits from the
general public. The intermediary may provide factoring, leasing,
insurance plans, or other financial services. Many intermediaries take
part in securities exchanges and utilize long-term plans for managing
and growing their funds. The overall economic stability of a country
may be shown through the activities of financial intermediaries and the
growth of the financial services industry.

Financial intermediaries move funds from parties with excess capital to

parties needing funds. The process creates efficient markets and
lowers the cost of conducting business. For example, a financial
advisor connects with clients through purchasing insurance,
stocks, bonds, real estate, and other assets.
Banks connect borrowers and lenders by providing capital from
other financial institutions and from the Federal Reserve. Insurance
companies collect premiums for policies and provide policy benefits. A
pension fund collects funds on behalf of members and distributes
payments to pensioners.

Types of Financial Intermediaries

Mutual funds provide active management of capital pooled by
shareholders. The fund manager connects with shareholders through
purchasing stock in companies he anticipates may outperform the
market. By doing so, the manager provides shareholders with assets,
companies with capital, and the market with liquidity.

Benefits of Financial Intermediaries

Through a financial intermediary, savers can pool their funds, enabling
them to make large investments, which in turn benefits the entity in
which they are investing. At the same time, financial intermediaries pool
risk by spreading funds across a diverse range of investments and
loans. Loans benefit households and countries by enabling them to
spend more money than they have at the current time.

Financial intermediaries also provide the benefit of reducing costs on

several fronts. For instance, they have access to economies of scale to
expertly evaluate the credit profile of potential borrowers and keep
records and profiles cost-effectively. Last, they reduce the costs of the
many financial transactions an individual investor would otherwise have
to make if the financial intermediary did not exist.

Example of a Financial Intermediary

In July 2016, the European Commission took on two new financial
instruments for European Structural and Investment (ESI) fund
investments. The goal was to create easier access to funding for
startups and urban development project promoters.1 Loans, equity,
guarantees, and other financial instruments attract greater public and
private funding sources that may be reinvested over many cycles as
compared to receiving grants.

One of the instruments, a co-investment facility, was to provide funding

for startups to develop their business models and attract additional
financial support through a collective investment plan managed by one
main financial intermediary. The European Commission projected the
total public and private resource investment at approximately €15
million (approximately $17.75 million) per small- and medium-sized
enterprise
Chapter 4: Non-deposit intermediaries:
investment vehicles
As the name suggests, non-depository intermediaries don't take
deposits. Instead, they perform other financial services and collect fees
for them as their primary means of business. Learn more about various
types of non-depository financial intermediaries and how they work.

In this article, we will discuss the main types of non-depository

institutions. In many cases, these institutions are private companies.
Although they may be regulated by the government, they are usually not
backed or protected by the government. Given below are different non-
depository intermediaries:

1. Insurance Companies:

Insurance companies specialize in writing contracts to protect their

policyholders from the risk of financial losses associated with particular
events, such as automobile accidents or fires. Insurance companies
make money on the policies they sell, which protect against financial
loss and/or build income for later use. The policies are not tangible and
the protection they offer is financial, so the companies are performing a
financial service.

Insurance companies collect premiums from policyholders, which the

companies then invest to obtain the funds necessary to pay claims to
policyholders and to cover their other costs.

Although insurance companies do not typically make loans, in some

cases the paid value of a policy may be used to secure a loan from the
insurance company or other banks who take the policy as security
against the loan. Insurance premiums (costs) are not deposits. Private
insurance companies try to earn a profit from the premiums beyond the
cost of insurance payouts.
2. Trust Companies/Pension Funds:

Companies that administer pension or retirement funds also perform

financial services. For many people, saving for retirement is the most
important form of saving. These companies take contributions from
people and promise in return to provide future income. Pension funds
invest contributions from workers and firms in stocks, bonds, and
mortgages to earn the money necessary to pay pension payments when
contributors retire. Growth for the contributor comes not from interest on
deposits, but investments made by the administrator of these pension
funds.

Some pension funds are closely regulated, but others may not be.
These investments may yield a profit, but there is a risk of loss as well.
Private and state and local government pension funds are an important
source of demand for financial securities.

3. Brokerage Houses:

A brokerage firm, or simply brokerage, is a financial institution that

facilitates the buying and selling of financial securities between a buyer
and a seller. Brokers are people who execute orders to buy and sell
stocks and other securities. They are paid commissions.

A traditional, or "full service", brokerage firm usually undertakes more

than simply carrying out a stock or bond trade. Their staff is entrusted
with the responsibility of researching the markets to provide appropriate
recommendations. They provide service to help investors do as well as
possible with their investments. Brokerage houses may offer advice or
guidance to individual investors as well as pension fund managers and
portfolio managers alike. They are private companies who make a profit
on the transactions.

4. Loan Companies:

Loan companies, sometimes called finance companies, are not banks.

They do not receive deposits, and they should not be confused with
banks, savings and loan associations, or credit unions. They are private
companies that lend money and make a profit on the interest. They
have relaxed norms of documentation when compared to other financial
institutions and will sometimes offer loans to customers when other
institutions will not. To offset the risk these companies charge a higher
rate of interest but provide quick access to funds to their customers.

5. Currency Exchanges:

Currency exchanges do not make loans or receive deposits. Currency

exchanges are private companies that cash checks, sell money orders,
or perform other exchange services. They charge a fee, usually, a
percentage of the amount exchanged. Currency exchanges often
located in areas where no other financial intermediaries exist, and they
offer the only financial services available to people in those areas. You
will often find these currency exchanges available in the Airports and
other travel and tourist destinations.

Because their business depends on these fees, interest rates are

usually higher than at banks or other financial institutions.

6. Mutual Funds:

Mutual Funds (MFs) are regulated entities, which collect money from
many investors and invest the aggregate amount in the markets in a
professional and transparent manner. The returns from these
investments net of management fees are available to you as an MF unit
holder.

A mutual fund is a type of professionally managed collective investment

vehicle that pools money from many investors to purchase securities. A
mutual fund obtains money by selling shares to investors and then
invests the money in various equities and bonds, typically charging a
small management fee for its services and sharing the returns with the
investors. They are sometimes referred to as "investment companies" or
"registered investment companies." Most mutual funds are "open-
ended," meaning investors can buy or sell shares of the fund at any
time. MFs offer various schemes, like those investing only in equity or
debt, index funds, gold funds, etc. to cater to the risk appetite of various
investors. Even with very small amounts, you can invest in MF schemes
through monthly systematic investment plans (SIP).
Mutual funds have both advantages and disadvantages compared to
direct investing in individual securities.

By buying shares in a mutual fund, investors can take the benefit of

increased diversification and liquidity along with the ability to participate
in investments that may be available only to larger investors. They also
reduce the costs they would incur if they were to buy many individual
stocks and bonds along with professional investment management,
service, and convenience. Because mutual funds are willing to buy back
their shares at any time, they also provide savers with easy access to
their money.

Mutual funds have disadvantages as well, which include additional fees,

less control over the timing of recognition of gains, less predictable
income, and no opportunity to exercise individual judgment or to
customize the invested portfolio.

7. Hedge Funds:

Hedge funds are not considered a type of mutual fund but are similar to
mutual funds in that they accept money from investors and use the
funds to buy a portfolio of assets. They are private, actively managed
investment funds, which invest, in a diverse range of markets,
investment instruments, and strategies. Hedge funds are often open-
ended, and allow additions or withdrawals by their investors.

However, a hedge fund typically has no more than 99 investors, all of

whom are wealthy individuals or institutions such as pension funds.
Hedge funds typically make riskier investments than do mutual funds,
and they charge investors much higher fees.

As these hedge funds are sold to a small number of investors, they

have been historically exempt from some of the regulation that governs
other funds. They are subject to the regulatory restrictions of their
country and generally, regulations limit hedge fund participation to
certain classes of accredited investors.
8. Investment Banks:

An investment bank is a financial institution that assists individuals,

corporations, and governments in raising capital by underwriting and/or
acting as the client's agent in the issuance of securities. They differ from
commercial banks in that they do not take in deposits and rarely lend
directly to households.

Investment Banks concentrate on providing advice to firms issuing

stocks and bonds or considering mergers with other firms. They also
engage in underwriting, in which they guarantee a price to a firm issuing
stocks or bonds and then make a profit by selling the stocks or bonds at
a higher price. They may provide ancillary services such as market
making, trading of derivatives and equity securities, and FICC services
(fixed income instruments, currencies, and commodities).
Chapter 5: Quasi-financial intermediaries
Ancillary Services of a Commercial Bank
Main objective of emergence of banks was to keep the people’s money safe and
provide loan to the people with requirement. People used to deposit their hard-earned
money in banks and banks used to lend this money who are worthy to get loans
(Repayment capacity). Now a days along with basic banking functions like deposit and
lending facilities banks are rendering various other types of financial services to its
customers. These expansion in products and services are due to various factor such as
high competition among public, private and foreign banks, advancement of technology,
openness to national economies for business transitions and many more. As time value
of money is commonly known concept among public now a days and they know the
future opportunities for their money. They don’t just rely only on saving accounts
investment and investing in other investment schemes. Thus, for the existence banks
can not depend on the money being deposited by the customers in the bank and had to
venture in other financial services to earn profit. These banking services other than
lending and deposit are known as ancillary services. Some ancillary services are as
following:

• Bank draft
• Mail/ telex transfer
• Fund Transfer (NEFT/RTGS)
• Travelers cheque
• Custodial Services
• Pension
• Merchant banking
• Retail banking
• Factoring
• Bank assurance/ Guaranty
• Mutual funds
• Sale and purchase of gold
• Insurance
• Foreign exchange / Forex services
• Notary services
• Bank cards
• Venture capitalist
• Internet banking
• Mobile banking
1. Bank Drafts: Negotiable investment Act, Section 85 (A) says that a bank draft is
an order to pay money drawn by one office to the bank upon other offices of the
same bank for a sum of money payable to order on demand. In other words, a
bank draft is a payment on behalf of a payer that is guaranteed by the issuing
bank. Bank draft provide assurance to the payee for the payment. A bank draft is
kind of cheque where payment is guaranteed by issuer bank which is issues after
confirming enough in the payers’ account. It is more complex process in
comparison to issue a bank cheque.

2. Mail/ Telex transfer: Mail transfer means transfer of money form one account to
another account of the same bank situated at different location. A mail transfer
is an internal message sent through ordinary postal channel advising the payee
branch or bank to pay the amount to a specific payee. When message is sent
through telex machine instead of postal channel then it is known as telex transfer
service.
3. Fund Transfer (NEFT/RTGS):

RTGS: The acronym 'RTGS' is known as Real Time Gross Settlement. According
to RBI, RTGS a system where there is continuous and real-time settlement of
fund-transfers, individually on a transaction by transaction basis. Its an instant
service as it does not take time to be transferred form one account to another.
Currently the RTGS system is mainly meant for large value transactions. The
minimum amount to be remitted through RTGS is ₹ 2,00,000/- while there is no
upper or maximum ceiling.

With effect from July 01, 2019, the Reserve Bank has waived the processing
charges levied by it for RTGS transactions. Banks may pass on the benefit to its
customers.

With a view to rationalize the service charges levied by banks for offering funds
transfer through RTGS system, a broad framework of charges has been
mandated as under:
 a) Inward transactions – Free, no charge to be levied.

b) Outward transactions – ₹ 2,00,000/- to 5,00,000/- : not exceeding ₹ 24.50/-

;(exclusive of tax, if any)
Above ₹ 5,00,000/- : not exceeding ₹ 49.50/-. (exclusive of tax, if any)

Banks may decide to charge a lower rate but cannot charge more than the rates
prescribed by RBI.

NEFT: According to RBI National Electronic Funds Transfer (NEFT) is a nation-

wide payment system facilitating one-to-one funds transfer. Under this
Scheme, individuals, firms and corporates can electronically transfer funds from
any bank branch to any individual, firm or corporate having an account with any
other bank branch in the country participating in the Scheme. This scheme is
very similar to the RTGS but there is no minimum limit under NEFT. However,
maximum amount per transaction is limited to ₹ 50,000/- for cash-based
remittances within India and for remittances to Nepal under the Indo-Nepal
Remittance Facility Scheme. Unlike RTGS these transactions take time in fund
transfer. Usually it takes 30 minutes in transaction.

Charges for the NEFT transactions are as following

The structure of charges that can be levied on the customer for NEFT is given
below:

a) Inward transactions at destination bank branches (for credit to beneficiary

accounts)

– Free, no charges to be levied on beneficiaries

b) Outward transactions at originating bank branches – charges applicable for

the remitter

- For transactions up to ₹ 10,000: not exceeding ₹ 2.50 (+ Applicable GST)

- For transactions above ₹ 10,000 up to ₹ 1 lakh: not exceeding ₹ 5 (+ Applicable

GST)

- For transactions above ₹ 1 lakh and up to ₹ 2 lakhs: not exceeding ₹ 15 (+

Applicable GST) - For transactions above ₹ 2 lakhs: not exceeding ₹ 25 (+

Applicable GST)

4. Travelers cheque: Traveller’s cheque is for a prepaid fixed amount and operates
like cash, so a purchaser can use it to buy goods or services when traveling. A
 customer can also exchange a traveller’s check for cash. These cheques are used
by the traveller as they are safer and more convenient to travel with instead of
currency notes. In case of losing the traveller, cheque banks may cancel the
previous one and may issue the new one. Now a days these cheques are not
common as we have other convenient methods like plastic money.

5. Custodial Services: These services are commonly known a bank locker services.
Customer can keep your valuables like jewels, documents, etc in these lockers.
These lockers can be availed based on availability in the bank and after paying
some charges to the bank as fee for locker. In case of theft or loos bank only pay
insured money to the customers instead of real value of the articles were placed
in the locker.

6. Pension services: Pension is a social security scheme where a fixed sum amount
is paid to the retired and superannuated employees. EPF (Employee’s Provident
Fund) office helps in distributing the pension and banks provide them banking
and financial support. Different banks and its branched have responsibilities to
 distribute the pension for different organizations. Pensioner is supposed to open
an account with the nearest bank branch and this amount number is forwarded
to the concerned pension department for direct credit to the pension amount of
the pensioner.

7. Merchant banking: The corporate houses which generate capital by issuing

financial securities such as shares, bonds, debentures, mutual funds etc must face
disputes and problems related to it. To overcome such problems various financial
and nonfinancial institutions are providing specialized services of merchant
banking. Basically, it is consultancy services which provides advices to its clients
for financial, marketing, managerial and legal matters related to financial and
banking services.

8. Retail banking: Retail banking, also recognised as consumer banking or personal

banking, is banking that offers financial services to the general public. Retail
banking is a way for the daily customer to manage their money, have access to
credit, and deposit their money in a secure manner. Services provided by retail
banks include checking and savings accounts, mortgages, personal loans, credit
cards, and certificates of deposit. Most of the customers of the banks visit to the
local branch office where representatives and managers provide customer
services and financial advices.

9. Factoring: This is a financial service where all the services are provided which
starts form sale of goods and services and end with collection of receivables. A
factor is known as intermediary agent the finances receivables. A factor is
essentially a funding source that agrees to pay the company the value of an
invoice less a discount for commission and fees.

10. Bank assurance: Bank assurance is also known as bank guaranty. It means the
lending institution ensures that the liabilities of debtor will be met. Bank assures
another party on the behalf of a party that it will not fail to mitigate the promises.
If that party fails to keep its promises bank compensate another party and
recover its losses latter form the party which took bank guaranty from the bank.

11. Mutual funds: The basic purpose of mutual funds is to collect investment form
large number of the investors and depositors, then invent the capital in
diversified manner. These investment schemes reduce the risk of loss like equity
investments. These services are very beneficial for the investors who have little
or no knowledge of the investment and equity market.

12. Sale and purchase of gold: Commercial banks also deal in sale and purchase of
gold. Now a days all the banks are providing goad bonds on regular basis. Apart
form that bank also deals in purchasing and selling of cold coins and bars.
 Customer purchase and sell gold through banks to avoid any chances or
fraudulent.

13. Insurance: Commercial banks provide wide variety of the insurances like life
insurance, health insurance, vehicle insurance, insurance on loans etc. Banks are
providing insurance with the help of joint ventures with insurance companies like
PNB MetLife, SBI life etc.

14. Foreign exchange / Forex services: Commercial banks also deal with foreign
currency. These banks provide wide range of forex services mainly conversion of
currency. They also help the customers in selling and purchasing of foreign
exchange.

15. Notary services: Banks in India work according to the guidelines of the RBI. These
days Know your customer (KYC) is mandatory for all types of commercial bank
operations. Apart from that banks also provide life certificate which can be used
in other government schemes as well as id proof.

16. Bank cards: Banks provide various types of cards to the customers like debit
cards, credit cards, gift cards etc. With the help of these cards the card holder can
transact without the help of hard cash currency. These cards are also known as
plastic money.

17. Venture capitalist: Venture is a concept where a new high-risk project is dealt by
an entrepreneur. Making the availability of fund for high risk project is known as
venture capital. These ventures have high risk with high returns. After calculating
the risk bank provide capital for such projects for higher returns.

18. Internet Banking: Such types of banking services provide the customer facility to
complete all the banking transactions without even visiting to the bank physically.
 Sometimes bank charge nominal maintenance fee for availing the internet
services to the customers.

19. Mobile banking: As name says such services can be enjoyed with the help of a
smart phone and banking applications. Such services are similar like internet
banking with some limitations. Usually such applications can be installed in the
smart phone for free of cost.