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Indian Financial Markets – ICSI CSEET (Paper-3)
by cakart
OVERVIEW OF INDIAN FINANCIAL ECOSYSTEM
The financial system of an economy is a crucial element for its economic development. It facilitates the flow of funds from the households (savers) to business organisations (investors), thereby assisting in creation of wealth for the nation. Mainly, the financial system of a country is concerned with the following:
(a) Allocation and mobilisation of savings.
(b) Provision of funds.
(c) Facilitating the financial transactions.
(d) Developing financial markets.
(e) Provision of legal financial structure.
(f) Provision of financial and advisory services.
The important features of a financial are-
(i) It plays an important role in economic development of a country.
(ii) It encourages both savings and investment
(iii) It links savers and investors.
(iv) It assists in capital formation.
(v) It facilitates expansion of financial markets.
India has a diversified financial sector undergoing rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. The sector comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. The banking regulator has allowed new entities such as payments banks to be created recently thereby adding to the types of entities operating in the sector.
In other words, financial services sector consists of the capital markets, insurance sector and nonbanking financial companies (NBFCs). India's gross national savings (GDS) as a percentage of Gross Domestic Product (GDP) stood at 30.50 per cent in 2019. The total amount of Initial Public Offerings increased to Rs 84,357 crore (US$ 13,089 million) by the end of FY18. IPO's reached to US$ 1.94 billion in FY19 (up to Feb 2019). Ultra High Net Worth Individual (UHNWI) increased to 2,697 in 2018 and the population of UHNWI has grew by 118 per cent from 2013 to 2018.
Noteworthy developments in Indian Financial Ecosystem
— Rising incomes are driving the demand for financial services across income brackets.
— Financial inclusion drive from RBI has expanded the target market to semi-urban and rural areas.
— Investment corpus in Indian insurance sector can rise to US$ 1 trillion by 2025.
— Credit, insurance and investment penetration is rising in rural areas.
— HNWI (High Networth Individual) participation is growing in the wealth management segment.
— Lower mutual fund penetration of 5-6 per cent reflects latent growth opportunities.
— The Government of India launched India Post Payments Bank (IPPB), to provide every district with one branch which will help increase rural penetration.
— India benefits from a large cross-utilisation of channels to expand reach of financial services.
— Maharashtra has launched its mobile wallet facility allowing transferring of funds from other mobile wallets. Maharashtra is the first state to launch it.
— As of October 2018, the Financial Inclusion Lab has selected 11 fintech innovators with an investment of US$ 9.5 million promoted by the IIM-Ahmedabad's Bharat Inclusion Initiative (BII) along with JP Morgan, Michael and Susan Dell Foundation, and the Bill and Melinda Gates Foundation.
— Government has approved new banking licenses and increased the FDI limit in the insurance sector.
KEY FACETS AND GROWTH OF FINANCIAL INSTITUTIONS IN INDIA
The significant characteristics of Indian financial system are as under:
Plays a pivotal role in accelerating the rate and volume of savings through provision of different financial instruments and efficient mobilisation of savings.
It is playing a significant role in increasing the national output by providing funds to corporate customers to expand their business operations.
Safeguarding the interests of the investors by ensuring smooth financial transactions through regulatory bodies like, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) etc.
Contributes substantially towards the economic development and raising the standard of living of the people.
Promotes development of weaker section of the society through rural development banks and cooperative societies.
Assist corporate customers to make better financial decisions by offering effective financial and advisory services.
Facilitates financial deepening and broadening. Financial deepening refers to increase in financial assets as a percentage of GDP and financial broadening pertains to increasing number of participants in the financial system.
The growth of Indian financial system may be broadly covered for banking, mutual funds and insurance.
(1) Banking Sector
The banking industry handles finances in a country including cash and credit. Banks are the institutional bodies that accept deposits and grant credit to the entities and play a major role in maintaining the economic stature of a country. Given their importance in the economy, banks are kept under strict regulation in most of the countries. In India, the Reserve Bank of India (RBI) is the apex banking institution that regulates the monetary policy in the country. Banks are classified into classified into four categories –
(i) Commercial Banks
(ii) Small Finance Banks
(iii) Payments Banks
(iv) Co-operative Banks
A brief description of the aforesaid forms of banks is as under:
(i) Commercial Banks : Commercial Banks can be further classified into public sector banks, private sector banks, foreign banks and Regional Rural Banks (RRB). On the other hand, cooperative banks are classified into urban and rural. Apart from these, a fairly new addition to the structure is payments bank. Commercial Banks are regulated under the Banking Regulation Act, 1949 and their business model is designed to make profit. Their primary function is to accept deposits and grant loans to the general public, corporate and government.
Public sector banks are the nationalised banks and account for more than 75 per cent of the total banking business in the country. Majority of stakes in these banks are held by the government.
Private sector banks are those in which major stake or equity is held by private shareholders. All the banking rules and regulations laid down by the RBI will be applicable on private sector banks as well.
A foreign bank is one that has its headquarters in a foreign country but operates in India as a private entity. These banks are under the obligation to follow the regulations of its home country as well as the country in which they are operating.
Regional Rural Banks (RRBs) are also scheduled commercial banks but they are established with the main objective of providing credit to weaker sections of the society like agricultural labourers, marginal farmers and small enterprises. They usually operate at regional levels in different states of India and may have branches in selected urban areas as well. Other important functions carried out by RRBs include-
Providing banking and financial services to rural and semi-urban areas.
Government operations like disbursement of wages of MGNREGA workers, distribution of pensions, etc.
Para-Banking facilities like debit cards, credit cards and locker facilities
(ii) Small Finance Banks : This is a niche banking segment in the country and is aimed to provide financial inclusion to sections of the society that are not served by other banks. The main customers of small finance banks include micro industries, small and marginal farmers, unorganized sector entities and small business units. These are licensed under Section 22 of the Banking Regulation Act, 1949 and are governed by the provisions of RBI Act, 1934 and FEMA.
(iii) Payments Bank : This is a relatively new model of bank in the Indian Banking industry. It was conceptualised by the RBI and is allowed to accept a restricted deposit. they also offer services like ATM cards, debit cards, net-banking and mobile-banking.The following are the payments bank in India:
India Post Payments Bank
Fino Payments Bank
Paytm Payments Bank
Airtel Payments Banks
Comparison between Traditional Banks and Payment Banks
Features Traditional Banks Payment Banks
Accept deposits Yes Yes
Pay Interest on Deposits Yes Yes
Withdrawal facility for customers Yes Yes
Provide loans or involve in lending activities Yes No
Issue credit cards Yes No
Investment products Yes Yes
Maximum Deposit limit No limit Rs.1 lakh only per individual customer.
Source: fintrakk.com
(iv) Urban Co-operative Banks : Urban Co-operative Banks refer to the primary cooperative banks located in urban and semi-urban areas. These banks essentially lent to small borrowers and businesses centered around communities, localities work place groups.
(v) State Co-operative Banks : A State Cooperative Bank is a federation of the central cooperative bank which acts as custodian of the cooperative banking structure in the State.
The major developments of Indian banking sector is captured in the following table-
Years Major Developments
1921 • Closed market
• State-owned Imperial Bank of India was the only bank existing.
1935 • RBI was established as the central bank of country.
• Quasi central banking role of Imperial Bank came to an end.
1936-1955 • Imperial Bank expanded its network to 480 branches.
• In order to increase penetration in rural areas, Imperial Bank was converted into State Bank of India.
1956-2000 • Nationalisation of 14 large commercial banks in 1969 & 6 more banks in 1980.
• Entry of private players such as ICICI intensifying the competition.
• Gradual technology upgradation in PSU banks .
onwards • In 2003, Kotak Mahindra Finance Ltd received a banking license from RBI and became the first NBFC to be converted into a bank
• In 2009, the government removed the Banking Cash Transaction Tax which had been introduced in 2005.
onwards • As per Union Budget 2019-2020, Provision coverage ratio of banks reached highest in 7 years.
• As per RBI, as of November 30, 2018, India recorded foreign exchange reserves of approximately US$ 393.72 billion.
As of May 29,2019, there are 20 Public Sector Banks, 22 Private Sector Banks, 44 Foreign Banks, 56 Regional Rural Banks (RRBs), 1542 Urban Co-operative Banks and 94,384 Rural Cooperative Banks. However, after the mergers, the county will have 12 public sector banks including State Bank of India and Bank of Baroda . Bank of India and Central Bank of India will continue to remain independent. It is interesting to note that credit off-take has been surging ahead over the past decade, aided by strong economic growth, rising disposable incomes, increasing consumerism & easier access to credit. During FY07-18, credit off-take grew at a CAGR of 10.94 per cent. As of Q3 FY19, total credit extended surged to Rs 93,751.17 billion (US$ 1,299.39 billion). Demand has grown for both corporate & retail loans; particularly the services, real estate, consumer durables & agriculture allied sectors have led the growth in credit. Credit to non-food industries increased by 12.3 per cent year-on-year reaching Rs 86,334 billion (US$ 1.24 trillion) in March 29, 2019.
To capture the rural areas Indian banks are expanding their businesses. According to RBI, Under Financial Inclusion Plan, 598,093 banking outlets were provided in villages as on March 2017. As of September 2018, Ministry of Finance, Government of India launched the Financial Inclusion Index. This index will measure access, usage and quality to financial services.
As of September 2018, Department of Financial Services (DFS), Ministry of Finance and National Informatics Centre (NIC) launched Jan Dhan Darshak as a part of financial inclusion initiative. It is a mobile app to help people locate financial services in India.
The increasingly dynamic business scenario & financial sophistication has increased the need for customised exotic financial products. Banks are developing innovative financial products & advanced risk management methods to capture the market share. Bank of Maharashtra tied up with Cigna TTK, to market their insurance products across India.
With entry of foreign banks, competition in the Indian banking sector has intensified.Banks are increasingly looking at consolidation to derive greater benefits such as enhanced synergy cost take-outs from economies of scale, organisational efficiency & diversification of risks.
(2) Mutual Funds
A mutual fund is an investment security that enables investors to pool their money together into one professionally managed investment. Mutual funds can invest in stocks, bonds, cash or a combination of those assets.
Phases Major Developments
First Phase (1964-1987) The Mutual Fund industry in India started in 1963 with formation of UTI in 1963 by an Act of Parliament and functioned under the Regulatory and administrative control of the Reserve Bank of India (RBI). In 1978, UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. Unit Scheme 1964 (US '64) was the first scheme launched by UTI. At the end of 1988, UTI had Rs. 6,700 crores of Assets Under Management (AUM).
Second Phase (1987-1993) The year 1987 marked the entry of public sector mutual funds set up by Public Sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first 'non-UTI' mutual fund established in June 1987, followed by Canbank Mutual Fund (Dec. 1987), Punjab National Bank Mutual Fund (Aug. 1989), Indian Bank Mutual Fund (Nov 1989), Bank of India (Jun 1990), Bank of Baroda Mutual Fund (Oct. 1992). LIC established its mutual fund in June 1989, while GIC had set up its mutual fund in December 1990. At the end of 1993, the MF industry had assets under management of Rs. 47,004 crores.
Third Phase (1993-2003) The Indian securities market gained greater importance with the establishment of SEBI in April 1992 to protect the interests of the investors in securities market and to promote the development of, and to regulate, the securities market.
In the year 1993, the first set of SEBI Mutual Fund Regulations came into being for all mutual funds, except UTI. The erstwhile Kothari Pioneer (now merged with Franklin Templeton MF) was the first private sector MF registered in July 1993. With the entry of private sector funds in 1993, a new era began in the Indian MF industry, giving the Indian investors a wider choice of MF products. The initial SEBI MF Regulations were revised and replaced in 1996 with a comprehensive set of regulations, viz., SEBI (Mutual Fund) Regulations, 1996 which is currently applicable.
The number of MFs increased over the years, with many foreign sponsors setting up mutual funds in India. Also the MF industry witnessed several mergers and acquisitions during this phase. As at the end of January 2003, there were 33 MFs with total AUM of Rs. 1,21,805 crores, out of which UTI alone had AUM of Rs. 44,541 crores.
Fourth Phase (Since February 2003 – April 2014) In February 2003, following the repeal of the Unit Trust of India Act 1963, UTI was bifurcated into two separate entities, viz., the Specified Undertaking of the Unit Trust of India (SUUTI) and UTI Mutual Fund which functions under the SEBI MF Regulations. With the bifurcation of the erstwhile UTI and several mergers taking place among different private sector funds, the MF industry entered its fourth phase of consolidation.
Following the global melt-down in the year 2009, securities markets all over the world had tanked and so was the case in India. Most investors who had entered the capital market during the peak, had lost money and their faith in MF products was shaken greatly. The abolition of Entry Load by SEBI, coupled with the after-effects of the global financial crisis, deepened the adverse impact on the Indian MF Industry, which struggled to recover and remodel itself for over two years, in an attempt to maintain its economic viability which is evident from the sluggish growth in MF Industry AUM between 2010 to 2013.
Fifth (Current Phase)- Since May 2014 Taking cognisance of the lack of penetration of MFs, especially in tier II and tier III cities, and the need for greater alignment of the interest of various stakeholders, SEBI introduced several progressive measures in September 2012 to "re-energize" the Indian Mutual Fund industry and increase MFs' penetration.
In due course, the measures did succeed in reversing the negative trend that had set in after the global melt-down and improved significantly after the new Government was formed at the Center.
Since May 2014, the Industry has witnessed steady inflows and increase in the AUM as well as the number of investor folios (accounts).
The Industry's AUM crossed the milestone of Rs. 10 Trillion (Rs. 10 Lakh Crore) for the first time as on 31st May 2014 and in a short span of two years the AUM size has crossed Rs. 15 lakh crore in July 2016.
The overall size of the Indian MF Industry has grown from Rs. 3.26 trillion as on 31st March 2007 to Rs. 15.63 trillion as on 31st August 2016, the highest AUM ever and a five-fold increase in a span of less than 10 years !!
In fact, the MF Industry has more doubled its AUM in the last 4 years from Rs. 5.87 trillion as on 31st March, 2012 to Rs. 12.33 trillion as on 31st March, 2016 and further grown to Rs. 15.63 trillion as on 31st August 2016.
The no. of investor folios has gone up from 3.95 crore folios as on 31 -03-2014 to 4.98 crore as on 31 -08-2016.
On an average 3.38 lakh new folios are added every month in the last 2 years since Jun 2014.
The growth in the size of the Industry has been possible due to the twin effects of the regulatory measures taken by SEBI in reenergising the MF Industry in September 2012 and the support from mutual fund distributors in expanding the retail base.
MF Distributors have been providing the much needed last mile connect with investors, particularly in smaller towns and this is not limited to just enabling investors to invest in appropriate schemes, but also in helping investors stay on course through bouts of market volatility and thus experience the benefit of investing in mutual funds.
In fact, even though FY 2015-16 was not a very good year for the Indian securities market, the MF Industry witnessed steady positive net inflows month after month, even when the FIIs were pulling out in a big way. This was largely because of the 'hand-holding' of the investors by the MF distributors and convincing them to stay invested and/or invest at lower NAVs when the market had fallen.
MF distributors have also had a major role in popularising Systematic Investment Plans (SIP) over the years. In April 2016, the no. of SIP accounts has crossed 1 crore mark and currently each month retail investorscontribute around Rs. 3,500 crore via SIPs.
(3) Insurance Sector
The insurance industry of India consists of 57 insurance companies of which 24 are in life insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers there are six public sector insurers. In addition to these, there is sole national reinsurer, namely, General Insurance Corporation of India (GIC Re). Other stakeholders in Indian Insurance market include agents (individual and corporate), brokers, surveyors and third party administrators servicing health insurance claims.
Government's policy of insuring the uninsured has gradually pushed insurance penetration in the country and proliferation of insurance schemes.
Gross premiums written in India reached Rs 5.53 trillion (US$ 94.48 billion) in FY18, with Rs 4.58 trillion (US$ 71.1 billion) from life insurance and Rs 1.51 trillion (US$ 23.38 billion) from non-life insurance. Overall insurance penetration (premiums as % of GDP) in India reached 3.69 per cent in 2017 from 2.71 per cent in 2001.
In FY19 (up to October 2018), premium from new life insurance business increased 3.66 per cent year-on-year to Rs 1.09 trillion (US$ 15.46 billion). In FY19 (up to October 2018), gross direct premiums of non-life insurers reached Rs 962.05 billion (US$ 13.71 billion), showing a year-on-year growth rate of 12.40 per cent.
The Government of India has taken a number of initiatives to boost the insurance industry. Some of them are as follows:
In September 2018, National Health Protection Scheme was launched under Ayushman Bharat to provide coverage of up to Rs 500,000 (US$ 7,723) to more than 100 million vulnerable families. The scheme is expected to increase penetration of health insurance in India from 34 per cent to 50 per cent.
Over 47.9 million famers were benefitted under Pradhan Mantri Fasal Bima Yojana (PMFBY) in 2017-18.
The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue redesigned initial public offering (IPO) guidelines for insurance companies in India, which are to looking to divest equity through the IPO route.
IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1 (AT1) bonds that are issued by banks to augment their tier 1 capital, in order to expand the pool of eligible investors for the banks.
Major Events in the Journey of Indian Insurance Sector
Years Major Events
1956-72 All life insurance companies were nationalised to form LIC in 1956 to increase penetration and protect policy holders from mismanagement.
The non-life insurance business was nationalised to form GIC in 1972.
1993-99 Malhotra Committee recommended opening up the insurance sector to private players.
IRDA, LIC and GIC Acts were passed in 1999, making IRDA the statutory regulatory body for insurance and ending the monopoly of LIC and GIC.
2000-2014 Post liberalisation, the insurance industry recorded significant growth; the number of private players increased to 46 in 2017.
2015 In 2015, Government introduced Pradhan Mantri Suraksha Bima Yojna and Pradhan Mantri Jeevan Jyoti Bima Yojana.
Government introduced Atal Pension Yojana and Health insurance in 2015.
2017 onwards National Health Protection Scheme was proposed to be launched under Ayushman Bharat, as per Union Budget 2018-19.
Insurance companies raised more than US$ 6 billion from public issues in 2017.
Notable Trends
(i) New distribution channels like bancassurance, online distribution and NBFCs have widened the reach and reduced costs.
(ii) Firms have tied up with local NGOs to target lucrative rural markets.
(iii) In October 2018, Indian e-commerce major Flipkart entered the insurance space in partnership with Bajaj Allianz to offer mobile insurance.
(iv) Amazon India is also expected to enter the insurance market as an agent.
(v) In September 2018, India Post Payments Bank (IPPB) also partnered with Bajaj Allianz to distribute their products.
(vi) Over the years, share of private sector in life insurance segment has grown from around 2 per cent in FY03 to 31.8 per cent in FY19 (up to September 2018).
(vii) In the non-life insurance segment, share of private sector increased to 55.70 per cent in FY20 (up to April 2019) from 14.5 per cent in FY04.
(viii) The life insurance sector has witnessed the launch of innovative products such as Unit Linked Insurance Plans (ULIPs).
(ix) Other traditional products have also been customised to meet specific needs of Indian consumers.
(x) In September 2018, HDFC Ergo launched 'E@Secure' a cyber insurance policy for individuals.
(xi) Large insurers continue to expand, focusing on cost rationalisation and aligning business models to realise reported Embedded Value (EV), and generate value from future business rather than focus on present profits.
(xii) In January 2019, online insurance distribution platform, Turtlemint raised US$ 25 million in funding.
(xiii) As of November 2018, HDFC Ergo is in advanced talks to acquire Apollo Munich Health Insurance at a valuation of around Rs 2,600 crore (US$ 370.05 million).
PUBLIC ANDPRIVATE SECTOR BANKS
The banking sector was developed during the British era. British East India Company set up three banks: Bank of Bengal (1809); Bank of Bombay (1840) and Bank of Madras (1843). These three banks were later merged and called Imperial Bank, which was taken over by State Bank of India (SBI) in 1955. The Reserve Bank of India was established in 1935, followed by the Punjab National Bank, Bank of India, Canara Bank and Indian Bank.
July 19, 1969 was an important date in the history of Indian banking. As it is on this date that 14 major scheduled commercial banks having a deposit of more than INR 50 crore were nationalized. The 14 banks were- Central Bank of India, Bank of Maharashtra, Dena Bank, Punjab National Bank, Syndicate Bank, Canara Bank, Indian Overseas Bank, Indian Bank, Bank of Baroda, Union Bank, Allahabad Bank, United Bank of India, UCO Bank and Bank of India.
Subsequently, some private banks were observed to suffer from governance problems. Further, there was a need to address the need of credit delivery in greater measure. In the second wave of nationalization six banks, i.e. Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab and Sind Bank and Vijaya Bank—with deposit liabilities of ?200 crore and above were nationalised in April 1980. With the nationalisation of these six banks, the number of public sector banks (PSBs), including State Bank of India and its associate banks, rose to 28 in April 1980.
PSBs have played a significant role in the development of the country over the last five decades. They have rapidly expanded their branch network, extended credit to crucial segments such as large industry, MSMEs, agriculture, trade and retail, and participated wholeheartedly in the government's financial inclusion efforts.
Despite the opening up of the sector to private entities in the early 1990s, PSBs remain formidable players. This is underscored by the fact that their market share in overall bank credit and overall bank deposits was at 63.2 per cent and 66.9 per cent respectively at the end of FY18.
Though their market share has come down over the years, PSBs may regain some or most of it. They are now through with the recognition of bad loans, and are taking efforts to recover them. Further, they have tightened the loan origination process and put in place a monitoring mechanism to ensure that new loans don't go off-kilter. Moreover, the government is continuously pumping in capital to nurse them back to health and pushing for consolidation.
While some PSBs (such as SBI, PNB and Canara Bank) are lumbering giants, they did not balk when it was time to adapt to changes in the financial system and customer requirements, embracing retail banking and technology with gusto.
A recent drastic initiative of Government of India is going to change the scenario of public sector banks. As a banking reform measure, 10 public sector banks will be merged into four entities. This would take the number of banks in the country from 27 in 2017 to 12.
These bank mergers, and the ones already carried out, will lead to the creation of big banks with an enhanced capacity to give credit. These big banks, would also be able to compete globally and increase their operational efficiency by reducing their cost of lending.
The banks have been chosen for mergers on the basis of ensuring that there is no disruption in the banking services, and that the banks should benefit from increased CASA [current account savings account] and greater reach.
The largest of the mergers announced is that of Punjab National Bank with Oriental Bank of Commerce and United Bank. The amalgamated entity — to be called Punjab National Bank — will become the second-largest public sector bank in India, after the State Bank of India. It will also become the second-largest bank in India in terms of its branch network, with a combined total of 11,437 branches.
The second merger announced was that of Canara Bank and Syndicate Bank, which would render the merged entity the fourth-largest public sector bank. The merger also has the potential to lead to large cost reductions due to network overlaps. Further, the similar business cultures of the two banks would also facilitate a smooth transition.
The fourth merger announced is of Indian Bank and Allahabad Bank. This, too, would lead to a doubling of the size of the business and would also lead to a huge potential for scaling up due to the complementary networks of the two banks.
Private Sector Banks
Private Sector Banks refer to those banks where most of the capital is in private hands. In India, there are two types of private sector banks viz. Old Private Sector Banks and New Private Sector Banks. Old private sector banks are those which existed in India at the time of nationalization of major banks but were not nationalized due to their small size or some other reason. After the banking reforms, these banks got license to continue and have existed in India along with new private banks and government banks.
Old Private Banks
At present, there are 12 old private sector banks in India as follows:
Catholic Syrian Bank
City Union Bank
Dhanlaxmi Bank
Jammu and Kashmir Bank
Karnataka Bank
Karur Vysya Bank
Nainital Bank
Ratnakar Bank
Tamilnad Mercantile Bank
Among the above, Nainital Bank is a subsidiary of the Bank of Baroda, which has 98.57% stake in it.
New Private Sector Banks
The new private sector banks were incorporated as per the revised guidelines issued by the RBI regarding the entry of private sector banks in 1993. At present, there are nine new private sector banks as follows:
Development Credit Bank (DCB Bank Ltd)
Bandhan Bank of Bandhan Financial Services.
Note: All the old and new banks listed above are scheduled commercial banks.
Small Private Banks in India
Small private banks are financial institutions that have the license to offer fundamental banking services by accepting deposits and lending. The aim of these banks is to provide financial inclusion to those sections of the economy which is not served by other banks like small business units, small and marginal farmers, micro and small industries and the unorganized sector. The list of small private banks in India are as under:
Ujjivan small finance bank.
Jana small finance bank.
Equitas small finance bank.
AU small finance bank.
Capital small finance bank.
Fincare small finance bank.
ESAF small finance bank.
North East small finance bank.
Suryoday small finance bank.
Utkarsh small finance bank.
Almost every reform is born out of a crisis. So is the case with Indian economic reforms. The Balance of Payments crisis in 1991 forced the government to begin dismantling the licence permit raj. As Manmohan Singh began setting up framework for fiscal reforms under Prime Minister Narasimha Rao's direction, Rangarajan as Governor began erecting a new monetary structure.
Although RBI had the mandate to issue new banking licences, it did not until 1994 when the dust over the financial crisis settled. It was also the time when the markets were rocked by frauds in the nonbanking finance companies segment with CRB Financial being the prime example. It was a providential escape for the RBI which was about to give a banking licence to CRB as well.
Institutions such as IDBI, ICICI, HDFC and UTI were given licences. Others who managed were Centurion Bank, Bank of Punjab, Times Bank, Global Trust Bank and IndusInd Bank of the Hindujas. Barring IndusInd, all the others are merged into another bank.
Global Trust Bank, was the first one to blow up among the new-age banks in the midst of a scandal. It raised questions about RBI's judgement. But the central bank was quick enough to identify problems and merge it with Oriental Bank of Commerce in 2004.
Centurion Bank of Punjab and Times Bank merged with HDFC Bank. IDBI Bank NSE 5.70 %, which merged with parent Industrial Development Bank of India, is a standing example of how not to run an institution.
INDUSTRIAL FINANCE CORPORATION OF INDIA AND SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA
(a) Industrial Development Corporation of India
At the time of independence in 1947, the Indian Capital Markets were relatively less developed. The demand for capital was growing rapidly, however there was a dearth of providers of capital. The commercial banks that existed were not equipped well enough to provide for long term capital needs in any significant manner. Against this backdrop and to bridge the demand supply gap for capital needs of the economy, the Government of India established The Industrial Finance Corporation of India (IFCI) on July 1, 1948 by way of an IFC Act 1948.
IFCI was the first Development Financial Institution of India set up to propel economic growth through development of infrastructure and industry. Since then, IFCI has contributed significantly to the economy through its incessant support to projects in all the three spheres of growth & development – manufacturing, infrastructure & services and agriculture allied sectors. The Liberalisation of the Indian Economy in 1991 made significant changes in the Indian Capital Markets & Financial System. To aid raising of funds directly through capital markets, the constitution of IFCI was changed from a statutory corporation to a company under the Indian Companies Act, 1956. Subsequently, the name of the company was changed to 'IFCI Limited' with effect from October 1999.
Since its inception 70 years back, IFCI has witnessed and sustained all business economic cycles. IFCI has been able to maintain the financial sustainability with the consistent support and cooperation of all its stakeholders and particularly the Government of India. In addition to its core competence in long term lending to industrial and infrastructure sectors, IFCI is also enhancing its organizational value through optimising value of core and non-core assets & investments. Over the years, IFCI played a pivotal role in establishment of various institutes (including some of its subsidiaries & associates) – that are respected in their fields today, namely Stock Holding Corporation of India Ltd (SHCIL), National Stock Exchange Ltd (NSE), LIC Housing Finance Ltd, Tourism Finance Corporation of India Ltd (TFCI), Management Development Institute (MDI), ICRA Ltd, among many others. With the changes in the markets over a period of time a few of the subsidiaries were divested and currently IFCI Group has the following subsidiaries – Stock Holding Corporation of India Ltd, IFCI Venture Capital Fund Ltd, IFCI Factors Ltd, IFCI Infrastructure Development Ltd, IFCI Financial Services Ltd, MPCON, Management Development Institute and Institute of Leadership Development.
IFCI Products
The products of IFCI may be categorised under the following:
Loan Products: IFCI Ltd., established as the Industrial Finance Corporation of India (IFCI) on July 1, 1948, was the first Development Financial Institution in the country, setup to cater to the long-term finance needs of the industrial sector. Since its inception, IFCI has been a catalyst in creating a robust industrial base for the country through modernization of Indian industry, export promotion, import substitution, nurturing sunrise industries etc. through commercially viable and market-friendly initiatives.
In order to continue serving the needs of the Industry and society, IFCI offers the following products broadly categorized into three segments – Project Finance, Corporate Finance & Structured Finance spreading across industries, services and Agro based sectors.
Project Finance : IFCI's team of professionals with in-depth understanding of the sectoral dynamics, has the ability to provide customized financial solutions to meet the growing & diversified requirement for different levels of the projects – greenfield projects, brownfield, diversification and modernisation of existing projects in infrastructure and manufacturing sectors.
The various sectors covered under Project Finance are Power including Renewable energy, Telecommunications, Roads, Oil & gas, Ports, Airports, Basic Metals, Chemicals, Pharmaceuticals, Electronics, Textiles, Real Estate, Smart Cities & Urban Infrastructure etc.
Corporate Finance : IFCI caters to the varied needs of diverse set of customers ranging across small, mid and large corporates. IFCI offers financial solutions in areas of corporate finance through Balance Sheet Funding, Loan Against Shares, Lease Rental Discounting, Promoter Funding, Long Term Working Capital requirements, Capital Expenditure and regular Maintenance Capex.
IFCI also offers a Short Term Loan product (tenure upto 1 year) to meet various business requirements including bridge financing and short term working capital requirements.
Syndication & Advisory : IFCI has taken an initiative to provide customized corporate advisory services and facilitating the financial re-engineering of various corporate houses and companies. We assimilate the inputs gathered from our vast and rich experience of project appraisal, documentation, syndication, product design in providing a customized comprehensive end to end financial solution for Corporates. We further carry out debt and equity syndication and advisory services for our client companies.
In the area of providing customized corporate advisory services, IFCI has been able to secure new assignments relating to financial/investment appraisal, business reengineering and advisory activities.
Structured Products : IFCI also provides financing solutions to its clients through Structured Debt/Mezzanine products and assists in providing optimal financing solutions for various requirements such as sponsor financing, acquisition financing, pre-IPO financing and Off-Balance Sheet Structured Solutions amongst others.
(b) Small Industries Development Bank of India (SIDBI)
Small Industries Development Bank of India (SIDBI) set up on 2nd April 1990 under an Act of Indian Parliament, acts as the Principal Financial Institution for Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector as well as for coordination of functions of institutions engaged in similar activities.
SIDBI's initiatives have remained aligned to the national goals of poverty alleviation, employment generation, kindling entrepreneurship and fostering competitiveness in MSME sector.
Some of SIDBI's key initiatives over more than the past 25 years of tirelessly promoting the growth of MSMEs, include-
(i) Providing a cumulative assistance of around INR 5.40 lakh crore channelized into MSME segment.
(ii) Directly impacting over 360 lakh persons/enterprises through its branch network of around 80 offices spread across the country as well as through the network of banks I institutions (having more than 1.25 lakh branches) across the country.
(iii) Extending loans, equity and quasi-equity aggregating to INR 13,689 crore bene?tting 356 lakh disadvantaged people, mostly women, through its Micro Finance operations.
(iv) Deepening its outreach by nurturing and evolving more than 100 MFIs who have emerged as strong and viable financial intermediaries serving the unserved.
(v) Supporting more than 1.16 lakh budding and existing entrepreneurs by infusing skills and reskilling initiatives.
(vi) Facilitating Institutions Building by adopting a SIDBI Plus approach and creating its Subsidiary and Associate Institutions for providing impetus to the growth of MSME ecosystem.
vii) Developing a passionate pool of 1000+ professionals with 22% women and 40% belonging to SC/ST and OBCs category, for serving to the needs of the dynamic and consistently evolving MSME Sector.
Key Milestones in the Journey of SIDBI
Years Milestones Achieved
1990 Setting up of SIDBI
1994 Foundation of Microfinance laid
1995 Technology Bureau for Small Enterprise (TBSE) was set up which converted into India SME Technology Services
1999 Setting up of SIDBI Venture Capital Limited
2000 Setting up of Credit Guarantee Fund Trust for Micro & Small Enterprise (CGTMSE)
2005 Setting up of SMERA Ratings Ltd.
2008 Birth of India SME Asset Reconstruction Company Ltd. (ISARC)
2015 Set up MUDRA
2016 Trade Recievables Discounting System (TReDS)
2017 Launched Certified Credit Counsellor (CCC)
2018 Launch MSME Pulse and CriSidEx
Regional Rural Banks(RRBs) are Indian Scheduled Commercial Banks (Government Banks) operating at regional level in different States of India. They have been created with a view of serving primarily the rural areas of India with basic banking and financial services. However, RRBs may have branches set up for urban operations and their area of operation may include urban areas too.
The area of operation of RRBs is limited to the area as notified by Government of India covering one or more districts in the State. RRBs also perform a variety of different functions. RRBs perform various functions in following heads:
(a) Providing banking facilities to rural and semi-urban areas.
(b) Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pensions etc.
(c) Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking,UPI etc.
(d) Small financial banks.
REGIONAL RURAL BANKS (RRBs)
Regional Rural Banks were established under the provisions of an Ordinance passed on 26th September, 1975 and the RRB Act 1976 to provide sufficient banking and credit facility for agriculture and other rural sectors. As a result Five Regional Rural Banks were set up on 2nd October,1975,Gandhi Jayanti. These were set up on the recommendations of The Narshimham committee Working Group[1] during the tenure of Indira Gandhi's Government with a view to include rural areas into economic mainstream since that time about 70% of the Indian Population was of Rural Orientation. The development process of RRBs started on 2nd October,1975,Gandhi Jayanti with the forming of the first RRB, the Prathama Bank, Head Office at Moradabad (U.P.) with authorised capital of Rs 5 crore at its starting. As on 2nd October, 1975 Out of the remaining four RRBs in the country one was Set up at Malda in West Bengal under the name of Gour Gramin Bank,which was the first RRB in the Eastern Region of India.
The current structure of RRBs is that Central Government owns 50% , Sponsorship Bank holds 35% and State Government holds 15%.
India is eyeing a mega revamp of its regional rural banks (RRBs) and the plan includes consolidation of these lenders for better operational efficiencies in line with the government's big rural focus.
The plan that the finance ministry is drawing up also envisages RRBs adopting differentiated banking strategies, such as targeting specific sectors, for a strong regional connect. Some RRBs will be merged with their sponsoring banks. There are 56 operational RRBs & the roadmap is to bring them down to 38 or below.
Cooperative bank is an institution established on the cooperative basis and dealing in ordinary banking business. Like other banks, the cooperative banks are founded by collecting funds through shares, accept deposits and grant loans.
The cooperative banks, however, differ from joint stock banks in the following manner:
Cooperative banks issue shares of unlimited liability, while the joint stock banks issue shares of limited liability.
In a cooperative bank, one shareholder has one vote whatever the number of shares he may hold. In a joint stock bank, the voting right of a shareholder is determined by the number of shares he possesses.
Cooperative banks are generally concerned with the rural credit and provide financial assistance for agricultural and rural activities. Joint stock companies are primarily concerned with the credit requirements of trade and industry.
Cooperative banking in India is federal in structure. Primary credit societies are at the lowest rung. Then, there are central cooperative banks at the district level and state cooperative banks at the state level. Joint stock banks do not have such a federal structure.
Cooperative credit societies are located in the villages spread over entire country. Joint stock banks and their branches mainly concentrate in the urban areas, particularly in the big cities.
History of Cooperative Banking in India
Cooperative movement in India was started primarily for dealing with the problem of rural credit. The history of Indian cooperative banking started with the passing of Cooperative Societies Act in 1904. The objective of this Act was to establish cooperative credit societies "to encourage thrift, self-help and cooperation among agriculturists, artisans and persons of limited means."
Many cooperative credit societies were set up under this Act. The Cooperative Societies Act, 1912 recognised the need for establishing new organisations for supervision, auditing and supply of cooperative credit. These organisations were- (a) A union, consisting of primary societies; (b) the central banks; and (c) provincial banks.
Although beginning has been made in the direction of establishing cooperative societies and extending cooperative credit, but the progress remained unsatisfactory in the pre-independence period. Even after being in operation for half a century, the cooperative credit formed only 3.1 per cent of the total rural credit in 1951-52.
Structure of Cooperative Banking
There are different types of cooperative credit institutions working in India. These institutions can be classified into two broad categories- agricultural and non-agricultural. Agricultural credit institutions dominate the entire cooperative credit structure.
Agricultural credit institutions are further divided into short-term agricultural credit institutions and long-term agricultural credit institutions.
The short-term agricultural credit institutions which cater to the short-term financial needs of agriculturists have three-tier federal structure- (a) at the apex, there is the state cooperative bank in each state; (b) at the district level, there are central cooperative banks; (c) at the village level, there are primary agricultural credit societies. Long-term agricultural credit is provided by the land development banks.
The whole structure of cooperative credit institutions is shown in the chart given.
Cooperative Credit Institutions
Agricultural Credit Institution Non-Agricultural Credit Intitutions
Short-Term Credit Institutions
↓ Long-Term Credit Institutions (Land Development banks)
State Copperative Central Cooperative Banks Primary Agricultural Credit Societies
Source: Economics discussions
There are 4 types of co-operative banks in India:
Central Co-Operative Banks :These banks are organized and operated at the district level and can be of two types:
(a) Co-operative Banking Union
(b) Mixed control Co-operative Bank
In the first, the members of the bank are the co-operative societies only. However, in the second, the members can be co-operative societies as well as individuals. The central cooperative banks lend money mainly to the affiliated primary societies with typical loan tenure lending between 1 to 3 years.
State Co-Operative Banks : These banks are organized and operated at the district level and rest at the top of the hierarchy in the co-operative credit structure. With the help of State Cooperative Banks (SCBs), the RBI funds the co-operative institutions. These banks also get loans at an interest rate of 1% to 2% lower than the standard bank rate.
Primary Co-Operative Banks : These offer credit services in the urban and semi-urban regions. Thus, they are not considered as agricultural credit societies.
Primary Co-Operative Banks receive concessional refinance service from RBI and IDBI from time to time for them to offer housing loans and other types of loans that can be used by small businesses.
Land Development Banks : The land development banks are divided into three tiers which are primary, state, and central. These offer credit services to the farmers for developmental purposes. They used to be regulated by the RBI as well as the state governments. However, this responsibility was recently transferred to the National Bank for Agricultural and Rural Development (NABARD).
NON-BANKING FINANCE COMPANIES (NBFCs)
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/ securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).
NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:
NBFC cannot accept demand deposits;
NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;
iii. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
Different types of NBFCs
NBFCs are categorized a) in terms of the type of liabilities into Deposit and Non-Deposit accepting NBFCs, b) non deposit taking NBFCs by their size into systemically important and other non-deposit holding companies (NBFC-NDSI and NBFC-ND) and c) by the kind of activity they conduct. Within this broad categorization the different types of NBFCs are as follows:
(i) Asset Finance Company (AFC) : An AFC is a company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive/economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipments, moving on own power and general purpose industrial machines. Principal business for this purpose is defined as aggregate of financing real/physical assets supporting economic activity and income arising therefrom is not less than 60% of its total assets and total income respectively.
(ii) Investment Company (IC) : IC means any company which is a financial institution carrying on as its principal business the acquisition of securities.
(iii) Loan Company (LC) : LC means any company which is a financial institution carrying on as its principal business the providing of finance whether by making loans or advances or otherwise for any activity other than its own but does not include an Asset Finance Company.
(iv) Infrastructure Finance Company (IFC) : IFC is a non-banking finance company a) which deploys at least 75 per cent of its total assets in infrastructure loans, b) has a minimum Net Owned Funds of Rs. 300 crore, c) has a minimum credit rating of 'A 'or equivalent d) and a CRAR of 15%.
(v) Systemically Important Core Investment Company (CIC-ND-SI) : CIC-ND-SI is an NBFC carrying on the business of acquisition of shares and securities which satisfies the following conditions:-
(a) it holds not less than 90% of its Total Assets in the form of investment in equity shares, preference shares, debt or loans in group companies;
(b) its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its Total Assets;
(c) it does not trade in its investments in shares, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment;
(d) it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI act, 1934 except investment in bank deposits, money market instruments, government securities, loans to and investments in debt issuances of group companies or guarantees issued on behalf of group companies.
(e) Its asset size is Rs. 100 crore or above and
(f) It accepts public funds
(vi) Infrastructure Debt Fund : Non- Banking Financial Company (IDF-NBFC) : IDF-NBFC is a company registered as NBFC to facilitate the flow of long term debt into infrastructure projects. IDF- NBFC raise resources through issue of Rupee or Dollar denominated bonds of minimum 5 year maturity. Only Infrastructure Finance Companies (IFC) can sponsor IDF-NBFCs.
(vii) Non-Banking Financial Company – Micro Finance Institution (NBFC-MFI) : NBFC-MFI is a nondeposit taking NBFC having not less than 85% of its assets in the nature of qualifying assets which satisfy the following criteria:
loan disbursed by an NBFC-MFI to a borrower with a rural household annual income not exceeding Rs. 1,00,000 or urban and semi-urban household income not exceeding Rs. 1,60,000;
loan amount does not exceed Rs. 50,000 in the first cycle and Rs. 1,00,000 in subsequent cycles;
total indebtedness of the borrower does not exceed Rs. 1,00,000;
tenure of the loan not to be less than 24 months for loan amount in excess of Rs. 15,000 with prepayment without penalty;
loan to be extended without collateral;
aggregate amount of loans, given for income generation, is not less than 50 per cent of the total loans given by the MFIs;
loan is repayable on weekly, fortnightly or monthly instalments at the choice of the borrower
(viii) Non-Banking Financial Company – Factors (NBFC-Factors) : NBFC-Factor is a non-deposit taking NBFC engaged in the principal business of factoring. The financial assets in the factoring business should constitute at least 50 percent of its total assets and its income derived from factoring business should not be less than 50 percent of its gross income.
(ix) Mortgage Guarantee Companies (MGC) – MGC are financial institutions for which at least 90% of the business turnover is mortgage guarantee business or at least 90% of the gross income is from mortgage guarantee business and net owned fund is Rs. 100 crore.
(x) NBFC- Non-Operative Financial Holding Company (NOFHC) is financial institution through which promoter / promoter groups will be permitted to set up a new bank. It's a wholly- owned Non-Operative Financial Holding Company (NOFHC) which will hold the bank as well as all other financial services companies regulated by RBI or other financial sector regulators, to the extent permissible under the applicable regulatory prescriptions.
BASICS OF CAPITAL MARKET : TYPES OF SHARES AND DEBENTURES
The history of the capital market in India dates back to the eighteenth century when East India Company securities were traded in the country. Until the end of the nineteenth century, securities trading was unorganized and the main trading centres were Bombay(now Mumbai) and Calcutta (now Kolkata). Of the two, Bombay was the chief trading centre wherein bank shares were the major trading stock. During the American Civil War (1860-61). Bombay was an important source of supply for cotton. Hence, trading activities flourished during the period, resulting in a boom in share prices. This boom, the first in the history of the Indian capital market, lasted for a half a decade. The first joint stock company was established on 1850. The bubble burst on July 1, 1865, when there was tremendous slump in share prices.
Trading was at that time limited to a dozen brokers, their trading place was under a banyan tree in front of the Town Hall in Bombay. These stockbrokers organized an informal association in 1875- Native Shares and Stock Brokers Association. Bombay. The stock exchanges in Calcutta and Ahmedabad, also industrial and trading centres; came up later. The Bombay Stock Exchange was recognized in May 1927 under the Bombay Securities Contracts Control Act, 1925.
Indian remained largely inactive till the 1970s. Partial liberalisation of the economy and pro-capital market policies during the 1980s infused some life into the markets, but it was only the economic liberalisation of the 1990s that provided a lasting impetus. Today, segments of India's capital markets are comparable with counterparts in many of the advanced economies in terms of efficiency (price discovery), tradability (low impact cost), resilience (co-movement of rates across product classes and yield curves), and stability. In particular, their ability to withstand several periods of stress, notably the Asian financial crisis in 1997-98, the global financial crisis in 2007-09 and the "taper tantrum" episode in 2013, is a sign of their increasing maturity.
Types of Shares and Debentures
Types of Shares
Equity share capital
Equity shares, also known as ordinary shares or common shares represent the owners' capital in a company. The holders of these shares are the real owners of the company. They have a control over the working of the company. Equity shareholders are paid dividend after paying it to the preference shareholders. The rate of dividend on these shares depends upon the profits of the company. They may be paid a higher rate of dividend or they may not get anything.
Equity share is a main source of finance for any company giving investors rights to vote, share profits and claim on assets. Various types of equity share capital are authorized, issued, subscribed, paid up, rights, bonus, sweat equity etc. The expression of the value of equity shares are in terms of face value or par value, issue price, book value, market value, intrinsic value, stock market value etc.
Normally, a company is started with equity finance as its first source of capital from the owners or promoters of that company. After a certain level of growth, there is a requirement for more capital for further growth. The company then finds an investor in the form of friends, relatives, venture capitalists, mutual funds, or any such small group of investors and issue fresh equity shares to these investors.
A point comes where the company reaches a very big level and requires huge capital investment for business growth. Initial Public Offer (IPO) is the offer of shares which the company makes to the general public for the first time. And Follow on Public Offer (FPO) is more such offers in future to the public.
Types of Equity Share Capital / Shares
Types of Equity Share Capital
Authorised Share Capital
Issued Share Capital
Subscribed Share Capital
Rights Shares
Sweat Equity Shares
Authorised Share Capital : It is the maximum amount of capital which a company can issue. The companies can increase it from time to time. However, for that we need to comply with some formalities also have to pay some fees to the legal bodies.
Issued Share Capital : It is that part of authorized capital which the company offers to the investors.
Subscribed Share Capital : It is that part of issued capital which an investor accepts and agrees upon.
Paid up Capital : It is the part of the subscribed capital, which the investors pay. Normally, all companies accept complete money in one shot and therefore issued, subscribed and paid capital becomes one and the same. Conceptually, paid-up capital is the amount of money which a company actually invests in the business.
Rights Shares : These shares are those which a company issues to it's existing shareholders. The company issues such kind of shares in order to protect the ownership rights of the existing investors.
Sweat Equity Shares : Sweat equity shares are issued to exceptional employees or directors of the company for their exceptional job in terms of providing know-how or intellectual property rights to the company.
Preference Share Capital
Preference shares, more commonly referred to as preferred stock, are shares of a company's stock with dividends that are paid out to shareholders before common stock dividends are issued. If the company enters bankruptcy, preferred stock holders are entitled to be paid from company assets before common stockholders. Most preference shares have a fixed dividend, while common stocks generally do not. Preferred stock shareholders also typically do not hold any voting rights, but common shareholders usually do.
Types of Preference Shares
Cumulative Preference Shares
Non-Cumulative Preference Shares
Redeemable Preference Shares
Participating Preference Shares
Non-participating Preference Shares
Convertible Preference Shares
Non-convertible Preference Shares
Cumulative Preference Shares : Preference dividend is payable if the company earns adequate profit. However, cumulative preference shares carry additional features which allow the preference shareholders to claim unpaid dividends of the years in which dividend could not be paid due to insufficient profit.
Non-Cumulative Preference Shares : The holders of non-cumulative preference shares will get preference dividend if the company earns sufficient profit but they do not have the right to claim unpaid dividend which could not be paid due to insufficient profit.
Redeemable Preference Shares : Redeemable preference shares are those shares which are redeemed or repaid after the expiry of a stipulated period.
Participating Preference Shares : Participating preference shareholders are entitled to share the surplus profit and surplus assets of the company in addition to preference dividend.
Non-participating Preference Shares : Non-participating preference shareholders are not entitled to share surplus profit and surplus assets like participating preference shareholders.
Convertible Preference Shares : The holders of convertible preference shares are given an option to convert whole or part of their holding into equity shares after a specific period of time.
Non-convertible Preference Shares : The holders of non-convertible preference shares do not have the option to convert their holding into equity shares i.e. they remain as preference share till their redemption.
A company may raise long-term finance through public borrowings. These loans are raised by the issue of debentures. "A debenture is a document under the company's seal which provides for the payment of principal sum and interest thereon at regular intervals, which is usually secured by a fixed or floating charge on the company's property or undertaking and which acknowledges a loan to the company".
A debenture holder is a creditor of the company. A fixed rate of interest is paid on debentures. The interest on debentures is a charge on the profit and loss account of the company. The debentures are generally given a floating charge over the assets of the company. When the debentures are secured, they are paid on priority in comparison to all other creditors.
Types of Debentures
Secured Debentures : These are debentures that are secured against an asset/assets of the company. This means a charge is created on such an asset in case of default in repayment of such debentures. So in case, the company does not have enough funds to repay such debentures, the said asset will be sold to pay such a loan. The charge may be fixed, i.e. against a specific assets/assets or floating, i.e. against all assets of the firm.
Secured Debentures
Unsecured Debentures
Redeemable Debentures
Irredeemable Debentures
Fully Convertible Debentures
Partly Convertible Debentures
Non-Convertible Debentures
Unsecured Debentures : These are not secured by any charge against the assets of the company, neither fixed nor floating. Normally such kinds of debentures are not issued by companies in India.
Redeemable Debentures : These debentures are payable at the expiry of their term. Which means at the end of a specified period they are payable, either in the lump sum or in installments over a time period. Such debentures can be redeemable at par, premium or at a discount.
Irredeemable Debentures : Such debentures are perpetual in nature. There is no fixed date at which they become payable. They are redeemable when the company goes into the liquidation process. Or they can be redeemable after an unspecified long time interval.
Fully Convertible Debentures : These shares can be converted to equity shares at the option of the debenture holder. So if he wishes then after a specified time interval all his shares will be converted to equity shares and he will become a shareholder.
Partly Convertible Debentures : Here the holders of such debentures are given the option to partially convert their debentures to shares. If he opts for the conversion, he will be both a creditor and a shareholder of the company.
Non-Convertible Debentures : As the name suggests such debentures do not have an option to be converted to shares or any kind of equity. These debentures will remain so till their maturity, no conversion will take place. These are the most common type of debentures.
Bearer Debentures are those which are payable to the bearer thereof. These can be transferred merely by delivery. Interest is paid to the person who produces the interest coupon attached to such debentures.
Registered Debentures are those which are payable to the persons who appear in the Register of Debenture holders. These can be transferred only by executing a transfer deed. Interest is paid to the registered holder.
FINANCIAL ASSISTANCE SCENARIO FOR SMALL AND MEDIUM ENTERPRISES AND START-UPS
Financial Assistance Scenario for Small and Medium Enterprises in India
There are various schemes launched by Ministry of Micro, Small & Medium Enterprises, and Government of India for providing financial assistance to SME sector. However, in this section we would restrict our discussion to certain selected schemes.
(a) Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
Related Scheme Scheme of Fund for Regeneration of Traditional Industries (SFURTI).
Description The objectives of the scheme is to organize the traditional industries and artisans into clusters to make them competitive and provide support for their long term sustainability, sustained employment, to enhance marketability of products of such clusters, to equip traditional artisans of the associated clusters with the improved skills, to make provision for common facilities and improved tools and equipments for artisans, to strengthen the cluster governance systems with the active participation of the stakeholders, and to build up innovated and traditional skills, improved technologies, advanced processes, market intelligence and new models of public-private partnerships, so as to gradually replicate similar models of cluster-based regenerated traditional industries
Nature of assistance The financial assistance provided for any specific project shall be subject to a maximum of Rs 8 (eight) crore to support Soft, Hard and Thematic interventions.
Who can apply? Non-Government organizations (NGOs), institutions of the Central and StateGovernments and semi-Government institutions, field functionaries of State and Central Govt., Panchayati Raj institutions (PRIs), Private sector by forming cluster specific SPVs, Corporates and corporate Responsibillity (CSR) foundations with expertise to undertake cluster development
(b) A Scheme for Promotion of Innovation, Rural Industries and Entrepreneurship (ASPIRE)- Objectives of the Scheme:
(i) Create new jobs and reduce unemployment
(ii) Promote entrepreneurship culture in India
(iii) Grassroots economic development at district level
(iv) Facilitate innovative business solution for un-met social needs
(v) Promote innovation to further strengthen the competitiveness of MSME sector.
Nature of Assistance – 80 Livelihood business incubators (2014-2016) to be set up by NSIC, KVIC or Coir Board or any other Institution/agency of GoI/State Govt. on its own or by any of the agency/Scheme for promotion of Innovation, Entrepreneurship and AgroIndustry organisation of the M/o MSME, one-time grant of 100% of cost of Plant & Machinery other than the land and infrastructure or an amount up to Rs.100 lakhs whichever is less to be provided
In case of incubation centres to be set up under PPP mode with NSIC, KVIC or Coir Board or any other Institution/agency of GoI/State Govt., one- time grant of 50% of cost of Plant & Machinery other than the land and infrastructure or Rs.50.00 lakhs, whichever is less to be provided
Assistance towards the training cost of incubates will be met out of the ATI scheme of the Ministry as far as possible for both centres.
(c) Entrepreneurship and Skill Development Programme (ESDP)
Related Scheme Entrepreneurship Skill Development Programme (ESDP)
Description Entrepreneurship Development Programmes are being organized regularly to nurture the talent of youth by enlightening them on various aspects of industrial activity required for setting up MSEs. These EDPs are generally conducted in ITIs , Polytechnics and other technical institutions, where skill is available to motivate them towards self-employment.
Nature of assistance 20 % of the total targeted of ESDPs are conducted exclusively for weaker sections of the society i.e. (SC/ST/women and PH) with a stipend of Rs.500/- per month per candidate under the Promotional Package for (Micro, Small Enterprises) MSEs. No fee is charged from the candidates under these programmes.
Who can apply? These programmes are conducted by MSME-DIs of Ministry
(d) Schemes of National Small Industries Corporation (NSIC) – The schemes of National Small Industries Corporation are as under:
Single Point Registration – The Government is the single largest buyer of a variety of goods. With a view to increase the share of purchases from the small-scale sector, the Government Stores Purchase Programme was launched in 1955-56. NSIC registers Micro & small Enterprises (MSEs) under Single Point Registration scheme (SPRS) for participation in Government Purchases.
Financial Assistance for Start-Ups
There are numerous schemes launched by Government of India for financing start-ups. However, this section covers only three finance schemes i.e. (a) The Venture Capital Assistance Scheme; (b) Support for International Patent Protection in Electronics & Information Technology (SIP-EIT) and (c) Stand-Up India for Financing SC/ST and/or Women Entrepreneurs.
(a) The Venture Capital Assistance Scheme: This scheme is run by Ministry of Agriculture and Farmers welfare. Venture Capital Assistance is financial support in the form of an interest free loan provided by SFAC to qualifying projects to meet shortfall in the capital requirement for implementation of the project.
This section covers only three finance schemes
The Venture Capital Assistance Scheme
Support for International Patent Protection in Electronics & Information Technology (SIP-EIT)
Stand-Up India for Financing SC/ST and/or Women Entrepreneurs
The benefits of the Venture Capital Assistance Scheme are as under:
(i) Help in assisting agripreneurs to make investments in setting up agribusiness projects through financial participation.
(ii) Provides financial support for preparation of bankable Detailed Project Reports (DPRs) through Project Development Facility (PDF).
Eligibility Criteria (Who can apply)-
Partnership/Proprietary Firms
Self Help Groups
Agripreneurs
Units in agriexport zones
Agriculture graduates Individually or in groups for setting up agribusiness projects.
(b) Support for International Patent Protection in Electronics & Information Technology (SIP-EIT): This scheme is managed by Ministry of Electronics & Information Technology.
SIP-EIT is a scheme to provide financial support to MSMEs and Technology Start-up units for international patent filing to encourage innovation and recognize the value and capabilities of global IP along with capturing growth opportunities in ICTE sector.
Eligibility Criteria :
The Applicant should be registered under the MSME Development Act 2006 of Government of India as amended from time to time as a MSME unit as per the criteria for such registration(the applicant would be required to furnish the proof of such registration).
The applicant should be a registered company under the Companies Act of Government of India and should fulfil the investment limits in plant and machinery or equipment as defined in the MSME Development Act 2006 of Government of India as amended from time to time(this criteria will be ascertained from the proof of such registration and last audited balance sheet of the applicant)
The applicant should be a registered STP Unit and should fulfill the investment limits in plant and machinery or equipment as defined in the MSME Development Act 2006 of Government of India as amended from time to time(this criteria will be ascertained from the proof of such registration and last audited balance sheet of the applicant).
The applicant should be a technology incubation enterprise or a startup located in an incubation centre/ park and registered as a company (a certification from the incubation centre/ park in this case is mandatory) and should fulfill the investment limits in plant and machinery or equipment as defined in the MSME Development Act 2006 of Government of India as amended from time to time(this criteria will be ascertained from the proof of such registration and last audited balance sheet of the applicant).
(c) Stand-Up India for Financing SC/ST and/or Women Entrepreneurs : This scheme is managed by Small Industries Development Bank of India (SIDBI). Stand Up India Scheme facilitate
bank loans between 10 lakh and 1 crore to atleast one scheduled caste (SC) or Scehduled Tribe, borrower and atleast one women per bank branch for setting up a greenfield enterprise. This enterprise may be in manufacturing, services or the trading sector. In case of non-individual enterprises at least 51% of the shareholding and controlling stake should be held by either an SC/ST or Woman entrepreneur.
SC/ST and/or women entrepreneurs; above 18 years of age
Loans under the scheme is available for only greenfield project. GreenField signifies, in this context, the first time venture of the benefeciary in the manufacturing or services or trading sector
In case of non-individual enterprises,51% of the shareholding and controlling stakes should be held by either SC/ST and/or Women Entrepreneur
Borrower should not be in default to any bank or financial institution
Which of the following is not covered under the Commercial banks?
(a) Public sector banks
(b) Private sector banks
(c) Foreign banks
(d) Reserve Bank of India
Which is the first NBFC to be converted into a bank?
(a) Kotak Mahindra Finance Ltd.
(b) Muthoot Finance
(c) Bajaj Allianz
(d) GE Capital
In September 2018, which insurance company launched 'E@Secure' a cyber insurance policy for individuals?
(a) ICICI Lombard
(b) HDFC Ergo
(c) LIC
(d) IFFCO Tokio
In which year Mutual Fund industry started in India?
Which of the following manages Stand-Up India for Financing SCIST and/or Women Entrepreneur scheme?
(a) Small Industries Development Bank of India (SIDBI)
(b) Industrial Finance Corporation of India (IFCI)
(c) State Bank of India
(d) HDFC
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The « Demeure de l'Étrange » is now open!
I have the pleasure to present to you today (finally !!) the 3rd edition of the « Demeure de l'Étrange » (House of Curiosities) contest!
« Demeure de l'Étrange » : what is it ?
In this contest you will run through a very unusual house which has been transformed into a gigantic playground. Your mission, if you choose to accept it, will be to find the hidden treasure chests and « Roar ! » signs.
I must warn you, it will not be easy! It will be like running through a Super Mario Bros game where you use patience and precision to jump from platform to platform.
The house used in this contest has been completely remodeled and there is even a second house !!
In the next two weeks, two houses will open successively and you will have to meet the many challenges they contain.
For the first week of this contest, today until September 9th, I challenge you to approach all the chests contained in the "Annexe de l'Étrange" (the first house). The number of chests to reach in this first house is 10.
After the completion of the first stage, «la Demeure de l'Étrange » will welcome you to the second part (and second week) of the contest where you will have to find chests and Signs (Roar !) in the second house.
The contest will be more complicated in the second week and new challenges will be launched.
Approach all the chests hidden in the "Annexe" house and take a screenshot.
Send multiple entries in the same week. (For instance : do not send me 3 chests found on Monday, 2 on Tuesday, 9 on Saturday, etc… Only one entry per person per week allowed [Monday to Sunday evening].
To participate in Week 2, you must also have completed the "Annexe de l'Étrange".
If I have already recieved your full participation for the "Annexe" (week 1), you just need to send me your pictures of the "Demeure de l'Étrange" for the second week.
Simply press the "Print Screen" key on your keyboard once in game. The photo will go directly to the My Documents -> The Lord Of The Rings Online folder. Then drag them into your participation form.
A photo of your character within one meter of the chest, with the bubble of your character on the screen and the mini-map which can be seen.
Some chests made it difficult to take pictures, so use the "*" key to switch to subjective view.
Needed on the screenshot: the chest/sign, morale bar of your character with the name on it, the mini-map .
All screenshots must include the game information (character name and minimap).
To « reach a chest » means your character must be on the same platform as the chest (less than a meter away). Any further and the shot will be refused.
Remember, your character must be able to « open » the chest with his or her own hands….
A draw will be made at the end of each week (Monday, September 10 and Monday September 17) on the full entries.
– Week 2 : 2 x 500 LOTRO points + 1 surprise gift* !!
Good luck everyone and have fun !


text:
Q: Laravel Task Scheduling with multiple kernel.php like files I have a fully functional laravel scheduling system which I list my jobs and codes under app/Console/Kernel.php
the problem I face is that sometimes our teammates put some codes which cause the scheduling to crush and finally cause prevention of important jobs' execution.
I was thinking if there was a way to have multiple Kernel.php like files, to put some important jobs to one, and the new ones which may cause problems to another.
Thanks

redpajama_set_name: RedPajamaStackExchange


text:
Q: How can electrons move along the conductive wire? ( seems to be a paradox ) Tangential components
of the electric field across an interface between two media, with no impressed magnetic current
densities along the boundary of the interface, are continuous.
So: $ n \times (E_2 - E_1) = 0$. Now suppose an lumped circuit with some elements that are connected with infinite electric conductivity wire $(\sigma = \nsim)$
$\longrightarrow  E_1t =E_2t = 0$ (in the wire and cylinder).
What makes electrons move along the cylinder when there are no tangential components of the electric field?
lumped circuits : http://en.wikipedia.org/wiki/Lumped_element_model

A: To set the record straigth, conductivity cannot be infinite, an ultimate limit will be given by the velocity of light which can never be over shot. It can be very large as in superconductors but even there, it is limited.
You are talking of conductors at electrostatic equilibrium., static electricity. For your vector conclusions to be true there should be no current in the surface. While the charge is being built up there exists a current in the circuit.
When there exists current in the circuit the surfaces cannot be charged as the electrons move so as to neutralize the charge imposed by the power source. Have a look at the answer here today to a similar question.


So I thought it would be good to review something a little out of the centre of Oxford, as most of our content has been there and I put a poll up on the Instagram page where a lot of you were keen to see stuff to do in Oxfordshire too.
So here we have it, on a rainy and somewhat dull Saturday we decided to go to The Oxfordshire Golf Club, Spa and Hotel for some afternoon tea.
It is set in beautiful grounds in the Chilterns, a few minutes drive from the market town of Thame. The Oxfordshire is a luxury four star 50 bedroom Hotel and Spa with a Championship Golf Course of outstanding quality. The Oxfordshire is considered to be one of the most exciting golf courses in the country.
Previous host venue to major tournaments such as the Benson & Hedges International, Andersen Consulting World Championship and Ladies English Open.
Recent accolades include, top 50 places to Stay & Play voted by Golf Monthly magazine, Top Golf Course in the county voted by the Top 100 Golf Courses in England and awarded 4 Bubbles by The Good Spa Guide.
On arrival we drove through the entrance and up the sweeping bendy roads taking in the stunning scenery and eventually arrived up to the car park. We entered the big grand reception and were greeted warmly by both receptionists and explained we had booked some afternoon tea.
After being shown up to the Lounge Lakes bar, we sat down and this is where it started to get exciting.
The atmosphere was pleasant and relaxed as we sat down in our afternoon tea area which was clearly laid out ready for us.
I would describe the Lakes Lounge bar as classy but slightly dated in decoration and furniture, for example the carpet and chairs. My only other niggle was that the table was really low so it's not ideal for eating a full meal but just fine for afternoon tea.
Aside from that it is a really nice place to be and has stunning views of the golf course even on a dreary day like this. In the summer I can imagine it would be a great place to spend a day even if you don't play golf.
Shortly after being seated we were offered drinks. We opted for two lattes. They were both nice, you can tell they came from a push button coffee machine but that didn't matter too much because they looked and tasted the part.
As you can see in the picture below, the Oxfordshire put out a really good selection of sandwiches, desserts and scones in their afternoon tea.
The first tier included two scones with plenty of fresh clotted cream and two pots of jam.
The second tier included two mini macaroons, two pieces of fruit cake, two brownies, two brandy biscuit, cream and berry pots, two strawberry and cream mini cakes and two brownies.
The third tier included a great selection of sandwiches too which included the usual salmon and cream cheese, egg and cress, beef and mustard as well as ham hock with ketchup.
If you would like to book afternoon tea at the Oxfordshire, it will cost you £39 for two people. I think it is worth this, the biggest selling point is the beautiful setting and warm atmosphere. The quality of food more than justifies the price and I would suggest trying it if you are wanting to do something outside of the city and are in Oxfordshire. It's really close to the M40 motorway so if you have access to a car it is very easy to reach.
Overall I would rate my afternoon tea experience at the Oxfordshire as a 8/10 and would come back again.


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Word of mouth marketing is the best way to find a reliable and licensed electrician in the area. Ask your household members, friends, colleagues or neighbors if they recognize a bit of good, licensed electrician in the area. Builders, contractors, and developers may also recommend a listing of great electricians.
You can find electricians who can tell you they are licensed even if they are not. So, it is advisable to inquire about all electricians you need to hire for evidence of license before hiring. Anyone who performs electrical work needs to be licensed. A licensed electrician knows the ins and outs of electrical work and is also qualified for the position.
Demand names and contacts of several of the electrician's previous clients. After you have the references' contacts, call to discover more regarding the quality of services offered by the electrician you want to hire.
Also, remember to learn from all of these references the things they liked in regards to the electrician and whether there may be anything they failed to like about the electrician. It can be good to talk to recent clients and those clients from ten or more in the past to assist you to learn about the electrician's work as time passes.
Talk with potential electricians relating to your project and request them tips on how to make the design better or how you can save money without sacrificing quality. Seriously consider the answers each of the electricians you wish to hire offers you and set the electricians with the best answers on the short list. Like a bonus, you can find an effective design and money saving ideas as a result because you will get many good ideas from your different electricians.
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Contact potential electricians to discover how responsive they are. Reliable electricians usually answer their callers within a reasonable timeframe. Hire an electrical contractor who seems to be receptive making contact with you. Avoid those electricians who ignore your calls because they is probably not healthy.
Locating a reliable and licensed electrician can be time-consuming but will allow you to obtain an electrician who meets your needs. Going the excess mile will pay off and assist you in finding and hire an electrician who performs quality electrical work.