Financial Institutions and Markets


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Financial institutions, financial markets and financial services are the core pillars of a sound financial system of an economy. The depth and width of these pillars are the barometers and indicators to judge the efficiency and effectiveness of the growth of financial transactions of a country. All the governments and central banks across the globe lay the needed focus on the sustainable growth of these core strengths, leading to financial stability, liquidity, and leverage. There have been tremendous changes in the policies framework, systems, and procedures related to financial markets across the globe, especially after the global financial crisis of 2008. A good number of specialized financial institutions and intermediaries have emerged in India in the last few decades more so after the implementation of financial sector reforms process in 1991. The financial markets have widened to cover a broad range of products and services. The changes in the financial markets have been so fast that it was difficult to organize the concepts, systems, procedures, and policy implications in an appropriate manner.

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This book is an attempt to provide a practical approach to various aspects of financial markets, services, and instruments analyzing the conceptual framework, business utility, and their role in business decisions. This is a comprehensive approach to enable the readers to understand the concepts and practical applications with more clarity, and thereby analyze practical applications and implications. The book contains 20 chapters. The chapters such as Factoring Services, Venture Capital, Securitization, and Barter Exchange of India have been added besides other relevant chapters on the subject. A summary of the contents of the book is given as follows:
Chapter 1 is introductory, where a perspective on the Indian financial system, saving and investment functions, three important pillars of the financial system, and the global financial markets is presented. The functions of the Indian stock exchange system and the reforms brought into it, the role of stock exchanges and the organizational structure of stock markets in India have been covered in chapter 2. Chapters 3 and 4 deal with financial markets and financial institutions where different kinds of financial markets and their functions, the role of regulatory authorities, the relationship between different kinds of markets, different kinds of financial institutions and their role in the financial system have been explained. The role of other financial intermediaries has also been covered in the book. Chapter 5 deals exclusively with the merchant banking operations. This chapter exhaustively covers the role of a merchant bank in public issue management and its role as an investment banker.
There are different types of financial instruments introduced in the financial markets to facilitate and provide better liquidity in financial transactions. This has been covered in chapter 6. Chapter 7 explains various operational aspects related to the depository and custodial services in India. A detailed study is made about the depository transactions settlement process, demat accounts’ operations, NSDL, CDSL and custodial services. Chapter 8 focuses on credit rating systems, procedures, and various issues related to credit ratings. Chapters 9 and 10 cover mutual funds and insurance services where detailed analysis is undertaken on mutual fund investments, performance evaluation of mutual fund schemes, insurance services, players in the insurance sector, and the role of IRDA. The venture capital activities have been emerging and a good number of foreign venture capital firms have entered the Indian markets. A thorough review of venture capital funding and private equity has been done in chapter 11. Chapter 12 focuses on securitization processes and procedure, securitization of infrastructure projects, and the role of SARFAESI Act I on the securitization process. Chapter 13 is significant as it adds to various aspects of corporate re-structuring which covers—mergers and acquisitions, leveraged but out, buy-back of securities, and accounting and tax implications. A number of success cases are covered in this chapter. Chapter 14 deals with various aspects of lease finance, the structure of lease rentals, and other related issues on lease deals. The process and procedures of hire purchase finance and accounting treatment of hire purchase transactions are covered in chapter 15. The operations and role of non-banking financial companies (NBFCs) have become very crucial in augmenting and supplementing the involvement of the financial institutions in the financial system. Therefore, chapter 16 is devoted to explain the various aspects of NBFCs in India, their critical role, and their present status. Chapter 17 covers the activities and functions of housing finance companies, policy initiatives, and regulatory aspects of housing finance in India. Chapter 18 is devoted to factoring and forfaiting services with practical applications. Barter exchanges have emerged in the recent past and they have made their presence felt in the financial markets. Various systems, procedures, policy-related issues, and regulatory aspects of barter exchanges have been covered in chapter 19. The last chapter of the book, i.e. chapter 20, provides a broad view on the foreign exchange markets in India. To give an insight into the practical application of the concepts, practical cases, situations, and instances have been provided with the required numerical problems in relevant chapters. At the end of each chapter, various types of questions, such as short questions and fill in the blanks, have been included. At the end of each chapter, practical cases from the corporate sector have been incorporated to provide a practical view on the topic.
No single book is complete in itself. However, an attempt has been made to give exhaustive information about policy issues, practical implications, and the latest information and data to make this book more useful and practical for the management students, practising managers, policymakers, and other stakeholders. The author welcomes valuable suggestions to make this book more practical and useful.