What Does Primary Market Mean? A market that issues new securities on an exchange.

Companies, governments and other groups obtain financing through debt or equity based securities. Primary markets are facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for a given security and then oversee its sale directly to investors. What Does Secondary Market Mean? A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. The national exchanges - such as the New York Stock Exchange and the NASDAQ are secondary markets. Secondary markets exist for other securities as well, such as when funds, investment banks, or entities such as Fannie Mae purchase mortgages from issuing lenders. In any secondary market trade, the cash proceeds go to an investor rather than to the underlying company/entity directly. What Does Money Market Mean? A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year. Money market securities consist of negotiable certificates of deposit (CDs), bankers acceptances, U.S. Treasury bills, commercial paper, municipal notes, federal funds and repurchase agreements (repos). What Does Venture Capital Mean? Financing for new businesses. In other words, money provided by investors to startup firms and small businesses with perceived, long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns. Stock exchange refer your book? What Does Speculator Mean? A person who trades derivatives, commodities, bonds, equities or currencies with a higher-than-average risk in return for a higher-than-average profit potential. Speculators take large risks, especially with respect to anticipating future price movements, in the hope of making quick, large gains. What Does Speculation Mean? The process of selecting investments with higher risk in order to profit from an anticipated price movement.

Types of speculators? Bull, Bears, Lame ducks, Stags Dealers in stock exchange? Brokers, Jobber, Authorized clerk, Remisiers, Tarvaniwalas What Does Over-The-Counter Exchange Of India - OTCEI Mean? An electronic stock exchange based in India that is comprised of small- and mediumsized firms looking to gain access to the capital markets. Like electronic exchanges in the U.S. such as the Nasdaq, there is no central place of exchange and all trading is done through electronic networks. What Does Ordinary Shares Mean? Or equity share? Any shares that are not preferred shares and do not have any predetermined dividend amounts. An ordinary share represents equity ownership in a company and entitles the owner to a vote in matters put before shareholders in proportion to their percentage ownership in the company. Ordinary shareholders are entitled to receive dividends if any are available after dividends on preferred shares are paid. They are also entitled to their share of the residual economic value of the company should the business unwind; however, they are last in line after bondholders and preferred shareholders for receiving business proceeds. As such, ordinary shareholders are considered unsecured creditors . What Does Reserve Bank Of India - RBI Mean? The central bank of India, which was established on April 1, 1935, under the Reserve Bank of India Act. The RBI uses monetary policy to create financial stability in India and is charged with regulating the country's currency and credit systems. What Does Commercial Bank Mean? A financial institution that provides services such as a accepting deposits and giving business loans. What Does Merchant Bank Mean? A bank that deals mostly in (but is not limited to) international finance, long-term loans for companies and underwriting. Merchant banks do not provide regular banking services to the general public. What Does Mutual Fund Mean? An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money mangers, who invest the fund's capital and attempt to produce capital gains and income for the

fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. What Does Debenture Mean? A type of debt instrument that is not secured by physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture. What Does Bank Rate Mean? The rate at which central banks lend funds to national banks. A central bank adjusts the supply of currency within national borders by adjusting the bank rate. When the central bank reduces the bank rate, it increases the attractiveness for commercial banks to borrow, thus increasing the money supply. When the central bank increases the bank rate, it decreases the attractiveness for commercial banks to borrow, consequently decreasing the money supply Financial Intermediaries A structural change was noticed in the Indian financial system with the establishment of a host of financial intermediaries during the second phase of evolution of the system. Financial intermediaries comprises of public financial institutions, NBFCs, mutual funds,commercial banks, housing bank etc. BSE INDEX Sensex Sensitivity Index is shortly called as Sensex. Sensex comprises of 30 actively traded stocks from A group shares of different industries. The base year for sensex is 1978-79. BSE National Index This index comprises of 100 actively trading companies. The base year for this index is 1983-84. This comprises of all categories of equity shares. Function of RBI Main Functions Monetary Authority:

Formulates, implements and monitors the monetary policy. Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.

Regulator and supervisor of the financial system:

Prescribes broad parameters of banking operations within which the country's banking and financial system functions.

Objective: maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange

Manages the Foreign Exchange Management Act, 1999. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Issuer of currency:

Issues and exchanges or destroys currency and coins not fit for circulation. Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role

Performs a wide range of promotional functions to support national objectives.

Related Functions

Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker. Banker to banks: maintains banking accounts of all scheduled banks.

Financial market Call money market

Call money market is that part of the national money market where the day to day surplus of funds, of banks and primary dealers, are traded in.Call/ Notice/ term money market ranges between one day to 15 days borrowing and considered as highly liquid. Other key feature is that the borrowings are unsecured and the interest rates are very volatile depending on the demand and supply of the short term surplus/ defeciency amongst the interbank players. The average daily turnover in the call money market is around Rs. 12000-13000 cr every day and the market is active between 9.30 to 2.30 every working day and 9.30to 12.30 every Saturday. Features of call money market: 1. This market deals in very short period funds, ranging from one day to 15 days. 2. this market is very sensitive to any changes in financial system 3. in case of call money market funds are borrowed or lent very quickly

4. investment in call money market is quite profitable 5. interest charged in this market is called as call rates 6. call rates in call money market is very volatile 7. Call money market are mainly located in major commercial centers like Mumbai, Delhi, Chennai. Etc. Main participants in call money market are 1. scheduled commercial banks 2. non- scheduled commercial banks 3. state, district, and urban co-operative banks 4. foreign banks 5. discount and finance house of India 6. securities trading corporation of India Treasury Bills: The Treasury bills are short-term money market instrument that mature in a year or less than that. The purchase price is less than the face value. At maturity the government pays the Treasury Bill holder the full face value. The Treasury Bills are marketable, affordable and risk free. The security attached to the treasury bills comes at the cost of very low returns. Types Of Treasury Bills There are different types of Treasury bills based on the maturity period
and utility of the issuance like, ad-hoc Treasury bills, 3 months, 12months Treasury bills etc. In India, at present, the Treasury Bills are the 91-days and 364-days Treasury bills.

Benefits Of Investment In Treasury Bills No tax deducted at source Zero default risk being sovereign paper Highly liquid money market instrument Better returns especially in the short term Transparency Simplified settlement High degree of tradeability and active secondary market facilitates meeting unplanned fund requirements.

Certificate of Deposit: The certificates of deposit are basically time deposits that are issued by the commercial banks with maturity periods ranging from 3 months to five years. The return on the certificate of deposit is higher than the Treasury Bills because it assumes a higher level of risk. Commercial Paper: Commercial Paper is short-term loan that is issued by a corporation use for financing accounts receivable and inventories. commercial paper is an unsecured promissory note with a fixed maturity of 1 to 270 days. Commercial Paper is a money-market security issued (sold) by large banks and corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation's promise to pay the face amount on the maturity date specified on the note. Since it is not backed by collateral, only firms with excellent credit ratings from a recognized rating agency will be able to sell their commercial paper at a reasonable price. Commercial paper is usually sold at a discount from face value, and carries shorter repayment dates than bonds. The longer the maturity on a note, the higher the interest rate the issuing institution must pay. Interest rates fluctuate with market conditions, but are typically lower than banks' rates. Banker's Acceptance: It is a short-term credit investment. It is guaranteed by a bank to make payments. The Banker's Acceptance is traded in the Secondary market. The banker's acceptance is mostly used to finance exports, imports and other transactions in goods. The banker's acceptance need not be held till the maturity date but the holder has the option to sell it off in the secondary market whenever he finds it suitable. Euro Dollars: The Eurodollars are basically dollar- denominated deposits that are held in banks outside the United States. Since the Eurodollar market is free from any stringent regulations, the banks can operate at narrower margins as compared to the banks in U.S. The Eurodollars are traded at very high denominations and mature before six months. The Eurodollar market is within the reach of large institutions only and individual investors can access it only through money market funds. Repos: The Repo or the repurchase agreement is used by the government security holder when he sells the security to a lender and promises to repurchase from him overnight. Hence the Repos have terms raging from 1 night to 30 days. They are very safe due government backing. Gilt funds,as they are conveniently called, are mutual fund schemes floated by asset management companies with exclusive investments in government securities. The schemes are also referred to as mutual funds dedicated exclusively to investments in government securities. Government securities mean and include central government dated securities, state government securities and treasury bills. The gilt funds provide to the investors the safety of investments made in government securities and better returns than direct investments in these securities through investing in a variety of government securities yielding varying rate of returns gilt funds, however, do run the risk.. The first gilt fund in India was set up in December 1998. Discount market

UK's short-term money market comprising of banks, discount houses, and money brokers (called bill brokers) who discount bills of exchange (including treasury bills). Also called bill market, it is an important channel through which bank of England controls the amount of money in the financial system. The NASDAQ Stock Market, known as NASDAQ, is an American stock exchange. The full form is National Association of Securities and Dealers Automated Quotation.It is the largest electronic screen-based equity securities trading market in the United States. With approximately 3,700 companies and corporations, it has more trading volume per hour than any other stock exchange in the world NSE The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems, practices and procedures. NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market practices and trading volumes. The market today uses state-of-art information technology to provide an efficient and transparent trading, clearing and settlement mechanism, and has witnessed several innovations in products & services viz. demutualisation of stock exchange governance, screen based trading, compression of settlement cycles, dematerialisation and electronic transfer of securities, securities lending and borrowing, professionalisation of trading members, fine-tuned risk management systems, emergence of clearing corporations to assume counterparty risks, market of debt and derivative instruments and intensive use of information technology. Nifty S&P CNX Nifty is a well diversified 50 stock index accounting for 21 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialised company focused upon the index as a core product. IISL has a Marketing and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services.

The total traded value for the last six months of all Nifty stocks is approximately 54% of the traded value of all stocks on the NSE Nifty stocks represent about 62.50% of the Free Float Market Capitalization as on Sept 30, 2009. Impact cost of the S&P CNX Nifty for a portfolio size of Rs.2 crore is 0.16%

S&P CNX Nifty is professionally maintained and is ideal for derivatives trading From June 26, 2009, S&P CNX Nifty is computed based on free float methodology.

Introduction OTCEI Over The Counter Exchange of India was incorporated in the year 1990 and became fully operational from September 1993 onwards. Regulated under Sec.25 of Companies Act, 1956. NASDAQ is the role model for OTCEI. Sec.4 of SCRA (Securities Contracts Regulation Act) recognizes OTCEI as a stock exchange. The main aim of bringing OTCEI is to eliminate the outcry trading system in India and to bring in the international standards in the stock market operations. Promoters of OTCEI (Capital Contribution) UTI IDBI IFCI Can Bank Fin. Services 20% 17% 8% 8% ICICI SBI CAP LTD LIC Others 20% 11% 8% 8%

Features of OTCEI Trading through a network of computers of OTC dealers. A national level floor less exchange. Screen based trading. Exclusive listing is a must. Quicker liquidity. Fair market price. Simplified process of trade. Causes for Failure of OTCEI Hectic Listing Procedure Vital failure point - Exclusive listing made compulsory - Appointing a sponsor for listing - High listing fees. Investors are not fully conversant with fully computerized trading system. Investors are not given proper education on OTCEI workings. Comparative Study: RSE OTCEI - NSE

FEATURE Membership Method of Trading System of Trading Transparency Intermediaries Year of Start Trade Reach (India)

RSE All Floor Based Quote Driven Nil Needed Since 1875 Limited

OTCEI Only Corporate Screen Based Code Driven Ensured Limited 1991 Anywhere

NSE All Screen Based Order Driven 100% Limited 1994 Anywhere

DERIVATIVES @ FUNDAS A Brief History of Derivatives The history of derivatives is surprisingly longer than what most people think. Some texts even find the existence of the characteristics of derivative contracts in incidents of Mahabharata. Traces of derivative contracts can even be found in incidents that date back to the ages before Jesus Christ. In Genesis Chapter 29, believed to be about the year 1700 B.C., Jacob purchased an option costing him seven years of labor that granted him the right to marry Laban's daughter Rachel. His prospective father-in-law, however, reneged, perhaps making this not only the first derivative but the first default on a derivative. A Brief History of Derivatives Around 580 B.C., Thales the Milesian purchased options on olive presses and made a fortune off of a bumper crop in olives. However, the advent of modern day derivative contracts is attributed to the need for farmers to protect themselves from any decline in the price of their crops due to delayed monsoon, or overproduction. The first 'futures' contracts can be traced to the Yodoya rice market in Osaka, Japan around 1650. These were evidently standardised contracts, which made them much like today's futures. The Chicago Board of Trade (CBOT), the largest derivative exchange in the world, was established in 1848 where forward contracts on various commodities were standardised around 1865. From then on, futures contracts have remained more or less in the same form, as we know them today. Trading in Stock Index Futures (SIF) contracts was introduced by the Kansas City Board of Trade on February 24, 1982. In 1982 April, the Chicago Mercantile Exchange began trading a futures contract based on the Standard and Poor's Index of 500 common stocks.

 The success of the first two contracts induced other major exchanges to introduce similar instruments. NYSE Composite Stock Index, Value Line Composite Stock Index are among the popular stock index futures. In India Derivatives was introduced in the year 2000

What is a derivative? Derivatives are defined as financial instruments whose value derived from the prices of one or more other assets such as equity securities, fixed-income securities, foreign currencies, or commodities. A derivative is also a kind of contract between two counterparties to exchange payments linked to the prices of underlying assets. Derivative can also be defined as a financial instrument that does not constitute ownership, but a promise to convey ownership. TYPES OF DERIVATIVES The following are the basic two types of derivatives: 1. Financial Derivatives ( @ NSE & BSE) (a) Forwards (b) Futures (c) Options (d) Swaps 2. Commodities Derivatives (@ MCX & NCDEX) PLAYERS IN DERIVATIVES MARKET (a) Speculators (b) Hedgers (c) Arbitrageurs (a) FORWARD CONTRACTS A forward contract is an agreement to buy or sell an asset on a specified date for a specified price. One of the parties to the contract assumes a long position and agrees to buy the underlying asset on a certain specified future date for a specified price. The other party assumes short position and agrees to sell the asset on the same date for the same price. Other contract details like delivery date, price and quantity are negotiated bilaterally by the parties to the contract. Forward contracts are normally traded outside the exchanges. (b) FUTURES CONTRACTS A future contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Future contracts are standardized and exchange traded. To facilitate liquidity in the futures contracts, the exchange specifies certain standard features of the contract. Futures are standardized in terms of: i. Quantity of the underlying asset ii. Quality of the underlying asset

iii. iv. v.

Date of delivery Units of price quotation and mini. price change. Location of settlement.

(c) OPTIONS - Concept Options are contracts which provide the holder the right to sell or buy a specified quantity of an underlying asset at a fixed price on or before the expiration of the option date. The person who acquires the right is known as Option Holder (or) Buyer and the person who grants this right is known as Option Writer (or) Seller. The price payable for this right is known as the Premium and it depends upon the underlying assets. The agreed price by the both the parties is called as the Strike Price The agreed date is technically called as the Expiration Date (or) Strike Date OPTIONS - TYPES Depending upon whether an option is for a right to buy or Sell, the option can be classified into CALL and PUT: CALL OPTION Call option provides to the holder a right to buy specified assets at specified price on or before a specified date. (b) PUT OPTION Put option provides to the holder a right to sell specified assets at specified price on or before a specified date. EXPIRATION DATE KINDS The expiration date can be either of (a) American Option Style (On or before expiry date) OR (b) European Option Style. (Only on expiry date) (Note: In India Stock Options are of American Style and Index options are of European Style) (d) SWAPS Swaps are private agreements between two parties to exchange cash flows in the future according to a pre arranged formula. Two commonly used swaps are (a) Interest Rate Swaps These entail swapping only the interest related cash flows between the parties in the same currency. (b) Currency Swaps These entail swapping both principal and interest between the parties, with the cashflows in one direction being in a different currency than those in the opposite direction. (c) Swaptions Swaptions are options to buy or sell a swap that will become operative at the expiry of the options. Thus a swaption is an option on a forward swap. Rather than have calls and puts, the swaptions market receiver swaptions and payer swaptions. A receiver swaption is an option to receive fixed and paying floating. A payer swaption is an option to pay fixed and receive floating. payer swaptions. A receiver swaption is an option to receive fixed and paying floating. A payer swaption is an option to pay fixed and receive floating.

PUBLIC ISSUES MANAGEMENT INTRODUCTION Public Issues Management in India, quiet interesting and deliberative topic of the day. In general the following are the ways available in India as for as Public Issues are concerned: Public Offer through Prospectus Offer for Sale Private Placement Offer through Book Building Process Rights Issue I. PUBLIC OFFER THROUGH PROSPECTUS This method is the most common and popular method of issue of securities. The securities are offered to the investors through a detailed statement of terms and conditions known as prospectus. The prospectus is also known as Offer Document Contents of a Prospectus The contents of a prospectus are as per the requirements given in the Chapter VI of SEBI Guidelines, 2000. These requirements, interalia, are in respect of: Name of the company Board of Directors Existing and proposed activities of the issuer Authorised, Issued and Paid up capital Names of the Merchant Bankers, Lead Managers, Advisors, Registrar, Bankers, Underwriters Minimum Subscription Different disclaimer clauses Terms of the present issue Utilisation of issue proceeds Analysis of financial conditions & results of operations Financial Information of group companies Issues price and basis for that Risk Factors Other general and relevant financial information When & Why to go for this type of Public Issue Offer by Prospectus? The issue by prospectus method is adopted when the company wants to issue fixed number of securities at a fixed price (which may be equal to less than or more than the face value). The application forms together with the copy of prospectus are distributed among the public investors who offer to the company to buy a specific number of securities. In case of over-subscription, the securities are allotted to the investors, in consultation with the stock exchange where the securities are proposed to be listed.

What is the limitation of this method (Offer through prospectus)? One of the shortcomings of this method is that it is an expensive method. High cost of advertisement, flotation, brokerage and underwriting are involved. II. OFFER FOR SALE It is also called as Bought out Deals. In certain cases, the companies do not offer the securities directly to the investors. Instead, the securities are issued to an issue house or a merchant banker who will subsequently offer the securities for sale to the investors. If an existing company off-loads, a part of the promoters capital to a wholesaler instead of making a public issue. Classical example of offer for sale disinvestment of shares in PSU by the government is offer for sale. Pricing is the essential element to be decided in a bought out deal. The difference between the issue price by the company and the offer price by the issue house is one of the gains to the later. Advantages of a Bought out Deal Helps the promoters to realize the funds without any loss of time. A medium or small sized company, which already facing working capital shortage, cannot afford to have long lead-time before the funds could be mobilized from the public. The cost of raising funds is reduced. For issuing shares to the public the company incurs heavy expenses, which may invariably be as high as 5%-10% of the cost of the project. Helps the new entrepreneur to raise adequate capital from the market. Helps the promoters who are not familiar with the capital market but have sound professional knowledge to raise funds. Sponsors (issue houses) are mostly concerned with the promoters background and government policies than about the past track record or financial projections. Limitation of a Bought out Deal The major limitation of the bought out deal is, sponsor (issue house) are able to create a positive image about the shares and sell them at hefty premium. Single investment banker gives scope for manipulation of the results. Insider trading and price rigging could be carried out , which is unhealthy to the company. III. PRIVATE PLACEMENT In this case, the issuing company does not offer the securities to investors in general. Instead, the securities are offered to select big institutional clients only. These institutions could be a financial institution, corporate bodies and high networth individuals. The investors may be selected in conformity with the merchant banker. The stock is placed with the issue house client with the medium of placing letter and other documents which taken together contribute a prospectus, giving the information regarding the issue. The special feature of private placement is that there is no need for underwriting agreements since the placement itself amounts to underwriting.

Private placement of securities could be any kind of security like, equity share, preference share, debentures or bonds. Listed, unlisted or closely held companies all these are eligible for private placement. In India private placement of securities witness a growth in terms of debt securities with lot of innovation. The PSU has become a major user of private placements as its share in total private placement rose from an already high level of 69.5% in 1995-96 to above 80% in the recent past. Benefits of Private Placement Cost Effective Time Effective Structure Effective Access Effective IV. OFFER OF SHARES THROUGH BOOK BUILDING Book Building process in India was the outcome of the recommendations of Malegam Committee in October, 1995. Originally Book building process was available only to companies issuing more than Rs.100 crores; subsequently SEBI removes this restriction and opens this facility all companies for all sizes of issues. In India M/s Nirma is set to be the first company to adopt the book building mechanism 100 lakhs equity shares issue. (Note: This issue was suspended by SEBI) What is Book Building? - SEBI Guidelines defines Book Building as a process undertaken by which a demand for the securities proposed to be issued by a corporate body is elicited and built up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document. It may be noted that the book building process may be used for issue of securities, as well as for buy-back of shares. FACTORING IN INDIA What is factoring? Factoring is a financial option for the management of receivables. In simple definition it is the conversion of credit sales into cash. In factoring, a financial institution (factor) buys the accounts receivable of a company (Client) and pays up to 80%(rarely up to 90%) of the amount immediately on agreement. Factoring company pays the remaining amount (Balance 20%-finance cost-operating cost) to the client when the customer pays the debt. Collection of debt from the customer is done either by the factor or the client depending upon the type of factoring. We will see different types of factoring in this article. The account receivable in factoring can either be for a product or service. Examples are factoring against goods purchased, factoring for construction services (usually for government contracts where the government body is capable of paying back the debt in the stipulated period of factoring. Contractors submit invoices to

get cash instantly), factoring against medical insurance etc. Let us see how factoring is done against an invoice of goods purchased.

Customer

credit sale of goods Invoic e Pays the balance amount

Client

Pays the amount (In recourse type customer pays through client)

Submit invoice copy

Payment up to 80% initially

Factor

Characteristics of factoring 1. Usually the period for factoring is 90 to 150 days. Some factoring companies allow even more than 150 days. 2. Factoring is considered to be a costly source of finance compared to other sources of short term borrowings. 3. Factoring receivables is an ideal financial solution for new and emerging firms without strong financials. This is because credit worthiness is evaluated based on the financial strength of the customer (debtor). Hence these companies can leverage on the financial strength of their customers. 4. Bad debts will not be considered for factoring. 5. Credit rating is not mandatory. But the factoring companies usually carry out credit risk analysis before entering into the agreement. 6. Factoring is a method of off balance sheet financing. 7. Cost of factoring=finance cost + operating cost. Factoring cost vary according to the transaction size, financial strength of the customer etc. The cost of factoring

vary from 1.5% to 3% per month depending upon the financial strength of the client's customer. 8. Indian firms offer factoring for invoices as low as 1000Rs 9. For delayed payments beyond the approved credit period, penal charge of around 1-2% per month over and above the normal cost is charged (it varies like 1% for the first month and 2% afterwards).

Different types of Factoring 1. Disclosed and Undisclosed 2. Recourse and Non recourse A single factoring company may not offer all these services. Disclosed In disclosed factoring client's customers are notified of the factoring agreement. Disclosed type can either be recourse or non recourse. Undisclosed In undisclosed factoring, client's customers are not notified of the factoring arrangement. Sales ledger administration and collection of debts are undertaken by the client himself. Client has to pay the amount to the factor irrespective of whether customer has paid or not. But in disclosed type factor may or may not be responsible for the collection of debts depending on whether it is recourse or non recourse. Recourse factoring In recourse factoring, client undertakes to collect the debts from the customer. If the customer don't pay the amount on maturity, factor will recover the amount from the client. This is the most common type of factoring. Recourse factoring is offered at a lower interest rate since the risk by the factor is low. Balance amount is paid to client when the customer pays the factor. Non recourse factoring In non recourse factoring, factor undertakes to collect the debts from the customer. Balance amount is paid to client at the end of the credit period or when the customer pays the factor whichever comes first. The advantage of non recourse factoring is that continuous factoring will eliminate the need for credit and collection departments in the organization.

VENTURE CAPITAL Venture capital (also known as VC or Venture) is a type of private equity capital typically provided for early-stage, high-potential, growth companies in the interest of generating a return through an eventual realization event such as an IPO or trade sale of the company. Venture capital investments are generally made as cash in exchange for shares in the invested company. It is typical for venture capital investors to identify and back companies in high technology industries such as biotechnology and ICT (information and communication technology). Venture capital typically comes from institutional investors and high net worth individuals and is pooled together by dedicated investment firms. Venture capital firms typically comprise small teams with technology backgrounds (scientists, researchers) or those with business training or deep industry experience Or A venture capitalist (also known as a VC) is a person or investment firm that makes venture investments, and these venture capitalists are expected to bring managerial and technical expertise as well as capital to their investments. A venture capital fund refers to a pooled investment vehicle (often an LP or LLC) that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans. Venture capital is also associated with job creation, the knowledge economy and used as a proxy measure of innovation within an economic sector or geography. Structure of Venture Capital Firms Venture capital firms are typically structured as partnerships, the general partners of which serve as the managers of the firm and will serve as investment advisors to the venture capital funds raised. Venture capital firms in the United States may also be structured as limited liability companies, in which case the firm's managers are known as managing members. Investors in venture capital funds are known as limited partners. This constituency comprises both high net worth individuals and institutions with large amounts of available capital, such as state and private pension funds, university financial endowments, foundations, insurance companies, and pooled investment vehicles, called fund of funds or mutual funds. Types of Venture Capital Firms Depending on your business type, the venture capital firm you approach will differ. [17] For instance, if you're a startup internet company, funding requests from a more manufacturing-focused firm will not be effective. Doing some initial research on which

firms to approach will save time and effort. When approaching a VC firm, consider their portfolio:

Business Cycle: Do they invest in budding or established businesses? Industry: What is their industry focus? Investment: Is their typical investment sufficient for your needs? Location: Are they regional, national or international? Return: What is their expected return on investment? Involvement: What is their involvement level?

Targeting specific types of firms will yield the best results when seeking VC financing. Wikipedia has a list of venture capital firms that can help you in your initial exploration. The National Venture Capital Association segments dozens of VC firms into ways that might assist you in your search.[18] It is important to note that many VC firms have diverse portfolios with a range of clients. If this is the case, finding gaps in their portfolio is one strategy that might succeed. Roles within Venture Capital Firms Within the venture capital industry, the general partners and other investment professionals of the venture capital firm are often referred to as "venture capitalists" or "VCs". Typical career backgrounds vary, but broadly speaking venture capitalists come from either an operational or a finance background. Venture capitalists with an operational background tend to be former founders or executives of companies similar to those which the partnership finances or will have served as management consultants. Venture capitalists with finance backgrounds tend to have investment banking or other corporate finance experience. Although the titles are not entirely uniform from firm to firm, other positions at venture capital firms include:

Venture partners - Venture partners are expected to source potential investment opportunities ("bring in deals") and typically are compensated only for those deals with which they are involved. Entrepreneur-in-residence (EIR) - EIRs are experts in a particular domain and perform due diligence on potential deals. EIRs are engaged by venture capital firms temporarily (six to 18 months) and are expected to develop and pitch startup ideas to their host firm (although neither party is bound to work with each other). Some EIR's move on to executive positions within a portfolio company. Principal - This is a mid-level investment professional position, and often considered a "partner-track" position. Principals will have been promoted from a senior associate position or who have commensurate experience in another field such as investment banking or management consulting.

Associate - This is typically the most junior apprentice position within a venture capital firm. After a few successful years, an associate may move up to the "senior associate" position and potentially principal and beyond. Associates will often have worked for 1-2 years in another field such as investment banking or management consulting.

Structure of the funds Most venture capital funds have a fixed life of 10 years, with the possibility of a few years of extensions to allow for private companies still seeking liquidity. The investing cycle for most funds is generally three to five years, after which the focus is managing and making follow-on investments in an existing portfolio. This model was pioneered by successful funds in Silicon Valley through the 1980s to invest in technological trends broadly but only during their period of ascendance, and to cut exposure to management and marketing risks of any individual firm or its product. In such a fund, the investors have a fixed commitment to the fund that is initially unfunded and subsequently "called down" by the venture capital fund over time as the fund makes its investments. There are substantial penalties for a Limited Partner (or investor) that fails to participate in a capital call. It can take anywhere from a month or so to several years for venture capitalists to raise money from limited partners for their fund. At the time when all of the money has been raised, the fund is said to be closed and the 10 year lifetime begins. Some funds have partial closes when one half (or some other amount) of the fund has been raised. "Vintage year" generally refers to the year in which the fund was closed and may serve as a means to stratify VC funds for comparison. This free database of venture capital funds shows the difference between a venture capital fund management company and the venture capital funds managed by them. LEASE Meaning 0f Lease Financing A lease transaction is a commercial arrangement whereby an equipment owner or Manufacturer conveys to the equipment user the right to use the equipment in return for a rental. In other words, lease is a contract between the owner of an asset (the lessor) and its user (the lessee) for the right to use the asset during a specified period in return for a mutually agreed periodic payment (the lease rentals). The important feature of a lease contract is separation of the ownership of the asset from its usage. Lease financing is based on the observation made by Donald B. Grant: Why own a cow when the milk is so cheap? All you really need is milk and not the cow. Importance 0f Lease Financing Leasing industry plays an important role in the economic development of a country by providing money incentives to lessee. The lessee does not have to pay the cost of asset at the time of signing the contract of leases. Leasing contracts are more flexible so

lessees can structure the leasing contracts according to their needs for finance. The lessee can also pass on the risk of obsolescence to the lessor by acquiring those 229 appliances, which have high technological obsolescence. To day, most of us are familiar with leases of houses, apartments, offices, etc. Types Of Lease Agreements Lease agreements are basically of two types. They are (a) Financial lease and (b) Operating lease. The other variations in lease agreements are (c) Sale and lease back d) Leveraged leasing and (e) Direct leasing

Hire purchase Concept and meaning of hire Purchase Hire purchase is a type of installment credit under which the hire purchaser, called the hirer, agrees to take the goods on hire at a stated rental, which is inclusive of the repayment of principal as well as interest, with an option to purchase. Under this transaction, the hire purchaser acquires the property (goods) immediately on signing the hire purchase agreement but the ownership or title of the same is transferred only when the last instalment is paid. The hire purchase system is regulated by the Hire Purchase Act 1972. This Act defines a hire purchase as an agreement under which goods are let on hire and under which the hirer has an option to purchase them in accordance with the terms of the agreement and includes an agreement under which: 1) The owner delivers possession of goods thereof to a person on condition that such person pays the agreed amount in periodic instalments. 233 2) The property in the goods is to pass to such person on the payment of the last

of such instalments, and 3) Such person has a right to terminate the agreement at any time before the property so passes. Hire purchase should be distinguished from instalment sale wherein property passes to the purchaser with the payment of the first instalment. But in case of HP (ownership remains with the seller until the last instalment is paid) buyer gets ownership after paying the last instalment. HP also differs form leasing.

DIFFERENCE BETWEEN LEASE FINANCING AND HIRE PURCHASE

CONSUMER DURABLE LOANS Banks are coming out with unique loans to attract more customers. Right from Refrigerator, to music system to washing machine, you can buy anything. The demand for such loans witness a sharp rise during the festive season. 0% loans schemes are popular during this time. This loan is however available only with nationalised banks. Maximum Amount of Consumer Durable Loans Offered:

The quantum of the loans varies from one bank to another. However, most banks offer loans between Rs 10,000 and Rs 100,000. For instance, Punjab National Bank offers up to 90 per cent of the cost of the article, subject to a maximum of Rs 100,000. The minimum amount of loan offered is Rs 5,000. Syndicate Bank offers up to 80 per cent of the invoice value of the products purchased or 10 months gross salary, whichever is less, subject to a maximum of Rs 200,000. The maximum limit is Rs 100,000 for pensioners. Then there is UTI Bank, where the minimum amount is Rs 25,000 and the maximum is Rs 200,000, provided it does not exceed 85 per cent of the cost of the product. A loan can be taken for a maximum period of 60 months. UTI Bank, however, offers it for a maximum period of 36 months. Under SBI's 'Festival Loans' scheme, money is offered for only up to 12 months. Interest Charged by Banks on Consumer Durable Loans: The rate of interest on consumer durable loan is lower than the interest on a personal loan. So, taking this loan makes more sense. The rate of interest varies between banks and also depends on the prevailing market conditions. Consumer Durable Loans Application Process: Customers can obtain application form either in person from the bank or apply online. Banks charge a nominal 1% fee on the loan amount as processing charge. The processing takes 3-5 days. Documents Required for Approval of Consumer Durable Loans: 1. Proof of identity such as driving license or passport. 2. Proof of income such as your latest salary slip or a copy of Form 16. 3. Proof of residence such as your ration card, passport or latest electricity bill. 4. Bank statement for the last six months. The loan takes between three to five working days to be processed.

List of Some of Banks Offering Consumer Durable Loans: Federal Bank - Loan For Consumer Goods Bank of Baroda - Baroda Consumer Loans United Bank of India - Loan For Household Items HSBC Bank - Purchasing Consumer Durables Andhra Bank - Purchase of New Consumer Durables State Bank of Mysore - Happy Consumer Loan Allahabad Bank - AllBank Saral Loan Scheme Bharat Overseas Bank - Shakti Consumer Loan Custodial Services

Custodial Services Financial institution is a SEBI registered custodian under the SEBI (Custodian of Securities) Regulations, 1996 and a Depository Participant (DP) offering demat services to the Foreign and Domestic institutions, Provident Funds, Mutual Funds, Insurance Companies, Banks, Venture Capital Funds, Private Equity Funds, Corporate Customers, Brokers, Retail and High Net-worth Individuals. As a custodian, financial institution offers full range of Custodial Services for primary and secondary market operations pertaining to debt, equity and money market instruments. Services as a Custodian financial institution As a custodian, offers its expertise in the area of Trade Settlement, Safe Keeping, Benefit Collection, Reporting and Accounting. Trade Settlement Settlement of trades in equity and debt segment through Clearing House as well as Delivery Versus Payment (DVP). Settlement of trades for Money Market Instruments. Processing of applications for subscriptions in primary market. Processing of applications for subscriptions in respect of Rights Issue, Buy Back & Open Offers, etc. Submission of Reports as per requirement. Benefit Monitoring & Collection Recording details of the corporate benefits declared by the various companies Calculation of entitlement benefits Collection of benefits on due date Reconciliation of benefits collected with the entitlement Follow up for any shortfall in receipt of benefits Safe Keeping Safekeeping of securities held in the physical form as well as demat form Dematerialisation of Securities held in the physical form

Reconciliation of Stocks and Funds Reporting & MIS Holding Statement Report on Saleable Securities Report on Forthcoming Corporate Actions Report on Benefit Collection Report on receipt of securities and funds received in pay out Report on settled trades Fund Accounting Investment accounting for purchases and sales Valuation of securities held under custody Income and expense accounting Regulatory reporting

Depository Services Introduction: We have pleasure in informing you that the scripts of your company are amongst the first ten securities which have been notified by SEBI to be compulsorily traded in electronic form with effect from 4th January, 1999. We, therefore, feel that we should share with you certain information regarding the Depository System so as to assist you in converting your physical holdings into electronic form. Need for Depository System : The trading in physical segment is full of inefficiencies due to handling of large volumes of certificates and also involves various other problems like delays in transfer, delay in settlement, loss in transit, forgerly certificates, stolen certificates, mutilation of certificates, postal losses, court cases, litigation etc. To overcome these deficiencies, a new system of trading, viz. Depository system was introduced, which facilitates investor to hold securities in electronic form and to trade in these securities. The first depository set up in India is National Securities Depository Limited (NSDL) and is promoted by IDBI, UTI and NSE. What is Depository? Depository is an organization which holds your securities in electronic (also known as Book entry) form, in the same manner as a bank holds your money. Further, a Depository also transfers your securities without actually handling securities, in the same Day as a bank transfers funds without actually handling cash.

Benefits of Depository System: 1. No danger of loss of share certificates since the shares are credited to your Account. 2. No possibility of bad deliveries. 3. Elimination of all rise associated with physical certificates such as loss, theft, Forgery, mutilation etc. 4. No need to affix share transfer stamp as it is a paperless trading. 5. No postal / courier charges. 6. Less brokerage charges. 7. After the settlement, pay in and pay out are on the same day for paperless trading Which means you get your securities and cash immediately. 8. Scriptless trading helps allocate corporate benefits faster. 9. Facilitates pledging and hypothecation of your securities. 10. Eliminates the problem of odd lot shares. 11. Facility to lock your account if you are abroad. Services offered by NSDL : The following services are offered by NSDL to the investors, through its agents viz. Depository Participants. 1. Holding the investors securities in electronic form. 2. Dematerialisation and rematerialisation of securities. 3. Settlement of trades in electronic form. 4. Electronic credit of public offerings and non-cash corporate actions such as rights, bonus etc. Steps involved in joining depository system : There are 3 steps in which an investor can covert his physical certificate into electronic form. 1. Open an account with one of the participants of NSDL (A participant is a market intermediary through whom NSDL interacts with the investors). 2. Sign an Agreement with the participant. 3. Submit Dematerialisation Request form along with share certificate to the Issuer. How do you open a depository account ? Choose a participant from amongst the participants (a list of participants is given in Annexure-A) offering depository services and registered with NSDL. Thereafter : a. Fill up an Account Opening Form available with the participant. b. Sign Participant-Client Agreement. c. Receive your account number which should be quoted in all your correspondence. d. Your participant will provide you a statement of holdings and statement of transactions (like a bank pass book) every fortnight giving details of your holdings and transactions in your account. Dematerialisation Process : Once the account is opened, your existing shares can be dematerialised and converted into Electronic Form. Dematerialisation is a process by which you can deposit (i.e. demat) shares of any company listed on NSDL which are registered in your name and convert your physical holdings into electronic form. For this purpose, you have to a. Fill a Dematerialisation Request Form available with your participant.

b. Submit your share certificates along with the above form. (Please write Surrendered for Dematerialisation on the face of each certificate before you submit it for dematerialisation). c. Your account will be credited within 15 days. d. If you wish to convert your electronic shares back to physical shares at a later stage, you may do so by applying for rematerialistion. How do you trade in electronic shares : Demat segment on the National Stock Exchange When you wish to purchase shares from the secondary market, you can also buy them directly in the Electronic Form. For this purpose, there is a separate buying and selling electronic shares is just like buying and selling shares in physical segment. The following procedure be adopted for trading in electronic segment. 1. If you desire to sell shares in electronic form, you place an order with your broker under the Demat segment and instruct your participant by way of a Delivery Instruction (resembling a cheque) to debit your account with the number of shares sold by you. 2. If you wish to buy shares in electronic form, you must inform your broker about your depository account number so that electronic shares bought by you are credited into your account and instruct your participant by way of Receipt Instruction to receive credit in your account. 3. Payment for the shares bought or sold in depository mode is made in the same manner as in the physical securities. 4. The shares you have bought are transferred in your name the very next day of pay out without any risk of bad deliveries. No formalities of filling transfer deed, affixing share transfer stamp etc. is required to be complied with. Depository Services - fee structure : The charges for the services provided by the participant by the participant may vary from participant to participant. The following statement indicates the fee structure of the participant 1. Account opening - Nil - Rs.1,000 2. Account closing - Nil - Rs.1,000 3. Dematerialisation - Rs.2 per certificate-Rs.10 per certificate 4. Rematerialisation - Rs.15 per certificate-Rs.25 per certificate 5. Custody charges - 0.055% p.a. (since your company has paid one time custody charges to NSDL, custody charges will be NIL) 6. Transfer fee (buy) - 0.05% - 0.15% on value 7. Transfer fee (sell) - 0.025% - 0.15% on value 8. Off market transaction - 0.10% - 0.12% 9. Annual charges - Rs.500 - Rs.10,000 (depending on value) syndicated loan

A syndicated loan is one that is provided by a group of lenders and is structured, arranged, and administered by one or several commercial or investment banks known as arrangers. Starting with the large leveraged buyout loans of the mid-1980s, the syndicated loan market has become the dominant way for issuers to tap banks and other institutional capital providers for loans. At the most basic level, arrangers serve the investment-banking role of raising investor funding for an issuer in need of capital. The issuer pays the arranger a fee for this service, and this fee increases with the complexity and risk factors of the loan. As a result, the most profitable loans are those to leveraged borrowersissuers whose credit ratings are speculative grade and who are paying spreads (premiums above LIBOR or another base rate) sufficient to attract the interest of non-bank term loan investors. Though, this threshold moves up and down depending on market conditions. Loan Market Overview The retail market for a syndicated loan consists of banks and, in the case of leveraged transactions, finance companies and institutional investors. Before formally launching a loan to these retail accounts, arrangers will often get a market read by informally polling select investors to gauge their appetite for the credit. After this market read, the arrangers will launch the deal at a spread and fee that it thinks will clear the market. Until 1998, this would have been it. Once the pricing was set, it was set, except in the most extreme cases. If the loans were undersubscribed, the arrangers could very well be left above their desired hold level. Since the Russian debt crisis roiled the market in 1998, however, arrangers have adopted market-flex language, which allows them to change the pricing of the loan based on investor demandin some cases within a predetermined rangeas well as shift amounts between various tranches of a loan, as a standard feature of loan commitment letters. As a result of market flex, loan syndication functions as a book-building exercise, in bond-market parlance. A loan is originally launched to market at a target spread or, as was increasingly common by 2008 with a range of spreads referred to as price talk (i.e., a target spread of, say, LIBOR+250 to LIBOR+275). Investors then will make commitments that in many cases are tiered by the spread. For example, an account may put in for $25 million at LIBOR+275 or $15 million at LIBOR+250. At the end of the process, the arranger will total up the commitments and then make a call on where to price the paper. Following the example above, if the paper is vastly oversubscribed at LIBOR+250, the arranger may slice the spread further. Conversely, if it is undersubscribed even at LIBOR+275, then the arranger will be forced to raise the spread to bring more money to the table. Types of Syndications

There are three types of syndications: an underwritten deal, best-efforts syndication, and a club deal. Underwritten deal An underwritten deal is one for which the arrangers guarantee the entire commitment, then syndicate the loan. If the arrangers cannot fully subscribe the loan, they are forced to absorb the difference, which they may later try to sell to investors. This is easy, of course, if market conditions, or the credits fundamentals, improve. If not, the arranger may be forced to sell at a discount and, potentially, even take a loss on the paper. Or the arranger may just be left above its desired hold level of the credit. Arrangers underwrite loans for several reasons. First, offering an underwritten loan can be a competitive tool to win mandates. Second, underwritten loans usually require more lucrative fees because the agent is on the hook if potential lenders balk. Of course, with flex-language now common, underwriting a deal does not carry the same risk it once did when the pricing was set in stone prior to syndication. Best-efforts syndication A best-efforts syndication is one for which the arranger group commits to underwrite less than the entire amount of the loan, leaving the credit to the vicissitudes of the market. If the loan is undersubscribed, the credit may not closeor may need major surgery to clear the market. Traditionally, best-efforts syndications were used for risky borrowers or for complex transactions. Since the late 1990s, however, the rapid acceptance of market-flex language has made best-efforts loans the rule even for investment-grade transactions. Club deal A club deal is a smaller loanusually $25 million to $100 million, but as high as $150 millionthat is premarketed to a group of relationship lenders. The arranger is generally a first among equals, and each lender gets a full cut, or nearly a full cut, of the fees. The Syndication Process Before awarding a mandate, an issuer might solicit bids from arrangers. The banks will outline their syndication strategy and qualifications, as well as their view on the way the loan will price in market. Once the mandate is awarded, the syndication process starts. The arranger will prepare an information memo (IM) describing the terms of the transactions. The IM typically will include an executive summary, investment considerations, a list of terms and conditions, an industry overview, and a financial model. Because loans are unregistered securities, this will be a confidential offering made only to qualified banks and accredited investors. If the issuer is speculative grade and seeking capital from nonblank investors, the arranger will often prepare a public version of the IM. This version will be stripped of all confidential material such as management financial projections so that it can be viewed by accounts that operate on the

public side of the wall or that want to preserve their ability to buy bonds or stock or other public securities of the particular issuer (see the Public Versus Private section below). Naturally, investors that view materially nonpublic information of a company are disqualified from buying the companys public securities for some period of time. As the IM (or bank book, in traditional market lingo) is being prepared, the syndicate desk will solicit informal feedback from potential investors on what their appetite for the deal will be and at what price they are willing to invest. Once this intelligence has been gathered, the agent will formally market the deal to potential investors. The executive summary will include a description of the issuer, an overview of the transaction and rationale, sources and uses, and key statistics on the financials. Investment considerations will be, basically, managements sales pitch for the deal. The list of terms and conditions will be a preliminary term sheet describing the pricing, structure, collateral, covenants, and other terms of the credit (covenants are usually negotiated in detail after the arranger receives investor feedback). The industry overview will be a description of the companys industry and competitive position relative to its industry peers. The financial model will be a detailed model of the issuers historical, pro forma, and projected financials including managements high, low, and base case for the issuer. Most new acquisition-related loans are kicked off at a bank meeting at which potential lenders hear management and the sponsor group (if there is one) describe what the terms of the loan are and what transaction it backs. Management will provide its vision for the transaction and, most important, tell why and how the lenders will be repaid on or ahead of schedule. In addition, investors will be briefed regarding the multiple exit strategies, including second ways out via asset sales. (If it is a small deal or a refinancing instead of a formal meeting, there may be a series of calls or one-on-one meetings with potential investors.) Once the loan is closed, the final terms are then documented in detailed credit and security agreements. Subsequently, liens are perfected and collateral is attached. Loans, by their nature, are flexible documents that can be revised and amended from time to time. These amendments require different levels of approval. Amendments can range from something as simple as a covenant waiver to something as complex as a change in the collateral package or allowing the issuer to stretch out its payments or make an acquisition. Loan Market Participants There are three primary-investor consistencies: banks, finance companies, and institutional investors. Banks, in this case, can be either a commercial bank, a savings and loan institution, or a securities firm that usually provides investment-grade loans. These are typically large revolving credits that back commercial paper or are used for general corporate purposes or, in some cases, acquisitions. For leveraged loans, banks typically provide unfunded revolving credits, LOCs, andalthough they are becoming

increasingly less commonamortizing term loans, under a syndicated loan agreement. Finance companies have consistently represented less than 10% of the leveraged loan market, and tend to play in smaller deals$25 million to $200 million. These investors often seek asset-based loans that carry wide spreads and that often feature time-intensive collateral monitoring. Institutional investors in the loan market are principally structured vehicles known as collateralized loan obligations (CLO) and loan participation mutual funds (known as prime funds because they were originally pitched to investors as a money-market-like fund that would approximate the prime rate). In addition, hedge funds, high-yield bond funds, pension funds, insurance companies, and other proprietary investors do participate opportunistically in loans. Typically, however, they invest principally in wide-margin loans (referred to by some players as high-octane loans), with spreads of LIBOR+500 or higher. During the first half of 2008, these players accounted for roughly a quarter of overall investment. CLOs are special-purpose vehicles set up to hold and manage pools of leveraged loans. The special-purpose vehicle is financed with several tranches of debt (typically a AAA rated tranche, a AA tranche, a BBB tranche, and a mezzanine tranche) that have rights to the collateral and payment stream in descending order. In addition, there is an equity tranche, but the equity tranche is usually not rated. CLOs are created as arbitrage vehicles that generate equity returns through leverage, by issuing debt 10 to 11 times their equity contribution. There are also market-value CLOs that are less leveragedtypically 3 to 5 timesand allow managers more flexibility than more tightly structured arbitrage deals. CLOs are usually rated by two of the three major ratings agencies and impose a series of covenant tests on collateral managers, including minimum rating, industry diversification, and maximum default basket. By 2007, CLOs had become the dominant form of institutional investment in the leveraged loan market, taking a commanding 60% of primary activity by institutional investors. But when the structured finance market cratered in late 2007, CLO issuance tumbled and by mid-2008, CLOs share had fallen to 40%. Retail investors can access the loan market through prime funds. Prime funds were first introduced in the late 1980s. Most of the original prime funds were continuously offered funds with quarterly tender periods. Managers then rolled true closed-end, exchangetraded funds in the early 1990s. It was not until the early 2000s that fund complexes introduced open-ended funds that were redeemable each day. While quarterly redemption funds and closed-end funds remained the standard because the secondary loan market does not offer the rich liquidity that is supportive of open-end funds, the open-end funds had sufficiently raised their profile that by mid-2008 they accounted for 15% to 20% of the loan assets held by mutual funds. Credit Facilities Syndicated loans facilities(Credit Facilities) also known as type of loans are basically short\long term financial assistance programs which is designed to help financial

institutions and other institutional investors to draw notional amount as per the requirement. In general there are four main types of syndicated loan facilities: a revolving credit; a term loan; an LOC; an acquisition or equipment line (a delayed-draw term loan).

Regulatory frame work for financial markets and institutions Broad classification of the regulatory framework relating to financial service sector in India is as: 1. Institutional regulations: also known as structural regulations which call for a clear demarcation of activities of Financial institutions. It is to promote healthy competition among players. Apex agencies like SEBI to regulate the MB, Stock Broking Co. and RBI another structural entity prescribing the activities of commercial banking. 2. Prudential regulations: related to internal management of financial institutions and other financial services org, regarding capital adequacy, liquidity and solvency etc. Aims at preventing the entry of firms without adequate resources. (ex. Minimum net worth requirement for various financial service firms is fixed by the SEBI and RBI`s regulations relating to the NBFC`s) 3. Investors regulations: the role of SEBI is highlighted with periodic guidelines on investor protection. 4. Legislative Regulations: brought out by Govt. for all round development of financial services industry. They are, Banking Regulation Act, Securities Contract Regulation Act, meant for evolving rules, guidelines and regulations that govern the micro aspect and operational issues. Self-regulations: this is addition to the above regulations that are self imposed regulations such as, Foreign Exchange Dealers association, and Merchant Bankers association in addition to SEBI regulation that governs their members. The framework of regulations currently operating in India is elaborated as banking and financial services insurance services investment services Merchant Banking and Financial Services

Framework for Banking and Financial services regulated by the central government and RBI. RBI through RBI ACT and the Banking regulation Act ensure the orderly functioning of the institutions. Regulations relating to banking institutions are about sanction of new branch, minimum capital, reserves, maintenance of minimum capital reserves and other liquid assets. Appointment of Chairman, CEO, and nominating of member to BOD. Drawing and implementing the monetary and credit policies to effectively regulate the credit flows, CRR, SLR, and REPOS. Implementing various credit control measures (qualitative and quantitative) Regulating factoring, bill discounting and credit card services, etc. Regulations relating to the non-banking financial companies (NBFC`s) Regulated by RBI thru a host of measures such as Banking Laws Act, 1963, powers of regulation are exercised by RBI under the directives such as the NBFC`s Directions, 1997, 1987,etc. The regulation of NBFC`s is in relation to reports, periodical statements for the functioning. Prescribing eligibility to raise funds from the public its terms and conditions. Norms related to investing a % of the deposits in the approved securities and maintain funds, capital adequacy norms, accounting standards, formulation of policy in relation to deployment of funds. Punishing the NBFC`s by imposing penalties, canceling the license or registration, and initiating appropriate actions against the management of NBFC`s.

What is a Repo Rate?

Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is the rate at which our banks borrow rupees from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive.

CRR Rate in India

Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks. Statutory Liquidity Ratio Statutory Liquidity Ratio refers to the amount that the commercial banks require to maintain in the form of cash, or gold or govt. approved securities before providing credit to the customers. Statutory Liquidity Ratio is determined and maintained by the Reserve Bank of India in order to control the expansion of bank credit. Abbreviations used BgSE Bangalore Stock Exchange BSE The Stock Exchange, Mumbai CDS Central Depository Services Ltd CM Clearing Member Demat Dematerialisation DP Depository Participant DRF Dematerialisation Request Form FI Financial Institutions FII Foreign Institutional Investors IDBI Industrial Development Bank of India LSE Ludhiana Stock Exchange MF Mutual Fund NSDL National Securities Depository Ltd NSE National Stock Exchange OCB Overseas Corporate Body OTCEI Over The Counter Exchange of India Remat Rematerialisation RRF Rematerialisation Request Form SEBI Securities and Exchange Board of India UTI Unit Trust of India