Dr. S. Anthony Rahul GoldenM.Com., M.Phil., NET., Ph.D., MBA.,SET., NET., M.A., M.Sc. (Psy)., M.A., PGDBA.,
Asst. Professor of Commerce., Loyola College (Autonomous), Chennai - 34Mobile No- 91+9176313545
Unit I: Financial Services Industry covers:
- Financial Services Industry
- Emergence and Development
- Fund-based and Non-fund-based Activities
- Modern Activities
- New Financial Products and Services
- Innovative Financial Instruments
- Challenges Ahead
FINANCIAL SERVICES INDUSTRY
Introduction
Every individual, business organization, and government requires money at different stages. Some people have surplus money (savers), while others require money (borrowers). The financial system acts as a bridge between these two groups. The institutions that facilitate this transfer of funds are collectively known as the Financial Services Industry.
Financial services have become one of the fastest-growing sectors in every economy. In India, particularly after the economic reforms of 1991 (Liberalization, Privatization and Globalization—LPG), the financial services sector witnessed tremendous expansion. Today, financial services are no longer limited to banking alone. They include merchant banking, insurance, mutual funds, venture capital, leasing, factoring, stock broking, digital payments, fintech, wealth management, online trading, and many more.
A strong financial services sector contributes to:
- Economic growth
- Industrial development
- Employment generation
- Capital formation
- Wealth creation
- Financial inclusion
- International trade
Thus, the financial services industry is often described as the backbone or nervous system of a country's economy.
Meaning of Financial Services
Financial services refer to all activities involved in mobilizing savings from individuals and institutions and channeling them into productive investments.
Simply stated,
Financial Services = Mobilization of Savings + Allocation of Funds + Financial Advisory Services
The main objective is to ensure that idle money is transformed into productive investments, thereby promoting economic development.
Definitions
According to the study material,
Financial Services Industry is the collection of organizations which intermediate and facilitate financial transactions of individual and institutional investors through efficient allocation of resources.
Simple Classroom Example
Imagine there are three people.
Mr. Arun has ₹20 lakh saved for his retirement.
Ms. Priya wants ₹20 lakh to start a textile business.
Neither knows each other.
A commercial bank collects money from Arun and lends it to Priya.
Thus,
Savings → Bank → Business Investment
The bank earns profit, the investor receives interest, the entrepreneur gets funds, employment is created, and the economy grows.
This entire process represents financial services.
Objectives of Financial Services
The major objectives are:
- Mobilization of public savings
- Efficient allocation of resources
- Promoting industrial development
- Providing liquidity
- Reducing investment risk
- Supporting entrepreneurship
- Assisting capital market development
- Facilitating economic growth
- Increasing financial inclusion
- Improving wealth creation
Importance of Financial Services
Financial services are important because they:
1. Promote Economic Growth
Every economy requires continuous investment.
Without financial services:
- Industries cannot obtain capital.
- Entrepreneurs cannot start businesses.
- Infrastructure cannot be developed.
2. Encourage Savings
Banks, mutual funds, insurance companies and pension funds encourage people to save money.
Example
- Fixed Deposit
- Recurring Deposit
- SIP in Mutual Funds
3. Capital Formation
Savings become investments.
Investment creates
- factories
- roads
- ports
- schools
- hospitals
which increase national income.
4. Employment Generation
Financial institutions create direct employment.
Example
- Banks
- Insurance companies
- Stock exchanges
- Mutual fund companies
- NBFCs
- FinTech companies
Indirect employment is also generated through financed businesses.
5. Facilitates International Trade
Banks provide
- Letter of Credit
- Bank Guarantee
- Foreign Exchange
- Trade Finance
Without these services, international trade becomes difficult.
6. Supports Entrepreneurship
Financial institutions finance startups through
- Venture Capital
- Angel Investors
- Merchant Banking
- SME Loans
Example
Many Indian startups such as Flipkart, Ola and Zomato initially depended upon venture capital funding.
Classification of Financial Services Industry
The study material classifies financial services into two major groups:
I. Capital Market Intermediaries
These provide long-term finance.
Examples
- Merchant Banks
- Investment Banks
- Mutual Funds
- Insurance Companies
- Venture Capital Firms
II. Money Market Intermediaries
They provide short-term finance.
Examples
- Commercial Banks
- Co-operative Banks
- Regional Rural Banks
- NBFCs
Major Institutions Providing Financial Services
Commercial Banks
Examples
- State Bank of India
- Indian Bank
- Canara Bank
- HDFC Bank
- ICICI Bank
Functions
- Deposits
- Loans
- Internet Banking
- Mobile Banking
- Credit Cards
Non-Banking Financial Companies (NBFCs)
Examples
- Bajaj Finance
- Muthoot Finance
- Shriram Finance
They cannot accept demand deposits like commercial banks but provide various financing services.
Investment Banks
Functions
- IPO Management
- Corporate Finance
- Mergers and Acquisitions
- Portfolio Advisory
Evolution of Financial Services in India
The study material divides the evolution into three phases.
Phase I (1960–1980)
Merchant Banking Era
Major developments
- Merchant Banking introduced
- Insurance expansion
- Leasing services introduced
- Equipment financing started
Example
LIC and UTI played significant roles.
Phase II (1980–1990)
Investment Companies Era
New services introduced
- Mutual Funds
- Factoring
- Credit Rating
- Venture Capital
- Bills Discounting
This period focused on value-added financial services.
Phase III (1991 onwards)
Modern Financial Services Era
After LPG reforms,
India witnessed
- Demat Accounts
- Online Trading
- Depositories
- Electronic Settlement
- Book Building
- FIIs
- Private Mutual Funds
Today, this phase has further expanded into:
- UPI
- Mobile Banking
- Robo Advisory
- AI-Based Investment
- Blockchain
- Digital Lending
Present Trends in Financial Services
The source highlights several developments such as dynamism, the emergence of the primary equity market, credit rating, globalization, and liberalization.
In addition, today's classroom discussion can include:
- Digital banking
- Artificial Intelligence
- Machine Learning
- FinTech
- InsurTech
- Blockchain
- Cryptocurrency regulations
- Open Banking
- Embedded Finance
- Digital Rupee (CBDC)
Nature and Characteristics of Financial Services
According to the study material, financial services possess the following characteristics:
- Customer-oriented
- Intangible
- Dynamic
- Technology-driven
- Market-based
- Continuous innovation
- Highly regulated
- Information intensive
- Trust-based
- Risk-oriented
Functions of Financial Services Institutions
Major functions include:
- Mobilization of savings
- Capital formation
- Investment management
- Risk management
- Corporate advisory
- Merchant banking
- Factoring and forfaiting
- Leasing
- Venture capital
- Mutual fund services
- Housing finance
- Credit rating
- Securitization
- Wealth management
Constituents of Financial Services
The financial services industry consists of four major components:
- Financial Instruments
- Market Players
- Specialized Institutions
- Regulatory Bodies
Financial Instruments
Money Market Instruments (Short-term):
- Treasury Bills
- Commercial Paper
- Certificates of Deposit
- Bills of Exchange
Capital Market Instruments (Long-term):
- Equity Shares
- Preference Shares
- Debentures
- Government Securities
- Zero Coupon Bonds
- Derivatives
Market Players
- Commercial Banks
- Finance Companies
- Stock Brokers
- Underwriters
- Consultants
- Market Makers
Specialized Institutions
- Depositories
- Credit Rating Agencies
- Venture Capital Firms
- Factors
- Acceptance Houses
Regulatory Bodies
- Reserve Bank of India (RBI)
- Securities and Exchange Board of India (SEBI)
- Other statutory regulators
Factors Affecting Access to Financial Services
The study material lists numerous barriers that affect access to financial services.
Common classroom examples include:
- Low income
- Limited financial literacy
- Lack of legal identity
- Distance from banking facilities
- High service charges
- Complex documentation
- Gender disparities
- Digital divide
- Social and cultural barriers
Scope of Financial Services
The source categorizes the scope into traditional (fund-based and non-fund-based) and modern activities.
Traditional Fund-Based Activities
- Leasing
- Hire Purchase
- Factoring
- Forfaiting
- Housing Finance
- Insurance
- Venture Capital
- Money Market Investments
Traditional Non-Fund-Based Activities
- Issue Management
- Placement of Securities
- Working Capital Arrangement
- Government Approvals
- Financial Consultancy
Modern Activities
- Project Advisory
- Mergers & Acquisitions
- Corporate Restructuring
- Portfolio Management
- Debenture Trusteeship
- Capital Market Services
- Registration & Transfer Services
Modern Financial Products
Examples suitable for classroom discussion:
- Exchange Traded Funds (ETF)
- Sovereign Gold Bonds
- REITs
- InvITs
- Digital Rupee
- Buy Now Pay Later (BNPL)
- Green Bonds
- ESG-linked Funds
- Infrastructure Investment Trusts
Innovative Financial Instruments
Examples include:
- Derivatives
- Futures
- Options
- Swaps
- Convertible Debentures
- Zero Coupon Bonds
- Commercial Papers
- Asset-Backed Securities
- Mortgage-Backed Securities
- Structured Products
Challenges Before Financial Services Industry
Major challenges include:
- Cybersecurity threats
- Digital fraud
- Regulatory compliance
- AI-related risks
- Climate finance requirements
- Global economic uncertainty
- Financial inclusion gaps
- Data privacy concerns
- Competition from FinTech
- Cryptocurrency regulation
- Rising customer expectations
- ESG compliance
Classroom Case Study
Case: Digital Banking Revolution in India
A small vegetable vendor previously accepted only cash payments. After adopting UPI QR codes, customers could pay instantly using mobile phones. The vendor no longer handled large amounts of cash, received immediate payment confirmations, and could access formal credit based on digital transaction history.
Discussion Questions:
- Which financial service is being used?
- How has digital technology improved financial inclusion?
- What are the benefits to the customer and the vendor?
- What risks (e.g., cyber fraud, connectivity issues) should be considered?
The Financial Services Industry is a crucial component of the economy, acting as an intermediary between savers and investors. It mobilizes savings, facilitates investments, supports entrepreneurship, promotes economic growth, and improves financial inclusion. Since the LPG reforms, India has transformed from a traditional banking system to a technology-driven financial ecosystem with innovations such as digital payments, online trading, mutual funds, fintech, and AI-based financial services. The sector continues to evolve while addressing challenges such as cybersecurity, regulatory compliance, and financial inclusion.
Dr. S. Anthony Rahul GoldenM.Com., M.Phil., NET., Ph.D., MBA.,SET., NET., M.A., M.Sc. (Psy)., M.A., PGDBA.,
Asst. Professor of Commerce., Loyola College (Autonomous), Chennai - 34Mobile No- 91+9176313545
https://orcid.org/0000-0001-
8071-4801
Anthony Rahul Golden, S. - Author details - Scopus Preview
NEW FINANCIAL PRODUCTS AND SERVICES, INNOVATIVE FINANCIAL INSTRUMENTS & CHALLENGES AHEAD
1. NEW FINANCIAL PRODUCTS AND SERVICES
1.1 Introduction
Financial services have continuously changed according to the changing requirements of customers, businesses, investors and financial markets.
In the traditional financial system, the major services were:
- Deposits
- Loans
- Advances
- Bill discounting
- Insurance
- Basic investment services
However, with the development of financial markets, globalisation, competition, liberalisation and technology, customers began demanding more specialised, flexible and innovative financial solutions.
As a result, financial institutions started introducing new financial products and services.
Simple meaning
New Financial Products are newly developed or modified financial instruments designed to satisfy changing financial requirements.
New Financial Services are new or improved financial activities offered by financial institutions and intermediaries to provide greater convenience, efficiency, flexibility or risk management.
2. WHY DID NEW FINANCIAL PRODUCTS AND SERVICES EMERGE?
New financial products and services emerged because of several factors.
1. Changing customer requirements
Customers became more financially aware and wanted:
- better returns,
- greater convenience,
- flexibility,
- liquidity,
- safety,
- tax efficiency,
- risk protection.
2. Increasing competition
Financial institutions faced competition from:
- banks,
- NBFCs,
- mutual funds,
- insurance companies,
- investment institutions,
- fintech businesses.
Therefore, institutions had to innovate.
3. Globalisation
International financial markets became increasingly interconnected.
This created demand for:
- foreign exchange products,
- international investment,
- cross-border finance,
- hedging products,
- sophisticated financial instruments.
4. Technological development
Technology transformed the delivery of financial services.
Traditional:
Branch → Paper → Physical transaction
gradually moved towards:
Internet → Mobile → Digital transaction
5. Risk management requirements
Businesses increasingly required instruments to manage:
- interest-rate risk,
- foreign-exchange risk,
- commodity-price risk,
- market risk.
6. Liberalisation
Financial-sector reforms increased competition and encouraged the development of new products.
The uploaded material identifies liberalisation, globalisation, competition and technological development as important forces shaping the financial-services industry.
3. FEATURES OF NEW FINANCIAL PRODUCTS
New financial products generally aim to provide:
Flexibility
Products can be designed according to different customer requirements.
Liquidity
They may enable customers to access funds more easily.
Risk management
Some products help customers reduce or transfer financial risk.
Better investment opportunities
Investors can choose from a wider range of instruments.
Convenience
Technology allows customers to access services quickly.
Customisation
Financial products can increasingly be structured according to specific requirements.
4. IMPORTANT NEW FINANCIAL PRODUCTS AND SERVICES
For MBA students, the following categories are important:
- Mutual Funds
- Venture Capital
- Credit Rating
- Factoring
- Forfaiting
- Leasing
- Hire Purchase
- Portfolio Management
- Merchant Banking
- Securitisation
- Derivatives
- Financial Advisory Services
Some of these were already emerging as specialised financial services in the development phases described in the prescribed material.
5. MUTUAL FUNDS
Meaning
A mutual fund collects money from a large number of investors and invests the pooled money in a portfolio of financial assets according to its stated investment objective.
Example
Suppose:
10,000 investors invest ₹10,000 each.
Total:
₹10 crore
The fund manager invests the pooled money across eligible securities according to the scheme's mandate.
Main advantages
- Professional management
- Diversification
- Accessibility to small investors
- Liquidity in applicable schemes
- Variety of investment options
Simple diagram
Investor 1 ─┐Investor 2 ─┤Investor 3 ─┤Investor 4 ─┤↓MUTUAL FUND↓Fund Manager↓┌───────────┼───────────┐↓ ↓ ↓Equity Debt Other Assets
The source material identifies mutual funds as an important development during the second phase of the financial-services industry.
6. VENTURE CAPITAL
Meaning
Venture capital is a form of investment provided to businesses with high growth potential, usually involving significant business risk.
It is particularly relevant to:
- startups,
- technology businesses,
- innovative businesses,
- high-growth enterprises.
Example
A startup develops an innovative medical technology product.
It requires ₹10 crore for:
- research,
- product development,
- marketing,
- expansion.
A venture capitalist may provide capital in exchange for an equity interest.
Key concept
Venture Capital = Capital for Growth + Innovation + Higher Risk
The prescribed material includes venture capital among the financial services that developed during the second phase.
7. CREDIT RATING
Meaning
Credit rating provides an assessment of the creditworthiness or relative risk associated with a debt instrument or issuer, based on the methodology and information used by the rating agency.
Why is it needed?
Suppose Company A issues bonds worth ₹100 crore.
An investor asks:
"How risky is this investment?"
A credit rating provides an independent assessment that assists investors in evaluating credit risk.
Importance
- Helps investors assess risk
- Supports informed investment decisions
- Helps issuers access debt markets
- Improves information availability
The source material specifically identifies credit rating as a major development and explains its role in indicating the relative safety/risk of debt instruments.
8. FACTORING
Meaning
Factoring is a financial service in which a business obtains finance and/or receivables-management services against eligible trade receivables.
Example
ABC Ltd sells goods worth:
₹50 lakh
on 90-day credit.
But ABC needs working capital immediately.
It can use factoring to obtain liquidity against eligible receivables.
Credit Sales↓Receivables↓Factor↓Finance / Receivables Service↓Improved Liquidity
Main benefit
Working-capital improvement.
9. FORFAITING
Meaning
Forfaiting is a financing mechanism generally associated with international trade in which an exporter obtains finance by assigning eligible medium- or long-term export receivables, usually without recourse under the agreed arrangement.
Example
An Indian exporter sells machinery to an overseas buyer on deferred payment terms.
Instead of waiting several years for payment, the exporter may use forfaiting to obtain immediate finance against eligible export receivables.
Main benefit
It can provide:
- immediate liquidity,
- reduced receivables exposure,
- better cash-flow management.
10. LEASING
Leasing is a financial arrangement in which the owner of an asset provides another party the right to use the asset for an agreed period in return for rentals.
The source material discusses:
- Financial lease
- Operating lease
- Sale and leaseback
- Cross-border lease
Example
A company requires equipment costing ₹1 crore.
Instead of purchasing it immediately, it may obtain the right to use it through a lease and make periodic rental payments.
11. PORTFOLIO MANAGEMENT
Portfolio management refers to professional management of a collection of investments according to the client's:
- investment objective,
- risk tolerance,
- time horizon,
- financial requirements.
Example
An investor has ₹50 lakh.
Instead of investing everything in one company, the investment may be diversified across different permitted asset classes.
Main principle
Risk should be managed through appropriate diversification and asset allocation.
12. MERCHANT BANKING AS A FINANCIAL SERVICE
Merchant banking is an important specialised financial service.
Merchant bankers may provide:
- issue management,
- corporate advisory,
- capital raising,
- underwriting-related services,
- mergers and acquisitions advisory,
- restructuring services.
The prescribed material identifies merchant banking as one of the earliest specialised financial services in India's financial-services development.
13. SECURITISATION
Meaning
Securitisation involves converting a pool of financial assets or receivables into securities that can be issued to investors, subject to the applicable legal and regulatory framework.
Simple example
A financial institution has a large portfolio of eligible housing loans.
Instead of holding all those receivables until maturity, it may structure a pool of assets and issue securities backed by the cash flows from those assets.
Loans / Receivables↓Asset Pool↓Securitisation Structure↓Securities↓Investors
Benefits
- Liquidity
- Risk distribution
- Better balance-sheet management
- Access to capital-market funding
14. INNOVATIVE FINANCIAL INSTRUMENTS
Meaning
Innovative financial instruments are financial instruments that are developed or structured to meet specialised financing, investment or risk-management requirements.
They arise because traditional instruments may not adequately address modern financial problems.
Traditional instruments
- Equity shares
- Preference shares
- Debentures
- Bonds
Innovative instruments
- Zero-coupon bonds
- Deep-discount bonds
- Floating-rate instruments
- Derivatives
- Swaps
- Futures
- Options
- Securitised instruments
The prescribed study material specifically identifies zero-coupon bonds, deep-discount bonds and derivatives among capital-market instruments and innovative financial instruments.
15. ZERO-COUPON BONDS
Meaning
A zero-coupon bond does not normally make periodic coupon payments. Instead, it is issued at a price below its face/redemption value and provides the investor with the difference at maturity.
Example
Face value = ₹10,000
Issue price = ₹7,500
Maturity value = ₹10,000
Potential gross difference:
₹2,500
The investor does not receive periodic interest payments; the return is reflected in the difference between purchase price and redemption value.
16. DEEP-DISCOUNT BONDS
A deep-discount bond is issued at a substantial discount to its face value and redeemed at a higher value at maturity.
Example
Issue price:
₹4,000
Redemption value:
₹10,000
The investor's return arises mainly from the appreciation from the issue price to the redemption value.
The study material specifically includes deep-discount bonds under capital-market instruments.
17. FLOATING-RATE INSTRUMENTS
A floating-rate instrument has an interest rate that changes periodically according to a specified benchmark or reference rate plus/minus a spread, depending on the terms.
Why is it useful?
It can help borrowers and investors manage changing interest-rate environments.
Example
Interest rate:
Benchmark rate + 2%
If the benchmark changes, the applicable interest rate may also change according to the instrument's terms.
18. DERIVATIVES
Meaning
A derivative is a financial contract whose value is derived from the value or performance of an underlying asset, rate, index or other reference variable.
Underlying assets may include:
- shares,
- commodities,
- currencies,
- interest rates,
- market indices.
Major types
- Futures
- Options
- Forwards
- Swaps
19. FUTURES
A futures contract is a standardised agreement traded on an organised exchange to buy or sell an underlying asset or reference value at a specified price and future date, subject to exchange rules.
Example
An investor expects the price of an index to rise.
Instead of purchasing all the underlying shares, the investor may take a futures position.
Uses
- Hedging
- Price discovery
- Trading/speculation
20. OPTIONS
An option gives the buyer a right but not an obligation to buy or sell the underlying asset at a specified price according to the contract terms.
Two major types
Call Option → Right to buy
Put Option → Right to sell
Easy memory
CALL = BUY
PUT = SELL
The option buyer normally pays a premium for this right.
21. SWAPS
A swap is a contractual arrangement in which parties exchange specified cash flows according to agreed terms.
A common example is an interest-rate swap, where parties may exchange fixed-rate and floating-rate cash flows.
Example
Company A has floating-rate borrowing.
Company B has fixed-rate borrowing.
Depending on their requirements, they may enter into a swap arrangement through which the respective interest-rate exposures are exchanged according to agreed terms.
Purpose
Swaps are primarily used for:
- risk management,
- interest-rate management,
- currency-risk management.
22. INNOVATIVE INSTRUMENTS – WHY ARE THEY REQUIRED?
Innovative instruments emerged because businesses and investors required:
1. Better risk management
To manage:
- currency risk,
- interest-rate risk,
- commodity-price risk,
- market risk.
2. Greater flexibility
Financial structures can be designed according to specific needs.
3. Alternative sources of finance
Companies can access financing beyond traditional bank loans.
4. Investment diversification
Investors receive more choices.
5. Liquidity management
Some instruments facilitate better management of cash flows and financial assets.
23. NEW FINANCIAL SERVICES – TECHNOLOGY DIMENSION
Financial services have also undergone significant technological transformation.
The study material identifies developments such as:
- online trading,
- paperless trading,
- dematerialisation,
- depositories,
- book building.
Traditional model
Customer↓Physical Branch↓Paper Form↓Manual Processing↓Transaction
Technology-enabled model
Customer↓Internet / Mobile↓Digital Platform↓Electronic Processing↓Transaction
This has increased speed, accessibility and convenience, while also creating new risks.
24. CHALLENGES AHEAD
Meaning
The financial services industry has expanded rapidly, but its development has also created several challenges.
The study material concludes that financial institutions need to respond to intense competition, technological changes, regulatory developments, changing customer expectations and the need for greater efficiency.
25. MAJOR CHALLENGES FACING THE FINANCIAL SERVICES INDUSTRY
25.1 Increasing Competition
Financial institutions face competition from:
- commercial banks,
- NBFCs,
- mutual funds,
- insurance companies,
- investment institutions,
- fintech companies,
- global financial institutions.
Result
Institutions must continuously improve:
- service quality,
- product design,
- pricing,
- technology,
- customer experience.
26. TECHNOLOGICAL CHALLENGE
Technology has become both an opportunity and a challenge.
Opportunities
- Faster transactions
- Digital payments
- Online investment
- Automated services
- Data analytics
- Artificial intelligence
Challenges
- Cybersecurity
- Data privacy
- System failures
- Fraud
- Technology costs
- Digital exclusion
Important MBA concept
Technology reduces transaction costs but increases technology-related risks.
27. REGULATORY CHALLENGES
Financial services are highly regulated because financial institutions deal with public money and systemic risks.
Institutions need to comply with:
- prudential requirements,
- investor-protection rules,
- disclosure requirements,
- reporting requirements,
- customer-protection requirements,
- anti-money-laundering requirements,
- market-conduct requirements.
Challenge
The institution must balance:
Innovation ↔ Regulation
Too little regulation may increase risk.
Too much regulation may restrict innovation.
Therefore:
Effective regulation should protect the system without unnecessarily preventing useful innovation.
28. CUSTOMER EXPECTATION CHALLENGE
Today's customers expect:
- 24×7 access,
- quick service,
- transparency,
- convenience,
- personalised products,
- competitive pricing.
Therefore, financial institutions must continuously understand customer behaviour.
29. RISK MANAGEMENT CHALLENGE
Modern financial products can be complex.
Complexity can create:
- market risk,
- credit risk,
- liquidity risk,
- operational risk,
- legal risk,
- reputational risk,
- model risk.
Therefore, financial institutions require strong:
Risk identification → Risk measurement → Risk monitoring → Risk control
30. GLOBALISATION CHALLENGE
Global financial integration creates opportunities for international expansion but also exposes institutions to international risks.
Examples:
- Currency fluctuations
- Global interest rates
- International financial crises
- Geopolitical uncertainty
- Cross-border regulatory requirements
The study material identifies globalisation as an important factor that changed the financial-services environment.
31. CYBERSECURITY CHALLENGE
As financial transactions increasingly move online, cybersecurity becomes critical.
Potential threats include:
- phishing,
- identity theft,
- malware,
- account takeover,
- data breaches,
- payment fraud.
Therefore
Financial institutions need:
- strong authentication,
- encryption,
- monitoring,
- incident-response systems,
- customer awareness,
- continuous technology upgrades.
32. FINANCIAL INCLUSION CHALLENGE
Modern financial services must reach not only urban and technologically advanced customers but also:
- rural populations,
- low-income groups,
- small businesses,
- first-time users.
Objective
Financial innovation should not create financial exclusion.
Technology should therefore be used to increase accessibility rather than simply increase sophistication.
33. PRODUCT COMPLEXITY
Innovative financial instruments can sometimes be difficult for ordinary investors to understand.
For example:
A simple fixed deposit is easy to understand.
A complex derivative-linked product may involve:
- multiple variables,
- market conditions,
- embedded risks,
- complex payoff structures.
Therefore, financial institutions must ensure:
Product suitability + Transparency + Proper disclosure + Customer understanding
34. CHANGING REGULATORY ENVIRONMENT
Financial institutions must continuously adapt to changes in:
- banking regulations,
- securities regulations,
- taxation,
- accounting standards,
- international standards,
- digital-finance regulation.
Therefore:
Regulatory compliance has become a strategic function rather than merely an administrative function.
35. HUMAN RESOURCE CHALLENGE
Modern financial services require professionals with knowledge of:
- finance,
- accounting,
- economics,
- law,
- technology,
- data analytics,
- risk management.
Therefore, continuous employee training is necessary.
Modern financial professional
Finance Knowledge+Technology+Analytics+Regulation+Risk Management↓Modern Financial Professional
36. BALANCING INNOVATION AND RISK
One of the biggest challenges is:
How can financial institutions innovate without creating excessive risk?
This is an important MBA-level discussion.
Innovation without control
May lead to:
- excessive risk,
- fraud,
- mis-selling,
- market instability.
Regulation without innovation
May lead to:
- reduced competition,
- poor customer experience,
- inefficient services.
Therefore:
Innovation↕Risk Management↕Regulation↕Customer Protection
must work together.
37. COMPLETE UNIT-I FLOW
FINANCIAL SERVICES INDUSTRY↓EMERGENCE↓DEVELOPMENT↓FUND-BASED ACTIVITIES↓NON-FUND-BASED ACTIVITIES↓MODERN ACTIVITIES↓NEW FINANCIAL PRODUCTSAND SERVICES↓INNOVATIVE FINANCIALINSTRUMENTS↓DERIVATIVES / SECURITISATION↓CHALLENGES↓CompetitionTechnologyRegulationRiskGlobalisationCybersecurityCustomer ExpectationsFinancial Inclusion
38. MBA CLASSROOM CASE STUDY
Case: ABC Export Company
ABC Ltd. exports machinery worth ₹50 crore.
The company faces three problems:
Problem 1 – Working Capital
Foreign buyers will pay after six months.
Possible solution: Factoring/appropriate receivables financing.
Problem 2 – Currency Risk
The company will receive US dollars after six months.
If the rupee appreciates, the rupee value of its receipts may fall.
Possible solution: Appropriate foreign-exchange hedging instruments.
Problem 3 – Expansion
The company needs ₹100 crore for a new manufacturing facility.
Possible solution:
- Equity issue
- Debt financing
- Merchant banking
- Project advisory
Thus, a single company may require:
Traditional Financial Services + New Financial Products + Innovative Instruments
This is why MBA students should study financial services as an integrated system rather than as isolated products.
39. QUICK BULLETIN FOR STUDENTS
NEW FINANCIAL PRODUCTS & SERVICES
Why developed?
Changing customer needs + competition + liberalisation + globalisation + technology + risk management.
Examples:
Mutual Funds
Venture Capital
Credit Rating
Factoring
Forfaiting
Leasing
Portfolio Management
Merchant Banking
Securitisation
INNOVATIVE FINANCIAL INSTRUMENTS
Zero-Coupon Bond → No periodic coupon; return mainly through difference between purchase price and redemption value.
Deep-Discount Bond → Issued at substantial discount and redeemed at higher value.
Floating-Rate Instrument → Interest rate changes according to specified benchmark/terms.
Derivative → Value derived from an underlying asset/rate/index.
Futures → Standardised future contract.
Options → Right, not obligation.
Call → Right to buy.
Put → Right to sell.
Swap → Exchange of specified cash flows.
CHALLENGES AHEAD
Competition
Technology
Cybersecurity
Regulation
Globalisation
Risk Management
Customer Expectations
Financial Inclusion
Product Complexity
Skilled Human ResourcesCentral challenge:
INNOVATION ↔ RISK ↔ REGULATION ↔ CUSTOMER PROTECTION
40. EXAMINATION-ORIENTED QUESTIONS
2 Marks
- What are new financial products?
- What is an innovative financial instrument?
- Define securitisation.
- What is a zero-coupon bond?
- What is a deep-discount bond?
- What is a derivative?
- What is a futures contract?
- What is an option?
- What is a swap?
- What is venture capital?
5 Marks
- Explain the need for new financial products and services.
- Explain the importance of mutual funds.
- Explain venture capital as a modern financial service.
- Explain credit rating.
- Explain factoring and forfaiting.
- Explain zero-coupon and deep-discount bonds.
- Explain the major types of derivatives.
- Explain the major challenges faced by the financial services industry.
10/15 Marks
- Explain the emergence and development of new financial products and services in India.
- Discuss the various innovative financial instruments and explain their significance.
- Explain derivatives and their major types with suitable examples.
- Discuss the challenges faced by the financial services industry in the modern era.
- Explain how technological development, liberalisation and globalisation have influenced financial services.
- Discuss the importance of innovative financial instruments in modern financial markets.
- "Financial innovation creates both opportunities and risks." Discuss.
UNIT II – MERCHANT BANKING
Issues Management and Issue Management Intermediaries
Merchant Banking – Issue Management Intermediaries – Merchant Bankers/Lead Managers – Underwriters – Bankers to an Issue – Brokers – Registrars to an Issue and Share Transfer Agents – Debenture Trustees
Merchant banking is one of the most important specialised areas of financial services. It developed because companies increasingly required professional assistance for raising capital, managing securities issues, restructuring businesses and undertaking corporate financial decisions.
Anthony Rahul Golden defines... Merchant banking means providing specialised financial and advisory services to companies, particularly in connection with raising capital and major corporate transactions.
A merchant banker acts as a professional intermediary between:
Company → Capital Market → Investors
For example, if a company wants to raise ₹500 crore through a public issue, it has to deal with several activities:
determining the issue structure,
preparing documentation,
complying with regulatory requirements,
appointing intermediaries,
marketing the issue,
coordinating with investors,
arranging underwriting,
coordinating with bankers,
ensuring allotment and listing.
A merchant banker/lead manager plays a central coordinating role in this process.
2. WHAT IS ISSUE MANAGEMENT?
Issue management refers to the process of planning, organising, coordinating and managing the issue of securities by a company to investors.
Securities may include:
Equity shares
Preference shares
Debentures
Bonds
Other permitted securities
Simple definition
Issue Management is the systematic process through which a company raises capital from investors with the assistance of professional intermediaries.
3. WHY DO COMPANIES NEED ISSUE MANAGEMENT?
Suppose ABC Ltd. requires ₹200 crore for expansion.
It decides to raise the money from the public.
The company cannot simply announce:
"Give us ₹200 crore."
A public issue involves a complex process.
The company has to consider:
How much capital should be raised?
What type of security should be issued?
What should be the issue structure?
What disclosures are required?
What regulatory requirements apply?
Who will manage the issue?
Who will underwrite the issue?
Who will collect applications?
Who will maintain investor records?
How will securities be allotted?
How will the securities be listed?
Therefore, professional issue management becomes necessary.
4. ISSUE MANAGEMENT – BASIC PROCESS
The process can be understood as:
Company Requires Capital
↓
Decides to Raise Funds
↓
Appoints Lead Manager / Merchant Banker
↓
Issue Planning & Structuring
↓
Preparation of Offer Documents
↓
Appointment of Intermediaries
↓
Regulatory Compliance
↓
Marketing / Investor Communication
↓
Opening of Issue
↓
Applications & Funds
↓
Collection / Processing
↓
Allotment
↓
Refund / Release of Funds
↓
Listing of SecuritiesThe lead manager coordinates many of these activities.
5. ISSUE MANAGEMENT INTERMEDIARIES
A securities issue normally involves several specialised intermediaries.
The important intermediaries covered in this syllabus are:
Merchant Bankers / Lead Managers
Underwriters
Bankers to an Issue
Brokers
Registrars to an Issue
Share Transfer Agents
Debenture Trustees
Each intermediary has a different role.
Important classroom concept
One intermediary does not perform every function.
Instead, issue management works through a network of specialised intermediaries.
6. MERCHANT BANKERS / LEAD MANAGERS
Meaning
A merchant banker is a professional financial intermediary providing specialised corporate-finance and advisory services.
In issue management, the merchant banker may function as the Lead Manager, subject to the applicable regulatory framework.
Simple meaning
Lead Manager = The main professional coordinator of a securities issue.
7. WHY IS THE LEAD MANAGER IMPORTANT?
Imagine a company is organising a large wedding.
The family members may perform different tasks:
catering,
decoration,
invitations,
transportation,
photography.
But someone has to coordinate everything.
Similarly, in a securities issue:
Banker → handles banking-related collection/payment functions
Registrar → handles issue records and processing
Underwriter → provides underwriting support
Broker → assists with market/investor interface
Trustee → protects debenture holders where applicable
The Lead Manager coordinates the overall issue-management process.
8. FUNCTIONS OF MERCHANT BANKER / LEAD MANAGER
8.1 Pre-Issue Activities
The lead manager performs important activities before the issue opens.
These may include:
examining the company's financial position,
understanding the purpose of the issue,
advising on issue structure,
coordinating due diligence,
assisting in preparation of offer documents,
coordinating with regulatory authorities,
assisting in appointment of intermediaries,
coordinating with stock exchanges and other institutions,
assisting with issue marketing and investor communication.
9. ISSUE STRUCTURING
One of the important responsibilities of a merchant banker is advising the company regarding the appropriate structure of the issue.
The company may need to decide:
size of issue,
type of security,
pricing mechanism,
timing,
investor categories,
method of raising capital.
Example
ABC Ltd. requires ₹300 crore.
The merchant banker may advise the company regarding whether the capital should be raised through:
Equity → Debt → Combination of instruments
The final structure depends on the company's requirements and applicable regulatory conditions.
10. DUE DILIGENCE
Meaning
Due diligence involves systematic examination and verification of relevant information relating to the company and the proposed issue.
The merchant banker must examine matters such as:
financial information,
business operations,
management,
legal matters,
material contracts,
disclosures,
risks.
Why is due diligence important?
Because investors make decisions based on information provided in the issue documents.
Therefore:
Accurate information → Better investor decision-making → Greater market confidence
11. OFFER DOCUMENTATION
A securities issue requires appropriate documentation and disclosures under the applicable regulatory framework.
The merchant banker coordinates the preparation and review of the relevant offer documents.
The objective is to ensure that investors receive material information necessary for making informed decisions.
Information may include:
company profile,
business activities,
financial information,
risk factors,
objects of the issue,
management details,
capital structure,
legal information,
material developments.
12. COORDINATION WITH INTERMEDIARIES
The lead manager coordinates with:
underwriters,
bankers,
brokers,
registrars,
stock exchanges,
legal advisers,
auditors,
other relevant intermediaries.
Thus, the lead manager acts as the central coordinating point.
13. POST-ISSUE ACTIVITIES
The merchant banker/lead manager's responsibility does not necessarily end when the issue closes.
Post-issue activities may include coordination regarding:
application processing,
basis of allotment,
refunds/unblocking of funds as applicable,
issue-related reports,
listing,
resolution of investor complaints,
completion of regulatory requirements.
14. MERCHANT BANKER – CLASSROOM SUMMARY
Merchant Banker / Lead Manager
Before Issue
Planning → Structuring → Due Diligence → Documentation → Regulatory Coordination
During Issue
Coordination → Marketing → Intermediary Management → Monitoring
After Issue
Allotment Coordination → Refund/Unblocking → Listing → Compliance → Investor Grievance Coordination
15. UNDERWRITERS
Meaning
An underwriter is an intermediary who undertakes, subject to the terms of the underwriting arrangement and applicable regulations, to subscribe to securities that are not subscribed by investors.
Simple example
Suppose:
Company issues securities worth:
₹100 crore
Public subscription:
₹85 crore
Unsubscribed portion:
₹15 crore
If the issue has been appropriately underwritten, the underwriter may be required to take up the agreed unsubscribed portion according to the underwriting commitment.
16. WHY IS UNDERWRITING REQUIRED?
The company wants confidence that its planned issue will receive the required subscription.
Therefore:
Underwriting provides a form of subscription support and confidence in the capital-raising process.
Important
Underwriting does not mean that the company is guaranteed a profit.
It relates to the commitment concerning subscription of securities under the applicable underwriting arrangement.
17. FUNCTIONS OF UNDERWRITERS
1. Subscription support
Provides support against the risk of inadequate subscription, according to the underwriting agreement.
2. Investor confidence
Underwriting can enhance confidence in the issue.
3. Issue success
It helps companies reduce the risk associated with insufficient subscription.
4. Market support
Underwriting contributes to the orderly process of raising capital.
18. EXAMPLE OF UNDERWRITING
ABC Ltd. issues:
10 lakh shares × ₹100 = ₹10 crore
Suppose only:
8 lakh shares
are subscribed.
Unsubscribed amount:
2 lakh shares × ₹100 = ₹2 crore
If an underwriter has a valid commitment covering the relevant shortfall, the underwriter may be required to subscribe according to the terms.
Memory point
Underwriter = Subscription Risk Support
19. BANKERS TO AN ISSUE
Meaning
Bankers to an issue are banking intermediaries appointed to perform specified banking functions relating to a securities issue.
Their role is different from that of the lead manager.
Lead Manager
Manages and coordinates the issue.
Banker to Issue
Performs banking-related functions connected with the issue.
20. FUNCTIONS OF BANKERS TO AN ISSUE
Depending on the issue structure and applicable framework, bankers may facilitate:
collection of application monies,
handling of issue-related accounts,
processing of payment-related transactions,
transfer of funds,
refunds/unblocking as applicable,
other banking services connected with the issue.
Example
An investor applies for shares and pays the required application amount through the designated banking mechanism.
The banker facilitates the relevant financial transaction.
21. BROKERS
Meaning
A broker acts as an intermediary between buyers and sellers in the securities market.
In the context of issue management, brokers may assist with:
distribution/marketing of securities,
reaching investors,
facilitating market-related activities,
investor interaction.
Simple concept
Company / Issue
↓
Broker
↓
InvestorsBrokers therefore help connect securities offerings and the investor community, subject to the applicable issue and market framework.
22. FUNCTIONS OF BROKERS
1. Investor reach
They help securities reach potential investors.
2. Market information
Brokers possess knowledge of market conditions and investor behaviour.
3. Investor interaction
They may communicate information about the issue to prospective investors.
4. Secondary-market services
After listing, brokers also facilitate buying and selling of securities in the secondary market according to applicable rules.
23. REGISTRARS TO AN ISSUE
Meaning
A Registrar to an Issue is an intermediary responsible for processing applications and maintaining records connected with a securities issue.
The registrar performs an important record-management and processing function.
24. FUNCTIONS OF REGISTRAR TO AN ISSUE
Important functions include:
receiving and processing application data,
maintaining investor records,
reconciling application information,
coordinating with banks and other intermediaries,
assisting in determining the basis of allotment,
processing allotment information,
processing refunds/unblocking as applicable,
addressing investor queries/grievances related to the issue,
maintaining relevant records.
Example
Suppose an issue receives:
5 lakh applications.
It is not practical for the company to manually manage every application.
The registrar uses specialised systems to process:
application details,
investor information,
payment information,
allotment data.
25. SHARE TRANSFER AGENTS
Meaning
A Share Transfer Agent (STA) performs activities relating to maintaining records of security holders and processing specified investor/service requests, subject to the applicable framework.
Important functions
maintaining investor records,
processing transfer-related requests where applicable,
processing transmission requests,
updating investor information,
handling corporate-action related records,
responding to investor service requests,
maintaining records of security holders.
26. REGISTRAR TO ISSUE VS SHARE TRANSFER AGENT
Students frequently confuse these two.
| Basis | Registrar to an Issue | Share Transfer Agent |
|---|---|---|
| Main focus | Securities issue | Ongoing security-holder services |
| Major activity | Application and allotment processing | Maintenance and servicing of holder records |
| Stage | Mainly issue stage | Post-issue / continuing servicing |
| Example | Processing IPO applications | Processing eligible investor service/transfer requests |
| Record keeping | Issue-related records | Security-holder records |
Easy memory
Registrar to Issue = Issue Stage
Share Transfer Agent = Investor Service Stage
An entity may perform both functions if appropriately authorised/registered under the applicable regulatory framework.
27. DEBENTURE TRUSTEES
Meaning
A Debenture Trustee is a trustee appointed to protect the interests of debenture holders/security holders in accordance with the trust deed and applicable regulations.
This becomes particularly important when a company raises funds through debt securities.
28. WHY ARE DEBENTURE TRUSTEES REQUIRED?
Suppose a company raises:
₹500 crore through debentures
from:
10,000 investors.
It would be difficult for every investor individually to monitor whether the company is complying with the terms of the issue.
Therefore, a trustee acts on behalf of the investors/debenture holders within the scope of the trust arrangement.
Basic structure
Company
↓
Issues Debentures
↓
Investors / Debenture Holders
↑
│
Debenture Trustee
│
Protects / Represents
Investor Interests29. FUNCTIONS OF DEBENTURE TRUSTEE
The functions depend on the trust deed and applicable regulatory framework, but generally include:
1. Protection of debenture holders
The trustee acts to safeguard the interests of security holders.
2. Monitoring compliance
The trustee monitors compliance with relevant terms and conditions.
3. Monitoring security
Where securities are secured, the trustee monitors matters relating to the security created for the debenture holders.
4. Monitoring covenants
The trustee monitors compliance with relevant covenants and obligations.
5. Communication
The trustee communicates relevant information to debenture holders.
6. Action in case of default
Where there is a default, the trustee may take appropriate action according to the trust deed and applicable regulations.
30. DEBENTURE TRUSTEE – EXAMPLE
XYZ Ltd. raises:
₹100 crore
through secured debentures.
The debenture holders expect:
timely interest payment,
repayment of principal,
maintenance of security,
compliance with issue conditions.
The debenture trustee monitors relevant obligations and represents the interests of the debenture holders within the applicable framework.
31. COMPLETE ISSUE MANAGEMENT STRUCTURE
This is an important diagram for students to understand.
COMPANY
│
↓
MERCHANT BANKER /
LEAD MANAGER
│
┌────────────┼─────────────┐
↓ ↓ ↓
UNDERWRITER BANKER REGISTRAR
│ TO ISSUE TO ISSUE
│ │ │
↓ ↓ ↓
Subscription Banking Applications
Support Functions & Records
│ │ │
└────────────┼─────────────┘
↓
INVESTORS
│
┌─────────┴─────────┐
↓ ↓
BROKERS SHARE TRANSFER
AGENTS
+
DEBENTURE TRUSTEE
│
↓
DEBENTURE HOLDERS32. COMPARISON OF ALL ISSUE MANAGEMENT INTERMEDIARIES
| Intermediary | Main Responsibility |
|---|---|
| Merchant Banker / Lead Manager | Overall issue management and coordination |
| Underwriter | Subscription support according to underwriting commitment |
| Banker to Issue | Banking-related issue functions |
| Broker | Investor/market intermediary functions |
| Registrar to Issue | Application processing, allotment and issue records |
| Share Transfer Agent | Security-holder records and investor servicing |
| Debenture Trustee | Protection/representation of debenture holders |
One-line memory method
Lead Manager – Manages
Underwriter – Underwrites
Banker – Banks
Broker – Connects
Registrar – Records the Issue
STA – Services Investors
Trustee – Protects Debenture Holders
33. HOW AN IPO MOVES FROM COMPANY TO INVESTOR
A simple classroom illustration:
Stage 1 – Company decides to raise capital
ABC Ltd. needs ₹500 crore.
↓
Stage 2 – Lead Manager appointed
Merchant banker assists in planning and managing the issue.
↓
Stage 3 – Due diligence and documentation
Relevant information is reviewed and offer documents are prepared.
↓
Stage 4 – Other intermediaries appointed
Underwriters, where applicable
Bankers
Registrar
Brokers/other intermediaries
↓
Stage 5 – Issue opens
Investors submit applications through the prescribed mechanisms.
↓
Stage 6 – Application processing
Registrar processes application information.
↓
Stage 7 – Funds
Banking intermediaries handle issue-related banking functions.
↓
Stage 8 – Allotment
Allotment is completed according to the applicable rules and basis.
↓
Stage 9 – Listing
Securities are admitted/listed as applicable.
↓
Stage 10 – Post-issue servicing
Share Transfer Agent and other intermediaries provide continuing investor services.
34. IF IT IS A DEBENTURE ISSUE
The structure changes slightly.
Company
↓
Lead Manager
↓
Debenture Issue
↓
Investors
↑
│
Debenture Trustee
│
Protection / MonitoringThe key additional intermediary is:
Debenture Trustee
because debt investors require appropriate representation and monitoring of the terms of the issue.
35. FUNDAMENTAL DIFFERENCE: EQUITY ISSUE VS DEBENTURE ISSUE
| Basis | Equity Issue | Debenture Issue |
|---|---|---|
| Investor status | Shareholder | Debenture holder |
| Return | Dividend, if declared | Interest/coupon according to terms |
| Ownership | Represents ownership interest | Represents debt claim |
| Trustee | Generally not a debenture trustee issue | Debenture trustee may be appointed as required |
| Risk | Equity holders generally bear greater residual risk | Debt holders have contractual claims according to terms |
| Repayment | Equity does not normally have a fixed maturity | Debentures generally have defined repayment terms |
36. CLASSROOM CASE STUDY
ABC Ltd. – ₹500 Crore Public Issue
ABC Ltd. wants to raise ₹500 crore for expansion.
Step 1
ABC appoints a Merchant Banker/Lead Manager.
The lead manager coordinates the issue.
Step 2
Due diligence is conducted.
Step 3
Offer documentation is prepared.
Step 4
An Underwriter provides underwriting support according to the agreed commitment.
Step 5
Bankers to the Issue handle designated banking functions.
Step 6
The Registrar to the Issue processes applications and maintains issue records.
Step 7
Brokers assist in reaching investors and performing relevant market intermediary functions.
Step 8
After securities are issued, the Share Transfer Agent handles continuing investor records and servicing functions.
Step 9
If ABC raises money through debentures, a Debenture Trustee acts for the protection/representation of debenture holders according to the applicable framework.
Therefore:
Issue management is a coordinated team effort.
37. IMPORTANT POINT – LEAD MANAGER IS NOT THE SAME AS UNDERWRITER
Students often make this mistake in examinations.
Lead Manager
Mainly:
Planning + Coordination + Management
Underwriter
Mainly:
Subscription Commitment/Support
Therefore:
Lead Manager manages the issue.
Underwriter supports the subscription of the issue according to the underwriting commitment.
38. IMPORTANT POINT – REGISTRAR IS NOT THE BANKER
Banker
Handles:
Money / Banking Transactions
Registrar
Handles:
Applications / Records / Allotment Processing
Remember:
Banker → Money
Registrar → Records
39. IMPORTANT POINT – TRUSTEE IS NOT A LEAD MANAGER
Lead Manager
Works primarily for:
Issue management and coordination
Debenture Trustee
Works to:
Protect/represent debenture holders' interests according to the trust arrangement and applicable regulations
40. MERCHANT BANKING – ISSUE MANAGEMENT
Merchant Banker / Lead Manager
→ Main issue manager and coordinator.Underwriter
→ Provides subscription support according to underwriting commitment.Banker to an Issue
→ Performs banking-related functions.Broker
→ Acts as market/investor intermediary.Registrar to an Issue
→ Processes applications and issue-related records.Share Transfer Agent
→ Maintains security-holder records and provides continuing investor services.Debenture Trustee
→ Protects/represents debenture holders according to the trust arrangement and applicable regulations.MEMORY TRICK
M – Manages
U – Underwrites
B – Banks
B – Brokers
R – Records
S – Services
T – Trusts/Protects
41. QUESTIONS
2 Marks
Define Merchant Banking.
What is Issue Management?
Who is a Lead Manager?
What is underwriting?
Who is a Banker to an Issue?
What is the role of a Registrar to an Issue?
What is a Share Transfer Agent?
Who is a Debenture Trustee?
5 Marks
Explain the functions of a Merchant Banker.
Explain the role of Underwriters in issue management.
Explain the functions of Bankers to an Issue.
Explain the role of Registrars to an Issue.
Explain the functions of Share Transfer Agents.
Explain the role of Debenture Trustees.
10/15 Marks
Explain the various intermediaries involved in issue management.
Discuss the role and functions of Merchant Bankers/Lead Managers in issue management.
Explain the role of Underwriters, Bankers, Brokers and Registrars in the issue of securities.
Explain the role and responsibilities of Debenture Trustees in protecting the interests of debenture holders.
Describe the complete process of issue management with the role of different intermediaries.
Distinguish between Merchant Banker, Underwriter, Banker to Issue, Broker, Registrar and Debenture Trustee.
42.MAP
MERCHANT BANKING
│
↓
ISSUE MANAGEMENT
│
┌────────────────┼────────────────┐
↓ ↓ ↓
PRE-ISSUE ISSUE STAGE POST-ISSUE
│ │ │
↓ ↓ ↓
Lead Manager Banker Registrar
Due Diligence Underwriter Allotment
Documentation Broker Listing
Structuring Investor Service
│
└─────────────────────────────────────
│
↓
DEBENTURE ISSUE
│
↓
DEBENTURE TRUSTEE
│
↓
PROTECTION OF HOLDERS
