Financial Services

Financial Services– Commercial banks provide securities related services. Banks in India have set up subsidiaries to provide capital market related services, advice on portfolio Management or investment counseling.

In India several banks such as Bank of India, Canara Bank, India Bank and State Bank of India have set up subsidiaries under the guidelines issued by the Reserve Bank in 1987, followed by guidelines laid down by the Ministry of Finance in 1991. Other financial services rendered by commercial banks are:

Off-Balance sheet Activities: It consists of the followings activities:

• Commitments such as unused overdraft facilities and note issuance facilities, which may require banks to advance funds and acquire a credit exposure at some future date.
• Provision of guarantees to borrow in direct financing markets and bankers acceptance of commercial bills or time draft which substitutes banks credit rating for that of the borrowing firm (which remains and off-balance sheet exposure for the bank as long as the acceptance is not discounted and held by the accepting bank).
• The entry of banks into forwarding contracts in the markets in foreign exchange, interest rate, and the stock market.
• Banks engaging in merchant and investment banking activities like securities underwriting have blurred the distinction between business of banks and investment banks and between banking and financial markets generally and are often referred to as marketization of banking.

Insurance: Banks have been permitted to act as distributors of insurance products. They have set up their own subsidiary or bought shares of the insurance companies or swapped shares with insurance companies. Insurance companies in turn have acquired stakes in some banks either as investment, diversification or to promote the distribution of insurance products through bank branches.

Loans: To satisfy the requirement of individuals who are short of funds in their goal achievement, banks plays a vital role by offering various loans. Depending on the purpose of funds requirement, an individual is qualified for a personal loan, home loan, car loan or education loan.

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