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Financial Markets and Financial Services in India
By Benson Kunjukunju , S. Mohanan

First Published : 2012
ISBN : 9788177083163
Pages : 490
Binding : Hardbound
Size : 7 x 9
Price : US$ 122

Financial markets are the centres that provide facilities for buying and selling of financial assets. Financial markets have developed significantly worldwide and are undergoing constant innovations to improve monetary impulses in different segments of the economy.

Till the early 1990s, most of the financial markets in India were characterised by controls over the pricing of financial assets, restrictions on flows or transactions, barriers to entry, low liquidity and high transaction costs. These characteristics came in the way of development of the markets and allocative efficiency of resources channelled through them. From 1991 onward, wide-ranging financial market reforms have been implemented as a part of economic reforms measures.

Financial markets in India are getting increasingly integrated, domestically and globally. Reform measures in terms of free pricing, removal of barriers to flows and broad-based participation have yielded results in terms of fairly high degree of integration of the money market, the government securities market and the foreign exchange market, although in varying degrees.

Financial markets are at the core of the transmission mechanism of monetary policy. In India, financial markets have been developed with a specific emphasis on increasing allocative efficiency of resources and promoting financial stability.

The purpose of this book is to provide an understanding of the organization, operation and working of financial markets and services in India. The areas covered include the following: Capital Market • Primary Market • Participants in the Primary Market • Legislations and Regulators in the Capital Market  • Secondary Market • Operators in the Secondary Market • Stock Exchanges  • Bombay Stock Exchange National Stock Exchange of India • Over the Counter Exchange of India • Stock Market Indices • Derivatives Market • Money Market • Corporate Debt Market • Government Securities Market • Securities and Exchange Board of India • Credit Rating Factoring and Forfeiting • Discounting of Bills • Securitisation of Debt • Credit Information Bureaus.  

Each chapter ends with two lists of questions: (a) short answer type questions and (b) essay type questions.

The book is designed to interest a cross-section of readers, viz. teachers and students of economics, commerce, law, public administration, business management, chartered accountancy and company secretaryship. It will also serve the needs of legislators, business executives, entrepreneurs and investors, and others interested in financial sector developments in India.

1. Financial Markets and Financial Services: An Introduction
1.1 Financial Markets
1.1.1 Classification of Financial Market
1.1.2 Factors Affecting Financial Market
1.2 Financial Services
1.2.1 Kinds of Financial Services

2. Capital Market
2.1 Meaning of Capital Market
2.2 Functions of Capital Market
2.3 Capital Market Segments
2.4 Basic Capital Market Instruments
2.4.1 Equity Securities
2.4.2 Preference Shares
2.5 Debt Securities
2.5.1 Debentures
2.6 Bonds
2.6.1 Indentures and Covenants
2.6.2 Types of Bonds
2.7 Advantages of Corporate Bonds
2.8 Disadvantages of Corporate Bonds
3. Primary Market
3.1 Introduction
3.2 Characteristics of Primary Market
3.3 Primary and Secondary Markets
3.4 Kinds of Issues
3.5 Public Issue
3.5.1 Initial Public Offer (IPO)
3.5.2 Further Public Offer (FPO)
3.5.3 Difference between IPO and FPO
3.6 Rights Issue
3.7 Bonus Issue
3.8 Private Placement
3.8.1 Preferential Allotment
3.8.2 Qualified Institutional Placement
3.9 Issue of Shares in the Primary Market
3.10 Entry Norms for Unlisted Companies Making a Public Issue (IPO)
3.11 Alternative Routes to Companies not Satisfying any of the above Conditions
3.11.1 First Alternative Route
3.11.2 Second Alternative Route
3.12 Guidelines for Public Issue of Shares by Already Listed Companies
3.13 Alternative Route
3.14 Exemptions of Eligibility Conditions for Issue of Shares
3.15 General Conditions Governing the Issue of Shares in the Primary Market
3.16 Pricing of Equity Shares
3.16.1 Types of Pricing
3.16.2 Fixing of Face Value of Shares for Public Issue/Rights Issue
3.16.3 Issue of Shares at a Premium
3.16.4 Issue of Shares at a Discount
3.17 Promoters Contribution
3.17.1 Lock-in Period of Promoters Contribution
3.17.2 Securities Ineligible for Computation of Promoters Contributions
3.17.3 Exemption from Promoters Contribution
3.18 Pre-Issue Duties of a Company in Respect of Issue of Shares
3.18.1 Drafting Memorandum of Understanding and Allocation of Responsibilities
3.18.2 Exercise of Due Diligence
3.18.3 Filing Offer Document to the SEBI
3.18.4 Payment of Requisite Fees to the Board
3.18.5 Submission of Undertaking to SEBI
3.18.6 Filing of Due Diligence Certificate
3.18.7 Despatch of Issue Material
3.18.8 Agreement with Depositories
3.18.9 Mandatory Collection Centres
3.18.10 Authorized Collection Agents
3.18.11 Appointment of Compliance Officer
3.18.12 Minimum Number of Applications for Shares
3.18.13 Minimum Application Money
3.18.14 Minimum Subscription
3.18.15 Period of Issue Open for Subscription
3.18.16 Basis of Allotment of Shares in Case of Oversubscription
3.18.17 Net Offer to the Public
3.18.18 Reservation of Securities to Small Individual Applicants
3.18.19 Reservation of Securities to Small Individual Applicants
3.18.20 Reservation of Securities to other Categories
3.18.21 Firm Allotment
3.18.22 Green Shoe Option
3.18.23 Guidelines on Advertisement in Connection with Capital Issues
3.18.24 Post Issue Advertisements
3.19 Rights Issue
3.20 Bonus Issue
3.20.1 SEBI Guidelines on Issue of Bonus Shares
3.21 Private Placement
3.21.1 SEBI guidelines for Preferential Allotment of Shares
3.22 Prospectus
3.22.1 Red Herring Prospectus
3.22.2 Abridged Prospectus
3.22.3 Offer Document
3.22.4 Placement Document
3.22.5 Need for a Prospectus
3.22.6 Contents of Prospectus
3.23 Book Building
3.23.1 Definition of Book Building
3.23.2 Procedure in Book Building Process
3.23.3 Bidding Procedure
3.23.4 Advantages of Book Building
3.24 Stock Invest Scheme
3.25 Issue of Sweat Equity
3.26 Employees Stock Option Scheme
3.26.1 Guidelines on Employee Stock Option Scheme
3.27 Employees Stock Purchase Scheme
3.28 Buy Back of Securities
3.28.1 Sources for Buy Back of Shares
3.28.2 Objectives of Buy Back of Shares
3.28.3 General Conditions to be satisfied for Buy Back of Securities
3.28.4 SEBI Guidelines for Buy Back of Securities
3.28.5 Buy Back from Existing Holders through Tender Offer
3.28.6 Buy Back from Open Market through Book Building Process
3.28.7 Buy Back through Stock Exchange
3.28.8 From Odd-lot holders
4. Participants in the Primary Market
4.1 Introduction
4.2 Merchant Bankers
4.3 Bankers to an Issue
4.3.1 Grant of Registration as Bankers to the Issue
4.3.2 Payment of Fees
4.3.3 Agreement with the Issuer Company
4.3.4 Redressal of Grievances
4.3.5 Collection Centres
4.3.6 Duties of Bankers to the Issue
4.3.7 Code of Conduct for the Bankers to an Issue
4.4 Registrar to an Issue
4.4.1 Functions of Registrar to an Issue
4.4.2 Registration of Registrar to an Issue
4.4.3 Grant of Registration as Bankers to the Issue
4.4.4 Fee for Registration
4.4.5 Agreement with the Issuer Company
4.4.6 Appointment of Compliance Officer
4.4.7 Duties of Registrar to an Issue
4.4.8 Code of Conduct for Registrar to the Issue
4.5 Underwriters to the Issue
4.5.1 Registration of Underwriters
4.5.2 Consideration of Application for Registration
4.5.3 Payment of Fees
4.5.4 Types of Underwriting
4.5.6 Underwriting Obligations
4.5.7 Code of Conduct for the Underwriters
4.5.8 Benefits of Underwriting
4.6 Investment Banks
4.7 Depositories
4.7.1 Meaning of Depository
4.7.2 Definition of Depository
4.7.3 Types of Institutions Eligible for Registration as Depositories
4.7.4 Grant of Registration as Depository
4.7.5 Services Provided by Depositories
4.7.6 Securities that can be Converted into Dematerialized Form
4.7.7 Depository Participant
4.7.8 Types of Institutions Eligible to Act as Depository Participant
4.7.9 Grant of Registration as Depository Participant
4.7.10 Dematerialization
4.7.11 Depositories in India
4.7.12 Advantages of Dematerialization
4.7.13 Disadvantages of Dematerialization
4.8 Portfolio Managers
4.9 Custodians
5. Legislations and Regulators in the Capital Market
5.1 Introduction
5.2 Important Legislations Governing Indian Securities Market
5.2.1 Indian Companies Act, 1956
5.2.2 Securities Contracts (Regulation) Act, 1956
5.2.3 Securities and Exchange Board of India Act, 1992
5.2.4 Depositories Act, 1996
5.3 Regulators in Indian Securities Market
5.3.1 Securities and Exchange Board of India
5.3.2 Reserve Bank of India
5.3.3 Department of Company Affairs
5.3.4 Securities Appellate Tribunal
6. Secondary Market
6.1 Introduction
6.2 Securities Dealt in the Secondary Market
6.3 Listing of Securities
6.4 Objectives of Listing
6.5 Acts and Regulations Governing Listing
6.6 Companies Act, 1956 Regarding Listing
6.7 SEBI Guidelines to Newly Listed Companies
6.8 SEBI Guidelines to Listed Companies
6.9 Application for Listing
6.10 Norms Stipulated by Stock Exchange for Listing
6.10.1 Additional Requirements to be fulfilled
6.11 Listing Agreement
6.12 Deposit of Security Amount in the Stock Exchange
6.13 Allotment of Shares
6.14 Trading Permission
6.15 Fees Levied by the Stock Exchange for Listing of Securities
6.15.1 Fees Levied by National Stock Exchange
6.15.2 Fees Levied by Bombay Stock Exchange
6.16 Central Listing Authority
6.17 Listing of Securities Issued on Preferential Allotment Basis or Under Employees Stock Option Scheme
6.18 Issuers Registered Outside India
6.19 Consequences of Non-Compliance by Issuer
6.20 Delisting of Securities
6.20.1 Voluntary Delisting of Securities
6.20.2 Compulsory Delisting of Securities
6.20.3 Liquidation or Merger
6.21 Re-admission to Dealings on the Exchange
6.22 Trading in Government Securities
6.23 Benefits of Listing to Companies
6.24 Benefits to the Investors
6.25 Disadvantages of Listing
6.26 Classification of Listed Securities
6.26.1 Cleared Securities
6.26.2 Non-cleared Securities
6.27 Types of Transactions in Stock Exchanges
6.27.1 Spot Delivery Transactions
6.27.2 Forward Transactions
7. Operators in the Secondary Market
7.1 Introduction
7.2 Membership in Recognized Stock Exchanges
7.3 Conditions for Eligibility to Become a Member
7.3.1 Qualification for Members of an Exchange
7.3.2 Experience of Members
7.4 Companies Registered Under Companies Act, 1956
7.5 Procedure for Registration as Stock Brokers
7.6 Conditions for Grant of Certificate to Stockbroker
7.7 Registration Fees
7.8 Capital Adequacy Norms
7.8.1 Basic Minimum Capital
7.8.2 Additional Capital
7.9 Code of Conduct for Stockbrokers
7.10 Penalties for Default in Case of Stock Brokers
7.11 Permissible Activities of Stock Brokers
7.12 Sub-Broker
7.12.1 Eligibility Criteria for Registration as a Sub-broker
7.12.2 Procedure for Registration
7.12.3 Registration Fees
7.12.4 Code of Conduct for Sub-Brokers
7.13 Types of Members in Stock Exchange
7.13.1 Brokers
7.13.2 Jobbers
7.13.3 Distinction between Brokers and Jobbers
7.13.4 Arbitrageur
7.13.5 Market Makers
7.13.6 Taravaniwala
7.13.7 Badliwalas
7.14 Non-members in Stock Exchanges
7.14.1 Remisier
7.14.2 Authorized Clerk
7.15 Classification of Buyers and Sellers in a Stock Exchange
7.15.1 Investors
7.15.2 Speculators
7.16 Kinds of Speculators
7.16.1 Bull
7.16.2 Bear
7.16.3 Stag
7.16.4 Lame Duck
7.17 Clearing and Settlement Systems
7.18 Trading and Settlement Process
7.18.1 Clearing House
7.18.2 Clearing Corporation
7.18.3 Clearing Members
7.18.4 Custodians
7.18.5 Clearing Banks
7.18.6 Depositories
7.19 Settlement Cycle
7.19.1 Rolling Settlement
8. Stock Exchanges
8.1 Introduction
8.2 History of Stock Exchange
8.3 History of Indian Stock Exchanges
8.4 Meaning of Stock Exchange
8.5 Definition of Stock Exchange
8.6 Characteristics of a Stock Exchange
8.7 Objectives of Stock Exchange
8.8 Functions of Stock Exchange
8.9 Securities Contracts Regulations Act, 1956
8.10 Role of SEBI in Stock Exchange
8.10.1 Powers of SEBI in Stock Exchanges
8.10.2 Powers Delegated by the Central Government to SEBI
8.11 Application for Recognition as Stock Exchange
8.12 Grant of Recognition to Stock Exchange
8.13 Withdrawal of Recognition
8.14 Power to Suspend Business of Recognized Stock Exchange
8.15 Power of Stock Exchanges to Make Byelaws
8.16 Power of Stock Exchanges to Make Rules
8.17 Submission of Annual Returns to the Central Government
8.18 Benefits of Stock Exchanges
8.18.1 Benefits to Companies
8.18.2 Benefits to Investors
8.18.3 Benefits to the Community
8.19 Limitations of Stock Exchanges
8.20 Procedure of Trading
8.20.1 Different Types of Order
8.20.2 Margin Levied by Stock Exchange
8.20.3 Averaging
8.21 Demutualization of Stock Exchanges
8.22 Stock Market Manipulations
8.22.1 Insider Trading
8.22.2 Front Running
8.22.3 Circular Trading
8.22.4 Inside Information
8.22.5 Price Rigging
8.22.6 Wash Sales
8.22.7 Arbitrage
8.22.8 Kerb Deals
8.22.9 Concerning
8.23 Prohibition of Fraudulent and Unfair Trade Practices
8.24 Unfair Trade Practices
8.25 Market Halt/Circuit Breaker
8.26 Circuit Filter
8.27 Stock Exchanges in India
9. Bombay Stock Exchange and National Stock Exchange of India
9.1 Introduction
9.2 Bombay Stock Exchange
9.2.1 Board of Directors
9.2.2 Membership in BSE
9.2.3 Conditions for Eligibility for Becoming a Member
9.3 Monitoring Business of Members
9.4 On-Line Surveillance System
9.5 Capital for BSE Membership
9.5.1 Base Minimum Capital
9.5.2 Trade Guarantee Fund
9.5.3 Additional Capital
9.6 Classification of Securities
9.7 BSE Index
9.8 Compulsory Rolling Settlement
9.9 National Stock Exchange of India
9.9.1 Promoters of NSE
9.10 Objectives of NSE
9.11 Management of NSE
9.12 Screen Based Trading System
9.13 Membership in NSE
9.13.1 Eligibility Criteria for Trading Membership
9.13.2 Conditions for Membership
9.13.3 Education and Experience
9.13.4 Trading Membership in Wholesale Debt Market (WDM)
9.13.5 Trading Membership in Capital Market and Futures and Options Market
9.13.6 Trading Membership in Capital Market, Futures and Options and Wholesale Debt Market
9.14 Circuit Breakers
9.14.1 Index-Based Circuit Breakers
9.15 Price Bands
9.16 NSE Index
9.17 Subsidiaries of NSE
9.17.1 National Securities Clearing Corporation Ltd. (NSCCL)
9.17.2 NSE IT Ltd.
9.17.3 India Index Services and Products Ltd. (IISL)
9.17.4 National Securities Depository Ltd. (NSDL)
9.17.5 DotEx International Limited

10. Over the Counter Exchange of India
10.1 Introduction
10.2 Meaning of OTCEI
10.3 Reasons for the Formation of OTCEI
10.4 Establishment of OTCEI
10.5 Promoters of OTCEI
10.6 Specialties of Over-the-Counter Exchange of India
10.7 Membership of OTCEI
10.8 Participants/Intermediaries in OTC Market
10.9 Securities Traded on the OTCEI
10.9.1 Listed Securities
10.9.2 Permitted Securities
10.9.3 Initiated Debentures
10.10 Requirements for Listing on OTCEI
10.11 Guidelines for Listing OTCEI Issues
10.12 OTCEI’s Trading in Unlisted Securities
10.13 Market Makers
10.14 Types of Market Making
10.14.1 Compulsory Market Making
10.14.2 Additional Market Making
10.14.3 Voluntary Market Making
10.15.1 Standard Quotes
10.15.2 Non-Standard Quotes
10.16 Benefits to Companies for Listing in OTCEI
10.17 Benefits to Investors
11. Stock Market Indices
11.1 Introduction
11.2 Significance of Index Movement
11.3 Uses of Stock Index
11.4 Disadvantages of Stock Index
11.5 Types of Index
11.5.1 Broad Market Index
11.5.2 Specialized Index
11.6 Determinants of Stock Index
11.7 Different Methodologies for Calculation of Stock Indices
11.7.1 Market Capitalization Methodology
11.7.2 Free-Float Market Capitalization Methodology
11.8 Stock Indices of Bombay Stock Exchange
11.8.1 SENSEX
11.8.2 SENSEX-Criteria for the Selection of Scrips
11.8.3 SENSEX Calculation Methodology
11.8.4 Dollex Series of BSE Indices
11.8.5 BSE-100 Index
11.8.6 BSE-200 Index
11.8.7 BSE-500 Index
11.8.8 BSE Mid-Cap and BSE Small-Cap Index
11.8.9 Sectoral Indices of BSE
11.8.10 BSE Fast Moving Consumer Goods (FMCG)
11.8.11 BSE Capital Goods
11.8.12 BSE Consumer Durables
11.8.13 BSE Healthcare
11.8.14 BSE Capital Goods, BSE Consumer Durables, BSE IT
11.8.15 BSE BANKEX
11.8.16 BSE Auto
11.8.17 BSE Metal
11.8.18 BSE Oil and Gas
11.8.19 BSE Realty
11.8.20 BSE Power
11.9 Indices of National Stock Exchange of India
11.9.1 S&P CNX NIFTY
11.9.2 S&P CNX Nifty Junior
11.9.3 S&P CNX 100
11.9.4 S&P CNX 500 Equity Index
11.9.5 S&P Nifty Midcap 50
11.9.6 S&P CNX Midcap
11.9.7 S&P CNX Defty
11.9.8 Sectoral Indices of NSE
11.9.9 CNX MNC Index
11.9.10 CNX PSE Index
11.9.11 CNX IT Index
11.9.12 CNX FMCG Index
11.9.13 CNX Service Sector Index
11.9.14 CNX Bank Nifty
11.9.15 S&P CNX Industry Indices
11.9.16 CNX Energy Index
11.9.17 CNX Pharma Index
11.9.18 CNX Infrastructure Index
11.9.19 CNX PSU BANK Index
11.9.20 CNX Realty Index
12. Derivatives Market
12.1. Introduction
12.2 Meaning of Derivatives
12.3 Definition
12.4 Derivative Instruments
12.5 Type of Underlying
12.6 Basics of Derivatives
12.7 Financial Derivatives
12.8 History of Derivatives
12.9 Development of Derivatives Market in India
12.10 Functions of Derivatives Market
12.11 Factors Driving the Growth of Financial Derivatives
12.12 Benefits of Derivatives
12.13 Disadvantages of Derivatives
12.14 Types of Derivative Contracts
12.14.1 Forward Contracts
12.14.2 Futures Contracts
12.14.3 Options
12.14.4 Types of Options
12.15 Participants in the Derivatives Market
12.15.1 Hedgers
12.15.2 Speculators
12.15.3 Arbitrageurs
12.16 Structure of Derivative Markets in India
12.17 Types of Derivative Market
12.17.1 Exchange Traded Derivatives Market
12.17.2 Over the Counter Derivative Market
12.18 Membership in the Equity Derivatives Market
12.18.1 Trading Member
12.18.2 Clearing Member
12.18.3 Self-clearing Member
12.18.4 Professional Clearing Member
12.19 Derivative Instruments Available in NSE
12.20 BSE Derivative Products
12.20.1 Index
12.20.2 Bond Index
12.20.3 Volatility Index
12.20.4 Index Futures
12.20.5 Index Option
12.20.6 Stock Futures
12.20.7 Stock Options
12.20.8 Weekly Options
12.20.9 Mini Derivatives
12.21 Requirements for Membership of Equity Derivatives Exchange/Clearing Corporation
12.22 Conditions Stipulated by SEBI on the Regulation of Sales Practices
12.23 Eligibility Criteria for Stocks on which Derivatives Trading may be Permitted
12.24 Discontinuance/Exit of Futures and Options Contracts on Stocks
12.25 SEBI Guidelines for Derivative Exchange/Segment and its Clearing Corporation
12.25.1 For Derivative Exchange/Segment
12.25.2 For Clearing Corporation/House
12.26 Margining System in the Equity Derivatives Market
12.26.1 Client Margins
12.27 Measures Specified by SEBI to Protect the Rights of Investor in Derivatives Market
12.28 Currency Futures
12.29 Eligibility Criteria for Setting up of Currency Futures Segment in a Recognized Stock Exchange
12.30 Credit Derivatives
12.31 Multi-commodity Exchange
12.32 Commodity Derivatives
13. Money Market
13.1 Introduction
13.2 Definition of Money Market
13.3 Features of Money Market
13.4 Difference between Capital Market and Money Market
13.5 Similarities of Money Market and Capital Market
13.6 Constituents of Money Market
13.7 Structure of Money Market
13.7.1 Money Market Segments
13.7.2 Money Market Institutions
13.7.3 Money Market Instruments
13.7.4 Certificate of Deposits
13.7.5 Features of Certificates of Deposits
13.7.6 Issue Size of CDs
13.7.7 Issue of Duplicate Certificates
13.7.8 Advantages of Certificate of Deposit
13.7.9 Commercial Paper
13.7.10 Purpose of Introduction of Commercial Paper
13.7.11 Borrowers of Commercial Paper
13.7.12 Buyers of Commercial Paper
13.7.13 Features of Commercial Paper
13.7.14 Procedure for the Issue of Commercial Paper
13.7.15 Requirements for Issuing Commercial Paper
13.7.16 Repo and Reverse Repo
13.7.17 Features of Repo
13.7.18 Instruments used in Repo Market
13.7.19 Participants in the Repo and Reverse Repo Market
13.7.20 Benefits of Repo
13.7.21 Types of Repo
13.7.22 Inter Corporate Deposits
13.7.23 Participation Certificates
13.7.24 Commercial Bills
13.7.25 Derivative Usance Promissory Notes
13.7.26 Money Market Mutual Funds
13.7.27 Treasury Bills
13.8 Shortcomings of Indian Money Market
13.9 Reforms in Indian Money Market
14. Corporate Debt Market
14.1 Introduction
14.2 Meaning of Debt Securities
14.3 Segments of Debt Markets
14.3.1 Government Securities
14.3.2 Corporate Securities Market
14.3.3 Public Sector Bonds
14.4. Investors in Debt securities/Market
14.5 Benefits of Investing in Debt Instruments
14.6 Types of Debt Securities
14.6.1 Bonds
14.6.2 Debentures
14.6.3 Certificate of Deposit
14.6.4 Commercial Paper
14.6.5 Treasury Bills
14.7 Corporate Debt Market
14.7.1 Guidelines to the Companies for Issuing Debt Securities
14.7.2 General Conditions for Issuing Debt Securities
14.7.3 Other Conditions
14.7.4 Disclosures in the Offer Documents
14.7.5 Additional Disclosures in Offer Document
14.7.6 Filing of Draft Offer Document
14.7.7 Mode of Disclosure of Offer Document
14.7.8 Advertisements for Public Issues
14.7.9 Abridged Prospectus and Application Forms
14.7.10 Price Discovery through Book Building
14.8 Minimum Subscription
14.9 Underwriting
14.10 Requirement of Credit Rating of Debt Instruments
14.11 Creation of Charge
14.12 Debenture Trustee
14.13 Trust Deed
14.13.1 Duties of the Debenture Trustees
14.13.2 Fee for Registration as Debenture Trustee
14.13.3 Code of Conduct of Debenture Trustees
14.14 Creation of Debenture Redemption Reserve
14.15 Distribution of Dividends
14.16 Listing of Debt Securities
14.17 Conditions for Listing of Debt Securities Issued on Private Placement Basis
14.18 Allotment of Debt Securities
14.19 Conditions for Continuous Listing of Debt Securities
14.20 Clearing Corporation of India Ltd.
15. Government Securities Market
15.1 Introduction
15.2 Meaning of Government Securities
15.3 Types of Government Securities
15.4 Meaning of Gilt Edged Securities
15.5 Issuers of Government Securities
15.6 Investors in Government Securities
15.7 Features of Government Securities
15.8 Regulators in Government Securities Market
15.8.1 Reserve Bank of India
15.8.2 Securities and Exchange Board of India
15.9 Segments of Government Securities Market
15.9.1 Wholesale Market Segment
15.9.2 Middle Market segment
15.9.3 Retail Market Segment
15.10 Advantages of Government securities
15.11 Instruments in Government Securities Market
15.11.1 Treasury Bills
15.11.2 Dated Securities or Government Bonds
15.12 State Development Loans
15.13 Any other security created and issued by the Government
15.14 Types of Auctions in Government Securities
15.14.1 Yield Based Auction
15.14.2 Price Based Auction
15.14.3 Multiple Price Based or French Auction
15.14.4 Uniform Price Based or Dutch Acution
15.15 Private Placement of Government Securities
15.15.1 On-tap Issue
15.16 Issue of Securities in Conversion of Maturing Treasury Bills/Dated Securities
15.17 Retail Issue of Government Securities
15.18 Trading of Government Securities in Secondary Market
15.19 Demeterialization of Debt Securities
15.20 Clearing and Settlement
15.21 Important Intermediaries in the Government Securities Market
15.21.1 Primary Dealers
15.21.2 Satellite Dealers
15.21.3 Subsidiary General Account
15.21.4 Constituent Subsidiary General Ledger Account
15.21.5 Features of Constituent Subsidiary General Ledger Account
15.21.6 Advantages of Opening Constituent Subsidiary General Ledger Account
15.22 Securities Trading Corporation of India Ltd.
15.22.1 Activities of STCI
15.23 Recent Developments in the Government Securities Market
16. Securities and Exchange Board of India
16.1 Introduction
16.2 Objectives of SEBI
16.3 Powers and Functions of SEBI
16.4 Regulatory Jurisdiction of SEBI
16.5 Powers of Civil court to SEBI
16.6 More Powers of SEBI
16.7 Management of SEBI
16.8 Removal of Members from Office
16.9 Departments in SEBI
16.10 Divisions in SEBI
16.10.1 Division of Foreign Institutional Investors (FIIs) and Custodians
16.10.2 Division of Collective Investment Scheme
16.10.3 Division of Funds
16.10.4 Division of Registration of Market Intermediaries
16.10.5 Division of Issues and Listing
16.10.6 Division of Corporate Restructuring
16.10.7 Division of Investor Assistance and Education
16.10.8 Other Divisions
16.11 Efforts towards Investors’ Education
16.12 Investors’ Associations
16.13 Investor Grievances Redressal and Guidance
16.14 Investor Complaints
16.15 SEBI Meeting
16.16 Regulations on Provisions of Companies Act
16.17 Powers to Issue Directions
16.18 Powers Delegated to SEBI under SCR Act
16.19 Registration of Intermediaries
16.20 Financial Instruments Controlled by SEBI
16.21 Penalties Provided under SEBI Act
16.21.1 Penalty for Failure to Furnish Information and Returns
16.21.2 Penalty for Failure by any Person to Enter into Agreement with Clients
16.21.3 Penalty for Failure to Redress Investors’ Grievances
16.21.4 Penalty for Defaults in case of Collective Investment Scheme
16.21.5 Penalty for Failure to Observe Rules and Regulations by an Asset Management Company
16.21.6 Penalty for Default in Case of Stock Brokers
16.21.7 Penalty for Insider Trading
16.21.8 Penalty for Non-disclosure of Acquisition of Shares and Takeovers
16.22 Power of Adjudication
16.23 Accounts and Audit
16.24 SEBI and Capital Market
16.25 SEBI and Primary Market Reforms
16.26 SEBI and Secondary Market Reforms
16.27 Securities Appellate Tribunal
16.27.1 Appeal to the Securities Appellate Tribunal
16.27.2 Powers of Securities Appellate Tribunal
16.27.3 Right to Legal Representation
16.27.4 Penalties
16.27.5 Power to Adjudicate
16.27.6 Factors to be taken into Account by Adjudicating Officer

17. Credit Rating
17.1 Introduction
17.2 Meaning of Credit Rating
17.3 Objectives of Credit Rating
17.4 Credit Rating Agency
17.5 Difference between Credit Rating Agency and a Credit Bureau
17.6 Types of Credit Rating
17.7 Mandatory Rating
17.8 Regulators of Credit Rating Agencies
17.9 Registration of Credit Rating Agencies
17.9.1 Conditions to be fulfilled for the Grant of Certificate of Registration
17.10 Code of Conduct for Credit Rating Agencies
17.11 Rating Process
17.12 Validity Period of Rating
17.13 Change of Ratings
17.14 Procedure for Review of Ratings
17.15 Benefits of Credit Rating
17.15.1 Benefits to the Issuer/Borrower
17.15.2 Benefits to Investors
17.15.3 Benefits to the Brokers and Financial Intermediaries
17.15.4 Benefits to the Country/Government
17.16 Credit Rating Symbols in India
17.16.1 AAA-Highest Safety
17.16.2 AA-High Safety
17.16.3 A-Adequate Safety
17.16.4 BBB- Moderate Safety
17.16.5 BB-Inadequate Safety
17.16.6 Other Rating Symbols
17.17 Credit Rating Agencies in India
17.17.1 Credit Rating Information Services of India Ltd.
17.17.2 Investment Information and Credit Rating Agency of India (ICRA)
17.17.3 Credit Analysis and Research (CARE)
17.17.4 ONICRA Credit Rating Agency of India Limited
17.17.5 Fitch Ratings India Pvt. Ltd.
17.17.6 SME Rating Agency of India Limited
17.17.7 Limitations of Credit Rating
18. Factoring and Forfeiting
18.1 Introduction
18.2 Meaning of Factoring
18.3 Definition of Factoring
18.4 History of Factoring
18.5 Factoring Services in India
18.6 RBI Guidelines for Factoring Services by Commercial Banks
18.7 Need for Factoring
18.8 Services Rendered by Factors
18.9 Parties to the Factoring Contract
18.10 Mechanism of Factoring
18.11 Cost of Factoring Services
18.11.1 Service Charge
18.11.2 Discount Charges
18.12 Factoring Contract
18.13 Important Characteristics of Factoring Services
18.14 Differences between Factoring and Bank Loan
18.15 Functions of a Factor
18.15.1 Provision of Credit Management Service
18.15.2 Provision of finance
18.15.3 Collection of Client’s Debt
18.15.4 Provision of Maintenance of Accounts
18.15.5 Protection against Credit Risk
18.15.6 Provision of Advisory Services
18.15.7 Provision of Expertise
18.16 Procedures in Factoring
18.17 Types of Factoring
18.17.1 Full Service Factoring
18.17.2 Recourse Factoring
18.17.3 Advance Factoring
18.17.4 Maturity Factoring
18.17.5 Disclosed Factoring
18.17.6 Undisclosed Factoring
18.17.7 Domestic Factoring
18.17.8 International Factoring/Export Factoring
18.17.9 Invoice Factoring
18.17.10 Agency Factoring
18.17.11 Limited Factoring
18.18 Advantages/Benefits of Factoring to Clients
18.19 Disadvantages of Factoring
18.20 Forfeiting
18.21 Meaning and Definition of Forfeiting
18.22 Instruments Used in Forfeiting
18.23 Differences between Factoring and Forfeiting
18.24 Parties to Forfeiting
18.25 Characteristics of Forfeiting Transaction
18.26 Mechanism of Forfeiting
18.27 Cost of Forfeiting Services
18.28 Advantages of Forfeiting
18.29 Forfeiting Services in India
19. Discounting of Bills
19.1 Introduction
19.2 Meaning of bills of exchange
19.3 Definition
19.4 Parties to a Bill of Exchange
19.5 Acceptance of a Bill
19.6 Characteristics of a Bill of Exchange
19.7 Mechanism in Bills Discounting
19.8 Historical Perspective of Commercial Bill
19.9 Developments in Commercial Bill Market in India
19.10 Bill Market Scheme for Exporters
19.11 Reasons for the Development of Bill Market
19.12 Differences between Bills Discounting and Factoring
20. Securitisation of Debt
20.1 Introduction
20.2 Meaning of Securitisation
20.3 Definition
20.4 Origin and History of Securitisation
20.5 Securitisation in India
20.6 Legal Status Given to Securitisation
20.7 Institutions Allowed to Securitize Assets
20.8 Securitisable Assets
20.9 Important Players in a Securitisation Process
20.9.1 Originator
20.9.2 Special Purpose Vehicle
20.9.3 Investors
20.9.4 Obligor
20.9.5 Credit Rating Agency
20.9.6 Servicer
20.9.7 Trustee
20.9.8 Investment Bankers
20.9.9 Underwriters
20.9.10 Backup Servicer
20.10 Features of Securitisation Transaction
20.11 Steps in Securitisation Process
20.12 Working of Securitization Process
20.12.1 Origination of Assets
20.12.2 Transfer of Assets
20.12.3 Pooling and Servicing Agreement
20.12.4 Formation of a Special Purpose Vehicle
20.12.5 Appointment of Investment Bankers/Underwriters
20.12.6 Rating of Securities
20.12.7 Appointment of Servicer
20.13 Types of Securitisation
20.13.1 Asset Backed Securitization
20.13.2 Mortgage Backed Securitization
20.14 Types of Securities
20.14.1 Pass through Certificates
20.14.2 Pay Through Certificates
20.15 Credit Enhancement
20.15.1 External Credit Enhancements
20.15.2 Internal Credit Enhancements
20.16 Advantages of Securitisation
20.16.1 Advantages to the Originator
20.17 Disadvantages to Issuer
20.18 Advantages to the Investors
20.19 Differences between Factoring and Securitisation
20.20 Shortcomings Faced by Indian Securitised Markets
21. Credit Information Bureaus
21.1 Introduction
21.2 Meaning of Credit Information Bureau
21.3 Definition of Credit Information Bureau
21.4 Original of Credit Information Bureaus
21.5 Development of Credit Information Bureau in Asian Countries
21.6 Credit Information Services in India
21.7 Credit Information
21.8 Collection and Dissemination of Credit Information during 1990s
21.9 Setting Up of Credit Information Bureau in India
21.10 Credit Information Bureau (India) Ltd. (CIBIL)
21.11 Coverage of Credit Institutions
21.12 Legal Obligation of banks and FIs
21.13 Working of Credit Information Bureaus
21.14 Advantages of Credit Information Bureau
21.14.1 Advantages to Lending Institutions
21.14.2 Advantages to Borrowers
21.14.3 Disadvantages to Borrowers
21.15 Recent Trends
21.15.1 Experian Credit Information Co. of India Pvt. Ltd.
21.15.2 Equifax Credit Information Services Pvt. Ltd.




Dr. Benson Kunjukunju is presently Associate Professor in the Post-graduate and Research Department of Commerce, St. Thomas College, Kozhencherry, under Mahatma Gandhi University, Kottayam, Kerala. He did his M.Com. M.Phil. and Ph.D. from the University of Kerala, Trivandrum. He has more than 30 years of teaching experience at undergraduate and post-graduate levels. He is a recognized research guide of the Faculty of Commerce, Mahatma Gandhi University, Kottayam.

Dr. Kunjukunju has published 4 books and a good number of research articles in national and international journals of repute. His areas of specialization include financial accounting, financial institutions and financial markets.

Dr. S. Mohanan is currently Associate Professor, Department of Commerce, V.T.M. N.S.S. College, Dhanuvachapuram, Trivandrum, Kerala. He received his Ph.D. in Finance from the University of Kerala in 1992. He worked as Professor in the Department of Business Sciences, Universidad Catolica Del Norte, Antofagasta, Chile (2004-2006). He also worked as Associate Professor in Jimma University, Ethiopia (2002-2004) and in Dhofar University, Oman (2006-2008). He was a Senior Research Fellow at the University of Malaya, Kuala Lumpur, Malaysia (2010-2011).

Dr. Mohanan has published several research articles in Indian and international journals. His areas of research interest include corporate finance, bank management, and micro finance.

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