Contents in Brief. 1. Financial Markets and Financial Services: An Introduction Capital Market Primary Market 36-84

Transcription

1 Contents in Brief 1. Financial Markets and Financial Services: An Introduction 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 and 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

2 x Financial Markets and Financial Services in India 19. Discounting of Bills SecuritisationofDebt Credit Information Bureaus Bibliography Index

3 Contents in Detail Conversion Table v About the Book vii About the Authors viii Contents in Brief ix-x Contents in Detail - xi-xxxiii Preface xxxiv-xxxvii Abbreviations/Acronyms xxxviii-xlii 1. Financial Markets and Financial Services: An Introduction Financial Markets Classification of Financial Market Factors Affecting Financial Market 1.2 Financial Services Kinds of Financial Services 2. Capital Market Meaning of Capital Market 2.2 Functions of Capital Market 2.3 Capital Market Segments 2.4 Basic Capital Market Instruments Equity Securities Preference Shares 2.5 Debt Securities Debentures 2.6 Bonds Indentures and Covenants Types of Bonds 2.7 Advantages of Corporate Bonds 2.8 Disadvantages of Corporate Bonds 3. Primary Market Introduction 3.2 Characteristics of Primary Market 3.3 Primary and Secondary Markets

4 xii Financial Markets and Financial Services in India 3.4 Kinds of Issues 3.5 Public Issue Initial Public Offer (IPO) Further Public Offer (FPO) Difference between IPO and FPO 3.6 Rights Issue 3.7 Bonus Issue 3.8 Private Placement Preferential Allotment 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 First Alternative Route 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 Types of Pricing Fixing of Face Value of Shares for Public Issue/Rights Issue Issue of Shares at a Premium Issue of Shares at a Discount 3.17 Promoters Contribution Lock-in Period of Promoters Contribution Securities Ineligible for Computation of Promoters Contributions Exemption from Promoters Contribution 3.18 Pre-Issue Duties of a Company in Respect of Issue of Shares Drafting Memorandum of Understanding and Allocation of Responsibilities Exercise of Due Diligence Filing Offer Document to the SEBI

5 Contents xiii Payment of Requisite Fees to the Board Submission of Undertaking to SEBI Filing of Due Diligence Certificate Despatch of Issue Material Agreement with Depositories Mandatory Collection Centres Authorized Collection Agents Appointment of Compliance Officer Minimum Number of Applications for Shares Minimum Application Money Minimum Subscription Period of Issue Open for Subscription Basis of Allotment of Shares in Case of Oversubscription Net Offer to the Public Reservation of Securities to Small Individual Applicants Reservation of Securities to Small Individual Applicants Reservation of Securities to other Categories Firm Allotment Green Shoe Option Guidelines on Advertisement in Connection with Capital Issues Post Issue Advertisements 3.19 Rights Issue 3.20 Bonus Issue SEBI Guidelines on Issue of Bonus Shares 3.21 Private Placement SEBI guidelines for Preferential Allotment of Shares 3.22 Prospectus Red Herring Prospectus Abridged Prospectus Offer Document Placement Document Need for a Prospectus Contents of Prospectus 3.23 Book Building Definition of Book Building

6 xiv Financial Markets and Financial Services in India Procedure in Book Building Process Bidding Procedure Advantages of Book Building 3.24 Stock Invest Scheme 3.25 Issue of Sweat Equity 3.26 Employees Stock Option Scheme Guidelines on Employee Stock Option Scheme 3.27 Employees Stock Purchase Scheme 3.28 Buy Back of Securities Sources for Buy Back of Shares Objectives of Buy Back of Shares General Conditions to be satisfied for Buy Back of Securities SEBI Guidelines for Buy Back of Securities Buy Back from Existing Holders through Tender Offer Buy Back from Open Market through Book Building Process Buy Back through Stock Exchange From Odd-lot holders 4. Participants in the Primary Market Introduction 4.2 Merchant Bankers 4.3 Bankers to an Issue Grant of Registration as Bankers to the Issue Payment of Fees Agreement with the Issuer Company Redressal of Grievances Collection Centres Duties of Bankers to the Issue Code of Conduct for the Bankers to an Issue 4.4 Registrar to an Issue Functions of Registrar to an Issue Registration of Registrar to an Issue Grant of Registration as Bankers to the Issue Fee for Registration Agreement with the Issuer Company Appointment of Compliance Officer Duties of Registrar to an Issue

7 Contents xv Code of Conduct for Registrar to the Issue 4.5 Underwriters to the Issue Registration of Underwriters Consideration of Application for Registration Payment of Fees Types of Underwriting Underwriting Obligations Code of Conduct for the Underwriters Benefits of Underwriting 4.6 Investment Banks 4.7 Depositories Meaning of Depository Definition of Depository % Types of Institutions Eligible for Registration as Depositories Grant of Registration as Depository Services Provided by Depositories Securities that can be Converted into Dematerialized Form Depository Participant Types of Institutions Eligible to Act as Depository Participant Grant of Registration as Depository Participant Dematerialization Depositories in India Advantages of Dematerialization Disadvantages of Dematerialization 4.8 Portfolio Managers 4.9 Custodians 5. Legislations and Regulators in the Capital Market Introduction 5.2 Important Legislations Governing Indian Securities Market Indian Companies Act, Securities Contracts (Regulation) Act, Securities and Exchange Board of India Act, Depositories Act, Regulators in Indian Securities Market Securities and Exchange Board of India

8 xvi Financial Markets and Financial Services in India Reserve Bank of India Department of Company Affairs Securities Appellate Tribunal 6. Secondary Market 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 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 Fees Levied by National Stock Exchange 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 Voluntary Delisting of Securities Compulsory Delisting of Securities 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 thclrivestors 6.25 Disadvantages of Listing 6.26 Classification of Listed Securities Cleared Securities

9 Contents xvii Non-cleared Securities 6.27 Types of Transactions in Stock Exchanges Spot Delivery Transactions Forward Transactions 7. Operators in the Secondary Market Introduction 7.2 Membership in Recognized Stock Exchanges 7.3 Conditions for Eligibility to Become a Member Qualification for Members of an Exchange Experience of Members 7.4 Companies Registered Under Companies Act, Procedure for Registration as Stock Brokers 7.6 Conditions for Grant of Certificate to Stockbroker 7.7 Registration Fees 7.8 Capital Adequacy Norms Basic Minimum Capital 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 Eligibility Criteria for Registration as a Sub-broker Procedure for Registration Registration Fees Code of Conduct for Sub-Brokers 7.13 Types of Members in Stock Exchange Brokers Jobbers Distinction between Brokers and Jobbers Arbitrageur Market Makers Taravaniwala Badliwalas 7.14 Non-members in Stock Exchanges Remisier Authorized Clerk 7.15 Classification of Buyers and Sellers in a Stock Exchange Investors

10 xviii Financial Markets and Financial Services in India Speculators 7.16 Kinds of Speculators Bull Bear Stag Lame Duck 7.17 Clearing and Settlement Systems 7.18 Trading and Settlement Process Clearing House Clearing Corporation Clearing Members Custodians Clearing Banks Depositories 7.19 Settlement Cycle Rolling Settlement 8. Stock Exchanges Introduction 8.2 History of Stock Exchange x 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, Role of SEBI in Stock Exchange Powers of SEBI in Stock Exchanges 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 Benefits to Companies

11 Contents xix Benefits to Investors Benefits to the Community 8.19 Limitations of Stock Exchanges 8.20 Procedure of Trading Different Types of Order Margin Levied by Stock Exchange Averaging 8.21 Demutualization of Stock Exchanges 8.22 Stock Market Manipulations Insider Trading Front Running Circular Trading Inside Information Price Rigging Wash Sales Arbitrage Kerb Deals 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 Board of Directors Membership in BSE 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 Base Minimum Capital Trade Guarantee Fund Additional Capital 9.6 Classification of Securities

12 xx Financial Markets and Financial Services in India 9.7 BSE Index 9.8 Compulsory Rolling Settlement 9.9 National Stock Exchange of India Promoters of NSE 9.10 Objectives of NSE 9.11 Management of NSE 9.12 Screen Based Trading System 9.13 Membership in NSE Eligibility Criteria for Trading Membership Conditions for Membership Education and Experience Trading Membership in Wholesale Debt Market (WDM) Trading Membership in Capital Market and Futures and Options Market Trading Membership in Capital Market, Futures and Options and Wholesale Debt Market 9.14 Circuit Breakers Index-Based Circuit Breakers 9.15 Price Bands 9.16 NSE Index 9.17 Subsidiaries of NSE National Securities Clearing Corporation Ltd. (NSCCL) NSE IT Ltd India Index Services and Products Ltd. (IISL) National Securities Depository Ltd. (NSDL) DotEx International Limited 10. Over the Counter Exchange of India 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

13 Contents xxi Listed Securities Permitted Securities Initiated Debentures Requirements for Listing on OTCEI Guidelines for Listing OTCEI Issues OTCEI's Trading in Unlisted Securities Market Makers Types of Market Making Compulsory Market Making Additional Market Making Voluntary Market Making Quotes Standard Quotes Non-Standard Quotes Benefits to Companies for Listing in OTCEI Benefits to Investors 11. Stock Market Indices Introduction 11.2 Significance of Index Movement 11.3 Uses of Stock Index 11.4 Disadvantages of Stock Index 11.5 Types of Index Broad Market Index Specialized Index 11.6 Determinants of Stock Index 11.7 Different Methodologies for Calculation of Stock Indices Market Capitalization Methodology Free-Float Market Capitalization Methodology 11.8 Stock Indices of Bombay Stock Exchange SENSEX SENSEX-Criteria for the Selection of Scrips SENSEX Calculation Methodology Dollex Series of BSE Indices BSE-100 Index BSE-200 Index BSE-500 Index BSE Mid-Cap and BSE Small-Cap Index Sectoral Indices of BSE

14 xxii Financial Markets and Financial Services in India BSE Fast Moving Consumer Goods (FMCG) BSE Capital Goods BSE Consumer Durables BSE Healthcare BSE Capital Goods, BSE Consumer Durables, BSE IT BSE BANKEX BSE Auto BSE Metal BSE Oil and Gas BSE Realty BSE Power 11.9 Indices of National Stock Exchange of India ' S&PCNX NIFTY S&P CNX Nifty Junior S&PCNX S&P CNX 500 Equity Index S&P Nifty Midcap S&P CNX Midcap S&P CNX Defty Sectoral Indices of NSE CNX MNC Index CNX PSE Index CNX IT Index CNX FMCG Index CNX Service Sector Index CNX Bank Nifty S&P CNX Industry Indices CNX Energy Index CNX Pharma Index CNX Infrastructure Index CNX PSU BANK Index CNX Realty Index 12. Derivatives Market Introduction 12.2 Meaning of Derivatives 12.3 Definition 12.4 Derivative Instruments 12.5 Type of Underlying

15 Contents xxiii 12.6 Basics of Derivatives 12.7 Financial Derivatives 12.8 History of Derivatives 12.9 Development of Derivatives Market in India Functions of Derivatives Market Factors Driving the Growth of Financial Derivatives Benefits of Derivatives Disadvantages of Derivatives Types of Derivative Contracts Forward Contracts Futures Contracts Options Types of Options Participants in the Derivatives Market Hedgers Speculators Arbitrageurs Structure of Derivative Markets in India Types of Derivative Market Exchange Traded Derivatives Market Over the Counter Derivative Market Membership in the Equity Derivatives Market Trading Member Clearing Member Self-clearing Member Professional Clearing Member Derivative Instruments Available in NSE BSE Derivative Products Index Bond Index Volatility Index Index Futures Index Option Stock Futures Stock Options Weekly Options Mini Derivatives Requirements for Membership of Equity Derivatives Exchange/Clearing Corporation

16 xxiv Financial Markets and Financial Services in India Conditions Stipulated by SEBI on the Regulation of Sales Practices Eligibility Criteria for Stocks on which Derivatives Trading may be Permitted Discontinuance/Exit of Futures and Options Contracts on Stocks SEBI Guidelines for Derivative Exchange/Segment and its Clearing Corporation For Derivative Exchange/Segment For Clearing Corporation/House Margining System in the Equity Derivatives Market Client Margins Measures Specified by SEBI to Protect the Rights of Investor in Derivatives Market Currency Futures Eligibility Criteria for Setting up of Currency Futures Segment in a Recognized Stock Exchange Credit Derivatives Multi-commodity Exchange Commodity Derivatives 13. Money Market 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 Money Market Segments Money Market Institutions Money Market Instruments Certificate of Deposits Features of Certificates of Deposits Issue Size of CDs Issue of Duplicate Certificates Advantages of Certificate of Deposit Commercial Paper Purpose of Introduction of Commercial Paper

17 Contents xxv Borrowers of Commercial Paper Buyers of Commercial Paper Features of Commercial Paper Procedure for the Issue of Commercial Paper Requirements for Issuing Commercial Paper Repo and Reverse Repo Features of Repo Instruments used in Repo Market Participants in the Repo and Reverse Repo Market Benefits of Repo Types of Repo Inter Corporate Deposits Participation Certificates Commercial Bills Derivative Usance Promissory Notes Money Market Mutual Funds Treasury Bills 13.8 Shortcomings of Indian Money Market 13.9 Reforms in Indian Money Market 14. Corporate Debt Market Introduction 14.2 Meaning of Debt Securities 14.3 Segments of Debt Markets Government Securities Corporate Securities Market Public Sector Bonds Investors in Debt securities/market 14.5 Benefits of Investing in Debt Instruments 14.6 Types of Debt Securities Bonds Debentures Certificate of Deposit Commercial Paper Treasury Bills 14.7 Corporate Debt Market Guidelines to the Companies for Issuing Debt Securities General Conditions for Issuing Debt Securities

18 xxvi Financial Markets and Financial Services in India Other Conditions Disclosures in the Offer Documents Additional Disclosures in Offer Document Filing of Draft Offer Document Mode of Disclosure of Offer Document Advertisements for Public Issues Abridged Prospectus and Application Forms Price Discovery through Book Building 14.8 Minimum Subscription 14.9 Underwriting Requirement of Credit Rating of Debt Instruments Creation of Charge Debenture Trustee Trust Deed Duties of the Debenture Trustees Fee for Registration as Debenture Trustee Code of Conduct of Debenture Trustees Creation of Debenture Redemption Reserve Distribution of Dividends Listing of Debt Securities Conditions for Listing of Debt Securities Issued on Private Placement Basis Allotment of Debt Securities Conditions for Continuous Listing of Debt Securities Clearing Corporation of India Ltd. 15. Government Securities Market 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 Reserve Bank of India Securities and Exchange Board of India 15.9 Segments of Government Securities Market Wholesale Market Segment

19 Contents xxvii Middle Market segment Retail Market Segment Advantages of Government securities Instruments in Government Securities Market Treasury Bills Dated Securities or Government Bonds State Development Loans Any other security created and issued by the Government Types of Auctions in Government Securities Yield Based Auction Price Based Auction Multiple Price Based or French Auction Uniform Price Based or Dutch Acution Private Placement of Government Securities On-tap Issue Issue of Securities in Conversion of Maturing Treasury Bills/Dated Securities Retail Issue of Government Securities Trading of Government Securities in Secondary Market Demeterialization of Debt Securities Clearing and Settlement Important Intermediaries in the Government Securities Market Primary Dealers Satellite Dealers Subsidiary General Account Constituent Subsidiary General Ledger Account Features of Constituent Subsidiary General Ledger Account Advantages of Opening Constituent Subsidiary General Ledger Account Securities Trading Corporation of India Ltd Activities of STCI Recent Developments in the Government Securities Market 16. Securities and Exchange Board of India Introduction 16.2 Objectives of SEBI

20 xxviii Financial Markets and Financial Services in India 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 Divisions in SEBI Division of Foreign Institutional Investors (FIIs) and Custodians Division of Collective Investment Scheme Division of Funds Division of Registration of Market Intermediaries Division of Issues and Listing Division of Corporate Restructuring Division of Investor Assistance and Education Other Divisions Efforts towards Investors' Education Investors' Associations Investor Grievances Redressal and Guidance Investor Complaints SEBI Meeting Regulations on Provisions of Companies Act Powers to Issue Directions Powers Delegated to SEBI under SCR Act Registration of Intermediaries Financial Instruments Controlled by SEBI Penalties Provided under SEBI Act Penalty for Failure to Furnish Information and Returns Penalty for Failure by any Person to Enter into Agreement with Clients Penalty for Failure to Redress Investors' Grievances Penalty for Defaults in case of Collective Investment Scheme Penalty for Failure to Observe Rules and Regulations by an Asset Management Company Penalty for Default in Case of Stock Brokers Penalty for Insider Trading

21 Contents xxix Penalty for Non-disclosure of Acquisition of Shares and Takeovers Power of Adjudication Accounts and Audit SEBI and Capital Market SEBI and Primary Market Reforms SEBI and Secondary Market Reforms Securities Appellate Tribunal Appeal to the Securities Appellate Tribunal Powers of Securities Appellate Tribunal Right to Legal Representation Penalties Power to Adjudicate Factors to be taken into Account by Adjudicating Officer 17. Credit Rating 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 Conditions to be fulfilled for the Grant of Certificate of Registration Code of Conduct for Credit Rating Agencies Rating Process Validity Period of Rating Change of Ratings Procedure for Review of Ratings Benefits of Credit Rating Benefits to the Issuer/Borrower Benefits to Investors Benefits to the Brokers and Financial Intermediaries Benefits to the Country/Government Credit Rating Symbols in India

22 xxx Financial Markets and Financial Services in India AAA-Highest Safety AA-High Safety A-Adequate Safety BBB- Moderate Safety BB-Inadequate Safety Other Rating Symbols Credit Rating Agencies in India Credit Rating Information. Services of India Ltd Investment Information and Credit Rating Agency of India (ICRA) Credit Analysis and Research (CARE) ONICRA Credit Rating Agency of India Limited Fitch Ratings India Pvt. Ltd; SME Rating Agency of India Limited Limitations of Credit Rating 18. Factoring and Forfeiting 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 Mechanism of Factoring Cost of Factoring Services Service Charge Discount Charges Factoring Contract Important Characteristics of Factoring Services Differences between Factoring and Bank Loan Functions of a Factor Provision of Credit Management Service Provision of finance Collection of Client's Debt Provision of Maintenance of Accounts Protection against Credit Risk

23 Contents xxxi Provision of Advisory Services Provision of Expertise Procedures in Factoring Types of Factoring Full Service Factoring Recourse Factoring Advance Factoring Maturity Factoring Disclosed Factoring Undisclosed Factoring Domestic Factoring International Factoring/Export Factoring Invoice Factoring Agency Factoring Limited Factoring Advantages/Benefits of Factoring to Clients Disadvantages of Factoring Forfeiting Meaning and Definition of Forfeiting Instruments Used in Forfeiting Differences between Factoring and Forfeiting Parties to Forfeiting Characteristics of Forfeiting Transaction Mechanism of Forfeiting Cost of Forfeiting Services Advantages of Forfeiting Forfeiting Services in India 19. Discounting of Bills 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 Bill Market Scheme for Exporters

24 xxxii Financial Markets and Financial Services in India Reasons for the Development of Bill Market Differences between Bills Discounting and Factoring 20. Securitisation of Debt 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 Originator Special Purpose Vehicle Investors Obligor Credit Rating Agency Servicer Trustee Investment Bankers Underwriters Backup Servicer Features of Securitisation Transaction Steps in Securitisation Process Working of Securitization Process Origination of Assets Transfer of Assets Pooling and Servicing Agreement Formation of a Special Purpose Vehicle Appointment of Investment Bankers/Underwriters Rating of Securities Appointment of Servicer Types of Securitisation Asset Backed Securitization Mortgage Backed Securitization Types of Securities Pass through Certificates Pay Through Certificates

25 Contents xxxiii Credit Enhancement External Credit Enhancements Internal Credit Enhancements Advantages of Securitisation Advantages to the Originator Disadvantages to Issuer Advantages to the Investors Differences between Factoring and Securitisation Shortcomings Faced by Indian Securitised Markets 21. Credit Information Bureaus 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 Credit Information Bureau (India) Ltd. (CIBIL) Coverage of Credit Institutions Legal Obligation of banks and FIs Working of Credit Information Bureaus Advantages of Credit Information Bureau Advantages to Lending Institutions Advantages to Borrowers Disadvantages to Borrowers Recent Trends Experian Credit Information Co. of India Pvt. Ltd Equifax Credit Information Services Pvt. Ltd. Bibliography Index