Contents in Brief 1. Financial Markets and Financial Services: An Introduction 1-14 2. Capital Market 15-35 3. Primary Market 36-84 4. Participants in the Primary Market 85-108 5. Legislations and Regulators in the Capital Market 109-119 6. Secondary Market 120-137 7. Operators in the Secondary Market 138-155 8. Stock Exchanges 156-181 9. Bombay Stock Exchange and National Stock Exchange of India 182-196 10. Over the Counter Exchange of India 197-205 11. Stock Market Indices 206-220 12. Derivatives Market 221-248 13. Money Market 249-274 14. Corporate Debt Market 275-293 15. Government Securities Market 294-313 16. Securities and Exchange Board of India 314-338 17. Credit Rating 339-355 18. Factoring and Forfeiting 356-378
x Financial Markets and Financial Services in India 19. Discounting of Bills 379-387 20. SecuritisationofDebt 388-410 21. Credit Information Bureaus 411-428 Bibliography 429-438 Index 439-446
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 1-14 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 15-35 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 36-84 3.1 Introduction 3.2 Characteristics of Primary Market 3.3 Primary and Secondary Markets
xii Financial Markets and Financial Services in India 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
Contents xiii 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
xiv Financial Markets and Financial Services in India 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 85-108 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
Contents xv 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 109-119 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
xvi Financial Markets and Financial Services in India 5.3.2 Reserve Bank of India 5.3.3 Department of Company Affairs 5.3.4 Securities Appellate Tribunal 6. Secondary Market 120-137 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 thclrivestors 6.25 Disadvantages of Listing 6.26 Classification of Listed Securities 6.26.1 Cleared Securities
Contents xvii 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 138-155 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
xviii Financial Markets and Financial Services in India 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 156-181 8.1 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, 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
Contents xix 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 182-196 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
xx Financial Markets and Financial Services in India 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 197-205 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
Contents xxi 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 Quotes 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 206-220 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
xxii Financial Markets and Financial Services in India 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&PCNX NIFTY 11.9.2 S&P CNX Nifty Junior 11.9.3 S&PCNX 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 221-248 12.1. Introduction 12.2 Meaning of Derivatives 12.3 Definition 12.4 Derivative Instruments 12.5 Type of Underlying
Contents xxiii 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
xxiv Financial Markets and Financial Services in India 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 249-274 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
Contents xxv 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 275-293 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
xxvi Financial Markets and Financial Services in India 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 294-313 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
Contents xxvii 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 314-338 16.1 Introduction 16.2 Objectives of SEBI
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 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
Contents xxix 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 339-355 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
xxx Financial Markets and Financial Services 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 356-378 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
Contents xxxi 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 379-387 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
xxxii Financial Markets and Financial Services in India 19.11 Reasons for the Development of Bill Market 19.12 Differences between Bills Discounting and Factoring 20. Securitisation of Debt 388-410 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
Contents xxxiii 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 411-428 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. Bibliography 429-438 Index 439-446