As per section 65(10) of the Finance Act, 1994, banking and financial services

means the following services provided by a banking company or a financial institution

including a non banking financial company, namely;
(i) financial leasing services including equipment leasing and hire-purchase by a
body corporate;
(ii) credit card services;
(iii)merchant banking services;
(iv) securities and foreign exchange (forex) broking;
(v) asset management including portfolio management, all forms of fund
management, pension fund management, custodial depository and trust services,
but does not include cash management;
(vi) advisory and other auxiliary financial services including investment and portfolio
research and advice, advice on mergers and acquisition and advice on corporate
restructuring and strategy; and
vii) provision and transfer of information and data processing.
Financial services can be defined as the products and services offered by institutions
like banks of various kinds for the facilitation of various financial transactions and
other related activities in the world of finance like loans, insurance, credit cards,
investment opportunities and money management as well as providing information on
the stock market and other issues like market trends
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Financial services refer to services provided by the finance industry. The finance
industry encompasses a broad range of organizations that deal with the management
of money. Among these organizations are banks, credit card companies, insurance

companies, consumer finance companies, stock brokerages, investment funds and

some government sponsored enterprises.

Functions of Financial Services

Facilitating transactions (exchange of goods and services) in the economy.

Mobilizing savings (for which the outlets would otherwise be much more
limited).

Allocating capital funds (notably to finance productive investment).

Monitoring managers (so that the funds allocated will be spent as envisaged).

Transforming risk (reducing it through aggregation and enabling it to be carried

by those more willing to bear it).

Characteristics and Features of Financial

Services
1. Customer-Specific: Financial services are usually customer focused. The firms
providing these services, study the needs of their customers in detail before
deciding their financial strategy, giving due regard to costs, liquidity and
maturity considerations. Financial services firms continuously remain in touch
with their customers, so that they can design products which can cater to the
specific needs of their customers. The providers of financial services constantly
carry out market surveys, so they can offer new products much ahead of need
and impending legislation. Newer technologies are being used to introduce
innovative, customer friendly products and services which clearly indicate that
the concentration of the providers of financial services is on generating
firm/customer specific services.
2. Intangibility: In a highly competitive global environment brand image is very
crucial. Unless the financial institutions providing financial products and
services have good image, enjoying the confidence of their clients, they may

not be successful. Thus institutions have to focus on the quality and

innovativeness of their services to build up their credibility.
3. Concomitant: Production of financial services and supply of these services
have to be concomitant. Both these functions i.e. production of new and
innovative financial services and supplying of these services are to be
performed simultaneously.
4. Tendency to Perish: Unlike any other service, financial services do tend to
perish and hence cannot be stored. They have to be supplied as required by the
customers. Hence financial institutions have to ensure a proper synchronization
of demand and supply.
5. People Based Services: Marketing of financial services has to be people
intensive and hence its subjected to variability of performance or quality of
service. The personnel in financial services organisation need to be selected on
the basis of their suitability and trained properly, so that they can perform their
activities efficiently and effectively.
6. Market Dynamics: The market dynamics depends to a great extent, on
socioeconomic changes such as disposable income, standard of living and
educational changes related to the various classes of customers. Therefore
financial services have to be constantly redefined and refined taking into
consideration the market dynamics. The institutions providing financial
services, while evolving new services could be proactive in visualizing in
advance what the market wants, or being reactive to the needs and wants of
their customers.

Scope of Financial Services

Financial services cover a wide range of activities. They can be broadly classified into
two, namely:

1. Traditional Activities

Traditionally, the financial intermediaries have been rendering a wide range of

services encompassing both capital and money market activities. They can be grouped
under two heads, viz.
1. Fund based activities and
2. Non-fund based activities.
Fund based activities: The traditional services which come under fund based
activities are the following:

Underwriting or investment in shares, debentures, bonds, etc. of new issues

(primary market activities).

Dealing in secondary market activities.

Participating in money market instruments like commercial papers, certificate

of deposits, treasury bills, discounting of bills etc.

Involving in equipment leasing, hire purchase, venture capital, seed capital etc.

Dealing in foreign exchange market activities. Non fund based activities

Non fund based activities: Financial intermediaries provide services on the basis of
non-fund activities also. This can be called fee based activity. Today customers,
whether individual or corporate, are not satisfied with mere provisions of finance.
They expect more from financial services companies. Hence a wide variety of
services, are being provided under this head. They include:

Managing the capital issue i.e. management of pre-issue and post-issue

activities relating to the capital issue in accordance with the SEBI guidelines
and thus enabling the promoters to market their issue.

Making arrangements for the placement of capital and debt instruments with
investment institutions.

Arrangement of funds from financial institutions for the clients project cost or
his working capital requirements.

Assisting in the process of getting all Government and other clearances.

2. Modern Activities
Beside the above traditional services, the financial intermediaries render innumerable
services in recent times. Most of them are in the nature of non-fund based activity. In
view of the importance, these activities have been in brief under the head New
financial products and services. However, some of the modern services provided by
them are given in brief here under.

Rendering project advisory services right from the preparation of the project
report till the raising of funds for starting the project with necessary
Government approvals.

Planning for M&A and assisting for their smooth carry out.

Guiding corporate customers in capital restructuring.

Acting as trustees to the debenture holders.

Recommending suitable changes in the management structure and management

style with a view to achieving better results.

Structuring the financial collaborations/joint ventures by identifying suitable

joint venture partners and preparing joint venture agreements.

Rehabilitating and restructuring sick companies through appropriate scheme of

reconstruction and facilitating the implementation of the scheme.

Hedging of risks due to exchange rate risk, interest rate risk, economic risk, and
political risk by using swaps and other derivative products.

Managing in-portfolio of large Public Sector Corporations.

Undertaking risk management services like insurance services, buy-back

options etc.

Advising the clients on the questions of selecting the best source of funds
taking into consideration the quantum of funds required, their cost, lending
period etc.

Guiding the clients in the minimization of the cost of debt and in the
determination of the optimum debt-equity mix.

Promoting credit rating agencies for the purpose of rating companies which
want to go public by the issue of debt instrument.

Undertaking services relating to the capital market, such as 1)Clearing services,

2)Registration and transfers, 3)Safe custody of securities, 4)Collection of
income on securities.

Financial Services is a term used to refer to the services provided by the finance market. Financial
Services is also the term used to describe organizations that deal with the management of money.
Examples are the Banks, investment banks, insurance companies, credit card companies and stock
brokerages.
These are the types of firms comprising the market, that provide a variety of money and investment
related services. Financial services are the largest market resource within the world, in terms of
earnings.
Defining Financial Services can also be termed as, any service or product of a financial nature that is
the area under discussion to, or is governed by a measure maintained by a Party or by a public body
that exercises regulatory or supervisory authority delegated by law.
Understanding Financial Services
Financial Services are generally not limited to the field of deposit-taking, loan and investment
services, but is also present in the fields of insurance, estate, trust and agency services, securities,
and all forms of financial or market intermediation including the distribution of financial products.
Aligned with a background of sharp risk, market and regulatory pressures, Financial Services
organizations are striving to grow and enhance their shareholder values.
Day by day the customer needs and expectations are growing. Thus, making the mark in increasing
personal wealth, a mature population and the desire that can more easily be reached to the
personalized financial products and services. Intense competition has squeezed market margins and
forced most companies to cut costs while enhancing the quality of customer choice and service.
As Financial Services organizations strive to become more innovative and entrepreneurial, the war for
talent is intensifying. The risks increase as the products become more complex, the organizations and
the business environment ever more uncertain.
At the same time, regulation is the tightening highlight within the reach of public and government
pressure for improved supremacy, transparency and accountability.
In this environment, the winners will be companies that can turn the challenges into opportunities to
build stronger and more enduring customer relationships, sharpen their process efficiency, unlock

talent and creativity, use improved risk management processes to deliver more sustainable returns
and use used regulatory demands as a catalyst for strengthening the business and enhancing market
confidence.
The fast pace of change aspect element within the global Financial Services market has created the
need for a new generation of solutions that can operate in real time with a very flawless reliability.
The challenges faced by the Financial Services market are forcing market participants to keep pace
with technological advances, and to become more proactive and efficient while keeping in mind to
reduce costs and risks.
The Financial Services have been able to represent an increasingly significant financial driver, and a
significant consumer of a wide range of business services and products. The current Fortune 500 has
listed 40 commercial banking companies with revenues of almost a $341 trillion, up a modest 3%
since last year.
Another $700 trillion or so comes from the 57 companies comprising the savings institutions,
insurance and diversified financial companies.
The market in Financial Services is not only a powerful economic force, but can also be considered as
a driver of other industries' success, standards, and operations. Virtually each and every company
uses financial services institutions for not only their own, but their customers business purposes, and
the practices, regulations and standards that the market adopts affects the way that their own
customers.
To have an effective network strategy in place enables the Financial Services organizations to become
more customer-oriented. This helps to increase their profitability, enhance the alertness factor, also
lessen total ownership costs, and deal with used business challenges.
There are many companies working with financial organizations worldwide to develop a sound
networking strategy for connecting companies with customers, suppliers, partners, and employees
too.
Thus concluding here that the Financial Services market is diverse and dynamic. An ever-changing
versatile, high-growth market, Financial Services consist of everything from individual or group
consultants to banks, credit cards and alternative financing providers.
Businesses that have differing needs and the diversity and range of the financial services market has
several selections available to better suit them all.
There is a lot you can learn about the Financial Services industry. It is an exciting, important industry
that has a direct impact on the way businesses operate and grow, and subsequently, the economy of
our nation too.