50914617 financial services ppt
TRANSCRIPT
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Financial System
Existence of a well organized financialsystem
Promotes the well being and standard ofliving of the people of a country
Money and monetary assets
Mobilize the saving
Promotes investment
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Financial System of any country consistsof financial markets, financial
intermediation and financial instrumentsor financial products
Suppliers of funds(Mainly households)Flow of financial services
Incomes , and financial
claims
Seekers of funds(Mainly business firms
and government)
Flow of funds (savings)
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Indian Financial System
Un-Organized
OrganizedMoney lenders
Local bankers
Traders
Landlords
Pawn brokers
Regulators
Financial Institutions
Financial Markets
Financial services
Financial Instruments
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Organized Indian Financial System
Money MarketInstrument
Capital MarketInstrument
Forex
Market
Capital
Market
Money
Market
Credit
Market
Primary Market
FinancialInstruments FinancialMarkets FinancialIntermediaries
Secondary Market
Regulators
1.MoF
2.SEBI
3.RBI
4.IRDA
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Indian Capital Market
Market Instruments Intermediaries
Primary Secondary
Equity DebtHybrid
Regulator
Brokers
Investment BankersStock ExchangesUnderwriters
SEBI
Players
Corporate IntermediariesCRA Banks/FI FDI /FIIIndividual
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Why Capital Markets Exist
Capital markets facilitate the transfer of capital (i.e.financial) assets from one owner to another.
They provide liquidity.
Liquidity refers to how easily an asset can betransferred without loss of value.
A side benefit of capital markets is that thetransaction price provides a measure of the value of
the asset.
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Role of Capital Markets
Mobilization of Savings & acceleration of CapitalFormation
Promotion of Industrial Growth
Raising of long term Capital
Ready & Continuous Markets
Proper Channelisation of Funds
Provision of a variety of Services
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Capital Market Instruments
Derivative
Market1.ExchangeTraded
2.Future & Option
a. Index
b. Stock
Equity Debt
Primary
Market1.Public
Issue
2. Private
Placement
a. Domestic Market
b. International Market
Secondary
Market1.NSE
2.BSE
3.OTCEI
4.ISE
5.RSE
Private
CorporateDept.
PSU Bond
Market
Govt.
Securities
Market
Primary Segment Secondary Segment
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Factors contributing to growth of Indian Capital Market
Growth of underwriting business
Setting up of SEBI
Mutual Funds
Credit Rating Agencies
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Indian Capital Market deficiencies
Lack of transparency
Physical settlementVariety of manipulative practices
Institutional deficiencies
Insider trading
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Money Market
Market for short-term money and financial assetsthat are near substitutes for money.
Short-Term means generally period upto one yearand near substitutes to money is used to denote anyfinancial asset which can be quickly converted intomoney with minimum transaction cost
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Money Market
It is a place for Large Institutions and governmentto manage their short-term cash needs
It is a subsection of the Fixed Income Market
It specializes in very short-term debt securities
They are also called as Cash Investments
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Defects of Money Market
Lack of Integration
Lack of Rational Interest Rates structure Absence of an organized bill market
Shortage of funds in the Money Market
Seasonal Stringency of funds and fluctuations inInterest rates
Inadequate banking facilities
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Money Market Instruments
Treasury Bills
Commercial Paper
Certificate of Deposit
Commercial Bills Term Money
1. Primary Segment2.Secondary Segment
Call Money Market
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FINANCIAL INSTRUMENTS
Money Market Instruments The money market can be defined as a market for short-term
money and financial assets that are near substitutes formoney. The term short-term means generally a period up toone year and near substitutes to money is used to denote anyfinancial asset which can be quickly converted into money
with minimum transaction cost.
Some of the important money market instruments are brieflydiscussed below;
1. Call/Notice Money2. Treasury Bills3. Term Money4. Certificate of Deposit5. Commercial Papers
http://www.stcionline.com/working-of-money-market.htmlhttp://www.stcionline.com/working-of-money-market.htmlhttp://www.stcionline.com/call-notice-money-inter-bank-term-money.htmlhttp://www.stcionline.com/commercial-papers-market.htmlhttp://www.stcionline.com/deposit-market-inter-corporate-market.htmlhttp://www.stcionline.com/commercial-papers-market.htmlhttp://www.stcionline.com/commercial-papers-market.htmlhttp://www.stcionline.com/deposit-market-inter-corporate-market.htmlhttp://www.stcionline.com/call-notice-money-inter-bank-term-money.htmlhttp://www.stcionline.com/working-of-money-market.htmlhttp://www.stcionline.com/working-of-money-market.html -
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1. Call Money Market
Loan disbursed by commercial banks
1 day 7 days
Bank can recall the loan at its
maturity
Usually advanced to bill brokers & stock exchange brokers.
2. Term Money
Term Money market for deposits of maturity beyond 14 daysis referred to as the term money market. The entryrestrictions are the same as those for Call/Notice Moneyexcept that, as per existing regulations, the specified entitiesare not allowed to lend beyond 14 days.
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3. Treasury Bills.
Government Paper Securities
Duration of 91 days
Promissory note of the government to pay a specifiedsum after a specified period
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4. Certificate of Deposits
Certificates of Deposit (CDs) is a negotiable money market instrumentand issued in dematerialized form or as a Usance Promissory Note, forfunds deposited at a bank or other eligible financial institution for aspecified time period.
Guidelines for issue of CDs are presently governed by various directivesissued by the Reserve Bank of India, as amended from time to time.
CDs can be issued by(i) scheduled commercial banks excluding Regional Rural Banks (RRBs)
and Local Area Banks (LABs); and(ii) select all-India Financial Institutions that have been permitted by RBI
to raise short-term resources within the umbrella limit fixed by RBI.Banks have the freedom to issue CDs depending on their requirements.
An FI may issue CDs within the overall umbrella limit fixed by RBI, i.e.,issue of CD together with other instruments viz., term money, termdeposits, commercial papers and interoperate deposits should notexceed 100 per cent of its net owned funds, as per the latest auditedbalance sheet.
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5. Commercial Paper CP is a note in evidence of the debt obligation of the issuer. On issuing
commercial paper the debt obligation is transformed into aninstrument.
CP is thus an unsecured promissory note privately placed with
investors at a discount rate to face value determined by market forces. CP is freely negotiable by endorsement and delivery. A company shall
be eligible to issue CP provided - (a) the tangible net worth of thecompany, as per the latest audited balance sheet, is not less than Rs. 4crore; (b) the working capital (fund-based) limit of the company fromthe banking system is not less than Rs.4 crore and (c) the borrowalaccount of the company is classified as a Standard Asset by thefinancing bank/s. The minimum maturity period of CP is 7 days.
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Capital Market Instruments
Capital Market Instruments
The capital market generally consists of the following long
term period i.e., more than one year period, financialinstruments; In the equity segment Equity shares,preference shares, convertible preference shares, non-convertible preference shares etc and in the debt segmentdebentures, zero coupon bonds, deep discount bonds etc.
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Equity Market
1 .Primary Markets Helps companies in raising funds through issue of
securities like shares and debentures.
Governed by SEBI (Securities and Exchange Board of
India). Methods of issuing securities in Primary Market:
Public Issue
Rights Issue
Bonus Issue
Private Placement
Bought-out Deals
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International CapitalMarkets
Development attributed to following factors:
investors need to avoid taxes in their own countryand to ensure protection against depreciating home
currencies. emergence of new technologies in the area of
financial services, development and deregulation offinancial markets
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Euro Bonds
These are the bonds that are issued outside thecountry of the currency in which it is denominated
Features:
No with holding of tax on interest payments These are in bearer form with coupon interest
attached
Listed on stock exchanges though traded on the OTC
market
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Foreign Bonds
Bonds floated in the domestic markets denominatedin the domestic currency by the non-resident.
Yankee Bonds
Samurai Bonds Bulldog Bonds
Shibosai Bonds
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Yankee bonds
These are US dollar denominated issues by theforeign borrowers in the US markets.
Features
Regulated by the SEC. Requires more disclosure thanthat given by the prospectus.
Foreign borrower to adopt US accounting policies
Bonds sponsored by the underwriting syndicate
Requires SEC registration before the sale.
To be rated by the US credit rating agencies
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Samurai Bonds
Yen denominated bonds issued in the Japanesemarkets by the non- Japanese companies.
Features
Maturity: 3-20 years Borrowers in order of priority sovereigns,
supranational and their entities, high quality privatecorporations having some kind of Japanese trade
links.
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Bull Dog Bonds
Sterling denominated foreign bonds floated in theUK market.
Features:
Maturity 5 for short maturities 25 for longmaturities.
Subscribed by the long-term institutional investors-pension funds, life insurance Cos
Bonds offered by placing or offer for sale process willhave to be listed on the London SE
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Shibosai Bonds
Privately placed bonds issued in the Japanesemarket
Features
Offered to institutional investors, including banksthe issues eligibility, coupon rate, etc governed bythe Japans MOF guidelines
Pricing done based on base rate and spread which
depends on the rating of Co or country.
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Forex Markets
Foreign Exchange Market: Deals with transactions in currenciesother than ones own currency.
Exchange rate: The rate at which one currency can be converted
into another currency Participants:
Exporters
Importers
Commercial Banks
Central Banks
Authorized Dealers and Money Changers
Brokers
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Equity Market
2. Secondary Market
Securities already issued in the primary market are tradedin the secondary market. Provides liquidity to the securitiesheld by the investors.
Provides liquidity to the securities held by the
investors.
Operates through stock exchanges that regulate the tradingactivities in this market.
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Equity Market
3. Derivatives Market Financial derivative is a product derived from the market of an
underlying asset.
Participants:
Hedgers Speculators
Arbitrators
Types of Derivatives:
Futures
Options - Caps
- floors and Collars
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Financial Institution
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Financial Institution
Financial Institutions
Industrial Development Bank of India (IDBI)
Industrial Finance Corporation of India (IFCI )
Industrial Investment Bank of India (IIBI)
Export and Import Bank of India
State Financial Corporations
State Industrial Development Corporations
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Non-banking financial institution
Non-Banking Financial Companies
Investment Trusts or Investment Companies: Close endorganizations, having fixed amount of authorized capitalprovides services through conserving and managing
property for those who cannot manage their own funds. Mutual Benefit Funds or Nidis: Sources of their funds are
share capital, deposits.
Merchant Banks : Offers financial advice & services for
fees; Services offered are management, marketing,underwriting of new issue, project promotion & finance,corporate advice, BOD, venture capital etc.
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Hire Purchase Finance Companies
Lease Finance Companies
Housing Finance Companies
National Housing Bank : Wholly owned by subsidiary ofRBI, Aim is to promote housing finance Institution atlocal & regional levels, It refinance housing loans toscheduled commercial & co operative banks, housingfinance companies etc.
Venture Capital Funding Companies
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DEVELOPMENT FINANCE INSTITUTION
All India Financial Institutions
IFCI: Industrial Finance Corporation of India
The IFCI, Indias first DFL, was established on 1 July 1948
IFCI principal activities can be categorised into
- Financing
- Promotional activities
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FINANCING ACTIVITIES
Project Activities
Financial Services
Corporate advisory Services
Corporate advisory Services to Foreign Investors
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PROMOTIONAL ACTIVITIES
Played a key role in the development of cooperatives in the sugar andtextile sector
It has promoted technical consultancy organisation
primarily in less developed state, to provide
necessary services to the promoters of small and
medium- sized industries in collaboration with other banks andinstitutions.
It has developed many institutions like
Management Development institute Investment and credit rating agency
Tourism finance corporation of India
Rashtriya Gramin Vikas Nidhi
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The steps taken for the revival of IFCI are as follows:IFCI constituted an expert committee in 2001
To formulate a medium-to long term strategic plan for IFCI in theemerging new business environment
The committee has laid down the road map plan for the next five years
It has made recommendations covering a wide range of structural andoperational areas
It has strengthened its risk management techniques and is putting inefforts to bring down the NPAs to a manageable level, through
corporate debt structuring It has initiated action against defaulters and has filed suits against
defaulter companies
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INDUSTRIAL DEVELOPMENT BANK OF INDIA
Established in 1964 by Parliament as a wholly owned subsidiary of theRBI
In 1976, the banks ownership was transferred to the Government ofIndia
IDBI has engineered the development of capital market through
helping in setting up of the- Securities Exchange Board of India (SEBI)
- National Stock Exchange of India Limited (NSE)
- Credit Analysis and Research Limited (CARE)
- Stock Holding corporation of India Limited (SHCIL)
- Investors Services of India Limited (ISIL)- National Securities Depository Limited (NSDL)
- Clearing Corporation of India Limited (CCIL)
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IDBI has undertaken several initiatives to reposition itself as a universalBank:-
In April 2001, IDBI appointed Boston consulting Group India PrivateLimited (BCG) as consultant to draw up a road map for conversion intoa universal bank
Formation of high level risk management committee to develop overallrisk management policy
The bank has constituted a credit risk management group to evaluatecredit risk both at the transaction level and also at the portfolio level
It has pioneered the setting up of Asset Reconstruction Company(India) Limited (ARCIL) in 2002 in association with select banks andfinancial institutions
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IDBI-SERVICES
IDBI provides Merchant banking and wide array of corporate advisoryservices as part of its fee based activities
This includes professional advice and services for
- issue management
- private placement of equity/debt instruments
- project evaluation- credit syndication
- share valuation
- corporate restructuring including mergers and acqusitions anddivestment of equity
the bank also offers a number of Forex related services on acommission basis including opening of letters of credit and remittance
of foreign currency on behalf of its assisted companies for import ofits goods and services
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IIBI
Established in 1985 under the IRBI Act 1984 It is a principal credit & reconstruction agency for re-habilitation of sick
& closed industrial units.
The range of its services include provision of infrastructure facilities ,consultancies , managerial & merchant banking facilities & making
available machinery & other equipment on a lease or hire purchasebases
It was renamed as industrial investment bank of India & broughtunder companies act 1956 since March 17 1997.
It finances new projects , modernization work , balancing equipmentneeds , correcting imbalance in current Assets , relieving strains oncash resources , repayment of pressing liabilities and other activities.
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IDFC
Conceived as an institution to facilitate the flow of private finance tocommercially viable infrastructure projects & help mitigate commercial& structural risk contain therein , by designing innovative products &processes.
It operates in areas such as energy , telecommunication & IT ,
integrated transportation , Urban infrastructure & food & agri-businessinfrastructure.
It offers the variety of services to projects in the infrastructure &advisory services.
It helps promoters raise resources from international markets
It intends offering advisory services to these funds to facilitate &strengthen their connectivity with infrastructure projects.
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SIDCS
Established under the companies act 1956, as wholly ownedundertakings of the state governments with the specific objective ofpromoting and developing medium and large industries in therespective states.
It undertakes a range of promotional activities including:
-repression of preparation of feasibility reports .
-conducting industrial potential surveys.
-entrepreneurship training and development programs.
-developing industrial estates.
It also offer package of developmental services that includeTechnical guidance, assistance in plant location and coordination with
other agencies.
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EXIM BANK
Established in 1982, is a wholly government owned financial institutionsetup for the purpose of financing, facilitating and promoting Indiasforeign trade.
Its financing services include a range of fund and non-fund basedprograms to enhance the exports, competitiveness of Indian companies.
Its major operations presently comprise
-financing of projects
-products and service exports
-building export competitiveness
-promotional programs-Financing of research and development activities of exporting
companies.
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SFC
It is a state level development bank setup under theSFCs act, 1951, for the development of small andmedium scale industries in their respective states.
It aims at bringing about balanced regionaldevelopment by wider dispersal of industries andgenerating larger employment opportunities.
It includes composite loan scheme, scheme for
women entrepreneurs, modernization scheme,equipment finance scheme etc.
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SIDBI
It offer a chain of financial product covering microfinance, business,incubation, venture capital etc.
It also provides support services such as training,market information and advise for enhancing theinherent strength of small scale units.
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Products And Services of SIDBI
Direct finance scheme.
Bills finance scheme.
Re-finance scheme.
International finance scheme. Marketing finance and development schemes.
SIDBI foundation for micro-credit.
Other schemes. Promotional and development activities.
Fixed deposit/bond.
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Financial Regulators
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Financial Regulators
Securities and Exchange Board of India (SEBI)
Reserve Bank of India
Ministry of Finance
IRDA
Security Exchange Board of India
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Security Exchange Board of India(SEBI)
Securities and Exchange Board of India(SEBI) was first established in the year
1988 Its a non-statutory body for regulating
the securities market
It became an autonomous body in 1992
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Functions Of SEBI
Regulates Capital Market.
Checks Trading of securities.
Checks the malpractices in securities market.
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Functions Of SEBI
It enhances investor's knowledge on market byproviding education.
It regulates the stockbrokers and sub-brokers.
To promote Research and Investigation
Obj ti f SEBI
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Objectives of SEBI
It tries to develop the securities market.
Promotes Investors Interest.
Makes rules and regulations for the securitiesmarket.
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R B k f I di
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Reserve Bank of India
Established on April 1, 1935 in accordance with theprovisions of the RBI Act, 1934.
The Central Office of the Reserve Bank has been in
Mumbai.
It acts as the apex monetary authority of the country.
F ti Of RBI
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Functions Of RBIMonetary Authority:
Formulation and Implementation of monetarypolicies.
Maintaining price stability and ensuring adequateflow of credit to the Productive sectors.
Issuer of currency: Issues and exchanges or destroys currency and coins.
Provide the public adequate quantity of supplies of
currency notes and coins.
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Regulator and supervisor of the financial system:
Prescribes broad parameters of banking operations Maintain public confidence, protect depositors' interest
and provide cost-effective banking services.
Authority On Foreign Exchange:
Manages the Foreign Exchange Management Act, 1999. Facilitate external trade, payment, promote orderly
development and maintenance of foreign exchangemarket.
Functions Of RBI
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Developmental role:
Performs a wide range of promotional functions tosupport national objectives.
Related Functions:
Banker to the Government: performs merchant bankingfunction for the central and the state governments.
Maintains banking accounts of all scheduled banks.
Functions Of RBI
M t M
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Monetary Measures
(a) Bank Rate:The Bank Rate was kept unchanged at 6.0 per cent.
(b) Reverse Repo Rate:
The Repo rate is around 7 per cent and Reverse repo
rate is around 6.10 per cent.
(c) Cash Reserve Ratio:
The cash reserve ratio (CRR) of scheduled banks iscurrently at 5.0 per cent.
Obj ti Of M F
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Objectives Of MoF
Reorientation of the economy Macro economic stability
To Increase competitive efficiency in the
operations
To remove structural rigidities and inefficiencies
To attain a balance between the goals of financial
stability & integrated & efficient markets
R d ti
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Recommendations
Reduce the level of state ownership in banking
Lift restrictions on foreign ownership of banks
Spur the development of the corporate-bondmarket
Strengthen legal protections
R d ti
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Recommendations
Deregulate the insurance industry
Drop proposed limits on pension reforms
Increase consumer ownership of mutual-fundproducts
Introduce a gold deposit scheme
R d ti
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Recommendations
Speed up the development of electronic payments.
Separate the RBI's regulatory and central-bankfunctions
Lift the remaining capital account controls
Phase out statutory priority lending andrestrictions on asset allocation
IRDA
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IRDA
Agent Registration
Portal
Designated
Person
(Ins. Co.)
Service Provider
-----------------------
1.Care-Site
2.Tech Support
Ins. Co.(Development
Officer)
I I I
EXAM
IRDA
Agent TrainingInstitute
Agents
IRDA Function
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IRDA Function.
Data Correction Approval (License)
Shows list of data correction requests by DPs IRDA can approve these requests
Cancellation Approval (License/Certificate)
Shows list of license cancellation requests
IRDA can approve or reject
IRDA can cancel with or without refund
Recall Cancellation Approval
Shows list of license recall cancellation requests
IRDA can approve or reject
Termination Approval
Shows list of license termination requests by Corporate DP
IRDA can approve or reject termination requests Terminate License
IRDA can terminate individual/corporate license
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Thank you