FUND BASED SERVICES

Fund Based Finance Service is a specialized method of

providing structured working capital and term loans that are
secured by account receivables, inventory, machinery,
equipment, and real estate.
Fund based income comes mainly from interest spread (the
difference between the interest earned and interest paid),
lease rentals, investments in capital market and real estate.
FEATURES OF FUND BASED SERVICES:
➢ It is an efficient way to finance an expanding operation
because borrowing capacity expands along with sales.
➢ It generates new business.
➢ It permits borrowers to take advantage of purchase
discounts because cash is received immediately upon
sales, permitting prompt payment to suppliers and
thereby earning the company a good enough reputation to
reduce the cost of purchases.
➢ Dealing in foreign exchange market activities.
➢ Dealing in Secondary Market activities.
➢ Underwriting or investment in shares, debentures, bonds,
etc. of new issues (Primary Market activities).
Fund Based Services are used for creating assets or supported
by assets where the funds are transformed into assets.
Following are the types of fund-based financial services:
1. LEASE FINANCING
2. HIRE PURCHASE
3. CONSUMER CREDIT/ CONSUMER SERVICE
4. FACTORING
5. VENTURE CAPITAL FINANCING &
6. MUTUAL FUND
1.LEASING: A lease may be defined as “a contractual
agreement whereby a party owning an asset provides the asset
for use to another over a certain time for consideration in the
form of periodic payments”.
Leasing enables a firm to avail the services of plant or
equipment without making the investment.
Leasing essentially involves the divorce of ownership from the
economic use of an asset/equipment.
LESSOR: Lessor is the owner of the asset that is being leased.
LESSEE: Lessee is the receiver of the services of the
asset under a lease contract.
2.HIRE PURCHASE: Hire purchase is a mode of financing the
price of the goods to be sold on a future date. In a hire purchase
transaction, the goods are let on hire, the purchase price is to be
paid in instalments and hirer is allowed an option to purchase the
goods by paying all the instalments.
There are two parties involved in hire purchase:
1. Hire Purchaser: He is the customer who obtains
possession of the goods at the outset and can use it, while
paying for it by instalments over an agreed period.
2. Hire Vendor: The time of ownership of the goods
remains with the seller called hire vendor until the hire
purchaser has made all the payments.
3.CONSUMER CREDIT: Consumer Credits include all fund-
based financing plans offered to primarily individuals to
acquire durable consumer goods. In a consumer credit
transaction, the individual consumer buyer pays a fraction of
the cash purchase price at the time of the delivery of the asset
and pays the balance with interest over a specified period.
Types of Consumer Credit:
1. CLOSED-END CREDIT: This form of credit is used for a
specific purpose for a specific amount and for a specific
period. Payments are usually of equal amounts.
Ex: Automobile loans, where a agreement lists the
repayments terms such as the number of payments, the
payment amount and how much the credit will cost.
2. OPENED-END CREDIT: Loans are made on a continuous
basis as you purchase items, and you are billed
periodically to make at least partial payment.
Ex: Using a credit card issued by a store, a bank card such
as VISA or Master Card. There is a maximum amount of
credit that you can use called Line of Credit, you must pay
the debt in full each month, you also have a finance charge
for use of credit.
4.FACTORING: Factoring is a financial transaction whereby a
business sells its account receivables to a third party (called a
factor) at a discount in exchange for immediate money with
which to finance a continued business.
There are three main parties in factoring. They are as
follows:
1.The Factor
2.The Client (Seller) and
3.The Customer (Buyer)
5. VENTURE CAPITAL FINANCING: The term Venture
capital comprises of two words, namely Venture and Capital.
The term venture literally means a course of proceeding the
outcome of which is uncertain, but which is attended by, the
risk of danger of loss. On the other hand, the term capital refers
to the resources to start the enterprise.
According to narrow sense, the capital which is available
for financing the new business ventures is called Venture
Capital. It involves leading finance to the growing companies.
6.MUTUAL FUNDS: A mutual fund refers to fund raised by a
financial service company by pooling the savings of the public.
It is invested in a diversified portfolio with a view to spreading
and minimizing the risk.

FEE BASED SERVICES

When Financial institutions operate in specialised fields to earn
income in form of fees, commission, brokerage or dividends it
is called a Fee Based Service.
Fee-based services can be broadly classified into corporate
and retail fee-based services. Organizations avail of such services
for meeting both their short-term and long-term financial
requirements.
FEATURES OF FEE BASED SERVICES:
➢ Managing the capital issue in accordance with SEBI
guidelines enabling promoters to market their issue.
➢ Deciding for placement of capital and debt instruments
with investment institutions.
➢ Arrangement of funds from financial institutions for client
projects cost or working capital.
➢ Assisting in getting all Government and other clearances.
Following are the types of Fee-based financial services:
1. ISSUE MANAGEMENT
2. PORTFOLIO MANAGEMENT
3. CORPORATE COUNSELLING
4. CREDIT RATING
5. STOCK BROKING

1.ISSUE MANAGEMENT: The process of issue management

is to supply a complete set of services and must try to improve and
develop the process of marking the issues by which the network of
the promoters will be extended.
2.PORTFOLIO MANAGEMENT: Portfolio management implies
the investment of funds taken from numbers/clients in various
securities and an adequate return should be given to them. In other
words, it is a scheme by which the portfolio manager raises funds
from his clients/members with a commitment in order to operate
the securities market together with the information, in well
explained terms relating to the composition of portfolio, annual
return, appropriation of capital, the extent of risk etc.
3. CORPORATE COUNSELLING: The corporate
counselling is another attractive fee-based service. At the time
of diversification, expansion and development, a medium size
company needs the service of an expert relating to the above for
which they seek the advice from various institutions. The
institutions also come forward to assist them as soon as they
receive the formal request from such firms.
4.CREDIT RATING: Evaluates the credit worthiness of a
debtor, especially a business(company) or a government. It is
an evaluation made by a credit rating agency of the debtor’s
ability to pay back the debt and the likelihood of default.
5.STOCK BROKING: Stock Broking is the function of buying
and selling Financial Securities such as Stocks
Shares and Bonds through the Stock Market by a
dealer (stockbroker) who acts as an agent on behalf of clients
wishing to buy or sell securities. Typically, a stockbroking firm
will charge commission on the trades it makes on a client’s
behalf, or a fee for retaining its services.
There are several different services a stockbroker can provide:
• Execution-only stockbrokers will complete orders on
your behalf, but do not offer any advice.
• Advisory stockbrokers will offer advice on where to
trade, but only trade on orders submitted by you.
• Discretionary stockbrokers will trade on your behalf,
executing trades without your input.
TOP FIVE FUND BASED SERVICES:
1. Bajaj Finance Ltd: It is one of the leading
NBFC and among the Top 10 Finance
companies in India. It is headquartered in Pune.
The Company is engaged in the lending and
allied activities. It focuses on consumer lending,
small and medium-sized enterprises (SME)
lending, commercial lending, rural lending,
fixed deposits, and value-added services.
2. SBI Mutual fund Trustee company
private limited: The SBI mutual fund
was set up as a trust under the Trust Act of
1882. This trust controls the SBI mutual fund,
one of India’s largest and oldest mutual funds.
The SBI Mutual funds was set up on June 29,
1987 and was incorporated on February 7, 1992.
3. India Bulls: India bulls is the conglomerate
company entered into the heavy equipment
rental business in India. India bulls’ brand as
the India bulls store one. They are almost
working in all segments of equipment. Lifting
machine, Construction Machine, Mining
machine, Material handling Machine.
4. Mahindra & Mahindra Financial Services
Limited: Started in January 1991 as Maxi
Motors Financial Services Limited, Mahindra &
Mahindra Financial Services Limited is a rural
non-banking financial company and is
headquartered in Mumbai. It is amongst the top
tractor financers in India and offers gold
advances, corporate and working capital
advances, hire purchasing among others.
 5. Alt LINE The Southern Bank Company:
Alt Line is a part of The Southern Bank
Company. It tops our list of invoice factoring
companies because you can factor high volumes
of invoices and receive an advance rate of up to
90%.

TOP FIVE FEE BASED SERVICES

1.J P MORGAN: It began in 1922, when a heritage firm
took an ownership interest in a merchant bank in Calcutta.
Today, they provide clients in India a comprehensive range of
corporate and investment banking services. Our global service
centres in Mumbai, Bengaluru and Hyderabad support
operations globally.

2. Credit Rating Information Services of India Limited

(CRISIL): Set up in 1987, Credit Rating Information Services
of India Limited (CRISIL) is one of the oldest credit rating
agencies in India. It is operational in countries including the
UK, USA, Poland, China, Hong Kong, and Argentina, in
addition to India. It evaluates the credit worthiness of
commercial entities based on their strengths, market
reputation, market share and board. It helps investors make
informed investment decisions by providing credit ratings for
companies, organisations and banks.
• Motilal Oswal: Motilal Oswal Financial Services Ltd. is a
reputed name in Financial Services with group companies
providing services such as Private Wealth Management, Retail
Broking and Distribution, Institutional Broking, Asset
Management, Investment Banking, Private Equity, Commodity
Broking, Currency Broking, Principal Strategies & Home
Finance. Motilal Oswal Securities Ltd. is a group company of
Motilal Oswal Financial Service Limited which started as a
stock broking company and has blossomed into well diversified
firm offering a range of financial products and services.
4. Life Insurance Corporation of India (LIC): is an
Indian statutory insurance and investment corporation
headquartered in the city of Mumbai and it is the most trusted
insurance company of India. It is under the ownership of
Government of India. The Oriental Life Insurance Company,
the first company in India offering life insurance coverage, was
established in Kolkata in 1818. Its primary target market was
the Europeans based in India, and it charged Indians heftier
premiums. Surendra Nath Tagore had founded Hindustan
Insurance Society, which later became Life Insurance
Corporation.
5. SPOORTHI CORPORATE COUNSELLING SERVICES
PRIVATE LIMITED: Spoorthi Corporate Counselling
Services Private Limited is a Guarantee and
Association company, incorporated on 25 Jul, 2012. It's a
private unlisted company and is classified as company limited
by guarantee'.