Financial Intermediaries Services Overview

Questions and Answers

What is the primary focus of development banks?

Offering credit cards to individuals

Providing retail banking services

Providing financial assistance to business units (correct)

Managing savings accounts for the public

Co-operative banks were initially established to provide credit to urban sectors.

False

What is the role of NABARD in India?

To provide rural credit to farmers and coordinate various financial institutions.

The specialized bank that provides long-term financial assistance to exporters and importers is called _____ Bank.

EXIM Signup and view all the answers

Match the following banks with their primary function:

EXIM Bank = Financial assistance for trade NABARD = Rural credit coordination Co-operative Banks = Credit for farmers Development Banks = Economic development financing Signup and view all the answers

What is loan syndication primarily used for?

To allow multiple banks to share credit risk Signup and view all the answers

Custodial services ensure the safety of customers' securities.

True Signup and view all the answers

What is the role of a broker in stock broking?

A broker acts as an intermediary, buying and selling goods or assets for others for a fee. Signup and view all the answers

A letter of credit is issued by a ______ to guarantee a buyer's payment.

bank Signup and view all the answers

Match the following financial services with their descriptions:

Credit Rating = Assessing the creditworthiness of borrowers Investment Management = Managing various securities to meet investor goals Corporate Advisory Services = Providing financial advice to corporations Custodial Services = Holding and safeguarding customers' securities Signup and view all the answers

What is another term for loan syndication?

Consortium Financing Signup and view all the answers

Corporate advisory services are exclusively provided by company boards.

False Signup and view all the answers

What minimum requirement prompts a fund-based facility in underwriting?

Minimum committed subscription Signup and view all the answers

Which of the following is a non-traditional service provided by financial intermediaries?

Providing project advisory services from project report to fund raising Signup and view all the answers

Financial intermediaries only provide traditional services such as capital arrangement and fund sourcing.

False Signup and view all the answers

What type of risks can be managed by using swaps and derivative products?

exchange rate risk, interest rate risk, economic risk, and political risk Signup and view all the answers

Financial intermediaries assist in __________ to help companies raise funds.

capital restructuring Signup and view all the answers

Match the following services with their descriptions:

Project Advisory Services = Guiding the client from project report to fund raising M&A Planning = Assisting with mergers and acquisitions Trustee Services = Acting on behalf of debenture holders Credit Rating Promotion = Promoting agencies to rate public companies Signup and view all the answers

Which service involves rehabilitating and restructuring companies in distress?

Reconstruction Schemes Signup and view all the answers

Financial intermediaries do not play a role in minimization of debt costs.

False Signup and view all the answers

Financial intermediaries help in the structuring of ___________ by identifying suitable partners.

joint ventures Signup and view all the answers

What is factoring primarily concerned with?

Managing sales ledgers and collecting debts Signup and view all the answers

Forfaiting is designed to protect the importer against non-payment of debts.

False Signup and view all the answers

What does leasing guarantee to the lessee?

Use of an asset Signup and view all the answers

In a hire purchase agreement, the ownership of the merchandise is transferred to the buyer after all the payments have been made. This initial payment is known as the ______.

down payment Signup and view all the answers

Match the financial services with their descriptions:

Factoring = Managing sales ledgers and collecting debts Forfaiting = Discounting export bills for immediate cash Leasing = Renting property with agreed terms Securitization = Transforming illiquid assets into securities Signup and view all the answers

Which of the following best describes securitization?

A technique to convert assets into marketable securities Signup and view all the answers

The factor in factoring only collects debts and does not assume credit risk.

False Signup and view all the answers

What services are related to the capital market?

Clearing services, registration and transfers, safe custody of securities, collection of income on securities Signup and view all the answers

What is the primary purpose of a mutual fund?

To collect funds for investment in securities Signup and view all the answers

Venture capital is typically low-risk financing for established companies.

False Signup and view all the answers

What do merchant bankers help facilitate in the financial market?

They help transfer capital from those who possess it to those who need it. Signup and view all the answers

A mutual fund is operated by __________ who manage the investment portfolio.

money managers Signup and view all the answers

Match the following financial terms with their definitions:

Mutual Funds = Investment in a pool of funds from multiple investors Insurance = Guarantee of compensation for specified risks Venture Capital = Financing for startups with growth potential Forex = Services related to foreign exchange transactions Signup and view all the answers

What is a common service provided under the Forex category?

Buying and selling foreign currencies Signup and view all the answers

Underwriting provides risk cover to issuers of securities only during economic downturns.

False Signup and view all the answers

What are venture capitalists typically entitled to in exchange for their investment?

A say in company decisions. Signup and view all the answers

Study Notes

Placement and Fund Arrangement

Capital and debt instruments are arranged for investments through financial institutions.
Financial advisors facilitate fund arrangement from financial institutions for projects and working capital.
Assisting clients with government clearances for projects is a critical service provided.

Non-Traditional Activities

Financial intermediaries now offer numerous non-fund based services termed ‘New financial products and services’.
Project advisory services include project report preparation and securing funds with government approvals.
Mergers and acquisitions (M&A) planning and execution assistance are significant offerings.
Corporates receive guidance on capital restructuring to enhance financial efficiency.
Financial intermediaries act as trustees for debenture holders.
Recommendations for improvements in management structure and style to boost performance are provided.
Structuring financial collaborations involves identifying joint venture partners and preparing agreements.
Sick companies benefit from rehabilitation and restructuring schemes facilitated by financial intermediaries.
Risk management services address exchange rate, interest rate, economic, and political risks using derivatives.
Management of portfolios for large Public Sector Corporations is a key service.
Advising on optimal debt costs and equity mix is essential for capital efficiency.
Credit rating agencies are promoted to assist companies in public debt issuance.

Fund-Based Services

Factoring: Involves managing sales ledger and assuming credit risk for the collection of debts.
Forfaiting: Allows exporters to receive cash against export bills, mitigating risk of non-payment.
Leasing: Contracts allow one party to rent property from another, ensuring regular payments over time.
Hire Purchase: Facilitates the buying of expensive goods via down payment and installments, transferring ownership post-payment.
Securitization: Converts illiquid assets into securities, enabling banks to raise fresh funds by selling these instruments.
Mutual Funds: Investment vehicles pooling funds from various investors for diversified securities investment.
Insurance: Provides compensation coverage for specified risks in return for premium payments.
Venture Capital: Funding for startups with growth potential, typically involving investor participation in company decisions.
Forex Services: Includes currency buying/selling, loans, deposits, cards, and remittances.

Fee-Based Services

Merchant Banking: Transfers capital from investors to seekers through activities like portfolio management and project counseling.
Underwriting: Insures issuers of securities to ensure minimum subscriptions are met.
Stock Broking: Involves buying and selling assets for clients with brokers charging a fee.
Loan Syndication: Arranged by lead banks for large loans, allowing multiple banks to share credit risk.
Custodial Services: Safeguards client securities to mitigate theft or loss risks.
Credit Rating: Assesses and provides ratings for securities to aid investment decisions.
Corporate Advisory Services: Offers financial advisory to corporations for operational finance aspects.
Investment Management: Professional management of various assets to achieve investors' financial goals.
Letter of Credit (L/C): A bank guarantee ensuring timely payment from buyer to seller.

Banking Institutions

Development Banks: Provide medium and long-term financial assistance for industrial and economic development.
Cooperative Banks: Established to provide credit to farmers at lower rates, also serve urban sectors.
Specialized Banks: Focus on specific functions; examples include:
- EXIM Bank: Offers long-term financial assistance to exporters and importers.
- NABARD: Coordinates rural credit institutions, aiming to improve access to credit for rural populations through programs like SHG-Bank linkage.

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Description

This quiz covers traditional and non-traditional services provided by financial intermediaries. It includes topics such as capital placement, funding arrangements, and securing governmental clearances. Test your knowledge about the critical roles these intermediaries play in the financial ecosystem.

Financial Intermediaries Services Overview

Questions and Answers

What is the primary focus of development banks?

Co-operative banks were initially established to provide credit to urban sectors.

What is the role of NABARD in India?

The specialized bank that provides long-term financial assistance to exporters and importers is called _____ Bank.

Match the following banks with their primary function:

What is loan syndication primarily used for?

Custodial services ensure the safety of customers' securities.

What is the role of a broker in stock broking?

A letter of credit is issued by a ______ to guarantee a buyer's payment.

Match the following financial services with their descriptions:

What is another term for loan syndication?

Corporate advisory services are exclusively provided by company boards.

What minimum requirement prompts a fund-based facility in underwriting?

Which of the following is a non-traditional service provided by financial intermediaries?

Financial intermediaries only provide traditional services such as capital arrangement and fund sourcing.

What type of risks can be managed by using swaps and derivative products?

Financial intermediaries assist in __________ to help companies raise funds.

Match the following services with their descriptions:

Which service involves rehabilitating and restructuring companies in distress?

Financial intermediaries do not play a role in minimization of debt costs.

Financial intermediaries help in the structuring of ___________ by identifying suitable partners.

What is factoring primarily concerned with?

Forfaiting is designed to protect the importer against non-payment of debts.

What does leasing guarantee to the lessee?

In a hire purchase agreement, the ownership of the merchandise is transferred to the buyer after all the payments have been made. This initial payment is known as the ______.

Match the financial services with their descriptions:

Which of the following best describes securitization?

The factor in factoring only collects debts and does not assume credit risk.

What services are related to the capital market?

What is the primary purpose of a mutual fund?

Venture capital is typically low-risk financing for established companies.

What do merchant bankers help facilitate in the financial market?

A mutual fund is operated by __________ who manage the investment portfolio.

Match the following financial terms with their definitions:

What is a common service provided under the Forex category?

Underwriting provides risk cover to issuers of securities only during economic downturns.

What are venture capitalists typically entitled to in exchange for their investment?

Study Notes

Placement and Fund Arrangement

Non-Traditional Activities

Fund-Based Services

Fee-Based Services

Banking Institutions

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Description

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