A Study of financial services w.r.

t Innovations in Shriram Finance

CHAPTER NO.1: INTRODUCTION

Shriram City Union Finance (SHRIRAM CITY) was established in 1986, and is part of the three decade-old Chennai-based Shriram Group. The company started as deposit-accepting non-banking financial company (NBFC) and is Indias premier financial services company today, specializing in small-ticket retail finance. The Chennai-based Shriram group has an enviable business heritage spanning over three decades. It has emerged as the largest player in its class on the Indian subcontinent. Specifically focusing on commercial vehicle loans, consumer durables financing and chit funds, the group's annual turnover crosses Rs. 18,000 crore. The Shriram groups business presence also expands to Insurance Consultancy, Life Insurance, Re-insurance, Stock Broking, Information Technology, Pharmaceuticals, Property Development, Project Engineering, Packaging and manufacturing of Auto Components. Shriram City has a comprehensive range of offerings comprising financing for Consumer Durables, 2, 3 & 4-wheeler finance (both new & pre-owned, passenger & commercial), Personal Loans, Small Business Loans and Retail Gold Loans. This has made SHRIRAM CITY a dominant player in the field and the only NBFC offering a wide product range under one roof. The company has over 633 Business Outlets across the country; Shriram City enjoys a high credit rating, as well as listing on the BSE, NSE & Madras Stock Exchanges. The company lends around Rs 300 crore a month in small-tickets of between Rs 8000 to Rs 1 lakh each, with tenors ranging from 12 to 36 months. Shriram City has serviced over 15 Lac customers till date and adds on an average 85,000 new customers every month.

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Shriram City is a major organized lender in the Retail and Micro & small enterprises credit space with leading market share in the southern region. Large customer base of 3.55 million and growing everyday. Shriram City Union Finance Ltd has recommended a final dividend of Rs. 3.5 per equity share (35%) . During the quarter ended, the robust growth of revenue is increased by 44.24% Rs.3998.00 million. Shriram city Finance has got certifited with ISO 27001. The top line and bottom line of the company are expected to grow at a CAGR of 19% and 25% over 2010 to 2013E respectively. Years Net sales EBITDA Net Profit EPS P/E FY 11 13180.00 9565.60 2405.90 48.56.

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CHAPTER NO.2: HISTORY

Our Company was incorporated as a private limited company, Shriram HirePurchase Finance Private Limited, on March 27, 1986, under the provisions of the Companies Act, 1956. Further with effect from October 29, 1988, the status of our Company was changed to a public limited company. The name of our Company was changed from Shriram Hire-Purchase Finance Limited to Shriram City Union Finance Limited and a fresh certificate of incorporation dated April 10, 1990 was issued by the ROC, Chennai, Tamil Nadu. Subsequently, our Company has obtained a certificate of registration as a Deposit-Accepting Financing Company, dated April 17, 2007, bearing registration no. 07-00458 issued by the RBI to carry on activities of a NBFC under section 45 IA of the RBI Act, 1934.

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CHAPTER NO.3: PRODUCT&SERVICES

Consumer Durable Finance- SHRIRAM CITY offers loans for a wide range of white goods and lifestyle products, viz. air-conditioners, computer systems, high-end TVs, audio & video systems, washing machines, refrigerators, microwave ovens, furniture, gym products. The company has tie-ups with major manufacturers/dealers and retail outlets at showrooms to enable easy access to products under finance. Auto Finance- SHRIRAM CITY currently offers a variety of loans against new and pre-owned two wheelers, 3-wheelers, 4 wheelers (both passenger & commercial). Personal Finance- SHRIRAM CITY offers quick finance at attractive interest rates with service at the customer's doorstep. Shriram City offers hassle-free, non-end use specific loans with minimum documentation. Retail Gold Loans- Retail Gold loans are the latest addition to SHRIRAM CITY's product line. SHRIRAM CITY's Retail Gold loans offer on-the-spot finance at attractive rates of interest. Small Business Loan- SHRIRAM CITY offers small business loans to self employed professionals, wholesale/retail dealers, general merchants, builders, manufacturers, hotel/ catering services, tour operators, etc. Shriram Insight services more than 1,25,000 clients through its network of 460 branches spread across the country. Our offerings include: Share trading Call & Trade
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Online (Internet) rading with highly secured payment gateways through leading banks in India. Trading & demat account at nominal cost Trading in cash & derivatives Margin funding Commodities trading Research, daily technical analysis, Intraday and positional calls, daily market report, company results analysis.

PRODUCT FEATURES Good returns to investors Advance information on forthcoming offers Best brokerage & adequate provision of forms

OUR DISTRIBUTION PRODUCTS Mutual funds: Equity, Debt, Liquid Company deposits: Hudco, HDFC, SAIL, others Capital gain bonds: NHAI, REC Tax-benefit schemes: 8% RBI, ICICI & IDBI bonds Initial public offers (IPOs) & NFOs

Commercial Vechile Finance

The Commercial Vehicle business of the group had its genesis in four companies, one in each zone and with the common mission of providing used vehicle financing to the largely under-served owner-operators in the trucking industry.

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Engaged exclusively in financing of Commercial Vehicles, both new as well as old, Shriram Transport Finance Company Limited (STFC), as of now has over 0.85 million truck-owners as customers. The Assets Under Management is in excess of Rs. 42,000 crores. STFC also enjoys monopoly position in financing of Used Vehicles. Growing at a Top line CAGR of 40% over the last 5 years, STFC boasts a pan-India branch network of 500 offices and 70 SBUs and employees more than 15,000 people. STFC is listed in the Bombay Stock Exchange (BSE), and National Stock Exchange (NSE) of India.

STFC is the consolidation of all the four entities, which happened with the advent of our major financial partner, Texas Pacific Group. This consolidation and subsequent growth over the last 5 years propelled STFC to the leadership position in the Transportation Finance Sector.

The key value proposition of STFC include funding the entire business cycle of the transporter, ranging from his basic working capital needs through discounting his freight bills and facilitating his vehicle replacement. Consumer and enterprise Finance The Consumer Finance business of the group had its origins from the needs of the Chit Funds customers and was started in year 2002 as a separate business unit, Shriram City Union Finance Ltd. Over the years, this business has evolved itself in the following four distinct verticals:

Individual Personal Loans catering to the needs of families for purposes ranging from emergencies to education.

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Small

Business Loans targeted to Micro Enterprises, self-employed

professionals and such under-served segments of the business community across the various sectors of the economy. Asset Purchase Loans include all asset-based finance with specific thrust on used and new three-wheelers / cars and two-wheelers through dealer outlets. Loan against gold is the last addition to the business verticals that caters to the emergency needs of families that are willing to pledge jewels as well as refinancing pawn brokers who have been running this business for decades. The attractiveness of the consumer business and the efficient manner in which the customer origination and collections are being done encouraged large private equity players like Texas Pacific Group to take significant stakes, which has in turn enabled a strong foundation for a sustained Year-on-Year growth in Enterprise value.

Retail Stock Broking Stock Broking business of the group was started in 1995, promoted by professional entrepreneurs and incubated by the Shriram Group through its entity, Shriram Insight Share Brokers Ltd.

Stock Broking business commenced operations with a corporate membership in NSE in the cash segment in 1996. Membership in the derivatives segment in the NSE was acquired in 2003.

The Business has expanded into the commodities market with a trading-cumclearing membership in the Multi Commodity Exchange (MCX) and the National Commodities and Derivatives Exchange (NCDEX) through a 100% subsidiary.
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Stock Broking business is firmly focused in the rapidly growing High Networth Individual (HNI) and Retail space. The business has an active client base of over 1,50,000.The business operates through 1000 branches with equal no. of trading terminals.

The business model of Stock Broking largely focused on owned branches in the initial years and has now graduated into the franchisee mode of expansion that will cater to PAN India target market. Rapid expansion has been made possible in this two-pronged strategy of owned and franchisee outlets and is expected to have an end-state distribution, networking over 3000 branches.

As the business starts targeting the next level of mass affluent customers, expanding into wealth management and advisory space, same would also become a key thrust area that can potentially enhance profitability and shareholder value in the medium term.

Overseas Investment Shriram Groups entry into the insurance business in India opened huge opportunities and avenues to unearth and utilize a lot of expertise available in these two businesses within the country and overseas.

With a view to take advantage of the insurance expertise available in India, the group has visions of being an international insurance player in the long term.

Shriram has started with a couple of pilot investments in a non-life insurance company in Philippines and in insurance broking firm in the Middle East. Middle East and South East Asia will be the focus areas for its international

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foray, the size of which will depend on the initial success of the group in pilot investment.

Insurance India has a flourishing insurance industry, with several national and international players competing and growing at rapid rates.

The insurance industry is expected to continue to outpace the rapid economic growth to reach US$ 350-400 billion in premium income by 2020, making India amongst the top three life insurance markets and top 15 non-life insurance markets by the year, according to an industry report titled India Insurance Turning 10, Going on 20. The report stated that the total penetration of insurance (premium as percentage of GDP) has increased from 2.3 per cent in 2001 to 5.2 per cent in 2011. Apart from this, there has been a vast increase in the coverage of insurance. The report added that the number of life policies in force has increased nearly 12 fold over the past decade and health insurance, nearly 25 times.

The total premium of the general insurance industry has seen a growth of 22 per cent to US$ 9.58 billion in 2010-11.

The total premiums of 23 life insurance companies have gone up by 15 per cent to US$ 28.3 billion in 2010-11.

The US$ 41 billion Indian life insurance industry is considered the fifth largest life insurance market, and is growing at a rapid pace of 32-34 per cent annually, according to the Life Insurance Council.

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Multiutility Vehicle Finance Widest range of utility vehicles in India covered by our finances Flexible repayment options, ranging from 12 to 60 months Speedy processing and sanctioning of loan within 48 hours Convenient repayment of loans with easy EMIs Our Loan Plans allow you to choose a plan that suits your needs Competitive Interest rates for all utility vehicles Hassle-free documentation process offering you maximum flexibility Repayment options include ECS, Cheque, Draft/Pay order or even Cash Three wheeler finance Most of the three wheeler financiers in India offer you three wheeler loans for new vehicles or used vehicles which are not older than 3 years. In some of the cases, you may have to deposit margin money. Collateral security has also to be deposited in some of the cases. For a single three wheeler most of the financiers provide auto loan up to an amount of INR 100,000. The rate of interest varies some where around 12% (reducing) annually. The huge potential market of the three wheeler industry in India is attracting various automobile companies to start manufacturing three wheelers, who were previously more interested in doing business in the sectors of car, two wheelers, and consumer vehicles. Not only is this, the increasing sale of three wheelers also inducing numerous financial institutions to offer product like three wheeler loans. Moreover, companies like Bajaj Auto have a Bajaj Finance scheme that enables the consumers to have easy access to loans and financing for buying a three wheeler.

The 18% annual growth of the three wheeler industry has been possible due to the direct and indirect help from the various financiers in India. One can avail of
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auto finance schemes of popular automobile financiers like ICICI Bank, HDFC Bank, Maruti Citicorp, Sundaram Finance, Tata Finance, FISAF, KMPL, Associates Finance, Citibank, Times Bank, Saraswat Cooperative etc. Most of the leading public sector undertaking banks even offer you loan for three wheelers. You can avail three wheeler loans from the banks like State Bank of India, Corporation Bank and from many more financial institutions.

Tractor finance Agriculture in India has a long history. Even today, the industry represents the largest economic sector in India, employing close to half of the total workforce. As the demands of an enormous and growing population continue to push farming output, Indian banks are providing greater and more varied financial assistance to the country's farmers. The agreement between tractor manufacturers and banks has offered Indian farmers new opportunities for agricultural finance, while further driving the country's significant agricultural sector. With tractors representing the unchanging foundation of the farming industry, this equipment is a key focus for banks. The Indian tractor market is among the largest in the world. To access agricultural equipment finance, farmers first contact a dealer with tractors for sale, or approach a bank branch directly. There is an emerging network of suitable bank branches in rural and semi-urban India. Most leading banks have developed tractor loans with a careful understanding of rural India. The consideration of these different and varied needs has resulted in a fairly straightforward application process, involving reduced documentation and processing time. Farmers can access finance for tractors of different makes and brands, and with some banks it is even possible to apply online.

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Farmers are sometimes given lower interest rates, as a further impetus for the agricultural industry. Depending on the details of the loan, flexible payment plans are established, from monthly to quarterly and half-yearly. The agriculture equipment market is growing steadily. Manual labour is an integral element of rural India, and an ageless system of farming. Tractors play an essential role in the automated agricultural life of the country, and their importance has been recognised by banks. Today's farmers have an opportunity to apply for tractor finance and take advantage of innovative payment terms . Construction equipement / Infrastructure finance A robust and thriving construction industry are essential to our Nation's growth. From mining to oil exploration, road construction to laying railways, power, irrigation, real estate development and water transportation, L&T Finance understands the intricacies of your business. We at L&T Finance offer financing for your Construction Equipment in the form of term loans, working capital loan and operating lease facilities.

Advantages of construction equipement Professional and transparent approach to customer service Ability to understand the business of the client and suggest product accordingly Funding available for entire range of products Presence in more than 52 locations Our salient features of construction equipement finance Funding available for both new as well as used asset Trained and empowered team
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Emphasis on continuous improvement of products and customer knowledge.

Customer segment finance

Mining Road Construction Infrastructure Development Oil Exploration Railway contractors Power Irrigation Real estate developers Water transport

Other products Co-branding finance Co-branding is an brand arrangement that associates

single product or service with more than one brand name, or otherwise associates a product with someone other than the principal producer. The typical co-branding agreement involves two or more companies acting in cooperation to associate any of various logos, color schemes, or brand identifiers to a specific product that is contractually designated for this purpose. The object for this is to combine the strength of two brands, in order to increase the premium consumers are willing to pay, make the product or service more resistant to copying by private label manufacturers, or to combine the different perceived properties associated with these brands with a single product. Ultimately, cobranding is a strategy built upon a sharing of brand equity; two partners each
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contributing some aspect of their brand (permissions, expertise, distribution, status, etc.) to create an offering that neither could develop as effectively on their own. Co Branding which is also called dual branding or brand bundling two or more well known brands are combined into a joint product or marketed together in same fashion. Co-branding, defined here as pairing two or more branded products (constituent brands) to form a separate and unique product (composite brand) (Park et al., 1996), is a strategy currently popular for introducing new consumer products. One form of co-branding is also the same company co-branding in which the company uses two of its product in a way that the consumer uses two of the companys product at the same time. Co-branding is an increasingly popular technique marketers use in attempting to transfer the positive associations of the partner (constituent) brands to a newly formed co-brand (composite brand). A joint Venture Co branding is the medium in which two independent brands come together to offer services to the consumer in which both the consumers benefit in terms of services offered by two established brands as well as the companies or the brands which have formed a Joint Venture as they get a ready customer base which they can cater to more effectively .

Freight bill discounting Under certain circumstances, the Bank may discount a bill of exchange instead of negotiating them. The amount the Bank advances to you also depends on your past record and reputation of the drawee. Usually, the Bank may want some conditions to be fulfilled to be able to discount a bill:
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A bill must be a usance bill It must have been accepted and bear at least two good signatures (e.g. of reputable individuals, companies or banks etc.)

The Bank will normally only discount trade bills Where a usance bill is drawn at a fixed period after sight, the bill must be accepted to establish the maturity The advising or confirming bank will hide the reimbursement instruction from the beneficiary so that his bank must present the documents to the nominated bank for negotiation in order to obtain payment under the DC terms. Bills which are financed by the receiving branch, whether drawn under a DC or not, are treated as Bills Receivable by both the remitting branch and the receiving branches. Presenting a bill Bills may be presented to the nominated bank in two ways: 1. Withrecourse We check the documents and confirm that they comply with the DC terms, and send the bill with the original DC to the nominated bank requesting payment. The nominated bank need not recheck the documents and it can claim a refund from us in the case of an unspotted discrepancy. We pay our customer after receipt of funds from the nominated bank. 2. Withoutrecourse We pass the original DC and unchecked documents to the nominated bank on a collection basis, requesting payment. The nominated bank has to check the documents in the normal way. Usually, we present documents to the nominated bank without recourse:
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a. When the opening bank is a member of the Bank nominated for payment, acceptance or negotiation. b. When the nominated bank has confirmed the DC. c. When the nominated bank is the drawee.

Working capital loan Objective: This scheme is aimed for those units currently facing problem due to lack of working capital support from commercial banks, but can be made viable with the infusion of fresh funds by way of one time core working capital assistance. Eligibility: 1. The scheme is meant for limited companies which are industrial concerns as defined in IDBI Act. 2. Those limited companies which have not got any working capital: a. They were under financed & hence running in lower capacity. b. There is market for the product. c. The promoters are competent and persons of integrity. d. Technology is not outdated. 3. The Company and the unit must be potentially viable. Quantum of Assistance: 75% of the working capital requirement of business for one cycle of operation.

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Promoters Contribution: 25% Interest rate: PLR + weightage of risk. Repayment Period: Maximum 3 years The borrower shall approach commercial banks for meeting its normal working capital requirement at any time during currency of the loan. As and when the assistance is sanctioned by the bank, the working capital loan from NEDFi should be repaid out of the proceeds of the loan sanctioned by the bank. NEDFi in turn shall release its charge on current assets and also concede second charge on fixed assets if so insisted by the bank. Security: i. ii. iii. iv. First charge by way of hypothecation of current assets. Charge on fixed assets of the unit. Personal Guarantee of Promoter Director/Corporate Guarantee First pari-passu charge on the fixed assets of the unit, if the assets are mortgaged to other institutions/ Bank v. Adequate collateral security.

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CHAPTER NO.4:PRODUCT & SERVICES AS PER INDUSTRY

TREASURY MANAGEMENT Treasury management (or treasury operations) includes management of an enterprise's holdings, with the ultimate goal of maximizing the firm's liquidity and mitigating its operational, financial and reputational risk. Treasury Management includes a firm's collections, disbursements, concentration, investment and funding activities. In larger firms, it may also include trading in bonds, currencies, financial derivatives and the associated financial risk management. Most banks have whole departments devoted to treasury management and supporting their clients' needs in this area. Until recently, large banks had the stronghold on the provision of treasury management products and services. However, smaller banks are increasingly launching and/or expanding their treasury management functions and offerings, because of the market opportunity afforded by the recent economic environment (with banks of all sizes focusing on the clients they serve best), availability of (recently displaced) highly-seasoned treasury management professionals, access to industry standard, third-party technology providers' products and services tiered according to the needs of smaller clients, and investment in education and other best practices. For non-banking entities, the terms Treasury Management and Cash

Management are sometimes used interchangeably, while, in fact, the scope of treasury management is larger (and includes funding and investment activities mentioned above). In general, a company's treasury operations comes under the control of the CFO, Vice-President / Director of Finance or Treasurer, and is

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handled on a day to day basis by the organization's treasury staff, controller, or comptroller. Bank Treasuries may have the following departments:

A Fixed Income or Money Market desk that is devoted to buying and selling interest bearing securities

A Foreign exchange or "FX" desk that buys and sells currencies A Capital Markets or Equities desk that deals in shares listed on the stock market.

In addition the Treasury function may also have a Proprietary Trading desk that conducts trading activities for the bank's own account and capital, an Asset liability management (ALM) desk that manages the risk of interest rate mismatch and liquidity; and a Transfer pricing or Pooling function that prices liquidity for business lines (the liability and asset sales teams) within the bank.

PORTFOLIO MANAGEMENT The art of selecting the right investment policy for the individuals in terms of minimum risk and maximum return is called as portfolio management. Portfolio management refers to managing an individuals investments in the form of bonds, shares, cash, mutual funds etc so that he earns the maximum profits within the stipulated time frame. Portfolio management refers to managing money of an individual under the expert guidance of portfolio managers. In a laymans language, the art of managing an individuals investment is called as portfolio management.

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Need for Portfolio Management Portfolio management presents the best investment plan to the individuals as per their income, budget, age and ability to undertake risks. Portfolio management minimizes the risks involved in investing and also increases the chance of making profits. Portfolio managers understand the clients financial needs and suggest the best and unique investment policy for them with minimum risks involved. Portfolio management enables the portfolio managers to provide customized investment solutions to clients as per their needs and requirements. Types of Portfolio Management: Portfolio Management is further of the following types:

Active Portfolio Management: As the name suggests, in an active portfolio management service, the portfolio managers are actively involved in buying and selling of securities to ensure maximum profits to individuals.

Passive Portfolio Management: In a passive portfolio management, the portfolio manager deals with a fixed portfolio designed to match the current market scenario.

Discretionary Portfolio management services: In Discretionary portfolio management services, an individual authorizes a portfolio manager to take care of his financial needs on his behalf. The individual issues money to the portfolio manager who in turn takes care of all his investment needs, paper work, documentation, filing and so on. In discretionary portfolio management, the portfolio manager has full rights to take decisions on his clients behalf.

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Non-Discretionary

Portfolio

management

services: In

non

discretionary portfolio management services, the portfolio manager can merely advise the client what is good and bad for him but the client reserves full right to take his own decisions.

FACTORING Factoring is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. In "advance" factoring, the factor provides financing to the seller of the accounts in the form of a cash "advance," often 70-85% of the purchase price of the accounts, with the balance of the purchase price being paid, net of the factor's discount fee (commission) and other charges, upon collection from the account client. In "maturity" factoring, the factor makes no advance on the purchased accounts; rather, the purchase price is paid on or about the average maturity date of the accounts being purchased in the batch. Factoring differs from a bank loan in several ways. The emphasis is on the value of the receivables (essentially a financial asset), whereas a bank focuses more on the value of the borrower's total assets, and often also considers, in underwriting the loan, the value attributable to non-accounts collateral owned by the borrower. Such collateral includes inventory, equipment, and real property, That is, a bank loan issuer looks beyond the credit-worthiness of the firm's accounts receivables and of the account debtors (obligors) thereon. Secondly, factoring is not a loan it is the purchase of a financial asset (the receivable). Third, a nonrecourse factor assumes the "credit risk that a purchased account will not collect due solely to the financial inability of account debtor to pay. In the United States, if the factor does not assume credit risk on the purchased accounts, in most cases a court will recharacterize the transaction as a secured loan.

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It is different from forfaiting in the sense that forfaiting is a transaction-based operation involving exporters in which the firm sells one of its transactions, while factoring is a Financial Transaction that involves the Sale of any portion of the firm's Receivables. The three parties directly involved are: the one who sells the receivable, the debtor (the account debtor, or customer of the seller), and the factor. The receivableis essentially a financial asset associated with the

debtor's liability to pay money owed to the seller (usually for work performed or goods sold). The seller then sells one or more of its invoices (the receivables) at a discount to the third party, the specialized financial organization (aka the factor), often, in advance factoring, to obtain cash. The sale of the receivables essentially transfers ownership of the receivables to the factor, indicating the factor obtains all of the rights associated with the receivables. Accordingly, the factor obtains the right to receive the payments made by the debtor for the invoice amount and, in nonrecourse factoring, must bear the loss if the account debtor does not pay the invoice amount due solely to his or its financial inability to pay. Usually, the account debtor is notified of the sale of the receivable, and the factor bills the debtor and makes all collections; however, non-notification factoring, where the client (seller) collects the accounts sold to the factor, as agent of the factor, also occurs.

There are three principal parts to "advance" factoring transaction; (a) the advance, a percentage of the invoice face value that is paid to the seller at the time of sale, (b) the reserve, the remainder of the purchase price held until the payment by the account debtor is made and (c) the discount fee, the cost associated with the transaction which is deducted from the reserve, along with other expenses, upon collection, before the reserve is disbursed to the factor's client. Sometimes the factor charges the seller (the factor's "client") both a
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discount fee, for the factor's assumption of credit risk and other services provided, as well as interest on the factor's advance, based on how long the advance, often treated as a loan (repaid by set-off against the factor's purchase obligation, when the account is collected), is outstanding.

FORFIATING In trade finance, forfaiting is a financial transaction involving the purchase of receivables from exporters by a forfaiter. The forfaiter takes on all the risks associated with the receivables but earns a margin. The forfaiter may also be immunized from certain risks if the transaction involves payment by negotiable instrument. The forfaiting is a transaction involving the sale of one of the firm's transactions. Factoring is also a financial transaction involving the purchase of financial assets, but Factoring involves the sale of any portion of a firm's receivables. The characteristics of a forfaiting transaction are:

Credit is extended to the exporter for a period ranging between 180 days to seven years.

Minimum bill size is normally $250,000, although $500,000 is preferred. The payment is normally receivable in any major convertible currency. A letter of credit or a guarantee is made by a bank, usually in the importer's country.

The contract can be for either goods or services.

CONSUMER FINANCE Consumer finance has to do with the lending process that occurs between the consumer and a lender. In some instances, the lender may be a bank or financial institution. At other times, the lender may be a business that offers in
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house

credit

in

exchange

for

the

business

of

the

consumer. Consumer finance can include just about any type of lending activity that result in the extension of credit to a consumer.

Most people have received financial assistance in obtaining desirable products through the use of consumer finance methods. In retail banking, the lender extends secured and unsecured loans to consumers who wish to purchase automobiles, homes, or engage in other activities that require substantial financing, such as re modelling a home. Generally, consumer lending of this type caries some degree of competition, since the consumer with a solid credit rating can often shop around and secure superior interest rates and terms for the loan agreement.

At the same time, not all forms of consumer finance are in the best interests of the consumer. In many parts of the world, institutions are in the business of lending money even to consumers with poor credit ratings, or who lack a reasonable ability to repay the borrowed funds. This can take the form of credit card offers, loans with extremely high rates of interest included in the finance structure of the loan, and other terms that will be difficult if not impossible for the consumer to meet.

SECURITIZATION Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations and selling said consolidated debt as bonds, pass-through securities, or Collateralized mortgage obligation (CMOs), to various investors. The principal and interest on the debt, underlying the security, is paid back to the various investors regularly. Securities backed by mortgage receivables are

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called mortgage-backed securities (MBS), while those backed by other types of receivables are asset-backed securities (ABS). Critics have suggested that the complexity inherent in securitization can limit investors' ability to monitor risk, and that competitive securitization markets with multiple securitizers may be particularly prone to sharp declines in underwriting standards. Private, competitive mortgage securitization is believed to have played an important role in the U.S. subprime mortgage crisis. In addition, off-balance sheet treatment for securitizations coupled with guarantees from the issuer can hide the extent of leverage of the securitizing firm, thereby facilitating risky capital structures and leading to an under-pricing of credit risk. Off-balance sheet securitizations are believed to have played a large role in the high leverage level of U.S. financial institutions before the financial crisis, and the need for bailouts. The granularity of pools of securitized assets is a mitigant to the credit risk of individual borrowers. Unlike general corporate debt, the credit quality of securitised debt is non-stationary due to changes in volatility that are time- and structure- dependent.

CREDIT DERIVATIVES In finance, a credit derivative refers to any one of "various instruments and techniques designed to separate and then transfer the credit risk" of the underlying loan. It is a securitized derivative whereby the credit risk is transferred to an entity other than the lender. Where credit protection is bought and sold between bilateral counterparties, this is known as an unfunded credit derivative. If the credit derivative is entered into by a financial institution or a special purpose vehicle (SPV) and payments under the credit derivative are funded using securitization techniques, such that a debt

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obligation is issued by the financial institution or SPV to support these obligations, this is known as a funded credit derivative. This synthetic securitization process has become increasingly popular over the last decade, with the simple versions of these structures being known as synthetic CDOs; credit-linked notes; single tranche CDOs, to name a few. In funded credit derivatives, transactions are often rated by rating agencies, which allows investors to take different slices of credit risk according to their risk appetite. Credit derivatives are fundamentally divided into two categories: funded credit derivatives and unfunded credit derivatives. An unfunded credit derivative is a bilateral contract between two counterparties, where each party is responsible for making its payments under the contract (i.e. payments of premiums and any cash or physical settlement amount) itself without recourse to other assets. A funded credit derivative involves the protection seller (the party that assumes the credit risk) making an initial payment that is used to settle any potential credit events. (The protection buyer, however, still may be exposed to the credit risk of the protection seller itself. This is known as counterparty risk.)

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CHAPTER NO.5: COMPARISON BETWEEN SHRIRAM FINANCE V/S INDUSTRY

Shriram Finance Industry

1. Consumer Durable Finance 2. Auto Finance 3. Personal Finance 4. Retail Gold Loans 5. Small Business Loan 6. Commercial Vehicle Finance 7. Consumer and Enterprise Finance 8. Retail Stock Broking 9. Overseas Investment 10. Multiutility Vehicle Finance 11. Three wheeler finance 12. Tractor finance

1. Treasury management 2. Portfolio management 3. Factoring management 4. Forfaiting management 5. Consumer management 6. Securitisation management 7. Credit derivatives

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CHAPTER NO.6: CONCLUSION

Shriram Insight is the most cost-effective, convenient and secures way to transact in a wide range of financial products and services. It offers a common platform for investors to invest in all equity products, commodities, forex, IPOs, insurance and other financial products. All the information I have gather that the topic is need and satisfaction analysis survey of distributor in financial service sector where u get the knowledge about what is the need of the franchisee who started our work in share market. In there when they get exactly facility which enhance their business in the market then they satisfy with the company because company given importance to the franchisee. In there like if you want TATA share from share market you will go to the Brokers to know the exact position of the share and what is the procedure to buy the share. In there your need to buy the share when you get the share you satisfy. Shriram Insight, the brokerage and distribution arm of Shriram Group, aims to tap investors in the smaller towns and cities through a flat fee structure. Shriram Insights brokerage rates are quite competitive. Shriram Insight offers most competitive brokerage rates - 0.05% for delivery trades and 0.005% for nondelivery trades. Currently, the company is in the process of finalising the franchises. There will be several franchises in each location. For instance, it plans to have about 60-70 franchises across Mumbai. The company plans to reach even the most remote areas and tie up with sub-brokers. Service of Shriram Insight is offered across 700 cities through 3000 outlets.

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Shriram Insight all set to start a price war between the brokerage firms. It was Kotak, who started this paisa brokerage trading just 3 months back, is now catching up with every Firm. In fact, the big plan is to grow the share market five times that of BSE volumes in the next few years, a top official of Shriram Insight said.

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CHAPTER NO.7: REFERENCE

WEBSITES www.google.com www.wikipedia.org www.scribd.com

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