Metamorphosis of Marketing Financial Services in India

By Krishna, Chaitanya, V | Journal of Services Research, April 1, 2005 | Go to article overview

Metamorphosis of Marketing Financial Services in India


Krishna, Chaitanya, V, Journal of Services Research


INTRODUCTION

The Indian financial services industry has undergone a metamorphosis since 1990. During the late seventies and early eighties, The Indian financial services industry was dominated by commercial banks and financial institutions which focused on catering to the needs of Indian industries. The late eighties and early nineties saw the mushrooming of financial companies offering a wide range of financial services. The economic liberalization has brought complete transformation in the Indian financial service industry.

MEANING OF FINANCIAL SERVICES

In general, all types of activities which are of a financial nature could be brought under the term 'financial services'. The term 'Financial Services' in a broad sense means 'mobilizing and allocating savings'. Thus, it includes all activities involved in the transformation of saving into investment.

Avadhani, (1998) opines that the 'financial service' can also be called 'Financial intermediation'. Financial intermediation is a process by which funds are mobilized from a large number of savers and make them available to all those who are in need of it and particularly to corporate customers. Thus, financial services sector is a key area and it is very vital for industrial development. A well-developed financial services industry is absolutely necessary to mobilize the savings and to allocate them to various investible channels and thereby to promote industrial development in a country.

RANGE OF FINANCIAL SERVICES

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

1. Traditional activities

2. Modern activities

Traditional activities are further classified into two, namely:

i. Fund based

ii. Non-fund based

Figure 1 below narrates the classification of Financial Services.

1. Traditional activities: are the services encompassing both capital market and money market activities and can be grouped under Fund based & non-fund based activities.

i. Fund based activities:

a) Underwriting of shares, debentures, new issues.

b) Dealing in secondary market activities

c) Involving in money market instruments

d) Lease equipments, hire purchases, venture capital, factoring and forfeiting etc.

e) Participating in foreign exchange market activities.

ii. Non-fund based activities:

a) Managing capital issues

b) Arrangements of funds from financial institutions for clients

c) Assisting in process of getting all government and other clearances

d) Providing expertise services like project counseling, corporate counseling etc.

2. Modern activities: Besides the above stated traditional services, the financial intermediaries also render various other services, which are titled under the head of 'modern services'. Some of them are illustrated below:

a) Planning for mergers & acquisitions

b) Guiding customers in capital restructuring

c) Recommending management in changes in the company's management style, structure etc.

d) Joint ventures, collaborations, preparing agreements for them.

e) Risk management & portfolio management services

f) Advisory services for clients on innovative products like swaps, derivatives products, buy back options, insurance services etc.

g) Capital market services like clearing services register & transfers, safe custody of securities, collection of income on securities for clients etc.

h) Promoting credit rating services for the purpose of rating companies which want to go public by the issue of debt instruments.

FINANCIAL INNOVATIONS, NEW PRODUCTS AND SERVICES

The importance of financial services is gaining momentum all over the world. The present day client expects a finance company to play the role of not just provider of finance but to be a departmental store of finance where the client can get what ever product or services he wants. …

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