The hirer is required to make a down payment of 20-25% of the cost and pay the balance amount along with interest in advance or arrears over a time period of 36-months Alternatively, instead of the down payment, the hirer as to deposit an equal amount as a fixed deposit with the finance co which provides entire finance on hire purchase terms, repayable with interest in MME over 36-48 months. Deposits and the accumulated interest is returned to the hirer upon the payment of last installment. Advantages of Hire Purchase is that it doesn’t involve immediate cash and secession is easy, however this may lead to bankruptcy, buyer may incur loss.
Q. What do you mean by Consumer Credit ? Explain the types of Consumer Credit? Credit is an arrangement to receive cash, goods or services now, and pay for them in the future Consumer credit is the use of credit for personal needs, except a home mortgage, by individuals and families Types of credit can be classified into two ii. Close end credit and open end credit. Closed end credit involves One-time loans for a specific purpose that you pay back in a specified period of time, and in payments of equal amounts. Egg.
Mortgage, automobile, ND installment loans for furniture, appliances and electronics Open end credit ,use as needed until reaching line of credit Max Credit cards, departments store cards, bank credit cards, incidental credit You pay interest and finance charges if you do not pay the bill in full when due Q. What do you understand by Venture Capital? Explain the scope of Venture Capital? ANSWER Venture capital is the capital provided by firms of professionals who invest alongside management in young, rapidly growing or changing companies that have the potential for high growth.
Venture capital is a form of equity financing specially designed for funding high risk and high reward projects. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT, software, etc. Usually there is a common perception that venture capital is a means of financing high technology projects. However, venture capital is investment of long term finance made in: 1 .
Ventures promoted by technically or professionally qualified but unproven entrepreneurs, or 2. Ventures seeking to harness commercially unproven technology, or 3. High risk event rest. Venture capitalists provide funds for long-term in through equity, conditional loan and convertible loan. Once the started venture reaches the full potential and starts earning profit, the venture capitalist will withdraw his investments. Assignment B IQ. What do you mean by Financial Services? Mention in brief following types of financial services? Financial services can also be called ‘financial intermediation’.
Financial intermediation is a process by which funds are embroiled from a large number of savers and make them available to all those who are in need of it and articulacy to corporate customers, monopolizing and allocating savings”. Thus it includes all activities involved in the transformation of savings into investment. Financial services can be classified into traditional activities (which mainly involves fund base activities such as investment in shares, debentures, bonds etc and non-fund based activities such as managing the capital issue) and also Modern activities which is usually non fund based in nature.
Such as acting as trustees to debenture holders. Some of the types of financial services are Assurance, in which one party agrees to pay for another party’s financial loss exulting from a specified event. Mutual Fund which is a corporation, trust or partnership that combines the assets of all its shareholders or partners into one common investment account for the purpose of providing diversification and professional management. Q. What do you mean by Initial Public Offer? Explain the different type of entry norm to make an PIP?
ANSWER Initial Public Offering, PIP, is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. Ipso generally involve one or more investment banks known as “underwriters”. The company offering its shares, called the “issuer”, enters a contract with a lead underwriter to sell its shares to the public. The underwriter then approaches investors with offers to sell these shares. A company can raise money by issuing either debt or equity. If the company has never issued equity to the public, it’s known as an PIP.
SIB has laid down eligibility norms for entities accessing the primary market through public issues. The main entry norms for companies making a public issue (PIP or FOP) are summarized as under: There are three types of entry norms Entry Norm I (EN l): The company shall meet the following acquirement: (a) Net Tangible Assets of at least RSI. 3 scores for 3 full years. (b) Distributable profits in tallest three years (c) Net worth of at least RSI. 1 core in three years (d) If change in name, tallest 50% revenue for preceding 1 year should be from the new activity. E) The issue size does not exceed 5 times the pre- issue net worth To provide sufficient flexibility and also to ensure that genuine companies do not suffer on account of rigidity of the parameters, SIB has provided two other alternative routes to company not satisfying any of the above conditions, for accessing the primary Market, as under: Entry Norm II (EN II): (a) Issue shall be through book building route, with at least 50% to be mandatory allotted to the Qualified Institutional Buyers (IQ BBS). (b) The minimum post-issue face value capital shall be RSI. 0 core or there shall be a compulsory market- making for at least 2 years Entry Norm Ill (EN Ill): (a) The “project” is appraised and participated to the extent of 15% by As/ Scheduled Commercial Banks of which at least 10% comes from the appraiser(s). (b) The minimum post-issue face value capital shall be RSI. 10 core or there shall be a compulsory market-making for at least 2 years. In addition to satisfying the aforesaid eligibility norms, the company shall also satisfy the criteria of having at least 1000 prospective allotted in its issue Q. What do you mean by Leasing?
Explain the different type of leasing? ANSWERS: Leasing refers to a contract under which the owner of an asset allows another person or party to use the asset in return for some rent. The persons involved are lesser and lessee. Lesser is the owner of the asset and the lessee is the person getting the benefit of asset taken on lease. Leasing is a contractual arrangement , where the owner (Lesser) of the Asset(Equipment) Transfers the possession / right to use the Asset (Equipment) to another/user Lessee) For an agreed period of time in return for rental.
At the end of the period -the asset reverts to the Lesser, or provision for the renewal of the Lease Contract, or option to transfer the ownership to the Lessee. The different types of leasing here are Financial lease, also known as capital lease or long term lease, here the lessee makes series of payment which exceeds the total cost of the equipment. This where both parties agree legally that the lessee will pay for the entire cost of the equipment and also include interest over a specified period of time.
The Lesser transfers to the Lessee, substantially all the risks and rewards incidental to ownership of the asset, whether or not the title is eventually transferred. Operating lease, which is a rental agreement is where the lessee is not obliged to pay for more than the original cost of the equipment during contractual period. Lesser will bear the maintenance expenses and taxes of the lesser. The Lessee has the the right to terminate the Lease at short notice without any significant penalty. Example is chartering of aircrafts and ships, along with crew,fuel and purport service.
Sales and Lease back is where The owner(Lessee) of the equipment sells it to a Leasing company (Lesser). The Lesser, leases the equipment back to the Lessee. The asset is generally sold at its market value. The firm makes periodical rental payment to the lesser. The ownership of asset rests with lesser. Leveraged lease; This involves three parties, lesser(equity investor), lessee and lender The Leasing company (Equity investor), buys the equipment, through substantial borrowing, and with full recourse to the Lessee and without recourse to it. The Lender obtains an assignment of the Lease and a first mortgage of he equipment.
A Trustee will act as an intermediary – on receipt of rentals,remits debt part to Lender and balance to Lesser Cross border lease: This is also known as international leasing or transnational leasing. This is referred to a lease transaction between the persons of two countries. The lesser and the lessee belong to two different countries. CASE STUDY Case study: Hash’s Restructuring in India Period: 1999-2004 Organization: HASH India Pub Date: Countries: India Industry: Banking Abstract: The case discusses the operations of HASH Group in India and the measures taken by HASH India in recent times to achieve a faster growth.
It discusses in detail the reorganization program launched by Booker, the CEO of HASH India to transform the conservative institution into an aggressive, performance-oriented one. The case discusses in detail various internal reorganization measures including the introduction of new work principles, downsizing, organizational reshuffling and greater focus on potential growth areas. Background The Hong Kong and Shanghai Banking Corporation Limited (HASH) entered India as early as 1959.
Despite being one of the oldest and well-established foreign banks, HASH had been lagging behind local private sector banks and there foreign banks in India in terms of business network and growth. Hash’s competitors and industry experts regarded it as a conservative bank that lacked competitive spirit. Commenting on HASH, the head of direct sales of one of its rival banks said, “HASH isn’t seen as being as aggressive as its rivals in the market. It has extremely good relationships with its branch customers and serves them very well, but it is just not seen as being aggressive in the rest of the market. Hash’s complacency was reflected in the bank’s financial performance. Local private sector banks like ICC and HEAD were far ahead of HASH in all easiness segments. When benchmark against foreign banks, HASH fared badly. Hash’s net profits fell by over 25 per cent for two consecutive years in the fiscal 2000-01 and 2001-02, while rival banks like Citibank posted a rise of 37 per cent in profits for the same period. On November 2002, Animal S K Booker (Booker) was appointed Group Manager and Chief Executive Officer (CEO) of the HASH Group in India.
Booker soon realized that HASH India followed a conventional approach to doing business and retained its old bureaucratic structure and culture. He believed that the much criticized ladybird work culture was the season for the lackluster financial performance of the bank. Booker decided to transform the banks work culture so that HASH could shed its bureaucratic and conservative image and gear up to face new challenges. He wanted HASH India to be proactive and aggressive like its competitors.
To achieve this, Booker concentrated on giving the bank a new direction by launching a major restructuring program. HASH is a leading global player in the banking and financial services industry. It is the third largest bank in the world in terms of market capitalization it provided a comprehensive range of financial services, namely, personal financial services, commercial banking, corporate investment banking, private banking and other related businesses. HASH was established in 1865 to finance the growing trade between Europe, India and China.
Scotland- born Thomas Sutherland (Sutherland), who worked for the Peninsular and Oriental Steam Navigation Company, established the bank. He found that there was considerable demand for local banking facilities in Hong Kong and on the Chinese coast. Sutherland established a bank in Hong Kong in March 1865, and another in Shanghai after a month. The banks’ headquarters were at Hong Kong. Soon, the bank opened branches around the world. The emphasis continued to be on strengthening the presence in China and the rest of the Asia- Pacific region.
By the end of the century, HASH emerged as the foremost financial institution in Asia. World War I (1914-1919), however, brought disruption and dislocation for many businesses. The asses saw a revival with HASH opening more branches. During World War II (1941-1945), the bank was forced to close many branches and its head office was temporarily shifted to London. After the war, the headquarters was shifted back to Hong Kong. The post-war political ND economic changes in the world compelled the bank to analyze and reorient its strategy for continued business growth.
The acquisition of the Mercantile Banked the British Bank of the Middle East (BOMB) in 1 959 laid the foundation for the present day HASH Group HASH in India Hash’s origins in India could be traced back to October 1853, when the Mercantile Bank of India, London and China was established in Iambi. Starting with an authorized capital of RSI 5 MN, the Mercantile Bank soon opened offices in London, Achaean (India), Colombo, Candy, Kola (India), Singapore, Hong Kong, Canton and Shanghai.
In the next 10 decades, the Mercantile Bank steadily expanded its geographical network and service offerings, keeping pace with the evolving banking and financial needs of customers. The Mercantile Bank was acquired by the HASH Group in 1959. The head office of Mercantile Bank at the Flora Fountain building in Iambi continued to be the head office of the HASH Group in India. In the asses, HASH decided to expand by acquisition and formation of its own subsidiaries. HASH introduced Indian’s first automated teller machine (ATM) in 1987.
In 2001, HASH opened the first bank branch in Pun (Western India) that remained open all 365 days a year. The Restructuring On his appointment, Booker’s approach was to focus on fine-tuning and executing existing strategies, rather than experimenting with new plans. He intended to take it slow and steady without radical changes. He said that “the people issue” was very important to him. Therefore, the key components of the restructuring programmers included introducing new work principles, downsizing, organizational reshuffling and focus on new growth areas.
New Work Principles Hash’s work culture was considered most bureaucratic among all foreign banks in India. Reportedly, the top management had a laid-back attitude towards work. An insider said, “There is a bunch of people at the top who aren’t very competent and who all play golf together. It is basically an old boucle’s. The Benefits The impact of the restructuring programmer was reflected by the improved financial performance of HASH (Refer Exhibit IV and V for the financial highlights of HASH).
For the financial year 2003-04, the assets per employee and net profit increased by 30 per cent; operating profit by 31 per cent and cost-to-income ratio came down from 47 to 43 per cent compared to the fiscal 2002-03. Personal financial services accounted for 36 per cent of total advances, against 31 per .NET in the previous fiscal. Hash’s retail assets doubled during this period from around a fourth to a third of its total assets. HASH expected that the retail business would grow by 40 per cent in the fiscal 2004-05.
Home loans business grew by 1 00 per cent; and the branches’ contribution comprised 30 per cent Looking Ahead Notwithstanding the benefits reaped from the restructuring, HASH was still a small player in several financial services businesses including asset management, home loans, stock broking, credit cards and retail banking in India. For instance, HASH Asset Management (India) Private Ltd. Munched in December 2002, had total assets under management amounting to RSI 540 bin by June 2004. Still, it was only the 1 10th largest asset management company (MAC) in India. The slow growth of advances was another problem for HASH.