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VIVEK COLLEGE OF COMMERCE

1 | P a g e ROLE OF FINANCIAL INSTITUTION IN STOCK MARKET

UNIVERSITY OF MUMBAI

PROJECT ON

ROLE OF FINANCIAL INSTITUTIONS IN STOCK MARKET

SUBMITTED BY

VAIBHAV SURESH MAHAMUNKAR

T. Y. B. COM. (FINANCIAL MARKETS)

SEMESTER V

ACADEMIC YEAR 2010-11

PROJECT GUIDE

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MR.DHAVAL PAREKH

VIVEK EDUCATION SOCIETY


SIDDHARTH NAGAR GOREGOAN (WEST)

MUMBAI- 400064.

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UNIVERSITY OF MUMBAI

PROJECT ON

ROLE OF FINANCIAL INSTITUTIONS IN STOCK MARKET

SUBMITTED BY

VAIBHAV SURESH MAHAMUNKAR

T. Y. B. COM. (FINANCIAL MARKETS)

SEMESTER V

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ACADEMIC YEAR 2010-11

PROJECT GUIDE

MR.DHAVAL PAREKH

VIVEK EDUCATION SOCIETY


SIDDHARTH NAGAR GOREGOAN (WEST)

MUMBAI- 400064.

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CERTIFICATE

I, Dhaval Parekh, hereby certify that Vaibhav Mahamunkar of Third Year

Bachelor of Commerce (Financial Markets), Vivek College of Commerce, has

successfully completed project on Role of Financial Insti tutions in Stock

Market in Semester V of the academic year 2010-11.

Internal Examiner External Examiner

Co-ordinator Principal

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D ECLARATION

I, Vaibhav Suresh Mahamunkar, student of Bachelor of Commerce (Financial

Markets) Semester V, Vivek College of Commerce, hereby declare that I have

completed the project on Role of Financial Institution in Stock Market in the

academic year 2010-11.

The information submitted is true and original to the best of my knowledge.

Signature Date:

VAIBHAV MAHAMUNKAR

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Acknowledgement

To list who all helped me is difficult because they are so numerous and the

depth is so enormous.

I would like to acknowledge the following as being idealistic channel and

fresh dimension in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.

I would like to thank my principal, Dr. Nandita Roy, for providing the

necessary facilities required for completion of this project.

I take this opportunity to thank our co-ordinator Mr. Mandar S. Thakur, for

his moral support and guidance.

I would also like to express my sincere gratitude towards my project guide

Mr.Dhaval Parekh whose guidance and care made the project successful.

I would like to thank my college library, for having provided various

reference books and magazines related to my project.

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Lastly, I would like to thank each and every person who directly or indirectly

helped me in the completion of the project, especially my parents and my

peers who supported me throughout my project.

Vaibhav Mahamunkar

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EXECUTIVE SUMMARY

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INDEX

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PROJECT WITH SUB - TO P ICS

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INTRODUCTION

A financial institution is an institution that provides financialservices for its clients or members. Probably the most important financialservice provided by financial institutions is acting as financial intermediaries.Most financial institutions are highly regulated by gover nment. Financialinstitutions provide service as intermediaries of the capital and debt markets.They are responsible for transferring funds from investors to companies inneed of those funds. Financial institutions facilitate the flow of moneythrough the economy. To do so, savings are pooled to mitigate the risk brought to provide funds for loans. Such is the primary means for depositoryinstitutions to develop revenue. Financial institutions in most countriesoperate in a heavily regulated environment as they are critical parts of countries' economies. Regulation structures differ in each country, buttypically involve prudential regulation as well as consumer protection andmarket stability. Some countries have one consolidated agency that regulatesall financial institutions while other have separate agencies for different typesof institutions such as banks, insurance companies and brokers. Some of the financial institutions also function as mediators in share markets and debtsecurity markets. There the principal function of financial institutions is tocollect funds from the investors and direct the funds to various financialservices providers in search for those funds.

Financial institutions deal with various financial activitiesassociated with bonds, debentures, stocks, loans, risk diversification,insurance, hedging, retirement planning, investment, portfolio managementand many other types of related functions. With the help of their functions,the financial institutions transfer money or funds to various tiers of economyand thus play a significant role in acting upon the domestic and theinternational economic scenario.

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For carrying out their business operations, financial institutionsimplement different types of economic models. They assist their clients andinvestors to maximize their profits by rendering appropriate guidance.

Financial institutions also impart a wide range of educational programs toeducate the investors on the fundamentals of in vestment and also regardingthe valuation of stock, bonds, assets, foreign exchanges, and commodities.

TYPES OF FINANCIAL INSTITUTION

The various financial institutions generally act as the intermediaries

between the capital market and debt market. But the service provided byfinancial institution depends on its type. The financial institutions are alsoresponsible to transfer funds from investors to the companies. Typically, theseare the key entities that control the flow of money in the economy.

y Commercial Banks y Credit Unions y Stock Brokerage Firms y Asset management Firms y Insurance Companiesy Finance Companiesy Building Societiesy Retailers

The services provided by the various types of financialinstitutions may vary from one institution to another. For example, the

services offered by the commercial banks are - insurance services, mortgages,loans and credit cards. The services provided by the brokerage firms, on theother hand, are different and they are - insurance, securities, mortgages, loans,credit cards, money market and check writing. The insurance companies offer - insurance services, securities, buying or selling service of the real estates,mortgages, loans, credit cards and check writing.

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The credit union is co-operative financial institution, which isusually controlled by the members of the union. The ma jor difference

between the credit unions and banks is that the credit unions are owned by themembers having accounts in it.

The stock brokerage firms are the other types of financialinstitutions that help both the corporations and indi viduals to invest in thestock market.

Another type of financial institution is the asset managementfirms. The prime functionality of these firms is to manage various securitiesand assets to meet the financial goals of the investors. Th e firms also offer fund management advice and decisions to the corporations and individuals.

M AJOR FINANCIAL INSTITUTIONS AND THEIR FUNCTIONS

Commercial Bank:

y Accepts both demand (checking) and time (savings) deposits.y Offers Interest-earning savings accounts against which checks can be written.y Offers money market deposit accounts, which pay interest at rates competitive

with other short-term investment vehicles.y It gives loans directly to borrowers or through the financial markets.

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Mutu al F u nd:

y Pools funds of savers and makes them available to business and governmentdemanders.

y Obtains funds through sales of shares and uses proceeds to acquire bonds andstocks.

y Creates a diversified and professionally managed portfolio of securities toachieve a specified investment objective.

y Thousands of funds, with a variety of investment objectives, exist.y Money market mutual funds provide competitive returns with very high

liquidity.

Sec u ri t ies Firm:

y Provides investment banking services by helping firms to obtain funds.y Provides brokerage services to facilitate the sales of existing securities.

Ins u rance Company:

y It is the largest type of financial intermediary handling individual savings.y Receives premium payments and places these funds in loans or investments to

cover future benefit payments.y Lends funds to individuals, businesses, and governments or channels them

throughthe financial markets.

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Credi t Union:

y Deals primarily in transfer of funds between consumers.y Membership is generally based on some common bond, such as working for

a given employer.y Accepts members savings deposits, account deposits, and money market

accounts.

Types/ Classifica t ion of Financial Ins t itut ions

We need to classify the financial institutions and this is done on such basis astheir primary activity or the degree of their specialization with relation tosavers or borrows with whom they customarily deal.

Banking and non-banking Ins t itut ions

According to one classification financial institutions are divided into thebanking and non banking ones. The banking institutions have quite a fewthings common with the non banking ones, but their distinguishing character lies in the fact that, unlike other institutions,

(a) They participate in the economys payments mechanism, i.e. theyprovide transactions services,

(b) Their deposit liabilities constitute a major part of national money supply

(c) They can as a whole create deposits or credit which is moneyIn other words the distinction between the two has been highlighted bycharacterizing the banking institutions as creators of credit and non -bankingas suppliers of credit. While the banking system in India comprises thecommercial banks and co-operative banks, the examples of non-bankingfinancial institutions are LIC, UTI.

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BANKING

Commercial banks - The commercial banks generally extend short-termloans to businessmen traders. Since their deposits are for a short period only,

they cannot land money for a long period. Ordinarily, these banks extendloans for a period between 3 to 6 month. These banks are not in a position togrant longterm loans to industries because their deposits are only for a shortperiod.

P u blic sec t or banks - The term public sector banks is used commonlyin India. This refers to banks that have their shares listed in the stock exchanges NSE and BSE and also the government of India holds majoritystake in these banks.

They can also be termed as government owned banks. Example: State bank of India

Private sector banks - Where as Private Sector Banks are those Banks wherethe management is controlled by Private Individuals and Government doesnot have any say in the management of these banks. Maximizing profit is thebasic motto.

Co-opera t ive Sec t or - The co-operative banking sector has beendeveloped in the country to replace the village moneylender, the predominantsource of rural finance, as the terms on which he made finance available havegenerally been harmful to the development of Indian agriculture. Althoughthe sector receives concessional finance from the reserve bank, it is governedby the state legislation. From the point of view of the money market, it maybe said to lie between the organized and unorganized market.

St a t e Co-opera t ive Banks - The state co-operative Bank is a federationof central co-operative banks and acts as a watchdog of the co -operativebanking structure in the state. Its funds are obtained from share capital,deposits, loans and overdrafts from the RBI. The state co-operative bankslend money to central co-operative banks and primary societies and notdirectly to farmers.

Cen t ral Co-opera t ive Banks - These are the federations of primarycredit societies in a district and are of two types those having a membershipof primary societies only and those having a membership of societies as wellas individuals. The funds of the bank consist of share capital, deposits, loansand overdrafts from State Co-operative Banks and joint stocks.

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Primary Co-opera t ive Credi t Socie t ies - The primary co-operativecredit society is an association of borrowers and non-borrowers residing in aparticular locality. The funds of the society are derived from the share capitaland deposits of members and loans from Central Co -operative Banks. Theborrowing power of the members as well as of the society is fixed. The loansare given to members for the purpose of cattle, fodder, fertilizers, pesticides,implements etc.

Land Developmen t Banks - The land Development Banks which areorganized in three tiers, namely, state, central and primary level , meet thelong term credit requirements of farmers for development purpose in purchaseof equipment like pump sets, tractors and other machineries, reclamation of land, fencing, digging up new wells and repairs of old wells etc.

NON BANKING

Apart from the banking financial institutions, there are a number of specialized financial institutions in India that have been incorporated for adefinite purpose. These institutions include the insurance companies, thehousing finance companies, mutual funds, merchant banks, credit reportingand debt collection companies and many more. Some of the specializedfinancial institutions in India are as follows:

Unit Trust of India (UTI)

Securities Trading Corporation of India Ltd. (STCI)

Industrial Development Bank of India (IDBI)

Industrial Reconstruction Bank of India (IRBI), now (Industrial InvestmentBank of India)

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Export - Import Bank of India (EXIM Bank)

Small Industries Development Bank of India (SIDBI)

National Bank for Agriculture and Rural Development (NABARD)

Life Insurance Corporation of India (LIC)

General Insurance Corporation of India (GIC)

Shipping Credit and Investment Company of India Ltd. (SCICI)

Housing and Urban Development Corporation Ltd. (HUDCO)

National Housing Bank (NHB)

Governmen t All those government concerns which are dealing in moneymarket and capital market but do not comes under Indian Banking Act 1949umbrella example post offices, PP F.

P u blic Sec t or All those concerns which are owned by public andgovernment (where more than 50% control is in government hand) areworking in financial system for the flow of finance.

Priva t e Sec t or - Private sector non banking organization means anyconcerns controlled by individuals and where no direct control of government. These institutions mainly form for profit maximization.

ROLE OF FINANCIAL INSTITUTIONS

The Indian Financial Institutions comprises of an impressive network of banks, other financial and investment institutions, offering wide range of products and services which together function in fairly developed capital andmoney markets. As such financial institutions have come to occupy animportant role in the process of economic development.

Deposits are very important part in any economy. Every participator of economy used to deposits his money in banks. Banks not only seen bydepositors as a safe place but also work as a place to keep money for investment

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In Savings- Savings are the habits of human being. People save their part of earning for securing future requirements. Banks are the main source toincrease habit of saving. Banks provide return on depositors savings andbanks utilize depositors savings for credit requirement of people.

In Banking- Financial Institutions role is vital in capital market as well asin money market. Banks are the most active participator of money market.Banks accept deposits and savings of citizens and provide return in form of interest. Banks also play role in meeting the requirement of loan of agriculturesector and industry. Co-operative banks are working in rural areas to promoteas well as to development agriculture.

In Agric u ltu re - Agriculture is prime sector of Indias economy. Morethan 70% of population is directly or indirectly giving their contribution inagriculture. Financial Institutions significance can be view in form of Co -operative banking in agriculture sector. No doubt since independence we have

become self dependent in farming but also we are exporting agro products.

In Small Ind u st ry - Financial institutions role in small industry is toprovide easy loans with government support. SSI development always remainkey interest are of government because of a large population of middleincome group who want to start business..

In Ind u st ry Financial Institutions are shaping every industry of nationlike Pharma, auto, retail, energy, infrastructure, education etc. F.I areproviding credit facilities to enhance economy size.

In Trade Trade are now not only flourishing within country but alsocompanies are doing M&A (merger and acquisition) outside of country. Inforeign trade and M&A huge money is demanded by organizations here F.Icome as a vital source in providing credit facility

In Employmen t F.I play role of collectors of deposits andsimultaneously bring money in economy by providing loan facilities. As themoney come in market new productive activity get start and chance of employment generate.

In Level of standard of living

F.I are providing home loans, car loans,consumer durables loan just to increase living standard of people. Now wecan see colour television, two wheelers in every second home. F.I role is toincrease purchasing power of people to provide options to spend in proces s toincrease living standard.

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In R u ral Developmen t F.I helping in rural development, they aremeeting money requirement of farmers. Rural areas require differentstrategies and policies for operations so F.I makes separate plans of bankingas rural co-operative bank can be seen its perfect example.

In Economic Prosperi t y - F.I foremost role is economic prosperitywhich is possible by smooth functioning of economy. Strong banking systemand fundamentals leads an economy to gain good GD P

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DIFFERENT TYPES OF BANKS WHICH ACT ASFINANCIAL INSTITUTION

y NATIONAL BANK FOR AGRICULTURE AND RURALDEVELOP M ENT (NABARD)

NABARD, an apex development bank, was set up on the recommendations of CRAFICARD Committee on July 12, 1982 under NABARD Act 1981 with acapital of Rs.100 crore contributed by Central Govt. and RBI, with its mainoffice in Mumbai, by merging the Agriculture Credit Dept and RuralPlanning and Credit Cell of RBI and took over the entire functions of Agriculture Refinance and Development Corporation (ARDC).

NABARD is managed by Board of Directors consisting of Chairman,Managing Director other directors.

NABARD raises funds through National Rural Credit - Long Termoperations, National Rural Credit-Establishment fund, through bonds anddebentures guaranteed by Central Govt, borrowing from RBI, Central Govt.or any other organisation approved by Central Govt and funds fr om externalsources.

It credit functions include providing credit to agriculture, small and villageand cottage industries through banks by way of refinance facilities tocommercial banks, RRBs, Coop Banks, Land Development Banks and other Financial Institutions like KVIC. Its developmental functions are co -ordination of various institutions, acting as agent of Govt. and RBI, providingtraining and research facilities. The regulatory functions include inspection of RRBs and Coop Banks, receipt of returns and making of recommendations for opening new branches.

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y EXPORT I M PORT BANK OF INDIA

It is apex institution for co-ordinating the working of institutions in Indiaengaged in financing exports and import of goods and services. With initialauthorized capital of Rs. 200 crore (increased to Rs.500 and then to Rs.2000crore) EXIM Bank was established on Jan 01, 1982 (and started functioningw.e.f March 01, 1982) under Export Import Bank of India Act 1982, whichtook over the export finance activities of IDBI. It raises funds by way of bonds and debentures, borrowing from RBI or other institutions, raisingforeign deposits.

It functions include:

-Direct finance to exporter of goods.

-Direct finance to software exports and consultancy services.-Finance for overseas joint ventures and turnkey construction project-Finance for import and export of machinery and equipment on lease basis-Finance for deferred payment facility-Issue of guarantees-Multi-currency financing facility to project expo rters.-Export bills re-discounting-Refinance to commercial banks in India-Guaranteeing the obligations.

y SM ALL INDUSTRIES DEVELOP M ENT BANK OF INDIA(SIDBI)

SIDBI was established under SIDBI Act 1988 and commenced its operationswef April 02, 1990 with head quarters in Lucknow and branches all over thecountry, as a subsidiary of IDBI. It took over the IDBI business relating tosmall scale industries including National Equity Scheme and Small In dustries

Development fund. The objective of establishment of SIDBI, in particular, isto strengthen and broad-base the existing institutional arrangement to meet therequirement of SSI and tiny industries.

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Its functions include:-Administration of SIDF and NEF for development and equity suppor t tosmall and tiny industry.-Providing working capital through single window scheme-Providing refinance support to banks/development finance institutions.-Undertaking direct financing of SSI units.-Coordination of functions of various institutions engaged in finance to SSIand tiny units.

y NATIONAL HOUSING BANK (NHB)

NHB, the apex bank for Housing, was established on July 09, 1988 under

NHB Act 1987, as a wholly owned subsidiary of RBI with head quarters inNew Delhi. The bank was set up with the main purpose of setting up of aninstitution to operate as a principal agency to promote housing financeinstitutions and to provide financial and other support to these institutions.NHB can raise sources by issue of bonds and debentures, borrowing f romRBI under short term loans and long term operations, borrowing from Centralgovt and other approved institutions.

Its functions include:

-P

romotion and development of housing finance institutions.-Refinance to banks and other housing finance institutions for credit facilitiesgranted by them for housing.-Inspection of books of accounts of housing finance institutions-Technical, administrative and advisory assistance to housing financeinstitutions.-Providing underwriting and guarantee facilities to housing financeinstitutions.-Arranging financing and resources for institutions engaged in housingfacilities.-Advising Central and other govt. in the matter of housing and housingfinance.-Collection and publication of information and d ata relating to housingfinance.-Maintaining control over corporate housing finance institutions.

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y INDUSTRIAL INVEST M ENT BANK OF INDIA (formerlyIRBI)

IIBI was initially set up as Industrial Reconstruction Corporation Limitedduring 1971 when it was renamed Industrial Reconstruction Bank of India

w.e.f Mar 20, 1985 under IRBI Act 1984 to take over the function of IRC.During 1997 the bank was converted to a joint stock company by naming itIndustrial Investment Bank of India.Its earlier functions were to provide finance for industrial rehabilitation andrevival of sick industrial units by way of rationalisation, expansion,diversification and modernisation.

y INDUSTRIAL CREDIT AND INVEST M ENTCORPORATION OF INDIA (ICICI)

ICICI was set up during 1955 as a private company with a view to providesupport to industry in India by way of rupee and foreign currency loans,particularly the private international investment and World Bank funds toassist the industry in the country in private sector.

It functions include:

-Assistance to industrial undertakings for new projects, expansion,modernisation, diversification etc. in the shape of rupee loans or foreigncurrency loans.-Subscription and underwriting of capital issues-Guaranteeing the payment for credits.-Merchant banking, equipment leasing and project counselling.

It floated a number of institutions successfully which include credit ratingagency CRISIL, ICICI Banking Corporation, SCICI (since merged with it) aMutual Fund etc. During Sept 1998 it changed its name to ICICI Ltd.

Of late; it has started providing working capital support to industrialundertakings.

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y INDUSTRIAL DEVELOP M ENT BANK OF INDIA (IDBI)

IDBI is the apex institution in the area of long term industrial finance. It wasestablished under the IDBI Act 1964 as a wholly owned subsidiary of RBIand started functioning on July 01, 1964. Under Public Financial InstitutionsLaws (Amendment) Act 1976, it was delinked from RBI. IDBI is engaged indirect financing of the industrial activities as well as in re-finance and re-discounting of bills against finance made available by commercial banksunder their various schemes.

The objectives of this institution are to create a principal institution for longterm finance, to coordinate the institutions working in this field for planneddevelopment of industrial sector, to provide technical and administrativesupport to the industries and to conduct research and development activitiesfor the benefit of industrial sector.

It raises funds by way of market borrowing by way of bonds and deposits,borrowing from Govt. and RBI, borrowing abroad in foreign currency andlines of credit.

Its functions include:- direct loans (rupee as well as foreign currency) to industrial undertakings asdefined in the Act to finance their new projects, expansion, modernisationetc.

- soft loans for various purposes including modernisation and under equipment finance scheme- underwriting and direct subscription to shares/debentures of the industri alcompanies.- Sanction of foreign currency loans for import of equipment or capitalgoods.- Short term working capital loans to the corporate for meeting their workingcapital requirements.- refinance to banks and other institutions against loa ns granted by them.

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OTHER FINANCIAL INSTITUTION

y INDUSTRIAL FINANCE CORPORATION OF INDIA L t d(IFCI)

IFCI was established under IFCI Act 1948 during July 1948 as Indias firstdevelopment bank. The main objective for which IFCI was established, are tomake medium and long term credit available to the industrial undertakingsand to assist them in creation of industrial facilities.

Its functions include:

-Direct financial support (by way of rupee term loans as well as foreigncurrency loans) to industrial units for undertaking new projects, expansion,modernisation, diversification etc.

-Subscription and underwriting of public issues of shares and debentures.

-Guaranteeing of foreign currency loans and also deferred payment

guarantees.

-Merchant banking, leasing and equipment finance .

During 1994, IFCI was converted into a joint-stock company and came outwith a public issue of shares. It is managed by a Board of Directors. It floatedinstitutions such as TFCI, ICRA etc.

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ROLE OF PRIVATE/CO MM ERCIAL BANKS AS AFINANCIAL INSTITUTION IN DETAIL

ICICI Bank

y OVERVIEW OF THE BANK

ICICI Bank services the financial sector for the entire set of bankingrequirements and provides a complete range of solutions. The FinancialInstitutions and Syndication Group (FISG) is responsible for ICICI Bank'srelationship with the financial sector.Under this, the Bank caters exclusively to the needs of

y Domestic Financialy Institutionsy Banksy

Mutual Fundsy Insurance Companiesy Fund Accounting

The FISG has built strong relationships through various interactive measures,like seminars, training programs, sharing of market information and viewswith clients, organising the Bank C.E.Os' Forum, etc .

y SERVICES PROVIDED BY THE BANK TO ITS CLIENTS:

1. Transac t ion Banking

The Bank delivers world class banking services to financial sector clients. Itscurrent roaming accounts empowers with 'Anytime, Anywhere Banking'. Its

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comprehensive collection and payment services span India's largest CMSnetwork of over 4,500 branches. The bank provides correspondent bankingtie-ups with foreign banks to assist them in their India-related businesses.

2. Loan Syndica t ion

The FISG is responsible for syndication of loans to corporate clients. ICICIensures the participation of bank and financial institution for the syndicationof loans. Some of the products syndicated are:

y Project Financey Corporate Term Loansy Working Capital Loansy Acquisition Finance, etc

3. Sell Down

ICICI Bank is a leader in the securitisation and asset sell-down market. Fromits portfolio, the FISG offers different products to its clients in this segment.The products are:

y Asset-Backed Securities (ABS)y Mortgage-Backed Securities (MBS)y Corporate Loan Sell-downy Direct Loan Assignment

4. Bu yo ut s

As a part of a risk-diversification and portfolio-churning strategy, ICICI Bank offers buyouts of the assets of its financial sector clients.

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5. Reso u rces

The Bank also raises resources, from clients, for internal use by issuing agamut of products, which run from Certificates of Deposit (CDs) to Termdeposits to Term Loans.

y ICICI BANK IN CAPITAL M ARKET

y Capi t al M arke t s

ICICI Bank is an active capital market intermediary. It is one of the promotersof several leading institutions in the country including National Stock Exchange of India Limited (NSE), National Commodities & DerivativesExchange Limited (NCDEX), Central Depository Services (India) Limited(CDSL). Since 2000, the Bank has also been one of the clearing andsettlement banks for NSE and Bombay Stock Exchange Limited (BSE). TheBank also took up the clearing and settlement banking status for NCDEX inFY 2004 and has recently got the clearing and settlement banking status onthe Multi Commodity Exchange of India Limited (MCX) and SpotExchanges.

y Primary M arke t s

Collecting BankersICICI is the leading collecting bankers (market leader) to Public/ Rights/Private Placement/ Mutual Funds/ Capital Gains Bonds issues. ICICI Bank isthe only Bank to cross Rs. 1 trillion Collections. It is the market leader in I POCollection with a 34% share and 65% market share in Retail and HNISegment.

Escrow and Paying Bankers :The bank acts as escrow and paying bankers to Mergers and Acquisitions.

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y Secondary M arke t s

As mentioned above, ICICI Bank acts as a 'clearing and settlement' banker for members of NSE, BSE, NCDEX, MCX and Spot Exchange. ICICI Bank alsooffers following products/services:

y Cash Management Services,y NRI accounts,y Payment gateway,y Portfolio management services accounts,y Supply Chain Management Account,y Corporate Internet Banking.

Clearing and Se tt lemen t Bankers

The Bank is the leading Clearing and Settlement Bank for The National Stock Exchange of India (NSE) and The Bombay Stock Exchange (BSE), and offersa range of products and services in the capital markets. It is also a Clearingand Settlement Bank for other Exchanges in India namely The NationalCommodity and Derivatives Exchange (NCDEX), The Multi -Commodity

Exchange (MCX) and Spot Exchange of India.

Bank G u aran t ees

The Bank issues bank guarantees to brokers on both the Capital Market andCommodity Market segment favouring the NSE/ BSE/ NCDEX/ MCX/ Spot

Exchange to meet Security Deposit/ Base Capital and Margin requirements of the exchanges and Professional Clearing for trading members clearing their trades through them.

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Sec u red Overdraf t To meet working capital requirements of the brokers on the Capital Marketsegment, the Bank provides after thorough credit appraisal secured overdraftin the form of overdraft against shares.

In t ra-day F u nding Intra-day Funding at the Bank's discretion to meet Exchange obligations(against cheques deposited in clearing or payouts to be received from theother exchanges) and client.

Temporary Overdraf t sThe Bank at its discretion provides Temporary Overdrafts to meet exchangeobligations and for any temporary cash flow mismatches.

CUSTODIAL SERVICES OF ICICI

As the largest private sector bank in India and the second largest bank in thecountry, ICICI Bank is a one-stop shop for all custody solutions. Backed bytop of the range CMS systems, ICICI Bank is able to service a range of customer segments.

The ICICI Bank Advan t age

y India's largest private sector bank and second largest bank in the country ,y Credit rating at par with sovereign rating,y State-of-the-art clearing, settlement and risk management systems ,y SWIFT interface for communication,y Seamless delivery through focused client relationship group with a fall back ,y Online viewing of reports through web enabled reporting and Internet

Banking,y Quick turnaround time for customer queries,y Comprehensive disaster recovery plan.

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C u st omer Segmen t s

y Foreign Institutional Investors (FIIs),

y Foreign Venture Capital Funds,y Overseas Private Equity Funds,y ADR/ GDR arbitrageurs (non - resident entities),y Overseas Depository Banks for GDR/ADR issues,y Pension Funds and Trusts,y Domestic Venture Capital Funds,y Insurance Companies,y Portfolio Management Companies,y

Mutual Funds,y Domestic and Foreign companies,y Trading members on stock exchanges,y High net worth Individuals.

CUSTODIAL SERVICES

ICICI Bank is a one stop shop offering end-to-end custodial solutions for:

1. Eq u it ies and Fixed income Ins t r u men t :

ICICI Bank offers a complete range of custodial services and ensures highprocessing standards.

Services offered are:

y Application for trading codes to stock exchanges ,y Guidance and application for foreign investments with regulators ,y Strong Straight Through Processing (ST P) platform for trade confirmation and

settlements; receipt and delivery of securities in both physical anddematerialised form,

y Dividend and other corporate benefit tracking and collection ,y Customised Information system,y Web enabled reporting system,

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y Computer controlled storage vaults and premises for safekeeping of thesecurities,

y Proxy and Nominee Services (where permitted).

The ICICI Bank Advan t age

y Mature ST P Platform: It offers a fully developed ST P platform for seamlessexchange of trading information from customers and brokers. This facilitatestimely settlement of trades and enhances the efficiency of the settlementprocess with minimal manual intervention.

y Fund settlement and transfer: Integrated fund transfer and settlement systemy Online functionalities: Electronic banking and availability of portfolio

statements on web. Online uploading and downloading of reports.y Corporate Benefit Entitlements: Online forthcoming corporate benefits report,

entitlement collection report and follow up for all outstanding benefits.y Forex Remittances: Speedy processing of inbound and outbound remittances

and competitive rate for forex conversion.y Customised Reporting : Apart from providing an extensive suite of standard

reports, systems are geared with customised reporting for meeting clientrequirements as well as equipped to talk to a variety of customer systems .

Repor t s (Web based Repor t ing)

y Holding Statement.y Asset Valuation.y Transaction Report.y Bank Statement.y Forthcoming Corporate Actions Report.

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2 . Exchange Traded Deriva t ives:

The ever-changing face of the stock market has made derivative instrumentsan important component of all investment portfolios. India is one of the fewmarkets in the world simultaneously offering the stock options and futures

and Index Options and Futures. Currently, the average daily traded volume inthe derivative segment is four times the existing cash market volume of NSE.ICICI Bank is a registered Professional Clearing Member ( PCM) for theDerivatives segment on both National Stock Exchange (NSE) and BombayStock Exchange (BSE). ICICI Bank is a pioneer and has set processingstandards in derivatives clearing business.


y Application for trading codes to stock exchanges .y Calculation and monitoring of margins - Initial and Mark to Market (MTM).y Monitoring of applicable position limits.y Trade give up.y Settlement of trades.y Reporting of fund position for margin obligations.y Customised Information system.y Web enabled reporting system.

Core S t reng t hs of ICICI

y St a t e-of- t he-ar t Risk M anagemen t Sys t em: Fully integrated risk management system ensuring quick and reliable monitoring of available andrequired margin and position limits.

y St r u ctu red Prod u ct s: Structured products to meet the collateral requirementsas defined by the exchange.

y Online monitoring tools for Mark To Market margin.

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y Banking arrangemen t wi t h all t he major c u s t odian banks inIndia: Instant exposure is provided to the client anytime during the tradinghours.

y C u st omised Repor t ing: Customised reporting for meeting cl ientrequirements.

y Dedica t ed Clien t Rela t ionship Personnel: Experienced RelationshipManagers available for extended hours.

Daily Repor t s (Web based repor t ing)

y Positions limit utilisation report.y Margin movement report.y Daily activity summary report (Scrip wise day's trade, open-close position and

MTM).y Scrip wise margin rates report.

3. GDR/ ADR/ E u ro Iss u es and Arbi t rage:

ICICI Bank is a custodian to the largest number of ADR/ GDR issuance from

India. ICICI bank is actively involved in committee instituted by regula torsfor policy formulation and operative guidelines on two way fungibility.


y Delivery and settlement of underlying shares upon cancellation of ADR/GDR.

y Re-issuance of ADR/ GDR.y Reporting of corporate benefit entitlements in cash or kin d.

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y SWIFT based information exchange systemy Local custodians for majority of actively traded ADR/ GDR issues by the

Indian companies facilitating instant credit of underlying shares intoCustodial account in India

y Quick head room informationy Quick processing of cancellation and re-issuance requests through fully

integrated and automated systems

4. F u nd Acco u n t ing:

ICICI Bank provides discretionary fund accounting services as a valueaddition to our custody clients.


y Investment Accounting: For all purchases and sales along with the profitand loss

y Valuation for all securities: Equity, debt, gilt, money mark instruments,derivatives etc

y Unit Capital Accounting: For recording capita l inflows and outflows fromthe fund/portfolio

y Income and expense accounting: Daily accrualsy

NAV Computationy MIS and Regulatory Reportingy Reconciliation: Reconciliation with third parties like registrar, bank or

custodian,Regulatory reporting,Insurance Regulatory and Development Authority (IRDA),Reserve Bank of India (RBI),Securities and Exchange Board of India (SEBI).

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Cons t itu en t Su bsidiary General Ledger (CSGL):

CSGL facilitates large banks and financial institutions to hold their

investments in Government securities and Treasury bills in the electronicbook-entry form. Such institutions can settle their trades for securities held inSGL through a Delivery-Versus- Payments (DV P) mechanism, which ensuresmovement of funds and securities simultaneously. ICICI Bank offers openingof SGL accounts and facilitates investment in Government Securities and T -Bills.


y Trade Confirmation & Settlementy Dematerialisation and Rematerialisation: Conversion of physical

certificates into the electronic book entry format and vice versay Corporate Action: Tracking and collection of corporate benefit

entitlements.

This also includes:

Primary Market Auctions

Open Market Operations/ Value Free Transfer

Calculation of Interest and Redemption


y Fully Integrated Fund and Settlement system eliminating settlement risk

y

Completely web based reporting

role of fi

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