QB _16 marks

ANAND INSTITUTE OF HIGHER TECHNOLOGY
KAZIPATTUR , CHENNAI
QUESTION BANK
MERCHANT BANKING AND FINANCIAL SERVICES/BA728
PART –A TWO MARKS QUESTION AND ANSWER

UNIT – I – MERCHANT BANKING

1. Define Merchant banking.
Merchant banking may be defined as, “an institution which covers a wide range of activities such as management of customer services, portfolio management, credit syndication, acceptance credit, counseling, insurance, etc.”

2. What is portfolio management?
Portfolio refers to investment in different kinds of securities such as shares, debentures or bonds issued by different companies and securities issued by the government.

3. Define Merchant banker.
Merchant banker may be defined as, “any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to the securities as a manager, consultant, adviser or rendering corporate advisory service in relation to such issue management”.

4. State the qualities required of a merchant banker.
 Ability to analyze various aspects such as technical, financial and economic aspects concerning the formation of an industrial project.
 Knowledge about the various aspects of capital markets, trends in stock exchange etc.,
 Innovative approach in developing capital market instrument to satisfy the ever changing needs of investing public.


5. Write a note on project counseling.
The division suggests suitable locations for the projects, technical consultants or collaborators, financing pattern, tax benefits, etc.,

6. State the problems of merchant bankers in India.
SEBI guidelines have authorized merchant bankers to undertake issue related activities only with an exception of portfolio management.
SEBI guidelines stipulate a minimum net worth of Rs. 1 core for authorization of merchant bankers.
Non co-operation of the issuing companies in timely allotment of securities and refund of application money is another problem of merchant bankers.
7. Write a note on Non-Resident Investment.
The services of merchant bankers include investment advisory services to NRI in terms of identification of investment opportunities, selection of securities, investment management etc. they also take care of the operational details like purchase and sale of securities, securing necessary clearance from RBI for repatriation of interest and dividend.

8. Classify financial assets giving examples.
Financial assets can be classified differently under different circumstances. One such classification is:
 Marketable assets (eg) Shares of listed companies, Government securities, Bonds of public sector undertakings
 Non- marketable assets (eg) Bank deposits, Provident funds, pension funds, NSC, insurance policies.

9. What is a money market?
Money market is a market for dealing with financial assets and securities which have a maturity period up to one year. In other words, it is a market for purely short term funds.

10. What is a capital market?
The capital market is a market for financial assets which have a long or indefinite maturity. Generally, it deals with long term securities which have a maturity period of above one year.

11. What is Performance guarantee?
Performance guarantees cover the payment of earnest money, retention money, advance payments, non-completion of contracts, etc.

12. State the functions of FEMA?
 To make necessary arrangements to transfer purchasing power from one country to another
 To provide adequate credit facilities for the promotion of foreign trade
 To cover foreign exchange risks by providing hedging facilities.

13. What do you mean by indirect securities? Give an example.
Secondary securities also known as indirect securities. These are securities issued by some intermediaries called financial intermediaries to the ultimate savers. Eg. UTI and Mutual funds issue securities in the form of units to the public and the money pooled is invested in companies.

14. What is venture capital financing?
Venture capital is another method of financing in the form of equity participation. A venture capitalist finances a project based on the potentialities of a new innovative project. Much thrust is given to new ideas or technological innovations. Indeed it is a long term risk capital finance high technological innovations.

15. What is market making?
Market making is a process of making two way quotes i.e. buy as well as sell quotes for the same scrip by the sponsor. The maximum permissible spread between the buy and sell is 10%. Compulsory market making has to undertaken by the sponsor of the scrip for a minimum period of 18months from the date of trading. At the end of 18 months, the sponsor may with draw for market making functions, provided an alternate compulsory market has been assigned for the scrip. The sponsor will arrange one or more member/dealer to make market in the scrip sponsored by it, known as Additional maker.

16. What is depository system?
The OTCEI’s unique depository system enables convenient and faster settlement for investors. The OTCEI’s depositors transfers delivery electronically to the purchaser as soon as the trade is completed.

17. State the features of OTCEI.
 It is a national ring less and computerized exchange.
 As opposed tot the traditional ring in the stock exchange
 Trading on the OTCEI takes place through a net work of computers of OTC dealers located at different places with in the same city and even across cities.

18. State the objectives of NSE.
 To establish nation wide trading facility for equities, debts and hybrids.
 To facilitate equal access investors across the country.
 To provide fairness, efficiency and transparency to the securities trading.

19. Comparison between Stock Exchange, OTCEI, and NSE.

S.NO BASIS OF POINT STOCK EXCHANGE OTCEI NSE
1 Membership Individuals, Firms & Corporate Corporate only Individuals, firms & corporate
2 Method of Training Floor based Screen based code driven Screen based order driven
3 System of Trading Quote-driven manual Computers linked to central OTCEI through telephone lines Computer linked by satellite through VSAT
4 Settlement T+14 T+3 rolling settlement Same day to T+5 in WDM standard Delivery in Equity market
5 Transparency NIL Ensured Total transparency
6 Intermediary Jobber needed Not needed Not Needed.




20. Write a note on corporate counseling.
Corporate counseling covers the entire field of merchant banking activities viz., project counseling, capital restructuring, project management, public issue management, loan syndication, working capital, fixed deposit, lease financing, acceptance credit etc.










































UNIT –II - ISSUE MANAGEMENT

1. Write a very short note on the role of Merchant banker.
Merchant banker, it can be observed that he is the most critical link between a company raising funds and the investors. He plays the role of a promoter, advisor, rehabilitator and an agent or intermediary for corporate enterprises. He translates the ideas into ventures by providing a number of promotional activities such as identification of projects, preparing feasibility reports, obtaining government bonds, raising fund for the project.
2. What are the future appraisal projects of merchant banker?
A merchant bank functions as a promoter of industrial enterprises in India. He helps the entrepreneur in:
 Conceiving an idea
 Identification of projects
 Preparing feasibility reports
 Obtaining government approvals, and incentives
 Technical assistance
 Financial collaborations and joint ventures and
 Economic appraisal
3. Define capital Structure.
According to Weston and Brigham, “Capital structure is the permanent financing of the firm represented primarily long- term debt, preferred stock and common equity, but excluding all short –term credit. Common equity includes common stock, capital surplus and accumulated retained earnings.”
4. State the fundamental patterns of capital structure.
The capital structure of a new company may consist of any of the following forms:
 Exclusive equity
 Equity and preferred stock
 Equity bonds
 Equity, bonds and preferred stock
5. What is optimal Capital structure?
The optimal capital structure may be defined as “that capital structure or combination of debt and equity that leads to the maximum value of the firm.”
6. What is capital gearing?
The term capital gearing refers to the relationship between equity capital (equity shares plus reserves) and long term debt. It may be planned or historical, the latter describing a state affairs where capital structure has evolved over a period of time, but not necessarily in the most advantageous way.





7. State the various types of designing capital structure instruments.
The various capital structure instruments used by corporate entities for raising resources are as follows:
1. Preference shares
2. Equity shares
3. Non – voting equity shares
4. Cumulative convertible preference shares.
5. Company fixed deposits.
6. warrants
7. Debentures and Bonds.
8. Write a note on public issue management.
The management of securities of the corporate sector offered to the public on a regular basis, and existing share holders, on a right basis, is known as “Public issue management.” Issue management is an important role of merchant bankers and lead managers.
9. What is the role of an issue manager as regards public issue management?
The merchant banker as an issue manager is helpful in the following ways:
 Easy floatation
 Financial consultant
 Underwriting
 Market makers
 Due diligence
 Coordination
 Liaison with SEBI
10. State the functions performed by the merchant banker in connection with management of public issue of corporate enterprise?
 Obtaining approval for the issue from SEBI
 Arranging for underwriting the proposed issue
 Preparation of draft and finalization of the prospectus and obtaining its clearance from the various agencies concerned.

11. State the role of registrars in public issues.
The Registrars work can be broadly divided into categories enumerated below:
 Pre- issue Activities
 Issue Activities
 Post issue Activities
12. Write a note on Dematerialization.
Before public or rights issue or an offer of sale of securities, the company should arrange for dematerialization of securities already issued or proposed to be issued. Investors should be given the option to receive the share certificates or hold them in dematerialized form.
13. State the SEBI guidelines relating to the public issue.
I. Eligibility norms for issue of securities
II. Pricing by companies issuing securities
III. Promoter’s contribution and Lock – in requirements
IV. Pre issue obligations.
14. Write a note on IPO.
The public issue made by a corporate entity for the first time in its life called Initial public offer (IPO). Under this method of marketing, securities are issued to successful applicants of the orders placed by them, through their brokers.
15. Write a note on Book-building.
A method of marketing the shares of a company where by the quantum and the price of the securities to be issued will be decided on the basis of the “bids” received from the prospective share holders by the lead merchant banker is known as “book-building method.”
16. Write a note on ESOP (Employee stock option scheme).
A method of marketing the securities of a company where by its employees are encouraged to take up shares and subscribe to it is known as “STOCK OPTION.”
17. What are bought – out Deals?
A method of marketing of securities of a body corporate where by the promoters of an unlisted companies make an outright sale of a chunk of equity shares to single sponsor or the lead sponsor is known as Bought out- deals.
18. What is under writing?
Under writing is a guarantee given by the underwriters to take up whole or part of the issue of securities not subscribed by the public? It is a marketing technique where by corporate enterprises are able to sell their securities to the public and there by achieve success in the public issue. The service is utilized by corporate in order to procure the necessary funds. The agreement between the issuing company and the financial intermediary, called the underwriter, whereby sale of a certain quantum of securities is guaranteed for the issuing company is known as underwriting agreement. The under writer works for a commission called underwriting commission.
19. What are the types of underwriting?
 Firm underwriting
 Sub- under writing
 Joint underwriting
 Syndicate underwriting.
20. What is a grey market?
When securities are not sold through prospectus, it is a case of “grey market placement”. In the grey market, trading takes place in securities much before official listing. The modus operandi in grey market is soliciting through post or print media, or door-to-door, and interested parties to purchase shares in private placement. While share of new companies are sold at par or at nominal premium, in the case of shares of existing and profit making companies, premium could be very high. The brochure that normally accompanies the application presents a rosy picture and does not convey gestation period or risk involved. The grey market exists with the active connivance of promoters. They sell shares out of their quota and profit from any premium collected.
21. Who is a portfolio manager?
Port folio manager means any person who pursuant to a contract or arrangement with a client, advises or directs or under takes on behalf of the client(whether as a discretionary portfolio manager or otherwise) the management or administration of a portfolio securities or the funds of the client, as the case may be.
22. What is meant by the term credit syndication?
A project financing service offered by merchant bankers where by financial facilities are organized and produced from financial institutions, banks, or other lending agencies is known as “credit syndication service.”
23. What are the major services rendered by merchant bankers as regards credit syndication.
 Ascertainment of promoter details
 Ascertainment of cost details
 Comparison of cost details
 Identification of funding sources
 Ascertainment of loan details
 Furnishing beneficiary details
 Making application
 Project appraisal
 Compliance for loan disbursement
 Documentation and creation of security
 Pre- disbursement compliance.
24. Write a note on the syndication of working capital funds by merchant bankers.
Merchant bankers seek to provide working capital loans for both new and existing industrial units. Working capital funds are determined with reference to such things as production schedule, sales and cash generation though taking into consideration various other factors including utilization of capacity and requirement of raw material. Besides, the following are the functions of a merchant banker as regards the extension of syndicated working capital loans.
25. What are the different types of working capital available for a firm?
 Cash credit
 Overdraft
 Demand loans
 Bill financing
 Letter of guarantee
 Letter of credit.














UNIT – III
1. Define Leasing.
Dictionary of Business and Management defines, “Lease is a form of contract transferring the use or occupancy of land, space, structure or equipment, in consideration of a payment, usually in the form of a rent.”
2. What are the different types of leasing?
 Financial lease
 Operating lease
 Leverage lease
 Sale and lease back
 Cross border lease.

3. What are the terms used in a lease agreement?
i. Lessor : The party who is the owner of the equipment and who gives it for lease to other party for payment of a periodical amount.
ii. Lesee : The party who obtains the equipment for the use for which he pays that is on lease.
iii. Lease property : The subject of the lease, the asset, article or equipment that is on lease.
iv. Terms of lease : This refers to the lease period for which the agreement will be in operation.
v. Lease rentals : This refers to the consideration for lease. This may be considered with –
 Interest on lessor investment
 In case of any maintenance of the equipment by the lessor that will also be included.
 Depreciation of the asset
 Servicing changes or packaging charges for providing the above services.
4. List out the legal aspects involved in leasing.
 Details of contracting parties. i.e. lessor and lessee
 Details of the asset or equipment or property which is leased
 Terms of lease
 Rent as part of lease
 Termination of lease
5. Write a note on direct lease.
Direct lease is one where in the owner of the equipment and the lessor are two different parties. Direct lease of two types-
i. Bipartite agreement
ii. Tripartite agreement.





6. How does financial lease differ from operating lease.
S.NO FINANCIAL LEASE OPERATING LEASE
1. The asset is procured purely for the benefit of the lessee and the lessor has lesser benefit compared to the lessee. The asset is meant for a number of lessees.
2. The risk and benefit of the asset is passed on to the lessee and only ownership is with the lessor. The lessee is in possession of the asset only for a particular time and hence risk is more borne by lessor.
3. If the asset becomes obsolete, it is the risk of the lessee. Since the lease time is short, the risk of obsolescence is with the lessor.
4. The lessor is more concerned with the rent or lease amount as there is repayment of the principal amount along with the interest. The lessor is not only concerned with the rentals but also the asset as it has to be given to number of lessees.
5. The lease is non revocable or irrevocable by either party The lease is revocable especially by the lessee.
7. What is cross border lease?
A type of lease where the lessor in one country leases out assets to lessee to another country, is known as cross border leasing.
8. What is swap leasing?
In swap leasing the lessee is allowed to exchange equipment leased out whenever the original asset has to be sent to the lessor for some repair or maintenance.
9. Define Hire purchase.
The term hire purchase is defined as , “an agreement under which goods are let on hire and under which the hirer has a option to purchase in accordance with the terms of agreement, and includes the an agreement under which:
a. Possession of goods is delivered by the owner thereof to a person on the condition that such person pays the agreed amount in periodic payments.
b. The property of the goods is to pass to such a person on the payment of the last of such installment
c. Such a person has a right to terminate the agreement any time before the property so passes”.
10. Write a note on tax benefits involved in HP transactions.
 Benefits in income tax
 Benefits in sales tax
 Benefits in interest tax.



11. Difference between Leasing vs. Hire purchase
Sl.No characteristics Lease financing Hire purchase financing
1 Ownership Ownership of the property lies with the finance company, the lessor, and its never transferred to the lessee, the user Ownership of the property is transferred to the hirer on the payment of the last installment.
2 Depreciation Lessor and not the lessee is entitled to claim depreciation tax shield The hirer is entitled to claim depreciation tax shield.
3 Capitalization Capitalization of the asset is done in the books of the lessor, the leasing company Capitalization of the asset is done in the books of hirer.
4 Payments The entire lessee payments are eligible for tax computation in the books of the lessee Only the hire- interest is eligible for tax computation in the books of the hirer
5 Salvage value The lessor, and not the lessee, has the right to claim the benefit of salvage value. The hirer can claim benefit of salvage value as the prospective owner of the asset.
12. Define the term Merger.
A type of business combination where two or more firms amalgamate into a single firm is known as merger. In a merger, one or more companies may merge with an existing company or they may combine to form a new company.
13. What are the different forms of a merger?
Merger takes place in the following forms:
a. Merger through absorption
b. Merger through consolidation.
14 . What are the various types of mergers?
a. Horizontal
b. Vertical
c. Diagonal
d. Forward
e. Reverse
f. Forward triangular
g. Reverse triangular
h. Conglomerate
i. Negotiated
j. Arranged
k. Agreed
l. Unopposed
m. Defined
n. Competitive
o. Tender offer
p. Diversification
15. What is hostile takeover?
Where in a merger one firm acquires another firm without the knowledge and consent of the management of the target firm, it takes the form of a Hostile take over. The acquiring firm makes an unilateral attempt to gain a controlling interest in the target firm, by purchasing shares of the later firm directly in the open (Stock) market.
16. What is poison pill?
Strategy adopted by an acquiring company itself while it is in the process of bidding for another company in order to make it unattractive to any prowling potential bidder. This strategy aims in initiating action against the predator by destroying the attractiveness of the firm. The acquiring company may issue substantial amount of convertible debentures to its existing shareholders which would make it difficult for the potential acquirer as there is a danger of considerable increase voting power of the company. Under this strategy, the target firm either sells or mortgagees or leases or otherwise disposes off some of its precious assets. Another way by which the target firm can defined itself from the ought of the potential bidder is to dispose of its liquidity by acquiring some asset or other firm.
17. What do you know of conglomerate mergers?
A company is said to be adopting a conglomerate merger strategy where it makes acquisitions across different industries. Where several firms engaged in unrelated lines of business combine together to form a new company, it takes the form of conglomerate merger.
18. Who are financial buyers?
Financial buyers are those who are in the business of acquiring companies with underutilized assets that are leverage able, improvable, and ultimately saleable. Financial buyers do not generally acquire companies for the very-long run purpose. Financial buyers adopt such methods as divestiture of product lines and businesses, and the constant restructuring of the acquired company’s finance in order to ready the acquired company for resale.
19. What is the prey for takeovers?
Following provide ideal conditions for an acquiring firm to prey a target firm for a take over bid:
 Overall poor market performance of the target firm, especially in terms of return to the share holders in the preceding years.
 Less profitability of the target firms as compared to other firms
 Lower share holding of the promoter/owner group in the target firm.
20. Write a note on white-knight.
Voluntary offer by the management of the target company to acquiring company to escape from the dangers of a hostile takeover and to protect itself from the possibility of displacement of existing management. The purpose of “WHITE – NIGHT STRATEGY” is to seek to find a bidder who could offer a higher offer price which would eventually drive away the original bidder. The objective is to make the takeover exercise as much unviable and unprofitable as possible for the original bidder. Such as a strategy will help get the target firm better deal.




UNIT - IV
1. What is factoring?
A financial service where by an institution called the factor, under takes the task of realizing accounts receivables such as book debts, bills receivables, and managing sundry debts and sales registers of commercial and trading firms in the capacity of an agent, for a commission is known as FACTORING.
2. Define factoring?
According to V.A. AVADHANI “factoring is a service of financial nature involving the conversion of credit bills into cash.”
3. What are the various functions involved in factoring?
Factoring services can be classified as follows:
 Full service
 With recourse
 Without recourse
 Maturity
 Bulk
 Invoice
 Agency
 International
 Suppliers guarantee
 Limited
 Buyer based
 Seller based

4. What do you mean by Invoice factoring?
Under this type, the factor simply provides finance against invoices without under taking any other functions. All works connected with sales administration, collection of dues etc have to be done by the client himself. The debtors are not at all notified and hence they are not aware of the financing arrangement. This type of factoring is very confidential in nature and hence it is called confidential invoice discounting or undisclosed factoring.
5. What is Edi factoring?
To assist international factoring, the FCI has developed a special communication system for its members called Electronic data interchange factoring. This is mainly to speed up the business communications so that factoring becomes more effective. Edi factoring facilitates paperless trading. The seller and debtors can exchange their communications relating to purchase order, invoice, payment, etc. through EDIFACT message. Thus,factoring can be done efficiently and speedily.
6. Define Forfaiting.
Forfeiting has been defined “as the non- recourse purchase by a bank or any other financial institution, of receivable arising from an export of goods and services.”




7. Difference between Factoring and forfeiting.

Sl No Characteristics FACTORING FORFAITING
1 SUITABILITY For transactions with short –term maturity period For transactions with medium-term maturity period
2 RECOURSE Can be either with or without recourse Can be without recourse only
3 RISK Risk can be transferred to seller All risks are assumed by forfeiter
4 COST Cost of factoring is usually borne by the seller Cost of forfeiting is borne by the overseas buyer
5 COVERAGE Covers a whole set of jobs at a predetermined price. Structuring and costing is done on a case- to- case basis

8. Difference between Factoring Vs. Bills discounting.

Sl.NO Characteristic FACTORING BILLS DISCOUNTING
1 Recourse May be with or without recourse Only with recourse
2 Collector Factor is the collector of receivables Drawer is the collector of receivables
3 Services Besides financing facility, many other services are also extended. Only financing facility is available
4 Refinancing Receivables once factored cannot be re factored Bills once discounted can be re discounted
5 Bulk finance Financing arrangement covers entire quantum of receivables Financing is bill based
6 Mode of accounting It is an off – balance sheet financing. No such possibility

9. What do you mean by financial service?
The financial service can also called as 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 service sector is a key area and it is very vital for industrial developments.



10. List down any four fund based activities of a financial service sector.
The traditional services which come under fund based activities are the following:
1. underwriting of or investment in shares, debentures, bonds, etc.,
2. dealing in secondary market activities
3. participating in money market instruments
4. involving equipment leasing, hire purchase, venture capital, seed capital etc.


11. What is financial services market?
The market for the exchange of financial products and instruments through a wide variety of players, each one offering a unique type of service, may be designated as the financial service market.
12. State the causes for financial innovation in the financial service sector.
 Low profitability
 Keen competition
 Economic liberalization
 Improved communication technology
 Customer service
 Global impact
 Investor awareness
13. What do you understand by the term financial engineering?
Financial engineering is the life blood of any financial ability. Financial engineering is the design, the development and the implementation of innovative financial instruments and processes and the formulation of creative solutions to problems in finance.
14. What is a mutual fund?
A mutual fund collects the savings from small investors, invest them in government and other corporate securities and earn income through interest and dividends, besides capital gains. It works on the principle of “small drops of water make a big ocean.”
15. What are the roles of mutual funds?
 Mobilizing small savings
 Investment avenue
 Professional management
 Diversified management
 Better liquidity
 Reduced risks
 Investment protection
 Switching facility
 Low transaction costs
 Economic development
 Convenience
 Other benefits.



16. Give an account of various schemes of mutual funds.
PRODUCTS / SCHEMES:
OPERATIONAL CLASSIFICATION:
 Open ended
 Closed ended
 Interval
RETURN BASED CLASSIFICATION:
 Income fund
 Growth fund
 Balanced fund
 Specialized fund
 Money market mutual funds
 Taxation funds
OTHER CLASSIFICATION:
 Leveraged funds
 Dual funds
 Index funds
 Bond funds
 Aggressive growth fund
 Off – shore mutual funds

17. What are MMMFs?
These funds are basically open ended mutual funds and such they have all the features of the open ended mutual fund. But they invest in highly liquid and safe securities like commercial paper, certificate of deposits, bankers acceptances. These instruments are called money market instruments. They take place of shares, debentures and bonds in a capital market.
18. What are off- shore mutual funds.
Off shore mutual funds are those funds which are meant for non-residential investors. Its preferred to direct foreign investment, since, it does not allow foreign domination over host country’s corporate sector.
19. What is an AMC?
The AMC actually manages the funds of the various schemes. The AMC employs a large number of professionals to make investments carry out research and to do agent and investor servicing. In fact, the success of any mutual fund depends upon the efficiency of this AMC. The AMC submits a quarterly report on the functioning of the mutual fund to the trustees who will guide and control the AMC.
20. What is meant by credit rating?
Credit rating is an assessment of the capacity of an issuer of debt security, by an independent agency, to pay interest and repay the principal as per the terms of issue of debt. A rating agency collects the qualitative as well as quantitative data from a company which has to be rated and assesses the relative strength and capacity of company to honor its obligations contained in the debt instrument through out the duration of the instrument. The rating is given is based on an objective judgement of a team of experts from the rating agency.

21. What are the functions of credit rating agencies?
 Superior information
 Low cost information
 Basis for a proper risk return trade off
 Healthy disciplines on corporate borrowers.
 Formulation of public policy guidelines on institutional investors.


UNIT – V
1. What is venture capital?
Venture capital may be defined as a financing institution which joins an entrepreneur as a co-promoter in a project and shares the risks and rewards of the enterprise.
2. State the features of venture capital?
 Venture capital is usually in the form of an equity participation
 Investment is made not only in high risk but also in high growth potential benefits
 Venture capital is available only for commercialization of new ideas or new technologies and not for enterprises which are engaged in trading, booking, financial services, agency, liaison work or research and development.
3. What are the various stages of venture capital financing.
 Development of an idea – seed finance
 Implementation stage – start up finance
 Fledging stage- Additional finance
 Establishment stage – Establishment finance.
4. Write a note on SBI CAP.
The state bank of India’s subsidiary SBI capital markets Ltd. Extend venture capital assistance to technical entrepreneurs who have good technique ability but lack financial strength. The support is by way of either direct subscription or by way of underwriting support to the company.
5. What are the disinvestment options available in India.
 Promoters buy back
 Public issue
 Sale to other venture capital funds
 Sale in OTC market and
 Management buy outs.
6. What do you mean by consumer finance?
Consumer finance the term consumer credit refers to a transfer of wealth, the payment of which is deferred in whole or in part, to future, and is liquidated piecemeal or in successive fractions under a plan agreed upon at the time of the transfer.
7. What are the different types of consumer credit?
 Revolving credit
 Fixed credit
 Cash loan
 Secured finance
 Unsecured finance
8. What are the different sources of consumer finance?
 Traders
 Commercial banks
 Credit card institutions
 NBFCs
 Credit unions
 Middlemen
 Other sources.
9. What is consumer finance insurance?
It is a common practice in countries like the US grant credit insurance in respect of finance to consumers. This kind of insurance is called consumer credit insurance.
10. Sketch the factors that have caused in boom in consumer finance in India in recent past.
 Fall in the average age of the consumer for large ticket items like housing, etc.
 Cheaper rate of interest on borrowings
 Flexible interest rate structure.
 Increase in start up salary levels of people
 Aspiration changes in the life styles.
 The DINK (double income no kid) factor
 The credit card advantage.
 The lure of Zero interest scheme
11. How will you define the term housing?
Housing means the houses or conditions that people live in. the related terms are housing association, housing estate and housing projects.
12. What is real estate finance?
A set of all financial arrangements that are made by housing finance institutions to meet the requirements of housing is called real estate financing. Housing finance institutions include banks, housing finance companies, special housing finance institutions.
13. What are town planning scheme?
Town planning schemes are found in many parts of the country. The town – planning department prepares a scheme for the improvement of a certain area, includes land owned by various land owners. The scheme comprises of earmarking of roads, open spaces, civic
Amenities and some social facilities.
14. What are the objectives of NHB?
 To promote a sound, healthy, viable and efficient housing finance system to cater to all segments of population
 To establish a net work of housing finance outlets to adequately serve different regions and different income groups
 To promote savings from housing
 To make housing more affordable.

15. What are commercial bills?
According to the INI act 1881,”Bill of exchange is an instrument in writing containing an unconditional order signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of that instrument.”
16. What are the different types of bills?
 Demand bills
 Usance bills
 Documentary bills
 D/A bills
 D/p bills
 Clean bills
 Inland bills
 Foreign bills
 Accommodation bills
 Supply bills
 Hundis
17. What is a credit card?
A credit card is a card or mechanism which enables card holders to purchase goods, travel and dine in a hotel without making immediate payments. The holders can use the cards to get credit from banks up to 45 days. The credit card relives the consumers from the botherisation of carrying cash and ensures safety. It is a convenience of extended credit without formality. Thus credit card is a passport to “safety convenience, prestige and credit”