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TitleBanking and Indian Financial Systems
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LanguageEnglish
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Total Pages425
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Page 1

PONDICHERRY UNIVERSITY
(A Central University)

DIRECTORATE OF DISTANCE EDUCATION

Banking and Indian Financial System

Paper Code : MBFM 3002

MBA - FINANCE

III Semester

Page 2

Author

Dr. B. Charumathi,
Associate Professor,
Dept. of Management Studies,
Pondicherry University,
Puducherry.

Edited by

Prof. Noor Basha Abdul,
Professor,
Department Of Commerce & Business Administration,
College Of Arts & Commerce,
Acharya Nagarjuna University,
Andhra Pradesh.

© All Rights Reserved
For Private Circulation Only

ISBN No. 978-81-923022-7-0

Page 212

208

1. To carry on the business of an Investment company by providing
financial assistance to Entrepreneurs for starting, expanding,
modernizing their activities in the following:

a) Small & Medium Entrepreneurs in the industrial sector

b) Tourism sector

c) Medical Infrastructure

d) Service sector

e) Construction sector

f) Infrastructure Development

2. To extend financial assistance by means of various financial
products, either fund based or non-fund based.

3. To participate in other development works, projects, schemes as
mandated by the Government.

4. To encourage and promote participation of capital in various forms
like equity, preference or debentures in industrial enterprises and
other economic activities.

5. To identify and motivate entrepreneurs to set up industries and
assist them in the spadework by providing required training and
guidance.

6. To offer and act as an agent for the disbursement of various
schemes, incentives, concessions and benefit on behalf of the State
and Central Government to units and enterprises assisted by EDC.

7. EDC has launched an initiative titled “Centre for Empowerment
& Excellence” aimed at training and empowering individuals to
strive for excellence. To fortify this initiative the corporation has
developed a cutting edge training complex inclusive of state-of-the-
art auditorium “Nalanda”, apart from the other smaller halls.

The products offered include General Term Loan Scheme, Scheme
of Financial assistance against Mortgage of Immovable Properties,
Scheme of Loans assistance for construction of residential/ residential
cum commercial complexes, Scheme of Loan assistance for construction
of commercial complexes, Scheme of term loan assistance to qualified
Professionals, Self Employment Scheme (CMRY), Self Employment
Scheme (CMRY) for Self Help Groups, Term Loan Scheme for NRG’s,

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209

Housing loan Scheme, Vehicle loan Scheme, Personal loan Scheme and
Modified Interest Rebate Scheme - 2012

7) Haryana Financial Corporation (HFC)

Haryana Financial Corporation has been set up under an Act of
Parliament known as State Financial Corporation’s Act 1951 and the work-
ing is governed by this act. The Head Office of the Corporation is at Chan-
digarh and Branch Offices at various District Headquarter of the State.

8) Himachal Pradesh Financial Corporation (HPFC)

Himachal Pradesh Financial Corporation (HPFC) was established
under the Financial Corporations Act, 1951, with the basic objective of
promoting and developing small and medium enterprises in the State
with a special focus on spreading industrial culture in the rural, semi-
urban and backward of Himachal Pradesh. The Corporation is owned by
the State Government jointly with SIDBI and is functioning under the
administrative control of the State Government.

The Managing Director of HPFC is appointed by the State
Government and Chairman by the SIDBI. The Board of Directors is highly
professional and consists of senior IAS officers of the State Government,
representative from SIDBI, Banks, Life Insurance Corporation and
individual shareholders. It has operated a number of financial assistance
schemes for the benefit of the entrepreneurs such as scheme for marketing
activities, equipment finance scheme, special schemes for assistance to
ex-servicemen and, single window scheme, etc. The Corporation has
sanctioned loan amount of ` 727 crores during 45 years of operation up
to 31st March 2012 out of which loans of ` 529 crores have been released
to 4521 borrowers.

9) Jammu & Kashmir Financial Corporation (JKFC)

The mission of JKFC is

➢ To generate and access resources for giving a fillip to development
and growth of the State on a sustainable basis.

➢ To infuse financial discipline amongst the public functionaries.

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420

CASE STUDY

Clash of the titans: Overlapping and contradictory foreign
investment regulations in India

The SEBI and RBI have been working independently towards
rationalising the existing investment regime to make it more investor-
friendly. This shift in attitude is evident with the introduction by SEBI
of Qualified Foreign Investors (“QFIs”) as a new class of investors, the
promulgation of the SEBI (Alternative Investment Fund) Regulations,
2012 and permission granted by RBI to Foreign Venture Capital Investors
(FVCIs) to participate in secondary transactions. In addition, RBI has
allowed FVCIs to be active participants in stock exchanges which seems
to encroach on the monopoly of Foreign Institutional Investors (FIIs)
regulated by SEBI.FVCIs were permitted invest in venture capital funds
and Indian venture capital undertakings, which are defined to mean
companies not listed on a recognised stock exchange and to invest up to a
third of their investible funds in preferential allotment by listed companies.
RBI’s circular dated 19 March 2012 extended this, allowing FVCIs to
invest in eligible securities by way of private arrangement, purchase from
a third party or by investing in securities on a recognised stock exchange.
Although the RBI Circular issued in this respect attempts to liberalise
investments made by FVCIs in India, it is subject to provisions of SEBI
Regulations, which currently don’t allow FVCIs to invest in the manner
permitted by RBI’s Circular.

The SEBI’s AIF Regulations, defines an Alternative Investment Fund
(AIF) to mean any fund established or incorporated in India which collects
funds from domestic and/or foreign investors for investing the funds in
accordance with a defined investment policy. However, the consolidated
Foreign Direct Investment Policy effective from 10 April 2012 does not
permit foreign investments in AIFs. While, the Department of Industrial
Policy and Promotion (DIPP) has in the last one year, issued clarifications
and made changes to the FDI Policy, none of the press notes issued till date
mention the possibility of foreign investments in AIFs. In addition to this,
the AIF Regulations created a category of AIFs that would be eligible for
tax benefits. However, the government has not announced any benefits or
conditions for funds to qualify as such AIFs so far. A similar disconnect is
seen in the regime for QFIs who were allowed to invest in the Indian equity

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421

and debt markets to boost foreign investment in the country. However,
this route hasn’t seen much success due to the skepticism surrounding the
tax risk for depositories whose clients are QFIs.

Question

1. What is the problem in this case? Give suggestions to solve the
problem.

REFERENCES

1. Abhijit Dutta, INDIAN FINANCIAL SYSTEM, Excel Books,
2012.

2. Bhalla, V. K., INDIAN: FINANCIAL SYSTEM, Anmol
Publishing Ltd., 2004.

3. Bhole L M, “FINANCIAL INSTITUTIONS AND MARKETS”,
Tata McGraw-Hall, New Delhi, 1999.

4. Gurusamy, S., FINANCIAL MARKETS AND INSTITUTIONS,
Thomson publications, 2nd Ed.,2009.

5. Khan M Y, “INDIAN FINANCIAL SYSTEM, Tata Mc Graw-
Hill, New Delhi, 2001.

6. Machiraji, H.R., INDIAN FINANCIAL SYSTEM, Jan 2010, 4th
Ed, Vikas Publishing.

7. Santhanam, B., BANKING AND FINANCIAL SYSTEM,
Margham Publiations, Chennai.

8. Swami, H. R, GUPTA, INDIAN BANKING AND FINANCIAL
SYSTEM, Indus Valley Publication, 2009.

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