3. Types of Investment
Direct
Equity
Mutual
Funds
Insurance
Fixed
Deposit
The buying of shares on a stock market and
holding by individual investors in
anticipation of dividends and capital gains
with changes in its value.
Professionally managed pools of money
from investors with similar investment
objectives.
Investments that protect you and your
family against an uncertain future.
An investment with reliable and pre-
defined goal for its return.
4. Types of Investment (cont.)
Bonds
Gold
Real
Estate
A fixed income bearing investment product
in which an investor lends money to a
company or government in return of
interest.
A traditionally favoured investment option
as a long term investment.
An investment option which generate an
ongoing income source in the form of rent
and also can raise in value over time.
6. IRDAI
IRDAI stands for Insurance Regulatory and
Development Authority of India.
It regulates insurance industry in India.
IRDAI as a statutory body was set up in
1999.
Major function of IRDAI includes protecting
the interests of the policyholders and
regulating, promoting and ensuring orderly
growth of insurance industry in India.
8. Classification of source of funds
In case of proprietary and partnership
concerns, the funds may be raised either
from personal sources or borrowings from
banks, friends etc.
In case of company form of organization, the
different sources of business finance
available may be categorized on different
basis viz., period, source of generation and
the ownership.
9. On the basis of Period
• Shares and debentures
• Loans from financial
institutions
Long
Term
• Certificate of deposits
• Lease financing and loans from
financial institutions
Medium
Term
• Trade credit, Customer
Advance
• Overdraft, Discounting of Bill
Short
Term
10. On the basis of Ownership
• Funds provided by the owners of an
enterprise, which may be a sole trader
or partners or shareholders of a
company
• Equity, related earnings
Owner’s
Fund
• Funds raised through loans and
borrowings
• Loans from financial institutions,
debentures, trade credit, certificate of
deposits.
Borrower’s
Fund
11. Equity Shares
A company divides its capital into shares.
These are offered to investors to raise
capital.
The owner of equity shares are the owner of
the company in proportion to their
shareholding.
Company may distribute its profit to
shareholders which is called dividend.
Value of shares will increase and decrease
based on the performance of the company.
12. Preference Shares
They are different categories of shares where
in preference share holders get preference
over equity share holders for payment of
dividend and payback of capital.
They have to pay a fixed amount of dividend
to the investor in case of profit.
13. Debentures
Issued to raise loan from investor at specific
rate of interest for the specific period.
The company has to pay interest and repay
the amount invested after specific period.
Debenture holders are not the owners of the
company.
14. Loans from Financial Institutions
Demand
Loan
Term Loan
Cash
Credit
Overdraft
Discountin
g of Bill
The entire amount is paid to the debtor
at one time, either in cash or by transfer
to his savings bank or current account.
Generally granted for fixed capital
requirements, e.g. investment in plant
and equipment, land, flat and building
etc. Interest has to be paid at pre-
decided interest rate.
A drawing account against credit granted
by the bank and is operated in same way
as a current account in which an
overdraft limit has been sanctioned.
Usually granted against the security of
goods.
It lets its account holders draw over and
above his own balance up to the extent
of the limit stipulated.
Banks also advance funds by discounting
bills of exchange.
15. Raising fund from Customers and Suppliers
• It is popular when the price of order is very high.
• Payment towards the price on the product which will
be delivered in a next date.
Customer’s
Advance
• The process of buying equipment and supplies for your
business from suppliers or vendors, without making
payment immediately.
• “buy now, pay later”, commonly used as a source of
short-term financing.
Trade Credit
• Profits generated by a company that are not
distributed to shareholders as dividends but are either
reinvested or kept as reserve.
Retained
Earnings
• One of the important sources of medium and long-term
financing where the owner of an asset gives another
person, the right to use that asset.
Lease
Financing
17. PAN and its Purpose
Permanent Account Number (PAN) is a 10 digit
alphanumeric number issued by the Income Tax
Department.
It enables the department to link all financial
transactions of the “person” and acts as its
identifier with the tax department.
It is mandatory to quote PAN on return of income.
It is also compulsory to quote PAN in all documents
pertaining to economic or financial transactions of
Direct Taxes.
It is mandatory to mention PAN for obtaining a
telephone or cellular telephone connection.
PAN has to be mentioned for making time deposit
with a bank/post office exceeding Rs.50,000/- or
depositing Rs.50,000/- or more in a Bank.
18. Aadhaar and its Purpose
It is a 12-digit unique number which the Unique
Identification Authority of India (UIDAI) will issue
to all residents in India. It stores basic
demographic and biometric information.
It is easily verifiable.
Unique and robust enough to eliminate the large
number of duplicate and fake identities in
government and private database.
It is for every individual, including infants.
Each individual will be given a single unique
Aadhaar ID number.
It does not replace any other ID e.g. Passport,
ration card.
19. Benefits of Aadhaar
Great potential for not-so-privileged, poor
and the marginalized people, mostly the rural
population.
Clear and unchangeable proof of identity.
Facilitate entry for poor and underprivileged
residents into the formal banking system.
Opportunity to avail services provided by the
government and the private sector.
Giving migrants mobility of identity.
Financial inclusion with deeper penetration,
easy distribution and direct benefit transfer.
21. Role of IRDAI in Grievance Redressal and
Channels of receiving Grievances
Channels:
- Toll free number
- E-mail on the official mail
- Registering a complaint on IGMS
- Complaint through letter/courier.
Role of IRDAI
- Facilitates registration of complaints against insurers.
- Facilitates resolution of complaints by insurers.
- Monitors timeliness of disposal.
- Takes up complaints on a sample basis for off-site
supervision.
- Uses MIS based on complaints for monitoring market
conduct and regulatory compliance.
24. Credit Card
Issued by a financial
institution, usually
banks, giving the holder
an option to buy goods
and services without
making any actual cash
payment.
A type of short-term
borrowing.
The card holder has to
pay the money back to
the bank within 30-50
days and an interest is
charged on late
payment.
Debit Card
Issued by a bank which
allows the holder access to
his account to withdraw
cash or pay for goods and
services.
A type of plastic money
which only allows access
to ones own deposited
money.
The card holder can go to
an ATM or pay
electronically at merchant
locations. It thus removes
the need for cheques as it
enables immediate transfer
and withdrawal of cash.
25. Advantages
Credit Card
Allows to make purchases
on credit . It allows you a
lot of flexibility.
accurate record-keeping.
Convenient remote
purchasing.
No need to carry cash
while making purchase or
travelling.
Debit Card
Easy and convenient
withdrawal of funds.
Can be used
anywhere to pay for
your purchases.
No monthly interest
charged on
transactions.
Allows ATM access.
27. Protection against Natural Disasters
General insurance policies provide financial
benefits which can help in overcoming post-
disaster financial shocks.
Public Liability Insurance Act 1991 has made
it mandatory for all establishments handling
hazardous chemicals to provide
compensation to third party victims of
industrial accidents.
Having insurance for crops as well as
livestock, helps in recovering the financial
loss post-disaster.
29. Quick facts on RBI
The apex monetary and banking institution in
India. India’s central bank.
RBI is headed by it’s governor.
RBI regulates the issue of bank notes, keep
reserves to secure monetary stability in India
and operate the currency and credit system
in the best interests of the country.
30. Functions of RBI
Issue of Currency
Banker to Government
Banker to Banks
Controller of credit and money supply
Regulator and supervisor of banks
Custodian of foreign exchange
Regulator of payment and settlement system
Maintenance of financial stability
Developmental Role
32. Loan
A sum of money
borrowed from a
financial institution is
called loan.
A loan is repaid with
an interest.
Interest is the extra
money we pay along
with the principal
amount borrowed.
Banks accept
deposits from people
and lends them to
people for various
purposes.
33. Types of Loans
Loan availed for the purpose of buying a new
home is called home loan.
Personal loans are meant to meet the
personal needs of an individual.
Vehicle loan or car loan fulfills your dream of
having a car or a bike.
Loan availed to pursue higher education is
called education loan.
Gold loans can be availed from banks and
other financial institutions in exchange for
keeping physical gold as security.
34. Types of Loans (cont.)
Various loans offered to cater the needs of
agricultural farmers are called agricultural
loans.
A type of loan where banks allow their
customers to withdraw more money than
they have in their account is called an Over
Draft.
Loan provided to either existing business or
those venturing into new business on the
basis of borrower’s credentials is called
business loan.
35. Process of applying for a loan
An application form for loan is provided by the
banks which should be filled correctly and the
type of loan you need should be mentioned
correctly.
Credit history check is done by the bank to know
the credit worthiness of the borrower. CIBIL
(Credit Information Bureau India Limited) collects
and maintains the records of individual’s
payments pertaining to loans and credit cards.
The customer need to produce their identity
proofs and other certificates to the bank.
After reviewing all the submitted documents of
the borrower, banks may approve or reject the
loan application.
37. What is Inflation
Inflation can be defined as a persistent rise in
general prices of goods and services in an
economy.
Mathematically, inflation is nothing but rate
of increase in price.
It is measured by calculating the increase in
rate of a price index i.e. the WPI (Wholesale
Price Index) and the CPI (Consumer Price
Index).
WPI is extensively used as a measure of
inflation in India.
38. Types of Inflation
Inflation due to excess demand is called
Demand Pull Inflation.
Aggregate Demand > Aggregate Supply.
Cost-push inflation occurs because of rise in
input prices i.e. rising costs.
Supply-shock inflation relates to a
considerable increase in the cost of goods
and services that are considered to be
essential and somewhat difficult to
substitute. It involves a trickledown effect.
39. Risk and Insurance
The term risk means the chance of suffering loss
due to possibility of adverse events beyond control
of man.
The events that give rise to risks are known as
perils.
The essences of the Insurance scheme is that it is a
-social science
-accumulation of funds
-involves a group of risks
-transfer of risk to the whole group.
Insurance is an arrangement through which a
person can plan for the continuation of income
when certain events disrupt one’s ability to earn
livelihood.
40. Thank You
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