Page 151 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Financial Institutions and Services

Notes The Gramm-Leach-Bliley Act enacted in the late 1990s brought the term financial services into
prominence when it repealed earlier laws which forbade a bank or any financial institution
from venturing into fields like insurance and investment. The result was the merger of many
organizations offering the above mentioned services under one banner giving rise to a new
type of banking popularly known as Commercial Banking and a number of organizations like
Citibank came into existence purely as service providers.
The Finance services industry though a highly profitable Industry with respect to earnings does
not count for a large share of the market and also employs a lesser number of people as compared
to some of the other Industries. Some of the major service providers and commercial banks in
this field are:
1. Citibank
2. HSBC

3. Standard Chartered
4. Citigroup
5. Merrill Lynch
6. Morgan Stanley

7. ING (Investment)
8. American Express (Credit Card)
9. VISA (Credit Card)
10. Allianz (Insurance)

10.2 Role of Financial Services

During the last decade, there has been a broadening and deepening of financial markets. Several
new instruments and products have been introduced. Existing sectors have been opened to new
private players. This has given a strong impetus to the development and modernization of the
financial sector. New players have adopted international best practices and modern technology
to offer a more sophisticated range of financial services to corporate and retail customers. This
process has clearly improved the range of financial services and service providers available to
Indian customers. The entry of new players has led to even existing players upgrading their
product offerings and distribution channels. This continued to be witnessed in 2002-03 across
key sectors like commercial banking and insurance, where private players achieved significant
success.
These changes have taken place against a wider systemic backdrop of easing of controls on
interest rates and their realignment with market rates, gradual reduction in resource pre-emption
by the government, relaxation of stipulations on concessional lending and removal of access to
concessional resources for financial institutions. Over the past few years, the sector has also
witnessed substantial progress in regulation and supervision. Financial intermediaries have
gradually moved to internationally acceptable norms for income recognition, asset classification,
and provisioning and capital adequacy.

This process continued in 2002-03, with RBI announcing guidelines for risk-based supervision
and consolidated supervision. While maintaining its soft interest rate stance, RBI cautioned
banks against taking large interest rate risks, and advocated a move towards a floating rate
interest rate structure.

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