CU-Sem VI-Investment Banking

BACHELOR OF COMMERCE SEM –VI INVESTMENT BANKING

First Published in 2022 All rights reserved. No Part of this book may be reproduced or transmitted, in any form or by any means, without permission in writing from Chandigarh University. Any person who does any unauthorized act in relation to this book may be liable to criminal prosecution and civil claims for damages. This book is meant for educational and learning purpose. The authors of the book has/have taken all reasonable care to ensure that the contents of the book do not violate any existing copyright or other intellectual property rights of any person in any manner whatsoever. In the event the Authors has/ have been unable to track any source and if any copyright has been inadvertently infringed, please notify the publisher in writing for corrective action. 2

CONTENT Unit - 1 Investment Banking .......................................................................................................4 Unit – 2 Investment Banking Business ......................................................................................14 Unit - 3 Types Of Investment ....................................................................................................27 Unit - 4 Traditional Banking .....................................................................................................38 Unit - 5 Financing .....................................................................................................................54 Unit - 6 Transaction Analysis ....................................................................................................66 Unit – 7 Discounted Cash Flow Analysis ..................................................................................87 Unit – 8 Financial Figures .........................................................................................................99 Unit - 9 Valuation ...................................................................................................................119 Unit - 10 M&A- I ....................................................................................................................130 Unit – 11 M&A- Ii ..................................................................................................................143 Unit – 12 Investment Bankers .................................................................................................153 Unit - 13 Leveraged ................................................................................................................162 Unit – 14 Lbo Analysis ...............................................................Error! Bookmark not defined. 3

UNIT - 1 INVESTMENT BANKING 1.0 Unit Objective 1.1 Introduction 1.2 Meaning of Investment banking 1.3 Role of Investment banking 1.4 Characteristics of Investment banking 1.5 Advantages of Investment banking 1.6 Disadvantages of Investment banking 1.7 Summary 1.8 Keywords 1.9 Unit end questions 1.10 Suggested Reading and E- Resources 1.0 UNIT OBJECTIVES  To understand the meaning of Investment banking  To discuss the role of Investment banking  To explain the characteristics of Investment banking  To discuss the advantages of Investment banking  To understand the disadvantages of Investment banking 1.1 INTRODUCTION Investment is the use of money on assets with the intention of generating income or capital growth. The two characteristics of investment are time and risk. It is sacrificed to consume now in order to benefit later. The price that must be paid is certain, but the future reward could not be. This investment feature denotes the level of risk. In order to get a return on the investment, the risk is accepted. Investment typically refers to a financial commitment. A person may view the decision to purchase a home for his or her own use as an investment. 4

The net increase to the country's capital stock, which consists of the commodities and services used in production, is what the economist refers to as investment. Buildings, equipment, or inventories must rise for there to be a net addition to the capital stock. Other goods and services are produced using these capital stocks. The allocation of funds to assets with the expectation of a profit over time is known as financial investment. In return for cash, financial claims like stocks and bonds are exchanged. They are anticipated to generate income and grow in value over time. Because personal savings are invested in the capital market as financial assets to be used for economic purposes, the financial and economic meanings are intertwined. Despite their connection, we are solely interested in the monetary investment made in securities. Consequently, \"a commitment of cash made in the hope of some positive rate of return\" can be used to describe investment. Investments must include the expectation of a return. Since the return is anticipated to materialise in the future, it's possible that the actual return surpassed the anticipated return. Investment risk is the potential for volatility in the actual return. Every investment therefore implies a return and risk. 1.2 MEANING OF INVESTMENT BANKING Investment banking is a unique branch of banking that assists people or organisations in raising funds and offers them financial consulting services. They serve as a middleman between security issuers and investors and aid startup companies in going public. They can sell shares on behalf of the issuer and receive commission for each share sold, or they can buy all the shares that are available at a price determined by their experts and resell them to the public. Investment banking is the area of a bank or financial institution that provides underwriting (capital raising) and mergers and acquisitions (M&A) advice services to governments, corporations, and institutions. Investment banks serve as a bridge between corporations and investors that have capital to invest (who require capital to grow and run their businesses). Objectives of Investment 5

An investor has a number of additional investment options where his money can go. Cash-based savings are unproductive and yield nothing. Savings are subsequently invested in assets based on the risk and return characteristics of those investments. The investor's goals are to reduce the amount of risk involved in the transaction and increase the return. Our savings are not only meaningless because they don't produce any income, but they also lose value as prices rise. Thus, inflation or a rise in prices reduces the purchasing power of money. Investments are made with savings to act as a buffer or insurance against inflation. Real rate of return would be negative if investment performance fell short of price increases. In order to encourage funds to flow into investments, an investment's return should be higher than ten percent if inflation is running at an average yearly rate of ten percent. Thus, the objectives of an investor can be stated as:  Maximization of return.  Minimization of risk  Hedge against inflation. The general goal of investors is to get the highest profits with the least amount of risk. The likelihood that actual returns received from an investment may differ from the predicted return can be thought of as risk in this context. We can categories the financial assets that are accessible for investment into several risk groups. Given that they are essentially risk free, government securities would fall under the low-risk category. Companies' preference shares and debentures could be categorized as medium risk assets. Financial assets in the high-risk category would be equity shares of corporations. Only if he anticipates receiving correspondingly bigger profits would an investor be willing to take on greater risk. Risk and return are weighed against one another. An investment's risk directly relates to its anticipated return. As a result, the financial market offers a variety of financial assets with varied risk-return profiles. 1.3 ROLE OF INVESTMENT BANKING 6

While the investment banking division of a bank only offers underwriting and M&A (merger and acquisition) services, an investment bank functions as a full-service organisation and offers a variety of services to its clients, including equity research, market-making, asset management, derivatives trading, and FICC services (fixed income instruments, currencies, and commodities).It provides both Sell-side and Buy-side services. Services related to trading equity, derivatives, promoting securities, etc. are offered on the sell-side, and consulting services are offered on the buy-side to companies interested in purchasing investments, such as insurance companies, pension funds, etc.  Role as an Advisor: For every firm, raising capital money is a time-consuming operation. This is where the assistance of an investment bank is useful. Using complex financial models to establish a fair price, an investment firm can aid in the sale of the company's shares. When selling shares, financial analysts consider elements like future earnings potential and the management team's strength. Investment banks provide guidance during merger and acquisition transactions by advising management on the company's value and assisting with its restructuring.  Underwriting Stocks and Bonds: For the purpose of underwriting stocks and bonds, investment banks assume financial risk in exchange for a fee. It involves doing research and figuring out how much risk is present in the insurance industry. An investment bank purchases a predetermined quantity of bonds or equities at a predetermined price and then resells them on an exchange. Before a firm may sell any shares, the investment bank must prepare the paperwork that will be submitted to the Securities and Exchange Commission. Information such as financial statements, managerial data, present ownership, and future goals will all be included in the documentation.  Other activities: Investment banks also carry out tasks including research, trading and sales, asset management, wealth management, and securitized products in addition to providing advice and aiding in capital raising for the businesses. 7

1.4 CHARACTERISTICS OF INVESTMENT BANKING Certain characteristics apply to all investments. Let's examine these investment characteristics.  Return The anticipation of a return is the defining feature of all investments. In actuality, obtaining a return is the main goal of investments. You might get the return in the form of interest plus capital growth.Capital appreciation is the increase in value between the purchase and sale prices. The yield on an investment is the dividend or interest earned. Different types of investments promise different rates of return. The nature of the investment, the maturity term, and a number of other factors all affect the return on an investment. Any investment carries some risk. This risk may be related to capital loss, capital repayment delays, interest payments that are not made, or variable returns. While some investments, like bank savings and government securities, are virtually risk-free, others are riskier. The following elements affect how risky an investment is. 1. The risk increases with the length of the maturity phase. 2. The risk increases when the borrower's credit worthiness decreases. 3. The risk changes depending on the type of investment. the purchase of ownership securities investments in stock shares are riskier than those in debt securities, for example. like bonds and debentures. Investment return and risk are related. In general, the greater the risk, the the return is higher.  Safety The certainty of a capital return without loss is implied by the safety of an investment time or money. Another quality that an investor wants for his assets is safety. Every investor anticipates receiving their investment back at maturity without a loss or delay.  Liquidity 8

Liquidity is the ability to easily sell or market an investment without suffering financial or time losses. Some assets, including bank deposits, P.O. deposits, NSC, NSS, and firm deposits, are not tradable. Even though some investment products, such as preference shares and debentures, are tradable, their liquidity is generally quite low. Equity shares of businesses with stock exchange listings can be easily traded on stock exchanges. A typical investor likes assets with liquidity, safety for his money, a good return with little risk, or risk minimization and return maximisation. 1.4 ADVANTAGES OF INVESTMENT BANKING  The investment banking division manages the projects for its clients in the most effective way possible, assists them in obtaining funds by optimising their revenue, and over time builds up the value of their brand.  They offer advisory services to their clients in relation to the restructuring of the business, so that the business can become more efficient and maximise its profit.  It helps their client in managing large projects, by identifying the risk associated with the projects beforehand, thus saving time. 1.5 DISADVANTAGE OF INVESTMENT BANKING  The investment banking division, with its knowledge, manages their clients' projects most effectively, assists them in obtaining funds by optimising their revenue, and builds up their brand worth over time.  They offer advisory services to their clients in relation to the restructuring of the business, so that the business can become more efficient and maximise its profit.  They offer advisory services to their clients in relation to the restructuring of the business, so that the business can become more efficient and maximise its profit. • Ithelps their client in managing large projects by identifying the risk associated with the projects beforehand, thus saving time. 9

1.6 SUMMARY  Investment is the use of money on assets with the intention of generating income or capital growth.  Investment banking is a unique branch of banking that assists people or organisations in raising funds and offers them financial consulting services.  The yield on an investment is the dividend or interest earned.  Liquidity is the ability to easily sell or market an investment without suffering financial or time losses.  An investment bank purchases a predetermined quantity of bonds or equities at a predetermined price and then resells them on an exchange.  Investment banks provide guidance during merger and acquisition transactions by advising management on the company's value and assisting with its restructuring. 1.7 KEYWORDS  Advisory - having or being the capacity to offer advice but not the ability to enforce it.  Underwriting - Signing and accepting responsibility under (an insurance policy) ensures payment in the event of loss or damage.  Hedge - a means of defending oneself from monetary loss or other unfavourable situations.  Inflation - a broad rise in prices and decline in the value of money as purchasing power.  Investment - the process of investing money to make money. 1.8LEARNING ACTIVITY 1. What is Liquidity? 2. What is Inflation? 10

1.9 UNIT AND QUESTIONS Descriptive questions A. Short question 1. What do you mean by Investment? 2. Explain the definition of Investment. 3. Describe the term Buy side. 4. Describe the term Safety in investment factor. 5. Discuss the term Sell side. Long questions 1. Describe the disadvantages of Investment banking. 2. Explain the advantage of Investment banking. 3. What are the role of Investment banking? 4. Write in briefly Investment banking. 5. Analysis the characteristics Investment banking B. Multiple choice questions 1. _______________acts as a full-service organization and provides a number of services to their customers. a. Cooperative bank b. Personal Banking c. Investment Bank d. Public bank 2. _____________services regarding the trading of equity, derivatives, promotion of securities, etc. a. Left- side 11

b. Buy- side c. Sell-side d. Right- side 3. ________________advisory services to firms who are interested in buying the investment like insurance firms, Pension funds, etc. a. Sell- side b. Right- side c. Left- side d. Buy-Side 4. __________refers to loss of principal amount. a. Buying b. Safety c. Risk d. Return 5. ___________is an important feature of every investment tool that is analyzed before allocating any fund in it. a. Sell b. Return c. Risk d. Safety Answers: 1- c,2- c,3-d ,4-c ,5- d. 1.10 SUGGESTED READING AND E- RESOURCES  PunithavathyPandian, SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT, Vikas Publications Pvt. Ltd, New Delhi. 2001. 12

 Kevin.S, SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT, PHI, Delhi, 2011  YogeshMaheswari, INVESTMENT MANAGEMENT, PHI, Delhi, 2011  Bhalla V K, INVESTMENT MANAGEMENT: SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT, S Chand, New Delhi, 2009  Prasanna Chandra, PORTFOLIO MANAGEMET, Tata McGraw Hill, New Delhi, 2008. 13

UNIT – 2 INVESTMENT BANKING BUSINESS 2.0 Unit Objective 2.1 Introduction 2.2 Principal businesses of Investment banks 2.3 Investment banking business 2.4 Summary 2.5 Keywords 2.6 Unit end questions 2.7 Suggested Reading and E- Resources 2.0 UNIT OBJECTIVES  To understand the principal businesses of Investment banks  To discuss Investment banking business 2.1 INTRODUCTION With its simplest form, investment banking is a financial service offered by a finance company or a banking division to assist large multinational corporations in their investment objectives. This service assists wealthy individuals, governments, and large businesses and organisations in raising or generating funds. An investment bank's key responsibilities include assisting in the sales of securities, underwriting new securities for all kinds of organisations, and setting up mergers, acquisitions, and reorganisations. Investment banks work to help big businesses, governments, and organisations carry out significant financial transactions and make critical financial choices. The investment banks frequently assist businesses in completing their initial public offerings (IPOs) in order to achieve this. These investment banks will achieve this by offering to sell the company's shares on the open market. 2.2 PRINCIPAL BUSINESSES OF INVESTMENT BANKS 14

Global investment banks often have a number of business divisions, each of which handles a different purpose. For instance, Corporate Finance deals with providing guidance on corporate finances, such as mergers, acquisitions, and divestitures; Research deals with looking into, valuing, and advising clients - both small investors and larger organisations like hedge funds and mutual funds regarding shares and corporate and government bonds; and Sales and Trading deals with purchasing and selling shares both on behalf of the bank's clients as well as other investors. Management of the bank's own capital, or proprietary trading, is frequently one of the largest sources of profit for investment banks. For instance, if the banks spot a good profit opportunity, they may arbitrage stocks on a massive scale, or they may arrange their books so that they benefit from a decline in bond prices or yields. In short, the principal functions of investment banks include: 1. Raising Capital 2. Brokerage Services 3. Proprietary Trading 4. Research Activities 5. Sales and Trading 1. Raising Capital Corporate finance is a typical function of investment banks, and it comprises counselling clients on mergers and acquisitions and assisting them in raising capital on the capital market. Generally speaking, providing merger and acquisition advice generates the best profit margins. Investment bankers frequently aggressively meet with executives to urge acquisitions or expansion, which has had a significant impact on the history of American business. 2. Brokerage Services The majority of the time, brokerage services entail trading and order execution on the clients' behalf. In turn, this gives the market liquidity. These brokerages facilitate the buying and selling of securities such as stocks, bonds, and mutual funds. 15

3. Proprietary Trading When a bank trades in stocks, bonds, options, commodities, or other products using its own money as opposed to its customer's money with the intention of making a profit for itself, this is referred to as proprietary trading in the context of investment banking. Investment banks are typically thought of as companies that help other companies raise funds on the capital markets (by selling stocks or bonds), but they are not averse to making money for themselves by engaging in trading activities. 4. Research Activities Research is typically understood to be a department that evaluates businesses and produces prospect reports, frequently with \"buy\" or \"sell\" recommendations. Research has typically been carried out by Investment Banks, even though in theory this activity would make the greatest sense at a stock brokerage where the advise could be delivered to the brokerage's clients (JM Morgan Stanley, Goldman Sachs etc). The main justification for this is that the Investment Bank must assume liability for the company's quality in relation to the costs incurred by the Investor. 5. Sales and Trading It is frequently referred to as the investment bank's most profitable division because it typically generates a lot more money than the other divisions. Investment banks will purchase and sell stocks and bonds as part of the market-making process in an effort to increase their profits with each transaction. The investment banks' sales team is known as sales, and its main duty is to approach institutional investors and convince them to purchase the stocks and bonds that the company has underwritten. Calling institutional investors to sell stocks, bonds, commodities, or other items the company may hold on its books is another activity of the sales team. 2.3 INVESTMENT BANKING BUSINESS 16

Investment banking is a unique branch of banking that assists people or organisations in raising funds and offers them financial consulting services. They serve as a middleman between security issuers and investors and aid startup companies in going public. They can sell shares on behalf of the issuer and receive commission for each share sold, or they can buy all the shares that are available at a price determined by their experts and resell them to the public.One of the most complicated financial systems in the world is investment banking. They support a wide range of objectives and commercial concerns. They offer a range of financial services, including proprietary trading—trading securities for their own accounts—mergers and acquisitions advisory—helping businesses with M&As; leveraged finance—lending money to businesses to buy assets and settle acquisitions; restructuring— improving corporate structures to make businesses more profitable and efficient; and new issues or IPOs—where these banks participate.Let's examine how offering acquisition advises by an investment bank generates revenue. Imagine if Company ABC purchases Company XYZ. ABC is unsure about the true value of company XYZ and what the long-term advantages will be in terms of sales, costs, etc. In this case, the investment bank will perform due diligence to assess the company's value, close the deal by assisting ABC in putting together the required paperwork, and give it advice on the best time to close the deal.  In this instance, the investment bank works on the purchase side, with potential support from other investment banks on the sell side to assist XYZ. The commission the bank will receive will increase with the size of the deal.  Some of the biggest investment banks in India are Bank of America, Barclays Capital, Citigroup Investment Banking, Deutsche Bank, and JP Morgan.  An investment bank and a bank's investment banking division (IBD) can occasionally be confused for one another. Underwriting, mergers and acquisitions, sales and trading, equities research, asset management, commercial banking, and retail banking are just a few of the many services provided by full-service investment banks. Only underwriting and M&A consulting services are provided by a bank's investment banking section. 17

Fig No 2.3 Investment Banking Business Full-service banks offer the following services:  Underwriting – Companies that seek to raise capital or go public through the IPO process work with capital raising and underwriting groups to connect investors and companies. The primary market, or \"new capital,\" is served by this function.  Mergers & Acquisitions (M&A) – Advisory jobs that oversee the M&A process from beginning to end for both business buyers and sellers.  Sales & Trading – Matching secondary market buyers and sellers of assets. Investment banking sales and trading units might trade the company's own money as well as operate as agents for clients.  Equity Research – The study, or \"coverage,\" of securities conducted by the equities research group supports stock trading and assists investors in making investment decisions. 18

 Asset Management – Managing investments across a variety of investing strategies for a broad spectrum of investors, including institutions and private individuals.Underwriting Services in Investment BankingFor businesses or other organisations, underwriting refers to the process of acquiring money by selling investors stocks or bonds (such as in an IPO). Businesses require capital to run and expand, and bankers assist them in obtaining that capital by pitching the business to potential investors. There are generally three types of underwriting:  Firm Commitment – The underwriter commits to purchasing the entire issue and taking full financial responsibility for any shares that remain unsold.  Best Efforts – Underwriter agrees to sell the greatest amount of the issue at the agreed-upon offering price, but is free to return any unsold shares to the issuer without incurring any costs.  All-or-None – The transaction is terminated and the issuing business receives nothing if the entire issue cannot be sold at the offering price. M&A Advisory Services The practise of assisting corporations and institutions in locating, assessing, and completing business purchases is known as mergers and acquisitions (M&A) advisory. This performs a crucial role in i-banking. Banks leverage their wide-ranging relationships and networks to identify possibilities and support client negotiations. In M&A deals, bankers provide advice on both sides, advising either the \"buy-side\" or the \"sell-side\" of the transaction. 19

Banking Clients Investment bankers provide extensive clientele with capital raising and M&A advice. These customers may be found anywhere in the world. Investment banks’ clients include:  Governments – Investment banks assist governments in capital-raising efforts, securities trading, and the acquisition or disposal of crown enterprises.  Corporations – Bankers deal with both private and publicly traded firms to assist them in going public (IPO), raising additional capital, expanding their operations, making acquisitions, and selling company units. They also conduct research for them and offer general corporate finance advice.  Institutions – To assist them in trading securities and offering research, banks collaborate with institutional investors who look after other people's money. Additionally, they assist private equity firms in acquiring portfolio companies and exiting those positions by either selling to a strategic buyer or doing an initial public offering (IPO). Investment Banking SkillsWork in i-banking necessitates extensive financial modelling and valuation. Bank Analysts and Associates spend a lot of time in Excel creating financial models and applying different valuation techniques to advise their clients and close agreements, whether for underwriting or M&A activity. These competencies are necessary for investment banking:  Financial modelling: 20

Building 3-statement models, discounted cash flow (DCF) models, LBO models, and other financial models are just a few examples of the many financial modelling tasks that can be performed.  Business valuation – Using a variety of valuation techniques, including DCF analysis, comparable company analysis, and prior transactions.  Pitch books and presentations – Constructing PPT presentations and pitchbooks from scratch to offer ideas to potential clients and attract new business (see CFI's Pitchbook Course).  Transaction documents – Creating a data room, creating a confidential information memorandum (CIM), a term sheet, a confidentiality agreement, and many other papers (see out CFI's library of free transaction templates).  Relationship management – Relationship management entails negotiating deals with current customers and ensuring that they are satisfied with the service received.  Sales and business development – Constantly meeting with potential customers to present ideas, offer assistance with their job, and offer value-added advice that will ultimately gain new business.  Negotiation – Helping clients maximise value creation by playing a significant role in the negotiation strategies used by buyers and sellers in a transaction. 21

Careers in Investment Banking It's quite difficult to join i-banking. There are frequently up to 100 candidates for every available position. For more information on how to get a job on Wall Street, check out our tutorial on how to ace an investment banking interview.You should also take a look at our illustration of actual interview questions from an investment bank. It also helps to take classes in financial modelling and valuation as you get ready for your interview. From most junior to most senior, the most popular job titles in i-banking are:  Analyst  Associate  Vice President  Director  Managing Director  Head, Vice Chair, or another special title 2.4 SUMMARY  Corporate finance is a typical function of investment banks, and it comprises counselling clients on mergers and acquisitions and assisting them in raising capital on the capital market.  The investment banks' sales team is known as sales, and its main duty is to approach institutional investors and convince them to purchase the stocks and bonds that the company has underwritten.  Investment banking is a unique branch of banking that assists people or organisations in raising funds and offers them financial consulting services.  One of the most complicated financial systems in the world is investment banking.  In M&A deals, bankers provide advice on both sides, advising either the \"buy-side\" or the \"sell-side\" of the transaction.  Bankers deal with both private and publicly traded firms to assist them in going public (IPO), raising additional capital, expanding their operations, making acquisitions, and selling company units. 22

 Helping clients maximise value creation by playing a significant role in the negotiation strategies used by buyers and sellers in a transaction. 2.5 KEYWORDS  Capital - wealth is the possession of money or other assets by an individual or group that may be used for a variety of activities, including investing or beginning a business.  Equity Research - Equity research is the analysis of a company and its surroundings in order to decide whether to acquire or sell its shares.  Asset management - Asset management is the process of gradually building up overall wealth through the purchase, upkeep, and trading of investments with the potential for appreciation.  IPO - A public offering in which shares of a firm are sold to institutional investors and typically also to retail investors is known as an initial public offering (IPO) or stock launch.  Financial modelling - Financial modelling is the process of compiling a spreadsheet- based overview of a company's costs and profits that can be used to estimate the effects of a potential event or choice. 2.6Learning Activity 1. What is IPO? 2. Explain the concept of Capital. 2.7UNIT END QUESTIONS Descriptive questions 23

A. Short question 1. What do you mean by Underwriting? 2. ExplainMergers & Acquisitions (M&A) 3. Describe the termEquity Research. 4. Write a note onSales and Trading. 5. Discuss a Brokerage Services Long questions 1. What are the principal functions of investment banks? 2. What is the different between Sales trading and Proprietary Trading? 3. Explain the various career in investment banking. 4. What are the Full-service that bank offer? 5. Explain in detail M&A Advisory Services. B. Multiple choice questions 1. _______________is a special segment of banking operation that helps individuals or organizations raise capital and provide financial consultancy services. a. Investment banking b. Personal banking c. Public banking d. Foreign banking 2._______________, concerned with advising on the finances of corporations, including mergers, acquisitions and divestitures. a. Brokerage Services b. Research and development c. Sales and distribution d. Corporate Finance 24

3.IBD stands for: a. Investment banking division b. Individual banking division c. Investment banking diverse d. Investment banking development 4._________________, is often one of the biggest sources of profit. a. Sales development b. Brokerage Services c. Proprietary Trading d. Corporate Finance 5._____________, concerned with buying and selling shares both on behalf of the bank’s clients and also for the bank itself. a. Raising Capital b. Sales and Trading c. Brokerage Services d. Corporate Finance Answers: 1-a ,2-d ,3-a ,4-c ,5-b 2.8 SUGGESTED READING AND E- RESOURCES  PunithavathyPandian, SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT, Vikas Publications Pvt. Ltd, New Delhi. 2001.  Kevin.S, SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT, PHI, Delhi, 2011  YogeshMaheswari, INVESTMENT MANAGEMENT, PHI, Delhi, 2011 25

 Bhalla V K, INVESTMENT MANAGEMENT: SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT, S Chand, New Delhi, 2009  Prasanna Chandra, PORTFOLIO MANAGEMET, Tata McGraw Hill, New Delhi, 2008. 26

UNIT - 3 TYPES OF INVESTMENT 3.0 Unit Objective 3.1 Introduction 3.2 Trading business 3.3 Asset management business 3.4 Summary 3.5 Keywords 3.6 Learning activity 3.7 Unit end questions 3.8 Suggested Reading and E- Resources 3.0 UNIT OBJECTIVES  To understand about Trading business  To discuss Asset management business 3.1 INTRODUCTION Investment banking is a division of banking that focuses on helping people and corporations raise money and offering financial guidance.Theyare a resource for start-up businesses looking to go public as well as a link between security issuers and investors. They sell stock on behalf of the issuers and receive remuneration for each share sold, or they purchase all existing securities allowed by their authorities and resold them to regular people. Since they allow the household sector to receive the maximum return on investment, investment banking is essential to the expansion of the economy. Additionally, they enable the industrial sector to obtain affordable finance. It's common to refer to the investment banking industry as a single unit. But this is not the case. Investment banks come in a variety of forms and are found all over the world. There are numerous ways to categorise these different investment banks. The most frequent criteria used to differentiate between these banks are the kind of financial commodities they offer and the geographic area to which they belong. They are typically divided 27

into groups based on the size of the transactions they mediate. Depending on the size of these deals, the role of investment banks fluctuates drastically. 3.2 TRADING BUSINESS Trading business Trading company concepts can be highly profitable based on one's skill level and require little capital. Consequently, they have enjoyed long-term popularity. Trading businesses acquire products from numerous producers or wholesalers and resell them to consumers or retailers. They either order things based on customer orders or store their own inventory in a warehouse to accomplish this. Today, trading business concepts is booming. Continue reading to learn about a few actions you could take if you were thinking about starting or growing your trading firm. Steps to Take Before Starting a Trading Business are: If you decide to pursue a career in trading, you must carefully plan and strategize. It is a good idea to have a thorough trade company plan. Following that, it's crucial to go over the following steps: 1. Researching the market and competition. 2. Decide on your target market: local, national, or global. 3. Next, decide whether to use a mixed, online, or offline business operation strategy. 4. Specify the product's price. Make sure to account for all of your costs as well as the pricing being given by rivals before setting a price. 5. Make contact with goods manufacturers. 6. Make revenue predictions and a revenue model. 7. Calculate your capital needs as well as your ongoing operating costs (including labour) up to the point of break-even. 8. When you have a clear understanding of all of these things, you should next apply for the licence, regulatory filings, GST number, etc. 28

Advantages of Trading Business  Easy and practical Time is of the essence when trading stocks on the stock market, thus many shareholders benefit from the efficiency of online trading portals. Through online trading, you can run a trade almost directly. Traditional trading transactions take a long time, which is inconvenient and may even wind up costing you a lot of money.  Good returns The main goal for the majority of people starting online trading is to be able to quit their work and make a living off the markets. The rewards depend on your capacity for risk, the amount you invest, and the proportion of profitable stock trades you make. If you play it carefully and shrewdly, you can easily make 18–30% in a year.  With derivatives, no capital is needed. Financial contracts known as derivatives derive their value from a primary asset. These could include stocks, indexes, currencies, commodities, exchange rates, and interest rates. These financial instruments help you generate income by assuming the long-term cost of the main asset. Therefore, their evaluation is based on that underlying asset.  Liquidity How much and how regularly a market or financial asset is exchanged is defined by the term \"liquidity.\" Markets that produce liquidity are referred to as liquidity pools. Market liquidity lowers risk and gives each individual additional opportunities to buy or sell at the price they choose.  Price discovery Price discovery is the process of determining the proper price of a security, commodity, or good or service by learning about available market resources, demand, and other relevant factors. In addition to the behaviours of the buyers and sellers, proper price discovery is dependent on the number, size, location, and competition of buyers and sellers. Disadvantages of Trading Business  Simple losses 29

Trading is often perceived as the simplest way to make money on the stock market, but it is also the simplest way to lose money. According to an old proverb, \"grabbing a huge fortune is the easiest way to make a modest fortune in the markets.\"  High tax obligation A tax liability is the total amount of taxes that a business or individual must pay under the laws at the time. A tax liability calculation is initiated by a chargeable event. Tax liabilities are incurred as a result of financial success, a profit from the sale of an asset, or more taxable activities. 3.3 ASSET MANAGEMENT BUSINESS An asset management company (AMC) is a business that makes investments on behalf of its clients using a pooled fund of resources. The money is invested in diverse projects across a range of asset classes. Companies that handle assets are frequently referred to as money managers or money management firms. Fig No 3.1 Assets Management Business Different Types of Asset Management Companies 30

Asset management companies come in many different forms and structures, such as:  Hedge funds  Mutual funds  Index funds  Exchange-traded funds  Private equity funds  Other funds In addition, they invest on behalf of various types of clients, such as:  Retail investors  Institutional investors  Public sector (government organizations)  Private sector  High-net-worth clients Asset Management Companies Explained Individual investors typically lack the knowledge and resources necessary to consistently generate solid long-term investing returns. As a result, a lot of investors rely on asset management firms to make investments on their behalf.Asset management firms are typically made up of a diverse mix of investing experts. They can use complex investment techniques and diversification to provide returns for investors since they have a lot of pooled resources. Client fees charged by AMCs are typically calculated as a proportion of all assets under management (AUM). AUM is just the sum of all investor capital contributions. 31

AUM may be subject to a 2% fee from an asset management fund. As an illustration, visualise an asset manager in charge of a $100 million fund. The fees will be $2 million ($100 million x 2.0%) for a year or other time period. Hedge firms are infamous for charging substantially higher fees—up to 20% sometimes. Hedge funds, on the other hand, use riskier and more unconventional investment tactics to produce profits. Buy-Side vs. Sell-side \"Buy-side\" firms are referred to as asset management corporations. It implies that they assist clients in purchasing investments. They choose which investments to buy based on those selections.In contrast, \"sell-side\" businesses, such investment banks and stockbrokers, offer investment services to other investors and buy-side businesses. In order to persuade the buy-side firms to execute transactions with them, sell-side companies do market research and assist in providing them with important information. Benefits to Asset Management Companies There are various benefits to pooling capital together, including: 1. Economies of scale Economies of scale are the cost advantages a business can obtain by expanding its operational footprint. The operational costs per unit are lower in larger businesses. Asset management firms, for instance, can buy securities in greater amounts and bargain for more favourable trading commission rates. Additionally, they can put a lot of money into a single office, which lowers overhead expenses. 2. Access to broad asset classes Access to broad asset classes means that asset management companies can invest in asset classes that an individual investor will not be able to. For example, an AMC can invest in multi-billion- dollar infrastructure projects, such as a power plant or a bridge. The investments are so large that an individual investor will not usually be able to access them. 32

3. Specialized expertise Asset management firms have access to a wide range of asset classes, allowing them to invest in asset classes that an individual investor would not be able to. An AMC, for instance, might finance multibillion-dollar infrastructure initiatives like a power plant or a bridge. Due to the size of the investments, an individual investor typically cannot access them. Limitationsof Asset Management Companies Asset management companies come with a few downsides as well, such as: 1. Management fees The majority of asset managers impose fixed fees that are paid regardless of results. As a result, over time, investors may find the fees to be very costly. The fees are substantial to cover these costs and to give asset managers a profit as well because running an AMC requires a lot of resources and experience. 2. Inflexible Asset managers have the potential to grow too big, becoming unwieldy and unresponsive to the changing market. Operating issues can occasionally result from managing too much capital.. 3. Risk of underperforming A benchmark is frequently used to compare an AMC's performance to. In order to compare performance, a benchmark is used, typically in the form of a wide market index. Asset managers run the danger of underperforming the markets, which can be highly expensive for investors when you factor in the management costs we previously stated. 3.4 SUMMARY 33

 Investment banking is a division of banking that focuses on helping people and corporations raise money and offering financial guidance.  Trading company concepts can be highly profitable based on one's skill level and require little capital.  Time is of the essence when trading stocks on the stock market, thus many shareholders benefit from the efficiency of online trading portals.  The main goal for the majority of people starting online trading is to be able to quit their work and make a living off the markets.  Price discovery is the process of determining the proper price of a security, commodity, or good or service by learning about available market resources, demand, and other relevant factors.  A tax liability is the total amount of taxes that a business or individual must pay under the laws at the time.  An asset management company (AMC) is a business that makes investments on behalf of its clients using a pooled fund of resources.  \"Buy-side\" firms are referred to as asset management corporations. It implies that they assist clients in purchasing investments.  \"Sell-side\" businesses, such investment banks and stockbrokers, offer investment services to other investors and buy-side businesses. 3.5 KEYWORDS  Asset management company - An asset management company (AMC) is a business that manages client funds that are pooled together and invests them in a variety of assets, such as stocks, bonds, real estate, master limited partnerships, and other investments.  Index Fund - An index fund is a portfolio of stocks or bonds created to closely resemble the make-up and performance of an index of the financial markets.  Retail investors - A retail investor is a nonprofessional investor who uses a brokerage company or savings account to buy and sell shares, mutual funds, or ETFs.  High-net-worth clients - A person with at least $1 million in liquid financial assets is considered high net worth. 34

 Tax liability - Tax liability is the total amount of tax that people and companies owe to the federal, state, and local governments in a specific time frame. 3.6LEARNING ACTIVITY 1. What is Price discovery? 2. Explain the concept of tax liability. 3.7UNIT END QUESTIONS A. Descriptive questions Short question 1. Explain the term trading. 2. Describe the term AMC. 3. Analyze the various asset management company names. 4. What is the different between Buy-Side vs. Sell-side? 5. Explain the concept of AUM. Long questions 1. What is an AMC? and explain the advantage of AMC. 2. Explain the Steps to Take Before Starting a Trading Business? 3. Which are India's Top 5 Trading Companies? 4. Analysis the advantages and disadvantage of Trading business. 5. Write brief on Trading Business and give example. B. Multiple choice questions 35

1. ________________ business ideas are a low investment and, depending on one’s skill, quite lucrative. a. Trading b. Industry c. Commerce d. Company 2. In which business ideas are also a popular business option? a. T shirt selling b. FMCG Trading c. Jewelry Trading d. Stock market trading business 3. AMC stands for _______________ a. association management company b. actual management company c. asset management company d. amortization management company 4. Who usually lack the expertise and resources to consistently produce strong investment returns over time? a. Trading investors b. Family investors c. Group investor d. Individual investors 5. Asset management companies are referred to as “______________firms. 36

a. right side b. sell-side c. buy-side d. left-side Answers: 1-a,2-d,3-c,4- d,5-c 3.8 SUGGESTED READING AND E- RESOURCES  PunithavathyPandian, SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT, Vikas Publications Pvt. Ltd, New Delhi. 2001.  Kevin.S, SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT, PHI, Delhi, 2011  YogeshMaheswari, INVESTMENT MANAGEMENT, PHI, Delhi, 2011  Bhalla V K, INVESTMENT MANAGEMENT: SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT, S Chand, New Delhi, 2009  Prasanna Chandra, PORTFOLIO MANAGEMET, Tata McGraw Hill, New Delhi, 2008. 37

UNIT - 4 TRADITIONAL BANKING 4.0 Unit Objective 4.1 Introduction 4.2 Concept of traditional banking, 4.3 Features of traditional banking 4.4 Limitations of traditional banking 4.5 Differentiate investment banking from traditional banking 4.6 Summary 4.7 Keywords 4.8 Learning activity 4.9 Unit end questions 4.10Suggested Reading and E- Resources 4.0UNIT OBJECTIVES  To understand the concept of traditional banking  To explain the features of traditional banking  To discuss the limitations of traditional banking  To explain Difference between investment banking from traditional banking 4.1 INTRODUCTION India's economic development is based on the banking industry. With the development of technology and taking into account people's requirements, significant changes in the management and banking system have been observed over time. The financial sector is divided into two broad groups, namely investment banks and Traditional banks, based on the work done by the banks. Traditional banks were established with the intention of carrying out business activities, such as lawfully accepting deposits and lending money to clients like individuals and corporations. 38

Investment banks, on the other hand, were founded to provide services to investors. Investment banks conduct their business in a unique way, serving as a middleman between stock and bond buyers and sellers to assist clients in acquiring funds. 4.2 CONCEPT OF TRADITIONAL BANKING For a very long period, the banking business was simply outdated. Given that banks have now been for several centuries, this makes sense. Traditional banking is used to describe banks with a local banking licence and a physical location. These are the well-known banks, including, to name a few, ING, Bank of America, and Banco Santander. A conventional bank normally has:  Physical proximity;  Regional offices in each nation where they operate;  Own-brand ATMs  A large number of workers;  Direct, one-on-one interactions with customers;  Committed account executives While traditional banking solutions frequently include online options, these are typically seen as a by-product of the bank's services, as opposed to online banks, who are wholly focused on the user interface for their online banking platform. History of Banking in India 39

Fig No4.1 History of Banking Pre Independence-Period (1786-1947) The \"Bank of Hindustan,\" which was founded in 1770 and had its headquarters in Calcutta, the then-capital of India, was the country's first bank. However, this bank did not succeed and was forced to close its doors in 1832. Only a few of the more than 600 banks that were registered in the nation before independence were able to survive. Several other banks were created in India after Bank of Hindustan. As follows:  The General Bank of India (1786-1791)  Oudh Commercial Bank (1881-1958)  Bank of Bengal (1809)  Bank of Bombay (1840)  Bank of Madras (1843) The Bank of Bengal, the Bank of Bombay, and the Bank of Madras were established by The East India Company and were known as the Presidential Banks while the British Empire ruled India. 40

Later, in 1921, these three banks were combined into a single institution known as the \"Imperial Bank of India.\" Later nationalised in 1955, The Imperial Bank of India was renamed The State Bank of India and is now the biggest public sector Bank. The following conclusions can be formed if we discuss the reasons why many significant banks could not survive during the pre-independence period:  Indian account holders were more likely to commit fraud.  Lack of machines and technology  Human errors & time-consuming  Minimal infrastructure  Inadequate management abilities The post-independence period, which came after the pre-independence period, saw some notable changes in the banking business landscape and has since grown significantly. Post-Independence Period (1947-1991) All of India's major banks were privately run at the time of its independence, which raised concerns because rural residents were still reliant on moneylenders for financial support. The then-Government chose to nationalise the banks in an effort to address this issue. The Banking Regulation Act of 1949 authorised the nationalisation of these institutions. However, in 1949, the Reserve Bank of India was nationalised. Given below is the list of these 14 Banks nationalised in 1969: 1. Allahabad Bank 2. Bank of India 3. Bank of Baroda 4. Bank of Maharashtra 5. Central Bank of India 6. Canara Bank 7. Dena Bank 41

8. Indian Overseas Bank 9. Indian Bank 10. Punjab National Bank 11. Syndicate Bank 12. Union Bank of India 13. United Bank 14. UCO Bank In the year 1980, another 6 banks were nationalised, taking the number to 20 banks. These banks included: 1. Andhra Bank 2. Corporation Bank 3. New Bank of India 4. Oriental Bank of Comm. 5. Punjab & Sind Bank 6. Vijaya Bank Apart from the above mentioned 20 banks, there were seven subsidiaries of SBI which were nationalised in 1959: 1. State Bank of Patiala 2. State Bank of Hyderabad 3. State Bank of Bikaner & Jaipur 4. State Bank of Mysore 5. State Bank of Travancore 6. State Bank of Saurashtra 7. State Bank of Indore Impact of Nationalization The Government decided to nationalise the banks for a number of reasons. The effects of nationalising banks in India are as follows: 42

 This resulted in a rise in funds, which improved the nation's economic situation and increased efficiency.  Aided in developing the nation's agricultural and rural sectors  It provided the people with significant work opportunities.  The government utilised bank profits for the benefit of the populace.  As the level of competition dropped, work productivity rose.  Major advancements in the Indian banking industry and the sector's evolution occurred during this post-Independence period. Liberalisation Period (1991-Till Date) After the nation's banks were formed, ongoing oversight and compliance with rules were required to maintain the profits generated by the banking industry. The most recent or current stage of the banking sector's development is quite important. A committee headed by Shri. M Narasimham was established by the government to oversee the different banking reforms in India in order to give stability and profitability to the Nationalized Public sector Banks. The emergence of private sector banks in India was the biggest development. 10 private sector banks were granted licences by the RBI to operate in the nation. Among these banks were: 1. Global Trust Bank 2. ICICI Bank 3. HDFC Bank 4. Axis Bank 5. Bank of Punjab 6. IndusInd Bank 7. Centurion Bank 8. IDBI Bank 9. Times Bank 10. Development Credit Bank The other measures taken include: 43

 Setting up of branches of the various Foreign Banks in India  No more nationalisation of Banks could be done  The committee announced that RBI and Government would treat both public and private sector banks equally  Any Foreign Bank could start joint ventures with Indian Banks  Payments banks were introduced with the development in the field of banking and technology  Small Finance Banks were allowed to set their branches across India  A major part of Indian banking moved online with internet banking and apps available for fund transfer Thus, the history of banking in India shows that with time and the needs of people, major developments have been brought about in the banking sector with an aim to prosper it. 4.3 FEATURES OF TRADITIONAL BANKING The prevalence of online banking makes it simple to overlook the advantages and benefits of conventional banking services. Online banking has made banking more affordable and convenient, but there are some services it does not provide.You only become aware of some of the advantages of traditional banking giants when you are in need of such services. 1. Personal Interaction There is nothing that compares to personal interaction i.e. interacting with a real person when it comes to banking. Even now, I find it difficult to communicate with machines as opposed to actual people. 2. The Ability to Process Cash Transactions There is no better location to deposit cash than in a physical bank branch if you have it and would like it to be done. By definition, online banks cannot handle currency transactions on your behalf. After all, they don't have branches.Therefore, traditional banking is for you if you deal with cash and need the bank to bank it or process it in any other way.Therefore, if you need to 44

deposit cash, merely having an online banking account may not be the best option. Even when it comes to cashing checks, you will need to use the cash machines at other banks because internet bankers lack this capability. 3. Notary Services Traditional bankers can provide notary services, i.e., someone to witness the signing of documents and also to confirm the identity of the person signing. They may charge a nominal fee or nothing at all.Most people prefer to accomplish this at their bank even though a notary public is not need to be a banker.Online banking is unable to offer this service since it is incompatible with face-to-face interactions with consumers.Fortunately, you won't always require a notary public's assistance. Therefore, you can get away with it or you can ask for help from other notaries, like lawyers. 4. Safe Deposit Boxes Another feature you can only obtain at a traditional bank is the ability to offer safe deposit boxes. Therefore, online banking is not for you if you wish to keep valuables like jewels and documents in a secure location.There is no better option than a bank safe deposit box if you need to store your assets in a location that is theft-, fire-, and water-resistant. Then, for a fair price, you can access them whenever the bank is open.There is no greater institution to be able to pay you than a bank, even if burglars were to be able to break in and steal your valuables. 5. Almost Instant Service for Some Transactions like Cashier’s Checks When opposed to days for online banking, the traditional bank will typically provide same-day service if you need a cashier's check.If you can afford to wait, this might be okay, but most businessmen can't afford to wait that long. The day they apply for it, they want to receive their cheque.While online banks allow you to spend extra to receive your check faster, the process of having it sent can cause a variety of worries.A check can be processed the same day if you have an account with one of the traditional banks; otherwise, you can simply visit your bank branch. And it will be delivered directly to you, which is far better than its posted to you. 45

6. You Can Enjoy the Old and The New Forms of Banking Under One Roof Even while online banks are currently all the rage, it's important to recognise that traditional banks have also done a great job updating their online offerings.Therefore, by sticking with conventional banks, you will benefit from the best of both worlds. You will be able to use services like safe deposit boxes and cash deposits while also having access to online banking.This is not the case with online banks because all they offer is electronic banking. 7. Traditional Banks Can Offer Other Services Such As Insurance or Stock Broking The majority of conventional banks have now expanded into other industries, including stockbroking and insurance services. As a result, in addition to receiving banking services, you can purchase stocks through the stockbroking division of your bank.Traditional banks can provide a variety of services that most online banks cannot, like home insurance, health insurance, and many others. 4.4 LIMITATIONS OF TRADITIONAL BANKING Traditional banking is distinguished by its extensive infrastructure (physical offices) and \"face- to-face\" customer service. Its marketing strategy has been to handle each client individually and with great compassion. In particular, accounts, payrolls, credit/debit cards, personal or mortgage loans, and other financial services are the main areas of concentration for this sort of banking in order to support its customers.When using traditional banking, a customer frequently needs to travel to the actual offices in order to complete procedures, conduct transactions, get cash, etc. There, you receive customised assistance as opposed to online banking, which allows for remote transaction processing (from a smartphone, tablet or personal computer). While traditional face- to-face banking is gradually \"migrating\" or utilising some online banking features, there are still some drawbacks for fintech companies at the moment, which we shall learn about below: (a) Operating expenses Traditional banks typically have significant operating costs since they have both administrative and client-facing locations (on the assumption that the more locations there are, the better their 46

reputation will be). Paying for public services, security, stationery costs, and the issuing of the plastics used to create debit and credit cards are among its major operating expenses. These are in addition to payments for payroll of in-person personnel. 3.6.1 Move to offices at certain times If a transfer or other type of management is necessary, it is frequently necessary to be \"physically present\" in the bank's office and during the hours set by the bank. This is a big disadvantage because the \"Banking hours\" typically overlap with the working hours of many companies or businesses, so it is frequently necessary to have a \"work permit\" to visit the bank. The travel time needed to get to the office (from either home or work), which can add another layer of difficulty for the user, is another consideration. 3.6.2 Slow processes Another drawback is how slowly some of its processes are completed (which is typically brought on by its internal hierarchy or organisation or the acts of its own officials). The length of time transactions between banks typically take (especially during vacations or weekends) is another example of how slowly things move.). 3.6.3 High commissions Due to their high operational costs, traditional banks generally have higher commission rates, which drives up the cost of many of their goods and services in comparison to those offered by fintech firms. 3.6.4 Low stimulus to savings There is no incentive to save because traditional banks often provide their savings customers a poor interest rate. This is due to the fact that traditional banking encourages more bank loans, which are funded by commercial bank money. These loans also produce more interest and collection fees, enabling traditional banking to print more fiat currency and increase profits. 47

3.6.5 Lack of permanent ATM network There are times when the ATM network is not ideal because, for example, there are not many machines in the city, there is a limited supply of cash, there are daily withdrawal limits, or there are occasional problems with the operation of the ATMs. All these issues can cause users discomfort or problems. 4.5 DIFFERENTIATE INVESTMENT BANKING FROM TRADITIONAL BANKING Investment Banking: A financial organisation that handles complex financial transactions is referred to as a \"investment bank.\" These banks act as a conduit between large enterprises and investors. The banks offer their clients a variety of services, including as supporting governments and businesses with the issuance of securities, assisting investors with the purchase of stocks, bonds, and other financial instruments, offering consulting services, and more. By collecting fees for their advice services, banks make money. The bank's trading activity is also open to profit or loss. These banks play a crucial role in aiding companies or government to take well-planned decisions and raise funds easily. The following are the services that an investment bank offers:  Underwriting of Securities  Raising of capital  Asset management  Wealth management  Advisory services  Merger and Acquisitions  Assisting companies in making an Initial Public Offer (IPO) Traditional Banking: 48

A facility that offers banking and financial services to the general public is referred to as a traditional bank. There was no such institution in the past where people could safely store their money or obtain loans. They therefore used to borrow money from money sharks and deposit it in post offices. In the future, banks that serve as bankers for all of the nation's citizens will be formed.Traditional banks might be privately, publically, or a combination of the two held. The banks assist in the economy-wide mobilisation of savings. The Banking Regulation Act of India, 1949, governs it. At a nominal interest rate, banks collect deposits from people of the nation and utilise that money to lend credit to other clients (borrowers), who pay higher interest rates. Banking institutions generate profits in this manner from the excess interest. In addition, one of the main ways that banks make money is through the fees they charge customers for using their various services. The financial institutions offer a wide range of services, including the following:  Accepting deposits  Advancing loans  Overdraft and cash credit facility  Payment on standing instructions  Withdrawal of money on demand  Collection of bills and promissory notes  Trading in shares and debentures on behalf of customer  Locker facility  ATM Card, Debit Card, Credit Card Facility  Mobile banking  Internet banking Differences Between Investment Bank and Traditional Bank Following are some basic distinctions between traditional banks and investment banks:  An investment bank is a type of financial intermediary created to offer corporations investment and advisory services. A bank called Traditional Bank was founded to offer banking services to the general people. 49

 Compared to traditional banks, which offer uniform services, investment banks offer customer-specific services.  Comparatively speaking, a traditional bank has a larger customer base than an investment bank.  The performance of the stock market affects the investment bank, whereas the traditional bank's interest rate is influenced by economic expansion and loan demand.  The investment bank acts as a banker for people, organisations, and the like. However, a traditional bank serves as a banker for all of the nation's residents.  Fees and commissions are how the investment bank makes money. In contrast to Traditional Bank, who makes money via interest and fees. 4.6 SUMMARY  The financial sector is divided into two broad groups, namely investment banks and Traditional banks, based on the work done by the banks.  Traditional banking is used to describe banks with a local banking licence and a physical location.  The \"Bank of Hindustan,\" which was founded in 1770 and had its headquarters in Calcutta, the then-capital of India, was the country's first bank.  The Bank of Bengal, the Bank of Bombay, and the Bank of Madras were established by The East India Company and were known as the Presidential Banks.  In the year 1980, another 6 banks were nationalised, taking the number to 20 banks. 4.7 KEYWORDS  Nationalization - The process of transferring ownership of privately held businesses, sectors, or assets to the state is known as nationalisation.  Liberalization - The process or method of liberalisation is the removal of state regulation of economic activity.  Online banking - Online banking, often known as internet banking, online banking, or home banking, is a type of electronic payment system that allows clients of banks and 50