CU-MCOM-SEM-IV-Capital Market and Financial Services

___________________________________________________________________________ ___________________________________________________________________________ 2. What is Land Development Banks? ___________________________________________________________________________ ___________________________________________________________________________ 4.10 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What are the Primary elements of national bank? 2. What do you mean by Co-usable Banks? 3. Explain about Investment funds Banks 4. What do you mean by Industrial Banks/Investment Banks? 5. What is Exchange Banks? Long Questions 1. Explain about NBFCs. 2. Explain the different kinds of Banking Institutions. 3. Explain about elements of national bank. 4. Explain the Role Offinancial institution in Economic Development. 5. Explain the benefits of financial institution. B. Multiple Choice Questions 1. __________area banks arose in India after progression. a. Planning b. Funds c. Controlling d. Private 2. The two principal purposes behind the presence of monetary establishments are monetary turn of events and ______________. a. Monetary solidness b. Buckle 51 CU IDOL SELF LEARNING MATERIAL (SLM)

c. Market Risk d. Credit Risk 3. The bank framed for administering, _____________and managing the exercises of both banking and other non-banking monetary organizations is called as national bank. e. Homogeneous f. Independent g. Heterogeneous h. Controlling 4. _______________organizations are the central members in the improvement of the capital market in any economy. a. Funds b. Agency costs c. Monetary d. Markets 5. The banks which are shaped to prepare investment funds of poor people and centre pay individuals of the general public are called as ___________banks. a. Procurement b. Reserve funds c. Capital budgeting d. Computation Answers 1-d, 2-a, 3-d, 4-b, 5-d 4.11 REFERENCES Reference’s book  Auer Bach Robert D., Finance Markets and Institutions, Macmillan Publishing Co. Inc., New York.  Bhole M.K., Financial Markets and Institutions, Macmillan Publishing Co. Inc., New York. 52 CU IDOL SELF LEARNING MATERIAL (SLM)

 Cooper Kersey and Donald R. Fraser, the Financial Market Place, Addison Wesley Publishing Company (Latest Edition).  Khan M.Y, Indian Financial System, Tata McGraw Hill.  Mandura Jeff, Financial Markets and Institutions, West Publishing Company, New York. Meir Kohn, Financial Institutions and Markets,  McGraw Hill Publishing Company, New York.  bulletin.rbi.org.in  www.rbi.org.in 53 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 5: CAPITAL MARKET 54 STRUCTURE 5.0 Learning Objectives 5.1 Introduction 5.2 Meaning and Definition 5.3 Characteristics of Capital Market 5.4 Importance or Functions of Capital Market 5.5 Features of Capital Market 5.6 Structure of Capital Market 5.7 Types of Capital Market 5.8 Recent Developments in the Indian Capital Market 5.9 Defects of Indian Capital Market 5.10 Role of SEBI in Capital Market 5.11 Summary 5.12 Keyword 5.13 Learning Activity 5.14 Unit End Questions 5.15 References 5.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  To understand meaning and characteristics of Capital Market.  To know more about features of Capital Market.  To understand about the structure and types of Capital Market.  To know role of SEBI in Capital Market. CU IDOL SELF LEARNING MATERIAL (SLM)

5.1 INTRODUCTION Capital business sectors and monetary revelations are a critical part of a working monetary framework and present-day economy. They assume a significant part in the distribution of capital across the economy. Capital business sectors are go-betweens where monetary protections are purchased and sold, (for example, the New York Stock Exchange). Capital business sectors can be separated into essential and optional capital business sectors. Essential capital business sectors are the place where financial backers purchase recently gave protections from a guarantor (e.g., a company) to assist it with raising capital. Guarantors can utilize capital from essential business sectors to subsidize an assortment of exercises, like paying laborers, assembling new production lines and plants, and making acquisitions. 5.2 MEANING AND DEFINITION Capital business sectors are monetary business sectors for the purchasing and selling of long- haul obligation or long-haul protections having a development period (age) of one year or more. These markets channel/direct the abundance of savers to the people who can put it to long haul useful/valuable use, for example, organizations or governments making long haul ventures/capital spending. Monetary controllers/guard dogs like the Securities and Trade Board of India (SEBI), regulate/direct the capital business sectors in their purviews/regions to secure financial backers against extortion/untruthfulness among different obligations. Capital market is a business opportunity for long haul reserves both value and obligation and assets raised inside and outside the country. The capital market helps monetary development by assembling the investment funds and coordinating something similar towards useful use. This is worked with through the accompanying measures or ways: 1. Issue of key safeties in the important market, i.e., synchronizing income from the excess area to the deficiency areas like the public authority and the corporate area. 2. Providing liquidity and appeal of exceptional compulsion and value instruments. 55 CU IDOL SELF LEARNING MATERIAL (SLM)

5.3 CHARACTERISTICS OF CAPITAL MARKET 1. Connection among savers and financial backers: The capital market goes about as a significant connection among savers and financial backers. The savers are banks of assets while financial backers are borrowers of assets. The savers who don't burn through all their pay are designated \"Surplus units\" and the financial backers/borrowers are known as \"deficiency units\". The capital market is the transmission instrument between surplus units and deficiency units. It is a channel through which overflow units loan their excess assets to shortage units. 2. Arrangements in Long Term store: Capital market gives assets for long and medium term. It doesn't manage channelizing putting something aside for short of what one year. 3. Uses Intermediaries: Capital market utilizes various delegates like specialists, guarantors, stores and so on these mediators go about as working organs of capital market and are vital components of capital market. 4. Capital development: The capital market prides motivators to savers as interest or profit to move their excess asset into the shortage units who will put it in various organizations. The exchange of assets by the excess units to the deficiency units prompts capital development. 5. Government Rules and Regulations: The capital market works openly yet under the direction of government approaches. These business sectors work inside the structure of government rules and guidelines, e.g., stock trade works under the guidelines of SEBI which is an administration body. An ideal capital market is one: 1. Where money is accessible at sensible expense. 2. Which works with monetary development? 3. Where market tasks are free, reasonable, cutthroat also, straightforward. 4. Should give adequate data to financial backers. 5. Should designate capital beneficially. 5.4 IMPORTANCE OR FUNCTIONS OF CAPITAL MARKET The capital market assumes a significant part in activating saving and channels them into useful ventures for the advancement of trade and industry. In that capacity, the capital market 56 CU IDOL SELF LEARNING MATERIAL (SLM)

helps in capital development and financial development of the country. We talk about beneath the significance of capital market. 1. Connection among savers and financial backers: The capital market goes about as a significant connection among savers and financial backers. The savers are moneylenders of assets while financial backers are borrowers of assets. The savers who don't burn through all their pay are designated \"Surplus units\" and the financial backers/borrowers are known as \"deficiency units\". The capital market is the transmission component between surplus units and shortage units. It is a channel through which overflow units loan their excess assets to shortage units. 2. Reason for industrialization: Capital market creates long haul reserves, which are fundamental for the foundation of enterprises. Subsequently, capital market goes about as a reason for industrialization. 3. Speeding up the speed of development: Easy and smooth accessibility of assets for medium and extensive stretch urges the business people to take beneficial adventures/organizations in the field of exchange, industry, trade and even agribusiness. It brings about the all-round financial development and speeds up the speed of financial turn of events. 4. Creating liquidity: Liquidity implies convertibility into cash. Portions of the public organizations are adaptable i.e.; in the event of monetary prerequisites these offers can be sold in the financial exchange and the money can be gotten. This is the manner by which capital market produces liquidity. 5. Increment the public pay: Funds stream into the capital market from people and monetary mediators which are consumed by business, industry and government. It hence works with the development of stream of funding to be utilized more beneficially and productivity to expand the public pay. 57 CU IDOL SELF LEARNING MATERIAL (SLM)

6. Capital development: The capital market prides motivators to savers as interest or profit to move their excess asset into the shortage units who will put it in various organizations. The exchange of assets by the excess units to the deficiency units prompts capital arrangement. 7. Useful speculation: The capital market gives an instrument for the people who have reserve funds move their reserve funds to the people who need assets for useful ventures. It redirects assets from inefficient and inefficient channels like gold, adornments, obvious utilization, and so on to useful ventures. 8. Adjustment of the worth of protections: A well-developed capital market containing master banking and non-banking middle people gets strength the worth of stocks and protections. It does as such by giving cash-flow to the poor at sensible financing costs and helps in limiting speculative exercises. 9. Empowers monetary development: The capital market supports monetary development. The different establishments which work in the capital market give amounts and subjective course to the progression of assets and bring normal distribution of assets. They do as such by changing over monetary resources into useful actual resources. This prompts the advancement of trade and industry through the private and public area, accordingly empowering/initiating monetary development. 5.5 FEATURES OF CAPITAL MARKET Here are the included of Capital Market: 1. Fills in as a connection among Savers and Investment Opportunities: Capital market fills in as a pivotal connection among saving and speculation measure as it moves cash from savers to pioneering borrowers. 2. Long haul Investment: It assists the financial backers with putting their well-deserved cash in long haul speculations. 3. Helps in Capital development: 58 CU IDOL SELF LEARNING MATERIAL (SLM)

Capital market offers openings for those financial backers who have excess measure of cash and need to stop their cash in some sort of speculation and furthermore take the advantage of the force of compounding. 4. Helps Intermediaries: While moving of offers and cash starting with one financial backer then onto the next, it takes helps of intermediaries like dealers, banks and so forth subsequently helping them in directing their business. 5. Rules and Regulations: The capital business sectors work under the guideline and rules of the Government accordingly making it a protected spot to exchange. 5.6 STRUCTURE OF CAPITAL MARKET 1. Security Market: Based on instruments or protections, the capital market in India is isolated into the plated edged market and modern security market. A. Overlaid edged Market: It is the market for Government and semi-government protections. Focal and State Governments and neighborhood bodies offer long haul bonds or protections to the general population, banks and monetary establishments. These bonds are sponsored by the RBI. there are no vulnerabilities in regards to yield, the board, increases to capital, and so on and thusly there is substantially less hypothesis in this market. The financial backers in government protections are prevalently organizations which are regularly constrained by law to contribute a specific part of their assets in these protections. The business banks, the LIC, the GIC and the fortunate assets go under this class. Securities exchanged are safer, more secure and exceptionally stable in esteem. Infact, these are more fluid than modern protections. These draw in more financial backers since they convey an assortment of expense motivations and discounts on annual duty and abundance charge. the normal worth of the exchange in the Government protections market is a lot bigger than if there should arise an occurrence of offers and debentures of organizations. 59 CU IDOL SELF LEARNING MATERIAL (SLM)

The Government protections market, in contrast to the market for shares, isn't a bartering market however an \"over the counter\" market. Finally, RBI assumes a predominant part in the plated edged market through its open- market activities. 2. The Industrial Securities Market The Industrial Securities Market alludes to the market for offers and debentures of old and new organizations of business, financial and modern concerns. This market is additionally partitioned into the new issue and the old issue market meaning the stock trade. (i) The Primary or New Issues Market. The essential capital market is for new issues by open restricted organizations as new capital issues straightforwardly to people in general as offer and debentures. Capital is additionally brought by organizations up in the essential market by private position whereby shares are likewise offered to explicit gathering of financial backers like family members, companions and holders of portions of a similar mechanical gathering or house. Trader investors, shared assets, business banks and other monetary foundations work as financiers and lead supervisors. The assistance in assembling the investment funds of people in general in new issues market and channelizing them into useful utilizations in terms of professional career and industry. (ii) The Secondary or Old Issues Market. The auxiliary capital market, normally known as the securities exchange bargains in different kinds of offers and debentures at the stock trades. They are effectively exchanged by intermediaries, shared assets and NBFIs like the UTI, GCI, and so forth Securities exchange is overseen and directed by the Securities and Exchange Board of India (SEBI). At this point, there are 23 SEBI supported Stock Exchanges in the country. Nonetheless, the two generally famous and biggest stock trades in India are Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). 3. Formative Financial Institutions (DFIs): A Development monetary foundation is characterized as an establishment advanced or helped by the public authority to give improvement money to areas of the economy. At the end of the day, a DFI is a monetary organization that gives medium and long-haul monetary help and occupied with advancement and improvement of industry, farming and different areas. Structures and Types of DFIs in India 60 CU IDOL SELF LEARNING MATERIAL (SLM)

DFIs can be comprehensively classified as all-India or state/territorial level establishments relying upon their geological inclusion of activity. Practically, all-India establishments can be named: Term-loaning establishments stretching out long haul money to various modern areas, Refinancing organizations (NABARD, SIDBI, NHB) stretching out renegotiate to banking just as non-banking mediators for money to agribusiness, SSIs and lodging areas, Sector-explicit/particular foundations Investment foundations. State/provincial level organizations are a particular gathering and involve different SFCs, SIDCs and NEDFI Ltd. Reasoning of DFIs in India Improving Rates of Savings and Investments Infancy Stage of Capital Market Risk Averse Commercial Bank Arrangement of Loan in Foreign Currency Specialized Credit Support System Arrangement of Priority Sector Financing Project Evaluation and Funding Coordinating Financing Agencies 4. Monetary Intermediaries a. Merchant Banking – Merchant banks in India oversee and guarantee new issues; they attempt partnership of credit; they prompt corporate customers on gathering pledges and other monetary perspectives. At first, business banks set up shipper banking divisions, which later became discrete financial auxiliaries. b. Renting and recruit buy organizations – Leasing has demonstrated a famous financing strategy for obtaining plant and hardware, particularly for little and medium estimated endeavors. Narasimha Committee perceived the significant and developing job of renting and recruit buy organizations in the monetary intermediation measure. 61 CU IDOL SELF LEARNING MATERIAL (SLM)

c. Common assets – Mutual assets are expertly overseen store, which pools speculation from a few financial backers to put resources into capital resources. Shared assets additionally give little or individual financial backers admittance to enhanced, expertly oversaw portfolios at a low cost. As of late, common assets are exposed to be one of the most significant among the fresher capital market organizations. d. Venture Capital Funds – Venture capital is a type of private value and a kind of financing that financial backers give to new businesses and independent companies that are accepted to have long haul development potential. Funding financing is one of the later contestants into the capital market. Funding by and large comes from well-off financial backers, venture banks and some other monetary foundations. 5.7 TYPES OF CAPITAL MARKET The capital market is principally sorted into: a. Essential Market: The essential market principally manages new protections that are given in the securities exchange interestingly. In this manner it is otherwise called the new issue market. The principal capacity of the essential market is to work with the exchange of the recently given shared from the organizations to general society. The primary financial backers in this kind of market are monetary organizations, banks, HNIs, and so forth b. Optional Market: It is the market where the exchanging of the protections really happens, along these lines it is likewise alluded to as the financial exchange. Here the purchasing and selling of protections happen, the current financial backers sell the protections and new financial backers by the protections. 5.8 RECENT DEVELOPMENTS IN THE INDIAN CAPITAL MARKET The Indian Capital Markets have been going through different advancements throughout the long term and the most critical of them have been recorded underneath: – 1. New Measures of Risk Management: Investments in Capital Markets are presented to different dangers. However, some are orderly dangers, others occur as aftereffect of unsystematic market exercises. Measures to decrease Price Volatility: Volatility is the variance of value developments. It is the pace of up or down development of the stock cost. Unpredictability is viewed as a negative factor for the business sectors as it addresses vulnerability and hazard. After the 62 CU IDOL SELF LEARNING MATERIAL (SLM)

presentation of Index fates exchanging 2000, there was a general decrease in the unpredictability of the costs. Circuit Breakers: Circuit breakers were acquainted with lessen enormous sell-offs and alarm selling. Now and then it is additionally called a \"collar\". On the off chance that an Index or a specific stock ascent or falls a specific level of 10%, 15% or 20%, exchanging is ended by the trade in that stock or list for a specific timeframe to control the frenzy and check for market controls. 2. Financial backer Awareness Campaign: To make the business sectors safer for the financial backers, SEBI presented the Investor Awareness Campaign by making an authority site for this. 3. Examinations: if there should arise an occurrence of any infringement of the guidelines and guidelines of the SEBI Act 1992, the examination are completed by SEBI. 4. T + 2 Settlement Cycle: Currently in the Indian Capital market, the settlement cycle is in the \"T+2\" cycle. Here, 'T' signifies the exchanging day and the 'T+2' settlement implies the settlement and conveyance of the offers happens in the second exchanging day after the exchange happens 5. Restriction on Insider Trading: Individuals having classified data of a specific organization can utilize the data to unscrupulously benefit from the securities exchanges. SEBI has made it understood and required to limit a wide range of insider exchanging the Indian Capital Markets. 5.9 DEFECTS OF INDIAN CAPITAL MARKET a. Helpless Liquidity 63 b. Postponement in Delivery c. Insider Trading d. Insufficient Market Instruments e. Obscure Prospects f. Stock Broking System Defective g. Needs Transparency h. Old Lot Shares Problem CU IDOL SELF LEARNING MATERIAL (SLM)

I. Insufficient security to financial backers j. Damaged Operations of Stock Exchange k. Insufficient Stock Exchanges l. Wasteful Banking and Postal Services m. Divided Markets 5.10 ROLE OF SEBI IN CAPITAL MARKET The Securities Exchange Board of India (SEBI) directs the elements of the Securities Market in India. It was set up in 1988 however didn't have any lawful status until May 1992, when it was conceded forces to legitimately uphold its power over the monetary market mediators. With the blossom of the size of activities in the monetary business sectors, there were a ton of acts of neglect occurring. Practices like a bogus issue, delay in conveyance, infringement of rules and guidelines of stock trades are on an ascent. To check these misbehaviors, the Govt. of India chose to set up an administrative body known as the Securities Exchange Board of India (SEBI).  The jobs and targets of SEBI are intricate and have been portrayed as beneath:  Guideline of the exercises of the securities exchange  Ensuring the privileges of financial backers  Guaranteeing the security of the ventures.  To forestall misbehaviors and fake exercises.  To foster an implicit rule for the mediators like representatives, shared asset merchants and so on. 5.11 SUMMARY  Capital Market is where long haul reserves are activated by the corporate endeavors and Government. Capital Market might be divided into essential market and optional market. Essential market manages new protections which were not beforehand tradable to general society. Auxiliary market is where existing protections are purchased and sold. 64 CU IDOL SELF LEARNING MATERIAL (SLM)

 Capital business sectors, ordinarily alluded to as the securities exchanges have been in presence for quite a long time. The British East India Company was the primary organization to welcome the general population to purchase partakes in the organization. From that point forward, throughout the long term, markets have gone through colossal changes. The manner in which the market works, the resource classes, the system of the trades and everything has been developing over the long run. The progressions have been gotten progressively as per the accommodation of the financial backers and market members. Likewise to forestall market members to exploit data to acquire money related advantages, the Securities Regulatory bodies over the world have reconnaissance techniques for alleviation of such demonstrations. 5.12 KEYWORD  Fair value: This is the theoretical price at which a futures contract should trade when compared to the cash or spot price.  Margin: The amount required from a client - in addition to any deposit due - to cover losses when a price moves adversely.  Underlying market: The market upon which the derivative market price is dependent.  Volatility: A statistical measure of a market's price movements over time. 5.13 LEARNING ACTIVITY 1. What are the measures to decrease Price Volatility? ___________________________________________________________________________ ___________________________________________________________________________ 2. What do you mean by Common assets? ___________________________________________________________________________ ___________________________________________________________________________ 5.14 UNIT END QUESTIONS A. Descriptive Questions 65 Short Questions 1. Explain about role of SEBI in Capital Market. CU IDOL SELF LEARNING MATERIAL (SLM)

2. What are the new measures of Risk Management? 3. What do you mean by Venture Capital Funds? 4. What is overlaid edged Market? 5. What are the different types of capital market? Long Questions 1. Explain about the defects of Indian Capital Market. 2. Explain the recent developments in the Indian Capital Market. 3. Explain in detail about structure of Capital market. 4. Explain about features of Capital Market. 5. Explain about importance of Capital Market. B. Multiple Choice Questions 1. The Govt. of India chose to set up an administrative body known as the ____________ a. SEBI b. Funds c. Controlling d. Supervisor 2. SEBI has made it understood and required to limit a wide range of insider exchanging the Indian______________. a. Buckle b. Capital Markets c. Credit Risk d. Liquidity Risk 3. ____________is the variance of value developments. a. Homogeneous b. Independent c. Volatility d. Heterogeneous 4. ________________is the market for Government and semi-government protections 66 a. Funds CU IDOL SELF LEARNING MATERIAL (SLM)

b. Agency costs c. Markets d. Overlaid edged Market 5. The capital market supports ______________development a. Monetary b. Procurement c. Capital budgeting d. Computation Answers 1-a, 2-b, 3-c, 4-d, 5-a 5.15 REFERENCES Reference’s book  Bhole, L.M. (1999). Financial Institutions and Markets, Tata McGraw Hill Company Ltd., New Delhi  Datt, G. &Mahajan, A. (2012). Indian Economy, S. Chand, Revised Sixty Sixth Edition  Gupta, S.B. (2009). Monetary Economics Institutions, Theory and Policy, S. Chand  Smith, P.F. (1978). Money and Financial Intermediation: The Theory and Structure of Financial System, Prentice Hall & Englewood-Cliff, New Jersey 67 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 6: SEBI 68 STRUCTURE 6.0 Learning Objectives 6.1 Introduction 6.2 Meaning 6.3 Structure of SEBI 6.4 Authority and Power of SEBI 6.5 Objectives of SEBI 6.6 Functions of SEBI 6.7 Role of SEBI 6.8 SEBI Guidelines for issue of fresh share capital 6.9 SEBI Guidelines for first issue by new companies in Primary Market 6.10 SEBI guidelines for Secondary market 6.11 Method for registering a mutual fund with SEBI 6.12 Mutual Funds Regulation by SEBI 6.13 SEBI New Margin Rules 6.14 Summary 6.15 Keyword 6.16 Learning Activity 6.17 Unit End Questions 6.18 References 6.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  To understand about SEBI.  To know about authority and power of SEBI. CU IDOL SELF LEARNING MATERIAL (SLM)

 To find out guidelines for issuing of fresh share capital.  To know about SEBI new margin rules. 6.1 INTRODUCTION SEBI is a legal administrative body set up on the twelfth of April, 1992. It screens and manages the Indian capital and protections market while guaranteeing to secure the interests of the financial backers, detailing guidelines and rules. The administrative center of SEBI is at Bandra Kurla Complex, Mumbai. 6.2 MEANING Protections and Exchanges Board of India (SEBI) is one of the main administrative body liable for dealing with the protections market in India. SEBI was set up with the expectation of saving the premium of financial backers who put resources into the protections market and to empower the turn of events and development of the protections market. Simultaneously, the board needs to direct and guarantee that all market members appropriately consent to the set standards. SEBI is enabled to force punishments on those market members that are not following the principles and guidelines. The Securities and Exchange Board of India (SEBI) was comprised as a non-legal administrative back in 1988. The Controller of Capital Issues was accountable for dealing with the protections market in India until the time the SEBI was comprised. It was being represented by the Capital Issues (Control) Act, 1947. This was one of the underlying demonstrations passed by the free Indian Parliament. The central command of Securities and Exchange Board of India is in the core of Mumbai (Bandra Kurla), the money capital of India. The SEBI likewise has its branch workplaces situated in Ahmedabad, Chennai, Kolkata, and New Delhi to serve western, southern, eastern, and northern locales of the nation individually. Aside from that, the SEBI has set up little neighborhood office workplaces at Bengaluru, Bhubaneshwar, Chandigarh, Guwahati, Kochi, Patna, and Jaipur. 69 CU IDOL SELF LEARNING MATERIAL (SLM)

6.3 STRUCTURE OF SEBI The Board of SEBI contains nine individuals. The Board is a total of the accompanying:  One Chairman of the board – selected by the Central Government of India  One Board part – selected by the Central Bank, that is, the RBI  Two Board individuals – hailing from the Union Ministry of Finance  Five Board individuals – chose by the Central Government of India The Chairman of SEBI, as well as managing the Board, likewise investigates the Communications, Vigilance, and Internal Inspection Department. There are four entire time individuals in the authoritative construction. The entire time individuals are allotted various divisions that they need to manage. Every office is independently headed by a leader chief. The leader chiefs report to explicit entire time individuals. The authoritative construction of SEBI comprises of in excess of 25 offices, like Foreign Portfolio Investors and Custodians (FPI&C), Corporation Finance Department (CFD), Information Technology Department (ITD), Department of Economic and Policy Analysis (DEPA-I,II, and III), Investment Management Department, Legal Affair Department, Treasury and Accounts Divisions (T&A), and National Institute of Securities Market (NISM) 6.4 AUTHORITY AND POWER OF SEBI SEBI has significant position and force as its main role was to control the market deliberately by forestalling any deceitful movement. It has three critical forces: 1. Semi Judicial-This incorporates drafting enactment as for the capital business sectors. With the assistance of this position, it has the option to lead hearing and pass decisions on the off chance that any false movement occurs. The advantage of this authority is that it guarantees that there is decency, dependability and responsibility in the capital market. 2. Semi Executive Functions-Implementing enactment likewise goes under SEBI. This implies that SEBI has the outright position to construct rules and guidelines to protect the premium of financial backers. 70 CU IDOL SELF LEARNING MATERIAL (SLM)

For instance, there is enactment called SEBI Listing commitment and Disclosure prerequisites; this was made to solidify and improve on arrangements of the current posting arrangements for different portions to monetary business sectors, for example, value shares. Such guidelines are made to keep any kind of illicit practice under control. 3. Semi Legislative-Under this section, the job of SEBI is to make rules for the security of premium of financial backers. Not many principles and guidelines made by SEBI are revelation prerequisites, exchanging guideline and posting commitment. The essential objective is to methodize and sustain the arrangement of current posting arrangements for different sections of the monetary market. In spite of the fact that SEBI has a great deal of forces, still, it needs to go through the Securities Appellate Tribunal and the Supreme Court of India. 6.5 OBJECTIVES OF SEBI The essential target of SEBI is to guarantee that the Indian securities exchange works deliberately. Additionally, it defends the premium of dealers and financial backers by giving them solid in protections. SEBI even deals with the improvement of value advertise and guarantee that individuals hold fast to the rules. As referenced over, one of the goals of its foundation is to guarantee that no misbehaviors are continued in the Indian Capital Market. Here is a rundown of the critical destinations of SEBI: 1. Screens significant securing of offers and takeover of organizations 2. Ensure the premium of financial backers 3. Advancing the improvement of protections market and controlling the business 4. It is likewise associated with research and improvement so the financial exchange is effective and refreshed with the high-level methods. 5. It offers a stage for sub-representatives, enlistment centers, stockbrokers, portfolio administrators, venture counselors, brokers, shipper investors, share move specialists, trustees of trust deeds, financiers, and other related individuals to enroll and control work. 71 CU IDOL SELF LEARNING MATERIAL (SLM)

6. They likewise check that the financial backers are instructed about the delegates of the protections market 7. They likewise keep a nearby check that no fake or unjustifiable practices are done identified with the protections market. 8. It additionally controls the activities of members, credit score organizations, and caretakers of protections, vaults and unfamiliar portfolio financial backers. 6.6 FUNCTIONS OF SEBI Fundamentally there are three key capacities performed by SEBI: A. Defensive Functions-This capacity is performed by SEBI to ration the premium of financial backers and monetary establishments. Its center defensive capacities are to check: 1. Value Rigging-The basic role of SEBI is to forestall controlled changes in the monetary market. Swings are the establishment of exchange and bring in cash for merchants or financial backers in the monetary market. Different individuals concentrate on chronicled vacillations based on its various speculations have likewise been made to foresee the pattern. These speculations are called Technical Analysis and a ton of brokers concentrate on them prior to contributing. For the most part these changes are regularly founded available, yet there are times when strange varieties are made by a gathering of corporate with the goal that the financial backers can have a tremendous misfortune. These developed changes are called value fixing. Subsequently, the job of SEBI here is to stop these abrupt changes. They have presented circuits for doing it; the circuit is a limit concerning the earlier day shutting. In the event that the security cost goes past the cutoff, then, at that point the electrical switch would be utilized, and exchanging for that particular security would be halted for several hours or a day. 2. Forestall insider exchanging: This can likewise be supposed to be a section to stop value fixing. The stock cost of any organization gets tremendously influenced by any open declaration or news about the organization. There are in every case certain individual who know about the impending news about the organization. Henceforth, they can exploit this news to purchase and sell the organization' security before the news comes right into it. This is named as insider exchanging. To forestall this, SEBI has 72 CU IDOL SELF LEARNING MATERIAL (SLM)

banished trusts of recorded organizations and worker government assistance conspires so they can't buy their own offers from the auxiliary market. SEBI has additionally mentioned these recorded organizations to divulge their representative advantage plans which ought to incorporate their stock buy. They ought to adjust them according to ESOS and ESPS rules. 3. Monetary instruction for financial backers another essential job of SEBI is to give on the web and disconnected courses or preparing by different intends to prepare the brokers and financial backers. These classes incorporate cash the executives and the nuts and bolts of the monetary market. 4. SEBI rules SEBI has made bye-law rules so any uncalled for rehearses that can be utilized by organizations to control security markets can be forestalled. B. Advancement Functions-The essential capacity of improvement capacities is giving preparing to the mediators. Here, SEBI additionally deals with getting advancement Indian Financial Market. A portion of the improvement capacities involve:  DEMAT Form of protections  Initial public offering is allowed through a trade  Training of electronic stage for monetary market  Data on rebate financier  Guaranteeing is discretionary to diminish the expense of issue  Preparing for monetary go-betweens The target of SEBI is to advance reasonable practices; consequently, it teaches them about it in addition to makes the financial backers mindful of the securities exchange top to bottom. C. Administrative Functions-In the administrative capacity, SEBI does the checking of the working of monetary market go-betweens. The execution of SEBI bye-laws messengers and corporate is finished. This is a crucial stage as it guarantees that the financial exchange works flawlessly with clean straightforwardness. 73 CU IDOL SELF LEARNING MATERIAL (SLM)

It is the job of SEBI to define rules and implicit rules for monetary middle people and control combinations, partnership and takeovers takeover of organizations. A portion of its administrative capacities are: 1. Enrolling and controlling elements of shared assets 2. Controls takeover of organizations 3. It needs to enroll all offer exchange specialists, go-betweens, trustees, representatives, sub- merchants and others associated with the stock trade 4. Direct requests and review of trades Likewise, SEBI has the position to charge an expense on capital market members. Furthermore, it likewise coordinates the FICO assessment offices. 6.7 ROLE OF SEBI SBI takes into account the necessity of three gatherings that work in the Indian Capital Market. It was established to work on the monetary market of India, consequently to get its motivation it deals with the most imperative monetary market members: 1. The guarantor of Securities-Any firm that issue protections ought to be recorded on the stock trade. Backers are substances that assistance in raising assets from the monetary market. The capacity of SEBI is to affirm that the issue of IPO's and FPO's happens strongly. 2. Financial backer they help in keeping the market alive as the capital market capacities on the grounds that the dealers exist. Financial backers bring in cash from the market, so SEBI guarantees that no misbehaviors occur against them on the lookout. Along these lines, it's the job of SEBI to protect the premium of financial backers and keep them from any unreasonable exchange practice. 3. Monetary Intermediaries-They are the go between in the monetary market, and they take care that the financial exchange exchanges happen flawlessly and safely. The job of SEBI is to screen every action of monetary delegates like NBFC's, specialist, sub-intermediary, and so forth. 6.8 SEBI GUIDELINES FOR ISSUE OF FRESH SHARE CAPITAL 1. All applications ought to be submitted to SEBI in the endorsed structure. 74 CU IDOL SELF LEARNING MATERIAL (SLM)

2. Applications ought to be joined by obvious duplicates of mechanical permit. 3. Cost of the task ought to be outfitted with plan of money. 4. Organization ought to have the offers given to general society and recorded in at least one perceived stock trades. 5. Where the issue of value share capital includes offer for membership by people in general interestingly, the worth of value capital, bought in capital secretly held by advertisers, and their companions will be at the very least 15% of the all-out gave value capital. 6. A value inclination proportion of 3:1 is permitted. 7. Capital expense of the undertakings ought to be according to the standard set with a sensible obligation value proportion. 8. New organization can't give shares along with some hidden costs. The profit on inclination offers ought to be inside the recommended list. 9. Every one of the subtleties of the endorsing arrangement. 10. Distribution of offers to NRIs isn't permitted without the endorsement of RBI. 11. Subtleties of any firm distribution for any monetary establishments. 12. Presentation by secretary or head of the organization. 6.9 SEBI GUIDELINES FOR FIRST ISSUE BY NEW COMPANIES IN PRIMARY MARKET 1. Another organization which has not finished a year of business tasks won't be permitted to give shares along with some built-in costs. 2. On the off chance that a current organization with a 5-year history of reliable productivity, is advancing another organization, then, at that point it is permitted to value its issue. 3. A draft of the plan must be given to the SEBI before open issue. 4. The portions of the new organizations must be recorded either with OTCEI or some other stock trade. 75 CU IDOL SELF LEARNING MATERIAL (SLM)

6.10 SEBI GUIDELINES FOR SECONDARY MARKET 1. Every one of the organizations entering the capital market should give an assertion with respect to finance usage of past issue. 2. Merchants are to fulfill capital ampleness standards so the part firms keep up with sufficient capital comparable to extraordinary positions. 3. The stock trade specialists need to modify their bye-laws with respect to capital ampleness standards. 4. Every one of the dealers ought to submit with SEBI their examined accounts. 5. The specialists should likewise reveal unmistakably the exchange cost of protections and the commission procured by them. This will bring straightforwardness and responsibility for the merchants. 6. The merchants should issue inside 24 hours of the exchange contract notes to the customers. 7. The dealers should unmistakably make reference to their records subtleties of assets having a place with customers and that of their own. 8. Edge cash on specific protections must be paid by claims with the goal that theoretical speculations are forestalled. 9. Market producers are presented for specific scrips by which agents become answerable for the organic market of the protections and the cost of the protections is kept up with. 10. A dealer can't guarantee over 5% of the public issue. 11. All exchanges in the market should be accounted for inside 24 hours to SEBI. 12. The representatives of Bombay and Calcutta should have a capital ampleness of rupees five lakhs and for Delhi and Ahmadabad it is rupee two lakhs. 13. Individuals who are specialists need to pay security store and this is fixed by SEBI. 6.11 METHOD FOR REGISTERING A MUTUAL FUND WITH SEBI According to the rules by SEBI, any appealing party who wishes to apply for posting ought to be done through the Form A which has been laid under Schedule I of SEBI Regulations 1996. 76 CU IDOL SELF LEARNING MATERIAL (SLM)

An individual who has more than or equivalent to 40% of the Net Worth of the Assets of the organization ought to be assumed as a Sponsor, and just he ought to apply in Form A. These are the couple of things that an individual ought to need to apply for it:  While filling the Form A, it is obligatory to present a non-refundable charge of Rs.5 lakh.  In the wake of doing this, SEBI would look at the application according to the qualification standards.  In the event that you meet the measures, from that point onward, you would need to finish different customs like executing the trust deed, joining the resource the executive’s organization, setting up a trustee organization, and so on  When the support meets every one of the conditions after that SEBI would give an enlistment endorsement from that point onward, you need to pay an enrollment charge of Rs.25 lakh. 6.12 MUTUAL FUNDS REGULATION BY SEBI Investors don't have position to hold over 10% of the shareholding straightforwardly or by implication in the AMC of a common asset. The expanding weight of the best three constituents of the record ought not to be over 65%. It is an order that each new asset ought to present their consistence status to SEBI before dispatch. Any financial backer of the fluid plan who exits inside seven days would need to suffer a consequence. Fluid plans should hold at least 20% in fluid resources like depository charges, government protections, money and rep on government protections. 6.13 SEBI NEW MARGIN RULES In September 2020, SEBI executed new standards on edge vow. The standard is relied upon to bring straightforwardness and forestall abuse of customers' protections by business firms. The new edge rules were coordinated to happen from June 1, yet were deferred because of pandemic pushing the execution date to September 1. The new edge runs by SEBI command the accompanying: 77 CU IDOL SELF LEARNING MATERIAL (SLM)

The stock, being swore, is to stay in the financial backer's de-mat record. As the stock isn't evolving accounts, the advantages from corporate occasions build straightforwardly to the financial backers Forthright assortment of edges by specialists for any buy or offer of protections, punishing any kind of inability to do as such. Customers could meet the edge prerequisites before the day's over, which is currently changed to the start of the day. Force of Attorney (POA) can't be allotted in the blessing of the intermediaries for promising. As under the old framework, specialists could request POA from the financial backers to execute choices for their benefit Edge vow made independently for financial backers requiring edge. Purchase Today Sell Tomorrow (BTST) not permitted any longer for shares purchased on edge. Financial backers are needed to respect the conveyance of offer (T+2 days is the standard settlement time frame). Ordinarily, financial backers would utilize intraday acknowledged benefits to meet the edge prerequisite, which is currently altered by the new guidelines. For a BTST exchange, it tends to be started just if the net accessible edge is equivalent to or more prominent than 20% of the exchange esteem. 6.14 SUMMARY The financial exchange is one of the main pointers of the monetary strength of the country. Hence, it is vital that individuals should keep confidence in it else individuals would quit contributing, and the market would go down. Prior to the foundation of SEBI, numerous false and tricks occurred, however since it came into the image, the market has become better and straightforward. 6.15 KEYWORD  Capital Market: The capital market is the market for securities, where companies and governments can raise long-term funds.  Deposit: An account at a banking institution that allows money to be deposited and withdrawn by the account holder.  Loan: A type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.  Money Market: That segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. 78 CU IDOL SELF LEARNING MATERIAL (SLM)

6.16 LEARNING ACTIVITY 1. What do you mean by Value Rigging? ___________________________________________________________________________ ___________________________________________________________________________ 2. What is Semi Executive Functions? ___________________________________________________________________________ ___________________________________________________________________________ 6.17 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What are Defensive Functions? 2. What do you mean by Advancement Functions? 3. What is Semi Judicial? 4. What is mutual funds regulation bySEBI? 5. What do you mean by Semi Legislative? Long Questions 1. Explain about SEBI guidelines. 2. Explain the types of agency problems. 3. Explain about method for registering a mutual fund withSEBI. 4. Explain about SEBI New Margin Rules. 5. Explain about the role of SEBI B. Multiple Choice Questions 1. The representatives of Bombay and Calcutta should have a capital ampleness of rupees five lakhs and for Delhi and Ahmadabad it is rupee _______________lakhs. a. 2 b. 5 c. 6 d. 9 79 CU IDOL SELF LEARNING MATERIAL (SLM)

2. ____________---are to fulfill capital ampleness standards so the part firms keep up with sufficient capital comparable to extraordinary positions. a. Buckle b. Market Risk c. Credit Risk d. Merchants 3. Distribution of offers to NRIs isn't permitted without the endorsement of_________. a. SBI b. RBI c. BBI d. NDI 4. A value inclination proportion of _______________is permitted. a. 9:1 b. 5:1 c. 3:1 d. 4:1 5. Investors don't have position to hold over 10% of the shareholding straightforwardly or by implication in the _____________of a common asset. a. Procurement b. AMC c. Capital budgeting d. Computation Answers 1-a, 2-d, 3-b, 4-c, 5-d 6.18 REFERENCES Reference’s book  Cooper Kersey and Donald R. Fraser, the Financial Market Place, Addison Wesley Publishing Company (Latest Edition). 80 CU IDOL SELF LEARNING MATERIAL (SLM)

 Khan M.Y, Indian Financial System, Tata McGraw Hill.  Mandura Jeff, Financial Markets and Institutions, West Publishing Company, New York.  Meir Kohn, Financial Institutions and Markets, McGraw Hill Publishing Company, New York. 81 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 7: CAPITAL MARKET INSTRUMENTS STRUCTURE 7.0 Learning Objectives 7.1 Introduction 7.2 Meaning and definition 7.3 Elements of a Capital Market 7.4 Types of capital market instruments 7.5 Functions of the Capital Market 7.6 Capital Market Instruments 7.7 Summary 7.8 Keyword 7.9 Learning Activity 7.10 Unit End Questions 7.11 References 7.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  To understand about Capital Market Instrument.  To know more about elements of Capital Market.  To find out the Capital Market Instruments.  To know functions of Capital Market. 7.1 INTRODUCTION The capital market is the market for protections, where organizations and governments can raise long haul reserves. It is a market where cash is loaned for periods longer than a year. The various kinds of monetary instruments that are exchanged the capital business sectors are value instruments, credit market instruments, protection instruments, unfamiliar trade instruments, half breed instruments and subsidiary instruments. 82 CU IDOL SELF LEARNING MATERIAL (SLM)

Capital Market comprises of essential market and auxiliary market. In essential market recently given securities and stocks are traded and in auxiliary market purchasing and selling of as of now existing bonds and stocks occur. Capital business sectors are the place where savers come to put their capital in long haul speculations like corporate obligation, value supported protections, and government securities. As such, savers – those with capital – come to contribute and the people who need capital come to acquire. So, organizations go to the capital business sectors to acquire cash to back another foundation project they are embraced – these are known as corporate securities. Capital business sectors manage long haul obligation that permits organizations and governments to tie down cash-flow to permit them to contribute and offer public types of assistance. This is characterized as anything more than one year. Anything under one year or less is considered inside the currency markets – where the cash is undeniably more fluid. 7.2 MEANING AND DEFINITION Capital market instruments normally comprise of obligation instruments and stock. The capital market is the place where governments and organizations raise long haul reserves, typically 1 year or more. There is an essential market, where new postings occur and an optional market where existing protections exchange. A portion of the chose capital market instruments are Bonds, Debentures, Preference offers and Ordinary offers. A capital market is a business opportunity for protections (obligation or value), where business ventures and government can raise long haul reserves. It is characterized as a market wherein cash is accommodated periods longer than a year, as the raising of transient finances happens on different business sectors (e.g., the currency market). The capital market is portrayed by a huge assortment of monetary instruments: value also, inclination shares, completely convertible debentures (FCDs), non-convertible debentures (NCDs) and halfway convertible debentures (PCDs) as of now rule the capital market, but new instruments are being presented, for example, debentures packaged with warrants, taking an interest inclination shares, zero-coupon bonds, gotten top notch notes, and so forth. 83 CU IDOL SELF LEARNING MATERIAL (SLM)

7.3 ELEMENTS OF A CAPITAL MARKET Individual financial backers, business bank, monetary foundations, insurance agencies, business organizations, and retirement reserves are some critical providers of assets on the lookout. Financial backers offer cash with the objective to make capital additions when their venture develops with time. Also, they appreciate advantages like profit, interests, and proprietorship rights. Organizations, business people, governments, and so forth, are reserve searchers. For example, the public authority issues obligation instruments also, stores to subsidize the economy and advancement projects. Normally, long haul ventures like offers, obligation, government protections, debentures, bonds, and so on, are exchanged here. What's more, there are additionally mixture protections, for example, convertible debentures and inclination shares. Stock trades work the market overwhelmingly. Different middle people incorporate speculation banks, financial speculators, and dealers. Administrative bodies have the position to screen and dispense with any criminal operations in the capital market. For example, the Securities and Exchange Commission neglects the stock trade tasks. The capital market and currency market are not the equivalent. Protections traded in the previous would commonly be a drawn-out venture with a lock-in time of longer than a year. Momentary ventures exchange the currency advertises and incorporate endorsement of stores, bills of trade, promissory notes, and so forth. 7.4 TYPES OF CAPITAL MARKET INSTRUMENTS The kinds of capital market instruments are comprehensively ordered into two sorts - 1. Value security a. Value shares These offers are the superb wellspring of money for a public restricted or business entity. At the point when people or establishments buy them, investors reserve the option to cast a ballot and furthermore advantage from profits when such association makes benefits. 84 CU IDOL SELF LEARNING MATERIAL (SLM)

Investors, in such cases, are viewed as the proprietors of an organization since they hold its offers. b. Inclination shares These are the optional wellsprings of money for a public restricted organization. As the name recommends, holders of such offers appreciate selective rights or particular treatment by that organization in explicit angles. They are probably going to accept their profit before value investors. Notwithstanding, they don't have any democratic rights commonly. 2. Obligation security a. Bonds It is a decent pay instrument, essentially gave by sovereign and state governments, regions, and even organizations to fund infrastructural advancement and different kinds of ventures. It very well may be seen as an advancing instrument, where a bond's guarantor is the borrower. Bondholders are considered as leasers concerning such an element and are qualified for occasional interest installment. Moreover, bonds convey a decent lock-in period. Subsequently, backers of bonds are commanded to reimburse the chief sum on thedevelopment date to bondholders. b. Debentures In contrast to bonds, debentures are unstable speculation alternatives. Therefore, they are not sponsored by any resource or guarantee. Here, loaning is totally founded on shared trust and, thus, financial backers go about as expected lenders of a responsible foundation or organization. These loads of four instruments are portions of the capital market. Since each is special and has recognizing highlights, they are valuable in various ways for an organization. Subsequently, it is significant to comprehend the diverse sort of capital market instruments so you can recognize their motivations. 85 CU IDOL SELF LEARNING MATERIAL (SLM)

7.5 FUNCTIONS OF THE CAPITAL MARKET Independent of the capital market and its sorts, their capacities are comparative. These are recorded beneath -  Upgrade exchanging of protections  Gives a typical stage to the two financial backers and savers  Aggregation of capital for organizations that need them  Animates monetary development  It works on the course of distribution of capital  Plans for progression of assets accessibility  It decreases data and exchange charges fundamentally.  Quicker valuation of protections.  Gives legitimate diverting of assets to be utilized beneficially. Accordingly, the capital market is a compelling mode for activating assets among financial backers and venders. With the capacities recorded above, it is obvious that the capital market isn't just a stage for reserve move yet in addition enjoys it drawn out benefits. It is helpful in boosting public livelihoods, subsequently upgrading the in general financial development of a country all in all. Accordingly, you should comprehend the ideas from the grassroots to find out about a capital market importance and types, capacities and importance. 7.6 CAPITAL MARKET INSTRUMENTS a. Security Markets: The security market is exceptionally different in its contributions, which is the reason a large portion of the exchanges this market is done 'Over the Counter' (OTC). There are a wide range of types, yet let us take a gander at the fundamental ones beneath: 1. Corporate Bonds – Investment-Grade: 86 CU IDOL SELF LEARNING MATERIAL (SLM)

Corporate securities are just organizations getting cash in return for a 'security' at a set pace of revenue. These generally come in transient bonds with a development of five years or less; transitional bonds, with a development between 5 to 12 years; and long-haul bonds with a development of more than 12 years. All the more explicitly, venture grade bonds are those classified for enormous organizations that are exceptionally far-fetched to default. They are more hazardous than government bonds, yet more secure than 'garbage bonds' – so are a shelter between hazard levels. 2. Corporate Bonds – Junk securities: Garbage securities offer a high return – a lot higher than different sorts. However, they likewise offer the most elevated level of hazard. This is on the grounds that the organizations that issue these bonds are either little or inconsistent. As such, the probability of getting the underlying venture back isn't high. This is a decent way for little to medium business to acquire capital and develop as it permits them to get to credit, they might not approach in any case. 3. Unfamiliar Bonds: Unfamiliar bonds are given in the homegrown country by an unfamiliar element in neighborhood money. For example, an Indian firm might need to bring some capital up in the US as it can't bring it up in the Indian capital business sectors. Thusly, it might issue $1 million in unfamiliar bonds – all in US dollars. The obligation is thusly repayable in US dollars. Albeit this can represent a more serious danger to the unfamiliar substance because of money variances, it gives a road to capital that might be inaccessible in its own market. Simultaneously, it permits financial backers to differentiate their portfolio to lessen their openness to monetary variances. 4. City Bonds: A city bond contrasts from an administration bond in the way that they are given by nearby government or one of its organizations – as opposed to the focal/central government. These are for the most part safe bonds however present a more serious danger than depository bonds. They can be famous really an expense excluded rendition, with the speculation financing neighborhood infrastructural activities like new stops, libraries, or extensions. 87 CU IDOL SELF LEARNING MATERIAL (SLM)

5. Depository Bonds: Government bonds, or 'depository bonds', as they are generally alluded to in the US, are given by focal government throughout a set timeframe – normally more prominent than 10 years. They acquire a limited quantity of premium – beneath the market normal, because of the generally safe related with such. These are viewed as the sacred goal of bonds in the reality they are for all intents and purposes hazard free. Nonetheless, a few countries have a preferable standing over others. Greece, Italy, and Spain for example present a more serious danger and along these lines offer a better return. Paradoxically, the US offers lower yields that address its dependability to make reimbursements. 6. Zero-coupon Bonds: Zero-coupon securities are securities that are sold available at a precarious rebate. This is on the grounds that there is no interest due until it terminates – so basically its worth increases over the long run. Frequently, these bonds are listed to expansion to guarantee the proprietor of the bond keeps up with its buying power all through time. b. financial exchanges The financial exchange appears differently in relation to the security market in the way that its contribution is relatively basic, with less decisions. Indeed, there are just two principal sorts of stocks. Allow us to take a gander at them beneath: 1. Normal Stock: Normal stock is for the most part given on the neighborhood financial exchange, for example, the New York Stock Exchange. The essential market for this is typically made through the Initial Public Offering (IPO). This is essentially where the organization sells a level of their organization as a trade-off for capital. At the point when we are discussing normal stocks, these are the most referred to kind of stocks there are. Truth is told, when alluding to stocks, these are the default type that we allude to. This is on the grounds that they are given in a more noteworthy amount by firms – which nearly implies there is a more prominent number of them accessible available. 88 CU IDOL SELF LEARNING MATERIAL (SLM)

The normal stock awards the proprietor a stake in the organization, along these lines permitting the proprietor a say in significant administration choices. Simultaneously, proprietors of normal stocks are likewise qualified for-profit installments where and when given. As a rule, these are viewed as more dangerous ventures than securities because of the instability however offer better returns over the long haul. This accompanies the related danger of the organization failing – normal investors are at the rear of the line with regards to default installments. They are behind banks, bondholders, and favored investors. In this way, in case of a default, they are probably not going to see quite a bit of their underlying venture back. 2. Favored Stock: Favored stocks are more explicit to each organization. They offer a proper profit that is expected every year except isn't ensured if the organization has monetary challenges. Be that as it may, the profit can be predated, which means it is at risk to be paid later on. Favored investors additionally advantage from a higher profit rate than normal investors. Simultaneously, their profit is additionally the last to be cut – which means an organization that is encountering monetary trouble will cut normal stock profits first. Favored stocks act similarly as normal stocks – you can get them through a dealer. They additionally address responsibility for organization. Be that as it may, while normal stocks have cast a ballot right, favored stocks don't. So favored stocks are basically the same as normal stocks however are like securities in the way that the proprietor gets a proper pace of pay throughout some stretch of time. However, they likewise have similitudes with normal stock in the way that they address part of the organization. 7.7 SUMMARY  There are different elements that should be viewed as when a financial backer requirement to make an interest in capital market instruments. These incorporate the dangers related with every security and how hazard loath the financial backer is. The term of the venture, the reason for the speculation and the conspicuous factor, the measure of cash accessible for the venture. In the event that an organization or 89 CU IDOL SELF LEARNING MATERIAL (SLM)

individual requires a consistent progression of pay, debentures or inclination offers might be the ideal capital market instruments. Anyway, if a specific customary offer is known to deliver out profits consistently it might likewise be considered among other capital market instruments.  As we have noted before standard offers convey more danger than bonds or inclination shares. On the off chance that an organization or individual is less danger lenient, securities might be the reasonable capital market instrument. Assuming the financial backer is more danger open minded, s/he might put resources into inclination offers or conventional offers. The time of the venture ought to likewise be thought of. On the off chance that assets are accessible for 90 days, currency market instruments are a superior choice. That way, the return that can be acquired on the currency market will be higher than will be gotten on the capital market. A financial backer can put resources into capital market instruments and exchange them yet because of their drawn-out nature the return will be lower than the currency market instrument's return. On the off chance that the assets are accessible for a more drawn- out timeframe, the capital market instruments will be greater. 7.8 KEYWORD  Capital Market: The capital market is the market for securities, where companies and governments can raise long-term funds.  Deposit: An account at a banking institution that allows money to be deposited and withdrawn by the account holder.  Loan: A type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.  Money Market: That segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. 7.9 LEARNING ACTIVITY 1. What do you mean by Normal Stock? ___________________________________________________________________________ ___________________________________________________________________________ 2. What is Favored Stock? 90 CU IDOL SELF LEARNING MATERIAL (SLM)

___________________________________________________________________________ ___________________________________________________________________________ 7.10 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What are Zero-coupon Bonds? 2. What do you mean by Depository Bonds? 3. What are Unfamiliar Bonds? 4. What are Inclination shares? 5. What are the Corporate Bonds? Long Questions 1. Explain about functions of the capital market. 2. Explain about elements of a capital market. 3. Explain about Capital Market Instruments. 4. Explain about types of capital market instruments. 5. Explain about the financial exchanges. B. Multiple Choice Questions 1. ____________stocks are more explicit to each organization. a. Planning b. Funds c. Favored d. Controlling 2. The capital market is a compelling mode for activating assets among financial backers and_______________. a. Buckle b. Venders c. Market Risk d. Credit Risk 91 CU IDOL SELF LEARNING MATERIAL (SLM)

3. Corporate securities are just organizations getting cash in return for a __________________ at a set pace of revenue. a. Security b. Homogeneous c. Independent d. Heterogeneous 4. _________________securities are securities that are sold available at a precarious rebate. a. Funds b. Zero-coupon c. Agency costs d. Markets 5. The security market is exceptionally different in its contributions, which is the reason a large portion of the exchanges this market is done ______________ a. ITC b. ABC c. UTC d. OTC Answers 1-c, 2-a, 3-d, 4-b, 5-d 7.11 REFERENCES Reference’s book  Bhole, L.M. (1999). Financial Institutions and Markets, Tata McGraw Hill Company Ltd., New Delhi  Datt,G. & Mahajan,A. (2012). Indian Economy, S. Chand, Revised Sixty Sixth Edition  Gupta,S.B. (2009). Monetary Economics Institutions, Theory and Policy, S. Chand 92 CU IDOL SELF LEARNING MATERIAL (SLM)

 Smith, P.F. (1978). Money and Financial Intermediation: The Theory and Structure of Financial System, Prentice Hall & Englewood-Cliff, New Jersey 93 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 8: SHARE CAPITAL AND DEBENTURES STRUCTURE 8.0 Learning Objectives 8.1 Introduction 8.2 Meaning and Definition 8.3 Nature of Shares 8.4 Types of Share Capital 8.5 Equity 8.6 Debenture 8.7 Types of Debentures 8.8 Rule 18 Of the Companies (Share Capital and Debentures) Rules, 2014 Relating to Debentures Is Given Below. 8.9 Sweat Equity Shares 8.10 Preference Share Capital 8.11 Voting Rights 8.12 Non-Voting Shares 8.13 Summary 8.14 Keyword 8.15 Learning Activity 8.16 Unit End Questions 8.17 References 8.0 LEARNING OBJECTIVES After studying this unit, you will be able to: 94  To understand Share and Debenture.  To know more about types of equity, debentures and preference. CU IDOL SELF LEARNING MATERIAL (SLM)

 To find out about sweat equity shares.  To know about voting and non- voting shares. 8.1 INTRODUCTION Each organization restricted by shares should have an offer capital. Offer capital of an organization alludes to the sum put resources into the organization for it to do its tasks. The offer capital might be modified or expanded, subject to specific conditions. An organization's offer capital might be partitioned into little portions of various classes. The various classes of offer capital and the rights appended to these classes are unique. 8.2 MEANING AND DEFINITION A business entity ought to have capital to back its exercises. Assets raised by giving offers as a trade-off for cash or different contemplations. The Memorandum of Association should express the measure of capital with which the organization is wanted to be enlisted and the quantity of offers into which it is to be isolated. At the point when all out capital of an organization is partitioned into shares, then, at that point it is called share capital. It establishes the premise of the capital construction of an organization. At the end of the day, the capital gathered by a joint stock organization for its business activity is known as offer capital. Offer: U/s 2(84) share implies share in the offer capital of the organization and incorporates stock. Hence share implies a unit into which the Share Capital of the organization is partitioned. An offer is the premium of the investor in the organization estimated by an amount of cash with the end goal of risk in any case and profit in the second as given by Justice Farewell. In the CIT versus Standard Vacuum Oil Co the adjudicator thought that \"by an offer in an organization is implied no amount of cash except for a premium estimated by an amount of cash and comprised of different rights presented on its holders by the articles of the organization which establish an agreement among them and the organization\". Offer Capital: Offer Capital means reserves raised by organizations by issue of offers. Various sorts based on rights: 95 CU IDOL SELF LEARNING MATERIAL (SLM)

Value Shares: Those offers which are not Preference Shares are value shares, equity shares are having casting a ballot rights and are the genuine proprietors of the 8.3 NATURE OF SHARES An offer is the interest of a part in an organization. Segment 2(84) of the Companies Act, 2013 (hereinafter alluded to as Act) \"share\" implies an offer in the offer capital of an organization and incorporates stock. It addresses the interest of an investor in the organization, estimated for the reasons for obligation and profit. It joins different rights and liabilities. Offer, debentures or other interest of any part in an organization will be mobile property. It will be adaptable in any way accommodated in the articles of relationship of the organization. A part may move any \"other interest\" in the organization in the way given in the articles. For instance, rights connected to a part in a ensure organization, for example, enrollment interest, suspension of enrollment or task of interest might be made adaptable by making an arrangement in the Articles of the organization. 8.4 TYPES OF SHARE CAPITAL A. Value Share Capital Segment 43 of the Act gives that the offer capital of an organization restricted by shares will be of two sorts: (a) Value share capital: (i) With casting a ballot right; or (ii) with differential rights as to profit, casting a ballot or in any case as per such standards as might be recommended; and (b) Inclination share capital: ''Value share capital'', regarding any organization restricted by shares, implies all offer capital which isn't inclination share capital. 96 CU IDOL SELF LEARNING MATERIAL (SLM)

According to area 43 (a) value share capital might be partitioned on the premise of casting a ballot rights and differential rights (DVR) as to profit, casting a ballot right or in any case as per the standards. A DVR share resembles a normal value share, yet it gives less democratic rights to the investor. The discrepancy in casting a survey right can be proficient by declining the level of casting a ballot power. It is great for long haul financial backers, regularly little financial backers who look for higher profit also, are not really keen on taking a democratic position. The Share Capital and Debentures Rules, 2014 give that no organization whether it is unlisted, recorded or a public organization restricted by shares will issue value imparts to differential rights as to profit, casting a ballot or something else, except if it agrees with the accompanying conditions: (a) The articles of attachment of the organization accept the topic of offers with differential rights; (b) The matter of offers is appropriate by a habitual goal passed at a regular congregation of the investors: Given that where the value portions of an organization are recorded on a perceived stock trade, the issue of such offers will be endorsed by the investors through postal polling form; (c) the offers with differential rights will not surpass twenty-six percent of the all-out post- issue settled up value share capital counting value imparts to differential rights gave at any place of time; (d) The organization having steady history of distributable benefits throughout the previous three years; (e) the organization has not defaulted in recording budget summaries what's more, yearly returns for three monetary years right away going before the monetary year wherein it is chosen to issue such offers; (f) the organization has no staying alive default in the installment of a pronounced profit to its investors or reimbursement of its developed stores or recovery of its inclination shares or debentures that have become due for recovery or installment of interest on such stores or debentures or installment of profit; 97 CU IDOL SELF LEARNING MATERIAL (SLM)

(g) the organization has not defaulted in installment of the profit on inclination offers or reimbursement of any term credit from a public monetary foundation or State level monetary organization or on the other hand booked Bank that has become repayable or premium payable subsequently or duty as for legal installments identifying with its workers to any power or default in crediting the sum in Investor Education and Protection Asset to the Central Government. 8.5 EQUITY Value shares will be shares which despise any particular directly in the matter of installment of profit or reimbursement of capital. The value investor gets profit solely after the installment of profits to the inclination shares. There is no fixed pace of profit for value investors. The pace of profit relies on the excess benefits. In the event of ending up of an organization, the value share capital is discounted solely after discounting the inclination share capital. Value investors reserve the privilege to partake in the administration of the organization. Be that as it may, value shares likewise convey more danger. 8.6 DEBENTURE Definition according to Companies Act 2013: u/s 2(30) 'debenture\" incorporates debenture stock, securities or some other instrument of an organization proving an obligation, regardless of whether establishing a charge on the resources of the organization or not. 8.7 TYPES OF DEBENTURES Order based on 1. Dubitability Registered/Unregistered • Registered Debentures: In this class of Debentures, names of holder are recorded in the books of the organization. Such debentures are not debatable instrument. • Bearer or Unregistered Debentures: These are debentures payable to bearer. The names of such debenture holders are not recorded in the books of the organization and such debentures are adaptable from one hand to another by simple conveyance. 2. Security-Secured/Unsecured 98 CU IDOL SELF LEARNING MATERIAL (SLM)

• Secured Debentures: This kind of Debentures make some charge on the property of the organization. There are two sort of charges-(a) fixed and (b) skimming charge. • Naked or Unsecured Debenture: This sort of debentures doesn't have any charge on the resources of the organization. The holder of such debentures like unstable banks might sue the organization on debentures for the recuperation of obligation. These will be treated as 'store' and the organizations (Acceptance of stores) Rules, 2014 will be material. 3. Need First home loan/Second home loan • First home loan debentures are those which are paid in need to different debentures. • Second home loan debentures are those which are paid after the recovery of first home loan debentures. 4. Perpetual quality Redeemable/Irredeemable • Redeemable Debentures: The Debentures are supposed to be redeemable when the organization saves the rights to reclaim them on or after a specific date. By and large debentures are redeemable except if in any case expressed. • Irredeemable or interminable Debentures: When debentures are irredeemable, they are called unending debentures. A debenture is treated as irredeemable where there is no period fixed for reimbursement of the chief sum it 5. Convertibility-Convertible/Non-convertible • Convertible Debentures: These debentures give a choice to the holders to convertible them into inclination or value shares at expressed paces of trade after a specific period. In the event that the holders practice the right of transformation, they stop to be bank to the organization and become individuals. • Non-convertible: Such debentures are paid in real money according to the terms and are not changed over into shares. 8.8 RULE 18 OF THE COMPANIES (SHARE CAPITAL AND DEBENTURES) RULES, 2014 RELATING TO DEBENTURES IS GIVEN BELOW. The Company will not give got debentures except if it consents to the accompanying conditions, specifically: 99 CU IDOL SELF LEARNING MATERIAL (SLM)

An issue of got debentures might be made, given the date of its reclamation will not surpass a long time from the date of issue. Provided that the accompanying classes of organizations might give got debentures for a period surpassing ten years however not surpassing thirty years. o Companies occupied with setting up of foundation projects. o Infrastructure Finance Companies, o Infrastructure Debt Fund o non-Banking monetary Companies o Companies Permitted by Ministry or Department of Central government or by the National Housing Bank or by some other legal position to give debentures. 8.9 SWEAT EQUITY SHARES Sweat value offers are such value shares, which are given by a Company to its chiefs or workers at a markdown or for thought, other than cash, for giving their expertise or making accessible rights in the idea of protected innovation rights or worth augmentations, by whatever name called. Sweat value shares is one of the methods of making share-based installments to workers of the organization. The issue of sweat value shares permits the organization to hold the workers by remunerating them for their administrations. Sweat value shares remunerates the recipients by giving them impetuses in lieu of their commitment towards the improvement of the organization. The issue is approved by a unique goal passed by the organization; The goal determines the quantity of offers, the current market value, thought, assuming any, and the class or classes of chiefs or representatives to whom such value shares are to be given; Where the value portions of the organization are recorded on a perceived stock trade, the perspiration value shares are given as per the guidelines made by the Securities and Exchange Board for this sake and in case they are not really recorded, the perspiration value shares are given as per rules. The articulations ''Employee'' implies 100 CU IDOL SELF LEARNING MATERIAL (SLM)