Question

Explain the various types of New Financial Institutions.

Answer 1

1. Venture Fund Institutions: Venture capital financing is a form of equity financing designed especially for funding new and innovative project ideas. Venture capital funds bring into force the hi-technology projects which are converted into commercial production.
2. Mutual Funds: Financial institutions that provide facilities for channeling savings of small investors into avenues of productive investments are called ‘Mutual Funds’.
3. Factoring Institutions: “Factoring” is an arrangement whereby a financial institution provides financial accommodation on the basis of assignment/sale of account receivables.
4. Over the Counter Exchange of India (OTCEI): The OTCEI was set up by a premier financial institution to allow the trading of securities across the electronic counters throughout the country.
5. National Stock Exchange of India Limited (NSEI): NSEI was established in 1992 to function as a model stock exchange. The Exchange aims at providing the advantage of a nation-wide electronic screen-based “scripless” and “floorless” trading system insecurities.
6. National Clearance and Depository System (NCDS): Under the scripless trading system, settlement of transactions relating to securities takes place through a book entry.
7. National Securities Depositories Limited: The NSDL was set up in the year 1996 for achieving a time-bound dematerialization as well as rematerialization of shares.
8. Stock Holding Corporation of India Limited (SHCIL): Stock Holding Corporation of India Limited (SHCIL) aims at serving as a central securities depository in respect of transactions on stock exchanges. The Corporation also takes up the administration of clearing functions at a national level.