CURRENT TRENDS & CASES IN

FINANCE
 INTRODUCTION TO
1.

MICRO-FINANCE
1. Microfinance Meaning
2. Types of Product
3. Models of Lending
4. Govt, RBI & NABARD Initiative to promote it
5. Benefits
6. Issue & Challenges
7. MFI & Case Study
8. VCF
9. Chit Fund
10. Shadow Banking

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What is Finance ? Why we need Finance ?
Finance involves the management of money and assets, including
activities such as investing, borrowing, lending, budgeting, and risk
management.
Need :
1.Investment
2.Operations
3.Expansion
4.Research and Development
5.Risk Management
6.Working Capital
7.Acquisitions and Mergers
8.Compliance and Regulations
9.Innovation
10.Survival

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 INTRODUCTION TO MICRO-FINANCE
Microfinance is a financial service offered to individuals who typically lack access to traditional banking services, especially in
developing countries. It involves providing small loans, savings accounts, insurance, and other basic financial services to low-
income individuals or groups who do not have access to conventional banking services.

Conceptual Framework’s Key Principles :

1 2 3 4 5 6 7

Financial Poverty Social Sustainability: Client- Capacity Risk

Inclusion: Alleviation: Impact: Balancing Centered Building: Management
Targeting Providing Promoting financial Approach: Offering :
those access to economic viability with Tailoring financial Mitigating
excluded financial development social services to literacy credit,
from services to , gender objectives to meet the training and operational,
traditional empower equality, and ensure long- specific other and market
banking individuals to social term impact. needs of educational risks through
services, invest in cohesion clients, often initiatives to thorough
especially income- within employing enhance assessment
low-income generating communities group clients' and
individuals activities and & women lending financial skills diversification
and cope with empowerme methodologi and strategies.
marginalized emergencies. nt. es and resilience.
communities. flexible
repayment
schedules.
Types of Microfinance Products :
1. Microloans: Small loans provided to individuals or 6. Housing Finance: Loans or financial assistance provided for
groups to finance income-generating activities such as housing-related expenses, including home construction, repairs, or
small businesses, agricultural inputs, or home purchasing land.
improvements. 7. Micro-leasing: Provision of assets or equipment on lease to
2. Group Loans: Loans extended to groups of borrowers microentrepreneurs, enabling them to start or expand their businesses
who collectively guarantee each other's repayment, without significant upfront costs.
fostering social collateral and peer support. Group 8. Agri-Finance: Specialized financial products tailored for
loans often involve weekly or monthly repayments agricultural activities, including farm inputs, equipment leasing, and
and are popular in community-based microfinance seasonal credit for crop cultivation.
models.
3. Individual Loans: Loans provided to individual
borrowers based on their creditworthiness and
repayment capacity. These loans may require
collateral or a personal guarantee.
4. Savings Accounts: Basic savings accounts that allow
clients to deposit and withdraw funds, build financial
assets, and access emergency funds. Microfinance
institutions often encourage regular saving habits
among clients.
5. Insurance Products: Microinsurance offerings such
as health insurance, life insurance, crop insurance, or
asset insurance designed to protect clients against
unforeseen risks and mitigate vulnerabilities.
 Models Of Micro-Finance Lending
1.Group-Based Model: Lends to small groups
with mutual guarantees.
2.Individual Lending Model: Direct loans to
individuals without group support.
3.Microfinance Institutions (MFIs): Specialized
entities offering financial services.
4.ROSCAs: Informal groups for pooled savings
and credit.
5.Digital Microfinance: Uses technology for
faster transactions.
(ROSCA)
6.SHGs: Empowers women through collective
savings and credit.
Initiative by Govt of India in Development of Microfinance :

1.Self-Help Group (SHG)-Bank Linkage Program: Introduced by NABARD in

1992 to facilitate linkages between SHGs and formal banking institutions.
2.National Rural Livelihoods Mission (NRLM): Launched in 2011 to promote
SHGs and provide financial assistance, capacity building, and livelihood support
to rural households.
3.National Urban Livelihoods Mission (NULM): Launched in 2013 to reduce
poverty and vulnerability of the urban poor households by enabling them to access
gainful self-employment and skilled wage employment opportunities.
4.Pradhan Mantri Mudra Yojana (PMMY): Started in 2015 to provide
collateral-free loans to micro, small, and medium enterprises (MSMEs), including
microfinance institutions.
5.Small Finance Banks (SFBs): Licensing of SFBs by the Reserve Bank of India
(RBI) to provide banking services, including microfinance, to underserved
sections of the population.
6.Stand-Up India Scheme: Initiated in 2016 to facilitate bank loans between ₹10
lakh and ₹1 crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST)
borrower and at least one woman borrower per bank branch for setting up
greenfield enterprises.
7.Prime Minister's Employment Generation Programme (PMEGP): A credit-
linked subsidy program launched in 2008 for generating self-employment
opportunities through establishment of micro-enterprises in the non-farm sector by
helping traditional artisans and unemployed youth in rural and urban areas.
8.Micro-Finance Bill : aimed to regulate microfinance institutions (MFIs), the bill
proposed measures to ensure fair practices, consumer protection, and transparency
within the microfinance sector.
Initiative by RBI & NABARD in Development of Microfinance :

Initiatives by RBI in Microfinance Development: Functions of NABARD :

1.Credit facilitation for agriculture and rural development.
1.Regulatory Guidelines: RBI issues guidelines ensuring stability and 2.Refinancing institutions supporting rural sectors.
sustainability of microfinance institutions. 3.Developmental initiatives for sustainable growth.
2.Licensing of SFBs: Grants licenses to Small Finance Banks to cater to 4.Promotion of rural infrastructure development.
underserved populations, including microfinance clients.
3.Financial Inclusion Agenda: Prioritizes financial inclusion through
5.Capacity building through training programs.
technology-driven solutions and expanding banking infrastructure. 6.Research to identify emerging trends and solutions.
4.Monitoring and Supervision: Monitors MFIs to ensure compliance with 7.Support for Self-Help Groups (SHGs).
regulatory norms and consumer protection.

Initiatives by NABARD in Microfinance

Development:
1.SHG-Bank Linkage Program: Facilitates access to credit, savings, and
financial services for rural households through SHGs.
2.Capacity Building: Conducts training programs to enhance financial
literacy and entrepreneurship skills among SHG members and MFIs.
3.Refinancing Support: Provides refinancing support to MFIs to expand
outreach and strengthen financial sustainability.
4.Promotion of Innovations: Promotes research and innovation in
microfinance to improve models and approaches.
Innovative Microfinance Model in India :

1.Micro-Franchising: Replicating proven business models on a small

scale, allowing individuals to operate micro-enterprises offering
financial services.
2.Mobile Banking: Using mobile phones to provide basic banking
services like transfers, payments, and account inquiries, particularly in
remote areas.
3.Banks on Wheels: Mobile banking units equipped with ATMs and
other facilities, bringing banking services directly to underserved
communities.
4.Banking Correspondent (BC) Model: Third-party agents offering
basic banking services on behalf of banks in remote areas, using
handheld devices or micro-ATMs.
5.Micro-leasing: Providing assets or equipment on lease to micro-
entrepreneurs, enabling them to access essential resources for business
without large upfront investments.

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Advantages of Microfinance in India:
1.Financial inclusion
2.Poverty alleviation
3.Women's empowerment
4.Entrepreneurship promotion
5.Flexible repayment terms
6.Community development through local investment
7.Access to credit for small businesses and startups.

Disadvantages of Microfinance in India:

1.Over-indebtedness
2.High interest rates
3.Dependency on external funding
4.Risk of mission drift
5.Limited coverage in remote areas
6.Lack of financial education among borrowers
7.Vulnerability to economic shocks and natural disasters
Issues/Challenges faced by Microfinance in India :
1.Over-indebtedness: Borrowers sometimes take multiple loans from different
microfinance institutions, leading to over-indebtedness and repayment difficulties.
2.Interest Rate Caps: Regulatory restrictions on interest rates can limit the
profitability of microfinance institutions and affect their ability to reach
sustainable scale.
3.Lack of Financial Literacy: Many clients lack basic financial literacy, making
it challenging for them to understand loan terms, manage their finances effectively,
and avoid overborrowing.
4.Credit Risk: Assessing the creditworthiness of clients, particularly those without
formal credit histories or collateral, poses a challenge for microfinance
institutions, leading to higher default rates.
5.Operational Costs: Serving clients in remote and rural areas can be costly due
to infrastructure challenges, limited banking infrastructure, and high transaction
costs.
6.Regulatory Environment: Changes in regulatory policies and compliance
requirements can impact the operations and profitability of microfinance
institutions, leading to uncertainty and operational challenges.
7.Political Interference: Microfinance has sometimes become politicized, leading
to policy changes, regulatory restrictions, and negative public perceptions, which
can affect the sector's growth and stability.
8.Gender Disparities: Despite efforts to promote women's empowerment through
microfinance, gender disparities persist, with women facing barriers to accessing
financial services, limited control over loan utilization, and challenges in
participating fully in economic activities.
9.Impact of Natural Disasters: Natural disasters such as floods, droughts, and
cyclones can disrupt economic activities, destroy assets, and lead to loan defaults,
affecting the financial stability of both clients and microfinance institutions.
What is Microfinance Institutions(MFI),its types, Benefits & Issues ?
Microfinance institutions (MFIs) are organizations that provide financial services, such as microloans,
savings accounts, insurance, and payment services, to low-income individuals and microenterprises who
lack access to traditional banking services.
Issues with Microfinance:
Types of Microfinance Institutions:
1.Over-indebtedness: Borrowers may become trapped in a
1.Non-Banking Financial Companies (NBFCs) focused on microfinance.
cycle of debt due to multiple loans and high interest rates.
2.Non-profit organizations (NGOs) providing microfinance services.
2.High Interest Rates: It carries higher interest rates to cover
3.Cooperatives and credit unions offering financial services to members.
operational costs, making them expensive for borrowers.
4.Small finance banks dedicated to serving the financial needs of under-
3.Mission Drift: Commercialization and profit motives may
served populations.
lead MFIs to divert their mission.
5.Commercial banks with specialized microfinance divisions or initiatives
4.Lack of Regulation: Weak regulatory oversight may expose
borrowers to predatory lending practices and inadequate
Benefits of Microfinance: consumer protection.
1.Financial Inclusion: Provides access to formal financial 5.Dependency on External Funding: MFIs rely on external
services for the unbanked and underbanked. funding sources such as Govt & Banks, affecting their stability
2.Poverty Alleviation: Empowers individuals to invest in and sustainability.
income-generating activities and improve livelihoods.
3.Women's Empowerment: Targets women borrowers,
enhancing their economic status and decision-making power.
4.Entrepreneurship Promotion: Supports small businesses and
startups, fostering economic growth and job creation.
5.Community Development: Encourages local investment and
social capital formation, contributing to overall development.
 CASE-STUDIES

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Swayam Krishi Sangam (SKS) Microfinance:
•Background: Founded in India in 1997 by Vikram Akula as NGO, SKS
Financial Data:
Microfinance aimed to provide financial services to low-income individuals,
particularly women, in rural areas. •SKS Microfinance reported a loan portfolio of
$1.5 billion and served over 7 million clients as
•Role: of 2018.
• Microcredit Provision: SKS MFI offered small loans to borrowers, •Despite facing challenges, SKS Microfinance
empowering them to start or expand small businesses and improve their reported a net profit of $20 million in the same
livelihoods. year.
• Financial Inclusion: It promoted financial inclusion by providing banking
services to those excluded from the traditional banking sector.
• Women Empowerment: SKS focused on lending to women, recognizing
their role as key drivers of household economies and agents of change.
• Social Impact: The organization aimed to alleviate poverty and promote
economic development by providing access to credit and other financial
services.
•Challenges:
• Interest Rates: Criticized for high-interest rates charged to borrowers,
leading to concerns about over-indebtedness and exploitation.
• Regulatory Issues: Faced regulatory challenges in some regions, leading to
restrictions or operational difficulties.
• Repayment Pressures: Borrowers faced repayment pressures, especially
during economic downturns or natural disasters, leading to defaults and loan
stress.
• Loan Sanctions of 550 cr and Loss of 40 cr in 2012.
Bangladesh Grameen Bank:
•Background: Established in Bangladesh in 1983 by Nobel laureate Muhammad
Yunus, Grameen Bank pioneered the concept of microcredit and social business.
•Role: •Challenges:
• Microcredit Pioneers: Grameen Bank introduced the concept of • Sustainability: Faced challenges in maintaining financial sustainability
microcredit, providing small loans to poor individuals, particularly while expanding outreach and maintaining the quality of services.
women, to start businesses and escape poverty. • Criticism: Criticized for high-interest rates and aggressive debt
• Social Business: It promoted the idea of social business, where profits recovery practices, leading to concerns about borrower welfare and
were reinvested to benefit borrowers and communities, rather than over-indebtedness.
maximizing shareholder returns. • Operational Efficiency: Faced challenges in achieving operational
• Women Empowerment: Grameen Bank focused on lending to women, efficiency and managing the complexities of serving rural and
recognizing their ability to effectively utilize credit and contribute to marginalized communities.
household welfare.
• Poverty Alleviation: By providing access to credit and financial
services, Grameen Bank aimed to alleviate poverty and promote
sustainable development.
•Successes:
• Empowerment: Grameen Bank empowered millions of women by
providing them with access to credit, fostering entrepreneurship, and
improving their socio-economic status.
• Replication: The microcredit model pioneered by Grameen Bank was
replicated in various countries worldwide, contributing to the global
microfinance movement.
• Social Impact: Grameen Bank's initiatives had a significant social
impact, lifting many families out of poverty and promoting economic
self-reliance.
 Concepts

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 Value Chain Finance” (VCF) refers to the use of a value chain and the way in which it supports
participants by tailoring services and products to one or more points in a value chain in order to reduce the risk and
cost of financing,and increase the efficiency of the value chain as a whole.
Example
In the agriculture sector, value chain financing helps farmers buy seeds and equipment, processors purchase crops,
distributors transport goods, and retailers stock inventory. It provides tailored loans and credit to each player,
ensuring smooth operations from farm to market, ultimately boosting productivity and profitability for all
involved.

Ways of Value Chain Financing :

1.Identify key players.
2.Assess financial needs.
3.Provide tailored financing solutions.
4.Mitigate risks.
5.Foster collaboration.
6.Enhance efficiency and competitiveness.
Chit Fund Finance is a type of savings and borrowing scheme popular in some parts of the
world, particularly in India. In a chit fund, a group of individuals comes together to pool their resources,
contributing a fixed amount of money periodically (usually monthly).

Advantages:
Working Of Chit Fund Finance
1.Financial Inclusion: Provides access to funds for unbanked individuals.
2.Community Building: Fosters a sense of belonging and trust among members.
3.Lower Interest Rates: Offers borrowing at competitive rates compared to formal lenders.
4.Flexibility: Allows for adaptable contribution and repayment terms.
5.Diverse Usage: Can be utilized for various needs like emergencies or investments.

Disadvantages:

1.Fraud Risk: Vulnerable to fraud or mismanagement by operators.

2.Regulatory Gaps: Lack of oversight in some regions leads to potential exploitation.
3.Dependency: Relies on the integrity and financial stability of other members.
4.Transparency Issues: Limited clarity in the auction process may cause disputes.
5.Default Risk: Possibility of member defaults leading to delays or loss of funds.
 Shadow Banking refers to a system of financial intermediaries and activities that operate outside the
traditional banking sector but perform similar functions to banks, such as credit intermediation, liquidity
provision, and maturity transformation.
These activities often involve entities like investment banks, hedge funds, money market funds, and other non-
bank financial institutions. Those do not accept Demand Deposit from Public.

Pros:
1.Diversifies Funding: Provides alternative funding sources beyond banks, enhancing liquidity.
2.Drives Innovation: Spurs financial product innovation and market efficiency.
3.Facilitates Risk Management: Enables effective risk transfer mechanisms.
4.Expands Access to Credit: Increases credit accessibility, fostering economic growth.

Cons:
1.Regulatory Gaps: Operates with less oversight, raising systemic risk.
2.Complexity and Opacity: Difficult to monitor, potentially causing market disruptions.
3.Liquidity and Stability Risks: Exposed to liquidity risks and instability due to short-term funding
reliance.
4.Contagion Effects: Interconnectedness can spread problems, heightening systemic risks.

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2.SMALL FINANCE BANK

Small
Self Help
Finance Bank
Group
Meaning
Small Finance Banks (SFBs) :
In India, Small Finance Banks (SFBs) are a type of niche banks created with the primary objective of providing
financial inclusion to sections of the population that are typically underserved by traditional banks, such as small
business units, small and marginal farmers, micro and small industries, and unorganized sector entities.
Features :
Financial Inclusion: SFBs are mandated to focus on providing banking services
to unbanked and underbanked segments of the population, particularly in rural and Functions :
remote areas. 1.Accept Deposit & Lend Loan
Target Customer Base: They cater to small businesses, micro and small
industries, low-income households, farmers, and other entities from the
2.Maintain CRR & SLR
unorganized sector. 3.PSL Lending
Deposit Mobilization: SFBs accept deposits from the public, including savings 4.Provide Financial Services like MF,
and term deposits, which helps in channelizing savings into the formal banking
Insurance & Pension products.
system.
Credit Facilities: They provide credit facilities such as micro loans, overdrafts,
and other banking services to their target customer base, enabling them to meet
their financial needs for business or personal purposes.
Microfinance: Many SFBs focus on microfinance activities, offering small loans
and financial services to individuals and groups who lack access to traditional
banking services.
Technology-driven Operations: While focusing on serving the underserved,
SFBs often leverage technology to streamline their operations, making banking
services more accessible and efficient, especially in remote areas.
Priority Sector Lending: SFBs are required to allocate a significant portion of
their lending towards priority sectors such as agriculture, small enterprises, and
weaker sections of society, as mandated by the Reserve Bank of India (RBI).
Payment Services: They offer payment and remittance services, facilitating
transactions for their customers and promoting financial inclusion.
 List Of Small Finance Banks (SFBs):
1. Capital SFB- india’s 1st SFB-2016
2. Equitas SFB
3. Suryoday SFB
4. Utkarsh SFB
5. Ujjivan SFB
6. AU SFB
7. Fincare SFB
8. Jana SFB

Eligibility Criteria for setting up Small Finance Banks (SFBs):

1.Individuals/Professionals: Residents with at least 10 years of senior-

level experience in banking and finance, or companies and societies
owned and controlled by residents with a successful track record of 5
years in business.
2.Existing Financial Entities: Private sector NBFCs, MFIs, and LABs
controlled by residents with a successful track record of 5 years can opt
for conversion into SFBs.
3.Urban Cooperative Banks (UCBs): UCBs willing to convert
voluntarily into SFBs can do so.
4.Minimum Net Worth: SFBs must have a minimum net worth of INR
100 crore at the commencement of business, increasing to INR 200
crore within five years.
Pros of Small Finance Banks (SFBs): The Small Finance Banks are governed by the provisions of
1.Foster financial inclusion. the following Acts:
2.Provide tailored products.
3.Focus on microfinance. •Banking Regulation Act, 1949
4.Integrate technology. •Foreign Exchange Management Act, 1999
5.Prioritize lending to key sectors. •Reserve Bank of India Act, 1934
•Payment & Settlement Systems Act, 2007
•Credit Information Companies (Regulation) Act, 2005
Cons of Small Finance Banks (SFBs): •Deposit Insurance and Credit Guarantee Corporation Act,
1.Encounter higher credit risk. (DICGC) 1961
2.Face operational challenges.
3.Incur regulatory compliance costs.
4.Operate on a smaller scale.
5.Experience profitability pressures.
 Business Model Of Small Finance Bank :

1. Min Paid up Capital -100 Cr- within next 5year -200cr

2. Eligibility Criteria – 10 year experience in banking, NBFcs & microfinance institution.
3. Initial Contribution – by promotor at least 40% & can brought down to 26% in next 12 years.
4. Foreign Shareholding - (FDI) policy for private sector banks, which is capped at 74%-49% automatic & 25% approval.
5. Priority Sector Lending – 75% of its net adjusted credit to agri,health,education,weaker section & renewable energy
6. CRR & SLR- 4.50% & 18%
7. Branches - 25% should be to rural & un served area.
8. DICGC : mandate upto 5 Lakh

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Self Help Groups (SHGs) :
The concept of Self-Help Groups (SHGs) revolves around the idea of collective empowerment through voluntary
association and mutual support among individuals, typically from marginalized or economically disadvantaged
backgrounds. SHGs are small groups of 10 to 20 members, primarily women, who come together to save regularly
and contribute to a common fund.

Its genesis can be traced to SEWA(Self Employed Women’s Association) foundation in 1972.
NABARD SHG-Bank Linkages Programme 1992- boosted its presence.
Swarojgar Yojana 1999 & NRLM -2011 penetrated it in rural areas.

Features:

1.Small groups of 10-20 members mostly Womens.

2.Regular savings and internal lending.
3.Social collateral instead of physical collateral.
4.Participatory decision-making.
5.Focus on women's empowerment and poverty alleviation.
6.Self-Rules & Regulations
Why We Need Self-Help Groups (SHGs):
1.Financial Inclusion: Provides banking access to marginalized
communities, aiding entrepreneurship and financial stability.
Social
2.Empowerment: Empowers marginalized individuals, particularly Objective
Economical
women, through collective decision-making and skill development. s
3.Poverty Alleviation: Enables income generation and Political
Benefits
entrepreneurship, lifting families out of poverty. Advantag
4.Social Support Networks: Builds solidarity and provides mutual Developme
es
assistance, especially in times of crisis. nt
5.Gender Equality: Promotes women's empowerment by offering
leadership opportunities and challenging gender norms.
6.Community Development: Fosters local development through
collective action and addressing community needs.

Disadvantages of Self-Help Groups (SHGs):

1.Resource Limitations: Limited access to funds and expertise.
2.Dependency Risk: Potential overreliance on group support.
3.Internal Conflicts: Disruption due to internal disagreements.
4.Exclusionary Tendencies: Unintended exclusion of certain members.
5.Sustainability Concerns: Challenges in maintaining long-term viability.
Promotion efforts for Self-Help Groups (SHGs)
in India occur through:
1.Government Initiatives: Programs like NRLM mobilize rural
households into SHGs, offering financial support and capacity
building.(RBI, NABARD, Schemes like Swarojgar )
2.Financial Institutions: Banks provide tailored products and
services, like microfinance loans, to SHGs.
3.NGOs: Offer training and assistance to SHGs for effective
organization and management.
4.Capacity Building: Training programs focus on financial
literacy, entrepreneurship, and group dynamics.
5.Market Linkages: Facilitate access to markets for SHG
products through training and partnerships.
6.Awareness Campaigns: Spread awareness about SHG
benefits through various communication channels.
7.Government Support: Provides services like technology
access and social welfare programs to support SHGs.

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Issues in Self-Help Groups (SHGs) can vary but
commonly include:

1.Leadership Challenges: Inadequate leadership skills or dominance by

certain members can lead to conflicts and hinder group cohesion. What can be
2.Financial Management: Poor financial literacy and mismanagement done to resolve
of funds may result in defaults on loans or inefficient use of resources.
issues ?
3.Dependency Syndrome: Over-reliance on external support, such as
subsidies or grants, can undermine the self-reliant ethos of SHGs.
4.Social Norms: Gender biases or caste-based discrimination within
SHGs may restrict the participation and decision-making power of
certain members.
5.Sustainability Concerns: Lack of market linkages, access to training,
and ongoing support can impact the long-term sustainability of SHG
initiatives.
6.Group Dynamics: Issues like unequal participation, lack of trust
among members, or personality clashes may disrupt group functioning.
7.External Factors: Economic downturns, natural disasters, or changes
in government policies can adversely affect SHG activities and
outcomes.
Importance of SHG-Bank Linkages:

1.Financial Inclusion: Linkages enable SHGs to Example:

access formal banking services, promoting financial In India, the linkage between SHGs and banks has been
inclusion among marginalized communities. instrumental in empowering women and reducing poverty. The
2.Access to Credit: SHGs can secure loans from Self-Employed Women's Association (SEWA) Bank in
banks at lower interest rates compared to informal
Gujarat exemplifies successful SHG-bank linkages, where
moneylenders, facilitating entrepreneurship and
income generation activities. SHGs of women engage in various income-generating activities
3.Savings Mobilization: Banks provide a secure with the support of loans and financial services from the bank.
platform for SHGs to save money, encouraging a This partnership has transformed the lives of thousands of
culture of savings and asset building among women by providing access to credit, savings, and training,
members. enabling them to improve their livelihoods and achieve
4.Capacity Building: Banks offer financial literacy economic empowerment.
training and support to SHGs, enhancing their
financial management skills and promoting
sustainable livelihoods.
5.Empowerment: Access to credit and financial
services empowers SHG members, particularly
women, by providing them with economic
independence and decision-making power within
their households.

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3.RETAIL BANKING

Retail Bank
Alternative
Meaning
Delivery
,Functions, types
Channel-Types
& products
 Retail Banking :
Retail banking serves directly to individual consumers and small businesses, offering services like savings and
checking accounts, loans, credit cards, and investment products through branches, online platforms, ATMs, and mobile
apps.
Retail Banking Services provided by following banks :
Features : Commercial Banks:
Savings Banks: Focus Cooperative Banks:
Offer deposit
1.Personalized services tailored to on savings and Owned by members,
products, loans,
deposit services, provide retail
individual and small business needs. payments,
often community- banking services like
investments, and
2.Basic banking products like savings oriented. commercial banks.
insurance.
and checking accounts.
3.Various consumer loans including
Neo-banks: Digital-
mortgages and personal loans. Credit Unions: Online Banks:
only banks offering
Member-owned Operate digitally,
4.Credit facilities such as credit cards innovative retail
cooperatives serving providing savings,
banking solutions to
and overdrafts. specific communities loans, and payment
specific customer
or professions. services online.
5.Convenient access through branches, segments.

ATMs, online, and mobile banking.

6.Financial advice and education to
help customers make informed
decisions.

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Products and services offered by retail Factors contributing to the growth of retail
banking include: banking:
1.Deposit Products: Savings accounts, current 1.Demographic trends: Population growth and urbanization.
accounts, certificates of deposit (CDs) like FD & RD, 2.Technological advancements: Digital banking innovations.
Zero balance accounts. 3.Regulatory changes: Promoting competition and consumer
2.Lending Services: Mortgages, personal loans, auto protection.
loans, education loans, small business loans. 4.Changing customer preferences: Demand for convenience
3.Payment and Transaction Services: Credit cards, and personalized services.
debit cards, online banking, mobile banking, bill 5.Economic growth: Increased demand for banking services.
payment, money transfers. 6.Financial inclusion initiatives: Expanding access to
4.Investment and Wealth Management: Mutual underserved populations.
funds, stocks, bonds, retirement accounts, financial 7.Globalization and market competition: Expansion into new
planning, advisory services. markets.
5.Insurance Products: Life insurance, health
insurance, property insurance, liability insurance.
6.Financial Advisory Services: Financial planning,
retirement planning, budgeting, investment advice.
Advantages of Retail Banking:

1.Accessibility: Convenient access to banking services.

2.Personalized Services: Tailored financial solutions.
3.Convenience: Easy transactions and account management.
4.Financial Inclusion: Basic banking services for all.
5.Relationship Building: Long-term trust and loyalty.

Disadvantages of Retail Banking:

1.Limited Services: Lack of specialized offerings.

2.Fees and Charges: Incurred for various services.
3.Security Risks: Vulnerability to cyber threats.
4.Interest Rates: Often lower for deposits, higher for loans.
5.Dependency on Technology: Risk of service disruptions.

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 Alternate Delivery Channels :
Alternate delivery channels in retail banking refer to non-traditional methods through which banking services are provided to
customers. These channels offer convenience and accessibility, allowing customers to conduct banking transactions outside of
traditional branch locations. These include ATM, IBs, Mo.Banking, SMS Banking & Wallet Banking.
Types of ADC :

6. SMS Banking: SMS banking services allow customers to receive account

ATMs Online Mobile Phone Banking: Interactive alerts, check balances, view transaction history, and perform other banking
(Automate Banking: Banking: Phone banking Voice activities via text messages on their mobile phones.
d Teller Online Mobile services enable Response 7. Point-of-Sale (POS) Terminals: POS terminals enable customers to make
Machines): banking banking customers to (IVR)
ATMs platforms apps access their Systems: IVR purchases and initiate payments using their debit or credit cards at retail
enable allow provide accounts and systems stores, restaurants, and other merchant locations.
customers customers to similar perform allow 8. Online Payment Platforms: Online payment platforms facilitate
to access their functionalitie banking customers to
withdraw accounts, s as online transactions by perform electronic transactions, allowing customers to make payments, transfer
cash, view banking but calling a bank's banking money, and purchase goods and services over the internet.
deposit balances, are customer transactions
funds, transfer funds, specifically service hotline by
transfer pay bills, and designed for and interacting interacting
money, perform smartphones with an with an
and various and tablets, automated automated
perform banking offering system or telephone
other basic activities over greater speaking to a system using
banking the internet flexibility and customer voice
transaction using a convenienc service commands
s without computer or e for on-the- representative. or keypad
visiting a mobile go banking. inputs.
branch. device.
Customers can access a variety of features and services, including:

1
1 2 3 4 5 6 7 8 9
0

Account Fund Bill Mobile ATM Loan Card Account Investmen Customer
Informatio Transfers: Payments: Deposits: Services: Applicatio Managem Alerts: t Services: Support:
n: Check Transfer Pay bills Deposit Withdraw ns: Apply ent: Receive Monitor Access
balances, money for utilities, checks cash, for Activate, notificatio investmen customer
view between credit remotely deposit personal block, or ns via t service
transactio accounts, cards, by funds, loans, report email, portfolios, represent
n history, both loans, and capturing transfer mortgage lost/stolen SMS, or buy/sell atives via
and within the other images of money s, and debit and push stocks, phone,
monitor same expenses the between other credit notificatio mutual email, live
account bank and directly checks accounts, types of cards, ns for funds, and chat, or
activity in to from their using a and credit and set account other secure
real-time. accounts bank mobile inquire online or spending activities, investmen messaging
at other accounts. banking about through limits. such as t products, for
banks. app. account mobile low and assistance
balances. banking balances, access with
apps. large research account
transactio and inquiries,
ns, and bill market issue
due informatio resolution,
dates. n. and
general
banking
support.
Advantages of ADCs in Retail Banking:
1.Convenience: Anytime, anywhere access to banking services.
2.Accessibility: Reach customers in remote areas.
3.Cost-Effectiveness: Reduced operational costs for banks.
4.Efficiency: Streamlined banking processes for faster transactions.
5.Expanded Reach: Access to a broader customer base.

Disadvantages of ADCs in Retail Banking:

1.Security Risks: Vulnerability to cyber threats.

2.Technological Limitations: Service disruptions and technical issues.
3.Lack of Personal Interaction: Reduced customer engagement.
4.Digital Divide: Exclusion of technologically disadvantaged populations.
5.Complexity: Challenges for some customers in using digital channels.

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Customer Relationship Management (CRM) is a strategy and technology used by
businesses to manage interactions with current and potential customers. It involves collecting, analyzing,
and utilizing customer data to improve relationships, increase customer satisfaction, and drive sales and
retention.
(CRM) is needed because it:

1.Enhances customer experience, like when Amazon suggests

personalized product recommendations based on past purchases.
2.Increases customer retention, as seen in loyalty programs such as
Starbucks Rewards, which offers free drinks and discounts to repeat
customers.
3.Improves sales and marketing effectiveness, as demonstrated by
Netflix's targeted email campaigns promoting new content based on
viewing history.
4.Provides better customer service, as exemplified by Zappos' renowned
customer service, which goes above and beyond to resolve issues and
satisfy customers.
5.Facilitates data-driven decision making, like how Spotify uses listening
habits to curate personalized playlists and recommend new music.
6.Streamlines business processes, as seen in Salesforce's CRM platform,
which centralizes customer data and communication for more efficient
collaboration and workflow management.
Customer Interaction Management (CIM) refers to the process of managing and
optimizing interactions between a business and its customers across various touchpoints and
channels. It involves tracking, analysing, and responding to customer interactions to enhance the
overall customer experience and achieve business objectives.

The need for Customer Interaction Management arises from several factors:

1.Enhanced Customer Engagement: CIM allows businesses to actively engage with customers
through personalized interactions, fostering stronger relationships and loyalty.
2.Improved Customer Satisfaction: By effectively managing interactions and addressing
customer needs promptly and efficiently, CIM helps enhance customer satisfaction and loyalty.
3.Multi-Channel Support: With customers interacting through various channels such as email,
phone, social media, and live chat, CIM ensures consistent and seamless communication across all
touchpoints.
4.Real-Time Insights: CIM provides real-time insights into customer behavior, preferences, and
sentiments, enabling businesses to tailor their interactions and offerings accordingly.
5.Proactive Issue Resolution: By identifying and addressing customer issues proactively, CIM
helps prevent escalations, minimize negative experiences, and maintain a positive brand reputation.
6.Opportunity Identification: CIM enables businesses to identify upselling and cross-selling
opportunities, personalize offers, and maximize revenue generation from customer interactions.
7.Efficient Resource Allocation: By optimizing workflows and resource allocation based on
customer interaction data, CIM helps improve operational efficiency and resource utilization.
Technology Acts As A Differentiator In
Banking :
Technology has become a significant differentiator in the banking industry, offering
institutions opportunities to improve efficiency, customer experience, security, and innovation.
Here are some ways in which technology acts as a differentiator in banking:

Speedy
Personalization:
Digital Platforms: Transactions: Real-
Tailored services
Offer convenience time payment
based on customer
and accessibility. systems and
behavior.
blockchain.

Innovation: Efficiency and Cost

Security Measures:
Introduction of new Reduction:
Biometric
products like robo- Automation
authentication and
advisors and digital through AI and
fraud detection.
wallets. RPA.

Open Banking:
Data-driven
Collaboration with
Decision Making:
third-party providers
Insights from big
data analytics. via APIs for
enhanced services.
Payment Banks :
A payment bank is a type of bank in India that operates with a specific focus on providing basic banking
services and facilitating transactions, especially for underserved populations. Payment banks are distinct from
traditional banks in that they do not engage in lending activities like issuing loans or credit cards.
Instead, they primarily offer services such as:
Deposits: Payment
banks accept deposits Remittance Services:
from individuals and Facilitating domestic
small businesses, with a and international
maximum deposit limit remittances, allowing
set by regulatory customers to send and
authorities. Zero receive money securely
Balance Account and quickly.
Facility with debit card.

Bill Payments: Allowing

Fund Transfers: Enabling customers to pay utility
electronic fund transfers bills, mobile phone bills,
between accounts, and other recurring
both within the bank payments conveniently
and to other banks. through digital
channels.

Financial Inclusion:
Mobile Banking: Focusing on reaching
Offering mobile-based unbanked and
banking services, underbanked
including account populations, particularly
management, balance in rural and remote
inquiries, and areas, to improve their
transactions. access to basic banking
services.
Features of Payment Bank :

Maximum Deposit limit Zero Bal Account with Do 'not issues credit
is 1,00,000 Per Year. Debit cards. cards & loans.

Paying Utility Bills &

Accept & Send 25% Branches should
Facility of IMPS,NEFT &
Remittance. be local areas.
RTGS.

Promotor holding
Minimum paid up should be 40%
capital shall be 100 cr. maintainable till initial
5 years.
Advantages:
1.Financial Inclusion: Reach unbanked populations.
2.Convenience: Accessible digital banking.
3.Cost-effective: Lower fees and charges.
4.Efficiency: Quick transactions.
5.Innovation: Drive technological advancement.

Disadvantages:
1.Limited Services: No lending activities.
2.Technology Dependence: Vulnerable to disruptions.
3.Security Risks: Potential for cyber threats.
4.Limited Physical Presence: Lack of branches and ATMs.
5.Sustainability Challenges: Profitability concerns.

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List of Payment Banks

Jana Small Finance

Airtel Payments Paytm Payments India Post Payments NSDL Payments Aditya Birla Bank (formerly
Jio Payments Bank Fino Payments Bank
Bank Bank Bank Bank Payments Bank aJanalakshmi
Financial Services)

Financial Inclusion Schemes in India :

1.Pradhan Mantri Jan Dhan Yojana (PMJDY): Universal banking
access with basic accounts, insurance, and overdraft facilities.
2.MUDRA Yojana: Loans up to ₹10 lakh for small/micro enterprises to
promote entrepreneurship.
3.Stand-Up India Scheme: Bank loans for SC, ST, and women
entrepreneurs to encourage self-employment.
4.Atal Pension Yojana (APY): Pension scheme for workers in the
unorganized sector.
5.National Rural Livelihoods Mission (NRLM): Skill development
and credit access for rural livelihoods.
6.Direct Benefit Transfer (DBT): Direct subsidy transfers to bank
accounts to reduce leakages and promote banking.
Operating Guidelines for payment banks set by the Reserve
Bank of India (RBI):

1.Eligibility: Entities like NBFCs, mobile companies, and

others meeting specified criteria can apply.
2.Promoter Shareholding: Initial promoter contribution should
be at least 40%.
3.Capital Requirement: Minimum paid-up equity capital of
₹100 crores.
4.Activities: Permitted activities include accepting demand
deposits, remittance services, mobile banking, issuing debit
cards, and utility bill payments.
5.Deposit Limits: Can accept deposits up to ₹2 lakhs per
individual customer.
6.Foreign Investment: Subject to existing FDI policy for
private sector banks.
7.Technology: Must have robust technology infrastructure and
comply with cybersecurity standards.
8.Governance and Compliance: Must adhere to regulatory
requirements related to governance, risk management, customer
protection, and reporting.
9.Supervision: Subject to regular reporting and supervision by
the RBI.
10.Branches : 25% banks should be in rural areas.
 The business model of a payment bank
The business model of a payment bank is unique compared to traditional banks, focusing primarily on providing basic
banking services to underserved and unserved segments of the population.

Business Model of Payment Bank 5. Loans & Credits:

1.Metadata: 1. Micro Loans: Offers small-ticket loans to customers based on their
1. Customer Data: Utilizes customer transaction data to offer personalized transaction history and creditworthiness.
banking solutions and targeted financial products. 2. Overdraft Facilities: Provides overdraft facilities to eligible customers for
2. Transaction Metadata: Analyzes transaction patterns to identify customer short-term credit needs, charging interest on the amount utilized.
needs and preferences for better service offerings. 6. Transfer Fees & Interchange:
2.Lean Cost: 1. Domestic Transfers: Charges a nominal fee for domestic fund transfers
1. Operational Efficiency: Utilizes technology-driven solutions to automate through NEFT, IMPS, or UPI.
processes and reduce manual interventions. 2. International Transfers: Offers international remittance services at
2. Cost-effective Infrastructure: Focuses on digital channels and partnerships competitive exchange rates with applicable transfer fees.
with existing retail outlets to minimize overhead costs. 3. Interchange Fees: Earns interchange fees from card transactions processed
3.Digital Branches: through its network, contributing to revenue generation.
1. Mobile Banking: Offers mobile banking apps with user-friendly interfaces
for account management, transfers, and payments.
2. Online Banking: Provides web-based platforms for online transactions,
inquiries, and customer support.
3. Agent Network: Employs a network of agents to facilitate cash deposits,
withdrawals, and other banking services in remote areas.
4.Float on Money:
1. Interest Income: Earns interest on the float by investing in low-risk
government securities and short-term deposits.
2. Transaction Fees: Charges minimal fees on transactions to generate revenue
from the float without offering interest to account holders.
 Thank You

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Unit 4. Startup in India
What is Startup ?

A startup is a newly established business, typically in the early stages of

development, focused on innovative products or services with high growth
potential.

India has the 2rd largest startup ecosystem in the world; expected to witness YoY growth
of 10-12%.
20,000 startups in India; around 4,750 of these are technology led startups
1,400 new tech startups were born in 2016 alone; implying there are 3-4 tech startups born
every day.

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Fundraising
Fundraising is the process of seeking and gathering financial contributions from investors,
lenders, or donors to support a business, project, or cause.

Process of Fundraising:

1.Planning: Define the amount needed, purpose, and fundraising strategy.

2.Research: Identify potential investors or funding sources.
3.Preparation: Develop a compelling pitch, business plan, and financial projections.
4.Approaching: Reach out to potential investors or donors through presentations, meetings, or
proposals.
5.Negotiation: Discuss terms and conditions, and address any concerns from investors.
6.Closing: Finalize agreements and secure the funds.
7.Follow-Up: Maintain communication with investors and provide updates on progress.

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Types of fundraising include:
1.Equity Financing:
1. Venture Capital: Investment from venture capital firms in exchange for equity.
2. Angel Investors: Individual investors providing capital for startups in exchange for ownership equity.
3. Initial Public Offering (IPO): Offering shares of the company to the public on a stock exchange.
2.Debt Financing:
1. Bank Loans: Borrowing from banks with an obligation to repay with interest.
2. Convertible Debt: Loans that can be converted into equity at a later stage.
3.Crowdfunding:
1. Rewards-Based Crowdfunding: Raising small amounts of money from a large number of people in
exchange for a reward or product pre-sale.
2. Equity Crowdfunding: Raising capital from a large number of investors in exchange for equity.
4.Grants and Competitions:
1. Government Grants: Non-repayable funds provided by the government for specific projects or
purposes.
2. Startup Competitions: Funding awarded to winners of business plan competitions.
5.Bootstrapping:
1. Personal Savings: Using personal funds to start and grow the business.
2. Revenue Reinvestment: Using the company’s own revenue to finance growth.
6.Corporate Partnerships:
1. Strategic Partnerships: Collaborating with larger companies for funding and resources in exchange
for equity or other benefits.
7.Philanthropic Funding:
1. Donations: Funds received from individuals or organizations without the expectation of financial
return.
2. Nonprofit Grants: Funding provided to nonprofit organizations for specific initiatives.

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SEBI (Securities and Exchange Board of India) has specific regulations for
startup listing and fundraising, primarily through the Innovators Growth Platform
(IGP).
Key points include:
1.Eligibility: Startups should be in the intensive use of technology, intellectual
property, or other innovative areas.
2.Minimum Promoter Contribution: Promoters should hold at least 20% of post-
issue capital.
3.Listing Requirements: Startups can list on the IGP if:
1. They have issued at least 25% of their pre-issue capital to institutional
investors for two years.
2. Alternatively, they can list with a public issue of shares worth a minimum of
₹10 crores.
4.Fundraising: Startups can raise funds through:
1. Initial Public Offerings (IPOs) on the IGP.
2. Preferential Allotment to institutional investors.
3. Qualified Institutional Placements (QIPs).
5.Disclosure and Compliance: Startups must comply with specific disclosure
norms, including financial statements, management discussion, and analysis reports,
to ensure transparency.
Schemes Available For New Startup By Government In The Form Of Finance In India
1.Startup India Initiative:
•Inception: Launched in January 2016.
•Tax Exemption: Provides a 3-year tax holiday for eligible startups.
•Funding Support: Access to ₹10,000 crore Fund of Funds for Startups (FFS).
•Ease of Business: Simplifies the incorporation process and compliance requirements.
2.Pradhan Mantri Mudra Yojana (PMMY):
•Loan Amount: Offers loans up to ₹10 lakhs.
•Categories: Divided into Shishu (up to ₹50,000), Kishor (₹50,000 to ₹5 lakhs), and Tarun
(₹5 lakhs to ₹10 lakhs).
•Objective: Aims to provide credit to non-corporate, non-farm small/micro enterprises.
•Coverage: Over 24.48 crore loans sanctioned as of March 2023.
3.Stand-Up India:
•Target Audience: Focuses on SC/ST and women entrepreneurs.
•Loan Range: Provides bank loans between ₹10 lakhs and ₹1 crore.
•Objective: To promote greenfield enterprises in manufacturing, services, and trading
sectors.
•Collateral: Loans are covered by the Credit Guarantee Scheme.
4.Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE):
•Loan Amount: Offers collateral-free loans up to ₹2 crores.
•Coverage: Applicable to both new and existing micro and small enterprises.
•Guarantee Cover: Up to 85% of the sanctioned amount.
•Purpose: To enhance credit delivery to MSEs.
5.SIDBI Startup Mitra:
•Platform: An online portal connecting startups with various stakeholders.
•Support: Provides funding, mentorship, and networking opportunities.
•Funding Sources: Includes various schemes from SIDBI and government-backed funds.
•Objective: To create a robust ecosystem for startups.
6.Atal Innovation Mission (AIM):
•Initiatives: Includes Atal Tinkering Labs, Atal Incubation
Centers, and Atal New India Challenges.
•Funding: Provides grants and funding support for innovation and
entrepreneurship.
•Objective: To foster a culture of innovation and
entrepreneurship.
•Coverage: Over 10,000 Atal Tinkering Labs established across
India.
7.National Initiative for Developing and Harnessing
Innovations (NIDHI):
•Components: Includes Seed Support System, Accelerator
Program, and PRAYAS.
•Funding: Offers seed funding, prototyping grants, and incubation
support.
•Objective: To nurture and scale innovations.
•Reach: Supports startups from idea to commercialization stage.
8.Make in India:
•Launch: Initiated in September 2014.
•Focus Sectors: Targets 25 sectors, including manufacturing,
electronics, and biotechnology.
•Incentives: Provides various incentives like tax rebates and
simplified regulations.
•Objective: To transform India into a global manufacturing hub.

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Angel Funding
Angel Funding is a type of early-stage investment where affluent individuals, known as angel investors,
provide capital to startups in exchange for equity or convertible debt. This funding helps startups to grow
and develop before they have access to more substantial venture capital.
Types of Angel Funding:
1.Seed Funding:
1. Initial capital provided to help startups develop their
idea and create a prototype or MVP (Minimum Viable
Product).
2.Series A Funding:
1. Larger investment provided after a startup has
demonstrated potential and achieved initial milestones,
used for scaling operations.
3.Convertible Debt:
1. Investment given as a loan that can be converted into
equity at a later stage, often during a subsequent
funding round.
4.Equity Financing:
1. Direct purchase of a stake in the company, giving the
angel investor partial ownership in exchange for their
investment.
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Advantages of Angel Funding:

1.Early-Stage Capital:
1. Provides vital funding when traditional options are unavailable.
2.Mentorship:
1. Offers valuable industry experience and guidance.
3.Networking:
1. Grants access to extensive networks and potential partners.
4.Flexible Terms:
1. Generally comes with fewer conditions than venture capital.

Disadvantages of Angel Funding:

1.Ownership Dilution:
1. Requires giving up significant equity and control.
2.High Expectations:
1. Investors may demand rapid growth and high returns.
3.Potential Conflicts:
1. Differences in vision or strategy can lead to disagreements.
4.Limited Funding:
1. Typically provides smaller amounts than venture capital.
Financial Technology :
Fintech is the use of technology to deliver financial services efficiently and innovatively. It includes
various digital solutions like mobile banking, online payments, and robo-advisors, aiming to improve
access, reduce costs, and enhance user experience in the financial sector.

Features of Fintech:

1.Digital Payments: Facilitates online transactions, mobile

payments, and digital wallets.
2.Lending Platforms: Enables peer-to-peer lending,
crowdfunding, and online lending platforms.
3.Blockchain Technology: Utilizes distributed ledger
technology for secure and transparent transactions.
4.Robo-Advisors: Provides automated investment advisory
services based on algorithms and data analysis.

Examples and Companies in India:

1.Payment Solutions: Paytm, PhonePe, Razorpay.

2.Digital Lending: Lendingkart, Capital Float, KredX.
3.Blockchain: Unocoin, CoinDCX, ZebPay.
4.Robo-Advisory: Scripbox, Wealthfront, Groww.
Advantages of Fintech:

1.Convenience: Provides easy access to financial services

anytime, anywhere.
2.Cost-Effective: Reduces operational costs and fees compared
to traditional banking.
3.Financial Inclusion: Extends services to underserved
populations, promoting financial literacy and inclusion.
4.Innovation: Drives innovation in financial services, leading
to improved products and customer experiences.

Disadvantages of Fintech:

1.Security Concerns: Risks of cyberattacks, data breaches, and

fraud are heightened.
2.Regulatory Challenges: Adapting to evolving regulatory
frameworks and compliance requirements.
3.Digital Divide: Excludes individuals without access to
technology or internet connectivity.
4.Dependency on Technology: Disruptions in technology or
infrastructure can disrupt services and transactions.

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Prepaid Payment Mechanism: Prepaid payment mechanism refers to a system where
users load funds onto a card, account, or mobile wallet in advance, which can then be used to
make purchases or transactions.
Features: Cons:
1.Preloaded Funds: Users preload a specific amount onto the 1.Limited Acceptance: Not accepted everywhere,
payment instrument. especially in regions with low digital penetration.
2.Convenience: Offers quick and easy payment options for 2.Fees: Some prepaid instruments may incur fees for
purchases. loading funds, transactions, or account maintenance.
3.Security: Minimizes the risk of fraud and theft, as transactions are 3.Loss of Funds: Risk of loss or theft of the prepaid
prepaid and not linked directly to bank accounts. instrument, as funds are non-recoverable.
4.Anonymity: Provides anonymity as transactions are not tied to 4.Reload Requirements: Users need to regularly
personal bank accounts reload funds onto the instrument, which can be
Pros: inconvenient.
1.Convenience: Offers hassle-free transactions without the need
for cash or physical cards.
2.Security: Reduces the risk of fraud and theft associated with
traditional payment methods.
3.Budget Management: Helps users manage expenses by
limiting spending to prepaid funds.
4.Accessibility: Widely accepted and accessible, especially in
regions with limited banking infrastructure.
Types of Prepaid Payment Mechanisms:
1.Closed System:
1. Definition: Limited for use at specific merchants or within a closed
network.
2. Example: Store gift cards or loyalty cards that can only be used at
designated stores or chains.
3. Features: Restricted usage and typically non-reloadable.
2.Semi-Closed System:
1. Definition: Can be used for purchases at multiple merchants, but not for
cash withdrawals.
2. Example: Prepaid cards issued by banks or financial institutions for
retail transactions.
3. Features: Widely accepted for purchases but cannot be used to
withdraw cash.
3.Semi-Open System:
1. Definition: Can be used for both purchases and cash withdrawals, but
within a specified network.
2. Example: Prepaid cards issued by banks that can be used at ATMs and
for retail transactions within the issuing bank's network.
3. Features: Allows cash withdrawals within a limited network in addition
to retail transactions.
4.Open System:
1. Definition: Can be used for purchases and cash withdrawals across
multiple networks and locations.
2. Example: Prepaid cards issued by major card networks like Visa or
Mastercard, accepted globally.
3. Features: Offers the widest acceptance and flexibility for both retail
transactions and cash withdrawals.
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Unit 5. Case Studies
How do 'Paytm Payments Bank Limited market money? Analyze it with suitable Facts & Figures.

Paytm Payments Bank Limited markets money primarily 1.Cashback and Rewards Programs:
through its digital banking services and mobile wallet 1. Paytm Payments Bank incentivizes users to transact through its
platform. Here's an analysis supported by relevant facts and platform by offering cashback and rewards programs.
figures: 2. These programs encourage users to make payments and
1.Digital Banking Services: transfers through the Paytm ecosystem, thereby increasing user
1. Paytm Payments Bank offers a range of digital engagement and driving transaction volumes.
banking services, including savings accounts, 3. For example, Paytm frequently offers cashback incentives on
current accounts, and debit cards. bill payments, recharges, and online purchases, attracting users
2. As of March 2022, Paytm Payments Bank had to its platform.
over 180 million savings accounts and processed 2.Marketing and Advertising Campaigns:
over 1.5 billion transactions per month. 1. Paytm Payments Bank invests in marketing and advertising
3. Through its digital banking services, Paytm campaigns to promote its services and attract customers.
Payments Bank provides customers with 2. The company leverages various channels, including digital
convenient access to banking facilities, allowing marketing, television commercials, and print media, to reach its
them to manage their money efficiently. target audience.
2.Mobile Wallet Platform: 3. Paytm's marketing campaigns highlight the convenience,
1. Paytm's mobile wallet platform enables users to security, and benefits of using its digital banking services and
make payments, transfer money, pay bills, and mobile wallet platform.
recharge mobile phones. In summary, Paytm Payments Bank effectively markets money through
2. As of March 2022, Paytm had over 500 million its digital banking services, mobile wallet platform, cashback and rewards
registered users on its platform, making it one of programs, and marketing campaigns. The company's strong user base and
the largest digital payment platforms in India. transaction volumes reflect the success of its marketing strategies in
3. The mobile wallet platform serves as a convenient promoting digital financial services in India.
and widely accepted digital payment solution,
allowing users to conduct various financial
transactions seamlessly.
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Analyse "phone pe" Business model with suitable facts and figures.
PhonePe, a digital payments platform in India, operates with a business model focused on facilitating secure and convenient digital transactions.
Here's an analysis supported by relevant facts and figures:
1.Digital Payments Platform:
1. PhonePe serves as a comprehensive digital payments platform, allowing users to make a wide range of transactions, including peer-to-peer
transfers, bill payments, recharges, and online shopping.
2. As of March 2022, PhonePe had over 450 million registered users and processed over 3 billion transactions per month, making it one of
the leading digital payment platforms in India.
2.Unified Payments Interface (UPI):
1. PhonePe leverages the Unified Payments Interface (UPI), a real-time payment system developed by the National Payments Corporation of
India (NPCI), to facilitate instant bank-to-bank transactions.
2. The UPI integration enables seamless and secure fund transfers between users' bank accounts, driving adoption and usage of the PhonePe
platform.
3.Partnerships and Ecosystem Integration:
1. PhonePe has formed strategic partnerships and integrated with various merchants, service providers, and financial institutions to expand
its ecosystem and offer a wide range of services.
2. Through partnerships with online and offline merchants, PhonePe enables users to make payments at thousands of retail outlets,
restaurants, and e-commerce platforms.
4.Innovative Features and Offerings:
1. PhonePe continually introduces innovative features and offerings to enhance user experience and drive engagement on its platform.
2. For example, PhonePe offers digital gold purchases, insurance products, mutual fund investments, and credit services, providing users
with additional financial services beyond basic payments.
5.Cashback and Rewards Programs:
1. PhonePe incentivizes users to transact through its platform by offering cashback rewards and discounts on various transactions.
2. These cashback and rewards programs encourage user retention, drive repeat usage, and attract new users to the PhonePe ecosystem.
6.Marketing and Branding Initiatives:
1. PhonePe invests in marketing and branding initiatives to promote its platform and increase brand awareness.
2. The company leverages various channels, including digital marketing, television commercials, sponsorships, and partnerships, to reach its
target audience and drive user acquisition.
In summary, PhonePe operates with a robust business model centered around providing a comprehensive digital payments platform, leveraging UPI
integration, forming strategic partnerships, offering innovative features and services, implementing cashback and rewards programs, and investing in
marketing and branding initiatives. The platform's extensive user base and transaction volumes reflect the success of its business model in the Indian
digital payments market.
Nikhil Swami Sir, MBA – Contact 9315043816👇 for DS Class & other personalized class for MBA,MCOM,BCOM & BBA
 Thank You

Nikhil Swami Sir, MBA – Contact 9315043816👇 for DS Class & other personalized class for MBA,MCOM,BCOM & BBA