Payment system for Banking in india .pptx

Payment system for Banking

1. Insurance Act, 1938 The first Insurance Act was passed in 1938 and it was adapted from British Law it covered all the types of insurances present at that time and for the rest of the insurances, British Common Law was passed. 120 sections were there in Insurance Act, and it had 8 schedules. Before this, there was only one Insurance act which was Marine Insurance Act, which was passed in 1906 and was present in British India but was only applicable to Marine Insurance. The Insurance act led to the form of a regulatory body named Controller of Insurance.

2. According to the law the companies which are Indian and registered under the Companies Act, 1956 will be allowed to operate in India . It is necessary to have a license from the IRDA (Insurance Regulatory and Development Authority of India). The entity owned by foreign companies cannot be more than 49% according to 2015.

3. Insurance Amendment Act, 2002 The Insurance (Amendment) Act or General Insurance business Bill, 2002, was passed by the President of India. It was passed by the Parliament in its monsoon season of 2002. The main significance of the Insurance Amendment Act, of 2002 was to detach the GIC (General Insurance Corporation) from four of its subsidies which were: NIL (National Insurance Company) Ltd. New India Assurance Company Ltd. Oriental Insurance Company Ltd. United India Insurance Company Ltd. It also provided General Insurance Corporation to do the business of re-insurance . This also ensures that the four companies will do their own business of general insurance . The Insurance Act, of 2002 tries to correct the Insurance Act, of 1938 . It allows the Insurance Cooperative Society to do Insurance Business in India without any issues.

4. Features of the Insurance Act Constituting a Division of Insurance to oversee and control the insurance business. The insurance companies must register under the insurance companies act and submit their financial returns annually. Mandatory investment up to 55% in the securities of life fund approved by the government.

5. Prohibiting rebating and restricting the commission and licensing payment of the agents were some of the important provisions to bring professionalism to this business. The initial deposits provision was allowed only to the major players in this field. Insurance companies will have to evaluate their company periodically and this was made compulsory to check the financial stability of the particular Insurance Company . A certificate of an Actuary (job involves calculating insurance risks and payments ) was required for the premium tables and the formats of the policy were also standardised . The Insurance Act of 1938 ensured the objective of executing and amending the laws which are related to the Insurance Business.

6. Insurance Acts in India There are a total of 15 Insurance Acts which have been passed till now in India, and every act is important in its own way. They altogether build up the Insurance ecosystem present in India. All the acts make it easy and more reliable for the citizens to invest and buy insurance. It also decreases the chances of fraud and improves security by having a close look at all the companies which provide insurance to the people of the country. There is also a regulatory body set up which can be termed as IRDAI (Insurance Regulatory and Development Authority of India) which looks after all the issues or matters related to insurance.

7. Let us look at all the Insurance Acts in India till now: Insurance Act 1938 Life Insurance Act 1956 LIC (Life Insurance Corporation) (Amendment) Act 1957 Marine Insurance Act, 1963 Emergency Risks Undertaking Insurance Act 1971 Emergency Risks Goods Insurance Act, 1971 General Insurance Business Act 1972 IRDAI (Insurance Regulatory and Development Authority of India) Act, 1999

8. General Insurance Business ( Nationalisation ) Amendment Act, 2002 Actuaries Act, 2006 The Securities and Insurance Laws (Amendment and Validation) Act, 2012 The Insurance Laws (Amendment) Act, 2015 The Insurance Amendment Act, 2021 General Insurance Business Amendment Act, 2021 This is the full list of all types of Insurance Acts in India.

9. Insurance Regulatory & Development Authority of India Overview The Insurance Regulatory & Development Authority of India is the apex body of insurance providers in India. It primarily oversees the functioning of the General Insurance and Life  Insurance companies  operating across the country . Hence, it is mainly responsible to protect the interests of the policyholders and to regulate the insurance sector. Structure of IRDAI According to Section 4 of the Insurance Regulatory and Development Authority of India Act 1999, the IRDAI constituted by an act of Parliament, specified the following structure of the Authority. It is a 10-member institution consisting of a Chairman, Five Full-time Members, and Four Part-time Members. Besides, all the members of the IRDAI are appointed by the government of India .

10. Objectives of IRDAI The main objective of the IRDAI is to enforce all the provisions as mentioned under the Insurance Act. Hence, the mission statement of the IRDAI include the following: To protect the interest of the policyholder and exercise their fair treatment To frame policies regularly to ensure that the industry operates without any ambiguity To regulate the insurance industry in fairness and ensure its financial soundness To promote fairness, orderly conduct, and transparency in financial markets dealing with insurance and build a reliable Management Information System (MIS) to enforce financial soundness in the insurance sector To ensure speedy settlement of genuine claims, prevent insurance frauds, and other prohibit other malpractices while ensuring effective grievance redressal framework.

11. Features of IRDAI Acts as a regulator for the insurance sector Protects the policyholders’ interests Entrusted under the Insurance Act to endow the certificate of registration to new insurance companies in India Creates new rules and policies under Section 114A of the Insurance Act, 1938 Supervising and regulating the insurance industry’s activities to ensure a healthy environment for the insurers and policyholders.

12. Significant Roles of IRDAI in the Insurance Sector in India  The IRDAI plays a vital role in highlighting the importance of the policyholders and their best interest while framing policies and regulations. Therefore, it is quintessential to know about the important roles of the IRDAI. Some of them are:   To protect the policyholders’ interest To provide for long-term funds to enhance the nation’s economy To help increase the growth of the insurance sector for the benefit of the policyholders To set, enforce, promote, and monitor high standards of fair dealing, financial soundness, and integrity of the insurance providers To prohibit fraud and malpractices by setting up a grievance redressal forum and ensuring that the interest of the policyholder is protected To ensure an optimum amount of self-regulation of the insurance industry

13. Functions of IRDAI Now that we know about the objectives and significant roles of the IRDAI, let us also have a look at the functions of the authoritative body. Below are the important functions of the IRDAI towards the insurance industry in India: Issuing, modifying, suspending, or cancelling registrations Specifying the code of conduct for the loss assessors and surveyors Investigating and inspecting insurers, intermediaries, and other relevant bodies Levying fees and other charges Regulating the terms and conditions, rates, and advantages that may be offered by the insurance companies but not covered by the Tariff Advisory Committee under Section 64U of the Insurance Act 1938 Regulating a margin of solvency Promoting and regulating professional all the institutions connected with the insurance and reinsurance industry Supervising the Tariff Advisory Committee Specifying the percentage of general and life insurance business undertaken in the social or rural sector Granting, modifying, suspending, renewing, cancelling, or withdrawing registration certificates of the insurance companies

14. Types of Insurance Policies Controlled by the IRDAI  As we know, the Insurance Regulatory and Development Authority of India (IRDAI) is responsible for regulating and managing the insurance sector in India. Hence, it generally looks after the Life and Non-Life or General Insurance domains which can be further categorized into types of insurance. Below are a few types of insurance policies governed by the IRDAI: Life Insurance Term plans ULIP (Unit Linked Insurance Plan) Endowment Money-back Retirement General Insurance Health Insurance Motor/ vehicle Travel Home Gadgets Property

15. Insurance Ombudsman The  Insurance Ombudsman  is an initiative by the government of India in order to ensure a cost-effective, impartial, and efficient settlement of grievances related to the insurance policies. Hence, if at all a policyholder faces an issue, they can file their complaints at zero costs at an office that covers their jurisdiction. Currently, there are 17 Ombudsman offices across India, each of them covering different jurisdictions. After the grievance has been lodged, the office of the Ombudsman arranges a hearing for the same. The hearing has to be attended by the representatives of the insurer and the claimant. Generally, the Ombudsman declares the award within 03 months of the hearing. Only those claimants whose claim is less than the value of INR 30 lakh can approach an Ombudsman.

16. New Guidelines for Health & Mediclaim Insurance by the IRDAI Being the apex body of the insurance sector, the IRDAI is also responsible for framing new guidelines and rules for the health insurance domain. Let’s have a quick look at the new rules for health and mediclaim insurance as set by the IRDAI in 2020. Introduction of Telemedicine:  As per the IRDAI’s latest directives, the insurers can now consult a doctor through online consultations. The IRDAI has also prescribed the insurers to introduce telemedicine consultations in their insurance policy. Claiming Settlements:  In case the insurer delays settlement of the claim, the insurance company becomes liable to pay interest on the claim amount. Hence, the insurance company should ensure that they settle a claim within 30 to 45 days since the policyholder has submitted the last document. Claim Rejections:  The new guidelines by the IRDAI suggests that the insurer cannot reject a claim if the policyholder has renewed the policy for a term of 08 years without any lapses. This duration is termed as the moratorium period. As well, the insurer cannot appeal to the IRDA for the rejection of the claim except in case the claim is raised against the exclusion of the policy or in case of fraud

17. Venture capital Venture capital means financing startups and small businesses with high growth potential. Venture capitalists invest money in exchange for equity ownership in the company, expecting a return on their investment in the future. Typically, venture capital is from high net-worth investors, pension funds, corporations, financial institutions, and investment banks. Venture capital need not be only capital contribution. It may be in the form of technical or managerial expertise .

18. How Does Venture Capital Work? Venture capitalists invest funds in exchange for significant equity ownership in the company, expecting a return and exit in the future. Venture capital investment is in stages, with the initial investment used to fund the product or service development and subsequent investments used to fuel growth and expansion. Ideally, venture capitalists infuse capital in a company for two years and earn returns on it for the next five years with an expected return of as high as ten times the invested capital. 

19. Who are Venture Capitalists? Venture capitalists are typically professional investors managing large pools of capital raised from institutional investors. They have experience evaluating startups and small businesses and can provide strategic guidance and industry expertise.  A venture capitalist may be an individual or group of investors with a collective investment objective. 

20. Why Is Venture Capital Important? Venture capital is vital as it funds startups or small and medium enterprises with high growth potential without financing from traditional sources . Venture capital provides financial support, strategic guidance, and industry expertise, which can help startups overcome the challenges of starting and growing a business. Venture capital is further significant because it helps to drive innovation and economic growth . Venture capitalists help to create new products and services that can have a substantial effect on the economy. Venture capital firms create jobs and promote innovation and new business models that can disrupt industries . 

21. Venture capital is especially suitable for budding businesses and industries . It provides a chance to flourish and fill the gap created by the banking system due to the high risk associated with startups . It taps into companies with limited years of operation, new business models and poor financial history. 

22. When Should One Go for Venture Capital Funding? a.    Capital Infusion The primary reason to opt for venture capital is to raise funds. The promoter or the promoter's close family infuse seed capital when starting. However, the company may reach the point where it needs to scale, sometimes years ahead of profitability. In such cases, venture capital is valuable.  b.    Growth and Expansion  Venture capital is a suitable option if you plan to expand your business. In addition to financial assistance, it also provides legal, business, and marketing expertise required for aggressive business expansion. c.    Mentorship Venture capital firms consist of professionals with years of experience and goodwill. Thus, it is apt to develop scalability. You can utilise their forte to grow your business, boost your network with their direction and reach greater heights. d.    Competition  Some startups opt for venture capital funding when it has a substantial reach and faces cut-throat competition in the market. In such cases, venture capital firms can provide the distinguishing factor required to survive. 

23. Types of Venture Capital Type of Fund Particulars Seed Funding Provides capital to help startups get off the ground and develop an initial product or service. Often, the entrepreneur's angel investors or friends and family provide seed funding. Early Stage Funding This funding is for companies that have a proven concept and are in the process of developing and testing their product or service.  Venture capital  firms that specialise in this stage provide early-stage funding. Expansion/ Later Stage Funding Expansion funding suits companies with a successful track record and a capital requirement for marketing, hiring, product development, and other growth-related expenses.

24. Mezzanine Financing This type of funding is provided to companies preparing for an IPO or acquisition. Mezzanine financing is often a combination of debt and equity and is provided by  venture capital  firms that specialise in this type of funding. Bridge Financing Provides short-term funding to help companies bridge the gap between two funding rounds. Bridge financing can be in debt, equity, or a combination of both forms. This type of funding is often provided by  venture capital  firms already invested in the company. Strategic Corporate Venture Capital (CVC) This type of funding is provided by corporations that want to invest in startups that are aligned with their strategic objectives. CVCs can provide startups access to resources, expertise, and industry contacts.

25. Advantages of Venture Capital 1.    Access to Funding 2.    Business Expertise 3.    Long-Term Support 4.    Reduced Risk 5.    Marketing and Publicity Disadvantages of Venture Capital 1.    Dilution of Control 2.    Pressure to Succeed 3.    Time-Consuming 4.    High-cost 5.    Limited Options

26. Bill Discounting What is Bill Discounting? Bill Discounting is one such option, which allows a business to get quick payment for their work and meet their operating expenses without having to depend on any external agency to provide the funds. Bill Discounting, also called Invoice Discounting , is a trading activity where a seller sells some goods or services to a buyer. The buyer has to make the payment as per the agreed credit period . Now, if the buyer needs money before that, he can approach a bank or some NBFC and ‘sell’ that invoice to them. The financial institution gets the invoice verified by the buyer and then makes payment to the seller on their behalf. However, they make some deductions, called ‘discount’, as their commission.  

27. So, in a way, the seller gets a discounted payment for their bill. This way, they can run their business operations, and buyers get an extended credit period. the seller gets payment on a ‘discount’, this transaction is called Bill Discounting.

28. Bill Discounting Process: Supply : Goods/services delivered. Invoice : Raised by seller. Acceptance : Buyer acknowledges invoice. Application : Seller approaches financial institution. Verification : Institution checks buyer’s credit. Disbursement : Funds provided to seller minus discount. Repayment : Buyer pays institution on due date.

29. Features of Bill Discounting: Evaluating the seller and buyer:  Before approving the bill discounting, the bank or NBFC first checks the seller’s reputation and the buyer’s creditworthiness. This is done to ensure that the buyer does not default on making the payment to the bank. Making instant cash available for the buyer:  It is the most salient feature of bill discounting. The bank or NBFC purchases the invoice and immediately pays after discounting the bill. This makes life easy for the seller. They get an immediate payment and do not need to wait for the buyer to pay the bill. Discount Charge:  The difference margin between the face value of the invoice and the amount approved and disbursed by the bank is called the discount. This discount is calculated on the maturity value at a certain percentage per annum. Maturity:  The maturity date of a bill means the date on which payment of the invoice is due. The average maturity period is 30, 60, 90, or 120 days. 

30. Bill Discounting Rate of Interest: Most banks and NBFCs do not have a fixed interest rate for discounting bills. Any financial institution considers several factors before deciding on the discount, which may vary from customer to customer. The various factors that go into consideration for deciding the discounting rate are: Financial history and credit score of the seller Years of being in the business Business volume Credit-worthiness of the buyer Stability of the business and industry

31. Factors that affect the eligibility: In addition to the criteria mentioned above, some general guidelines that affect the eligibility for bill discounting are listed below: Number of years in the business Nature or type of business Business Volume and Annual Turnover Financial Stability of the seller Repayment history and capability of the buyer Business Positive Net worth or Profitability Credit rating of a business Previous loan defaults, if any

32. Documents Required for Bill Discounting: Some of the most common documents required for approving a bill discounting are: Duly filled application form with passport-sized photographs Business PAN card and address proof Applicant’s Aadhar card. GST Returns Income tax return & Financial statement with an audit report. Business Establishment Proof Last 12 months’ bank statement Bill of Exchange Letter of Credit Commercial Invoice Packing list with all the details Logistics details with a copy of the delivery note, if any Proof of certificates, registrations, licenses, and permits, if any Any other document required

33. Bill Discounting Versus Business Loan S.NO Comparison Parameter Business Loan Bill Discounting 1 Requirement of Collateral Collateral Required Not Required 2 Processing Time Long. Usually takes weeks Quick within 2-3 days 3 Suitability Usually taken for long-term requirements Suited for short-term requirements 4 Mode Generally manually Completely digital 5 Document Process Lengthy & Complex Simple eligibility criteria 6 Eligibility Criteria Very strict Simple 7 Impact on the Balance Sheet Considered a debt hence impact the balance sheet Off the book process. Hence, No Impact on the balance sheet

34. SEBI SEBI is chiefly concerned with the monitoring and regulating of the Indian capital and securities market , while taking measures to protect the best interest of the investors’ community. It is also responsible for formulating regulations and guideline s which are to be followed by the concerned authorities. In any economy, the security market is a particular segment of a financial market that raises long-term capital by means of securities, bonds, shares, and mutual funds. This particular market is known as the security market of that economy. In India, in order to regulate the security market, the government set up the SEBI . Besides, the security market also comprises stock exchanges, FIIs, different share indices, etc. The security market is further categorized into  Primary and Secondary markets .

35. Primary Markets:  A market where different instruments are traded directly between the entity responsible for raising the capital and the entity responsible for purchasing the instrument. Secondary Markets:  It is a market where the instruments of the security market are traded among the primary instrument-holders. These transactions are required to be regulated for floor trading, for which, the stock exchanges are set up. Structure of the SEBI  The Securities and Exchange Board of India functions as a corporate framework that comprises various departments, each of which are managed by a departmental head. There are more than 20 departments under the SEBI. Some of the include: Corporation Finance Investment Management Commodity Derivatives Market Regulation Economic & Policy Analysis Debt & Hybrid Securities

36. SEBI Hierarchical Structure The hierarchical structure comprises of the following members: Chairman of SEBI (Nominated by the Union Government of India) Two officers (From the Union Finance Ministry) One member (From the  RBI ) Five other members (Nominated by the Union Government of India) Objectives of SEBI Established under the Section 3 of the SEBI Act, 1992, the Securities and Exchange Board of India is entrusted with complete statutory responsibility of: Protecting the interests of all the investors in the securities market and providing a healthy environment to them. Working for the regulation of the securities market by preventing any malpractices . Promoting the development of the securities market with proper and fair functioning by checking over brokers, underwriters, etc.

37. Functions of SEBI The functioning of the Securities Exchange Board of India is primarily divided into the following three categories: Protective Function Regulatory Function Development Function Protective Functions To protect the interest of the investors and other stakeholders can be considered as one of the prime functions of SEBI. Some of the protective functions of include: Preventing insider trading Creating awareness among investors Promoting fair practices Prohibiting fraudulent/ unfair trade practices

38. Regulatory Functions SEBI’s regulatory functions are usually performed in order to keep tabs on the functioning of the business across the financial markets. Few of its regulatory functions are: Performing and exercising powers Conducting inquiries and audit of exchanges Levying of fees Regulating takeover of companies Registering and regulating credit rating agencies Development Functions Apart from the above protective and regulatory functions, the SEBI is also responsible to undertake certain development functions. The following are a few examples of SEBI’s development functions:  Carrying out research and development work Promoting of fair trading practices Reducing malpractices within the securities market Imparting training to intermediaries Buying-selling funds from the AMC directly through a broker

39. SEBI Guidelines  The SEBI’s regulatory jurisdiction is widespread across corporations along with all the intermediaries and individuals involved in the securities market. Hence, it performs the following functions in order to fulfil its objectives. The following functions involve all the three, that is, protective, development, and regulatory. Check the below list to know more about the guidelines.  It Regulates the working of the security market, especially in terms of stockbrokers, share transfer agents, registrars to an issue, underwriters, portfolio managers, investment advisers, and other such intermediaries. Regulating and registering the working of the custodian of securities, CRAs(credit rating agency), foreign institutional investors, depository institutions, etc. by notification specified on its behalf. Promoting and regulating self-regulatory organizations Promoting investors’ training and education of intermediaries of the securities market. Prohibiting fraudulent trade practices and promoting a healthy environment in the securities market. Disallowing insider trading in securities.

40. Levying fees and/ or other charges for carrying out all the regulating/ registering activities. Keeping tabs on price-rigging by fraudulent investors. Calling for information, undertaking inspections, conducting audits and inquiries of the stock exchanges, self-regulatory organizations, mutual funds, and other individuals that may be involved with the securities market. Conducting research for all the purposes mentioned above Performing such other functions that may be as prescribed In order to carry out the above functions and duties under the Securities and Exchange Board of India Act, the SEBI has been vested with similar powers that are available to a Civil Court under the Code of Civil Procedure, 1908 for trying a suit concerning the following: Discovery and production of books of accounts and other documents at the place and time prescribed by SEBI Enforcing and summoning the attendance of person(s) and evaluating them on the place and time prescribed by SEBI Inspection of any books, registers, and other documents of any person(s) as listed in the Section 12 of the SEBI Act . These are namely stockbrokers, sub-brokers, share transfer agents, registrar to an issue, merchant brokers, bankers to an issue, portfolio managers, and other such intermediaries as associated with the securities market.