Types of Fund Based Services and Fee Based Services

Fund Based Services: It refers to services that are used to acquire assets or funds for a customer. It consists of:

• Primary market activities
• Secondary market activities
• Foreign exchange activities
• Specialized financial Services

Important fund based services include:

• Leasing
• Hire purchase
• Factoring
• Forfeiting
• Mutual funds
• Bill discounting
• Credit Financing
• Housing Finance
• Venture capital

Fee based services: When financial institutions operate in specialised fields to earn income in form of fees, commission, brokerage or dividends it is called a Fee based Service.  They include:

• Issue Management
• Portfolio management
• Corporate counseling
• Merchant banking
• Credit rating
• Stock broking
• Capital restructuring
• Bank Guarantee
• Letter of Credit
• Debt Restructuring

Types of Financial Activities

Fund based Activities:

• Underwriting or investment in shares, debentures, bonds, etc. of new issues (Primary Market Activities)
• Dealing in secondary market activities
• Participating in money market instruments eg. Discounting bills, treasury bills, certificate of deposit etc.
• Involving in equipment leasing, hire purchase, venture capitals
• Dealing in foreign exchange activities

Fee based Activities:

• Managing the capital issue in accordance with SEBI guidelines enabling promoters to market their issue
• Making arrangements for placement of capital and debt instruments with investment institutions
• Arrangement of funds from financial institutions for clients project cost or working capital
• Assisting in getting all Government and other clearances