Types of Fund Based Services and Fee Based Services

10th May 2021 1 By indiafreenotes

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