Advantages: CREDIT CARD

1. They allow you to make purchases on credit without carrying around a lot of cash.
This allows you a lot of flexibility.
1. They allow accurate record-keeping by consolidating purchases into a single
statement.
1. They allow convenient remote purchasing - ordering/shopping online or by
phone. They allow you to pay for large purchases in small, monthly installments.
1. Under certain circumstances, they allow you to withhold payment for
merchandise which proves defective.
1. They are cheaper for short-term borrowing - interest is only paid on the remaining
debt, not the full loan amount.
1. Many cards offer additional benefits such as additional insurance cover on
purchases, cash back, air miles and discounts on holidays.
Disadvantages:
1. You may become an impulsive buyer and tend to overspend because of the ease
of using credit cards. Cards can encourage the purchasing of goods and services you
cannot really afford.
2. Credit cards are a relatively expensive way of obtaining credit if you don't use
them carefully, especially because of the high interest rates and other costs.
3. Lost or stolen cards may result in some unwanted expense and inconvenience.
4. The use of a large number of credit cards can get you even further into debt.
5. Using a credit card, especially remotely, introduces an element of risk as the card
details may fall into the wrong hands resulting in fraudulent purchases on the card.
Fraudulent or unauthorized charges may take months to dispute, investigate, and resolve.
Credit History
A person’s credit history is important in order to be approved for loans and for financial
security.
Credit is defined simply as “the provision of resources by one party to another party
where that second party does not immediately pay the first party for the resources in full,
thereby generating a debt, and instead arranges either to pay for or to return those
resources at a later date.” The concept of credit has been around since the ancient times
even when cash was still not in use and barter was the norm.
Nowadays though the word credit is synonymous with granting loans. Loans have
become a common way to finance everything from the purchase of automobiles to houses
and, due to the arrival of credit cards, even everyday items such as groceries.
Credit ratings
A credit rating is a measure used by creditors to determine how much they can trust a
certain borrower, whether the borrower be an individual, a corporation, or a country. The
credit rating is derived using past financial data or the borrower’s credit history. There
are several factors that can affect the credit rating of an individual including:
#the person’s ability to pay a loan – Reflected by the person’s salary and other assets
#the amount of credit in existence – This is what credit limits are for. If the person is near
his credit limit or has reached it it is harder to get a loan. This also reflects whether the
person is in the habit of going into debt
#credit history – Shows whether the person makes payments on time. This also reflects
the persons spending and saving patterns
A good credit rating is very important when it comes to applying for loans. A person with
a poor credit rating will find it much harder to get approval for a loan than a person that
has a good credit rating.
However, the problems with the credit rating system are several, and it would be unfair to
say that these problems are to be found only in the Indian CRAs as they plague CRAs all
over the world. Some of them are listed below:
• There is often a possibility of biased ratings and misrepresentation on account of
the lack of accountability in the process and the close nexus between the agency and the
issuer (at least in the Indian context).
• Rating only represents the past and present performances of the company and
therefore future events may alter the nature of the rating.
• Rating is based on the material provided by the company and therefore, there is
always a risk of concealment of information on the part of the latter.
• Rating of a debt instrument is not a guarantee as to the soundness of the company.
• Ratings often on the debt instruments of different agencies.
• Small differences in degrees of risk are usually not indicated by CRAs. Thus
issues with the same rating may actually be of differing quality.
• Similarly, default probability need not be specifically predicted. Calculations are
usually done in relative terms.
• CRAs cannot be used as recommendations to buy, sell or hold securities as they
do not comment on the adequacy of market price, suitability of any security for an
investor or the taxability of the payments.
• The information is obtained from issuers, underwriters, etc. and is usually not
checked for accuracy or truth. Thus ratings may change on account of non-availability of
information or unavailability of adequate information.
• Changes in market considerations may result in loss that will not be reflected in
CRAs.
Introduction
The venture capital investment helps for the growth of innovative entrepreneurships in
India. Venture capital has developed as a result of the need to provide non-conventional,
risky finance to new ventures based on innovative entrepreneurship. Venture capital is an
investment in the form of equity, quasi-equity and sometimes debt - straight or
conditional, made in new or untried concepts, promoted by a technically or professionally
qualified entrepreneur. Venture capital means risk capital. It refers to capital investment,
both equity and debt, which carries substantial risk and uncertainties. The risk envisaged
may be very high may be so high as to result in total loss or very less so as to result in
high gains
The concept of Venture Capital
Venture capital means many things to many people. It is in fact nearly impossible to
come across one single definition of the concept.
Jane Koloski Morris, editor of the well known industry publication, Venture Economics,
defines venture capital as 'providing seed, start-up and first stage financing' and also
'funding the expansion of companies that have already demonstrated their business
potential but do not yet have access to the public securities market or to credit oriented
institutional funding sources.
The European Venture Capital Association describes it as risk finance for entrepreneurial
growth oriented companies. It is investment for the medium or long term return seeking
to maximize medium or long term for both parties. It is a partnership with the
entrepreneur in which the investor can add value to the company because of his
knowledge, experience and contact base.
Venture Capital in India
In India the Venture Capital plays a vital role in the development and growth of
innovative entrepreneurships. Venture Capital activity in the past was possibly done by
the developmental financial institutions like IDBI, ICICI and State Financial
Corporations. These institutions promoted entities in the private sector with debt as an
instrument of funding. For a long time funds raised from public were used as a source of
Venture Capital. This source however depended a lot on the market vagaries. And with
the minimum paid up capital requirements being raised for listing at the stock exchanges,
it became difficult for smaller firms with viable projects to raise funds from public. In
India, the need for Venture Capital was recognised in the 7th five year plan and long term
fiscal policy of GOI. In 1973 a committee on Development of small and medium
enterprises highlighted the need to faster VC as a source of funding new entrepreneurs
and technology. VC financing really started in India in 1988 with the formation of
Technology Development and Information Company of India Ltd. (TDICI) - promoted
by ICICI and UTI. The first private VC fund was sponsored by Credit Capital Finance
Corporation (CFC) and promoted by Bank of India, Asian Development Bank and the
Commonwealth Development Corporation viz. Credit Capital Venture Fund. At the same
time Gujarat Venture Finance Ltd. and APIDC Venture Capital Ltd. were started by state
level financial institutions. Sources of these funds were the financial institutions, foreign
institutional investors or pension funds and high net-worth individuals. The venture
capital funds in India are listed in Annexure I.
Financial services refer to services provided by the finance industry. The finance
industry encompasses a broad range of organizations that deal with the management of
money. Among these organizations are banks, credit card companies, insurance
companies,consumer finance companies, stock brokerages, investment funds and some
government sponsored enterprises.