Financial Products – Meaning & Growing Innovation

Introduction

A Financial Product is a contract between two parties that has a monetary value. It is the vehicle through which money flows in the financial system.

1. Evolution

1. Traditional Era: Bank Deposits, Loans, Physical Gold, Insurance (Endowment).
2. Modern Era (Post 1991): Equity Shares, Mutual Funds, Credit Cards.
3. Digital Era (Post 2010): ETFs, REITs, P2P Lending, Crypto-assets (regulated VDA).

2. Classification

1. Assurance Products: Insurance (Life/Health).
2. Investment Products: Shares, Bonds, MFs (Wealth Creation).
3. Loan Products: Home Loan, Personal Loan (Liability).
4. Payment Products: Debit Card, Prepaid Wallets.

3. Innovation

• Structured Products: Market Linked Debentures (MLDs) combining safety of bonds with upside of equity.
• Green Bonds: Raised specifically for eco-friendly projects.
• Fractional Ownership: Owning a small piece of a Commercial Building (REIT).

Summary

• Definition: Contract with monetary value.
• Trend: Shift from Traditional (FDs) to Modern (ETFs).
• Purpose: Protection (Insurance) vs Growth (Investment).

Quiz Time! 🎯

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