The following are the classification of financial institutions in Sri Lanka

• The Central Bank of Sri Lanka

• Banking Sector

• Licensed commercial banks

• Licensed specialized banks
• Other institutions which accept deposits

• Registered finance companies

• Co-operative rural banks

• Thrift and credit co-operative societies (Sanasa)
• Other financial institutions

• Specialized leasing companies

• Vanik/ Merchant banks

• Primary dealers

• Share brokers companies

• Unit trusts

• Venture capital companies

• Credit rating organizations
• Contractual saving institutions

• Insurance companies

• Employees trust fund

• Employees provident fund

• Approved private provident fund

• Government service provident fund (According to Central Bank annual report- 2008)

• The financial organizations which accepts current account, savings account and other deposits, operates foreign exchange activities and are able to create money are called licensed commercial banks.
• There are large numbers of licensed commercial banks registered under the Central Bank of Sri lanka. A few banks are owned by the government sector whereas the majority of the banks are owned by the private sector.
• Licensed commercial banks provide various services including acceptance of deposits and lending money.

• Give more clear information to the students about the various services which make business              activities easier.
• Licensed specialized banks can be defined as follows. Licenced specialized banks are the financial institutions which have obtained a license from the Central Bank to conduct specialized banking business under the banking act. These banks are not permitted to maintain current accounts or foreign exchange transactions. These are special characteristics of the licensed specialized banks. However, they are authorized to accept savings and time deposits.
• Explain clearly the importance of such services including accepting deposits and lending money to business by the licensed specialized banks
• Suggest examples of licenced specialized banks.
• The following is the description of registered finance companies. • A public limited company which is registered under the Financial Companies Act and obtains a license from the Central Bank of Sri Lanka.
The following functions are performed by finance companies

• Financing on hire purchase

• Trading on real estate

• Provision of leasing facilities

• Providing short term loans

• Investing money on government securities, treasury bonds

• Acceptance of term deposits

• Describe the contribution rendered by the above functions for the performance and the growth of businesses

• Mention a few examples of registered finance companies.

The various functions carried out by the cooperative rural banks are as follows

• Accepting both deposits of members as well as non- members.
• Providing pawning facilities
• Acceptance of different categories of deposits. (Savings and to Fixed deposits )
• Providing loans to its members for the purpose of agriculture, production, Industries and trade.
• Disseminate the co-operative life-style among rural people
• Thrift and credit cooperative society (Sanasa) gives a helping hand to business activities
• Basic objectives of the society is promoting saving habits and providing loans to members. It should obtain a license from the commissioner of cooperatives under the co-operative act. It accepts money as savings and shares from members and provides loans to members.
• Leasing companies could be defined as follows: A special financial institution which provides money for businessmen in order to lease equipment or any other asset and is known as a leasing company. The main income of these leasing companies is the normal rent, received by giving the particular movable assets on lease.\
 Advantages gained by a businessman from leasing companies are as follows
• Arranging facilities for the use of valuable assets without paying the whole value.
• Exemption from income tax for the payment of rent on lease.
• Helps eliminate capital risks as well as losses incurred due to outdated machines.
• Is not shown on the liability side of the balance sheet of the business.
• Earning a high income without investing a large amount of money
• Indicates examples of leasing companies

• A stock brokers company acts as an intermediate person for the purchase or sale of stocks and debentures from incorporated companies

 The following are the commercial services carried out by stock broker companies
• Accept sales or purchase orders from investors.
• Open up an account for investors at the central depositary system.
• Provide necessary advice to invest in shares and debentures.
• Confirm maximum advantages that could be obtained by the investors by analyzing the sharemarketand by preparing a report on market research.
• Give approval to listed companies after they have fulfilled the necessary requirements.
• Help capital formation at the public companies
• Present examples of share brokers companies.
• The special financial institutions which are specialized in providing management and consultancy services are called merchant banks. They do not accept deposits.
Merchant banks provide various services to businessmen.
• Preparing project reports
• Providing consultancy services for finance and marketing
• Performing underwriting services
• Providing leasing services
• Give examples of merchant banks.
• Introduce unit trustees in the following manner.
• Unit trusts mobilize resources by selling its units to the investors and invests funds through the stock exchange. Funds are invested in the investment portfolio by professional investment managers. The benefits of the unit trust are distributed among the unit holders.
 There are three parties included in a unit trust.
• Trustees
• Fund management companies
• Unit holders or investors

• The following are the advantages of investing in a unit trust
• Risking money in various investments will be minimized through a unit trust.
• Obtain services from professional managers on investing.
• Venture capital companies: Provide funds to start new business activities, expand present
business activities, purchase or take over business activities. In addition to that it provides
under writing services and syndicate of credit.
• Mention examples of venture capital
• Credit rating organizations provide services to businesses.
• Provision of guidance to investors to identity the features of financial instruments in
the finance market. This helps to evaluate the financial strength of creditors and to
compare them without difficulty in an international grade as there are common criteria
being used for the credit rating.
Contractual saving institutions also provide services to business.
• Insurance company
These organizations obtain funds by providing various insurance policies. Insurance
companies invest in the financial market. Insurance policies are issued to entrepreneurs
to cover their various risks.
• Employees provident fund and pensions schemes
• These schemes are constituted under labour law. This fund is formed with the
contributions from both the parties. The contributed money with benefits would be
given to the employees at the time of their retirement.