1-indian financial system-ppt in pdf form
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India Financial SystemTRANSCRIPT
INDIAN FINANCIAL SYSTEMINDIAN FINANCIAL SYSTEM
Presented Presented byby
Dr.S.C.BihariDr.S.C.Bihari
WHAT IS A FINANCIAL SYSTEM
• Financial system: An integral part of modern economy.
• The financial system of a country : A set of • Organizations, • Instruments, • Markets, • Services and • Methods of operations, procedures -• Closely interrelated with each other.
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Structure of a Financial System
FinancialServices
Financial Markets
FinancialInstruments
Financial Intermediaries
Organized Unorganized
Primary / Secondary
Primary / Secondary
Capital Markets
Money Markets
Primary / Secondary
Short Term
Medium Term
Long Term
Regulatory
Non-Intermediaries Others
BANKING
NON-BANKING
Intermediaries
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Financial Services
Leasing
Stock Holding
Refinancing
Discounting Rediscounting
Factoring
Merchant Banking
HirePurchase
FinancialPerformanceGuarantees
Credit functions
Acceptance Of Deposits
FinancialServices
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Financial Instruments• Enable movement of funds from surplus
units to deficit units• There are instruments for savers such as
deposits, equities, mutual fund units, etc.• There are instruments for borrowers such
as loans, overdrafts, etc.• Like businesses, governments too raise
funds through issuing of bonds, Treasury bills, etc.
• Instruments like PPF, KVP, etc. are available to savers who wish to park money with safe government avenues.
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Financial Instruments contd.Financial Instruments contdFinancial Instruments contd.
KVPs
Relief Bonds
National Savings
CertificateDebt Equity
Swaps
DepositsWith
Companies
CapitalGains Bonds
Preference Shares
EquityShares
Financial Instruments
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Financial Markets• Money Market-
for short-term funds (less than a year)• Organised (Banks)• Unorganised (money lenders, chit funds,
etc.)
• Capital Market-for long-term funds• Primary Issues Market• Stock Market• Bond Market
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Organised Money Market
• Call money market• Bill Market
• Treasury bills• Commercial bills
• Bank loans (short-term)• Organised money market comprises
RBI, banks (commercial and co-operative)
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Money Market Instruments• Money market instruments are those
which have maturity period of less than one year.
• The most active part of the money market is the market for overnight call and term money between banks and institutions and repo transactions
• Call money/ repo are very short-term money market products
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Money Market Instruments contd…• Certificates of Deposit• Commercial Paper• Inter-bank participation certificates• Inter-bank term money• Treasury Bills• Bill rediscounting• Call/notice/term money• Market Repo
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Capital Market• Market for long-term capital. Demand
comes from the industrial, service sector and government
• Supply comes from individuals, corporates, banks, financial institutions, etc.
• Can be classified into:• Gilt-edged market• Securities market (new issues and stock
market)
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Securities MarketIt refers to the market for shares and debentures of old and new companies
• New Issues Market- also known as the primary market- refers to raising of new capital in the form of shares and debentures
• Stock Market- also known as the secondary market deals with securities already issued by companies
Types of Financial Intermediaries• Depository institutions and • Non-depository institutions.
DEPOSITORY INSTITUTIONS• 1. Commercial Banks.• 2. Saving and Loans
Institutions.• 3. Credit Unions.
NON-DEPOSITORY
INSTITUTIONS
• 1. Finance Companies.• 2. Mutual Funds.• 3. Security Firms, Investment
Bankers, Brokers, and Dealers.• 4. Pension Funds.• 5. Insurance Companies.
Depository institutions provide
Funds to serve the interests of the society
Safeguard their monies and
Act as an important source for the investment community.
FINANCE COMPANIES
CONSUMERCONSUMER
SALESSALES
•The consumer finance companies (for example, GE Countrywide) provide finance to individuals for purchase of consumer goods.
•Sales finance companiesmake direct loans to consumers-by purchasing installment paper from dealers selling automobiles
and other consumer durables.
•Sales finance companiesmake direct loans to consumers-by purchasing installment paper from dealers selling automobiles
and other consumer durables.
MUTUAL FUNDSPortfolio of stocks, bonds, and/or
cash managed by an investment company
on behalf of many investors.
•When an individual invests in a mutual fund: Becomes a part owner of
a large investment portfolio
Non-life insurance do Automobile insurance
Fire insurance, Home insurance,
Engineering insuranceLiability Insurance etc.
INSURANCE COMPANIES• There are two types of insurance companies
– life insurance companies, and Non-life insurance companies.
• The principal business of life insurance companies is to insure the policyholder against death
INVESTMENT BANKING
Assist companies in raising capital,through a private placement or
public offering of company stock.
•They market large amounts of new securities on behalf of
governments, government agencies and companies.
LEASING COMPANIESLeasing :Provides access
to productive assets.
•A lessor :Gives assets on lease: Gets regular inflow of lease rentals.
•A lessee: Gets the asset at a lower cost without borrowing or owning it.
MORTGAGE BANKS
•Mortgage bankers :Fund the construction of homes, offices, buildings and other structures.
•They sell their assets to a long-term lender
such as an insurance company to get back liquidity
PENSION FUNDS Dedicated to protecting individuals and families against loss of income
Allow investors to invest a portion of their current income
as pension funds.
•Importance of pension funds :Due to increased life expectancy
Types of Financial Institutions
Financial Sector -Regulators
Regulators
Reserve Bank of India(RBI)
Securities ExchangeBoard of India
(SEBI)
Insurance Regulatoryand Development
Authority(IRDA)
Banks Capital Markets/Mutual Funds
Insurance Companies
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A Glimpse of Indian Financial SystemRegulatory
BodiesFinancial
IntermediariesDevelopme
nt Institutions
Financial Services
Financial Instruments
Reserve Bank of India Reserve Bank of India EXIM Bank Hire Purchase Equity Shares
as a regulator as a banker NABARD Deposit Insurance Preference shares
SEBI Commercial Bnaks SCICI Insurance Debentures
BIFR Cooperative banks and IDBI Guarantees Bonds
IRDA Societies SIDBI SolvenciesGovernment Securities
DICGCPost Office Savings Banks TFCI Acceptances KVP
ECGC PF Organization Bill Discounting NSS
SHCI Pension Funds Merchant Banking NSC
FMCSmall savings organizations Factoring Bank Deposits
LIC of India Credit ratingDeposit with Companies
GIC Credit information
UTIEconomic consultancy
Mutual Funds Stock holding
Investment Trusts Refinancing
Underwriting
Leasing
Thanks for your attention
•Dr. S. C. Bihari• Tell:08417-236660 to 65(Extn: 6214)• Mail:[email protected]