chapter 1 introduction to indian financial system
TRANSCRIPT
Introduction
Suppliers of Funds
IndividualsBusinesses
Governments
Demanders of Funds
IndividualsBusinesses
Governments
THE FINANCIAL SYSTEM
Transferring CapitalTransferring Capital Direct Transfer of Funds
saver
Transferring CapitalTransferring Capital Direct Transfer of Funds
saverfirm
CashCash
Transferring CapitalTransferring Capital Direct Transfer of Funds
saverfirm
CashCash
SecuritiesSecurities
Transferring CapitalTransferring Capital Direct Transfer of Funds
saverfirm
Suppliers of Funds
IndividualsBusinesses
Governments
Demanders of Funds
IndividualsBusinesses
Governments
THE FINANCIAL SYSTEM
Private PlacementFunds
Securities
Transferring CapitalTransferring Capital Indirect Transfer using a Financial Intermediary
saver
Transferring CapitalTransferring Capital Indirect Transfer using a Financial Intermediary
financialintermediary
saver
FundsFunds
Transferring CapitalTransferring Capital Indirect Transfer using a Financial Intermediary
financialintermediary
saver
FundsFunds
Transferring CapitalTransferring Capital Indirect Transfer using a Financial Intermediary
financialintermediary firm
saver
FundsFunds
Transferring CapitalTransferring Capital Indirect Transfer using a Financial Intermediary
FundsFunds
financialintermediary firm
saver
FundsFunds
Transferring CapitalTransferring Capital Indirect Transfer using a Financial Intermediary
FundsFunds
financialintermediary firm
saver
FirmFirmSecuritiesSecurities
FundsFunds
Transferring CapitalTransferring Capital Indirect Transfer using a Financial Intermediary
IntermediaryIntermediarySecuritiesSecurities
FundsFunds
FirmFirmSecuritiesSecurities
financialintermediary firm
saver
Financial Institutions
Commercial BanksInsurance Companies
Mutual FundsProvident Funds
Non Banking FinancialInstitutions
Suppliers of Funds
IndividualsBusinesses
Governments
Demanders of Funds
IndividualsBusinesses
Governments
Funds
Deposits/shares
Funds
Securities
THE FINANCIAL SYSTEM
Private PlacementFunds
Securities
Transferring CapitalTransferring Capital Direct Transfer using Financial Market
saver
Transferring CapitalTransferring Capital Direct Transfer through Financial Markets
saver
firmFinancial Markets
FundsFunds
Transferring CapitalTransferring Capital Direct Transfer through Financial Markets
saver
firmFinancial Markets
FundsFunds
Transferring CapitalTransferring Capital Direct Transfer through Financial Markets
FundsFunds
saver
firmFinancial Markets
FundsFunds
Transferring CapitalTransferring Capital Direct Transfer through Financial Markets
FundsFunds
SecuritiesSecurities
saver
firmFinancial Markets
FundsFunds
Transferring CapitalTransferring Capital Direct Transfer through Financial Markets
SecuritiesSecurities
FundsFunds
SecuritiesSecurities
saver
firmFinancial Markets
Financial Institutions
Commercial BanksInsurance Companies
Mutual FundsProvident Funds
Non Banking FinancialInstitutions
Suppliers of Funds
IndividualsBusinesses
Governments
Financial Markets
Money MarketCapital Market
Demanders of Funds
IndividualsBusinesses
GovernmentsPrivate Placement
Funds
Deposits/shares
Funds
Securities
Funds
Loans
Securities
Funds
Securities
THE FINANCIAL SYSTEM
Funds
Financial Institutions
Commercial BanksInsurance Companies
Mutual FundsProvident Funds
Non Banking FinancialInstitutions
Suppliers of Funds
IndividualsBusinesses
Governments
Financial Markets
Money MarketCapital Market
Demanders of Funds
IndividualsBusinesses
GovernmentsPrivate Placement
Funds
Deposits/shares
Funds
Securities
Funds
Loans
Funds
Securities
Funds Securities
Funds
Securities
THE FINANCIAL SYSTEM
The Indian Financial System
Formal financial system – organized, institutional and regulated
Informal financial system Advantages
Low transaction costsMinimum default risk
DisadvantagesWide range of interest ratesHigher rates of interestUnregulated
Types of Financial System
Financial Institutions
Financial Markets
Financial Instruments
Financial Services
Components of the Financial System
The Indian Financial System, 2e -- Pathak
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Financial Institutions
Banking
Non-banking
Financial MarketsTypes Money Market – A market for short-term debt
instruments Capital Market – A market for long-term equity and debt instruments
Segments Primary Market – A market for new issues Secondary Market – A market for trading outstanding issues
Financial InstrumentsTypes
Primary
Secondary
Distinct Features
Marketable
Tradable
Tailor-made
Financial Services
Major CategoriesFunds intermediationPayments mechanismProvision of liquidityRisk management
Financial engineering- Financial engineers use various mathematical tools in order to create new investment strategies. The new products created by financial engineers can serve as solutions to problems or as ways to maximize returns from potential investment opportunities.
Mobilise and allocate savingsMonitor corporate performanceProvide payment and settlement systemsOptimum allocation of risk bearing and reductionDisseminate price related informationOffer portfolio adjustment facilityLower the cost of transactionsPromote the process of financial deepening and broadening
Functions of Financial System
Key Elements of a Well-functioning Financial System
A strong legal and regulatory environmentStable moneySound public finances and public debt managementA central bankSound banking systemInformation systemWell-functioning securities market