FINANCIAL INSTITUTIONS

DEFINITIONInstitution  which collects  funds  from the  public  and places  them in  financial assets, such as  deposits,  loans, and  bonds, rather

than  tangible  property are called Financial Institution.

In  financial economics, a  financial institution is an  institution  that provides 

financial services  for its clients or members.

IMPORTANCE

• PROVIDE FUNDS• INFRASTRUCTURAL FACILITIES• PROMOTIONAL ACTIVITIES• DEVELOPMENT OF BACKWARD

AREAS• PLANNED DEVELOPMENT• ACCELERATING INDUSTRIALISATION• EMPLOYMENT GENERATION

FUNCTIONS• PRIMARY FUNCTIONS:

• Accepting Deposits.• Providing Commercial Loans.• Providing Real Estate Loans.• Providing Mortgage Loans.• Issuing Share Certificates.• OTHER FUNCTIONS:• ACT AS INTERMEDIARIES.• FACILITATE THE FLOW OF MONEY.

TYPES OF FINANCIAL INSTITUTION

1. BANKS

A. ORGANISED

B. UNORGANISED

2. NON-BANKING FINANCIAL INSTITUTION

A. ORGANISED

B. UNORGANISED

SPECIALISED FINANCIAL INSTITUTION

SPECIALISED FINANCIAL INSTITUTIONS ARE ALSO CALLED

DEVELOPMENT BANKS.THEY DON’T ONLY PROVIDE FINANCE BUT ALSO

DEVELOPES NEW ENTERPRISES

ADVANTAGES OF RAISING LOANS FROM SPECIALISED

FINANCIAL INSTITUTION• AVAILABILITY OF FINANCE FOR

DEVELOPMENT SCHEMES.• REASONABLE SECURITY

REQUIREMENTS.• AVAILABILITY OF FINANCE DURING

PERIOD OF DEPRESSION.• EASY REPAYMENT FACILITY.• UNDERWRITING FACILITY.

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