FINANCIAL SYSTEM

A FINANCIAL SYSTEM ACTS AS AN INTERMEDIARY AND FACILITATES THE FLOW OF FUNDS FROM THE SURPLUS UNITS TO DEFICIT UNITS THERE ARE TWO UNITS IN A FINANCIAL SYSTEM SURPLUS UNITS AND DEFICIT UNITS

OTHER INTERESTED GROUPS

SPECULATORS ARBITRAGEURS HEDGERS

FUNCTIONS

PROMOTES SAVINGS PROMOTES INVESTMENTS MANAGING RISK PROVIDES FINANCIAL INFORMATION PROVIDES LIQUIDITY PROVIDES A SYSTEM FOR PAYMENT

FINANCIAL SYSTEM FINANCIAL MARKETS FINANCIAL INSTRUMENTS FINANCIAL INSTITUTIONS REGULATOS

FINANCIAL MARKET

FINANCIAL MARKET REFERS TO A MARKET WHERE THE FINANCIAL INSTRUMENTS ARE TRADED AND RETRADED

FINANCIAL MARKET

MONEY MARKET CAPITAL MARKET GOVERNMENT SECURITIES MARKET FOREIGN EXCHANGE MARKET

MONEY MARKET

IT PROVIDES US SHORT TERM FUNDS IT DEALS WITH CASH OR CASH EQUIVALENTS

MONEY MARKET PRIMARY MARKET SECONDARY MARKET

INSTRUMENTS

CALL MONEY MARKET TREASURY BILL MARKET COMMERCIAL PAPER CERTIFICATE OF DEPOSIT MONEY MARKET MUTUAL FUND COMMERCIAL BILL INTER BANK PARTICIPANTS

CALL MONEY MARKET

CALL MONEY MARKET REFERS TO A PLACE WHERE DAY-TO-DAY SURPLUSES/DEFICITS OF BANKS ARE EVEN OUT IT IS ISSUED FOR A PERIOD OF 1 TO 14 DAYS SITUATED IN MUMBAI, KOLKATA, CHENNAI, DELHI, AHMEDABAD

PARTICIPANTS

SCHEDULED AND NON-SCHEDULED COMMERCIAL BANKS FOREIGN BANKS STATE, DISTRICT AND URBAN COOPERATIVE BANKS DFHI STCI LIC, GIC, UTI, NABARD ETC,

PURPOSE OF CALL MONEY MARKET

FILL THE TEMPORARY GAPS THAT MAY ARISE DUE TO LENDING AND BORROWING OF BANKS FOR MEETING CRR REQUIREMENT MEET SUDDEN DEMAND FOR FUNDS

REASONS FOR VOLATILITY

HUGE BORROWINGS ON CERTAIN DAYS SOME BANKS GIVE MORE CREDIT THAN THEIR OWN RESOURCES WITHDRWAL OF FUNDS BY INSTITUTIONAL LENDERS FOR THEIR BUSINESS REQUIREMENT LIQUIDITY CRISIS VOLATILITY IN THE FOREX MARKET SOME OCCASIONAL FACTORS MISMATCH OF ASSETS AND LIABILITIS OF COMMERCIAL BANKS

TREASURY BILLS MARKET

T-BILLS ARE ISSUED BY THE GOVERNMENT TO MEET THE SHORT TERM FUNDS REQUIREMENT T-BILLS ARE ALSO USED BY RBI TO PERFORM OPEN MARKET OPERATIONS

FEATURES OF T-BILLS

HIGHLY SECURED AND LIQUID ELIGIBLE FOR SLR REQUIREMENT OF BANKS ISUED EITHER IN THE FORM OF PROMISSORY NOTE OR CREDITED TO SGL ACCOUNT MINIMUM SIZE Rs.25000 AND IN MULTIPLES THEREOF ISSUED AT A DISCOUNT TO FACE VALUE PRESENTLY GOVERNMENT ISSUES TWO TYPES OF T-BILLS 91DAYS AND 364 DAYS RBI AND THE COMMERCIAL BANKS BUY T-BILLS

COMMERCIAL PAPER

COMMERCIAL PAPERS ARE SHORT TERM UNSECURED PROMISSORY NOTES ISSUED AT A DISCOUNT TO FACE VALUE WITH A FIXED MATURITY BY WELL KNOWN COMPANIES THAT ARE FINANCIALLY STRONG AND CARRY A HIGH CREDIT RATING

FEATURES OF CP

UNSECURED ISSUED AT A DISCOUNT TO FACE VALUE MATURITY 15 DAYS TO 1 YEAR MINIMUM SIZE Rs.5 LAKHS AND IN MULTIPLES THEREOF COMPULSORY CREDIT RATING CAN BE ISSUED DIRECTLY TO THE LENDERS OR THROUGH BANKS/MERCHANT BANKERS/DEALERS/BROAKERS IN THE OPEN MARKET BANKS, NBFCs, CORPORATE BODIES, PUBLIC SECTOR CORPORATIONS, VARIOUS TRUSTS ARE THE BUYERS STAMP DUTY

GUIDELINES FOR ISSUE OF CP

TANGIBLE NETWORTH > Rs. 4 CRORES FUND BASED WORKING CAPITAL LIMIT OF THE COMPANY > Rs. 4 CRORES MAXIMUM LIMIT IS 75% OF WORKING CAPITAL MINIMUM DENOMINATION Rs. 5 LAKHS AND MINIMUM SIZE OF AN ISSUE TO A SINGLE INVESTOR IS Rs. 25 LAKHS MINIMUM CREDIT RATING P2 FROM CRISIL AND A2 FROM ICRA UNDERWRITING IS NOT COMPULSORY PRIOR APPROVAL OF RBI IS NOT NECESSARY

CERTIFICATE OF DEPOSIT

CDs ARE BANK DEPOSITS WHICH ARE TRANSFERABLE FROM ONE PARTY TO ANOTHER THEY ARE MARKETABLE OR NEGOTIABLE SHORT-TERM INSTRUMENTS IN BEARER FORM AND ARE ALSO KNOWN AS NEGOTIABLE CERTIFICATE OF DEPOSIT

FEATURES OF A CD

DOCUMENT OF TITLE TO A TIME DEPOSIT NEGOTIABLE NO DEFAULT RISK VERY LIQUID ISSUED AT A DISCOUNT TO FACE VALUE MATURITY DATED OBLIGATION OF BANKS MAY BE REGISTERED OR IN BEARER FORM ATTRACTS STAMP DUTY FREELY TRANSFERABLE BY ENDORSEMENT AND DELIVERY LOCK-IN PERIOD OF 30 DAYS

FEATURES OF A CD

ISSUED IN DEMAT FORM INDIVIDUALS, CORPORATIONS, COMPANIES, TRUSTS, FUNDS, NRIS, ASSOCIATIONS ETC. ARE SUBSCRIBERS CAN BE ISSUED DIRECTLY TO INVESTORS OR THROUGH THE DEALER TRADED IN SECONDARY MARKET MINIMUM DENOMINATION Rs. 5 LAKHS MINIMUM SIZE OF THE ISSUE BY A SINGLE DEPOSITOR Rs.10 LAKHS MATURITY PERIOD 3 MONTHS TO 1 YEAR SUBJECT TO CRR AND SLR REQUIREMENT CAN NOT BE BOUGHT BACK BY THE ISSUER

MONEY MARKET MUTUAL FUND

MMMFS ARE MFS THAT PRIMARILY INVESTS IN MONEY MARKET INSTRUMENTS OF VERY HIGH QUALITY AND OF VERY SHORT MATURITY

FEATURES OF MMMF

CAN BE SET UP BY COMMERCIAL BANKS, PRIVATE SECTOR MFS WITH PRIOR APPROVAL OF SEBI AND RBI, PUBLIC FINANCIAL INSTITUTIONS EITHER DIRECTLY OR THROUGH THEIR EXISTING MF SUBSIDIARIES INDIVDUALS AND CORPORATES ARE SUBSCRIBERS BOTH OPEN ENDED AND CLOSE ENDED SCHEMES ARE ALLOWED MINIMUM LOCK-IN PERIOD 30 DAYS MINIMUM SIZE OF A MMMF IS Rs. 50 CRORES SIZE SHOULD NOT EXCEED 2% OF THE AGGREGATE DEPOSIT OF THE LATEST ACCOUNTING YEAR FOR BANKS AND 2% OF LONG TERM DOMESTIC BORROWING FOR PUBLIC FINANCIAL INSTITUTIONS

CAPITAL MARKET
CAPITAL MARKET PRIMARY MARKET OR NEW ISSUE MARKET SECONDARY MARKET OR STOCK EXCHANGE

WHERE INSTRUMENTS ARE ISSUED FOR THE FIRST TIME

WHERE INSTRUMENTS OF THE PRIMARY MARKET ARE TRADED AND RETRADED

FUNCTIONS OF PRIMARY MARKET

ORGINATION INVESTIGATION, ANALYSIS AND PROCESSING OF NEW PROPOSAL UNDERWRITING DISTRIBUTION

INSTRUMENTS

SHARE DEBENTURE FIXED DEPOSIT BONDS GOVT. SECURITIES LOANS FROM BANKS/FINANCIAL INSTITUTIONS NON SECURITY FORMS OF FINANCIAL INVESTMENT

METHODS OF ISSUE

PUBLIC ISSUE FIXED PRICE METHOD AND BOOK BUILDING METHOD RIGHTS ISSUE PRIVATE PLACEMENT BOUGHT OUT DEALS SALE TO QIBS EURO ISSUES

ELIGIBILITY NORMS FOR UNLISTED COMPANIES

TANGIBLE ASSETS DISTRIBUTABLE PROFIT NETWORTH CHANGE OF NAME ISSUE SIZE

ALTERNATIVELY

ISSUE THROUGH BOOK BUILDING METHOD OR PARTICIPATION OF BANKS AND FINANCIAL INSTITUTIONS AND THE MINIMUM POST ISSUE FACE VALUE OF CAPITAL WOULD BE Rs.10 CRORE OR THERE WOULD BE COMPULSORY MARKET MAKING FOR ATLEAST 2 YEARS FROM THE DATE OF LISTING

STOCK EXCHANGE

THE INSTRUMENTS OF THE PRIMARY MARKET ARE TRADED AND RETRADED CORPORATISATION AND DEMUTUALISATION OF STOCK EXCHANGES PRESENTLY THERE ARE 23 STOCK EXCHANGES IN INDIA

PARTICIPANTS AND INTERMEDIARIES

INDIVIDUAL INESTORS BROKERS SUB-BROKERS DEPOSITORIES FIIS FIS MERCHANT BANKERS PRIMARY DEALERS MUTUAL FUNDS CUSTODIANS CLEARING CORPORATION

REGISTRARS AND SHARE TRANSFER AGENT UNDERWRITERS BANKERS DEBENTURE TRUSTEES CREDIT RATING AGENCIES VENTURE CAPITAL FUNDS DPS

GOVERMENT SECURITIES MARKET

SECURITIES ISSUED BY CENTRAL GOVT. AND STATE GOVT. GUARANTEED BY CENTRAL GOVT. FOR ALL INDIA FINANCIAL INSTITUTIONS GUARANTEED BY STATE GOVT. FOR STATE FINANCIAL INSTITUTIONS TREASURY BILLS

NATURE OF GOVT. SECURITIES

STOCK CERTIFICATES PROMISSORY NOTES BEARER BONDS

INVESTORS OF GOVT. SECURITIES

COMMERCIAL BANKS FINANCIAL INSTITUTIONS LARGE CORPORATE BODIES RBI FIIS

FOREIGN EXCHANGE MARKET

FOREIGN CURRENCIES ARE TRADED

PARTICIPANTS IN FOREX MARKET

COMMERCIAL BANKS CENTRAL BANK AUTHORISED DEALERS AUTHORISED MONEY CHANGERS CORPORATES

DERIVATIVES MARKET

A FINANCIAL DERIVATIVE IS A PRODUCT THE VALUE OF WHICH IS DERIVED FROM ANOTHER UNDERLYING ASSET

TYPES OF DERIVATIVE

FORWARD CONTRACT FUTURE CONTRACT OPTION CONTRACT SWAP

PARTICIPANTS IN THE DERIVATIVE MARKET

SPECULATORS ARBITRAGEURS HEDGERS

REGULATORS

SEBI RBI COMPANY LAW BOARD DEPARTMENT OF COMPANY AFFAIRS DEPARTMENT OF ECONOMIC AFFAIRS