I NDI AN FI NANCI AL SYSTEM

I NDI AN FI NANCI AL SYSTEM

Presented Presented by by
Dr .S.C.Bi har i
Dr .S.C.Bi har i
WHAT I S A FI NANCI AL
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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St r uc t ur e of a Fi nanc i al
Syst em
Fi nanc i al
Ser vi c es
Financial
Markets
Financial
Instruments
Financial
Intermediaries
Organized
Unorganized
Pr i mar y /
Sec ondar y
Pr i mar y /
Sec ondar y
Capi t al
Mar k et s
Money
Mar k et s
Primary /
Secondary
Shor t
Ter m
Medi um
Ter m
Long
Ter m
Regul at
or y
Non-I nt er
medi ar i es
Ot her s
BANKI NG
NON-
BANKI NG
I nt er medi ar i
es
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Financial Services
Leasi ng
St oc k
Hol di ng
Ref i nanc i ng
Di sc ount i ng
Redi sc ount i ng
Fac t or i ng
Mer c hant
Bank i ng
Hi r e
Pur c hase
Fi nanc i al
Per f or manc e
Guar ant ees
Cr edi t
f unc t i ons
Ac c ept anc e
Of Deposi t s
Fi nanc i al
Ser vi c es
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Fi nanc i al I nst r ument s
Enabl e movement of f unds f r om sur pl us
uni t s t o def i c i t uni t s
Ther e ar e i nst r ument s f or saver s suc h as
deposi t s, equi t i es, mut ual f und uni t s, et c .
Ther e ar e i nst r ument s f or bor r ow er s suc h
as l oans, over dr af t s, et c .
Li k e busi nesses, gover nment s t oo r ai se
f unds t hr ough i ssui ng of bonds, Tr easur y
bi l l s, et c .
I nst r ument s l i k e PPF, KVP, et c . ar e
avai l abl e t o saver s w ho w i sh t o par k money
w i t h saf e gover nment avenues.
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Financial Instruments contd.
Financial Instruments contd Financial Instruments contd.
KVPs
Rel i ef
Bonds
Nat i onal
Savi ngs
Cert i f i c at e
Debt Equi t y
Swaps
Deposi t s
Wi t h
Compani es
Capi t al
Gai ns Bonds
Pr ef er enc e
Shar es
Equi t y
Shar es
Fi nanc i al
I nst r ument s
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Fi nanc i al Mar k et s
Money Mar k et -
f or shor t -t er m f unds (l ess t han a year )
Or gani sed (Bank s)
Unor gani sed (money l ender s, c hi t f unds,
et c .)
Capi t al Mar k et -
f or l ong-t er m f unds
Pr i mar y I ssues Mar k et
St oc k Mar k et
Bond Mar k et
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Or gani sed Money Mar k et
Cal l money mar k et
Bi l l Mar k et
Tr easur y bi l l s
Commer c i al bi l l s
Bank l oans (shor t -t er m)
Or gani sed money mar k et c ompr i ses
RBI , bank s (c ommer c i al and c o-
oper at i ve)
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Money Mar k et I nst r ument s
Money mar k et i nst r ument s ar e t hose
w hi c h have mat ur i t y per i od of l ess
t han one year .
The most ac t i ve par t of t he money
mar k et i s t he mar k et f or over ni ght c al l
and t er m money bet w een bank s and
i nst i t ut i ons and r epo t r ansac t i ons
Cal l money/ r epo ar e ver y shor t -t er m
money mar k et pr oduc t s
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Money Mar k et I nst r ument s
c ont d
Cer t i f i c at es of Deposi t
Commer c i al Paper
I nt er -bank par t i c i pat i on c er t i f i c at es
I nt er -bank t er m money
Tr easur y Bi l l s
Bi l l r edi sc ount i ng
Cal l /not i c e/t er m money
Mar k et Repo
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Capi t al Mar k et
Mar k et f or l ong-t er m c api t al . Demand
c omes f r om t he i ndust r i al , ser vi c e
sec t or and gover nment
Suppl y c omes f r om i ndi vi dual s,
c or por at es, bank s, f i nanc i al
i nst i t ut i ons, et c .
Can be c l assi f i ed i nt o:
Gi l t -edged mar k et
Sec ur i t i es mar k et (new i ssues and st oc k
mar k et )
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Sec ur i t i es Mar k et
I t r ef er s t o t he mar k et f or shar es and
debent ur es of ol d and new c ompani es
New I ssues Mar k et - al so k now n as t he
pr i mar y mar k et - r ef er s t o r ai si ng of
new c api t al i n t he f or m of shar es and
debent ur es
St oc k Mar k et - al so k now n as t he
sec ondar y mar k et deal s w i t h
sec ur i t i es al r eady i ssued by
c ompani es
Types of Fi nanc i al I nt er medi ar i es
Depository institutions and
Non-depository institutions.
DEPOSI TORY I NSTI TUTI ONS
1. Commer c i al Bank s.
2. Savi ng and Loans
I nst i t ut i ons.
3. Cr edi t Uni ons.
N
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1. Fi nanc e Compani es.
2. Mut ual Funds.
3. Sec ur i t y Fi r ms, I nvest ment
Bank er s, Br ok er s, and Deal er s.
4. Pensi on Funds.
5. I nsur anc e Compani es.
Deposi t or y i nst i t ut i ons
pr ovi de
Funds t o ser ve t he
i nt er est s of t he soc i et y
Saf eguar d t hei r moni es and
Ac t as an i mpor t ant sour c e
f or t he i nvest ment c ommuni t y.
FI NANCE COMPANI ES
CONSUMER CONSUMER
SALES SALES
The c onsumer f i nanc e
c ompani es (f or ex ampl e, GE
Count r yw i de) pr ovi de f i nanc e
t o i ndi vi dual s f or pur c hase of
c onsumer goods.
Sal es f i nanc e c ompani es
mak e di r ec t l oans t o c onsumer s-
by pur c hasi ng i nst al l ment paper
f r om deal er s sel l i ng aut omobi l es
and ot her c onsumer dur abl es.
Sal es f i nanc e c ompani es
mak e di r ec t l oans t o c onsumer s-
by pur c hasi ng i nst al l ment paper
f r om deal er s sel l i ng aut omobi l es
and ot her c onsumer dur abl es.
MUTUAL FUNDS
Por t f ol i o of st oc k s, bonds, and/or
c ash managed by an
i nvest ment c ompany
on behal f of many i nvest or s.
When an i ndi vi dual
i nvest s i n a mut ual f und:
Bec omes a par t ow ner of
a l ar ge i nvest ment por t f ol i o
Non-l i f e i nsur anc e do
Aut omobi l e i nsur anc e
Fi r e i nsur anc e,
Home i nsur anc e,
Engi neer i ng i nsur anc e
Li abi l i t y I nsur anc e et c .
I NSURANCE COMPANI ES
Ther e ar e t w o t ypes of i nsur anc e c ompani es
l i f e i nsur anc e c ompani es, and Non-l i f e
i nsur anc e c ompani es.
The pr i nc i pal busi ness of l i f e i nsur anc e
c ompani es i s t o i nsur e t he pol i c yhol der
agai nst deat h
I NVESTMENT BANKI NG
Assi st c ompani es i n r ai si ng c api t al ,
t hr ough a pr i vat e pl ac ement or
publ i c of f er i ng of c ompany st oc k .
They mar k et l ar ge amount s of
new sec ur i t i es on behal f of
gover nment s, gover nment agenc i es
and c ompani es.
LEASI NG COMPANI ES
Leasi ng :Pr ovi des ac c ess
t o pr oduc t i ve asset s.
A l essor :Gi ves asset s on l ease
: Get s r egul ar i nf l ow of l ease r ent al s.
A l essee: Get s t he asset at a l ow er
c ost w i t hout bor r ow i ng or ow ni ng i t .
MORTGAGE BANKS
Mor t gage bank er s :Fund t he
c onst r uc t i on of homes, of f i c es,
bui l di ngs and ot her st r uc t ur es.
They sel l t hei r asset s
t o a l ong-t er m l ender
suc h as an i nsur anc e c ompany
t o get bac k l i qui di t y
PENSI ON FUNDS
Dedi c at ed t o pr ot ec t i ng
i ndi vi dual s and f ami l i es
agai nst l oss of i nc ome
Al l ow i nvest or s t o i nvest
a por t i on of t hei r c ur r ent i nc ome
as pensi on f unds.
I mpor t anc e of pensi on f unds :
Due t o i nc r eased l i f e ex pec t anc y
Types of Fi nanc i al I nst i t ut i ons
Fi nanc i al Sec t or -
Regul at or s
Regulators
Reserve Bank of
India
(RBI)
Securities Exchange
Board of India
(SEBI)
Insurance Regulatory
and Development
Authority
(IRDA)
Banks
Capital Markets/
Mutual Funds
Insurance
Companies
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A Gl i mpse of I ndi an Fi nanc i al Syst em
Regul at or y
Bodi es
Fi nanc i al
I nt er medi ar i es
Devel opme
nt
I nst i t ut i ons
Fi nanc i al
Ser vi c es
Fi nanc i al
I nst r ument s
Reser ve Bank
of I ndi a Reser ve Bank of I ndi a EXI M Bank Hi r e Pur c hase Equi t y Shar es
as a r egul at or as a bank er NABARD Deposi t I nsur anc e Pr ef er enc e shar es
SEBI Commer c i al Bnak s SCI CI I nsur anc e Debent ur es
BI FR Cooper at i ve bank s and I DBI Guar ant ees Bonds
I RDA Soc i et i es SI DBI Sol venc i es
Gover nment
Sec ur i t i es
DI CGC
Post Of f i c e Savi ngs
Bank s TFCI Ac c ept anc es KVP
ECGC PF Or gani zat i on Bi l l Di sc ount i ng NSS
SHCI Pensi on Funds Mer c hant Bank i ng NSC
FMC
Smal l savi ngs
or gani zat i ons Fac t or i ng Bank Deposi t s
LI C of I ndi a Cr edi t r at i ng
Deposi t w i t h
Compani es
GI C Cr edi t i nf or mat i on
UTI
Ec onomi c
c onsul t anc y
Mut ual Funds St oc k hol di ng
I nvest ment Tr ust s Ref i nanc i ng
Under w r i t i ng
Leasi ng
Thank s f or your
at t ent i on
Dr . S. C. Bi har i
Tel l :08417-236660 t o 65(Ex t n: 6214)
Mai l :sc bi har i @gmai l .c om