1. It consists of institutions which bring together individuals with surplus saving and individuals with deficit saving. 2.

It consists of institutions which lubricate the functioning of economic activities. 3. It reduces the risks of wealth holding but also creates condition of risk in the economy. 4. It consists of institutions which play vital role in stabilisation of economys behaviour.

Contribution of commercial banks in India

Total Deposit as % of GDP
80 70 60 50 40 30 20 10 0

Bank credit as % of GDP

Composition of Deposits
6000000

TD

DD

5000000

4000000

Rs. Crs.

3000000

2000000

1000000

Composition of Bank Credit

Non-food credit
4500000

Food Credit

4000000
3500000 3000000 2500000 2000000 1500000 1000000 500000 0

Investments by commercial banks as % of deposits

50.00 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00

Composition of households assets

10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0

Shares & debent- ures Non- banking deposits

Provident and pension fund Bank deposits

Life insurance fund Currency

Market Capitalisation at BSE

1200000
1000000 800000 600000 400000 200000

Financial System

Financial Intermediaries

Financial Markets

Financial Intermediaries

Banks

NBFCs

Mutual Funds

Insurance Companies

Commercial Banks

Development Banks

NBFCs

Asset finance companies

Housing finance companies

Venture capital funds

Stock broking firms

 An NBFC is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).

 NBFC cannot accept demand deposits. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

In terms of Section 45-IA of the RBI Act, 1934, no NBFC can commence or carry on business of a non-banking financial institution without obtaining a certificate of registration from the RBI and without having a Net Owned Funds of Rs. 25 lakhs (Rs two crore since April 1999).

Regulator Respective State Governments Insurance companies IRDA Housing Finance Companies NHB Venture Capital Fund SEBI Merchant Banking companies SEBI Stock broking companies SEBI Nidhi Companies Ministry of corporate affairs, Government of India

Category of Companies Chit Funds

 List of NBFCs permitted to accept deposits.pdf List of Non-Deposits Accepting NBFCs.xls

 Mutual Fund is a special type of investment institution which acts as an investment conduit. It pools the savings of relatively small savers for the purpose of well diversified portfolio of sound investment. The list consists of many such as UTI, SBI Mutual Fund, Reliance Mutual fund etc.

List of Mutual Funds in India.xlsx

700000

600000

500000

400000

Rs. crs

300000

200000

100000

0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

200000

150000

100000

50000

-50000

-100000

Insurance companies are those which provide pool of savings to investors (industries) from different individuals in exchange of promise to them a specified amount of monetary benefits either at maturity of policy or at the time of accident.

S.No

NAME OF THE COMPANY

1 Bajaj Allianz Life Insurance Company Limited . 2 Birla Sun Life Insurance Co. Ltd
3 HDFC Standard Life Insurance Co. Ltd 4 ICICI Prudential Life Insurance Co. Ltd 5 ING Vysya Life Insurance Company Ltd. Life Insurance Corporation of IndiaYogakshema, Jeeva Bima Marg, 6 Post Box No. 19953 MUMBAI 400 021 7 Max Life Insurance Co. Ltd

8 PNB Metlife India Insurance Co. Ltd. 9 Kotak Mahindra Old Mutual Life Insurance Limited
10 SBI Life Insurance Co. Ltd 11 Tata AIA Life Insurance Company Limited 12 Reliance Life Insurance Company Limited.

13 Aviva Life Insurance Company India Limited

14 Sahara India Life Insurance Co, Ltd. 15 Shriram Life Insurance Co, Ltd. 16 Bharti AXA Life Insurance Company Ltd.

17 Future Generali India Life Insurance Company Limited

18 IDBI Federal Life Insurance Company Ltd., 19 Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd. 20 AEGON Religare Life Insurance Company Limited. 21 DLF Pramerica Life Insurance Co. Ltd. Star Union Dai-ichi Life Insurance Co. Ltd., Star House, 3rd Floor, (West 22 Wing), C-5,Bandra-Kurla Complex, Bandra (East), 23 India First Life Insurance Company Limited 24 Edelweiss Tokio Life Insurance Co. Ltd.

Bajaj Allianz General Insurance Co. Ltd. ICICI Lombard General Insurance Co. Ltd. IFFCO Tokio General Insurance Co. Ltd. National Insurance Co. Ltd.

Tata AIG General Insurance Co. Ltd. Cholamandalam MS General Insurance Co. Ltd. HDFC ERGO General Insurance Co. Ltd. Export Credit Guarantee Corporation of India Ltd.

National Insurance Co. Ltd. The New India Assurance Co. Ltd.
The Oriental Insurance Co. Ltd. United India Insurance Co. Ltd. Reliance General Insurance Co. Ltd. Royal Sundaram Alliance Insurance Co. Ltd

Agriculture Insurance Co. of India Ltd. Star Health and Allied Insurance Company Limited
Apollo Munich Health Insurance Company Limited Future Generali India Insurance Company Limited Shriram General Insurance Company Limited, SBI General Insurance Company Limited

Loans
14000.00

Stock exchange securities

12000.00

10000.00

Rs. crs

8000.00

6000.00

4000.00

2000.00

0.00 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

10000.00 9000.00 8000.00 7000.00 6000.00 Public sector 5000.00 4000.00 3000.00 2000.00 1000.00 0.00 Private sector

Joint sector

Co-operative sector

Financial Markets

Money Market

Capital Market

Financial assets/Instruments

Money Market

Call money market

Treasury bills market

Commercial Paper market

Certificate of deposits market

Repo market
Mutual funds market

Capital Market

Primary/ New Issue market

Secondary/ Stock exchange market

Financial instruments

Direct instruments such as debentures

Indirect instruments such as securitised debt instruments

Derivatives such as forward, futures and options

 Equity/ordinary shares: They are ownership securities. The owners bear the risk and are residual claimants on income and management of the company. Preference shares: They are hybrid securities and partakes the features of both equity and debentures. The holders of such securities have preference rights over the equity holders in respect of fixed dividend as well as return of capital. All preference shares are redeemable within 10 years. Debentures: They are a creditorship security. The holders of debentures are entitled to a prescribed interest rates and first claim on the assets of the entity. There are perpetual debentures and redeemable debentures. Debentures can be convertible and nonconvertible into equity shares. Warrants: They are security which entitle the holders to purchase a specified number of shares at a stated price before a stated date. They are issued with either debentures or equity shares.

 Derivative: It is a product whose value is derived from the value of one/more basic variables called base (underlying asset/index/reference rate) in a contractual manner. The Security Contract (Regulation) Act defines derivatives to include (1) a security derived from debt instrument/share/secured or unsecured loan, (2) a contract which derives its value from the prices/index of prices of underlying securities. The most common form of contract derivatives are Forwards, Futures and Options.
i. Forward Contract: A forward contract is an agreement to exchange an asset, for cash, at a predetermined future date. Forward contract is not tradable and it has to be settled by physical delivery of the asset. Futures Contract: It is a forward contract which is transferable and therefore tradable. It is highly standardised contract between seller and buyer which obligate the former to deliver the latter the given assets in the specified quantities at a fixed time and at the contracted price. Options: Options are contracts that give the holder the right (but not the obligation) to buy (call option) or sell (put option) securities at a specified price within or at the end of a specified period. In order to acquire the right of the option the option buyer pays the option seller an option premium, which is the price paid for the right. Options are operated for commodities, currencies, securities, stock indexes etc.

ii.

iii.