Indian financial system

Group members Payal Agrawal 02 Vivek dubey 18 Bhavya Gupta 21 Trupti Mahimkar 49

Introduction
The economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and household sector. A financial system facilitates the flow of funds from the areas of surplus to the areas of deficit.

 The financial system can be defined as set of organisations, instruments, markets, services and methods of operations, procedures that are closely interrelatedwith each other

FINANCIAL MARKETS
Market in which financial assets are created or transferred as against a real transaction that involves exchange of money for real goods or services, a financial transaction involves creation or transfer of a financial asset. Financial Assets or Financial Instruments represents a claim to the payment of a sum of money sometime in the future and /or periodic payment in the form of interest or dividend.

Money Market
The money market is a wholesale debt market for lowrisk, highly-liquid, short-term instrument. Funds are available in this market for periods ranging from a single day up to a year. This market is dominated mostly by government, banks and financial institutions.

Capital Market
The capital market is designed to finance the long-term investments. The transactions taking place in this market will be for periods over a year.

Forex Market
The Forex market deals with the multicurrency requirements, which are met by the exchange of currencies. Depending on the exchange rate that is applicable, the transfer of funds takes place in this market. This is one of the most developed and integrated market across the globe.

Credit Market
Credit market is a place where banks, FIs and NBFCs purvey short, medium and long-term loans to corporate and individuals.

FINANCIAL INTERMEDIARIES
Institutes that collect savings from savers and make it available to the investors. It acts as a middleman between the lenders and the borrowers.

Key Financial Intermediaries

Commercial Banks Financial Institutions Mutual Funds Non Banking Financial Companies

Commercial Banks
Established under the Indian Companies Act 1913. Creates Credit

FINANCIAL INSTITUTIONS
To meet the needs of Industrial Sectors and specialized financial needs. Examples- NABARD, SIDBI, NHB

MUTUAL FUNDS
Mutual Funds now have over Rs.5,00,000 crore in assets under management Mobilizes savings from small investors and invests in short term instruments

NON BANKING FINANCIAL COMPANIES

Mobilize savings of the publics and advance loans to investors. Accept deposits and give loans and invest in securities.

FINANCIAL INSTRUMENTS

Money Market Instruments

1. Call/Notice Money The money borrowed or lent on demand for a very short period. 2. Treasury Bills TBills are short-term financial instruments that are issued on behalf of govt by the Central Bank of the country.

3. Certificate of Deposit Introduced in India in 1989. Size of CD market quite small in India. 4. Commercial Papers Introduced in 1990. The return on Commercial papers is always higher than that of T-bills.

Capital Market Instruments Hybrid Instruments