3. INTRODUCTION
The term financial system is a set of inter-related
activities/services working together to achieve
some predetermined purpose or goal. It includes
different markets, the institutions, instruments,
services and mechanisms which influence the
generation of savings, investment capital
formation and growth.
4. OBJECTIVE OF FINANCIAL SYSTEM
"supply funds to various sectors and activities of the
economy in ways that promote the fullest possible
utilization of resources without the destabilizing
consequence of price level changes or unnecessary
interference with individual desires."
7. The Organisation of the Financial System in India
i) Organised sector
i) Unorganised sector.
8. ORGANISED SECTOR
•COMPRISES OF BANKS,FINANCIAL AND INVESTMENT INSTITUTIONS
•SHORT TERM FUNDS ARE MAINLY PROVIDED BY COMMERCIAL AND CO-
OPERATIVE BANKS
The organised financial system comprises the following sub-systems:
1. Banking system
2. Cooperative system
3. Development Banking system
(i) Public sector
(ii) Private sector
4.Money markets
5. Financial companies/institutions.
9. Unorganised Financial System
Relatively less controlled moneylenders,
indigenous bankers, lending
pawn brokers, landlords, traders etc.
This part of the financial system is not
directly amenable to control by the Reserve
Bank of India (RBI).
10. RBI
The Reserve Bank of India as the central bank of the country, is at the head of this
group. Commercial banks themselves may be divided into two groups, the scheduled
and the non scheduled.
A. Public Sector Banks
i) State Bank of India State Bank Group
ii) Associate Bank
iii) 14 Nationalized Banks (1969) Nationalized Banks
iv) 6 Nationalized Banks (1980)
v) Regional Rural Banks Mainly sponsored by Public
Sector Bank
B. Private Sector Banks
i) Other Private Banks;
ii) New sophisticated Private Banks;
iii) Cooperative Banks included in the second schedule;
iv) Foreign banks in India, representative offices, and
v) One non-scheduled banks
11. Cooperative Sector
The cooperative banking sector has been developed in the country to supplant
the village moneylender, the predominant source of rural finance, as the terms
on which he made finance available have generally been usurious and
detrimental to the development of Indian agriculture
Central Co-operative Banks
These are the federations of primary credit societies in a district. These banks
finance member societies within the limits of the borrowing capacity of
societies. They also conduct all the business of a joint-stock bank.
12. MONEY MARKET
-SHORT TERM
-FIANCIAL ASSESTS THAT ARE NEAR SUBSTITUTE MONEY
-GOLD etc
CAPITAL MARKET
-LONG TERM PERIOD
-FINANCIAL INSTRUMENTS EG EQUITY SHARES PREFERENCE
SHARES
13. Intermediary Market Role
Stock Exchange Capital Market Secondary Market to securities
Investment Bankers Capital Market, Credit Market Corporate advisory services, Issue of securities
Underwriters Capital Market, Money Market Subscribe to unsubscribed portion of securities
Issue securities to the investors on behalf of the company
Registrars, Depositories, Custodians Capital Market
and handle share transfer activity
Primary Dealers Satellite Dealers Money Market Market making in government securities
Forex Dealers Forex Market Ensure exchange ink currencies
