Indian Financial System

Indian Financial system

The financial system or the financial sector of any country consist of (C)Specialised and non specialised financial institution. (D)Organised and unorganised financial market. (E)Financial instruments and services which facilitate transfer of funds.

The word “ system” in terms of “financial system”, implies a set of complex and closely connected or interlinked institution, agent practice, market, transactions, claims, and liabilities in the economy. The financial system is concerned about money, credit and finance-the three term are intimately related yet are somewhat different from each other.

As men material and money are crucial input in production activities The human capital and physical capital can be brought and developed with money, therefore money, credit and finance are lifeblood of economic system

Financial System Financial Financial Institution Financial Markets Financial Instruments Services Organized + Unorganized Regulatory +Intermediaries + Non Intermediaries+ Others Primary Secondary Primary + Secondary Banking + Non banking Short Medium Long Term Term Term Capital Market Money Market

Relationship between Financial System and Economic Economic Development development Saving & investment Or capital formation Deficit spending Surplus, spending Economic Units Economic Units Income Minus Income Minus (Consumption (Consumption +own Investment) + Investment Surplus or Deficit or Saving Negative Saving Financial System

Financial market are said to be perfect When (b)A large number of saver and investor operate in market. (c)The savers and investor are rational (d)All operators in the market are well informed and information is freely available to all of them. (e)There are no transaction cost (f)The financial asset are infinitely divisible (g)The participants in market have homogenous expectation (h)There are no taxes

Indian financial System at Present

Institutions 2 Non banking : INTERMEDIARIES (1) •Provident and pension 1 Banking fund • reserve bank of India •Small saving organization (RBI) •life insurance corporation (LIC) •commercial banks •general insurance •cooperative credit corporation (GIC) societies •unit trust of India (UTI) •cooperative banks •mutual funds •post-office saving banks •investment trust •investment companies

•finance corporation •nidhi’s chit funds •hire purchase finance companies •lease finance companies •national housing banks •housing and urban development corporation (HUDCO) •housing development finance corporation (HDFC),and other housing finance companies •manufacturing companies accepting public deposits •venture capital funds •National cooperative bank of India.(NCBI)

Special Development (2) •Industrial finance corporation of India(IFCI or IFC) •Industrial credit and investment corporation of India.(ICICI) •Industrial development bank of India(IDBI) •Industrial reconstruction bank of India(IRBI) •Export and import bank of India (EXIM Bank) •National bank of agriculture and rural development(NABARD) •Shipping credit and investment company of India(SCICI) •Tourism finance corporation of India(TFCI) •Agriculture finance consultancy ltd(AFC) • Risk capital and technology finance corporation (RCTFC) •National cooperative development corporation(NCDC) •Central warehousing corporation(CWC)

•State warehousing corporation(SWC) •Rural electrification corporation(REC) •National industrial development corporation(NIDC). •National small industries corporation(NSIC). •Small industries development bank of India(SIDBI) •State financial corporation(SFCs) •State industrial development corporations(SIDCs) •State industrial investment corporations(SIICs) •State small industries development corporations(SSIDCs) •Power finance corporation(PFC)

Regulatory and Others(3) 1 Regulatory: • RBI •Securities and exchange board of India(SEBI) •Board of industrial and financial reconstruction(BIFR) •Board of financial supervision •Insurance regulatory authority 2 Others: • Deposit insurance and credit guarantee Corporation(DICGC) •Export credit and guarantee Corporation(ECGC) • Technical consultancy organizations (TCOs) •Stock holding corporation of India(SHCI)

• Credit rating information services of India(CRISIL) •Discount and finance house of India(DFHI) •Infra structure leasing and financial services ltd(ISLFS) •Technology development and information company of India(TDICI) •Merchant Banks •Factoring Companies •Money lenders •Indigenous bankers Securities trading corporation of India(STCI) •Primary Dealers •Investment information and credit rating agency(ICRA) •Depositaries •Custodians

Instruments and Markets(4) 1 Instruments: •Equity ordinary shares •Preference shares •Industrial debentures or bonds •Capital gain bonds •Government (gilt-edged) securities or bonds •Relief bonds •National development bonds •Indra vikas patra •Kisan vikas patra •National saving scheme •National saving certificate •Deposit with banking institutions

•Insurance plan •Units •Deposit with companies •Participation certificates •Pass through certificates •Certificate of deposits(CDs) •Commercial papers •Call and notice money •Hundis •Mortgages •National saving annuity certificates •Social security certificates •Trade credits •Chits

•Inter-corporate deposits •Repo & reserve repos •Stockinvest •Global depositary receipts(GDRs) •Foreign Boards •Foreign currency convertible bonds(FCCBs) •Eurobonds & Euronotes •Floating rate Notes (FRNs) •Future option swaps and other foreign derivatives •Zero coupon bonds •Non voting shares •Indexed bonds 2 Markets:

•commercial bill market •government securities market •treasury bill market •Industrial securities market (stock market) •Foreign securities market •Over the counter exchange(OTCE) •Discount market •Market for commercial paper and certificates of deposits •Mortgage market •Market for guarantees •National stock exchange (NSE) •Derivatives market •Bonds market • Equities market

Services (5) •Hire purchase and installment credit •Deposit insurance and other insurance •Financial and performance guarantees •Acceptances •Merchant banking •Factoring •Credit rating •Credit information •Technical and economic consultancy •Stock holding •Discount and Rediscounting •Refinancing •Underwriting

•Funds transfer •Technology development •Leasing •Credit cards •Safe deposit vaults •Brokerage •Portfolio management •Deposit acceptance •Giving credit •Loan syndicating •Managing capital issues •Market making •Custodial services •Depositary services

Indian Financial System

by historica vision edu. pvt. ltd. on May 22, 2009

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Indian Financial System — Presentation Transcript