A financial system or financial sector functions as
an intermediary and facilitates the flow of funds
from the areas of surplus to the areas of deficit.
Financial System of any country consists of
financial markets, financial intermediation and
financial instruments or financial products .
A Financial Market can be defined as the market in
which financial assets are created or transferred.
Mechanism which allows people to trade.
(Short term instrument)
(Long term instrument)
The most important distinction between the
The difference in the period of maturity.
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.
Money Market- The money market is a wholesale debt
market for low-risk, 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
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.
Ministry of Finance
Government Securities: Issued by central government, state
government, semi government authorities such as municipalities,
state electricity boards and public sectors corporations.
Industrial Securities: These are securities issued by the
corporate sector to finance their long term and working capital
requirements. The Major Instruments that fall under Industrial
Call money market
Commercial Paper (CP)
Certificate of deposit (CD)
Repo market ( Repurchase
agreement ) etc.
NARBARD: National Bank of Agricultural and Rural Bank
EXIM: Export-Import Bank of India
IDBI: Industrial Development Bank of India
SIDBI: Small Industries Development Bank of India
SIDC: Securities Industries development corporation
NBFC: Non-Banking Financial Company
ECGC: Export credit Guarantee corporation
IIBI: Industrial Investment Bank of India
NHB: National Housing Bank
IFCI: Industrial Finance Corporation of India
IDFC: Infrastructure Development Finance Company
RRB’s: Regional Rural Banks
EFT’s: Electronic fund transfer