1. Existence of a well organized financial
Promotes the well being and standard of
living of the people of a country
Money and monetary assets
Mobilize the saving
2. Financial System of any country consists
of financial markets, financial
intermediation and financial instruments
or financial products
Flow of funds (savings)
Seekers of funds
(Mainly business firms
Flow of financial services
Incomes , and financial
Suppliers of funds
6. Interrelation--Financial system & Economy
7. Organized Indian Financial System
8. Mechanism which allows people to trade
Affected by forces of supply and demand
In Finance, Financial markets facilitates
9. Capital markets facilitate the transfer of capital
(i.e. financial) assets from one owner to
They provide liquidity.
Liquidity refers to how easily an asset can be
transferred without loss of value.
A side benefit of capital markets is that the
transaction price provides a measure of the
value of the asset.
10. Mobilization of Savings & acceleration of
Promotion of Industrial Growth
Raising of long term Capital
Ready & Continuous Markets
Proper Channelisation of Funds
Provision of a variety of Services
11. Stock Market was for a privileged few
Archaic systems - Out cry method
Lack of Transparency - High tones costs
No use of Technology
Outdated banking system
Volumes - less than Rs. 300 cr per day
No settlement guarantee mechanism - High
12. 1994-Equity Trading commences on NSE
1995-All Trading goes Electronic
1996- Depository comes in to existence
1999- FIIs Participation- Globalisation
2000- over 80% trades in Demat form
2001- Major Stocks move to Rolling Sett
2003- T+2 settlements in all stocks
2003 - Demutualisation of Exchanges
13. Each scam has brought in reforms - 1992 / 2001
Screen based Trading through NSE
Capital adequacy norms stipulated
Dematerialization of Shares - risks of
fraudulent paper eliminated
Entry of Foreign Investors
Investor awareness programs
Inter-action between banking and exchanges
14. Corporatisation of exchange memberships
Banning of Badla / ALBM
Introduction of Derivative products - Index
/ Stock Futures & Options
Reforms/Changes in the margining system
STP - electronic contracts
15. • 22 Stock Exchanges,
• Over 10000 Electronic Terminals at over 400 locations all
• 9108 Stock Brokers and 14582 Sub brokers
• 9644 Listed Companies
• 2 Depositories and 483 Depository Participants
• 128 Merchant Bankers, 59 Underwriters
• 34 Debenture Trustees, 96 Portfolio Managers
• 83 Registrars & Transfer Agents, 59 Bankers to Issue
• 4 Credit Rating Agencies
16. Indian Capital Market
18. Raising capital for businesses
Mobilizing savings for investment
Facilitate company growth
Redistribution of wealth
19. Corporate governance
Creates investment opportunities for small investors
Government raises capital for development projects
Barometer of the economy
20. Growth Pattern of the Indian Stock Market
As on 31st
No. of Stock
Capital of Listed
Cos. (Cr. Rs.)
Market value of
Capital of Listed
Cos. (Cr. Rs.)
Listed Cos. (4/2)
Market Value of
Capital per Listed
Cos. (Lakh Rs.)
of Capital per
ADR / GDR
Debentures Zero coupon
22. Establishment of Development banks &
Industrial financial institution.
Growing public confidence
Increasing awareness of investment
23. Growth of underwriting business
Setting up of SEBI
Credit Rating Agencies
24. Lack of transparency
Variety of manipulative practices
25. Market for short-term money and financial
assets that are near substitutes for money.
Short-Term means generally period upto one
year and near substitutes to money is used to
denote any financial asset which can be quickly
converted into money with minimum
26. It is a place for Large Institutions and
government to manage their short-term cash
It is a subsection of the Fixed Income Market
It specializes in very short-term debt securities
They are also called as Cash Investments
27. Lack of Integration
Lack of Rational Interest Rates structure
Absence of an organized bill market
Shortage of funds in the Money Market
Seasonal Stringency of funds and fluctuations in
Inadequate banking facilities
28. Treasury Bills
Certificate of Deposit
Money Market Mutual Funds
29. Segment Issuer
Zero Coupon Bonds, Coupon Bearing Bonds,
Capital Index Bonds, Treasury Bills.
Govt. Guaranteed Bonds, Debentures
PSU Bonds, Debenture, Commercial Paper
Debentures, Bonds, Commercial Paper, Floating
Rate Bonds, Zero Coupon Bonds, InterCorporate Deposits
Certificate of Deposits, Bonds
Certificate of Deposits, Bonds
30. Securities and Exchange Board of India
Reserve Bank of India
Ministry of Finance
31. Securities and Exchange Board of India
(SEBI) was first established in the year
Its a non-statutory body for regulating
the securities market
It became an autonomous body in 1992
32. Regulates Capital Market.
Checks Trading of securities.
Checks the malpractices in securities
33. It enhances investor's knowledge on market by
It regulates the stockbrokers and sub-brokers.
To promote Research and Investigation
34. It tries to develop the securities market.
Promotes Investors Interest.
Makes rules and regulations for the securities
35. Sole Control on Brokers
For Share Prices
For Mutual Funds
36. Established on April 1, 1935 in accordance with
the provisions of the RBI Act, 1934.
The Central Office of the Reserve Bank has
been in Mumbai.
It acts as the apex monetary authority of the
37. Monetary Authority:
Formulation and Implementation of monetary
Maintaining price stability and ensuring adequate
flow of credit to the Productive sectors.
Issuer of currency:
Issues and exchanges or destroys currency and
Provide the public adequate quantity of supplies of
currency notes and coins.
38. Functions Of RBI
Regulator and supervisor of the financial system:
Prescribes broad parameters of banking operations
Maintain public confidence, protect depositors' interest
and provide cost-effective banking services.
Authority On Foreign Exchange:
Manages the Foreign Exchange Management Act, 1999.
Facilitate external trade, payment, promote orderly
development and maintenance of foreign exchange
39. Functions Of RBI
Performs a wide range of promotional functions to
support national objectives.
Banker to the Government: performs merchant banking
function for the central and the state governments.
Maintains banking accounts of all scheduled banks.
40. (a) Bank Rate:
The Bank Rate was kept unchanged at 6.0 per cent.
(b) Reverse Repo Rate:
The Repo rate is around 7 per cent and Reverse repo
rate is around 6.10 per cent.
(c) Cash Reserve Ratio:
The cash reserve ratio (CRR) of scheduled banks is
currently at 5.0 per cent.
41. Pre-reforms period
42. The period from the mid 1960s to the early 1990s.
Administered interest rates
Industrial licensing and controls
Dominant public sector
High capital-output ratio
43. Banks and financial institutions acted as a
Price discovery process was prevented.
Government failed to generate resources for
investment and public services.
Till 90s it was closed, highly regulated, and
44. Economic reforms initiated in June 1991.
The committee appointed under the chairmanship
of M Narasimham.
He submitted report with all the
Government liberalized the various sectors in the
Reform of the public sector and tax system.
45. Reorientation of the economy
Macro economic stability
To Increase competitive efficiency in the
To remove structural rigidities and
To attain a balance between the goals of
financial stability & integrated & efficient
46. Reduce the level of state ownership in
Lift restrictions on foreign ownership of
Spur the development of the corporate-bond
Strengthen legal protections
47. Deregulate the insurance industry
Drop proposed limits on pension reforms
Increase consumer ownership of mutual-fund
Introduce a gold deposit scheme
48. Speed up the development of electronic
Separate the RBI's regulatory and centralbank functions
Lift the remaining capital account controls
Phase out statutory priority lending and
restrictions on asset allocation
49. The financial system is fairly integrated, stable,
Weaknesses need to be addressed.
The reforms have been more capital centric in
Foreign capital flows and foreign exchange
reserves have increased but absorption of foreign
capital is low.