Introduction to financial system

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Introduction to financial system

  1. 1. Introduction to Financial System By Dr. Gurendra Nath Bhardwaj Associate Professor IILM, Graduate School of Management, Greater Noida. Email: [email_address]
  2. 2. Issues for discussion <ul><li>Difference between Money Market & Capital Market </li></ul><ul><li>Effect of Monetary Policy on Money Market </li></ul><ul><li>Legal aspects of Money & Capital Market </li></ul>
  3. 3. Agenda <ul><li>An attempt to get answers of- </li></ul><ul><li>What are the various components of a Financial System? </li></ul><ul><li>What are contemporary issues of Financial System? </li></ul>
  4. 4. <ul><li>A financial System may be defined as a set of- </li></ul><ul><li>Institutions </li></ul><ul><li>Instruments & </li></ul><ul><li>Markets </li></ul><ul><li>Which foster saving & channels them to their most efficient use. </li></ul>
  5. 5. Well developed financial markets are required for creating a balanced financial system in which both financial markets and other financial institutions play important role. Markets, Institutions & instruments are the prime movers of economic growth -Prof. Olsons
  6. 6. <ul><li>A financial market consists of investors or buyers, sellers, dealers and brokers and does not refer to a physical location. </li></ul><ul><li>The participants in the market are linked by formal trading rules and communication networks for originating and trading financial securities. </li></ul>
  7. 7. Functions of Financial Market <ul><li>Facilitate transfer of funds from surplus sector (Lenders) to deficit sectors (borrowers). </li></ul><ul><li>Make market operations be free, fair, competitive and transparent. </li></ul>
  8. 8. <ul><li>Important functions of financial markets are- </li></ul><ul><li>Price discovery process, which results from the inter-action of buyers & sellers in the market when they trade assets. </li></ul><ul><li>Provision of liquidity by providing a mechanism for an investor to sell financial assets. </li></ul><ul><li>Low cost transactions & informations. </li></ul>
  9. 9. Types of markets <ul><li>Money Market </li></ul><ul><li>Capital Market </li></ul>
  10. 10. Capital Market <ul><li>Capital market consists of - </li></ul><ul><li>Primary Market </li></ul><ul><li>Secondary Market </li></ul>
  11. 11. Primary Market <ul><li>It deals with the issue of new instruments by the corporate sector. </li></ul><ul><li>The major player in the primary markets are the merchant/ Investment banker, mutual funds, financial institutions, foreign institutional investors and individual investors. </li></ul>
  12. 12. Secondary Market <ul><li>It provides continuous market for the securities already issued to be bought & sold in volume with little variation in the current market prices. </li></ul><ul><li>The players in the secondary market are the brokers, the mutual funds, financial institutions, foreign institutional investors and individual investors. </li></ul>
  13. 13. With a view to protect investor's interest and orderly development of capital market, Securities & Exchange Board (SEBI), regulates the capital market and intermediaries.
  14. 14. <ul><li>Thanks </li></ul>

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