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1. ST. XAVIER’S COLLEGE OF
MANAGEMENT & TECHNOLOGY, PATNA
FISM PRESENTATION
BY – GROUP 7

2. TOPIC :
A ppt on RBI & the Indian financial
system

3. CONTENTS
1. Indian Financial System
2. Structure of Indian Financial System
3. Components of Financial System
4. Functions/ Importance/Roles of Financial System
5. Growth & Development of Financial System
6. Basic Element of a well functioning Financial System
7. Financial System Design
8. The Reserve Bank of India
9. Objective of the Reserve Bank of India
10. Organisation of the Reserve Bank of India
11. Main functions of the Reserve Bank of India
12. Role of the Reserve Bank of India

4. INDIAN FINANCIAL SYSTEM
Financial system is a set of institutions instruments and
markets which fosters saving and channels them to their most
efficient use.
A financial system is a complex, well integrated set of sub system
of financial market , financial institution and financial services
that facilitates effective allocation and mobilization of
available resources.
 Formal financial system
 Informal financial system

6. COMPONENTS OF FINANCIAL SYSTEM
1. FINANCIAL MARKET
 Capital market
 Money market
 Foreign Exchange market
 Credit market
2. FINANCIAL INSTITUTION
 Banking institution
 Non Banking institution

7. 3. FINANCIAL INSTRUMENTS
 Long term – share , debentures
 Short term – promissory notes, bills of exchange
4. FINANCIAL SERVICES
 Banking services – commercial banks, development banks
 Non banking services – LIC, GIC
 Other services – ATM , Debit cards, credit cards

8. FUNCTIONS/ IMPORTANCE/ROLES
OF FINANCIAL SYSTEM
1. It links the savers & investors
2. It helps to monitor corporate performance.
3. It provides a mechanism for managing uncertainty and controlling risk.
4. It provides a mechanism for the transfer of resources across geographical
boundaries
5. It offers portfolio adjustment facilities
6. It helps in lowering the transaction costs and increase returns.
7. It promotes the process of capital formation.
8. It helps in promoting the process of financial deepening and broadening.

9. GROWTH & DEVELOPMENT OF
INDIAN FINANCIAL SYSTEM
1. Nationalisation of financial institutions:
2. Establishment of Development Banks
3. Establishment of institution for housing finance:
4. Establishment of Stock Holding Corporation of India (SHCIL):
5. Establishment of mutual funds and venture capital institutions:
6. New Economic Policy of 1991

10. BASIC ELEMENTS OF A WELL
FUNCTIONING FINANCIAL SYSTEM
 A strong legal and regulatory environment
 Stable money
 Sound public finances and public debt management
 A central bank
 Sound banking system
 Information system
 Well functioning securities market

11. WEAKNESS OF INDIAN FINANCIAL
SYSTEM
1.Lack of co-ordination among financial
institutions
2. Dominance of development banks in
industrial finance
3.Inactive and erratic capital market
4. Unhealthy financial practices
5. Monopolistic market structures

12. FINANCIAL SYSTEM DESIGNS
 Bank based
 Market Based

13.  Market based financial system
Advantages
 Provides attractive terms to both investors & borrowers
 Facilitates diversification
 Allows risk-sharing
 Allows financing of new technologies
Disadvantages
 Prone to instability
 Exposure to market risk
 Free rider problem

14.  Bank based financial system
Advantages
 Close relationship with parties
 Provides tailor made contracts
 Efficient intertemporal risk sharing
 No free- rider problem
Drawbacks
 Retards innovation and growth
 Impedes competition

15. THE RESERVE BANK OF INDIA
The reserve bank of India was established by legislation in 1934 through the
Reserve bank of India Act 1934. It started functioning from April 1, 1935.
Its central office is at Mumbai since 1937. Though originally privately
owned, since nationalization in 1949, it is fully owned by the government
of India. The reserve bank of India is the central bank of our country.

16. OBJECTIVES OF THE RESERVE
BANK
 To secure monetary stability within the
country
 To operate the currency and credit system to
the advantages of the country.

17. MAIN FUNCTIONS OF THE RBI
 To formulate, implement, and monitor the monetary policy
 To prescribe broad parameters of banking operations
 To facilitate external trade
 To issue and exchange or destroy currency and coins
 To perform a wide range of promotional functions
 To perform merchant banking functions for the central and the state
governments
 To maintain banking accounts of all scheduled banks.

18. ORGANISATION OF THE RESERVE
BANK
 Central Boards
 Official Directors
 Non- Official Directors
 Local Boards

19. ROLE OF THE RBI
 Monetary authority of the country
 Regulators and supervisor of the financial system
 Banker to the government
 Manager of exchange control
 Issuer of currency
 Developmental role
 Banker to the banks