Banking & non banking financial institutions


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Banking & non banking financial institutions

  1. 1. Banking and Non-Banking Financial Institutions
  2. 2. Financial institutions in India Finance refers to funds needed to carry out production activities. Funds are needed for meeting current requirements or day to day expenses and for buying capital goods. A business unit, factory or a workshop needs funds for paying wages and salaries for buying raw materials. Institution that meet all such requirements of finance are called financial institutions.
  3. 3. Non-Banking financial Institutions.
Non-banking Financial Institutions carry outfinancing activities but their resources arenot directly obtained from the savers asdebt. Instead, these Institutions mobilize thepublic savings for rendering other financialservices including investment.All such Institutions are financialintermediaries and when they lend, they areknown as Non-Banking FinancialIntermediaries (NBFIs) or InvestmentInstitutions. Eg: UNIT TRUST OF INDIA LIFE INSURANCE CORPORATION (LIC) GENERAL INSURANCE CORPORATION (GIC)
  4. 4. Commercial Banks Commercial banks offer a wide range of corporate financial services that address the specific needs of private enterprise. They provide deposit, loan and trading facilities but will not service investment activities in financial markets. The term commercial bank is used to differentiate these banks from investment banks, which are primarily engaged in the financial markets. Commercial banks are also differentiated from retail banks that cater to individual clients only. For eg: Citigroup HSBC Bank
  5. 5. FUNCTIONS OF A COMMERCIAL BANK:Primary Functions: Secondary Functions:I- ACCEPTING DEPOSITS: I- AGENCY SERVICES.a) Saving Account Deposits. II- GENERAL UTILITYb) Fixed Deposits. SERVICES.3) Call Deposits.II- PROVIDING LOADS ANDADVANCES:a) Call loans.b) Short Term loans.c) Medium Term loans.d) Long Term loans.
  6. 6. CENTRAL BANKS: A central bank is a public institution that usually issues the currency, regulates the money supply and controls the interest rates in a country. Central Banks also often oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on printing the national currency, which usually serves as the nations legal tender. EG: RBI
  7. 7.  The Reserve Bank of India was established in 1935 as a private shareholders bank. It is the apex bank in the banking structure and leader of the money market. The functions of RBI are as follows: Monopoly of note issue: The RBI has the sole right of note issue. All currency notes except 1 rupee note and coins are issued by the Issue Department of the Central Bank. Banker to the Government: The RBI is the banker agent and advisor to the Government. It accepts deposits and makes payment on behalf of the Government. Bankers Bank: RBI acts as a banker for all commercial banks. All scheduled banks come under the direct control of RBI. Credit control: The central bank uses both quantitative and qualitative weapons to control credit. Credit control is said to be one of the principal functions
  8. 8.  MUTUAL FUNDS SECTOR: It is defined as an intermediary which performs the function of buying and selling securities on behalf of its unit holders. They are also known as thematic funds. Mutual funds have been a significant source of investment in both government and corporate securities. Thus, mutual fund collects money from investors and invest the funds on behalf of the unit holders. SEBI regulates the functioning of mutual funds, and it requires that all MFs should be established as trusts under the Indian Trusts Act.
  9. 9.  Mutual Funds offer a variety of schemes: Open ended funds Under this, the units are sold and redeemed on a continuous basis. The price is determined on the basis of the Net asset value of the fund. Close ended funds Here, fixed number of units are sold at the time of offering the issue of the public. They have a lock-in period and offer assured dividend. Venture capital funds Specialized funds Fund of funds
  10. 10.  Association of Mutual Funds in India (AMFI) has got its new chairman. This position at AMFI was vacant since departure of U K Sinha from the association to become the chief at market regulatory body Security and Exchange Commission of India (SEBI). The new chairman at the AMFI is Milind Barve. Milind Barve is serving as Managing Director of HDFC Asset Management Company.
  11. 11.  INSURANCE SECTOR: The insurance sector is another major component of the non-banking financial sector. It provides security by reducing risk and promotes the welfare of the people. The funds collected by it in the form of premium are invested productivity. They provide long term capital to the industrial sector thereby help in industrialization of the economy. The first insurance company by name the oriental life insurance company was established in India in 1818. LIC came into existence in 1956 due to the nationalization of private and foreign insurers. The General Insurance Corporation was established in 1972.
  12. 12. Insurance Sector provides many insurance like health,general and life insurance etc.
  13. 13. Facts about LIC: The first insurance company by name the Oriental Life Insurance Company was established in India in 1818. Life Insurance Corporation Of India came into existence in 1956 due to the Nationalization of private and foreign Insurers. The insurance sector in India has gone through many changes and at present, is one of the emerging sectors of the economy promising faster growth.
  14. 14. Presented by:170.Shraddha Singh174. Rehman Khan175. Rudolph Pereira176. Pradeep Sode178. Sanah SuvarnaM.V.L.U College of Arts, Science and Commerce.