This document provides an overview of India's financial system and its key components. It discusses that the financial system plays a vital role in a country's economic growth by channeling funds from savers to investors. The main components of India's financial system include financial institutions like banks, cooperative banks, and insurance companies; financial markets like the capital and money markets; financial instruments/assets like stocks, bonds, and currencies; and financial services like banking, loans, and wealth management. The document also outlines the functions and types of financial systems as well as the various institutions, markets, instruments, and services that make up India's formal financial system.

1. A Presentation On Financial
System And Its Components
GROUP- 4
NAME COLLEGE ROLL NO. UNIVERSITY ROLL NO.
NEELAM ACHARYA BC20-069 71R0020076
SOUMYA PARAMANIK BC20-120 71R0020153
BARSHA DAS BC20-015 71R0020027
SHRUTI DAS BC20-117 71R0020135

2. INTRODUCTION
• A financial system plays a vital role in the economic growth of a country. When the system functions properly, it
channelizes funds from savers to investors. By increasing productivity.
• Financial system is a concept derived from the wide concept of finance.
• The financial system is a system that allows the transfer of money between savers and investors.
• It plays an important role in global, national, regional, institutional and individual areas
Financial
system
Financial
market
Financial
institutions
Financial
instruments
Financial
service

3. MEANING
Financial system refers to all the securities, intermediaries and markets that exist to make transfers from savers to borrowers
possible .It includes households, corporate sectors, market and governments.
financial system is related with three terms: Money, Credit and Finance.
Financial
system
money
finance
credit
MONEY
• Medium of exchange or means of
payments
CREDIT
• Sum of money to be refunded with
interest
FINANCE
• Refers to monetary resources including
ownership securities and debts

4. Functions of Financial System
•Mobilization of savings/ Link between savers and investors
•Capital Formation
•Selection of Projects
•Payment Mechanism:
•Transfer of Resources/resources allocation
•Minimizing the Risk/ Risk management
•Reducing the Cost of Transactions

5. Types of Financial System
• Formal (organized) financial system: This is also known as organized financial system because it comes under the purview of Ministry of
Finance (MOF), Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), and regulatory bodies
• The informal financial system consists of individual money lenders, groups of persons operating as associations, partnership firms
consisting of local brokers’ pawn brokers and non-banking financial intermediaries such as finance, investment and chit fund companies.
These people have a system and they have their own rules on how they should function in their day-to-day activities.
Formal
financial
system
Financial
institutions
Financial
instruments
Financial
services
Financial
market

6. Components of Indian financial
system

7. Financial Institutions
• Meaning: Financial Institutions are business organizations serving as a link between savers and investors and so
help in the credit allocation process.
• The financial institutions are classified into term lending institutions, refinance institutions, investment institutions
and state level institutions. These are also to be classified into banking and non-banking institutions.
• Non- banking institutions
The examples of non banking institutions are as under:
a. Mutual funds
b. Provident and pension funds
c. Small savings Organizations
d. Life insurance corporation (LIC)
Banking
institutions
Commercial
bank
Cooperative
bank
Regional
rural bank
Foreign
bank

8. Financial markets
• Financial markets refers to any market place where buyers and sellers participate in trading of assets such as shares , bonds
, currencies and other financial instruments.
• Financial markets are essential players in the economic Development of the nation . They function as facilitating
originations in the savings-investment process and act as an effective part of a financial system.
• Types of financial markets :-
Financial
market
Capital
market
Primary
market
Secondary
market
Money
market

9. Financial instruments / assets
• In any financial transaction, these should be a creation or transfer of financial asset. Hence, the basic product of any financial system is the financial
asset. A financial asset is one which is used for production or consumption or for further creation of assets.
• Financial assets are defined as “an asset that derives value because of contractual claim”.
Characteristics of financial instruments
1. Liquidity
2. Marketing
3. Collateral value
4. Transferability
Classification of financial instruments
Term financial
instruments
Short term
Medium
term
Long term
Type based
security
primary
secondary
innovative

10. Financial services
• “Financial Services can be defined as the products and services offered by institutions like banks of various kinds for the
facilitation of various financial transactions and other related activities in the world of financial like loans, insurance, credit cards,
investment opportunities and money management as well as providing information on the stock market and other issues like
market trends.”
Classifications of financial services
leasing
factoring
Bills
discounting
loan
Fund
based
services
Portfolio
management
Loan
syndication
Corporate
counselling
Foreign
collaboration
Fee
based
services

11. Important Types of Financial Services
A. Banking services :-
• Keeping money safe while allowing withdrawals when needed
• Provide overdraft agreements .
• Issuance of cheque books .
• Provide wealth management and tax planning services.
B.Foreign exchange services :-
• Currency exchange
• Wire transfer
• Foreign currency banking