The document provides an overview of the Indian financial system, including its key components, structure, and roles. It discusses the various financial institutions that make up the system, such as banking institutions (commercial banks, cooperative banks, regional banks, foreign banks), non-banking financial institutions, regulatory authorities like SEBI and IRDA, and financial markets (organized vs unorganized, money market, capital market, government securities market, foreign exchange market). It also covers financial instruments, fund-based and non-fund based financial services, and the functions and importance of the financial system in India's economic development.

1. Presented By:
Amit Saini
Abilash Kumar Bhagat
Hemeshwar Verma
Nikita Agarwal
Indian Financial System

2. • Financial System
• Roles
• Features
• Functions
• Importance
• Structure
• Components
Contents:

3. • It may be defined as “a set of markets and Institutions to facilitate the
exchange of assets and risks.”
• It helps in the formation of capital.
• It meets the short term and long term capital needs of households,
corporate houses, Government and foreigners.
• To mobilize the savings in the form of money and invest them in the
productive manner.
Financial System:

4. • Savings.
• Loans.
• Investments.
• Government Expenditure.
• Resource Allocation.
• Business Growth.
Roles of Indian Financial System in Economic
Development:

5. • It plays a vital role in the Economic Development of a Country.
• It encourages both savings and investment.
• It links savers and investors.
• It helps in capital formation.
• It helps in allocation of risk.
• It facilitates expansion of financial markets.
Features:

6. Functions:
• To link the savers & investors.
• To inspire the operators to monitor the performance of the
investment.
• To achieve optimum allocation of risk bearing.
• Helps in promoting the process of financial deepening and
broadening.

7. • Facilitate economic/Industrial activity and growth.
• It helps accelerate the volume and rate of savings.
• Monitors the management of companies.
• Facilitates execution of monetary policy by the Central Bank.
• Facilitates evaluation of assets.
Importance:

8. Structure:

9. • Financial institutions are those organizations that are involved in
providing various types of financial services to their customers. The
financial institutions are controlled and supervised by the rules and
regulations by government authorities.
• Types: 1. Banking Institutions.
2. Non-Banking Financial Institutions (NBFI).
Financial Institutions:

10. • Bank is financial institutions which accepts deposits from the public
and grant loan to the public on their demand.
• Types: 1. Commercial Banks.
2. Co-operative Banks.
3. Regional Banks.
4. Foreign Banks.
Banking Institutions:

11. • A commercial bank is a financial institution which performs the
functions of accepting deposits from the general public and giving
loans for investment with the aim of earning profit.
• Commercial banks are profit-seeking institutions, i.e., they do banking
business to earn profit.
• Types: 1. Private Banks.
2. Public Banks.
Commercial Banks:

12. • A bank that holds deposits, makes loans and provides other financial
services to co-operatives and member-owned organizations.
• It involves autonomous association of persons united voluntarily to
meet their common economic, social and cultural needs.
• It includes: 1. State Co-operative Banks (SCBs).
2. Urban Co-operative Banks (UCBS).
Co-operative Banks:

13. • A depository institution, i.e. a bank, savings and loan, or credit union,
which is larger than a community bank, which operates below the
state level, but smaller than a money center bank, which operates
either nationally or internationally.
Regional Banks:

14. • A foreign branch bank is a type of foreign bank that is obligated to
follow the regulations of both the home and host countries. Because
the foreign branch bank’s loan limits are based on the parent bank's
capital, foreign banks can provide more loans than subsidiary banks.
Foreign Banks:

15. • NBFC are financial institutions that provide certain types
of banking services, but do not hold a banking license.
• NBFCs in India:
1. Industrial Finance Corporation of India (IFCI).
2. Industrial Development Bank of India (IDBI).
3. State Financial Corporations (SFCs).
4. Export-Import Bank of India (EXIM).
5. National Bank for Agriculture and Rural Development (NABARD).
6. Small Industrial Development Bank of India (SIDBI).
7. Housing Development Financial Corporation (HDFC).
Non-Banking Financial Institutions (NBFI):

16. • Established on April 12, 1992.
• Regulator of capital markets in India under a resolution of the
Government of India.
• To protect the interests of investors in securities and to promote the
development of, and to regulate the securities market.
• It includes: 1. Mutual Funds.
2. Other Capital Market Entities:
a) Brokerage.
b) Stock Exchange.
c) Foreign Institutional Investors (FII).
Securities and Exchange Board of India
(SEBI)

17. • Established in 1999.
• Promoting competition to enhance customer satisfaction with
increased consumer choice and lower premiums while ensuring the
financial security of the insurance market.
• Protecting policyholder interests.
• It includes: 1. Life Insurance.
2. Non-Life Insurance.
Insurance Regulatory and Development
Authority (IRDA)

18. • Established by Government of India on August 23, 2003.
• Promoting old age income security by establishing, developing and
regulating pension funds and protects the interests of subscribers to
schemes of pension funds and related matters.
Pension Fund Regulatory and Development
Authority (PFRDA)

19. • A location where buyers and sellers meet to exchange goods and
services at prices determined by the forces of supply and demand.
• Types: 1. Unorganized Markets.
2. Organized Markets.
Financial Markets:

20. • It is not incorporated with the government and thus, no rules are
required to be followed.
• The sector that comprises of small scale enterprises or units and are
not registered with the government.
• It includes: 1. Money Lenders.
2. Local Bankers.
3. Traders.
4. Pawn Brokers.
Unorganized Markets:

21. • It is one that is incorporated with the appropriate authority or
government and follow its rules and regulations.
• The sector in which the employment terms are fixed and employees
have assured work is organized sector.
• Types: 1. Capital Market.
2. Money Market.
3. Government Securities Market.
4. Foreign Exchange Market.
Organized Markets:

22. • A capital market is a financial market in which long-term debt or
equity-backed securities are bought and sold.
• Capital market is a market for financial investments that are direct or
indirect claims to capital.
• The part of a financial system concerned with raising capital by
dealing in shares, bonds, and other long-term investments.
• Types: 1. Primary Market.
2. Secondary Market.
Capital Market:

23. • Primary market is the part of capital market where issue of new
securities takes place. Public sector institutions, companies and
governments obtain funds for further growth of the company after
the sale of their securities or bonds in primary market.
• Its Instruments: 1. Initial Public Offering.
2. Investment Bankers.
3. Underwriting.
Primary Market:

24. • The secondary market is that market in which the buying and selling
of the previously issued securities is done.
• The transactions of the secondary market are generally done through
the medium of stock exchange.
• Its Instruments: 1. Stock Market.
2. Brokers.
Secondary Market:

25. • Money market refers to the market where borrowers and lenders
exchange short- term funds to solve their liquidity needs.
• Money market instruments are generally financial claims that have
low default risk, and are characterized by maturities under one year
and high marketability.
• Its Instruments: 1. Treasury Bills.
2. Call Money.
3. Trade Credit.
4. Commercial Bills.
Money Market:

26. • It is a market where the government securities are traded.
• This market is also known as Gilt-edge market.
• In India there are two kinds of governments securities i.e. short term
& long term.
Government Securities Market:

27. • It is a place where a foreign exchange is brought and sold.
• With the growth of population and development of nations and
political boundaries, it was found that each nation was self sufficient
in every thing.
• Each country has to dependent on others for goods and securities.
• As each country developed its own currency, the currency of one
country was not acceptable to another country, where a different
currency is in different circulation.
Foreign Exchange Market:

28. • A Financial Instrument is a legal document identified by cheques,
drafts, bonds, shares, bills of exchange, futures or options contracts
etc., which has a monetary value. The agreement is signed between
two parties regarding payment of money with specified conditions.
• Types: 1. Cash Instruments.
2. Derivatives Instrument.
Financial Instruments:

29. • A service refers to those facilities offered by institutions or
organizations in the finance industry which include banks, non-
banking financial components such as, stock brokerage firms,
insurance firms, mutual funds and foreign exchange etc.
• Types: 1. Fund Based.
2. Non-Fund Based.
Financial Services:

30. • The firm raises funds through debt, equity, deposits and the bank
invests the funds in securities or lends to those who are in need of
capital.
• Fund based financial services retained a certain portion of the
equities purchased.
• Fund Based Limit is a limit in which the company is getting money
actually (Cash).
Fund Based:

31. • It includes: 1. Leasing: FLCI, TCFCL, Grover Leasing ltd.
2. Hire Purchase: Vairams, Vikas.
3. Installment Payable System.
4. Venture Capital.
5. Private Equity.
6. Micro Finance.
7. Factoring.
8. Credit Card.
Cont’d:

32. • The services wherein financial institutions operates in specialized
fields to earn a substantial income in the form of fees or non-fund
based or dividends or brokerage on operations.
• Non-Fund based income does not involve much risk. But, it requires a
lot of expertise on the part of a financial company to offer such Non-
Fund based services.
Non-Fund Based:

33. • It includes: 1. Credit Rating.
2. Stock Broking Services.
3. Wealth Management.
4. Depository Services.
5. Merchant Banking.
6. Underwriting.
7. Portfolio Management Services.
8. Asset Securitization.
9. Issue Management.
Cont’d:

34. Thank You