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FINANCIAL SYSTEM- FORMAL AND INFORMAL - AND INTRODUCTION TO NBFC

The document discusses non-banking financial companies (NBFCs) and microfinance in India. It provides definitions and explanations of key terms related to financial systems and institutions. Some of the main points covered include the evolution of India's financial system from a private sector-dominated system to a more regulated system with public sector institutions. The document also describes the components of India's formal financial system, including regulators, financial institutions, markets, instruments, and services. It discusses banks and the difference between banks and non-banking financial companies (NBFCs).

Education◦
Non-Banking Financial Companies (NBFCs) and Micro Finance. Prepared By: Mr.Mohammed Jasir PV Asst. Professor Dept. of Management Studies ICET, Mulavoor Contact: 9605 69 32 66
Topics • Evolution of Financial Services • Indian Financial System • Formal Financial System And Informal Financial System • Financial Institutions • Banking Companies • Difference Between Banks And NBFCs
Meaning of Financial Services • In general, all types of activities which are of financial nature may be regarded as financial services. • In a broad sense, the term financial services means mobilisation and allocation of savings. • Thus, it includes all activities involved in the transformation of savings into investment.
Meaning Contd.. • Financial services refer to services provided by the finance industry. • The finance industry consists of a broad range of organizations that deal with the management of money. • These organizations include banks, credit card companies, insurance companies, consumer finance companies, stock brokers, investment funds and some government sponsored enterprises.
Financial services; Definition • Financial services may be defined as the products and services offered by financial institutions for the facilitation of various financial transactions and other related activities.
Definition • Financial services can also be called financial intermediation. Financial intermediation is a process by which funds are mobilized from a large number of savers and make them available to all those who are in need of it and particularly to corporate customers
Functions of financial services 1.Facilitating transactions (exchange of goods and services) in the economy. 2. Mobilizing savings (for which the outlets would otherwise be much more limited). 3. Allocating capital funds (notably to finance productive investment). 4. Monitoring managers (so that the funds allocated will be spent as envisaged). 5. Transforming risk (reducing it through aggregation and enabling it to be carried by those more willing to bear it).
Meaning of Financial System • A financial system functions as an intermediary between savers and investors. It facilitates the flow of funds from the areas of surplus to the areas of deficit. It is concerned about the money, credit and finance. These three parts are very closely interrelated with each other and depend on each other.
Definition • In the worlds of Van Horne, “financial system allocates savings efficiently in an economy to ultimate users either for investment in real assets or for consumption”. • According to Prasanna Chandra, “financial system consists of a variety of institutions, markets and instruments related in a systematic manner and provide the principal means by which savings are transformed into investments”.
Functions of Financial System 1. Saving function 2. Liquidity function 3. Payment function 4. Risk function 5. Information function 6. Transfer function 7. Reformatory functions 8. Other functions
The Indian Financial System
Meaning of the Financial System A set of sub systems of financial institutions, markets, instruments and services Intermediates with the flow of funds between savers and borrowers. Facilitates transfer and allocation of scarce resources efficiently and effectively
3 Indian Financial System Formal or Organised Informal or Unorganized Regulators RBI MoF SEBI IRDA Financial institutions or Intermediaries Financial Markets Financial Instruments Financial Services • Money lenders • Local bankers • Traders • Landlords • Chit Funds
Formal and Informal Financial System • The financial systems of most developing countries are characterized by co-existence and co-operation between the formal and informal financial sectors. • The formal financial sector is characterized by the presence of an organized, institutional and regulated system which caters to the financial needs of the modern spheres of economy. • The informal financial sector is an unorganized, non- institutional and non-regulated system dealing with traditional and rural spheres of the economy. 4
Organised and un-organised Non- OrganizedOrganized • Money lenders • Local bankers • Traders • Landlords • Chit Funds • Regulators • Financial Institutions • Financial Markets • Financial services
Organized Indian Financial System Money Market Instrument Capital Market Instrument Forex Market Capital Market Money Market Credit Market Financial Instruments Financial Markets Financial Intermediaries Primary Market Secondary Market Regulators • RBI • MoF • SEBI • IRD
 Regulators Financial Institutions  Financial Markets  Financial Instruments  Financial Services Components of the Financial System
Regulators • The formal financial system comes under the regulations of the ministry of finance (MOF), reserve Bank of India (RBI), Securities and Exchange board of India (SEBI) and other regulatory bodies. 8
Financial Institutions 9 Financial Institutions (Intermediaries) Banking Institutions Non-Banking Institutions Mutual Funds Public sector Private Sector Insurance and Housing Finance companies
Types of Financial Institutions Banking: creators and purveyors of credit. Types Commercial Banks Cooperative Banks Non-banking: purveyors of credit Types Developmental financial institutions Mutual funds Insurance companies NBFCs
Functions of Financial Institutions Provide three transformation services Liability, asset and size transformation Maturity transformation Risk transformation
Financial Markets Types Money Market – A market for short-term debt instruments Capital Market – A market for long-term equity and debt instruments Segments  Primary Market – A market for new issues Secondary Market – A market for trading outstanding issues
Link Between Primary and Secondary Capital Market A buoyant secondary market is indispensable for the presence of a vibrant primary market. The secondary market provides a basis for the determination of prices of new issues.  Depth of the secondary market depends on the primary market.  Bunching of new issues affects prices in the secondary market.
Why Capital Markets Exist • Capital markets facilitate the transfer of capital (i.e. financial) assets from one owner to another. • They provide liquidity. – Liquidity refers to how easily an asset can be transferred without loss of value. • A side benefit of capital markets is that the transaction price provides a measure of the value of the asset.
Role of Capital Markets • Mobilization of Savings & acceleration of Capital Formation • Promotion of Industrial Growth • Raising of long term Capital • Ready & Continuous Markets • Proper Channelisation of Funds • Provision of a variety of Services
Financial Instruments 16 Financial Instruments Primary Securities Equity, Preference shares, Debt Secondary Securities Time deposits, MF units Insurance policies
Financial Services Major Categories Funds intermediation Payments mechanism Provision of liquidity Risk management Financial engineering
Key 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
Indian Financial System – An Overview PHASES * Upto 1951 Pvt. Sector *1951 to 1990 Public Sector *Early Nineties Privatisation *Present Status Globalisation 19
Pre 1951 1. Control of Money Lenders 2. No Laws / Total Private Sector 3. No Regulatory Bodies 4. Hardly any industrialization 5. Banks– Traditional lenders for Trade and that too short term 6. Main concentration on Traditional Agriculture 7. Narrow industrial securities market (i.e. old/Bullion/Metal but largely linked to London Market) 8. Absence of intermediatary institutions in long-term financing of industry 9. Industry had limited access to outside saving/resources 20
1951 to 1990 Moneylenders ruled till 1951. No worth-while Banks at that time. Industries depended upon their own money. 1951 onwards 5 years PLAN commenced. PVT. SECTORS TO PUBLIC SECTOR – MIXED ECONOMY 1st 5 year PLAN in 1951 – Planned Economic Process. As part of Alignment of Financial Systems – Priorities laid down by Govt. – Policies. MAIN Elements of Fin. Organisations i. Public ownership of Financial Institution ii. Strengthening of Institutional Structure iii. Protection to Investors iv. Participation in Corporate Management v. Organisational Deficiencies. 21
1951-1990 Nationalization RBI SBI LIC Banks 1948 1956 (take-over of Imperial Bank of India) 1956 (Merges of over 250 Life Insurance Companies) 1969 (14 major banks with Deposits of over Rs. 50 Crs.nationalised) 1980 (6 more Banks) Insurance 1972 (General Insurance Corp. GIC by New India, Oriental, united and National. 22
POST 1990s IMPORTANT DEVELOPMENTS Development Financial Institutions : (DFIs) • Started providing Working Capital also • Set up CREDIT RATING AGENCIES CRISIL(IPO IN 1993-94; standard & poor acquires 9.68%in 1996-97S & P acquires shares / holding up to 58.46%) ICRA Set up in 1991 by leading FIs/Banks/Fin. Ser. Cos. And Moody’s CARE Set-up by IFCI/Banks. FITCH a 100% subsidiary of FITCH Group. • Privatisation of DFI Reduction in Govt. holding & Public Participation e.g. IFCI Ltd., IDBI Ltd., ICICI Ltd. • Conversion into Banking / Merger into Banking Companies IDBI Bank & ICICI Bank • Issuance of Bond by DFIs without Govt.’s Guarantees to mobilize resources. • Reduction in holding of Govt. in Banks, i.e. Public Participation / Listing 23
POST 1990 INDUSTRIES • Rise & Growth of Service Sector industries. • Reliance & Dependence on technology. • E-mail & mobile made sea-change in communication, data collection etc. • Computerization – a catch phrase and inevitable need of an hour. • Dependent on Capital Market rather than only Debts dependency. • Scalability of operations through globally competitive size. • Broad basing of Board. • Professional Management. NBFC • NBFC under RBI governance to finance retail assets and mobilize small/medium sized savings. • Very large NBFCs are emerging (Shri Ram Transport Finance, Birla, Tata Finance, Sundaram Finance, Reliance Finance, DLF, Religare etc. 24
Indian Financial System • The Indian financial system can be broadly classified into formal (organised) financial system and the informal (unorganised) financial system. • The formal financial system comprises financial institutions, financial markets, financial instruments and financial services.
INTRODUCTION Access to finance is the ability of individuals or enterprises to obtain financial services, including credit, deposit, payment, insurance, and other risk management services. Accumulated evidence has shown that financial access promotes growth for enterprises through the provision of credit to both new and existing businesses. It benefits the economy in general by accelerating economic growth, intensifying competition, as well as boosting demand for labour. Financial services may be provided by a variety of financial intermediaries that are part of the financial system. A distinction is made between formal and informal providers of financial services, which is based primarily on whether there is a legal infrastructure that provides recourse to lenders and protection to depositors.
FORMAL FINANCIAL SECTOR . Formal financial institutions often ignore small farmers, lower income households, and small-scale enterprises in favour of large scale, well-off, literate clientele who can satisfy their stringent loan conditions. Complex administrative services procedures are beyond the knowledge and understanding of the rural masses and small savers. Formal financial institutions do not mobilize rural savings or small scale deposits. Formal sector of institutions are selective regarding their clients, so as to avoid clients who make only small deposits. Loan application procedures are very complex and needs reading and writing skills so that a file on the borrower maybe established. The transaction costs are high and the repayment costs are low. The formal sector regularly has loanable funds available. The formal sector keeps written records on the activities of the clients.
The formal financial system comprises of Ministry of Finance, RBI, SEBI and other regulatory bodies. The formal financial system comprises financial institutions, financial markets, financial instruments and financial services. The informal financial system consists of individual money lenders, groups of persons operating as funds or associations, partnership firms consisting of local brokers, pawn brokers, and non-banking financial intermediaries such as finance, investment and chit fund companies.
a) UNORGANISED MARKETS In these markets there are a number of money lenders, indigenous bankers, traders etc., who lend money to the public. Indigenous bankers also collect deposits from the public. There are also private finance companies, chit funds etc., whose activities are not controlled by the RBI. Recently the RBI has taken steps to bring private finance companies and chit funds under its strict control by issuing non-banking financial companies (Reserve Bank) Directions, 1998. The RBI has already taken some steps to bring the unorganized sector under the organized fold. They have not been successful. The regulations concerning their financial dealings are still inadequate and their financial instruments have not been standardized.
b) ORGANISED MARKETS In the organized markets, there are standardized rules and regulations governing their financial dealings. There is also a high degree of institutionalization and instrumentalisation. These markets are subject to strict supervision and control by the RBI or other regulatory bodies. These organized markets can be further classified into two. They are : ORGANISED MARKETS CAPITAL MARKET MONEY MARKET
Growth and Development of Indian Financial System 1. Nationalisation of financial institutions 2. Establishment of Development Banks 3. Establishment of Institution for Agricultural Development 4. Establishment of institution for housing finance 5. Establishment of Stock Holding Corporation of India (SHCIL) 6. Establishment of mutual funds and venture capital institutions 7. New Economic Policy of 1991
Weaknesses of Indian Financial System • Lack of co-ordination among financial institutions • Dominance of development banks in industrial finance • Inactive and erratic capital market • Unhealthy financial practices • Monopolistic market structures • Other factors – Banks and Financial Institutions have high level of NPA. – Government burdened with high level of domestic debt. – Cooperative banks are labelled with scams. – Investors confidence reduced in the public sector undertaking etc., – Financial illiteracy.
Structure of Indian Financial System • Financial structure refers to shape, components and their order in the financial system. • The Indian financial system can be broadly classified into formal (organised) financial system and the informal (unorganised) financial system. • The formal financial system comprises of Ministry of Finance, RBI, SEBI and other regulatory bodies. • The informal financial system consists of individual money lenders, groups of persons operating as funds or associations, partnership firms consisting of local brokers, pawn brokers, and non-banking financial intermediaries such as finance, investment and chit fund companies.
Components/ Constituents of Indian Financial system: The following are the four main components of Indian Financial system. 1. Financial institutions 2. Financial Markets 3. Financial Instruments/Assets/Securities 4. Financial Services.
Financial institutions: • Financial institutions are the intermediaries who facilitate smooth functioning of the financial system by making investors and borrowers meet. • They mobilize savings of the surplus units and allocate them in productive activities promising a better rate of return. • Financial institutions also provide services to entities seeking advice on various issues ranging from restructuring to diversification plans. • They provide whole range of services to the entities who want to raise funds from the markets elsewhere.
Financial Institutions • Financial Institutions are an important component of financial system. • Financial institutions are also known as financial intermediaries. • This is because they collect the savings from the savers and pass on the same to desired channels. • They provide finance for the development of various sectors of the economy such as industry, agriculture, service etc. Thus financial institutions play an important role in the financial system or economy.
MAJOR FUNCTIONS OF FINANCIAL INSTITUTIONS • The major functions of financial institutions, whether short-term of long-term, are to provide the maximum financial convenience to the public. This may be done in three ways: a) Promoting the overall savings of the economy by deepening and widening the financial structure b) Distributing the existing savings in amore efficient manner so that those in greater need; from the social and economic point of view, get priority in allotment; c) Creating credit and deposit money and facilitating the transactions of trade, production and distribution in furtherance of the economy.
FUNCTIONS OF FINANCIAL INSTITUTIONS
Specialized financial investment and banking intuitions are established on an ongoing process in India, as integral parts of a the capital market on account of the following reasons; A) Need for promotion services B) Need for higher capital formation C) Need for replacement finance; D) Need for organized capital market; E) Need for long-term finance; F) Planned economic development G) Finance for small business and H) Finance for priority sectors.
Role of Financial Institution in the Financial System • Financial institutions are financial intermediaries. • They provide the means and mechanism of transferring the resources from those whose income is more than expenditure to those who need these resources for productive purposes. • The savings of the savers will reach the borrowers through the financial intermediaries in the form of financial instruments such as shares, stocks, debentures, deposits, loans etc. Thus, they play the role of intermediate between the savings and investments.
Conti… • They provide safety, liquidity and ensure return for savings. • Financial institutions develop the saving habit among the people. • They mobilise huge amount of savings for the industrial development as a productive capital. The financial institutions supply capital to the small, medium and large scale industries in India in the form of capital, venture capital, and services to promote the industrial growth in India. • These contribute for the growth and development of industries, agriculture etc.
Classification of Financial Institutions All financial institutions in India may be broadly clarified into two 1. Banking Financial Institutions And 2. Non-banking Financial Institutions.
I. Banking Financial Institutions • Banking financial institutions are those financial institutions which carry on banking activities. • Banking business is carried on by these institutions after obtaining an approval under Banking Regulation Act, 1949 and RBI. • It accepts deposits from the public. It lends money to people engaged in commerce, industry and agriculture. • It finances foreign trade and deals in foreign exchange.
Conti… • It provides short, medium and long term credit. • It acts as an agent of RBI. • It deals in stocks and shares, trusteeship, executorships etc. • In short, the bank can be aptly described, as ‘department store of finance’ because it engages itself in every form of banking business.
Banking financial institutions mainly comprise of commercial banks. Commercial banks A Bank is a financial Institution whose main business is accepting deposits and lending loans. A Banker is a dealer of money and credit. Banking is an evolutionary concept i.e. expanding its network of operations. According to Banking revolutions Act 1949, the word BANKING has been defined as “Accepting for the purpose of lending and investment of deposits of money from the public repayable on demand or otherwise”.
Functions of Commercial Banks Globalisation transformed commercial banks into super markets of financial services. The important functions of commercial banks are explained below: A. Primary Functions i. Accepting Deposit ii. Lending Loans B. Secondary Functions i) Agency functions ii) General Utility Services iii) Credit Creation
I. Primary Functions These are further classified into 2 categories i) Accepting Deposits: - ii) Lending Loans Accepting Deposits: Deposits are the capital of banker. Therefore, it is first Primary function of the banker. He accepts deposits from those who can save and lend it to the needy borrowers. The size of operation of every bank is determined by size and nature of Deposits. To attract the saving from all sort (categories) of individuals,
Commercial banks accepts various types of deposits account they are: a) Fixed Deposits b) Current Deposits c) Saving Bank account d) Recurring Deposits
ii) Lending Loans:- The 2nd important function of the commercial bank is advancing loans. Bank accepts deposits to lend it at higher rate of interest. Every Commercial Bank keep the rate of interest on its deposit at lower level or less that what he charges on its loans which is as NIM (Net Interest Margin).
The banker advances different types of loans to the individual and firms. They are: - a) Overdraft b) Cash Credit c) Term Loan d) Discounting Bill
II) Secondary Functions i) Agency functions:- ii) General Utility Services: - iii) Credit Creation: -
i) Agency functions: Bankers act as an agent to the customers it means he performs certain functions on behalf of the customers such services are called Agency Services. Example: a) Bank pay electricity bill, water bill, Insurance Premium etc. b) They guide the customer in Task Planning. c) Bank provides safety locker facility. d) Pay salaries of customer’s employees.
ii) General Utility Services: - Bankers are the past of society. They offer: several services to general public Example. a) It provides cheap remittance (transfer) facilities. b) The banks issue traveller cheque for safe travelling to its customers. c) Banks accepts and collects foreign Bills of Exchanges. d)Other than these services the bankers also provide ATM services, Internet Banking, Electronic fund transfer (EFT), E-Banking to provide quick and proper services to its customers.
iii) Credit Creation: - • It is a unique function of Commercial Banks. • When a bank advances loan to its customer if doesn’t lend cash but opens an account in the borrowers name and credits the amount of loan to that account. • Thus, whenever a bank grants loan, it creates an equal amount of bank deposits. • Creation of deposits is called Credit Creation. • In simple words we can define Credit creation as multiple expansions of deposits. • Creation of such deposits will results an increase in the stock
II. Non-Banking Financial Institutions These are the financial institutions which are not permitted to carry on the banking activities as per Banking Regulation Act, 1949 and RBI regulations. These institutions have been established by special legislations to provide finance to specified categories of industries or persons.
Classification of Non-Banking Financial Institutions Non-banking financial institutions can be classified to three. They are : 1. All-India Financial Institutions or All-India Development Banks or Specialised Financial Institutions 2. State Level Financial Institutions 3. Investment Institutions
a. All-India Financial Institutions • Government of India has nationalised 20 commercial banks (excluding subsidiaries of SBI) so far. A number of financial institutions have also been set up to supply finance to industry and agriculture. • Unfortunately, these commercial banks and financial institutions fail to provide long term finance to industries. With the objective of giving term loans, Govt. has set up some specialised financial institutions. These specialised financial institutions are called development banks. • The development banks have to sacrifice business principles of conventional financial institutions and pay due regard to public interest so as to act as an instrument of economic development in conformity with national objectives, plans and priorities.
•Development banks are expected to act as catalysts in performing developmental and promotional functions. As regards banking obligations, it is supposed to undertake the primary task of providing financial assistance in different forms. •These are something more than pure financial institutions. Development banks are viewed as financial intermediary supplying medium and long term funds to bankable economic development projects and providing related services. •They are expected to mobilise large capital from other sources. Accordingly, the task of economic transformation and rapid industrialisation can best be handled only through development banks rather than through the normal process of governmental machinery.
Important development or specialised financial institutions may be discussed as follows: • IFCI • ICICI • SFCs • IDBI • KFC
Difference Between Banks And NBFCs
Continuation..
Difference between NBFCs & Banks • NBFCs perform functions similar to that of banks but there are a few differences- • Provides Banking services to People without holding a Bank license, • An NBFC cannot accept Demand Deposits, • An NBFC is not a part of the payment and settlement system and as such, • An NBFC cannot issue Cheques drawn on itself, and • Deposit insurance facility of the Deposit Insurance and Credit Guarantee Corporation is not available for NBFC depositors, unlike banks, • An NBFC is not required to maintain Reserve Ratios (CRR, SLR etc.) • An NBFC cannot indulge Primarily in Agricultural, Industrial Activity, Sale-Purchase, Construction of Immovable Property • Foreign Investment allowed up to 100%.
What is difference between banks & NBFCs? Banks and NBFCs are basically financial intermediaries. Banks are regulated under the Banking Regulation Act though most of the laws of Companies Act are also applicable to banks. NBFCs are registered under the Companies Act. Both are regulated by the RBI. Main differences between banks and NBFCs are: i. NBFC cannot accept demand deposits; ii. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself; iii. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
IV. Bank is a financial institution whose liabilities (i.e., deposits) are widely accepted as a means of payment in the settlement of debt. Non-bank financial intermediaries, on the other hand, are those institutions whose liabilities are not accepted as means of payment for the settlement of debt. V. Banks are termed as creators of credit through money multiplier activity whereas NBFCs are not.
Banking Company: Meaning, Licensing and Other Details Meaning: • According to Sec. 5 of the Banking Regulation Act, 1949, a banking company means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdrawn by Cheque, Draft, Order, or otherwise. • In short, a banking company means and includes any company which carries on the business or which transacts the business of banking in India. Therefore, any company which is engaged in trade or manufacture, which accepts deposits of money from the public for the purpose of financing its business only, shall not be deemed to carry on the business of banking.
Conti….. • No company can use as part of its name any of the words bank, banker or banking other than a banking company and, at the same time, no company can carry on business of banking in India unless and until it uses at least one of such words as part of its name.
Licensing of Banking Companies: • According to Sec. 22, no company shall carry on banking business in India unless it holds a license issued by the Reserve Bank of India. If the following conditions are satisfied, the Reserve Bank of India may grant a license: (i) “That the company is or will be in a position to pay its present and future depositors in full as their claims accrue; (ii) That the affairs of the company are not being or are not likely to be conducted in a manner detrimental to the interests of its present or future depositor; (iii) That, in the case of a foreign banking company, the carrying on of a banking business by such company in India will be in the public interest, that the Government or law of the country of its origin does not discriminate against Indian banking companies carrying on business in that country, and that it complies with all the requirements of law applicable to it”.
Cancellation of License: The Reserve Bank of India may cancel a license if: (i) The company ceases to carry on banking business in India; (ii) The company at any time fails to comply with any of the conditions on which the license was granted; or (iii) At any time, any of the conditions, on the satisfaction of which the Reserve Bank of India granted the license, has not been fulfilled.
Area of Business of Banking Companies: Sec. 6 of the Banking Regulation Act, 1949, lays down that the following business may also be carried on by a banking company, in addition to the usual banking business: (a) Acting as agents for any government or local authority or any other person or persons; the carrying on of agency business of any description including the clearing and forwarding of goods, giving of receipts and discharges and otherwise acting as an attorney on behalf of customers, but excluding the business of a managing agent of a company;
(b) Contracting for public and private loans and negotiating and issuing the same; (c) Selecting, insuring, guaranteeing, underwriting, participating, in managing and carrying out of any issue, public or private, of state, municipal or other loans or of shares, stock, debentures or debenture stock of any company, corporation or association and of lending of money for the purpose of any such issue; (d) Carrying on and transacting every kind of guarantee and indemnity business; (e) Managing, selling and realizing any property which may come into the possession of the company in satisfaction or part satisfaction of any of its claims;
(f) Acquiring or holding and generally dealing with any property, or title or interest in any such property which may form the security or part of the security for any loans or advances or which may be connected with any such security; (g) Undertaking and executing trusts; (h) Undertaking the administration of estates as executor, trustee or otherwise; (i) Establishing and supporting associations, institutions, funds, trusts, and convenience for the benefit of employees, ex-employees, their dependents and the general public;
(j) Acquiring, constructing, maintaining and altering any building or works necessary for the purpose of the banking company; (k) Selling, improving, managing, developing, exchanging, leasing, mortgaging, disposing-off or turning into account or otherwise dealing with all or any part of the property and rights of the company; (l) Acquiring and undertaking the whole or any part of the business of any person or company when such business is of a nature enumerated or described in Sec. 6.
(m) Doing such other things as are necessary for the efficient conduct of the above-named business, such as acquisition, construction, alteration etc. of any building or works necessary or convenient for the purpose of the company; and (n) Any other form’ of business which the Central Government may notify in the Official Gazette.
Key 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