The document discusses the key constituents of a financial system in India including money markets and capital markets. The money market is for low-risk, short-term instruments up to one year and is regulated by the Reserve Bank of India. The capital market finances long-term investments over one year and is regulated by the Securities and Exchange Board of India. It includes equity, debt, and hybrid instruments traded on primary and secondary markets. The government securities market and industrial securities market make up the capital markets.

1. FINANCIAL SYSTEMS

2. Constituents of a Financial System

3. Money Market- Money Market- The money market is a wholesale debt market for low-risk, highly-liquid, short-term instrument. Funds are available in this market for periods ranging from a single day up to a year. This market is dominated mostly by government, banks and financial institutions In India money market is regulated by Reserve bank of India

4. FINANCIAL INSTRUMENTS Money Market Instruments Some of the important money market instruments are briefly discussed below; 1. Call/Notice Money 2. Treasury Bills 3. Term Money 4. Certificate of Deposit 5. Commercial Papers

5. Capital Market Capital Market - The capital market is designed to finance the long-term investments . The transactions taking place in this market will be for periods over a year. Securities Exchange Board of India (SEBI) [ www.sebi.gov.in ] regulates capital market

6. FINANCIAL INSTRUMENTS Capital Market Instruments Capital market consists of primary market and secondary market 1.Equity segment -Equity shares, preference shares, convertible preference shares, non-convertible preference shares etc 2. Debt segment -debentures, zero coupon bonds, deep discount bonds etc. 3. Hybrid Instruments- convertible debentures, warrants etc

7. Indian Capital Markets Gilt- Edged Market- Government securities market Industrial Securities Market- Primary market and Secondary market.

8. Gilt- Edged Market- Is the market for government and semi government securities Features- stable in value and are much sought after by banks Guaranteed return on investments No speculations in securities

9. Industrial Securities Market- A market for industrial securities Comprises the following segments- primary market and secondary market

10. Primary market Also known as new issues market It is a market for raising fresh capital Modes of raising capital in the primary market- Public issue Rights issue Private placement

11. Secondary market A market which deals with the securities that have been already issued The activity of buying and selling of securities in a secondary market are carried through the mechanism of stock exchange