The document discusses the structure, functions, and components of the Indian financial system, highlighting the roles of financial institutions and markets in transferring capital. It covers key reforms since 1991, including changes in banking, stock markets, and the introduction of the Insolvency and Bankruptcy Code. Additionally, it emphasizes the financial system's contribution to economic development and the importance of a strong regulatory environment.

1. Chap 1
Financial Institution
Market & Services
Introduction

2. The Indian Financial System, 2e -- Pathak
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2008
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India
Pvt.
Ltd
Topics to be Covered
 Meaning
 – Structure
 - Functions
 - Components of financial system
 - Financial system and economic development
 - Reforms in Financial Sector in India

3. Transferring Capital
 Direct Transfer of Funds
saver

4. Transferring Capital
 Direct Transfer of Funds
saver
firm

5. Cash
Transferring Capital
 Direct Transfer of Funds
saver
firm

6. Cash
Securities
Transferring Capital
 Direct Transfer of Funds
saver
firm

7. Suppliers of Funds
Individuals
Businesses
Governments
Demanders of Funds
Individuals
Businesses
Governments
THE FINANCIAL SYSTEM

8. Suppliers of Funds
Individuals
Businesses
Governments
Demanders of Funds
Individuals
Businesses
Governments
THE FINANCIAL SYSTEM
Private Placement
Funds
Securities

9. The Indian Financial System, 2e -- Pathak
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Private Placement
 A private placement is the sale of
securities to a relatively small number
of select investors as a way of raising
capital.
A private placement is different from a
public issue, in which securities are
made available for sale on the open
market to any type of investor.

10. Transferring Capital
 Indirect Transfer using a Financial
Intermediary
saver

11. Transferring Capital
 Indirect Transfer using a Financial
Intermediary
financial
intermediary
saver

12. Funds
Transferring Capital
 Indirect Transfer using a Financial
Intermediary
financial
intermediary
saver

13. Funds
Transferring Capital
 Indirect Transfer using a Financial
Intermediary
financial
intermediary firm
saver

14. Funds
Transferring Capital
 Indirect Transfer using a Financial
Intermediary
Funds
financial
intermediary firm
saver

15. Funds
Transferring Capital
 Indirect Transfer using a Financial
Intermediary
Funds
financial
intermediary firm
saver
Firm
Securities

16. Funds
Transferring Capital
 Indirect Transfer using a Financial
Intermediary
Intermediary
Securities
Funds
Firm
Securities
financial
intermediary firm
saver

17. Financial Institutions
Commercial Banks
Insurance Companies
Mutual Funds
Provident Funds
Non Banking Financial
Institutions
Suppliers of Funds
Individuals
Businesses
Governments
Demanders of Funds
Individuals
Businesses
Governments
Funds
Deposits/shares
Funds
Securities
THE FINANCIAL SYSTEM
Private Placement
Funds
Securities

18. The Indian Financial System, 2e -- Pathak
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Financial Intermediate
 A financial intermediary is an entity
that acts as the middleman between
two parties in a financial transaction,
such as a commercial
bank, investment banks, mutual
funds and pension funds.

19. Transferring Capital
 Direct Transfer using Financial
Market
saver

20. Transferring Capital
 Direct Transfer through Financial
Markets
saver
firm
Financial Markets

21. Funds
Transferring Capital
 Direct Transfer through Financial
Markets
saver
firm
Financial Markets

22. Funds
Transferring Capital
 Direct Transfer through Financial
Markets
Funds
saver
firm
Financial Markets

23. Funds
Transferring Capital
 Direct Transfer through Financial
Markets
Funds
Securities
saver
firm
Financial Markets

24. Funds
Transferring Capital
 Direct Transfer through Financial
Markets
Securities
Funds
Securities
saver
firm
Financial Markets

25. Financial Institutions
Commercial Banks
Insurance Companies
Mutual Funds
Provident Funds
Non Banking Financial
Institutions
Suppliers of Funds
Individuals
Businesses
Governments
Financial Markets
Money Market
Capital Market
Demanders of Funds
Individuals
Businesses
Governments
Private Placement
Funds
Deposits/shares
Funds
Securities
Funds
Loans
Securities
Funds
Securities
THE FINANCIAL SYSTEM
Funds

26. Financial Institutions
Commercial Banks
Insurance Companies
Mutual Funds
Provident Funds
Non Banking Financial
Institutions
Suppliers of Funds
Individuals
Businesses
Governments
Financial Markets
Money Market
Capital Market
Demanders of Funds
Individuals
Businesses
Governments
Private Placement
Funds
Deposits/shares
Funds
Securities
Funds
Loans
Funds
Securities
Funds Securities
Funds
Securities
THE FINANCIAL SYSTEM

27. The Indian Financial System, 2e -- Pathak
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Meaning of Financial System
 A financial system is an economic
arrangement wherein financial institutions
facilitate the transfer of funds and assets
between borrowers, lenders, and investors.
Its goal is to efficiently distribute economic
resources to promote economic growth and
generate a return on investment (ROI) for
market participants

28.  Financial Institutions
 Financial Markets
 Financial Instruments
 Financial Services
Components of the Financial
System

29.  Formal financial system – organized,
institutional and regulated
 Informal financial system
Advantages
Low transaction costs
Minimum default risk
Disadvantages
Wide range of interest rates
Higher rates of interest
Unregulated
Types of Financial
System

30. The Indian Financial System, 2e -- Pathak
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FINANCIAL INSTITUTIONS AND ITS ENVIRONMENT
INTERNATIONAL ENVIRONMENT, INTERNATIONAL INSTITUTIONS
PARLIAMENT, ACTS,REGULATIONS
STATE BUDGET
SUPERVISORY INSTITUTIONS,
AUTHORITIES
CENTRAL BANK
FINANCIAL
INSTITUTIONS

31. The Indian Financial System, 2e -- Pathak
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2008
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Financial Institutions

32. 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

33. Financial Instruments
Types
 Primary
 Secondary
Distinct Features
 Marketable
 Tradable
 Tailor-made

34. Financial Services
Major Categories
Funds intermediation
Payments mechanism
Provision of liquidity
Risk management
Financial engineering- Financial engineers use various
mathematical tools in order to create new investment strategies. The
new products created by financial engineers can serve as solutions
to problems or as ways to maximize returns from potential
investment opportunities.

35. Mobilise and allocate savings
Monitor corporate performance
Provide payment and settlement systems
Optimum allocation of risk bearing and
reduction
Disseminate price related information
Offer portfolio adjustment facility
Lower the cost of transactions
Promote the process of financial deepening
and broadening
Functions of Financial
System

36. 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

37. The Indian Financial System, 2e -- Pathak
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Role of Financial System in
economic Development
 Saving –Investment Relationship
 Growth in the capital market
 Foreign Exchange Securities
 Govt securities.
 Trade Development
 Economic Growth
 Balance Economic Development.

38. The Indian Financial System, 2e -- Pathak
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Indian Financial System

39. The Indian Financial System, 2e -- Pathak
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Lehman Bank Collapse

40. The Indian Financial System, 2e -- Pathak
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Financial System and Economic
Development
 https://www.drishtiias.com/daily-updat
es/daily-news-editorials/sri-lanka-s-cri
sis
 https://www.youtube.com/watch?v=0
1xYpDhYwGg

41. The Indian Financial System, 2e -- Pathak
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Reforms in Indian Financial
System
 Reforms in Stock Market
 Reforms in Banking Sector
 Reforms in Insolvency and Bankruptcy
code.

42. The Indian Financial System, 2e -- Pathak
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Stock Market
 The Securities and Exchange Board of
India (SEBI) that was created in 1988,
acquired legal standing in 1993.
 In November 1994, the National Stock
Exchange (NSE), opened for business. This
was India’s second stock exchange, the
first one being the Bombay Stock
Exchange (BSE)

43. The Indian Financial System, 2e -- Pathak
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-Contd-
 Also in 1994, all exchanges in India
switched from floor trading to
anonymous electronic trading.
 Also in 1996, dematerialisation of shares
took place. Today nearly all equity
settlement takes place at the depository.

44. The Indian Financial System, 2e -- Pathak
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-Contd-
 In 2000 and 2001, equity derivatives
trading started with index derivatives and
derivatives on some individual stocks.

45. The Indian Financial System, 2e -- Pathak
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Brain at Work
Statement : Government has spoiled many top
ranking financial institutions by appointing
bureaucrats as Directors of these institutions.

46. The Indian Financial System, 2e -- Pathak
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Conclusions
1. Government should appoint Directors of the
financial institutes taking into consideration
the expertise of the person in the area of
finance.
2. The Director of the financial institute should
have expertise commensurate with the
financial work carried out by the institute.

47. The Indian Financial System, 2e -- Pathak
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Options
 Only I follows
 Only II follows
 Either I or II follows
 Neither I or II follows
 Both I and II follows

48. The Indian Financial System, 2e -- Pathak
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Ans
 Both I & II follows.

49. The Indian Financial System, 2e -- Pathak
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Brain at Work
 Statements: The
Government run
company had asked
its employees to
declare their income
and assets but it has
been strongly
resisted by
employees union and
no employee is going
to declare his
income.
CONCLUSION
1.The employees of this
company do not seem to
have any additional
undisclosed income
besides their salary.
2.The employees union
wants all senior officers
to declare their income
first.

50. The Indian Financial System, 2e -- Pathak
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Options
 Only I follows
 Only II follows
 Either I or II follows
 Neither I or II follows
 Both I and II follows

51. The Indian Financial System, 2e -- Pathak
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Ans
 Neither I nor II follows.

52. The Indian Financial System, 2e -- Pathak
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Reforms in Banking Sector
 new private banks were given licenses
and foreign banks were permitted entry.
 several reform initiatives were
implemented based on the Narasimham
Committee reports (1991, 1998). These
brought about changes in the asset
classification and income recognition
norms of the banks.

53. The Indian Financial System, 2e -- Pathak
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Reforms since 1991
 Reduction in Statutory Liquidity Ratio
(SLR) and Cash Reserve Ratio (CRR)
 End of Administered Interest Rate
Regime
 Prudential Norms: High Capital
Adequacy Ratio
 Competitive Financial System

54. The Indian Financial System, 2e -- Pathak
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-Contd-
 A foreign bank may operate in India
through any one of three channels,
namely.
 Non-Performing Assets (NPA) and
Income Recognition Norm
 Elimination of Direct Credit Controls

55. The Indian Financial System, 2e -- Pathak
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Contd
 The RBI (Reserve Bank of India) has issued
specialised banking licenses to new
categories of banks namely small finance
banks and payments banks.
 Promoting Micro-Finance to Increase
Financial Inclusion.
 Setting up of Rural Infrastructure
Development Fund (RIDF)

56. The Indian Financial System, 2e -- Pathak
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Insolvency and Bankruptcy
Reforms
 The Insolvency and Bankruptcy Act (IBC)
was enacted in 2016. It is a landmark law
in that for the first time, there is a
proposal to create a well-defined,
comprehensive framework for resolving
insolvencies and bankruptcies in non-
financial firms.

57. The Indian Financial System, 2e -- Pathak
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-Contd-
 The law also made the National Company
Law Tribunal (NCLT) the adjudicating
authority for bankruptcy resolution.