2. INTRODUCTION
FINANCIAL SYSTEM
FINANCE SYSTEM
the source of providing set of interrelated parts or
funds for a particular activity. Subsystems working
together to achieve some
objectives
sources of raising revenue
for the activities and functions
of a Government.
3. FLOW OF FUNDS IN A SYSTEM
flow of funds
savings
incomes & financial claims
Seekers of
funds (firms&
government)
Suppliers of
funds OF
Fhouse holds)h
5. FEATURES OF FINANCIAL SYSTEM
Set of subsystems
Integrated and organised subsystems
Regulatory organisations
Operate in close cooperation
Mechanism to transfer savings into productive
investment
Each subsystem render services
6. FUNCTIONS OF FINANCIAL SYSTEM
Formation of Capital
Selection of Productive projects
Monitors the Performance
Payment mechanism & Settlement of debts
Transfer of funds
Control risk
Reduce the cost of finance to projects
Provision of liquidity
Regulates the activities
7. COMPONENTS OF FINANCIAL SYSTEM
FINANCIAL
SYSTEM
FINANCIAL
INSTITUTION
FINANCIAL
MARKET
FINANCIAL
INSTRUNMENTS
FINANCIAL
SERVICES
8. FINANCIAL MARKET
Place where people and organisation
wanting to borrow money are bought
together with those having surplus funds
Centre for buying and selling of financial
claims
May or may not have physical existence
Mobilize the savings
Economic development
9. FINANCIAL INSTRUMENTS
It represents claim against future
income and wealth of others.
Financial instruments possess
liquidity,
marketability
maturity period.
10. FINANCIAL INSTITUTION
Includes institutions and mechanisms which
Affect generation of savings by the community
Mobilisation of savings
Effective distribution of savings
Institutions are banks, insurance companies,
mutual funds- promote/mobilise savings
Individual investors, industrial and trading
companies- borrowers
12. MERCHANT BANKING
A Merchant bank is a financial institution primarily
engaged in internal finance and long term loans for
multinational corporations and governments.
It can also be used to describe the private equity
activities of banking.
Merchant
banks tend to advise corporations and wealthy
individuals on how to use their money
13. DEFINITION OF MERCHANT BANKING
The Notification of the Ministry of finance defines A
merchant banker as , any person who is engaged in
the business of
issue management either by making
arrangements regarding selling, buying or
subscribing to the securities as manager,
consultant, adviser or rendering corporate
advisory service in relation to such issue
management .
14. OBJECTIVES OF MERCHANT BANKING
Channelizing the financial surplus of the general
public into productive investments
avenues
• Co-coordinating the activities of various
intermediaries like the registrar, bankers,
advertising agency, printers, underwriters, brokers,
etc., to the share issue
• Ensuring the compliance with rules and
regulations governing the securities market
15. FUNCTIONS OF MERCHANT BANKING
Corporate counseling
Project Counseling
Capita l Structuring
Portfolio Management
Issue Management
Credit Syndication
Working capital
Venture Capital
Lease Finance
Fixed Deposits
16. REGULATORY FRAMEWORK
1.Is it mandatory for a merchant banker to register with the
SEBI?
2. Who is eligible to obtain registration as a merchant banker?
3. What are the various categories for which registration can be
obtained?
The categories for which registration may be granted are given
below:
Category I – to carry on the activity of issue management and to
act as adviser, consultant, manager, underwriter,
portfolio manager.
Category II - to act as adviser, consultant, co-manager,
underwriter, portfolio manager.
Category III - to act as underwriter, adviser or consultant to an
issue
Category IV – to act only as adviser or consultant to an issue
17. REGULATORY FRAMEWORK
What is the capital requirement for carrying on activity
as merchant banker?
The capital requirement depends upon the category.
The minimum net worth requirement for acting as
merchant banker is given below:
Category I – Rs. 5 crores
Category II – Rs, 50 lakhs
Category III – Rs. 20 lakhs
Category IV – Nil