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🞭 The word "system", in the term "financial system",
implies a set of complex and closely connected or
interlined institutions, agents, practices, markets,
transactions, claims, and liabilities in the
economy.
🞭 The financial system comprises of a variety of
intermediaries, market, and instruments. It provide
the principal means by which savings are
transformed into investments.
The economic development of any country depends
upon the well organised financial system
Financial system is a system which supplies the
necessary financial inputs for the production of
goods and service to improve the standard of life
and well being of the nation.
Financial system are of crucial significance to capital
formation. The process of capital formation involves three
distinct, although inter-related activities.
Saving : the ability by which claims to resources are set
aside and become available for the other purpose.
Finance : The activity by which claims to resources are
either assembled from those released by domestic
savings, obtained from abroad etc.
Investments : the activity by which resources are
actually committed to production.
1. Payment system
2. Pooling of funds
3. Transfer resources
4. Risk management
5. Price information for decentralised
decision making
6. Dealing with incentive problem
7. Reformatory function
🞭 Financial institutions are the participants in a
financial market.
🞭 They are business organizations dealing in
financial resources.
🞭 They collect resources by accepting deposits
from individuals and institutions and
lend them to trade, industry
and others.
🞭 On the basis of the nature of activities,
financial institutions may be classified as:
(a)Regulatory and promotional institutions,
(b)Banking institutions, and
(c)Non-banking institutions
Financial Institutions
Classification of Financial
Markets
🞭 Classification on the basis of the type of
financial claim
Debt market & Equity Market
🞭 Classification on the basis of maturity of
claims
Money market
Capital market
🞭 Classification on the basis of seasoning of
claim
Primary market
Secondary market
🞭 Classification on the basis of structure or
arrangements
Organised markets Unorganised markets
🞭 Classification on the basis of timing of
delivery
Cash / Spot market Forward/Future
market
🞭 Other types of financial market Foreign
exchange market
Derivatives market
🞭 Financial instruments are the financial assets,
securities and claims. They may be viewed as
financial assets and financial liabilities.
🞭 Financial assets represent claims for the
payment of a sum of money sometime in the
future (repayment of principal) and/or a periodic
payment in the form of interest ordividend.
🞭 Financial assets like deposits with banks, companies
and post offices, insurance policies, NSCs, provident
funds and pension funds are not tradable.
🞭 Securities (included in financialassets) like equity
shares and debentures, or government
securities and bonds are tradable. Hence
they are transferable.
Financial Instruments
🞭 The financial instruments may be capital
market instruments or money market
instruments or hybrid instruments.
🞭 The financial instruments that are used for
raising capital through the capital market are
known as capital market instruments.
🞭 The financial instruments that are used for
raising and supplying money in a short
period not exceeding one year through
money market are called money market
instruments.
🞭 Hybrid instruments are those instruments
which have both the features of equity and
debenture. Examples are convertible
debentures, warrants etc.
Characteristics of Financial
Instruments
a. Liquidity
b. Marketing
c. Collateral value
d. Transferability
e. Maturity period.
f. Transaction costs.
g. Risk
h. Future trading
🞭 Its objective is to intermediate and facilitate
financial transactions of individuals and
institutional investors
🞭 The financial services include all activities
connected with the transformation of savings
into investment.
🞭 Important financial services include lease
financing, hire purchase, instalment payment
systems, merchant banking, factoring,
forfaiting etc.
1.Hire Purchase Services
2. Leasing Services
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
overview - Indian Financial System.ppt
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overview - Indian Financial System.ppt

  • 1.
  • 2. 🞭 The word "system", in the term "financial system", implies a set of complex and closely connected or interlined institutions, agents, practices, markets, transactions, claims, and liabilities in the economy. 🞭 The financial system comprises of a variety of intermediaries, market, and instruments. It provide the principal means by which savings are transformed into investments.
  • 3. The economic development of any country depends upon the well organised financial system Financial system is a system which supplies the necessary financial inputs for the production of goods and service to improve the standard of life and well being of the nation.
  • 4. Financial system are of crucial significance to capital formation. The process of capital formation involves three distinct, although inter-related activities. Saving : the ability by which claims to resources are set aside and become available for the other purpose. Finance : The activity by which claims to resources are either assembled from those released by domestic savings, obtained from abroad etc. Investments : the activity by which resources are actually committed to production.
  • 5. 1. Payment system 2. Pooling of funds 3. Transfer resources 4. Risk management 5. Price information for decentralised decision making 6. Dealing with incentive problem 7. Reformatory function
  • 6.
  • 7.
  • 8. 🞭 Financial institutions are the participants in a financial market. 🞭 They are business organizations dealing in financial resources. 🞭 They collect resources by accepting deposits from individuals and institutions and lend them to trade, industry and others. 🞭 On the basis of the nature of activities, financial institutions may be classified as: (a)Regulatory and promotional institutions, (b)Banking institutions, and (c)Non-banking institutions Financial Institutions
  • 9.
  • 10.
  • 11. Classification of Financial Markets 🞭 Classification on the basis of the type of financial claim Debt market & Equity Market 🞭 Classification on the basis of maturity of claims Money market Capital market 🞭 Classification on the basis of seasoning of claim Primary market Secondary market
  • 12. 🞭 Classification on the basis of structure or arrangements Organised markets Unorganised markets 🞭 Classification on the basis of timing of delivery Cash / Spot market Forward/Future market 🞭 Other types of financial market Foreign exchange market Derivatives market
  • 13.
  • 14. 🞭 Financial instruments are the financial assets, securities and claims. They may be viewed as financial assets and financial liabilities. 🞭 Financial assets represent claims for the payment of a sum of money sometime in the future (repayment of principal) and/or a periodic payment in the form of interest ordividend. 🞭 Financial assets like deposits with banks, companies and post offices, insurance policies, NSCs, provident funds and pension funds are not tradable. 🞭 Securities (included in financialassets) like equity shares and debentures, or government securities and bonds are tradable. Hence they are transferable. Financial Instruments
  • 15. 🞭 The financial instruments may be capital market instruments or money market instruments or hybrid instruments. 🞭 The financial instruments that are used for raising capital through the capital market are known as capital market instruments. 🞭 The financial instruments that are used for raising and supplying money in a short period not exceeding one year through money market are called money market instruments. 🞭 Hybrid instruments are those instruments which have both the features of equity and debenture. Examples are convertible debentures, warrants etc.
  • 16. Characteristics of Financial Instruments a. Liquidity b. Marketing c. Collateral value d. Transferability e. Maturity period. f. Transaction costs. g. Risk h. Future trading
  • 17.
  • 18. 🞭 Its objective is to intermediate and facilitate financial transactions of individuals and institutional investors 🞭 The financial services include all activities connected with the transformation of savings into investment. 🞭 Important financial services include lease financing, hire purchase, instalment payment systems, merchant banking, factoring, forfaiting etc.
  • 19. 1.Hire Purchase Services 2. Leasing Services
  • 20. 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