Overview of Indian Financial System and Markets

FINANCIAL MARKETS
SYBBI
SEMESTER-III
Academic Year-20-21
MODULES
INDIAN FINANCIAL SYSTEM
FINANCIAL MARKETS IN INDIA
COMMODITY MARKET
DERIVATIVES MARKET
INDIAN FINANCIAL SYSTEM
OVERVIEW AND STRUCTURE OF
INDIAN FINANCIAL SYSTEM
The financial system enables lenders and borrowers to
exchange funds.
India has a financial system that is controlled by independent
regulators in the sectors of insurance, banking, capital
markets and various services sectors.
The financial system of an economy provides the way to
collect money from the people who have it and distribute it to
those who can use it best.
 So, the efficient allocation of economic resources is achieved
by a financial system that distributes money to those people
and for those purposes that will yield the best returns.
The financial system is composed of the products and services
provided by financial institutions, which includes banks,
insurance companies, pension funds, organized exchanges,
and the many other companies that serve to facilitate
economic transactions.
 Virtually all economic transactions are effected by one or
more of these financial institutions.
They create financial instruments, such as stocks and bonds,
pay interest on deposits, lend money to creditworthy
borrowers, and create and maintain the payment systems of
modern economies.
OBJECTIVES
These financial products and services are based on the following
fundamental objectives of any modern financial system:
 
I. To provide a payment system
II. To give time value to money
III. To offer products and services to reduce financial risk or to
compensate risk-taking for desirable objectives
IV. To collect and disperse information that allows the most efficient
allocation of economic resources
V. To create and maintain financial markets that provide prices, which
indicates how well investments are performing, determines the
subsequent allocation of resources, and to maintain economic stability
in the markets
FUNCTIONS AND ROLE OF FINANCIAL
SYSTEM
 
1.
Pooling of Funds
2.
Capital Formation
3.
Facilitates Payment
4.
Provides Liquidity
5.
Short and Long Term Needs
6.
Risk Function
7.
Better Decisions
8.
Finances Government Needs
9.
Economic Development
 1.Pooling of Funds
In a financial system, the Savings of people are transferred from households to
business organizations. With these production increases and better goods are
manufactured, which increases the standard of living of people.
2. Capital Formation
Business require finance. These are made available through banks, households and
different financial institutions. They mobilize savings which leads to Capital Formation.
3. Facilitates Payment
The financial system offers convenient modes of payment for goods and services. New
methods of payments like credit cards, debit cards, cheques, etc. facilitates quick and
easy transactions.
4. Provides Liquidity
In financial system, liquidity means the ability to convert into cash. The financial
market provides the investors the opportunity to liquidate their investments, which
are in instruments like shares, debentures, bonds, etc. Price is determined on the daily
basis according to the operations of the market force of demand and supply.
5. Short and Long Term Needs
The financial market takes into account the various needs of different individuals and
organizations. This facilitates optimum use of finances for productive purposes.
6. Risk Function
The financial markets provide protection against life, health and
income risks. Risk Management is an essential component of a
growing economy.
7. Better Decisions
Financial Markets provide information about the market and various
financial assets. This helps the investors to compare different
investment options and choose the best one. It helps in decision
making in choosing portfolio allocations of their wealth.
8. Finances Government Needs
Government needs huge amount of money for the development of
defense infrastructure. It also requires finance for social welfare
activities, public health, education, etc. This is supplied to them by
financial markets.
9. Economic Development
India is a mixed economy. The Government intervenes in the financial
system to influence macro-economic variables like interest rate or
inflation. Thus, credits can be made available to corporate at a cheaper
rate. This leads to economic development of the nation.
STRUCTURE OF FINANCIAL SYSTEM
FINANCIAL MARKET
MONEY MARKET
The money market refers to trading in short-term
debt investments.
At the wholesale level, it involves large-volume
trades between institutions and traders.
 At the retail level, it includes money market
mutual funds bought by individual investors and
money market accounts opened by bank
customers.
In all of these cases, the money market is
characterized by a high degree of safety and
relatively low rates of return.
The money market involves the purchase and
sale of large volumes of very short-term debt
products, such as overnight reserves or
commercial paper.
An individual may invest in the money market
by purchasing a money market mutual fund,
buying a Treasury bill, or opening a money
market account at a bank.
Money market investments are characterized
by safety and liquidity, with money market
fund shares
The money market is one of the pillars of the
global financial system.
It involves overnight swaps of vast amounts of
money between banks and the  government.
The majority of money market transactions are
wholesale transactions that take place between
financial institutions and companies.
Institutions that participate in the money market
include banks that lend to one another and to
large companies and time deposit markets.
Some of those wholesale transactions eventually
make their way into the hands of consumers as
components of money market mutual funds and
other investments.
CAPITAL MARKET
Capital markets are venues where savings and
investments are channeled between the suppliers
who have capital and those who are in need of
capital.
The entities that have capital include retail
and institutional investors while those who seek
capital are businesses, governments, and people.
Capital markets are composed of primary and
secondary markets.
The most common capital markets are the stock
market and the bond market.
Capital markets refer to the places where
savings and investments are moved between
suppliers of capital and those who are in need
of capital.
Capital markets consist of the primary market,
where new securities are issued and sold, and
the secondary market, where already-issued
securities are traded between investors.
The most common capital markets are the
stock market and the bond market.
These venues may include the stock market, the
bond market, and the currency and foreign
exchange markets.
Most markets are concentrated in major financial
centers like NSE BSE, Commodities exchanges
Capital markets are composed of the suppliers
and users of funds.
Suppliers include households and the institutions
serving them—pension funds, life insurance
companies, charitable foundations, and non-
financial companies—that generate cash beyond
their needs for investment.
Capital markets are used to sell financial
products such as equities and debt securities.
Equities are stocks, which are ownership
shares in a company. Debt securities, such as
bonds,
These markets are divided into two different
categories:
Primary markets 
—where new equity stock and
bond issues are sold to investors
Secondary markets- 
which trade existing
securities.
FUNCTIONS OF FINANCIAL SYSTEM
Saving Function
Wealth function
Liquidity function
Transferring resources across time and space
Economic development
Payment function
Risk function
AGENCIES PROVIDING  OF FINANCIAL
SERVIES
Banks
Insurance
Mutual Funds
Merchant banking
Venture capital
Factoring
Forfeiting
FUND BASED SERVICES
LEASING
HIRE PURCHASE
VENTURE CAPITAL
SEED CAPITAL
FACTORING
FORFAITING
CREDIT FINANCANCING
HOUSING FINANCE
MUTUAL FUND
NON-FUND BASED ACTIVITIES(FEES
BASED  ACTIVITIES)
MERCHANT BANKING
CREDIT RATING
LOAN SYNDICATION
PORTFOLIO MANAGEMENT
MERGER AND ACQUISITION
STOCK BROKING
CUSTODIAN SERVICES
CAPITAL RESTRUCTURING
ISSUE MANAGEMENT
CHALLENGES FACED BY FINANCIAL
SERVICE INDUSTRY
Increasing competition
Regulatory compliance
Cultural shift
Changing business models
Rising expectation
Customer retention
Changing technology
Continuous innovation
Sensitive  customer
FINANCIAL INNOVATION
Financial innovation is the process of creating
new financial products, services, or processes.
Financial innovation has come via advances over
time in financial instruments and payment
systems used in the lending and borrowing of
funds.
These changes – which include updates in
technology, risk transfer, and credit
and equity generation – have increased available
credit for borrowers and given banks new and
less costly ways to raise equity capital.
Financial innovation
 is the act of creating new
financial instruments as well as new financial
technologies, institutions, and markets.
Recent financial innovations include hedge
funds, private equity, derivatives, retail-
structured products, exchange-traded funds.
The shadow banking system has spawned an
array of financial innovations
including mortgage-backed securities products
and collateralized debt obligations (CDOs).
There are 3 categories of innovation:
institutional, product, and process.
Institutional innovations relate to the creation of
new types of financial firms such as specialist
credit card firms like Capital One, electronic
trading platforms.
Product innovation relates to new products such
as derivatives, securitization, and foreign
currency mortgages.
 Process innovations relate to new ways of doing
financial business, including online
banking and telephone banking.
TYPES OF FINANCIAL INNOVATION
Financial system /Institutional Innovation
Process Innovation
Product Innovation
CHARACTERISTICS OF FINANCIAL
SERVICES
Intangibility
Customer orientation
Inseparability
Perishability
Dynamics
CHAPTER 2      
FINANCIAL MARKETS AND
REGULATORY FRAMWORK
Classification of Financial Markets
Organized Market
Unorganized Market
Capital Market
Money Market
Primary Market
Secondary Market
MONEY MARKET INSTRUMENTS
Promissory Note:
A promissory note is one of the earliest type of bills. It is a financial
instrument with a written promise by one party, to pay to another
party, a definite sum of money by demand or at a specified future
date, although it falls in due for payment after 90 days within three
days of grace.
Bills of exchange or commercial bills
The bills of exchange can be compared to the promissory note;
besides it is drawn by the creditor and is accepted by the bank of
the debater. The bill of exchange can be discounted by the creditor
with a bank or a broker. Additionally, there is a foreign bill of
exchange which becomes due for payment from the date of
acceptance. However, the remaining procedure is the same for the
internal bills of exchange.
Treasury Bills (T-Bills)
The Treasury bills are issued by the Central Government and known
to be one of the safest money market instruments available.
Besides, they carry zero risk, so the returns are not attractive. Also,
they come with different maturity periods like 1 year, 6 months or 3
months and are also circulated by primary and secondary markets.
The central government issues them at a lesser price than their
face-value.
The difference of maturity value of the instrument and the buying
price of the bill, which is decided with the help of bidding done via
auctions, is basically the interest earned by the buyer.
There are three types of treasury bills issued by the Government of
India currently that is through auctions which are 91-day, 182-day
and 364-day treasury bills.
Call and Notice Money
Call and Notice Money exist in the market. With
respect to Call Money, the funds are borrowed and lent
for one day, whereas in the Notice Market, they are
borrowed and lent up to 14 days, without any collateral
security. The commercial banks and cooperative banks
borrow and lend funds in this market. However, the all-
India financial institutions and mutual funds only
participate as lenders of funds.
Inter-bank Term Market
The inter-bank term market is for the cooperative and
commercial banks in India who borrow and lend funds
for a period of over 14 days and up to 90 days. This is
done without any collateral security at the rates
determined by markets.
Commercial Papers (CPs)
Commercial papers can be compared to an unsecured short-term promissory note which is
issued by top rated companies with a purpose of raising capital to meet requirements directly
from the market.
They usually have a fixed maturity period which can range anywhere from 1 day up to 270
days.
They offer higher returns as compared to treasury bills. They are automatically not as secure
in comparison. Also, Commercial papers are traded actively in secondary market.
Certificate of Deposits ( CD’s )
This functions as a deposit receipt for money which is deposited with a financial organization
or bank. The Certificate of Deposit is different from a Fixed Deposit receipt in two ways. i.
Certificate of deposits are issued only of the sum of money is huge. ii. Certificate of deposit is
freely negotiable.
The RBI first announced in 1989 that the Certificate of Investments have become the most
preferred choice of organization in terms of investments as they carry low risk which
providing high interest rates than the Treasury bills and term deposits.
CD’s are also issued at discounted price like the Treasury bills and they range between a span
of 7 days up to 1 year.
The Certificate of Deposit issued by banks range from 3 months, 6 months and 12 months.
Note: CD’s can be issued to individuals (except minors), companies, corporations, funds, non–
resident Indians, etc.
Repurchase Agreements (Repo)
Repo’s are also known as Reverse Repo or as
Repo. They are loans of short duration which are
agreed by buyers and sellers for the purpose of
selling and repurchasing.
However, these transactions can be carried out
between RBI approved parties.
Note: Transactions can only be permitted
between securities approved by RBI like the
central or state government securities, treasury
bills, central or state government securities, and
PSU bonds.
DISTINGUSH BETWEEN CAPITAL
MARKET AND MONEY MARKET
REGULATORY FRAMEWORK OF
FINANCIAL MARKETS
Financial market, financial institutions, financial
instruments and financial services all are
regulated by regulators like ministry of finance,
the company law board, RBI, SEBI, IRDA,
Department of Economic Affairs, Department of
Company Affairs etc.
The two major regulatory and promotional
institutions in India are RBI and SEBI
RBI- control banks
SEBI- Controls Financial Institutions
RESERVE BANK OF INDIA
The Reserve Bank of India is the central bank of
our country
The RBI is the apex financial institution of the
country's financial system entrusted with the task
of control, supervision, promotion, development
and planning
RBI came into existence on 1
st
 April, 1935 as per
the Reserve Bank of India Act, 1935. but it
nationalized by the government after
independence
RBI is the queen bee of the Indian financial
system which influences the commercial
banks management in more than one way
The RBI influences the management of
commercial banks through its various policies,
directions and regulations
 
ROLE OF RESERVE BANK OF INDIA
RBI plays various roles as per the requirement
of economic situation
1.
To manage adequate money and credit in the
country
2.
To maintain the stability of rupee internally
and externally
3.
Balanced and well managed banking
development in the country
4.
To develop well organized money market
To provide adequate agriculture credit
To manage public debt
To seek international monetary co-operation
Centralization of cash reserves of commercial
banks
To set up Government banks
FUNCTIONS OF RBI
Traditional Functions
Supervisory functions
Promotional Role
TRADITIONAL FUNCTIONS/MONETARY
FUNCTIONS
Currency issue
Bankers bank
Custodian of foreign exchange reserves
Bank of central clearance, settlement and
transfer
Lender of last resort
Controller of credit
SUPERVISORY FUNCTIONS
Granting license to banks
Functions of inspection and enquiry
Controls the non banking financial
corporations
PROMOTIONAL ROLE
Promotion of Banking habits
Provide Refinance for export promotion
Facilities for agriculture
Facilitates to small scale industries
Provisions of training
Collection of data
Publication of the reports
FINANCIAL INFRASTRUCTURES
REGULATED BY RBI
Real Time Gross Settlement (RTGS)
Securities Settlement System (SSS)
Clearing Corporation of India ltd. (CCIL)
 
SECURITIES EXCHANGE BOARD OF
INDIA(SEBI)
SEBI is the nodal agency to control the capital
market and other related issues in India
It is administrative body established in 1988
and was given statutory recognition in January
1992 under the SEBI Act, 1992which came
into force on January 30,1992
SEBI has been has been active role in the
Indian capital market to attain the objectives
enshrined in the SEBI Act,1992
OBJECTIVES OF SEBI
To provide a degree of protection to the investors
and safeguard their rights and to ensure that
there is a steady flow of funds in the market
To promote fair market dealings by the issuer of
securities and ensure a market where they can
raise funds at a relatively low cost
To regulate and develop a code of conduct for the
financial intermediaries and to make them
competitive and professional
To provide for the matters connecting with or
incidental to the above
COMPOSITION OF SEBI:
The Board of Securities & Exchange Board of India
(SEBI) is comprised of 9 members, excluding the
Chairman. It is managed by its members, in the
following manner:
A Chairman is nominated by the Union Government.
2 members of SEBI, are officers from the Union
Ministry of Finance.
1 member of SEBI, is from the Reserve Bank of India.
There are 3 whole-time members, who are nominated
by the Government of India.
There are 2 Part-time members, who are also
nominated by the Government of India.
THE FUNCTIONS OF SEBI:
The regulatory jurisdiction of SEBI extends over corporates(in the
issuance of capital and transfer of securities), in addition to all the
intermediaries and individuals associated with the securities
market. SEBI performs the following functions to meet its
objectives. These functions involve protective measures,
Developmental activity and regulatory functions.
Registering and stock exchanges, merchant banks, mutual funds,
underwriers, registrars to the issues, Brokers, Sub-brokers, transfer
agents,etc.
Levying various fees and other charges(as 1% of the issue amount
of every company issuing shares kept by it as a caution money in
the concerned stock exchange where the company is enlisted).
Promoting the knowledge in investor education.
It conducts audit and Inspections of stock exchanges and their
various intermediaries.
It in involved in performing other concerned functions as may be
prescribed to it from time to time.
It Regulates the business in stock exchanges and other securities
markets in the economy.It prohibits Insider Trading by keeping a
check when insiders of a company buy securities of that company.
It takes strict action against insider trading.An Insider is any
individual who is connected with the company like its directors or
promoters, etc. These ‘insiders’ possess sensitive information which
has potential to affect the prices of the securities in the market.
However, you would point out that such information is not available
to common people, while the insiders can take advantage of this
information to make profit. This is known as Insider Trading.
It is involved in registering and regulating the working of players in
stock exchanges like stock brokers, sub-brokers, market makers, etc.
It Promotes as well as regulates the self-regulatory organizations
also.
SEBI prohibits the fraudulent and unfair trade
practices in the securities market.
SEBI is also interested in calling for information,
undertaking inspections, conducting audits and
inquiries of the stock exchanges, intermediaries,
self – regulatory organizations, mutual funds and
other persons associated with the securities
market in the country.
It keeps a check on Price-rigging by fraud
investors. Price rigging is basically manipulation
of the prices of securities for inflating or deflating
the market price of securities. Such practices are
harmful for the performance of market at large.
 
 
INSURANCE REGULATORY AND
DEVELOPMENT AUTHORITY
Insurance Regulatory and Development Authority is an autonomous apex statutory
body which regulates and develops the insurance industry in India
It was constituted by a parliament of India act called Insurance Regulatory and
Development Authority Act,1999 and duly passed by the government of India
The agency operates its headquarters at Hyderabad, Telangana where it shifted
from Delhi in 2001
Promote and ensure orderly growth of the insurance business and re-insurance
business
IRDA issue the applicant a certificate of registration, renew, modify, withdraw,
suspend or cancel such registration and protect the interest of the policy holders
in matters concerning assigning of policy, nomination by policy holders, insurable
interest, settlement of insurance claim, surrender value of policy and other terms
and conditions of contract of insurance
It regulates investment of funds by insurance companies regulating maintenance
of margin of solvency.
FUNCTIONS OF IRDA
 
Section 14 of IRDA Act,1999
 lays down the duties and functions of IRDA:
 
It issues the registration certificates to insurance companies and regulates them.
It protects the interest of policy holders.
It provides license to insurance intermediaries such as agents and brokers after
specifying the required qualifications and set norms/code of conduct for them.
It promotes and regulates the professional organisations related with insurance
business to promote efficiency in insurance sector.
It regulates and supervise the premium rates and terms of insurance covers.
It specifies the conditions and manners, according to which the insurance
companies and other intermediaries have to make their financial reports.
It regulates the investment of policyholder's funds by insurance companies.
It also ensures the maintenance of solvency margin (company's ability to pay out
claims) by insurance companies.
PENSION FUND REGULATORY AND
DEVELOPMENT AUTHORITY
Pension fund regulatory is a pension related authority
which was established in the year 23
rd
 August 2003.by
the Indian Government
It is authorized by the Finance Ministry and it helps in
promoting income security of old age by regulating and
also developing pension funds
This group can also help in protecting the interest rate
of the subscribers, associated with the schemes of
pension money along with the related matters
PFRDA is also responsible for the appointment of
different intermediate agencies like pension fund
managers, NPS bank and more
CHAPTER 3
INTERMEDIARIES V/S NON
INTERMEDIARIES
INTRODUCTION AND DEFINATION OF
INTERMEDIARIES
ROLE OF INTERMEDIARIES IN FINANCIAL MARKET
FINANCIAL INTERMEDIARIES IN CAPITAL MARKET
THE FUNCTIONS OF INTERMEDIARIES
FINANCIAL INTERMEDIARIES
BANKING INTERMEDIARIES
NON-BANKING INTERMEDIARIES
 
INTRODUCTION
INTERMEDIARIES IN CAPITAL MARKET
Merchant Banker
Registrar to an issue
Banker
Underwriter
Brokers
FUNCTIONS OF INTERMEDIATION
Providing safekeeping accounting, and
payments mechanisms for resources
Providing liquidity
Diversifying risk
Collecting and processing information
FINANCIAL INTERMEDIARIES
BANKING
RBI
Commercial Bank
Co-operative banks
Foreign banks
RRB
NON BANKING
Insurance
Mutual Funds
Factoring
Depository
Reserve Bank of India
The RBI is the central bank of our country. The Reserve
Bank of India is the apex financial institution of the
country’s financial system
RBI came into existence on 1
st
 April 1935 as per the Reserve
Bank of India Act, 1935.  but the bank was nationalized by
the government after Independence
It becomes public sector bank from 1
st
 January 1949.
RBI influences the management of management of
commercial banks through its various policies, directions
and regulations
The fundamental object of the RBI is to discharge purely
central banking functions in the Indian Money Market
          COMMERCIAL BANK
Commercial banks are those banks which accomplish all kinds of
banking functions such as accepting deposits, advancing loans,
credit creation, and agency function
Commercial banks mainly engaged in deposit and lending activities
to private and corporate clients in wholesale and retail banking
FEATURES OF COMMERCIAL BANK
It operates for profit
It accepts deposits from the general public and extends loans to the
households, firms, and government
Withdrawal by means of an instrument, whether a cheque or
otherwise
Large part of deposits are demand deposits withdrawable and
transferable
Need to maintain the reserves with RBI
CO-OPERATIVE BANKS
Co-operative banks are a part of the set of institutions, which are
engaged in financing  rural and agriculture development
Cooperative banks were assigned the important role of delivering of
fruits of economic planning at viewed grass root level
Cooperative banking
 is retail and commercial banking organized on
a cooperative basis. Cooperative banking institutions take deposits
and lend money in most parts of the world.
Cooperative banking, as discussed here, includes retail banking
carried out by credit unions, mutual savings banks, building
societies and cooperatives, as well as commercial banking services
provided by mutual organizations (such as cooperative federations)
to cooperative businesses.
FOREIGN BANK
A foreign bank branch is a type of foreign bank
that is obligated to follow the regulations of both
the home and host countries.
Banks often open a foreign branch to provide
more services to their multinational corporate
clients.
Foreign bank branches tend to be more effective
in countries with high taxes and nations where it
is easy for international firms to enter the market.
Foreign bank branches may face special
difficulties during an economic or political crisis.
RRB
 
Regional Rural Banks (RRBs)
 are Indian Scheduled Commercial Banks
(Government Banks) operating at regional level in different States of India.
They have been created with a view of serving primarily the rural areas of India
with basic banking and financial services.
However, RRBs may have branches set up for urban operations and their area of
operation may include urban areas too.
The area of operation of RRBs is limited to the area as notified by Government of
India covering one or more districts in the State.
RRBs also perform a variety of different functions. RRBs perform various functions
in following heads:
Providing banking facilities to rural and semi-urban areas.
Carrying out government operations like disbursement of wages of workers,
distribution of pensions etc.
Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile
banking, internet banking, UPI etc.
Small financial banks.
NON BANKING INTERMEDIARIES
INSURANCE
Insurance is a way of reducing your potential financial loss or
hardship
It can help cover the cost of unexpected events such as theft, illness
or property damage
It can also provide with financial payment upon death
Several insurance provide comprehensive coverage with affordable
premiums
Premiums are periodical payment and different insurance offer
miscellaneous premium options
The periodical insurance premiums are planned according to the
total insurance amount
Insurance is used as an effective tool of risk management
FEATURES OF INSURANCE
Pooling of losses
Payment of fortuitous losses
Risk transfer
Indemnification
Co-operative device
Value of risk
Payment of contingency
NEED AND PURPOSE OF INSURANCE
INDIVIDUAL
1.
Insurance provide security and safety
2.
Insurance afford peace of mind
3.
Insurance eliminates dependency
4.
Life insurance encourages saving
5.
Life insurance fulfills the needs of a person
Family need
Old age needs
Special need
Need for education
Marriage
Insurance needs for settlement
BUSINESS
1.
Uncertainty of business losses is reduced
2.
Business efficiency is increased with insurance
3.
Enhancement of credit
4.
Business continuation
5.
Welfare of employee
SOCIETY
1.
Wealth of the society is protected
2.
Economic growth of the country
3.
Reduction in inflation
MUTUAL FUND
Mutual fund is a collective investment vehicle
It is a pool of investors money invested according to
pre-specified investment objectives.
The benefit from the investment of pooled money
accrue to those that contribute to the pool
There is thus mutuality in the contribution and the
benefit
A mutual fund is an investment vehicle that permits
several investors to pool their resources in order to
purchase stocks, bonds, and other securities
TYPES OF MUTUAL FUNDS
BY SRTUCTURE
1.
Open ended funds
2.
Close ended funds
3.
Interval funds
BY INVESTMENT OBJECTIVES
1.
Growth funds
2.
Income funds
3.
Balanced funds
4.
Money Market Mutual Fund
OTHER SCHEMES
1.
Tax savings
2.
Special Funds
3.
Index funds
4.
Sectoral funds
5.
Exchange Traded funds
6.
Gold Exchange funds
FACTORING
 
80%
 
20%
TYPES OF FACTORING
Disclosed factoring
Undisclosed Factoring
Recourse Factoring
Non-Recourse Factoring
PARTIES INVOLVED IN FACTORING
BUYER (CUSTOMER)
SELLER (CLIENT)
FACTOR (BANK/ FINANCIAL INSTITUTION)
DEPOSITORY
NSDL (NATIONAL SECURITIES DEPOSITORY
LIMITED)
CDSL ( CENTRAL DEPOSTIORY SERVICES
LIMITED)
NATIONAL HOUSING BANK
Set up in July 9, 1988 under the National
Housing Bank Act, 1987.
Wholly owned by RBI
Head office in Delhi
The vision of NHB is “ Promoting inclusive
expansion with stability in Housing finance
maeket”
LEASING
BENEFITS/ADVANTAGES
1.
Convenience in case of short term need
2.
No risk of technological obsolesce
3.
Efficient Maintenance services
4.
Low administrative and transaction cost
5.
Debt-Equity ratio remains unchanged
6.
Benefit of tax shield
DISADVANTAGES OF LEASING
No Benefit of Residual value
High cost leasing
No benefit of ownership
Not flexible
Chances of disputes
TYPES OF LEASING
Operating lease/ Service lease
Financial lease
Ordinary lease
Leveraged lease
Domestic and International lease
HIRE PURCHASE
Hirer ( User) make cash down payment seller (
Hiree) of say, 20-25% of the cost of the asset
The balance of the cost price of the asset with
interest thereon is payable in equated
monthly installments
Sometimes, in place of cash down payment a
fixed deposit is required to be made with
seller and the entire amount of the cost is
recovered through EMIs
Each installment comprises of the cost of asset
and interest – Flat interest rate, Effective
interest rate
The hirer is entitled t terminate the hire
purchase contract by giving due notice to the
seller ( Hiree)
After payment of last installment hirer
becomes the owner and if he fails to make all
installments hiree can take the possession of
the asset
 
VENTURE CAPITAL
Venture capital is a form of “ risk capital”
The capital that is invested in a project,
business where there is a considerable
element of risk relating to the future creation
of profit and cashflow
STAGES OF VENTURE CAPITAL
FINANCING
INVESTMENT PROCESS
PRELIMINARY SCREENING
NEGOTIATING INVESTMENT
APPROVALS AND INVESTMENT COMPLETED
UNIT II
FINANCIAL MARKETS IN INDIA
 
CHAPTER 4
INDIAN MONEY MARKET
CHARACTERISTICS OF MONEY MARKET
It is a market for short term instruments and that are
close substitutes to money
It is fundamentally an over the phone market
It is a wholesale market for short term debt
instruments
It eases effective implementation of monetary policy of
RBI
Transactions are completed without the help of brokers
It  creates link between the RBI and commercial banks
The players in the money market are RBI, commercial
banks, and companies
DISTINGUSH BETWEEN CAPITAL
MARKET AND MONEY MARKET
IMPORTANCE OF MONEY MARKET
It is basically an over the phone market
It is a wholesale market for short term debt
instruments
It is not a single market but collection of
markets for several instruments
It facilitates effective implementation of
monetary policy of a central bank of a country
Transactions are made without brokers
It establishes the link between RBI and
commercial banks
The players in the money market are RBI,
Commercial banks, and companies
There is lack of integration between various
sub markets as well as various institutions and
agencies
There is lack coordination between co-
operative banks and commercial banks
MONEY MARKET INSTRUMENTS
Promissory Note:
A promissory note is one of the earliest type of bills. It is a financial
instrument with a written promise by one party, to pay to another
party, a definite sum of money by demand or at a specified future
date, although it falls in due for payment after 90 days within three
days of grace.
Bills of exchange or commercial bills
The bills of exchange can be compared to the promissory note;
besides it is drawn by the creditor and is accepted by the bank of
the debater. The bill of exchange can be discounted by the creditor
with a bank or a broker. Additionally, there is a foreign bill of
exchange which becomes due for payment from the date of
acceptance. However, the remaining procedure is the same for the
internal bills of exchange.
Treasury Bills (T-Bills)
The Treasury bills are issued by the Central Government and known
to be one of the safest money market instruments available.
Besides, they carry zero risk, so the returns are not attractive. Also,
they come with different maturity periods like 1 year, 6 months or 3
months and are also circulated by primary and secondary markets.
The central government issues them at a lesser price than their
face-value.
The difference of maturity value of the instrument and the buying
price of the bill, which is decided with the help of bidding done via
auctions, is basically the interest earned by the buyer.
There are three types of treasury bills issued by the Government of
India currently that is through auctions which are 91-day, 182-day
and 364-day treasury bills.
Call and Notice Money
Call and Notice Money exist in the market. With
respect to Call Money, the funds are borrowed and lent
for one day, whereas in the Notice Market, they are
borrowed and lent up to 14 days, without any collateral
security. The commercial banks and cooperative banks
borrow and lend funds in this market. However, the all-
India financial institutions and mutual funds only
participate as lenders of funds.
Inter-bank Term Market
The inter-bank term market is for the cooperative and
commercial banks in India who borrow and lend funds
for a period of over 14 days and up to 90 days. This is
done without any collateral security at the rates
determined by markets.
Commercial Papers (CPs)
Commercial papers can be compared to an unsecured short-term promissory note which is
issued by top rated companies with a purpose of raising capital to meet requirements directly
from the market.
They usually have a fixed maturity period which can range anywhere from 1 day up to 270
days.
They offer higher returns as compared to treasury bills. They are automatically not as secure
in comparison. Also, Commercial papers are traded actively in secondary market.
Certificate of Deposits ( CD’s )
This functions as a deposit receipt for money which is deposited with a financial organization
or bank. The Certificate of Deposit is different from a Fixed Deposit receipt in two ways. i.
Certificate of deposits are issued only of the sum of money is huge. ii. Certificate of deposit is
freely negotiable.
The RBI first announced in 1989 that the Certificate of Investments have become the most
preferred choice of organization in terms of investments as they carry low risk which
providing high interest rates than the Treasury bills and term deposits.
CD’s are also issued at discounted price like the Treasury bills and they range between a span
of 7 days up to 1 year.
The Certificate of Deposit issued by banks range from 3 months, 6 months and 12 months.
Note: CD’s can be issued to individuals (except minors), companies, corporations, funds, non–
resident Indians, etc.
Repurchase Agreements (Repo)
Repo’s are also known as Reverse Repo or as
Repo. They are loans of short duration which are
agreed by buyers and sellers for the purpose of
selling and repurchasing.
However, these transactions can be carried out
between RBI approved parties.
Note: Transactions can only be permitted
between securities approved by RBI like the
central or state government securities, treasury
bills, central or state government securities, and
PSU bonds.
CHAPTER 5
 
 
INDIAN CAPITAL MARKET
CAPITAL MARKET
Capital markets are venues where savings and
investments are channeled between the suppliers
who have capital and those who are in need of
capital.
The entities that have capital include retail
and institutional investors while those who seek
capital are businesses, governments, and people.
Capital markets are composed of primary and
secondary markets.
The most common capital markets are the stock
market and the bond market.
Capital markets refer to the places where
savings and investments are moved between
suppliers of capital and those who are in need
of capital.
Capital markets consist of the primary market,
where new securities are issued and sold, and
the secondary market, where already-issued
securities are traded between investors.
The most common capital markets are the
stock market and the bond market.
These venues may include the stock market, the
bond market, and the currency and foreign
exchange markets.
Most markets are concentrated in major financial
centers like NSE BSE, Commodities exchanges
Capital markets are composed of the suppliers
and users of funds.
Suppliers include households and the institutions
serving them—pension funds, life insurance
companies, charitable foundations, and non-
financial companies—that generate cash beyond
their needs for investment.
Capital markets are used to sell financial
products such as equities and debt securities.
Equities are stocks, which are ownership
shares in a company. Debt securities, such as
bonds,
These markets are divided into two different
categories:
Primary markets 
—where new equity stock and
bond issues are sold to investors
Secondary markets- 
which trade existing
securities.
FACTORS RESPONSIBLE FOR THE
GROWTH OF CAPITAL MARKET
Growth of Multinational
Growth of financial institutions
Merchant banking services
General awareness
Growing population
Legislative measures
Growth of Underwriting service
Public confidence
ROLE OF CAPITAL MARKET
Mobilization of savings
Capital formation
Economic development
Integrates different parts of the financial system
Promotion of stock market
Foreign capital
Economic welfare
Innovation
CAPITAL MARKET INSRTUMENTS
1.
EQUITY SHARE
2.
DEBT ( LOAN INSTRUMENTS)
Corporate debt
Bond
Government debt
3. MUTUAL FUND
DISTINGUSH BETWEEN EQUITY
MARKET AND DEBT MARKET
MEANING
INSTRUMENTS
VOTING RIGHTS
FUTURE CLAIM
ASSOCIATION OF RISK
RETURNS
NATURE OF HOLDING
CHAPTER 6
 
 
INDIAN STOCK MARKET
FEATURES OF STOCK MARKET
It is an organized market
It could be incorporated or non-incorporated
It is an open market for the buying and selling
of securities
Only listing securities can be allocated on a
stock exchange
It works under established rules and
regulations
FUNCTIONS OF STOCK EXCHANGES
Liquidity
Continues market for securities
Mobilization of saving
Capital formation
Economic development
Safeguard of the investors
BENEFITS OF STOCK EXCHANGE
TO THE INVESTOR
TO THE COMPANIES
BENEFIT TO COMMUNITY AND NATION
LISTING OF SECURITIES
BENEFIT TO THE COMPANY
Continues  market
Goodwill
Liquidity
Companies can easily raise capital
BENEFIT TO THE INVESTORS
It provides safety and security
PLAYERS IN STOCK MARKET
BEARS
BULLS
STAGS
MEMBERS IN A STOCK EXCHANGE
Jobber
Commission broker
Tarawaniwalas- Are like jobbers
Sub broker
Arbitrageurs
Authorized clerks
MAJOR STOCK EXCHANGES IN INDIA
BOMBAY STOCK EXCHANGE
NATIONAL STOCK EXCHANGE
FUNDAMENTAL ANALYSIS
Economic analysis
Industry analysis
Company analysis
Net profit margin
Book value per share
Current ratio
Debt ratio
Inventory turnover
Stock price valuation
TECHNICAL ANALYSIS
OPEN
HIGH
LOW
CLOSE
VOLUME
OPEN INTEREST
BID
ASK
METHODS OF TECHNICAL ANALYSIS
LINE CHART
BAR CHART
CANLESTICK CHART
VOLUME BAR CHART
RESISTENCE AND SUPPORT
CHAPTER 7
INDIAN EQUITY MARKET
PRIMARY MARKET
PLAYERS IN PRIMARY MARKET
1.
MERHCNANT BANKER
2.
REGISTRAR TO THE ISSUE
3.
BANKER
4.
BROKER
5.
UNDERWRITER
METHODS OF RAISING FUND IN
PRIMARY MARKET
PUBLIC ISSUE
OFFER FOR SALE
PRIVATE PLACEMENT
RIGHT ISSUE
TENDER METHOD
BONUS SHARES
PROSPECTUS
RED HERRING PROSPECTUS
ABRIDGED PROSPECTUS
SWEAT EQUITY
SWEAT EQUITY MEANS SUCH EQUITY SHARES
ISSUED TO ITS DIRECTORS OR EMPLOYEES AT A
DISCOUNT OR FOR CONSIDERATION
ESOP (EMPLOYEE STOCK OWNERSHIP PLAN)
RIGHT ISSUE
CHAPTER 8
INDIAN DEBT MARKET
ADVANTAGES OF DEBT INSTRUMENT
1.
Fixed and periodic receipt like interest
2.
Capital is preserved
3.
These instruments are more secured
4.
Investment in government bonds is more risk
free
5.
Lower volatility
6.
Diversity of instruments like index bonds
TYPES
MONEY MARKET INSTRUMENTS
1.
Treasury bills
2.
Certificate of deposits
3.
Commercial paper
Government securities
1.
Cash Management Bills
2.
Dated Government securities
3.
State Development loans
4.
Special securities
Corporate Bonds
INTEREST RATE BOND
FIXED RATE BOND
FLOATING RATE BOND
ZERO COUPON BOND
CAPITAL INDEXED BOND
BOND WITH CALL/PUT OPTION
UNIT3
CHAPTER 9
COMMODITY MARKET
REGULATORY FRMEWORKOF FRAMEWORK OF
COMMODITIES MARKET
1.
CENTRAL GOVERNMENT
2.
FORWARD MARKET COMMISSION
3.
EXCHANGES
MAIN PLAYERS OF COMMODITIES
MARKETS
SPECULATORS
HEDGERS
ARBITRAGERS
COMMODITY EXCHANGES IN INDIA
MULTI COMMODITIES EXCHANGE
NATIONAL COMODITIES AND DERIVATIVES
EXCHANGE
NATIONAL MULTI COMMODITY EXCHANGE
INDIAN COMMODITY EXCHANGE
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The Indian financial system plays a crucial role in the country's economy by facilitating the efficient allocation of resources. It encompasses various institutions, markets, and instruments that enable the smooth functioning of financial transactions. Understanding the meaning and functions of the financial system is essential for grasping its significance in driving economic growth and development.


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  1. FINANCIAL MARKETS SYBBI SEMESTER-III Academic Year-20-21

  2. MODULES INDIAN FINANCIAL SYSTEM FINANCIAL MARKETS IN INDIA COMMODITY MARKET DERIVATIVES MARKET

  3. INDIAN FINANCIAL SYSTEM A) Introduction, Meaning, Functions of financial system, Indian financial system from financial neutrality to financial activism and from financial volatility to financial stability, Role of Government in financial development B) Structure of Indian Financial System Banking & Non-Banking Financial Institutions, Organized and Unorganized Financial Markets, Financial Assets/Instruments, Fund based & Fee Based Financial Services.

  4. OVERVIEW AND STRUCTURE OF INDIAN FINANCIAL SYSTEM The financial system enables lenders and borrowers to exchange funds. India has a financial system that is controlled by independent regulators in the sectors of insurance, banking, capital markets and various services sectors. The financial system of an economy provides the way to collect money from the people who have it and distribute it to those who can use it best. So, the efficient allocation of economic resources is achieved by a financial system that distributes money to those people and for those purposes that will yield the best returns.

  5. The financial system is composed of the products and services provided by financial institutions, which includes banks, insurance companies, pension funds, organized exchanges, and the many other companies that serve to facilitate economic transactions. Virtually all economic transactions are effected by one or more of these financial institutions. They create financial instruments, such as stocks and bonds, pay interest on deposits, lend money to creditworthy borrowers, and create and maintain the payment systems of modern economies.

  6. OBJECTIVES These financial products and services are based on the following fundamental objectives of any modern financial system: I. To provide a payment system II. To give time value to money III. To offer products and services to reduce financial risk or to compensate risk-taking for desirable objectives IV. To collect and disperse information that allows the most efficient allocation of economic resources V. To create and maintain financial markets that provide prices, which indicates how well investments are performing, determines the subsequent allocation of resources, and to maintain economic stability in the markets

  7. FUNCTIONS AND ROLE OF FINANCIAL SYSTEM 1. Pooling of Funds 2. Capital Formation 3. Facilitates Payment 4. Provides Liquidity 5. Short and Long Term Needs 6. Risk Function 7. Better Decisions 8. Finances Government Needs 9. Economic Development

  8. 1.Pooling of Funds In a financial system, the Savings of people are transferred from households to business organizations. With these production increases and better goods are manufactured, which increases the standard of living of people. 2. Capital Formation Business require finance. These are made available through banks, households and different financial institutions. They mobilize savings which leads to Capital Formation. 3. Facilitates Payment The financial system offers convenient modes of payment for goods and services. New methods of payments like credit cards, debit cards, cheques, etc. facilitates quick and easy transactions. 4. Provides Liquidity In financial system, liquidity means the ability to convert into cash. The financial market provides the investors the opportunity to liquidate their investments, which are in instruments like shares, debentures, bonds, etc. Price is determined on the daily basis according to the operations of the market force of demand and supply. 5. Short and Long Term Needs The financial market takes into account the various needs of different individuals and organizations. This facilitates optimum use of finances for productive purposes.

  9. 6. Risk Function The financial markets provide protection against life, health and income risks. Risk Management is an essential component of a growing economy. 7. Better Decisions Financial Markets provide information about the market and various financial assets. This helps the investors to compare different investment options and choose the best one. It helps in decision making in choosing portfolio allocations of their wealth. 8. Finances Government Needs Government needs huge amount of money for the development of defense infrastructure. It also requires finance for social welfare activities, public health, education, etc. This is supplied to them by financial markets. 9. Economic Development India is a mixed economy. The Government intervenes in the financial system to influence macro-economic variables like interest rate or inflation. Thus, credits can be made available to corporate at a cheaper rate. This leads to economic development of the nation.

  10. STRUCTURE OF FINANCIAL SYSTEM

  11. FINANCIAL MARKET

  12. MONEY MARKET The money market refers to trading in short-term debt investments. At the wholesale level, it involves large-volume trades between institutions and traders. At the retail level, it includes money market mutual funds bought by individual investors and money market accounts customers. In all of these cases, the money market is characterized by a high degree of safety and relatively low rates of return. opened by bank

  13. The money market involves the purchase and sale of large volumes of very short-term debt products, such as overnight reserves or commercial paper. An individual may invest in the money market by purchasing a money market mutual fund, buying a Treasury bill, or opening a money market account at a bank. Money market investments are characterized by safety and liquidity, with money market fund shares

  14. The money market is one of the pillars of the global financial system. It involves overnight swaps of vast amounts of money between banks and the government. The majority of money market transactions are wholesale transactions that take place between financial institutions and companies. Institutions that participate in the money market include banks that lend to one another and to large companies and time deposit markets. Some of those wholesale transactions eventually make their way into the hands of consumers as components of money market mutual funds and other investments.

  15. CAPITAL MARKET Capital markets are venues where savings and investments are channeled between the suppliers who have capital and those who are in need of capital. The entities that have capital include retail and institutional investors while those who seek capital are businesses, governments, and people. Capital markets are composed of primary and secondary markets. The most common capital markets are the stock market and the bond market.

  16. Capital markets refer to the places where savings and investments are moved between suppliers of capital and those who are in need of capital. Capital markets consist of the primary market, where new securities are issued and sold, and the secondary market, where already-issued securities are traded between investors. The most common capital markets are the stock market and the bond market.

  17. These venues may include the stock market, the bond market, and the currency and foreign exchange markets. Most markets are concentrated in major financial centers like NSE BSE, Commodities exchanges Capital markets are composed of the suppliers and users of funds. Suppliers include households and the institutions serving them pension funds, life insurance companies, charitable foundations, and non- financial companies that generate cash beyond their needs for investment.

  18. Capital markets are used to sell financial products such as equities and debt securities. Equities are stocks, which are ownership shares in a company. Debt securities, such as bonds, These markets are divided into two different categories: Primary markets where new equity stock and bond issues are sold to investors Secondary markets- which trade existing securities.

  19. FUNCTIONS OF FINANCIAL SYSTEM Saving Function Wealth function Liquidity function Transferring resources across time and space Economic development Payment function Risk function

  20. AGENCIES PROVIDING OF FINANCIAL SERVIES Banks Insurance Mutual Funds Merchant banking Venture capital Factoring Forfeiting

  21. FUND BASED SERVICES LEASING HIRE PURCHASE VENTURE CAPITAL SEED CAPITAL FACTORING FORFAITING CREDIT FINANCANCING HOUSING FINANCE MUTUAL FUND

  22. NON-FUND BASED ACTIVITIES(FEES BASED ACTIVITIES) MERCHANT BANKING CREDIT RATING LOAN SYNDICATION PORTFOLIO MANAGEMENT MERGER AND ACQUISITION STOCK BROKING CUSTODIAN SERVICES CAPITAL RESTRUCTURING ISSUE MANAGEMENT

  23. CHALLENGES FACED BY FINANCIAL SERVICE INDUSTRY Increasing competition Regulatory compliance Cultural shift Changing business models Rising expectation Customer retention Changing technology Continuous innovation Sensitive customer

  24. FINANCIAL INNOVATION Financial innovation is the process of creating new financial products, services, or processes. Financial innovation has come via advances over time in financial instruments and payment systems used in the lending and borrowing of funds. These changes which include updates in technology, risk transfer, and equity generation have increased available credit for borrowers and given banks new and less costly ways to raise equity capital. and credit

  25. Financial innovation is the act of creating new financial instruments as well as new financial technologies, institutions, and markets. Recent financial innovations include hedge funds, private equity, structured products, exchange-traded funds. The shadow banking system has spawned an array of financial including mortgage-backed securities products and collateralized debt obligations (CDOs). derivatives, retail- innovations

  26. There institutional, product, and process. Institutional innovations relate to the creation of new types of financial firms such as specialist credit card firms like Capital One, electronic trading platforms. Product innovation relates to new products such as derivatives, securitization, currency mortgages. Process innovations relate to new ways of doing financial business, banking and telephone banking. are 3 categories of innovation: and foreign including online

  27. TYPES OF FINANCIAL INNOVATION Financial system /Institutional Innovation Process Innovation Product Innovation

  28. CHARACTERISTICS OF FINANCIAL SERVICES Intangibility Customer orientation Inseparability Perishability Dynamics

  29. CHAPTER 2 FINANCIAL MARKETS AND REGULATORY FRAMWORK Classification of Financial Markets Organized Market Unorganized Market Capital Market Money Market Primary Market Secondary Market

  30. MONEY MARKET INSTRUMENTS Promissory Note: A promissory note is one of the earliest type of bills. It is a financial instrument with a written promise by one party, to pay to another party, a definite sum of money by demand or at a specified future date, although it falls in due for payment after 90 days within three days of grace. Bills of exchange or commercial bills The bills of exchange can be compared to the promissory note; besides it is drawn by the creditor and is accepted by the bank of the debater. The bill of exchange can be discounted by the creditor with a bank or a broker. Additionally, there is a foreign bill of exchange which becomes due for payment from the date of acceptance. However, the remaining procedure is the same for the internal bills of exchange.

  31. Treasury Bills (T-Bills) The Treasury bills are issued by the Central Government and known to be one of the safest money market instruments available. Besides, they carry zero risk, so the returns are not attractive. Also, they come with different maturity periods like 1 year, 6 months or 3 months and are also circulated by primary and secondary markets. The central government issues them at a lesser price than their face-value. The difference of maturity value of the instrument and the buying price of the bill, which is decided with the help of bidding done via auctions, is basically the interest earned by the buyer. There are three types of treasury bills issued by the Government of India currently that is through auctions which are 91-day, 182-day and 364-day treasury bills.

  32. Call and Notice Money Call and Notice Money exist in the market. With respect to Call Money, the funds are borrowed and lent for one day, whereas in the Notice Market, they are borrowed and lent up to 14 days, without any collateral security. The commercial banks and cooperative banks borrow and lend funds in this market. However, the all- India financial institutions and mutual funds only participate as lenders of funds. Inter-bank Term Market The inter-bank term market is for the cooperative and commercial banks in India who borrow and lend funds for a period of over 14 days and up to 90 days. This is done without any collateral security at the rates determined by markets.

  33. Commercial Papers (CPs) Commercial papers can be compared to an unsecured short-term promissory note which is issued by top rated companies with a purpose of raising capital to meet requirements directly from the market. They usually have a fixed maturity period which can range anywhere from 1 day up to 270 days. They offer higher returns as compared to treasury bills. They are automatically not as secure in comparison. Also, Commercial papers are traded actively in secondary market. Certificate of Deposits ( CD s ) This functions as a deposit receipt for money which is deposited with a financial organization or bank. The Certificate of Deposit is different from a Fixed Deposit receipt in two ways. i. Certificate of deposits are issued only of the sum of money is huge. ii. Certificate of deposit is freely negotiable. The RBI first announced in 1989 that the Certificate of Investments have become the most preferred choice of organization in terms of investments as they carry low risk which providing high interest rates than the Treasury bills and term deposits. CD s are also issued at discounted price like the Treasury bills and they range between a span of 7 days up to 1 year. The Certificate of Deposit issued by banks range from 3 months, 6 months and 12 months. Note: CD s can be issued to individuals (except minors), companies, corporations, funds, non resident Indians, etc.

  34. Repurchase Agreements (Repo) Repo s are also known as Reverse Repo or as Repo. They are loans of short duration which are agreed by buyers and sellers for the purpose of selling and repurchasing. However, these transactions can be carried out between RBI approved parties. Note: Transactions can only be permitted between securities approved by RBI like the central or state government securities, treasury bills, central or state government securities, and PSU bonds.

  35. DISTINGUSH BETWEEN CAPITAL MARKET AND MONEY MARKET

  36. REGULATORY FRAMEWORK OF FINANCIAL MARKETS Financial market, financial institutions, financial instruments and financial regulated by regulators like ministry of finance, the company law board, RBI, SEBI, IRDA, Department of Economic Affairs, Department of Company Affairs etc. The two major regulatory and promotional institutions in India are RBI and SEBI RBI- control banks SEBI- Controls Financial Institutions services all are

  37. RESERVE BANK OF INDIA The Reserve Bank of India is the central bank of our country The RBI is the apex financial institution of the country's financial system entrusted with the task of control, supervision, promotion, development and planning RBI came into existence on 1stApril, 1935 as per the Reserve Bank of India Act, 1935. but it nationalized by the independence government after

  38. RBI is the queen bee of the Indian financial system which influences the commercial banks management in more than one way The RBI influences the management of commercial banks through its various policies, directions and regulations

  39. ROLE OF RESERVE BANK OF INDIA RBI plays various roles as per the requirement of economic situation 1. To manage adequate money and credit in the country 2. To maintain the stability of rupee internally and externally 3. Balanced and well managed banking development in the country 4. To develop well organized money market

  40. To provide adequate agriculture credit To manage public debt To seek international monetary co-operation Centralization of cash reserves of commercial banks To set up Government banks

  41. FUNCTIONS OF RBI Traditional Functions Supervisory functions Promotional Role

  42. TRADITIONAL FUNCTIONS/MONETARY FUNCTIONS Currency issue Bankers bank Custodian of foreign exchange reserves Bank of central clearance, settlement and transfer Lender of last resort Controller of credit

  43. SUPERVISORY FUNCTIONS Granting license to banks Functions of inspection and enquiry Controls the non banking financial corporations

  44. PROMOTIONAL ROLE Promotion of Banking habits Provide Refinance for export promotion Facilities for agriculture Facilitates to small scale industries Provisions of training Collection of data Publication of the reports

  45. FINANCIAL INFRASTRUCTURES REGULATED BY RBI Real Time Gross Settlement (RTGS) Securities Settlement System (SSS) Clearing Corporation of India ltd. (CCIL)

  46. SECURITIES EXCHANGE BOARD OF INDIA(SEBI) SEBI is the nodal agency to control the capital market and other related issues in India It is administrative body established in 1988 and was given statutory recognition in January 1992 under the SEBI Act, 1992which came into force on January 30,1992 SEBI has been has been active role in the Indian capital market to attain the objectives enshrined in the SEBI Act,1992

  47. OBJECTIVES OF SEBI To provide a degree of protection to the investors and safeguard their rights and to ensure that there is a steady flow of funds in the market To promote fair market dealings by the issuer of securities and ensure a market where they can raise funds at a relatively low cost To regulate and develop a code of conduct for the financial intermediaries and to make them competitive and professional To provide for the matters connecting with or incidental to the above

  48. COMPOSITION OF SEBI: The Board of Securities & Exchange Board of India (SEBI) is comprised of 9 members, excluding the Chairman. It is managed by its members, in the following manner: A Chairman is nominated by the Union Government. 2 members of SEBI, are officers from the Union Ministry of Finance. 1 member of SEBI, is from the Reserve Bank of India. There are 3 whole-time members, who are nominated by the Government of India. There are 2 Part-time members, who are also nominated by the Government of India.

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