Indian Financial System an Overview by Dr Navneet Joshi From JIMS Rohini

8/7/2019 Indian Financial System an Overview by Dr Navneet Joshi From JIMS Rohini

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DR.NAVNEET JOSHI - JIMS ROHINI ,DELHI

INDIAN FINANCIAL SYSTEM


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Objectives of Study Structure of Financial System Financial system & Economic Development


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In finance, the financial system is thesystem that allows the transfer of money

between savers and borrowers. It comprises a

set of complex and closely interconnected

financial institutions, markets, instruments,

services, practices, and transactions.


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Financial system are crucial to the allocation

of resources in a modern economy

They channel household savings to the corporate

sector and allocate investment funds among

firms


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These functions are common to the financial

systems of most developed economies. Yet the

form of these financial systems varies widely .


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Purpose of Financial System Financial system helps, to form your

organizations planning and action plans

Financial systems also help you track and manage

the resources required to successfully complete

your work

These tips provide basic practices you will need to

build financial sustainability in your organization


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Why financial system is important ?Financial system and capacity help the

organization to make sound decisions based on

cash flow and available resources

Most governments require that registered,

charitable organizations create accounts that

track income and expenses


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Funders require reports that demonstrate

that grants were used for intended purposes

Monitoring funds, or comparing actual income

and expenses versus budgeted amounts, helps

managers ensure that the necessary funds are in

place to complete an activity


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Establishing financial controls and clearaccounting procedures help ensure that

funds are used for intended purposes

Transparency, clear planning and realistic

projections contributes to the credibility of

the organization


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In other words, financial system may besaid to be made up of all those channelsthrough which savings become available forinvestment .


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Financial system is crucial significance to

capital formation. The Process of capital

formation involves three distinct ,although inter-

related activities :

Savings

Finance

Investment


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Organization Of Financialsystem

FinancialIntermediar-ies

FinancialMarkets

FinancialAssets/Instru-ments


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Financial Intermediaries

Banks NBFCs Mutual Funds InsuranceOrganizations

Assets Finance companiesHousing Finance Companies Venture Capital fundsMerchant Banking OrganizationsCredit Rating AgenciesStock Broking FirmsCustodial servicesDepositories


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Financial Markets

MoneyMarket

Capital/Security Market

Call MarketT-Bills MarketBills marketCP MarketCD MarketRepo Market

Primary/New issuemarket

Secondary/StockMarket/Exchange


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FinancialAssets/Instruments

Primary/Direct Indirect Derivatives

ForwardFuturesOptions

Innovative DebtInstruments

DebenturesPreference shares

Equity Shares Mutual Fund UnitsSecurity ReceiptsSecuritize DebtInstruments

Convertible DebenturesNon-Convertible DebenturesSecure Premium NodesWarrants


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Organization of IndianFinancial System

Phase- IPre 1951

Phase- II1951 To MidEighties

Phase- IIIPost-Nineties


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Phase- I Pre 1951Before 1951 the industry had very restricted

access to out side savings .the financial systemwas not responsive to opportunities for industrial

investment .Such a financial system was clearly

incapable of sustaining a high rate of industrial

growth ,particularly the growth of new and

innovating enterprises.


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Organization of Indian FinancialSystem (phase-II)

Private/GovernmentOwnership of

FinancialInstitutions

FortificationofInstitutionalstructures

InvestorProtection

ParticipationBy FinancialInstitutions in

CorporateManagement


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Private/Government Ownership ofFinancial Institutions

Nationalization of:RBI (1948)SBI (1956)LIC (1956) (245)Banks (1969-14,1980-6)GIC (1972)

New Institutions:DFIs ()UTI (1964)


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Fortification Of Institutionalstructures

DFIs:IFCI (1948,1993)SFCs (1971)ICICI (1994)IDBI (1964)SIDCsSIIC (1964)IIBI

Banks:Diversificationof Forms ofFinancing

Enlargement ofFunctionalCoverage

InnovativeBanking

LIC(1956)

(245)

UTI(1964)


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Organization of Indian FinancialSystem (phase-III)

Privatization ofFinancialInstitutions

BanksMutual FundsInsurance co.(1)

Reorganization of structure(2) FinancialMarkets

(3)Investor

Protection:SEBI(4)


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Reorganization of Structure(2)

DFIs /PFIs(i)

Banks(ii) NBFCs

(iii)MutualFunds

(iv)


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Banks - 2(ii)

PrudentialNorms:

Credit/AdvancePortfolioInvestment

PortfolioCapital

Adequacy

Management of Non-Performing Assets :

Debt RecoveryTribunals

Corporate DebtRestructuringSecuritization,

Reconstruction ofFinancial Assets &Enforcement ofSecurity Interest

RiskManagement

Asset LiabilityManagementCredit Risk

ManagementOperationalRisk

Management


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Financial Markets(3)

MoneyMarket Capital Market

Primary Market Stock Exchange

I I


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IDBI

The Industrial Development Bank of India Limited

commonly known by its acronym IDBI is one ofIndia's leading public sector banks and 4th largest

Bank in overall ratings. RBI categorized IDBI as an

"other public sector bank".It was established in 1964 by an Act of

Parliament to provide credit and other facilities for

the development of the fledgling Indian industry. Itis currently 10th largest development bank in the

world in terms of reach with 1228 ATMs, 725

branches and 486 centers.


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IFCI

The government established The Industrial

Finance Corporation of India (IFCI) on July 1,

1948, as the first Development Financial

Institution in the country to cater to the long-term finance needs of the industrial sector.

IFCI was changed in 1993 from a statutory

corporation to a company under the IndianCompanies Act, 1956


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ICICI

ICICI Bank is India's second-largest bankwith total assets of US$ 81 billion at March 31, 2010

The Bank has presence in 18 countries.

ICICI Bank offers a wide range of bankingproducts and financial services to corporate and

retail customers through a variety of delivery

channels and through its specialized subsidiaries in

the areas of investment banking, life and non-life

insurance, venture capital and asset management.


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At the state level, the machinery of the State

Industrial Development Corporations (SIDCs )

/State Industrial Investment Corporations (SIICs)

were geared up to meet the financial needs, in

terms of the requirements of the Third Five YearPlan.

In 1971, with the functional reorientation of the

development banks, the Industrial Reconstruction

Corporation of India (IRCI) LTD. Was jointly set upby the IDBI, BANKS and LIC to look after the

rehabilitation of sick mills.


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It was renamed as the IndustrialReconstruction Bank of India (IRBI)in

1984 .It was converted into a full-fledged

public financial institution (PFI) and was

renamed as the Industrial Investment

Bank of India (IIBI)in 1997.


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SFCs

Gujarat State Financial Corporation (GSFC) is apioneer term lending development financial

institution in the State of Gujarat.

It is created under the State FinancialCorporation Act, 1951 passed by Parliament. GSFCs

mandate is to provide finance to small and medium

scale enterprises. Formed in 1960, GSFC has

sanctioned loans and advances of over Rs.4400

crores; out of which, it has disbursed over Rs.3,300

crores to 47,000 units in the state.

IIBI


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IIBI

Industrial Investment Bank Of India Kolkatawas established in the year 1985. It offers

financial products and facilities. IIBI Kolkata

engages in a varied of fund based and non-fund

based actions, adding project finance, short

length, non-project, asset-backed financing in the

form of underwriting/direct subscription,

deferred payment guarantees, and workingcapital/other short-term loans to companies in

the country and globally.


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FINANCIAL SYSTEM & ECONOMIC DEVELOPMENT


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The Economic Development of a country

depends, inter alia, on the financial system. The

larger the proportion of the financial assets

(money and monetary assets) to real assets

(physical goods and services), the greater thescope for economic growth in the long run. For

growth to take place, investment is necessary

which flows from the financial system.


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Economic Development

Income Minus (consu-mption + own Investment)

Surplus SpendingEconomic Units

Surplus or savings Deficit or Negative Savings

Income Minus (consu-mption + own Investment)

Deficit SpendingEconomic Units

Financial System

Savings & Investment or capital formation


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Feel free to contact :[email protected]

Dr.Navneet JoshiAsst. Professor

JIMS, Rohini, Delhi

Documents

Indian Financial System an Overview by Dr Navneet Joshi From JIMS Rohini