Indian Financial System: Components & Structure

Presented By:Abhishek Agrawal 151301Ajay Agarwal 151302Akhil Nayak 151303Amit Mukherjee 151304

Submitted to: Prof Deepak Danak

Indian Financial System: Components

Components of Indian Financial

Informal Formal

Financial Institutions

Banking NBFC

Financial Markets

Money Market

Capital

Market

Financial Instrument

s

Based On Term

Based on Types

Financial Services

Financial InstitutionsFinancial institutions mobilize the savings of savers and give credit or finance to the investors.

On the basis of the nature of activities, financial institutions may be classified as:

I. Regulatory and promotional institutionII. Banking institutions III. NBFC

Components Of Financial InstitutionsFinancial Institutions

Banking

Commercial Bank

Co-Operative

BankDevelopment Bank

Payment Bank

NBFC

Asset Financing Company

Investment Company

Loan Company

Infrastructure Finance Company

Regulatory Institutions RBI

Financial Market

• It is the place where financial assets are created or transferred. Financial markets catch the attention of investors and make it possible for companies to finance their operations and attain growth. Without financial markets, borrowers would have problems to find lenders.• The key functions are:• 1. Assist in creation and allocation of credit and liquidity.

2. Serve as intermediaries for mobilization of savings.3. Help achieve balanced economic growth.4. Offer financial convenience.

Types of Financial Markets

Money MarketoHandles short-term financial

assets (less than a year)o make it possible for businesses

to gain access to funds on a short term basis

oMajor participant are: RBI and Commercial Banks

Capital Marketofinancial assets that have maturity

period of more than a yearoallow businesses to gain long-term

funding to aid expansiono focus on financing of fixed

investmentsomain participants are mutual funds,

insurance organizations, foreign institutional investors, corporate and individuals.

Types of Capital MarketsPrimary/New Issue Market

A market for fresh capital. It provides the channel for sale of new securities, not previously available.

It does not have any organizational setup

IPO(Initial Public Offering)

Secondary/stock Market A market for old/existing securities A place where buyers and sellers

of securities can enter into transactions to purchase and sell shares, bonds, debentures etc.

Has physical existenceExample – BSE,NSE

Financial Markets : Components

Financial Market

Money Market

Call Market

T-Bills Market

Bills Market CP Market CD

MarketRepo

Market

Capital Market

Primary Market

Secondary Market

Financial InstrumentsInternational Accounting Standards IAS 32 and 39 define a financial instrument as "any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity".

Financial instruments are tradable assets of any kind. They can be cash, evidence of an ownership interest in an entity, or a contractual right to receive or deliver cash or another financial instrument.

Types of Financial InstrumentsBased on the types:

Cash instruments — Instruments whose value is determined directly by the markets. They can be securities, which are readily transferable, and instruments such as loans and deposits, where both borrower and lender have to agree on a transfer.

Derivative instruments — Instruments which derive their value from the value and characteristics of one or more underlying entities such as an asset, index, or interest rate. They can be exchange-traded derivatives and over-the-counter (OTC) derivatives.

FINANCIAL SERVICES• Financial services are the economic services provided by the finance

industry.• It deals in a broad range of services provided by various financial

institutions

Types of Services:• Banking Services• Foreign Exchange Services• Investment Services• Insurance Services

FINANCIAL SERVICESBanking services

Issuance of checkbooks

Provide personal

loans, commercia

l loans

ATMs

Foreign exchange services

Currency Exchange

Foreign Currency Banking

Investment services

Asset management

Hedge fund management

Insurance

Insurance brokerage

Reinsurance

Lender – SaversHousehold

Business farmGovt.

Foreigners

FUNDFinancial Market FUND

Borrower – SpendersBusiness Farm

Govt.Foreigners

Financial Intermediaries

FUNDFU

ND

FUN

D

ReferencesI. The Indian Financial System: Markets, Institutions and Services By Bharati V. Pathak

(Publisher Pearson Education)

II. https://www.rbi.org.in/scripts/bs_nbfclist.aspx Visiting Date 25-Oct-2015

III. http://www.investopedia.com/terms/r/reinsurance.asp Visiting Date 27-Oct-2015

Thank You