Overview of Indian financial system

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FINANCIAL SYSTEM

A financial system or financial sector functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. 

Financial System of any country consists of financial markets, financial intermediation and financial instruments or financial products .

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CONSTITUENTS OF FINANCIAL SYSTEM

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FINANCIAL MARKET

A Financial Market can be defined as the market in which financial assets are created or transferred.

Mechanism which allows people to trade. Money market (Short term instrument)

Capital markets (Long term instrument)

The most important distinction between the two: The difference in the period of maturity.

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FINANCIAL MARKET Capital Market -  The capital market is designed to

finance the long-term investments.  The transactions taking place in this market will be for periods over a year.

Money Market- The money market is a wholesale debt market for low-risk, highly-liquid, short-term instrument.  Funds are available in this market for periods ranging from a single day up to a year.  This market is dominated mostly by government, banks and financial institutions.

Forex Market - The Forex market deals with the multicurrency requirements, which are met by the exchange of currencies.  Depending on the exchange rate that is applicable, the transfer of funds takes place in this market.  This is one of the most developed and integrated market across the globe.

Credit Market- Credit market is a place where banks, FIs and NBFCs purvey short, medium and long-term loans to corporate and individuals.

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MARKET REGULATORS

SEBI RBI Ministry of Finance

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FINANCIAL INSTRUMENTS Government Securities: Issued by central government,

state government, semi government authorities such as municipalities, state electricity boards and public sectors corporations.

Industrial Securities: These are securities issued by the corporate sector  to finance their long term and working capital requirements.  The Major Instruments that  fall under Industrial Securities are

Debentures Preference Shares Equity Shares

Call money market

Commercial Paper (CP)

Certificate of deposit (CD)

Repo market ( Repurchase

agreement ) etc.

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NARBARD: National Bank of Agricultural and Rural Bank EXIM: Export-Import Bank of India IDBI: Industrial Development Bank of India SIDBI: Small Industries Development Bank of India SIDC: Securities Industries development corporation NBFC: Non-Banking Financial Company ECGC: Export credit Guarantee corporation IIBI: Industrial Investment Bank of India NHB: National Housing Bank IFCI: Industrial Finance Corporation of India IDFC:  Infrastructure Development Finance Company RRB’s: Regional Rural Banks EFT’s: Electronic fund transfer

Thank You

Presented By:

Rabin Bhandari