GROUP MEMBERS

Abhishek Chaudhary Jatinder Dangwal Nupur Jain Ravinder Sharma Rishi Panwar Sakshi Chauhan Shashi Kumar Shankar Narayan Batabyal

 Existence of a well organised financial system. Promotes the well being and standard of living of the people of a country. Money and monetary assets. Mobilize the saving. Promotes investment. Financial System of any country consists of financial markets, financial intermediation and financial instruments or financial products.

Barter

Money Lender
Chit funds Indigenous Banking

Cooperative Movement
Societies Banks

Joint-Stock Banks
Consolidation Commercial Banks

Nationalization
Investment Banks Development Financial Institutions

Investment /Insurance Companies Stock Exchanges Market Operations

Specialized Financial Institutions

Merchant Banking Universal Banking

INDIAN FINANCIAL SYSTEM

ORGANIZED Regulators Financial Institutions Financial Markets Financial Services

NON-ORGANIZED Money Lenders Local bankers Traders Landlords Pawn brokers Chit Funds

 Regulators Financial Instruments- Money market

instrument and Capital market instrument

Financial markets- Forex market,Capital

market,Money market,Credit market. Capital market and Money market further combines and forms Primary markets and Secondary markets.

Financial Intermediaries

 RBI (Reserve Bank of India) SEBI (Securities and Exchange Board of India) CBDT (Central Bank of Direct Taxes) IRDA (Insurance Regulatory and Development Authority) BIFR (Board for Industrial and Financial Reconstruction)

1.Banking Institutions (a)Scheduled Commercial Banks -Public Sector Banks -Private Sector Banks -Foreign Banks -Regional Rural Banks (b)Scheduled Cooperative Banks

2.Non- Banking Institutions (a)Non Banking Financial Companies (b)Development Financial Institutions -All India Financial Institutions(exICICI,IDBI,IFCI etc) -State Level Institutions(ex-SFCs,SIDCs) -Other Institutions 3.Mutual Funds (a)Public Sector (b)Private Sector 4.Insurance and Housing Finance Companies

 Carry out financial activities . Resources are not directly obtained from the savers as debt. Oblige public savings for rendering other financial services including investments. UTI, LIC, GIC

 Established to fill the gaps between banking systems and capital market. Channeling funds to particular firms, industries, sectors, during the development process. To reduce financial constraints faced by companies. Converting themselves into universal banks. E.g.: ICICI bank

Mutual Funds
A fund established in the form of a trust by a sponsor ,to raise money by the trustees through the scale of units to the public, under one or more schemes, for investing in securities in accordance with these regulations.SEBI

IHFCs
Filing the gap of credit supply for house building. Big mobilisers of funds. Provide finance in form of mortgage loan. HUDCO LIC GIC Commercial Banks

 Scheduled Commercial Banks : Which have been included in the second schedule of RBI Act,1934 Scheduled cooperative Banks : Organized & managed on the principle of co operation , self help, and mutual help. They function with the rule of one member, one vote function on no profit, no loss basis.

 A Financial Market can be defined as the market in which financial assets are created or transferred. Financial assets or Financial Instruments represents a claim to the payment of a sum of money sometime in the future and periodic payment in the form of interest or dividend. Money Market - It is a wholesale debt market for low risk ,highly liquid,short-term instrument.

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.

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

Market for securities (debt or equity),where business enterprises and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a Year. Long Term Funds raised by Government Corporate Trading Instruments used Shares Derivatives

It involved in short-term borrowing and lending with original maturities. Trading in the money markets involves Treasury bills Commercial paper Bankers' acceptances Certificates of deposit Short-lived mortgage and asset-backed securities. It provides liquidity funding for the global

Capital market

Equity Market
1.Primary Market 2.Secondary Market 3.Derivatives Market

Debt Market
1.Private Corporate Debt 2.PSU Bond market 3.Govt. Securities

 Equity market is a private or public market for the trading of company stock and derivatives act at an agreed price. These are securities listed on a stock exchange . The Indian market of equities is transacted on the basis of NSE and BSE, the trading being carried on in a dematerialized form. Venture capital funds and Private equity funds are the types of funds in Indian equity market

 Various kinds of debts like mortgage, promissory notes etc can be traded with ease between interested parties . Participants : Banks Financial Institutions Mutual Funds Insurance Companies etc. Instruments: Government Securities Market Public Sector Units Bonds Corporate Securities market

 Primary Market : First time sales of equity .

Also called the new issue market, is the market for issuing new securities. Many companies, especially small and medium scale, enter the primary market to raise money from the public to expand their businesses. They sell their securities to the public through an initial public offering [ IPO]. Secondary Market : Financial market for trading of securities that have already been issued in an initial private or public offering. It enables quicker valuations of financial instruments for both equity and debt. The two major secondary markets of India : 1. Bombay Stock Exchange (BSE). 2. National Stock Exchange (NSE)

Call Money Market

Collatera l Loan Market

Bill Market

Money Market Segme nts Acceptan ce Market

Discount Market

 Call Money Market : Market where call funds are borrowed and lent. Deals in very short period funds. This market is being used by the central bank for conducting the open market operations. Collateral Loan Market : A place where loan, which are backed by collateral assets are facilitated. Also called as secured loan. Bill Market : Where different types of bills or commercial bills are circulated. A commercial bill is one which arises out of a credit transactions. Acceptance Market : Refers to the market where short-term genuine trade bills are accepted by financial institutions.

Bridges the gap between lack of knowledge of investors and financial instruments and markets. Help in raising fund from individuals, investors, institutions, and corporate organization. Efficient Distribution of fund. Effective mobilization of saving into productive units. Indian financial system has provided regulatory authorities to bring discipline in

Book building Credit Rating Deposit Insurance E-Commerce Hire Purchase Lease financing Syndicated Loan Depository Portfolio management

Documents which represents financial claims on assets and securities. Refers to claim periodical payments of certain amount of money by way of principle, interest or dividend.

There are instruments for savers such as equities, mutual fund units, etc. There are instruments for borrowers such as loans, overdrafts, etc. Like businesses, governments too raise funds through some instruments, such as bonds, Treasury bills, etc. Instruments like PPF, KVP, etc. are available to

Liquidity, for the quick conversion into cash. Collateral value, for pledging of instruments for obtaining loan. Price fluctuations of security. Tax status.

Money lenders: Offers small personal loans at high rate of interest. Important source of credit to a particular category of borrowers Pawn brokers: An individual or business entity offers loans in exchange for an item of value given to the pawn broker. Indigenous bankers: offer loan on short term. lent money on security of jewels and on promissory notes.

INTERRELATION Financial System Savers Lenders Sectors Households Foreign

Corporate Sector/Govt. Sector Investors/Borrowers Unorganized Sector

Economy

 Each scam has brought in reforms1992/2001 Screen based Trading through NSE Capital adequacy norms stipulated Dematerialization of Shares-risks of fraudulent paper eliminated Entry of foreign investors Investor awareness programs Rolling settlements Interaction between banking and exchanges

 Corporatisation of exchange memberships Banning of Badla/ALBM Introduction of Derivative productsIndex/Stock Futures & Options Reforms/Changes in the margining system STP- electronic contracts Margin Lending Securities Lending

 PRE REFORMS PERIOD STEPS TAKEN OBJECTIVES

CONCLUSION

PRE REFORMS PERIOD The period from the mid 1960s to early 1990s Characterized by: -Administered interest rates -Industrial liscensing and controls -Dominant public sector -Limited competition -High capital-output ratio

 Banks and financial institutions acted as a deposit agencies. Price discovery process was prevented. Government failed to generate resources for investment and public services. Till 90s it was closed, highly regulated and segmented system.

 Economic reforms initiated in June 1991 The committee appointed under the chairmanship of M Narasimham He submitted report with all the recommendations Government liberlised various sectors in the economy Reform of the public sector and tax system

 Reorientation of the economy Macroeconomic stability To increase competitive efficiency in the operations To remove structural rigidities and inefficiencies To attain a balance between the goals of financial stability and integrated and efficient markets.

 Reduce the level of state ownership in banking Lift restrictions on foreign ownership of banks Spur the development of the corporate bond market Strenghthen legal protections

 Deregulate the insurance industry Drop propose limits on pension reforms Increase consumer ownership of mutual-fund products Introduce a gold deposit scheme Speed up the development of electronic payments Separate RBIs regulatory and central bank functions Lift the remaining capital account controls Face out statutory priority lending and

 Financial System is fairly integrated, stable and efficient Weaknesses need to be addressed The reforms have been more capital centric in nature Foreign capital flows and foreign exchange reserves have increased but absorption of foreign capital is low