FINANCIAL SERVICES

INTRODUCTION
THE ECONOMIC DEVELOPMENT OF ANY COUNTRY DEPENDS UPON
THE EXISTENCE OF WELL ORGANISED FINANCIAL SYSTEM.
IT IS THE FINANCIAL SYSTEM WHICH SUPPLIES THE NECESSARY
FINANCIAL INPUTS FOR THE PRODUCTION OF GOODS AND SERVICES
AND THERE BY PROMOTING THE WELL BEING AND STANDARD OF
LIVING OF THE PEOPLE OF A COUNTRY.
THUS THE FINANCIAL SYSTEM IS A BROADER TERM THAT INCLUDES
FINANCIAL MARKETS AND FINANCIAL INSTITUTIONS WHICH SUPPORT
THE SYSTEM.
THE MAJOR ASSETS TRADED IN THE FINANCIAL MARKET ARE MONEY AND
MONETARY ASSETS.
THE RESPONSIBILITY OF THE FINANCIAL SYSTEM IS TO MOBILISE THE
SAVINGS IN THE FORM OF MONEY AND MONETARY ASSETS AND INVEST
THEM INTO PRODUCTIVE VENTURES.
AN EFFICIENT FUNCTIONING OF THE FINANCIAL SYSTEM FACILITATES THE
FREE FLOW OF FUNDS TO MORE PRODUCTIVE ACTIVITIES AND THUS
PROMOTES INVEST MENT.
THUS THE FINANCIAL SYSTEM PROVIDES THE INTERMEDIATION
BETWEEN SAVERS AND INVESTORS AND PROMOTES FASTER
ECONOMIC DEVELOPMENT.
fuNCTIONS OF FINANCIAL
SYSTEM
 1. PROVISION OF LIQUIDITY
IN FINANCIAL LANGUAGE MONEY AND MONETARY ASSETS ARE
REFERRED TO AS LIQUIDITY.

THE TERM LIQUIDITY REFERS TO CASH OR MONEY AND OTHER

ASSETS WHICH CAN BE CONVERTED INTO CASH READILY WITHOUT
LOSS OF VALUE AND TIME.
RBI, Commercial Banks – credit creation
2. MOBILISATION OF SAVINGS.
MOBILISE SAVINGS AND CHANNELISE THEM INTO PRODUCTIVE
ACTIVITIES.

TO ATTRACT SAVINGS FINANCIAL SYSTEM PROVIDES INCENTIVES.

FINANCIAL CONCEPTS
 FINANCIAL CONCEPTS
I. FINANCIAL ASSETS
II. FINANCIAL INTERMEDIARIES.
III. FINANCIAL MARKETS.
IV. FINANCIAL RATES OF RETURN
V. FINANCIAL INSTRUMENTS.
 FINANCIAL ASSETS.
BASIC PRODUCT OF FINANCIAL SYSTEM IS – FINANCIAL ASSET.
A FINANCIAL ASSET IS ONE WHICH IS USED FOR PRODUCTION OR
CONSUMPTION OR FOR FURTHER CREATION OF ASSETS. FOR Eg.
Equity shares.
Diff. PHYSICAL ASSETS
 CLASSIFICATION OF
FINANCIAL ASSETS.
I. MARKETABLE ASSETS

II. NON MARKETABLE ASSETS.

 MARKETABLE ASSETS
MARKETABLE ASSETS ARE THOSE WHICH CAN BE EASILY
TRANSFERRED FROM ONE PERSON TO ANOTHER WITHOUT MUCH
HINDRANCE. Eg: SHARES , BONDS , M.F.,UTI Units, Govt. Securities etc.
 NON MARKETABLE ASSETS.
IF THE ASSETS CANNOT BE TRANSFERRED EASILY, IT CAN BE SAY THAT
NON MARKETABLE ASSETS.
Bank Deposits, P.F., LIC Schemes, P.O. Certificates.
OTHER FORMS OF FINANCIAL
ASSETS
CASH ASSET

DEBT ASSET

STOCK ASSET.
 II. FINANCIAL
INTERMEDIARIES
 FINANCIAL INTERMEDIARIES
THE TERM FINANCIAL INTERMEDIARIES INCLUDES ALL KINDS OF
ORGANISATIONS WHICH INTERMEDIATE AND FACILITATE FINANCIAL
TRANSACTIONS OF BOTH INDIVIDUAL AND CORPORATE CUSTOMERS.
THEY MAY BE IN THE ORGANISED SECTOR OR IN THE UNORGANISED
SECTOR.
 CAPITAL MARKET
INTERMEDIARIES
1. DEVELOPMENT BANKS
2. INSURANCE COMPANIES (LIC & GIC)
3. UTI
4. AGRL. FINANCING INSTITUTIONS
5. GOVT. (PF, NSC)
6. EXIM BANK
7. NBFC (Hire Purchase, Leasing Co.etc.)
 MONEY MARKET
INTERMEDIARIES
1. RBI
2. COMMERCIAL BANKS
3. CO-OP. BANKS
4. P.O. , TREASURY BILLS Etc.
 III. FINANCIAL MARKETS
There is no specific place or location to indicate financial market. What ever
financial transactions takes place, it is deemed to have taken place in the
financial market.
However financial market can be referred to as those centres and
arrangements which facilitate buying and selling of financial assets, claims and
services.
 UNORGANISED SECTOR

1. MONEY LENDORS

2. INDIGENOUS BANKERS

3. PAWN BROKERS

4. TRADERS AND LAND LORDS.