INDIAN FINANCIAL SYSTEM

DR. R.L. CHAWLA

INDIAN FINANCIAL SYSTEM

INDIAN MONEY MARKET For Short Term Funds Demand for funds from individuals, firms & govt. Supply of funds from banks, FIs RBI, SBI, Commercial banks in org sector Indigenous Bankers/NBFCs INDIAN CAPITAL MARKET
Long & medium term Funds Facilities and institutional arrangements for borrowing and lending Demand from Mfg, Agr & Govt. Supply: Households, corporates, insurance companies, special agencies, govt. Banks,LIC, GIC, PFs,Invest in govt securities IFCI, IDBI,UTI, Invst in Pvt Sector

INDIAN FINANCIAL SYSTEM

Sub-markets : treasury bills, commercial bills, inter-bank call money market Financial intermediaries: Merchant banks, MFs, Leasing companies Gilt edged market for govt/semi-govt securities backed by RBI Industrial securities market Shares/Debentures

INDIAN FINANCIAL SYSTEM

INDIAN BANKING SYSTEM Commercial Banks/Cooperative banks RRBs, State Co-operative banks are scheduled banks Non scheduled banks not included in the second schedule of RBI act 1934

CALL MONEY MARKET

Money at call or short notice Centres are Metros, Ahmedabad and Manglore PSBs : 80% demand, 20% Pvt /Foreign banks NBFCs : 80% supply, 20% banking system

BILL MARKET/DISCOUNT MARKET

Short term bills upto 90 days bought & sold Commercial bill Treasury bill : 91 days, 182 days, 364 days; 14 days intermediary treasury bills in 1997

INTERNATIONAL FINANCIAL MARKETS

International Bank Lending International Bond Markets International Equity Markets Eurocurrency/Bond Markets

REASONS FOR GROWTH OF GLOBAL FINANCIAL MARKETS

Information Technology a) FMs highly information intensive b) about markets, risks, exchange/interest rates, creditworthiness, c)how much investment, where, how, which financial assets-bonds,currencies,stocks d) Integrated financial markets24 hrs.operations

DEREGULATION OF FMs
Deregulation of capital controls Regulatory regimes eased in 1970s Less restrictions on inward/outward investment flows Deregulation trend spread from DCs to EMEs

FUNCTIONING OF IFMs
Banks: Commercial banks or Investment banks Financial Centres: Tokyo, London, NY, Paris Int. Banking thro Correspondents or own branch Eurocurrency/ Bond Markets Origin, objectives, development Equity markets: objectives