ÌNDÌAN FÌNANCÌAL SYSTEM

ÌFS and its Functions
· System that allows the transfer of money
between savers and borrowers
· Ìt channels household savings to the
corporate sector
· Allows "asset - liability¨ transformation
· Ìt helps in risk transformation by
diversification
Structure of Banking in Ìndia
Scheduled
bank
Commercial
bank
Public sector
(27)
Nationalized
banks (19)
State bank of
Ìndia & its
associates (8)
Private sector
(30)
Foreign
banks (40)
Regional
Rural banks
(196)
Co-operative
bank
Commercial banks
Public sector banks are those where government
holdings are more than 50% while nationalized banks
are those banks which were nationalized on July 19,
1969. Thus all nationalized banks are public sector
banks.
so one can say public sector bank=Nationalized
bank+ SBÌ + SBÌ associates + ÌDBÌ Thus in total 27
PSB's are there.
· As on December 31
st
, Public sector banks recorded
a rise of 24.1% when compare to 16.9% in the last
year.
Private sector Banks
· Private sector banks are those banks in which
majority of stake is held by private individuals and
not by government
· The first private bank in Ìndia was Ìnduslnd Bank
· ÌDBÌ ranks the 10
th
largest development bank in the
world as private banks in Ìndia
· As on December 31
st
, Private sector banks
recorded a rise of 28% when compare to 8.4% in
the last year.
Foreign Bank
· Banks from other countries which have branches in
a country.
· Citi Bank opened its branch in Ìndia in 1902
· The foreign banks have brought forth some
innovations and changes in the banking industry of
the country. The banking industry is now more
competitive and customer friendly than before.
· As on December 31
st
, Foreign banks recorded a
rise of 19.8% when compared to a decline of 8% in
the last year.
Regional rural bank
· The banks provide credit to the weaker sections of
the rural areas, particularly the small and marginal
farmers and small entrepreneurs
· RRB's was set up by the government of Ìndia on
October 2, 1975
· The total authorized capital was earlier fixed at Rs.
1 crore which is now raised to Rs. 5 crore
· The RRB's are under control of NABARD which is
in charge of laying down policies for the RRB's
Funds flow from commercial bank
STRONC DENAND
CRED!T FLOW FRON SCHEDULED CONNERC!AL BANKS (RS CRORE)
!tem
Outstanding as on
Narch 26, 2010
As on Narch 27,
2003
As on Narch 26,
2010
Amount Per cent Amount Per cent
Public Sector
Banks
27,33,70S 3,2S,608 16.3 S,41,737 24.1
Foreign Banks 1,30,766 ·14,028 ·8.1 31,474 13.8
Private Banks 6,83,232 41,424 8.4 1,S1,618 28.2
All Scheduled
Commercial
Banks*
37,63,213 3,66,314 13.8 7,38,641 24.4
*: !ncluding Regional Rural
Banks
Source:RB!
Capital market
Capital Market in
Ìndia
Capital Market in
Ìndia
Government
security (Gill-
edged market)
Government
security (Gill-
edged market)
Ìndustrial security
market
Ìndustrial security
market
New issues
market
and
Old issue market
New issues
market
and
Old issue market
Development
financial
Ìnstitution
Development
financial
Ìnstitution
ÌFCÌ
ÌCÌCÌ
SFC's
ÌDBÌ
ÌÌBÌ
UTÌ
ÌFCÌ
ÌCÌCÌ
SFC's
ÌDBÌ
ÌÌBÌ
UTÌ
Financial
Ìntermediaries
Financial
Ìntermediaries
Merchant banks
Mutual funds
Leasing companies
Venture capitalist
Merchant banks
Mutual funds
Leasing companies
Venture capitalist
Gilt Edged Market And Types
· This market refers to the market for government
securities which are "of the best quality¨.
· Credible instrument used by government for
meeting its financial requirement.
· Types:-
Ì. Dated Securities with a fix maturity date.
ÌÌ. Zero coupon bonds
ÌÌÌ. Partly paid stock
ÌV. Treasury Bills
Ìndustrial security market
· An initiaI pubIic offering (IPO), referred to simply
as an "offering" or "flotation", is when a company
(called the 88:07) issues common stock
or shares to the public for the first time.
· Ìndia's largest ÌPO is from Coal Ìndia Ltd which
raised upto Rs.15000 crore
· A 8tock exchange is an entity that provides
"trading" facilities for stock brokers and traders to
trade stocks, bonds, and other securities.
Recent changes by SEBÌ
· Ìnvestment limit in ÌPO is increased from 1 lakh to
2 lakh
· SEBÌ decides ÌPO's should be listed with in 12
days
· SEBÌ introduced spot delivery system for
derivatives from April 1
st
2011
· Pre open market introduced by SEBÌ
Development financial Ìnstitutions
· Ìt was developed by "The Narasimham
committee¨in 1991
· These institutions provide a crucial role in providing
credit in the form of higher risk loans, equity
positions and risk guarantee instruments to private
sector investments in developing countries
Merchant banks
· Merchant bankers assist corporate in raising
capital.
· They assist in issue of Shares, syndicating loans,
public issue of debentures. They do not provide
funds.
· They only assist. They also actively arrange
working capital, appraisal Projects scrutinize &
persuade merger proposals
Merchant bankers as lead managers
$I.no $ize of the i88ue Maximum number
of Iead manager8
1 Less than 50 crores 2
2 50 ÷ 100 crores 3
3 100 ÷ 200 crores 4
4 200 ÷ 400 crores 5
5 Above 400 crores 5 or more as
prescribed by SEBÌ
Mutual Funds
· A mutuaI fund is a professionally managed type
of collective investment scheme that pools money
from many investors and invests typically in
investment securities.
· Types of mutual Funds
Ì. Open - ended schemes
ÌÌ. Close ÷ ended schemes
Bank v/s Mutual Fund
particuIar8 $ MUTU FU$
Returns Low Better
Administrative
Expenses
High Low
Risk Low Moderate
Ìnvestment Options Less More
Quality of assets Not transparent Transparent
Ìnterest calculation Minimum balance
between 10
th
& 30
th
of
every year
Everyday
Lease financing and hire purchase
· ea8ing is a process by which a firm can obtain the
use of a certain fixed assets for which it must pay a
series of contractual, periodic, tax deductible
payments.
· A hire-purchase contract allows the buyer to hire
the goods for a monthly rent.
· A hire purchase is termed an in8taIIment pIan.
Venture capital Financing
· Venture capital is risk financing available in the
form of equity
· A venture capitalist also provides management
support and acts as a partner and advisor to the
entrepreneur
· Methods of venture financing
Ì. Equity ÷ Contribute 49% of the total equity capital
ÌÌ. Conditional loan ÷ Amount repayable in form of
royalty, No interest charged
ÌÌÌ. Ìncome notes ÷ Charges both interest and royalty
on sales
THANK YOU

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