Professional Documents
Culture Documents
Payment system
Mobilization and allocation of funds
Risk management
Price information for decentralized decision making
Dealing with the problem of incentives
1) Payment system
The commercial banking system constitutes the
payment system in the financial market. The credit card
and debit card companies play a vital role with large
number of commercial banks having their independent
credit card and debit card divisions, the debit and credit
card system becomes a part of banking system.
1.Call/Notice Money
2. Treasury Bills
3. Term Money
4. Certificate of Deposit
5. Commercial Papers
1. Call /Notice-Money Market
Call/Notice money is the money borrowed or lent
on demand for a very short period. When money is
borrowed or lent for a day, it is known as Call (Overnight)
Money. Intervening holidays and Sunday are excluded for
this purpose. Thus money, borrowed on a day and repaid
on the next working day, is "Call Money". When money is
borrowed or lent for more than a day and up to 14 days, it
is "Notice Money". No collateral security is required to
cover these transactions.
3. Treasury Bills.
Treasury Bills were first issued by the Indian
government in 1917.Treasury Bills are short term (up to
one year) borrowing instruments of the union government.
It is a promise by the Government to pay a stated sum after
expiry of the stated period from the date of issue. It is
issued by the central bank of the country. It is one of the
safest money market instruments and is circulated in the
primary as well as secondary markets.
4. Certificate of Deposits
Certificates of Deposit (CDs) is a borrowing note for
the short-term similar to that of a promissory note. The
maturity date, fixed rate of interest and a fixed value-are
the three components of a certificate of deposit. The term
is generally between 3 months to 5 years. The funds cannot
be withdrawn instantaneously on demand, but has the
facility of being liquidated, if a certain amount of penalty
is paid. The risk associated with certificate of deposit is
higher and so is the return (compared to T-bills). It was in
1989 that the certificate of deposit was first brought into
the Indian money market.
5. Commercial Paper
CP is an unsecured promissory note privately
placed with investors at a discount rate to face value
determined by market forces. The commercial paper is
issued for settling short term liabilities or loans, for
financing of inventories. The minimum maturity period of
CP is 7 days. It was in 1990 that CP was first issued in the
Indian money market.
FINANCIAL SERVICES
A financial service is any kind of service of a financial
nature offered by a financial service provider. All banking
and insurance related services are included in this concept.
These services are intangible and invisible. The financial
services were developed in order to meet the needs of
individuals as well as companies.
Financial service is a very wide field. However we can
classify these services in the following groups:-
1) Banking and financial services:-the banking and
financial services include the following the services such
as-
Custody services
Credit card services
Letter of credit
Mutual fund services
Securities trading services
2) Insurance and insurance related services: insurance
and insurance related financial services include the
following:
Insurance brokerage
Speciality insurance products
Underwriting of financial risk
Reinsurance
3) Fund based financial services: financial services based
on fund or money is as follows:
Equipments leasing
Hire purchase
Bill discounting
Venture capital
Housing finance
4) Fee based financial services: financial services based
on fees are as follows:
Issue management
Portfolio management
Corporate counseling
Loan based syndication
Arrangement of foreign collaboration
5) Capital market services: capital market is a market for
raising capital. The following are the financial services
rendered by various intermediaries in relation to the capital
market.
Issue management
Merchant banking
REGULATORY SYSTEM
The government of India is responsible to regulate the
financial market in India. The two important regulatory
institutions of the government of India are the Reserve
bank of India (RBI) and the Security and Exchange
board of India (SEBI).
The RBI is the central bank of the country and as the apex
authority; it performs the following central banking and
developmental functions:
CONCLUSION-
INDEX
Introduction
Functions of financial system
Financial institutions
Financial markets
Financial intermediaries
Financial services
Regulatory system
-RBI
-SEBI
Conclusion