BANKS AND INSTITUTIONAL MANAGEMENT

The nature and role of financial system

Structure of financial system 1)

1) Financial System 
2) Financial Institutions
3) On the basis of the nature of activities,
4)  Non-banking financial institutions
5) Financial Markets 

 6) Classification on the basis of the type of financial claim

 7) Classification on the basis of maturity of claims

8) Classification on the basis of seasoning of claim

9)  Classification on the basis of structure or arrangements

10) Classification on the basis of timing of delivery

11) Other types of financial market:

12) Financial Instruments

13) Financial Services 

Functions of financial sectors

A good starting point for evaluating the Australian financial and payment systems is to
consider the desired role of finance in our society. This Chapter provides an introductory
discussion of the core functions of the financial sector, and the characteristics that set it
apart from other sectors of the economy.

1) Core Functions of the Financial Sector

2) Value exchange
3) Intermediation
4) Risk transfer
5) Liquidity
 Financial system and economic development

Role of Financial System in Economic Development ...

The development of any country depends on the economic growth the country achieves
over a period of time. Economic growth deals about investment and production and also
the extent of Gross Domestic Product in a country. Only when this grows, the people will
experience growth in the form of improved standard of living, namely economic
development.

 Savings- investment relation

 Growth of capital market
 Government securities
 Infrastructure and growth
 Trade development
 Employment growth
 Venture capital
 Balance economic growth

Indian financial system

The financial system of a country of a country is an important tool for
economic development of the country, as if helps in creation of wealth by
linking savings with investment. It facilitates the flow of funds from the
households to business firms to aid in wealth creation and development of
both the parties

The financial system of a country is concerned with:

 Allocation and mobilizations of savings

 Provisions of fund
 Facilitating the financial transactions
 Developing financial markets
 Provision of legal financial framework
 Provision of financial and advisory service

According to Robinson, the primary functions of a financial system is

“To provide a link between savings and investment for creation of wealth and
to permit portfolio adjustment in the composition of existing Wealth”.
 Features of financial system

 It plays a vital role in economic development of a country

 It encourages both savings and investment
 It links savers and investors
 It helps in capital formation
 It helps in allocation of risk
 It facilitates expansion of financial markets
 It aids in Financial deepening of broadening

Financial sectors reforms

Types of Financial Sector Reforms:

1)   Reduction in Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR):
2) End of Administered Interest Rate Regime
3) Prudential Norms: High Capital Adequacy Ratio
Competitive Financial System
4) Non-Performing Assets (NPA) and Income Recognition Norm:
5) Elimination of Direct Credit Controls
6) Promoting Micro-Finance to Increase Financial Inclusion
7) Setting up of Rural Infrastructure Development Fun:d (RIDF)

Reserve bank of India

Reserve Bank of India (RBI) is India’s central banking institution, which controls the monetary
policy of the Indian rupee. It commenced its operations on 1 April, 1935 during the British Rule
in accordance with the provisions of the Reserve Bank of India Act, 1934. The original share
capital was divided into shares of 100 each fully paid, which were initially owned entirely by
private Shareholders. Following India’s independence on 15 August, 1947, the RBI was
nationalised on 1 January, 1949.

Functions of RBI
1) Monetary Authority
2) Regulator and supervisor of the financial system
3) Regulator and supervisor of the payment systems
4) Manager of Foreign Exchange
5) Issuer of currency

Objectives
 * To manage the monetary and credit system of the country.
* Stabilize internal and external value of rupee.
*Establish monetary relations with other countries of the world and    international
financial institutions.
* To maintain balance between the demand and supply of currency

Organization and management

This article will help you to differentiate between organisation and management of an

enterprise.
Difference # Organisation:

1. ‘Organisation’ is the structure by which a harmonious inter-relation is established

between the workers and their work.

2. Through organisation authority and responsibility are delegated. These are organisa-

tional activities.

3. Organisation is one of the various functions of management. As a part of management,

organisation helps it to execute its other functions.

4. Organisation acts as a tool in the hands of the managers.

5. Organisation aims at performing the planned activities through creating proper work

environment.

6. The setting up of effective organisation structure depends on efficient management.

Difference # Management:

1. ‘Management’ is the executive process of getting works accomplished by the

subordinate employees.

2. The functions of management are administrative activities.

3. Management is the sum total of several activities—making plan, setting up

organisation, giving command and direction, motivating the employees, coordinating

and controlling various functions of the enterprise.

4. With the help of organisation the managers perform their duties and responsibilities.

5. The objective of management is to supervise the accomplishment of work of the

subordinate employees and to give necessary direction for getting the desired result for

achieving the pre-determined target.

6. Efficient management largely depends on strong organisation.

7. Management may be compared to the whole human body

Role and functions of organization and management

Functions of management
1) Planning
2) Organizing
3) Staffing
4) Controlling
5) Directing

Functions of management
1) To define the role of the individual
2) Determination of authority
3) Fixation of responsibility
4) Specialisation
5) Coordination
6) Proper utilisation of human resources
7) Efficient functioning
Monetary policy of the RBI

Objectives of monetary policy

1) Promotion of saving and investment

2) Controlling the imports and exports
3) Managing business cycles
4) Regulation of aggregate demand
5) Generation of employment
6) Helping with the development of infrastructure
7) Allocating more credit for the priority segments
8) Managing and developing the banking sector

Recent policy development