WHAT IS FINANCIAL INSTITUTIONS?

A financial institution.(R:) 'is a company which engaged

,
in the business of dealing in , -cial and monetary j _,.I

transactions such as de ·. Q~tsrl .,. , investments, and ;.

/"

curre,n cy exchang~,;. • .~. ·

l:.·.. •••··-- ~ ~--··

c \s;1,t hatt~elRS th -
FI's provide financial'proiiu_
cons er to manage their:mon~y.
th.ey also provide s - .ices and advice:;t,6'liilR
cons ___ er to meet their &nan~ go y>~ --
 TYPES OF FINANCIAL INSTITUTIONS
/
There ar~_different types of financial institutions.

Co1 ■ 11D'!l'Cial Banks.

~~:vestment Banks.
Co
 COMMERCIAL BANl<S
Co ___ercial: ·, ~- r.-__ -_ d to
provide a :.! '. ·ses which
.i ncludes :~., Iii-. ..-iii current
. . ')f1 I e

account/ _ .- _e,, c,ollecting

bills, issll:., . . . , •s, paying of
bills ,etc.
I ~- • - .
 INVESTMENT BANKS
Investment :b a .... -- :h el1~ ~iridivlduals or
organisations :r · · ..rovlde :f inancial
consultancy se
These b ___s a ·· 11
een security
- - - ·

issuers and :i nv .·~• •--~ to go public.

The.y either :buy "1 I es ,a t a ·p rice
es ated ·~ y their ·.·_.. _·-/~-_-~;; ~ .. .'the.m to public or
se11 s h-ares on .b-eh-' IJ: 0 f, th
-cW. 1 1
' e
.9;.issuer
- and- tak e co --··•ss1on
.
on each share.
 INSURANCE COM,PANIES

Insur,anc·_c · ,.
T- . ,r,,
· as non·
ba . . i .·, . . .~ . . . re
provi · -~ ·· · , - J~ · . • · liei,
I • fo,r, individuals
1

or corp ·· · · i asse~ -~a· nd

protec -1

, _ ~ · . .. 'R, secured
thr,o ug · ___ _ _. s.
 BROKERAGE FIRM

.A broker.age : -~ - , -·tlo,n whose main

duty .i s to .a ct_· ·. ·, ects buyers
and sellers an, , . . .· .· . d ,selling of
financial ,sec ··, . etw ee

Brokerage : · __ 1 - -ation ~ way of

- - • - - ·. - - - ·· - ; • -

. - .

co ·ssion or ,f . . __ ,. .. • the transaction·. .-- .

has successfully ic o~pleted.

 Financial Institution
• A financial institution (FI) is a company engaged in the
business of dealing with financial and monetary transactions
such as deposits, loans,investments, and currency exchange.
• Financial institutions encompass a broad range of business
operations within the financial services sector including banks,
trust companies, insurance companies, brokerage fmns, and
investment dealers.
 Financial Institutions

Banking Non Banking

 Banking Structure

ICommetml -. - n_b_ -----•-~

Co-operathe Bank■
I
Publk Sec:IDr
----- I I
Private Sector foreign Banks Regioulltwal
&Anks •nu &Anb(RU.)

St.te Co-operative Banks

District Co-oper•tive Banks

Other Co-operative Banks

 Non Banking

'
Financial
lntermediarie s
I
I I

Banking Non Banking

__,
I
I I J J I
Mutual Funds,
Development Housing
Finance
Insurance Venture capita NBFCs
Finance etc
 Structure of Development Bank■

Industrial Agricultural Expor1-lmport

0.Vel()JMMnt Banks Dcwlopmc-nt Banks Development Bank
I I
All-India
AU India S..t.e-Lcvel All India State-Level Local Level
I
I
I
SFCa/SlDCal
I
NABARO
I
SLDBI
I
PLDBI
I
Ex!m Bank
For Fo, sue, (formedy and
Large&Ale SmaD-SC.. AROC) bTancha
lndusaria lndultria of St.DBI

I
IFCI. IDBI,
I
NSIC
IRBI
(formerly IRCI),
ICICI
 Functions of Fis
Financial institutions have several functions that assist the public with various
needs in that sector.
1. Directing the Payment System
One of the primary and most public functions of financial institutions is
managing the payment system. That phrase refers to everyday commercial
transactions that involve individuals and businesses.
Financial institutions keep the payment system in motion through
checking and savings accounts, credit cards, and wire transfers.
2. Assisting With Resources and Capital
• Financial institutions help individuals and corporations with
resources and capital management by extending credit to those
who can pay it back. Loans and credit cards allow families and
companies to borrow funds and pay them back on a regular
schedule.
Acquiring capital for a new or existing business or personal
project can be difficult, so financial institutions allow people
and businesses to have access to the capital they need to be
successful.
3. Moving Financial Resources
Another important function of financial institutions is the moving of
resources around from place to place. These institutions assist with larger
transfers of funds like corporate investments, purchases of real estate, and
construction loans, as well as other larger transactions, such as paying
annuities.
Financial institutions can transfer resources from one party to another more
easily and with more flexibility than individuals or corporations can, which
makes this function so crucial.
4. Risk Management
Financial institutions manage risk and uncertainty for
companies and families. Insurance companies and other
portions of the financial sector allow large numbers of people
to pool and share the risk, making it easier to handle accidents
and other difficulties that occur in business or personal life.
5. Informing Financial Decisions
Financial institutions provide key information
that makes large scale monetary decision
easier. The information that financial
institutions provide allows individuals and
corporations to make educated and secure
decisions in real-time.
6. Maintaining the Market
Financial institutions also make it possible for individuals and
other entities to invest in the stock market. Investors can make
long-term or short-term ventures into the market for the
promise of a greater return. Institutions brokerage firms allow
companies to issue stock to have more cash flow based on
investors purchasing stock. Often, the stock market drives the
pulse of the financial sector as a whole.