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Indian Financial system

The financial system or the financial sector of any country consist of (A)Specialised and non specialised financial institution. (B)Organised and unorganised financial market. (C)Financial instruments and services which facilitate transfer of funds.

The word system in terms of financial system, implies a set of complex and closely connected or interlinked institution, agent practice, market, transactions, claims, and liabilities in the economy. The financial system is concerned about money, credit and finance-the three term are intimately related yet are somewhat different from each other.

As men material and money are crucial input in production activities The human capital and physical capital can be brought and developed with money, therefore money, credit and finance are lifeblood of economic system

Financial System
Financial Services

Financial Institution Financial Markets Financial Instruments Organized + Unorganized Primary Primary + Secondary Banking + Non banking Short Term Money Market Medium Term

Regulatory +Intermediaries + Non Intermediaries+ Others

Secondary

Long Term

Capital Market

Relationship between Financial System and Economic Development

Economic development Saving & investment Or capital formation Deficit spending Economic Units

Surplus, spending Economic Units

Income Minus (Consumption +own Investment) Surplus or Saving

Income Minus (Consumption + Investment

Deficit or Negative Saving

Financial System

Financial market are said to be perfect When (a)A large number of saver and investor operate in market. (b)The savers and investor are rational (c)All operators in the market are well informed and information is freely available to all of them. (d)There are no transaction cost (e)The financial asset are infinitely divisible (f)The participants in market have homogenous expectation (g)There are no taxes

Indian financial System at Present

Institutions
INTERMEDIARIES (1) 1 Banking
2 Non banking : Provident and pension fund

reserve bank of India Small saving organization (RBI) life insurance corporation commercial banks cooperative credit societies
(LIC)
general insurance corporation (GIC) unit trust of India (UTI) mutual funds

cooperative banks

post-office saving banks investment trust


investment companies

finance corporation

nidhis chit funds


hire purchase finance companies lease finance companies

national housing banks


housing and urban development corporation (HUDCO)

housing development finance corporation (HDFC),and other housing finance companies


manufacturing companies accepting public deposits venture capital funds National cooperative bank of India.(NCBI)

Special Development (2)


Industrial finance corporation of India(IFCI or IFC) Industrial credit and investment corporation of India.(ICICI) Industrial development bank of India(IDBI) Industrial reconstruction bank of India(IRBI) Export and import bank of India (EXIM Bank) National bank of agriculture and rural development(NABARD) Shipping credit and investment company of India(SCICI) Tourism finance corporation of India(TFCI) Agriculture finance consultancy ltd(AFC) Risk capital and technology finance corporation (RCTFC) National cooperative development corporation(NCDC) Central warehousing corporation(CWC)

State warehousing corporation(SWC)

Rural electrification corporation(REC)


National industrial development corporation(NIDC). National small industries corporation(NSIC). Small industries development bank of India(SIDBI) State financial corporation(SFCs)

State industrial development corporations(SIDCs)


State industrial investment corporations(SIICs) State small industries development corporations(SSIDCs) Power finance corporation(PFC)

Regulatory and Others(3) 1 Regulatory:


RBI Securities and exchange board of India(SEBI) Board of industrial and financial reconstruction(BIFR) Board of financial supervision Insurance regulatory authority

Others:

Deposit insurance and credit guarantee Corporation(DICGC)


Export credit and guarantee Corporation(ECGC)
Technical consultancy organizations (TCOs) Stock holding corporation of India(SHCI)

Credit rating information services of India(CRISIL)


Discount and finance house of India(DFHI) Infra structure leasing and financial services ltd(ISLFS) Technology development and information company of India(TDICI) Merchant Banks Factoring Companies Money lenders Indigenous bankers Securities trading corporation of India(STCI) Primary Dealers Investment information and credit rating agency(ICRA) Depositaries Custodians

Instruments and Markets(4) 1 Instruments:


Equity ordinary shares Preference shares

Industrial debentures or bonds


Capital gain bonds Government (gilt-edged) securities or bonds

Relief bonds
National development bonds Indra vikas patra Kisan vikas patra National saving scheme National saving certificate Deposit with banking institutions

Insurance plan Units Deposit with companies Participation certificates

Pass through certificates


Certificate of deposits(CDs) Commercial papers

Call and notice money


Hundis Mortgages National saving annuity certificates Social security certificates Trade credits Chits

Inter-corporate deposits Repo & reserve repos Stockinvest Global depositary receipts(GDRs) Foreign Boards Foreign currency convertible bonds(FCCBs) Eurobonds & Euronotes Floating rate Notes (FRNs)

Future option swaps and other foreign derivatives


Zero coupon bonds Non voting shares

Indexed bonds

2 Markets:

commercial bill market government securities market treasury bill market Industrial securities market (stock market) Foreign securities market Over the counter exchange(OTCE) Discount market Market for commercial paper and certificates of deposits

Mortgage market
Market for guarantees National stock exchange (NSE)

Derivatives market
Bonds market Equities market

Services (5)
Hire purchase and installment credit Deposit insurance and other insurance Financial and performance guarantees Acceptances Merchant banking Factoring

Credit rating
Credit information Technical and economic consultancy

Stock holding
Discount and Rediscounting Refinancing Underwriting

Funds transfer

Technology development
Leasing Credit cards

Safe deposit vaults


Brokerage Portfolio management Deposit acceptance Giving credit Loan syndicating Managing capital issues Market making Custodial services Depositary services