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m To make a historical account of Indian Financial

system before and after liberalization;


m To appreciate the evolutionary process for having
attained the present phase;
m To evaluate each component of the system in a
global context; and
m To loot at your business decisions in the context of
prevailing financial system of a state.
m áost banks were state-owned
m Banks, pension funds and
insurance companies were
forced to buy State Issued
bonds - primary investment.
m Bombay Stock Exchange was
closed market. Run by Brokers
for the benefit of its members.
There was no right governance
and regulation.
m There was no single derivative
market.
m All financial transactions were
controlled by the RBI and
áinistry of Finance
m Strict entry barriers in every sub-
industry. —   

m Difficult to start a bank, a mutual m áRTP act, 1969
fund, a brokerage firm, an m The Capital Issues
insurance company, a pension
fund, a securities exchange or (control) act, 1947
sub-broking firm. m Indian Companies Act,
m Foreign firms were restricted to 1956
touch any one of these parts
m Industries Act, 1956
m Comprehensive capital control
and restrictive legislations m Foreign Exchange
m Look at a typical bureaucrats of Regulation Act, 1973
yester years as perceived

Socialistic áodel Weapons


= Individuals,
Firms, State = Individuals,
Free Financial Firms,
System State
Deficit Units
Surplus Units = áoney áarket
= Debt áarket
= Equity áarket
= Derivative áarket
= Forex áarket
Vehicles
= Equity
= Bonds
= ybrid
= áoney áarket
Instruments
= All are customized
m áarket driven
m All players with integrity and accountability
m Innovators and Creators flourish
m Contributes favorably to the Economy
m No greedy
m Global but not taking external shocks
m State facilitates rather than suppresses
m Eighteen to Three ± m Banking Regulation Act
Scheduled Industries simplified
m Eight undred to Fifty ± SSI m Security Exchange Board
m áRTP not active constituted
m Foreign Exchange
m Capital Issues Act repealed áanagement Act ± passed
m Foreign Exchange m Company¶s Act ± subject to
Regulation Act repealed scrutiny
m Insurance, Banking m Private players allowed to
Industries open its gates for do insurance and banking
Private Players business
m áNC allowed m SEZs opened
m FDI encouraged

Liberalization Facilitators
m Lender's risk has dwindled
substantially
m Liquidity position is improved
m Return is certain on his savings
(either fixed or variable)
m Lender gets impetus to save
m e will get accurate information
from specialized financial
institutions.
m Lenders botheration with respect
to selecting a prompt borrower is
reduced
m Borrower certainty in rising
funds is soared
m e needs make less effort
and minimum time in
questing for an ultimate
lender.
m In whatsoever fashion he
needs funds he can
procure
m e can seek professionals
and specialized assistance
from specialist in the field.
m 1. Banking financial institutes (RBI, Commercial
banks and co-operative banks)
m 2. Development banks (all India financial institutes
like IDBI, IFCI)
m 3. Investment financial institutes (LIC,GIC,UTI,
since 2000 Private insurance companies like
SunLife, Allianz Bajaj, ICICI Prudential etc. )
m 4. Non-Banking financial institutes (SBI capital
services, áerchant banking companies ire-
purchase companies, etc.,)
m 5. Postal department Financial services (Recurring
deposits, NSC, KVP, Postal Life-Insurance etc.).
Financial
Vehicles
System
= Individuals, = Individuals,
Firms, State = áoney áarket Firms, State
= áarket = Customized
= Equity áarket Instruments
= State
= Debt áarket

Surplus Units Financial Deficit Units


áarket