Presentation On

Financial System
Prepared BySania Iqbal
MBA Final Semester

ContentsWhat is financial System? Structure of financial system How financial system helps in economic development?


Financial system

Financial system is a set of complex and closely intermixed financial institutions, markets, instruments, services practices, procedures and so on««

Financial system

Financial institutions

Financial markets

Financial instruments

Financial services

1. Financial Institutions 
Banking Institutions( Creator of credit) Non Banking Institutions (purveyor of credit) Point of distinctions 1.participate in economy¶s payment mechanism Their deposit liabilities constitute major part of national money supply They can as a whole create deposits or 9-5 credit

Intermediaries and non intermediaries
Act as intermediaries between savers & investors, lend money & mobilize savings, liabilities are toward ultimate savers

Non intermediaries
These do the loan business but their resources are not directly obtained from the savers e.g. IDBI and NABARD

2. Financial Markets

Financial markets are centers or arrangements that provide facilities for buying and selling of financial claims and services


Classification of Financial Markets 
Primary And secondary Markets Money and Capital Markets Other classification 1.Organized & unorganized 2. Formal and informal 3. Domestic & foreign


Financial Instruments

*It refers to claims, assets and securities 1.Financial Asset represents a claim to the payment of a sum of money sometime in future (repayment of principal)and or a periodic (regular or not so regular) payment in the form of interest or dividend


2.Financial Securities classified as primary and secondary securities. The former are issued by the ultimate investors directly to the ultimate savers as ordinary shares & debentures and the latter are issued by financial intermediaries to the ultimate savers as bank deposits, units, insurance policies etc


Financial instruments differ from each other in respect of their investment characteristic which are independent and interrelated. Some of the important characteristics of financial assets & products are: 1.Liquidity 2.Marketibility 3.Tranferibility 4.Transaction cost 5.Default risk 6. Maturity Period

Role of financial system in economic development 
Economic development is partially dependent on the financial system to help mediate the transfer of money to areas of the economy that need it most


Savings The financial system allows you to place your excess money into a savings account in a bank of your choice. Keeping your money in a bank safeguards your savings, and the bank pays you interest based on the amount you keep in your account. Loans: Money in deposit accounts, like savings accounts, is used to provide loans for a wide range of projects to people and Investments The financial system also facilitates the transfer of money from investors to businesses. When businesses raise capital, they sell stock to investors. businesses.

Business Growth:Businesses may expand their operations or finance growth by issuing debt instruments called bonds. Bonds are bought and sold through the financial system. Bond markets allow businesses to access investor capital to finance their growth Government Expenditure Governments may finance programs or deficit spending through the financial system by issuing bonds to raise money. Investors may buy government bonds to own a part of government debt, and collect interest payment from the government


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