Presentation on

Indian Financial System

By- Gaurav Ghatol

 The Indian financial sector in India
 A financial system allows the
exchange of funds between
lenders, investors and borrowers.
The Indian financial system
comprises of financial institutions,
financial markets, financial
instruments and financial services.
All these All the four elements of
the financial system are closely
related and work complementary
to each other. They play a
significant role for the
mobilization and allocation of
funds.
Financial Institutions
RBI

1)The Indian Banking Sector is regulated by the Resurv Bank Of India.

2) The RBI was established on 1 April 1935, According with the provision of RBI Act,1934
3) RBI was nationalized in 1949. And fully owned by the Government of India
4) RBI responsible for implementing monetary and `
credit policies,and issuing currency notes.
6)RBI exchange, and regulator of payment & settlement systems while
continuously working towards the development of Indian financial markets
7) regulator and manager of foreign exchange, and regulator of payment & settlement
systems while continuously working towards the development of Indian financial markets.
8) RBI is the primary regulator in the IFS, but not for all financial companies like register
themselves with the eh. Housing Finance Companies, Stock Exchanges, Companies, like
Nidhi Companies, Insurance companies and Chit Fund Companies are NBFCs and they
have been exempted from the of registration under Section 45-IA of the RBI Act, 1934
certain conditions. of NBFC
Financial Intermediary
intermediaries are institution witch facilitates the meeting of the investor and
borrower, These can be broadly divided in 2 broad classes,Banks & non-Banks.
Banks can be classified into following categories which are below:
A] Banking sector
• Central Bank (Reserve Bank of India or RBI) is the regulator of Indian bank.
. Specialised Banks : (NABARD, SIDBI small industrial development bank in India, is the
financial institution of MSME

. Commercial Banks :
*have the following main objective of commercial banks
Accepting Deposits.
Granting of Loans and Advances.
Agency Functions eg Clearing operations
General Utility Functions – locker services, bill payments.
*Bank can be classified into following categoriesa.

1) State Bank Group : State bank group is (State bank of Maisur, State bank of Indore,,State
bank of saurastra,State bank of Bikaner,state bank of India)

2) Natioanilesed Bank : Nationalise is example of Indian overseas bank,maharashtra

Bank,Bank of India,Central bank of India .

2) Regional Rural Banks : They bank have been created with a view basic of serving primarily
the rural areas of India with basic banking and financial
services. . Maharashtra Grammin bank,Vidharbh Gramin kokan bank.
1) Private Sector Banks : The private sector bank are banks were grater parts of stake or equity
are held by the private shareholders and not by government. private bank like icici bank, Axis
bank ,yes bank, kotak mahaindra bank,hdfc bank.
private sector bank has been functioning in India since the very beginning of the banking
system,during 1921 , that time private bank like bank of bengal,bank of Bombay, and Madras
bank after witch all together formed imperal bank of India,

2) Local Area Banks : Subhead local Area bank ltd, Krishna bhima samrudhi local area bank
andhra pradesh, costal local Area Bank ltd,Capital local area bank ltd.

3) Small Finance Banks : Jana lakshmi small finance,ujjivan small finance,utkarsh small finance,syndicate
small finance banks, Fin care banks
4) Foreign Banks : Foreign banks are defined as banks frome a foreign country working in India through
branches. This banks like DBS,City bank,HSSB bank ,Morshils bank,Katar bank this are the foreign bank.

5)Payments Banks : payment bank is an Indian new model of banks conceptualized b RBI. These banks
can accept a restricted deposit, whits is currently limited to one Lakh per costumer. These bank cannot
issue loans and credit cards. & both current ac & saving ac can be operated by such banks. Currently
working followings banks payment bank, Air tel payment bank payments bank,Postal payment bank, Jio
payment banks,Nsdl payment bank( national security deposit) fino payment bank.
* Co-operative -Banks can be classified into following categories.

2) State Cooperative Banks : State cooperative banks are the apex institutions in the three-tier
cooperative credit structure, operating at the state level. Every state has a state .

Co-operative banks are the banks whose main objective is to provide financial assistance to economically

weaker sections of the society. Such banks are registered under the Cooperative Societies Act.
) Urban Co-oprative Banks : This bank is located in urban areas. This bank is localities work
place groups.They essentially lent to small borrowers and businesses.
this bank are registered under the cooperative societies act. The term Urban Co-operative
Banks (UCBs), though not formally defined, refers to primary cooperative banks located in urban and semi-
urban areas. ... These banks were traditionally centred around communities, localities work place groups. They
essentially lent to small borrowers and businesses

3) District Central Co-operative Banks : They bank have been operating as the district coeval
eg. DCCB
Banking
Structure in
India
 Financial Institution NBFC
Non Banking Financial Companies (NBFCs):
Though NBFCs lend money to the individuals and businesses like the banks, eg. Bajaj
,there are certain differences between an NBFC and a Bank. These differences are given
below:
(i) NBFC cannot accept demand deposits;
(ii) NBFCs do not form part of the payment and settlement system and cannot issue
cheque s drawn on itself;
(iii). Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is
not available to depositors

RBI is the primary regulator in the Indian financial system, not all financial companies
need to register themselves with the RBI. Housing Finance Companies, Merchant Banking
Companies, Stock Exchanges, Companies engaged in the business of stock-broking/sub-
broking, Venture Capital Fund Companies, Nidhi Companies, Insurance companies and
Chit Fund Companies are NBFCs but they have been exempted from the requirement of
registration under Section 45-IA of the RBI Act, 1934
Non-Bank Financial Intermediaries (NBFIs) *Following are the Intermediaries of NBFC in
India :
I1- insurance companies : Is the regulated by IRDA, This company is provide coverage or
compensation in case of any losses, damages, injury or death caused to the insured,
provided the insured have taken an insurance and have paid the required insurance
premiums.

2- mutual funds : Is regulated by the SEBI

3- investment companies, Is regulated by the

4- pensions funds and Non banking financial company : Is

Financial intermediaries NBFC

 Se

 1) I
 Financial Regulatory NBFC
Securities and Exchange Board of India [SEBI was formed in 1992]

1) Important functions of SEBI are protecting investor interests, promoting and regulating the Indian
securities markets.
2) SEBI IS The Indian Government regulatory body to control the securities market .
3) Securities and Exchange Board of India With the increase in dealings in stock markets by common
people,
4 The main objectives of SEBI is keeping a check in the malpractices in the securities and commodities
market and protect the investors interest.

SEBI performs it’s responsibilities through the following departments:

1.Division of New Products and Market Policy.
2.Division of Exchange Administration.
3.Division of Inspection.
4.Division of Risk Management.
5.Division of Complaints
6.Division of Products
 Financial intermediaries
Insurance Regulatory and Development Authority (IRDA)

1) IRDA was in 1999 to regulate Insurance industry in India.

2) IRDA has its headquarters in Hyderabad, Telengana.
3) The IRDA is responsible for regulation, promotion and supervision of the orderly growth of
the insurance and reinsurance business in India.
4) And It is also responsible for protecting the interests of the policy holders.

Pension Fund Regulatory and Development Authority (PFRDA)

1) The Pension Fund Regulatory and Development Authority Act passed by the Gov. of India in 2013,
2)PFRDA is the sole authority to regulate the pension system in India,( NPS National pension
scheme)
3) Following functions of the PFRDA as to promote old age income security by establishing,
developing and regulating pension funds, to protect the interests of subscribers to schemes of
pension funds.
Financial Market

1) Financial market is a place where the savers and borrowers transact with each other through the financial intermediaries. In
other words.
2) it is a place where financial products are sold and bought by the intermediaries.

Financial markets be classified in two broad components:

1} Capital markets : capital market is deals with financial products which have more than one year of maturity period while Money
market refers to instruments is to short time (less than 1 year)
noun
the part of a financial system concerned with raising capital by dealing in shares, bonds, and other long-term investments.

What are the capital market instruments?

Financial Instruments Used in a Capital Market | Financial Management
Securities: 'Securities' is a general term for a stock exchange investment. ...
Equity Shares: Equity Shares are the ordinary shares of a limited company. ...
Preference Shares: ...
Debentures: ...
Bonds: ...
Government Securities:

2} Money Market :
Money market instrument meets short term requirements of the borrowers and provides liquidity to the lenders. The most common money market instruments
are Treasury Bills, Certificate of Deposits, Commercial Papers, Repurchase Agreements and Banker's Acceptance. The maturity of money market instruments is
from one day to one year. In India, this market is regulated by both RBI. What are the capital market instruments?
Financial Instruments Used in money market Mutuual fund
1} Money Lenders :Moneylending is the practice of giving cash loans or supplying goods or services,
when the debt is repaid at a high rate of interest over a short period. Banks, building societies, insurance
companies and credit unions are not considered moneylenders.

2} Chit Funds : A chit fund is a collective instrument tool where there are two participants, one is the
organizer and the other is the member.
chit funds are saving cum borrowing schemes, where member or subscriber agrees to contribute fixed
amount every month for the fixed period. The total amount contributed by subscribers shall be auctioned and
given as prize money to needy subscriber every month. An exact analogy of chit fund is kitty party3}
Indigenous Bankers :Indigenous bankers are private firms or individuals who operate as banks and as
such both receive deposits and give loans. Like banks, they are also financial intermediaries. They should be
distinguished h professional moneylenders whose primary business is not banking but money lending.
Indigenous bankers  combine banking with trading and agriculture help the farmers to raise production of
crops. Paying them in cash with no waste of time, and also giving them loans. The indigenous bankers act as
commission agents when they purchase agricultural products on behalf of firms, mills, and trading
houses..eg. Sankari
Financial Instruments

Financial Instruments Another important constituent of financial system is provide financial

instruments. They represent a claim against the future income and wealth of others.
It will be a claim against a person or institutions, for the payment of the some of the money at a
specified future date.
It is the example like Treasury bills, commercial papers (CP), Certificates if Deposits (CD)

1} Cash ; cash is form of coins or paper note ,not cheque s or plastic card.

2} Shares : Shares is one of many equal parts into witch the value of a company is divided, that can be
sold to people who want to own part of the company. is the type Equity share ,preferential shares.

3} Mutual Funds : Mutual fund is kind of investment that uses money from investors to invest in
stocks, bonds. Fund manager decides how to invest the money

4} Bonds : Debt market which agreement between two party with guaranty invest thru Bond, with fix
interest & security which are no gives ownership.
Financial Services

Financial services are the economic services provided by the finance industry, which encompasses a broad

range of businesses that manage money, including credit unions, banks, credit-card companies, insurance
companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds,
individual 
1} Loans : bank loans are made at interest, meaning borrowers pay a certain percentage of the principal
amount to the lender as compensation for borrowing. See also: Loan.
A loan is when money is given to another party in exchange for repayment of the loan principal amount plus
interest. Loan terms are agreed to by each party before any money is advanced
2} Saving Account :A loan is when money is given to another party in exchange for repayment of the loan
principal amount plus interest. Loan terms are agreed to by each party before any money is advanced

3} Investment Banking :
An investment bank is a financial services company or corporate division that engages in advisory-based
financial transactions on behalf of individuals, corporations, and governments.

4} Cash Management : Cash management refers to a broad area of finance involving the collection,
handling, and usage of cash. It involves assessing market liquidity, cash flow, and investments
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