FINANCIAL SECTORS OF

ECONOMY
BY MOHD AFRIDI
 BANKING
It is systems of financial institutions called banks that help people store and use their
money
Banks offer clients the opportunity to open accounts for different purposes, like saving
or investing their money.
The banking industry is also valuable to the economy, as it provides resources for
individuals, families and organizations for
transactions and
investments
Banks provide valuable services like storing funds, managing credit and facilitating
financial transactions
 MERITS AND DEMERITS

Merits
• Fixed and assured returns
• Loan facility
• Easy liquidity
• Digitalisation
Demerits
• Low returns
• Penalties on pre mature withdrawal
• No tax benefits
 STOCK MARKET
The stock market refers to public markets that exist for issuing, buying, and
selling stocks that trade on a stock exchange or over-the-counter
Stocks, also known as equities, represent fractional ownership in a company,
and the stock market is a place where investors can buy and sell ownership of
such investible assets
An efficiently functioning stock market is considered critical to economic development, as it
gives companies the ability to quickly access capital from the public.
 MERITS AND DEMERITS
Merits Demerits
• Easy • High fluctuation
• Liquidity • No tax benefits
• Ownership perk • Huge market knowledge
• Digitalisation • Insider trading
• Flexible investment • Necessity of demat account
 MUTUAL FUNDS
Mutual fund means a fund established in the form of a trust to raise
monies through the sale of units to the public
The money could be invested in stocks, bonds, money market instruments,
gold, real estate and other similar assets.
These funds are operated by money managers or fund managers, who by
investing in line with the specified investment objective attempt to create
growth or appreciation of the amount for investors
 MERITS AND DEMERITS
Merits
• Moderately high returns
• Many no. of options available
• Moderate liquidity
• Regulated by SEBI
• Professional assistance
Demerits
• High commission charges
• No tax benefits
• Subject to market risk
• Insider trading
• Necessity of demat account
 REAL ESTATE
Real estate is property consisting of land and the buildings on it, along with
its natural resource such as crops, minerals or water
There are several types of real estate, each with a unique purpose and utility.
The main categories are: 1. Land 2. Residential 3. Commercial
In terms of law, real is in relation to land property and is different from
personal property while estate means the "interest" a person has in that land
property.
 MERITS AND DEMERITS
Merits Demerits
• Secondary income • Low returns
• Loan facility • Capital required
• Inflation cover • No tax benefits
• No liquidity
• Maintenance charge
 GOLD
Gold is a chemical element with the symbol Au and atomic number 79, making it
one of the higher atomic number elements that occur naturally.
Gold is a precious metal that has been used for coinage, jewelry, and
other arts throughout recorded history. In the past, a gold standard was often
implemented as a monetary policy.
Gold coins ceased to be minted as a circulating currency in the 1930s, and the
world gold standard was abandoned for a fiat currency system after the Nixon
shock measures of 1971.
 MERITS AND DEMERITS
Merits Demerits
• Loan facility • Low liquidity
• Inflation cover • No tax benefit
• Protection against uncertain • Storage issue
• Symbol of status • Making charges 20% of gold
• Lesser resale value
PUBLIC PROVIDENT FUND (PPF)
The Public Provident Fund (PPF) is a savings-cum-tax-saving instrument in 
India, introduced by the National Savings Institute of the Ministry of Finance
in 1968.
The main objective of the scheme is to mobilize small savings by offering an
investment with reasonable returns combined with income tax benefits.
The scheme is fully guaranteed by the Central Government. Balance in the PPF
account is not subject to attachment under any order or decree of court under
the Government Savings Banks Act, 1873.
 MERITS AND DEMERITS
Merit Demerits
• Govt owned Post office • Locking period of 7 years
• Safety and security
• Fixed and assured return
• Tax benefit under ATC
• Minors can also investment
 GOVERNMENT BONDS
A government bond or sovereign bond is a debt obligation issued by a national
government to support government spending. It generally includes a
commitment to pay periodic interest, called coupon payments, and to repay the
face value on the maturity date.
Government bonds can be denominated in a foreign currency or the
government's domestic currency. Countries with less stable economies tend to
denominate their bonds in the currency of a country with a more stable
economy
 MERITS AND DEMERITS
Merits Demerits
• Risk free • Low returns
• High liquidity • Interest rate risk
• Regular income
• Longer duration returns
 LIFE INSURANCE
Life insurance is a contract between an insurance policy holder and an insurer
or assurer, where the insurer promises to pay a designated beneficiary a sum of
money upon the death of an insured person.
Depending on the contract, other events such as terminal illness or critical
illness can also trigger payment. The policy holder typically pays a premium,
either regularly or as one lump sum. The benefits may include other expenses,
such as funeral expenses.
 MERITS AND DEMERITS
Merits Demerits
• Safety and security IIDI • High premium high age
• High returns
• Tax benefit
• Flexible invest
• Life cover