D R . D . Y.

P A T I L E D U C A T I O N A L E N T E R P R I S E S C H A R I T A B L E T R U S T ’ S

DR. D. Y.PATIL SCHOOL OF MANA GEME NT

D R . D . Y. P A T I L T E C H N I C A L C A M P U S

DR. D. Y. PATIL KNOWLEDGE CITY, CHARHOLI (BK), VIA- LOHEGAON, PUNE - 412105

MBA - II
S U B J E C T : F I N A N C I A L M A R K E T S A N D B A N K I N G O P E R AT I O N S

COURSE CODE : 205 FIN

BASICS CONCEPTS
OF
INDIAN
FINANCIAL
SYSTEM
 CONTENT

SR. TOPIC
NO.
1) FINANCIAL SYSTEM ( INTRODUCTION AND ROLE)

2) INDIAN FINANCIAL SYSTEM

3) FUNCTIONS OF BANK
Financial System

INT RODUC TION :

 A financial system is the set of global, regional, or firm-specific institutions and
practices used to facilitate the exchange of funds.
 Financial systems can be organized using market principles, central planning, or a
hybrid of both.
 Institutions within a financial system include everything from banks to stock
exchanges and government treasuries.
Financial System

ROLE IN ECONOMIC DEVELOPMENT :

a) Savings investment relationship

b) Financial systems help in growth of capital market

c) Employment growth is boosted by financial system

d) Financial system ensures balanced growth

e) financial system helps in fiscal discipline and control of economy

 INDIAN FINANCIAL SYSTEM

FINANCIAL FINANCIAL FINANCIAL FINANCIAL FINANCIAL

INSTITUTION MARKET INSTRUMENT SERVICES REGULATORS

Banking Money RBI

Debts
Institution Market

Capital Equity SEBI

Non-banking
Market Shares
Institution

IRDA
 INDIAN FINANCIAL SYSTEM

A) F I N A N C I A L I N S T I T U T I O N S :
 Financial institutions are classified as banking and non banking financial institutions.

 Banking institutions are creators of credit while non banking financial institutions are

vendors of credit.

 Non Banking financial institutions can be categorized as investment companies, housing

companies, leasing companies, hire purchase companies, specialized financial institutions.

INDIAN FINANCIAL SYSTEM
B) F I N A N C I A L M A R K E T S :

 Money market and capital market are the organized financial markets in India.

 Examples of the money market are Treasury bill market, call money market, commercial

bill market etc.

 The stock market, the government bond market and derivatives market are examples of

capital market.
INDIAN FINANCIAL SYSTEM
C) F I N A N C I A L I N S T R U M E N T S :
Financial instrument is a claim against a person or an institution for the payment
at a future date of a sum of money or a periodic payment in the form of interest or
dividend.

Financial instruments may be primary or secondary securities. Primary securities are

issued by the ultimate borrowers of funds to the ultimate savers eg. Bank Deposits,
Mutual Fund Units, Insurance Policies, etc.
INDIAN FINANCIAL SYSTEM
D) F I N A N C I A L S E RV I C E S :

 Financial services include merchant banking, leasing, hire purchase, credit rating etc.

 Financial services rendered by the financial intermediaries' bridge the gap between lack of

knowledge on the part of the investors and increasing sophistication of financial markets

and instruments.
INDIAN FINANCIAL SYSTEM
E) F I N A N C I A L R E G U L ATO R S :
 Regulators are meant to ensure smooth and orderly working of the financial markets

 In India, different financial markets have specialized regulators, viz

a) Securities and Exchange Board of India (SEBI) - C a p i t a l m a r k e t s .

b) Reserve Bank of India - B a n k i n g s e c t o r a n d m o n e y m a r k e t .

c) Insurance Regulatory and Development Authority IRDA - I n s u r a n c e s e c t o r.

BANKS

 A bank is a financial institution that acts as an intermediary

between individuals, businesses, and governments.

 It facilitates various financial transactions and provides a range of

financial services.
 FUNCTIONS OF BANK

FUNCTIONS
OF BANK

PRIMARY SECONDARY
FUNCTIONS FUNCTIONS
PRIMARY FUNCTIONS OF BANKS :

1) A C C E P T I N G D E P O S I T S :
a) Banks accept various types of deposits, such as –

savings accounts, current accounts, and fixed deposits.

b) Deposits provide individuals and businesses a safe place to store their
money and earn interest.
Primary Functions of Banks :

2) P R O V I D I N G L O A N S A N D C R E D I T :
a) Banks lend money to individuals and businesses in the form
of loans, mortgages, and credit facilities.
b) This function helps to stimulate economic growth and supports
individuals in achieving their financial goals.
 Secondary Functions of Banks :

1) A G E N C Y F U N C T I O N S :

1. Payment and Collection of cheques, Bills and Promissory notes.

2. Execution of standing instructions.

3. Acting as a trustee, Executor.

Secondary Functions of Banks :

2) G E N E R A L U T I L I T Y F U N C T I O N S :

1. Safekeeping of Valuables
2. Foreign Exchange Services
3. Letter of Credit
4. Underwriting of securities
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