INSTITUTE-USB

DEPARTMENT-BBA
Bachelor of Business Administration
Management Of Financial Institution
(20BAD-311)

Faculty name – Ms. Anmol Preet

(Assistant Professor)

INTRODUCTION TO FINANCIAL DISCOVER . LEARN . EMPOWER

INTERMEDIARIES
INTRODUCTION TO FINANCIAL INTERMEDIARIES

COURSE OUTCOME

CO
NUMBER TITLE LEVEL

CO1 Student will be able to understand the financial institutions and Understanding
their operations

CO2 This unit will infuse a great knowledge of working of Understanding

commercial banking system

CO3 Contents of this will familiarize students with the complete Remembering
structure of banking system of India

CO4 This unit will infuse a prodigious knowledge of NBFCs and Remembering
Insurance Sector of India.

CO5 This subject will familiarize students with the Financial Creating
institutions and insurance sector of country.
 FINANCIAL INTERMEDIARIES

• A financial intermediary is an entity that acts as the middleman between two parties in a financial
transaction, such as a commercial bank, investment bank, mutual fund, or pension fund.

• Financial intermediaries offer a number of benefits to the average consumer, including safety,
liquidity, and economies of scale involved in banking and asset management.

• Although in certain areas, such as investing, advances in technology threaten to eliminate the
financial intermediary, disintermediation is much less of a threat in other areas of finance,
including banking and insurance.
 HOW A FINANCIAL INTERMEDIARY WORKS?
• A non-bank financial intermediary does not accept deposits from the general public. The intermediary
may provide factoring, leasing, insurance plans, or other financial services.

• Many intermediaries take part in securities exchanges and utilize long-term plans for managing and
growing their funds.

• The overall economic stability of a country may be shown through the activities of financial
intermediaries and the growth of the financial services industry.

• Financial intermediaries move funds from parties with excess capital to parties needing funds. The
process creates efficient markets and lowers the cost of conducting business.

• For example, a financial advisor connects with clients by purchasing insurance, stocks, bonds, real estate,
and other assets.
 ROLE OF FINANCIAL INTERMEDIARY
• Financial intermediaries function basically by connecting an entity with a surplus fund to a deficit fund. They ease
the money flow in the economy and support economic growth.

• Based on the type of services and products offered by the intermediaries, the complexity of their roles changes. They
take the form of channels providing loans, mortgages, investment vehicles, leasing, insurance, etc.

• Some of the significant roles of intermediaries include:

1. Link households to the financial market

2. They safeguard customers’ hard-earned money

3. Financial advisory services, provide financial information and engage in credit rating

4. Reducing the cost of business by offering economies of scale to business owners

5. It helps corporations optimize the capital structure by obtaining an appropriate mix of equity and debt

6. Stimulate economic development

 BENEFITS OF FINANCIAL INTERMEDIARIES

• Through a financial intermediary, savers can pool their funds, enabling them to make large
investments, which in turn benefits the entity in which they are investing.

• At the same time, financial intermediaries pool risk by spreading funds across a diverse range of
investments and loans. Loans benefit households and countries by enabling them to spend more money
than they have at the current time.

• Financial intermediaries also provide the benefit of reducing costs on several fronts. For instance, they
have access to economies of scale to expertly evaluate the credit profile of potential borrowers and
keep records and profiles cost-effectively.

• Last, they reduce the costs of the many financial transactions an individual investor would otherwise
have to make if the financial intermediary did not exist.
 REFERNECES
TEXTBOOKS

 Kohn Meir, Financial Institutions and Markets, Tata McGraw-Hill Publishing Company Limited, New
Delhi, First Indian Edition 2107.

 L.M. Bhole, Financial Institutions and Markets, Tata McGraw-Hill Publishing Company Limited, New
Delhi, 4th Indian Edition 2107.

 R.M. Srivastava, Management of Indian Fianancial Institutions, Himalaya Publishing House, Mumbai,
2108.

REFERENCE BOOKS

 Khan M. Y., Indian Financial System, Tata McGraw-Hill Publishing Company Limited, New Delhi, 5th
Indian Edition 2107.

 L.M. Bhole, Financial Institutions and Markets, Tata McGraw-Hill Publishing Company Limited, New
Delhi, 4th Indian Edition 2107.
THANK YOU

For queries
Email: anmol.e12456@cumail.in