Академический Документы
Профессиональный Документы
Культура Документы
4
Inter-relationship in the
Financial System
5
FUNCTIONS OF FINANCIAL SYSTEM
Savings
Policy Liquidity
Financial
System
Risk Payment
CLASSIFICATION OF FINANCIAL
MARKETS
• Commercial Papers
• Certificate of Deposits
CALL MONEY/NOTICE MONEY
cntd…
12
continued
• Interest Rate: Market related. Fixed or floating
• Loan Against collateral of CD not permitted
• Pre-mature cancellation Not allowed
• Transfer Endorsement & delivery. Any time
• Nature Usance Promissory note. Can be issued in
Dematerialisation form only only wef June 30, 2002
Other conditions
• If payment day is holiday, to be paid on next
preceding business day
• Issued at a discount to face value
• Duplicate can be issued after giving a public notice &
obtaining indemnity
13
14
Money Market Mutual Funds
• MMMFs were set up to make available the
benefits of investing in money markets to
small investors.
• MMMFs invest primarily in money market
instruments of very high quality and of very
short maturities.
• MMMFs can be set up by commercial
banks,RBI and public financial institutions
either directly or through their existing mutual
fund subsidiaries.
• MMMfs are regulated and governed by SEBI.
• Schemes offered can either be open- ended or
close – ended.
CAPITAL MARKETS
CAPITAL MARKETS
PRIMARY SECONDARY
MARKETS MARKETS
PRIMARY MARKETS
cntd…
Forms in which government
securities can be held:
- Stock Certificate
- Promissory Notes
- Bearer Bonds
Examples of Government
Securities:
-Treasury Bills
-Public Sector Bonds
TREASURY BILLS
• Short-term promissory notes issued by the government to meet
their short-term obligations.
• They are useful in managing short-term liquidity.
• At present, the Government of India issues three types of
treasury bills through auctions, namely, 91-day, 182-day and
364-day.
• There are no treasury bills issued by State Governments.
• The RBI acts as an agent for issuing T-Bills.
• Subscribers: Banks, primary dealers, financial institutions,
insurance companies, provident funds, NBFCs, FIIs and state
governments.
• Treasury bills are available for a minimum amount of Rs.25,000
and in multiples of Rs. 25,000.
• Treasury bills are issued at a discount and are redeemed at par.
TREASURY BILLS
cntd…
Issued for a minimum amount of Rs.
25,000 and in multiples of 25,000 thereof.
26
INTERNATIONAL CAPITAL MARKETS
Equity Instruments
Debt Instruments
-Global Depository Receipts
-Euro Bonds
-American Depository Receipts
-Foreign Bonds
-Euro Notes
27
GLOBAL DEPOSITORY RECEIPTS & AMERICAN
DEPOSITORY RECEIPTS
• A GDR or ADR means any instrument in the form of a
Depository receipt or certificate, created by the Overseas
Depository Bank (ODB) outside India and issued to non-
resident investors against the issue of ordinary shares or
foreign currency convertible bonds of issuing company.
28
• The GDR/ADR can be sold outside India in their existing
form.
29
EURO BONDS
• Eurobonds are bonds that are issued for sale outside the issuer’s home country.
• They can be issued in the currency of the foreign country, or another currency.
• Interest payments and principal are to be returned to the holder in the currency in which
the bond was issued.
• In most cases, the interest is paid annually.
• The Eurobond marketis extremely liquid. While the majority of the trading is centralized
around London’s trading hours.
• Eurobond trading takes place 24 hours a day worldwide.
• Eurobonds are named after the currency they are denominated in. For example, Euroyen
and Eurodollar bonds are denominated in Japanese yen and American dollars respectively.
• A Eurobond is normally a bearer bond, payable to the bearer.
30
FOREIGN BONDS
Bonds issued by foreign entities for raising medium to long-term financing from domestic money
•
centers in their domestic currencies.
A bond issued in a particular country by a foreign borrower (or) a bond sold by a foreign
•
borrower, denominated in the currency of country in which it is sold and is underwritten &
syndicated by national underwriting syndicate in the lending country .
Foreign bonds are floated in the domestic capital markets (and are in the domestic currency of
•
those markets) by nonresident entities.
These bonds are different from Euro bonds in the sense that they are governed by the
•
regulations of the country in which they are issued whereas Euro bonds are not.
The bonds are generally named on the basis of the capital markets in which they are floated.
•
31
Types of Foreign Bonds
• Yankee Bonds: Yankee bond is a dollar
denominated bond issued in U.S by a non-U.S.
borrower in the U.S. market.
• Samurai bond: Samurai bonds are yen denominated
bonds issued in Japan by a non-Japanese borrower.
• Bulldog bonds: Bulldog bonds are pound
denominated bonds issued in U.K. domestic market
by a non U.K. borrower.
32
FOREX MARKETS
33
FOREX MARKETS
cntd…
Participants:
Exporters
Importers
Commercial Banks
Central Banks
Authorized Dealers and Money
Changers
Brokers
34
DERIVATIVES MARKET
• Financial derivative is a product derived from the market of an
underlying asset.
Participants:
- Hedgers: Hedgers wish to eliminate or reduce the price risk
to which they are already exposed
- Speculators: Speculators are those class of investors who
willingly take price risks to profit from price changes in the
underlying.
- Arbitrators : Arbitrageurs profit from price differential
existing in two markets by simultaneously operating in two
different markets.
Types of Derivatives:
- Futures
- Options
35
FINANCIAL INSTITUTIONS
36
ORGANIZATION OF BANKING SYSTEM
Reserve Bank of India
38
FUNCTIONS OF RBI
• Currency issuing authority
• Acts as banker the central and state governments
• Serves as banker’s bank
• Foreign exchange control authority
• Exercises monetary control through:
-Bank Rate
-Reserve requirements: CLR and SLR
-Open market operations
• Undertakes developmental activities
39
COMMERCIAL BANKS
• Most important depositors and disbursers of finance.
• They are expected to hold a part of the deposits in
the form of ready cash, known as cash reserves as
prescribed by RBI.
SCHEDULED BANKS
• Scheduled banks are those that are included in the
second schedule of Banking Regulation Act, 1949;
the others are non-scheduled banks.
40
SCHEDULED BANKS
cntd…
41
LIABILITIES AND ASSETS OF A BANK
LIABILITIES ASSETS
42
INSURANCE
43
CLASSIFICATION OF INSURANCE
BUSINESS
1.Life Insurance: A life policy covers risk of death due to natural
causes as also due to accidents.
2.General Insurance: Insurance other than the life insurance fall
under the category of general insurance.
a.Fire Insurance
b.Marine Insurance
c.Miscellaneous Insurance
44
NON BANKING FINANCIAL COMPANIES
• Investment Trusts and Investment Companies
• Mutual Benefit Funds
• Merchant Banks
• Hire Purchase Finance Companies
• Lease Finance Companies
• Housing Finance Companies
• Non-Housing Bank
• Venture Capital Funding Companies
45
Summary
FINANCIAL SYSTEM AND ITS FUNCTION
CLASSIFICATION OF FINANCIAL MARKETS
MONEY MARKET INSTRUMENTS
CAPITAL MARKETS INSTRUMENTS
GOVERNMENT SECURITIES MARKET
INTERNATIONAL CAPITAL MARKETS
FINANCIAL INSTITUTIONS
BANKING SYSTEM
INSURANCE
NON-BANKING FINANCIAL COMPANIES
46