Академический Документы
Профессиональный Документы
Культура Документы
INDIAN
FINANCIAL
SECTOR
PRESENTED TO:
COMPILED BY:
Indian Financial Sector
CONTENTS
Introduction
INTRODUCTION
The financial system or the financial sector of any country consists of:-
(a) specialized & non specialized financial institution
(b) organized &unorganized financial markets and
(c) Financial instruments & services which facilitate transfer of funds.
Insurance company
Primary Secondary
Market Market
1980s 1990s
1947 1970s
1960s
intermediation, i.e., a lack of a long term capital market and the relative
neglect of agriculture in particular and rural areas in general.
In view of the above, it was decided to nationalize the banking sector so that
credit allocation could take place in accordance in plan priorities.
Nationalization took place in two phases, with a first round in 1969 followed
by another in 1980.
By the mid-seventies it was felt that commercialized banks did not have
sufficient expertise in rural banking and hence in 1975 Regional Rural
Banks (RRBs) were set up to help bring rural India into the ambit of the
financial network. This effort was capped in 1980 with the formation of
National Bank for Agriculture and Rural Development (NABARD), which
was to function as an apex bank for all cooperative banks in the country,
helping control and guide their activities. NABARD was also given the
remit of regulating rural credit cooperatives.
Following with the logic of specialization, the 1980s saw other DFIs with
specific remits being set up – e.g. The EXIM Bank for export financing, the
Indian Financial Sector
Long term finance for the private sector came from DFIs and institutional
investors or through the capital market. However both price and quantity of
capital issues was regulated by the Controller of Capital Issues.
Therefore the deepening of financial intermediation had occurred with an
increase in the draft by both the commercial sector and the government on
financial resources mobilized.
At the end of the 1980s then the Indian financial system was characterized
by segmented financial markets with significant restrictions on both the
asset and liability side of the balance sheet of financial intermediaries as
well as the price at which financial products could be offered.
securities, an increase in net bank lending to the government meant that the
asset side of banks’ balance sheets tended to become increasingly illiquid.
The impetus for change came from one expected and one unexpected
quarter - first, the importance of prudential capital adequacy ratios was
underlined by the announcement of BaselI norms (see Error: Reference
source not found Error: Reference source not found) That banks were
expected to adhere to; second the macroeconomic crisis of 1990-91.
Briefly however, given the problems facing the financial system and
keeping in mind the institutional changes necessary to help India financially
integrate into the global economy, financial reform focused on the
following: improving the asset quality on bank balance sheets in particular
and operational efficiency in general; increasing competition by removing
regulatory barriers to entry; increasing product competition by removing
restrictions on asset and liability sides of financial intermediaries; allowing
financial intermediaries freedom to set their prices; putting in place a market
for government securities; and improving the functioning of the call money
market.
which would now be financed by directly borrowing from the market, but
also monetary policy would be conducted through open market operations
and a large liquid bond market would help the RBI sterilise, if necessary,
foreign exchange movements.
3. Protection of Investors –
Lot many acts were passed during this period for protection of investors in
financial markets. The various acts Companies Act, 1956 ; Capital Issues
Control Act, 1947 ; Securities Contract Regulation Act, 1956 ; Monopolies
Indian Financial Sector
public welfare and equity. The capital market an important role in allocation
of resources. The major development during this phase are:-
to investment in capital market for this. SLR and CRR were produced; SLR
earlier @ 38.5% was reduced to 25% and CRR which used to be 25% is at
present 5%. Permission was also given to banks to directly undertake
leasing, hire-purchase and factoring business. There was trust on
development of primary market, secondary market and money market.
3. Investors Protection –
SEBI is given power to regulate financial markets and the various
intermediaries in the financial markets.
FINANCIAL MARKET
Indian Financial Sector
Money Market
Commercial Paper
Certificate of Deposit
Capital Market
Money market deal with short term monetary assets and claims, which are
generally from one day to one year duration.
Govt. securities on the other hand are also called dated securities to denote
that they are generally long term in nature and are issued by state and central
govt. under their borrowing programmes and duration of more than one
year, generally of 5 years and above.
These securities being long term in nature are also traded in govt. securities
market between institution and banks also on the stock exchanges- debt
segments.
MONEY MARKET
One of the important function of a well developed money market is to
channelize saving into short term productive investments like working
capital. Call money market, treasury bills market and markets for
commercial paper and certificate of deposit are some of the example of
money market.
“call money”, and if it exceeds one day (but less than 15 days), is referred as
“notice money” in this market any amount could be lent or borrowed at a
convenient interest rate . Which is acceptable to both borrower and lender
.these loans are consider as highly liquid as they are repayable on demand
at the option of ether the lender or borrower.
PURPOSE
Banks usually borrow form the market to avoid the penal interest rate for not
meeting CRR requirement and high cost of refinance from RBI. Call money
helps the banks to maintain short term liquidity position at comfortable
level.
LOCATION
In India call money markets are mainly located in commercial centers and
big industrial centers and industrial center such as Mumbai, Calcutta,
Chennai, Delhi and Ahmedabad. As BSE and NSE and head office of RBI
Indian Financial Sector
and many other banks are situated in Mumbai; the volume of funds involved
in call money market in Mumbai is far bigger than other cities.
PARTICIPANTS
Initially, only few large banks were operating in the bank market. however
the market had expanded and now scheduled , non scheduled commercial
banks foreign banks ,state , district, and urban cooperative banks , financial
institution such as LIC,UTI,GIC, and its subsidiaries , IDBI, NABARD,
IRBI, ECGC, EXIM Bank, IFCI, NHB , TFCI, and SIDBI, Mutual fund
such as SBI Mutual fund . LIC Mutual funds. And RBI Intermediaries like
DFHI and STCI are participants in local call money markets. However RBI
has recently introduced restriction on some of the participants to phase them
out of call money market in a time bound manner.
CALL RATES
The interest paid on call loan is known as the call rates. Unlike in the case of
other short and long rates. The call rate is expected to freely reflect the day
to day availability and long rates. These rates vary highly from day to day.
Often from hour to hour. While high rates indicate a tightness of liquidity
position in market. The rate is largely subject to be influenced by sources of
supply and demand for funds.
The call money rate had fluctuated from time to time reflecting the seasonal
variation in fund requirements. Call rates climbs high during busy seasons in
relation to those in slack season. These seasonal variations were high due to
a limited number of lender and many borrowers. The entry of financial
institution and money market mutual funds into the call market has reduced
the demand supply gap and these fluctuations gradually came down in
recent years.
1:- large borrower by banks to meet the CRR requirements on certain dates
cause a gate demand for call money. These rates usually go up during the
first week to meet CRR requirements and decline afterwards.
2:- the sanction of loans by banks, in excess of their own resources compel
the bank to rely on the call market. Banks use the call market as a source of
funds for meeting dis-equilibrium of inflow and out flow of fund s.
Indian Financial Sector
3:- the withdrawal of funds to pay advance tax by the corporate sector leads
to steep increase in call money rates in the market.
COMMERCIAL PAPER
THE FEATURES OF CP
1. They are negotiable by endorsement and delivery.
5. The tangible net worth issuing company should not be less than 4
lakhs
6. The company fund based working capital limit should not less than Rs
10 crore.
Indian Financial Sector
7. The issuing company shall have P2 and A2 rating from CRISIL and
ICRA.
CERTIFICATE OF DEPOSIT
FEATURES OF CD
1. All scheduled bank other than RRB and scheduled cooperative
bank are eligible to issue CDs.
2. CDs can be issued to individuals, corporation, companies, trust,
funds and associations. NRI can subscribe to CDs but only on a
non- repatriation basis.
3. They are issued at a discount rate freely determined by the
issuing bank and market.
4. They issued in the multiple of Rs 5 lakh subject to minimum
size of each issue of Rs is 10 lakh.
Indian Financial Sector
Treasury bills are the main financial instruments of money market. These
bills are issued by the government. The borrowings of the government are
monitored & controlled by the central bank. The bills are issued by the RBI
on behalf of the central government. The RBI is the agent of Union
Government. They are issued by tender or tap. The bills were sold to the
public by tender method up to 1965. These bills were put at weekly
auctions. A treasury bill is a particular kind of finance bill. It is a promissory
note issued by the government. Until 1950 these bills were also issued by
the state government. After 1950 onwards the central government has the
authority to issue such bills. These bills are greater liquidity than any other
kind of bills. They are of two kinds: a) ad hoc, b) regular.
Ad hoc treasury bills are issued to the state governments, semi government
departments & foreign ventral banks. They are not marketable. The ad hoc
bills are not sold to the banks & public. The regular treasury bills are sold to
the general public & banks. They are freely marketable. These bills are sold
by the RBI on behalf of the central government.
The treasury bills can be categorized as follows:-
Indian Financial Sector
These bills were introduced in 1998. The treasury bills in India issued
on auction basis. The date of issue of these bills will be announced in
advance to the market. The information regarding the notified amount
is announced before each auction. The notified amount in respect of
treasury bills auction is announced in advance for the whole year
separately. A uniform calendar of treasury bills issuance is also
announced.
The 91 days treasury bills were issued from July 1965. These were
issued tap basis at a discount rate. The discount rates vary between
2.5 to 4.6% P.a. from July 1974 the discount rate of 4.6% remained
uncharged the return on these bills were very low. However the RBI
provides rediscounting facility freely for this bill.
The 182 days treasury bills was introduced in November 1986. The
chakravarthy committee made recommendations regarding 182 day
Indian Financial Sector
Earlier these funds were regulated by the RBI. But RBI withdrew its
guidelines, with effect form March 7, 2001 and now they are
governed by SEBI.
Secondary Market
Primary Market
Players Operation
Indian Financial Sector
Interest Rates
Intermediaries (Merchant
Banks FIIs & Broker)
Procedures
Investor (Public)
CAPITAL MARKET
Capital market deals with long term funds. These funds are subject to
uncertainty & risk. Its supplies long term funds & medium term funds to the
corporate sector. It provides the mechanism for facilitating capital fund
transactions. It deals I ordinary shares, bond debentures & stocks &
securities of the governments. In this market the funds flow will come from
savers. It converts financial assets in to productive physical assets. It
provides incentives to savers in the form of interest or dividend to the
investors. It leads to the capital formation. The following factors play an
important role in the growth of the capital market:-
• A strong & powerful central government.
• Financial dynamics
• Speedy industrialization
• Attracting foreign investment
• Investments from NRI’s
• Speedy implementation of policies
• Regulatory changes
• Globalization
• The level of savings & investments pattern of the household sectors
• Development of financial theories
• Sophisticated technological advances.
2. Financial intermediaries
3. Investors.
I. COMPANIES:
Generally every company which is a public limited company can access
the capital market. The companies which are in need of finance for
their project can approach the market. The capital market provides
funds from the savers of the community. The companies can mobilize
the resources for their long term needs such as project cost, expansion
& diversification of projects & other expenditure of India to raise the
capital from the market. The SEBI is the most powerful organization to
monitor, control & guidance the capital market. It classifies the
companies for the issue of share capital as new companies, existing
unlisted companies& existing listed companies. According to its
guidelines a company is a new company if it satisfies all the following:-
a) The company shall not complete 12 months of commercial
operations.
b) Its audited operative results are not available.
c) The company may set up by entrepreneurs with or without
track record.
A company which can be treated as existing listed company, if its
shares are listed in any recognized stock exchange in India. A company
is said to be an existing unlisted company if it is a closely held or
private company.
III. INVESTORS:
The capital market consists many numbers of investors. All types
of investor’s basic objective is to get good returns on their
investment. Investment means, just parking one’s idle fund in a
Indian Financial Sector
providing long term credit to the corporate sector. Therefore the premier
financial institutions such as ICICI, IDBI, UTI, and LIC & GIC constitute
the largest segment. A number of new financial instruments & financial
intermediaries have emerged in the capital market. Usually the capital
markets are classified in two ways:-
A. On the basis of issuer
B. On the basis of instruments
On the basis of issuer the capital market can be classified again two types:-
a) Corporate securities market
b) Governments securities market
On the basis of financial instruments the capital markets are classifieds into
two kinds:-
a) Equity market
b) Debt market
Recently there has been a substantial development of the India capital
market. It comprises various submarkets.
Equity market is more popular in India. It refers to the market for equity
shares of existing & new companies. Every company shall approach the
market for raising of funds. The equity market can be divided into two
categories (a) primary market (b) secondary market. Debt market represents
the market for long term financial instruments such as debentures, bonds,
etc.
PRIMARY MARKET
Indian Financial Sector
INTRODUCTION:
It was set up in 1988 through administrative order it became statutory body
in 1992. SEBI is under the control of Ministry of Finance. Head office is at
Mumbai and regional offices are at Delhi, Calcutta and Chennai. The
creation of SEBI is with the objective to replace multiple regulatory
structures. It is governed by six member board of governors appointed by
government of India and RBI.
OBJECTIVES OF SEBI:
1. To protect the interest of investors in securities.
2. To regulate securities market and the various intermediaries in the
market.
3. To develop securities market over a period of time.
Indian Financial Sector
TYPES OF ISSUE
A company can raise its capital through issue of share and debenture by
means of :-
PUBLIC ISSUE :-
Public issue is the most popular method of raising capital and involves
raising capital and involve raising of fund direct from the public .
RIGHT ISSUE :-
Right issue is the method of raising additional finance from existing
members by offering securities to them on pro rata basis.
BONUS ISSUE:-
Some companies distribute profits to existing shareholders by way of
fully paid up bonus share in lieu of dividend. Bonus share are issued in
the ratio of existing share held. The shareholder do not have to nay
additional payment for these share .
PRIVATE PLACEMENT :-
private placement market financing is the direct sale by a public limited
company or private limited company of private as well as public sector
of its securities to a limited number of sophisticated investors like UTI ,
LIC , GIC state finance corporation and pension and insurance funds the
intermediaries are credit rating agencies and trustees and financial
advisors such as merchant bankers. And the maximum time – frame
required for private placement market is only 2 to 3 months. Private
placement can be made out of promoter quota but it cannot be made
with unrelated investors.
SECONDRY MARKET
The secondary market is that segment of the capital market where the
outstanding securities are traded from the investors point of view the
secondary market imparts liquidity to the long – term securities held by
them by providing an auction market for these securities.
BSE is the first stock exchange in the country which obtained permanent
recognition (in 1956) from the Government of India under the Securities
Contracts (Regulation) Act 1956. BSE's pivotal and pre-eminent role in the
development of the Indian capital market is widely recognized. It migrated
from the open outcry system to an online screen-based order driven trading
system in 1995. Earlier an Association of Persons (AOP), BSE is now a
corporatised and demutualised entity incorporated under the provisions of
the Companies Act, 1956, pursuant to the BSE (Corporatisation and
Demutualisation) Scheme, 2005 notified by the Securities and Exchange
Board of India (SEBI). With demutualisation, BSE has two of world's best
exchanges, Deutsche Börse and Singapore Exchange, as its strategic
partners.
Over the past 133 years, BSE has facilitated the growth of the Indian
Indian Financial Sector
The BSE Index, SENSEX, is India's first stock market index that enjoys an
iconic stature , and is tracked worldwide. It is an index of 30 stocks
representing 12 major sectors. The SENSEX is constructed on a 'free-float'
methodology, and is sensitive to market sentiments and market realities.
Apart from the SENSEX, BSE offers 21 indices, including 12 sectoral
indices. BSE has entered into an index cooperation agreement with
Deutsche Börse. This agreement has made SENSEX and other BSE indices
available to investors in Europe and America. Moreover, Barclays Global
Investors (BGI), the global leader in ETFs through its iShares® brand, has
created the 'iShares® BSE SENSEX India Tracker' which tracks the
SENSEX. The ETF enables investors in Hong Kong to take an exposure to
the Indian equity market.
BSE has tied up with U.S. Futures Exchange (USFE) for U.S. dollar-
denominated futures trading of SENSEX in the U.S. The tie-up enables
Indian Financial Sector
eligible U.S. investors to directly participate in India's equity markets for the
first time, without requiring American Depository Receipt (ADR)
authorization. The first Exchange Traded Fund (ETF) on SENSEX, called
"SPIcE" is listed on BSE. It brings to the investors a trading tool that can be
easily used for the purposes of investment, trading, hedging and arbitrage.
SPIcE allows small investors to take a long-term view of the market.
BSE provides an efficient and transparent market for trading in equity, debt
instruments and derivatives. It has a nation-wide reach with a presence in
more than 450 cities and towns of India. BSE has always been at par with
the international standards. The systems and processes are designed to
safeguard market integrity and enhance transparency in operations. BSE is
the first exchange in India and the second in the world to obtain an ISO
9001:2000 certification. It is also the first exchange in the country and
second in the world to receive Information Security Management System
Standard BS 7799-2-2002 certification for its BSE On-line Trading System
(BOLT).
BSE continues to innovate. In recent times, it has become the first national
level stock exchange to launch its website in Gujarati and Hindi to reach out
to a larger number of investors. It has successfully launched a reporting
platform for corporate bonds in India christened the ICDM or Indian
Corporate Debt Market and a unique ticker-cum-screen aptly named 'BSE
Broadcast' which enables information dissemination to the common man on
the street.
Indian Financial Sector
BSE also has a wide range of services to empower investors and facilitate
smooth transactions:
The BSE On-line Trading (BOLT): BSE On-line Trading (BOLT) facilitates
on-line screen based trading in securities. BOLT is currently operating in
25,000 Trader Workstations located across over 450 cities in India.
BSE Training Institute: BTI imparts capital market training and certification,
in collaboration with reputed management institutes and universities. It
offers over 40 courses on various aspects of the capital market and financial
sector. More than 20,000 people have attended the BTI programmes
Awards
Drawing from its rich past and its equally robust performance in the recent
times, BSE will continue to remain an icon in the Indian capital market.
Indian Financial Sector
The National Stock Exchange of India Limited has genesis in the report of
the High Powered Study Group on Establishment of New Stock Exchanges,
which recommended promotion of a National Stock Exchange by financial
institutions (FIs) to provide access to investors from all across the country
on an equal footing. Based on the recommendations, NSE was promoted by
leading Financial Institutions at the behest of the Government of India and
was incorporated in November 1992 as a tax-paying company unlike other
stock exchanges in the country.
NSE's mission is setting the agenda for change in the securities markets in
India. The NSE was set-up with the main objectives of:
The standards set by NSE in terms of market practices and technology have
become industry benchmarks and are being emulated by other market
participants. NSE is more than a mere market facilitator. It's that force
which is guiding the industry towards new horizons and greater
opportunities.
CORPORATE STRUCTURE
NSE is one of the first de-mutualised stock exchanges in the country, where
the ownership and management of the Exchange is completely divorced
from the right to trade on it. Though the impetus for its establishment came
from policy makers in the country, it has been set up as a public limited
company, owned by the leading institutional investors in the country.
From day one, NSE has adopted the form of a demutualised exchange - the
ownership, management and trading is in the hands of three different sets of
people. NSE is owned by a set of leading financial institutions, banks,
insurance companies and other financial intermediaries and is managed by
professionals, who do not directly or indirectly trade on the Exchange. This
has completely eliminated any conflict of interest and helped NSE in
aggressively pursuing policies and practices within a public interest
framework.
The NSE model however, does not preclude, but in fact accommodates
involvement, support and contribution of trading members in a variety of
ways. Its Board comprises of senior executives from promoter institutions,
eminent professionals in the fields of law, economics, accountancy, finance,
taxation, and etc, public representatives, nominees of SEBI and one full time
executive of the Exchange.
Indian Financial Sector
While the Board deals with broad policy issues, decisions relating to market
operations are delegated by the Board to various committees constituted by
it. Such committees includes representatives from trading members,
professionals, the public and the management. The day-to-day management
of the Exchange is delegated to the Managing Director who is supported by
a team of professional staff.
INTERNATIONAL
CAPITAL MARKETS
INTERNATIONAL INTERNATIONAL
BOND MARKET EQUITY MARKET
AMERICAN GLOBAL
YANKEE EURO/
DEPOSITORY DEPOSITORY
BONDS DOLLAR RECIEPTS RECIEPTS
BULLDOG EURO/
BONDS POUNDS
FINANCIAL INSTITUTION
INVESTMENT INSTITUTIONS
BANKS
Investment Trust
NIDHIS
Merchant Banks
Hire Purchases Finance Company
Lease Finance Company
Housing Finance Companies
National Housing Bank
Venture Capital Funding Companies
bank of India and it was made the principal credit and reconstruction agency
in the country in 1985 through the RBI act 1984. The bank started co-
ordinary similar work of the institutions and banks preparing schemes for
reconstructions by reconstructing the liabilities appraising schemes of
merger & amalgamation of sick company and providing financial assistance
for modernization expansion, diversification and technological up gradation
of sick units.
In March 1987, in line with the ongoing policies of financial and economic
reforms, IRBI was converted into a full-fledged development financial
institution. It was renamed as Industrial Investment Bank of India ltd. And
was incorporated as company under the companies act 1956. Its entire
equity is finance for the establishment of new industrial project as well as
for expansion diversification and modernization of existing industrial
enterprises. It provides financial assistance in the form of term loans,
subscription to debenture equity shares and deferred payment guarantees.
IIBI is now also active ion merchant banking and its services includes inter
alia, structuring suitable instrument for public rights issues preparation of
prospective offer documents and working as a lead manager it also offers its
services for debt syndication and package of services for merger and
acquisition.
also provides financial assistance to bank in extending credit for export and
export linked imports it also provides advisory services and information to
exports.
INVESTEMENT INSTITUITONS
The GIC was establish in 1974 with the nationalization of general insurance
business in country it can invest up to 30 % of the fresh accrual of funds in
the private sector . like the LIC the GIC also provides finance by
participating in consortium based on the appraisal made by other financial
institutions but does not independently provide the finance.
MUTUAL FUNDS
Mutual funds serves the purpose of mobilizing of funds from various
categories of investors and channelizing them into productive investment.
Apart form UTI. Mutual fund sponsored by various bank subsidiaries,
insurance organizations private sector financial institutions DFI and FII have
come up . these mutual fund work within the framework of SEBI regulation
which prescribe the mechanism for setting up of a mutual fund , procedure
of registration its constitution and the duties, functions and responsibility of
the various parties involved.
Indian Financial Sector
BANK
The Reserve Bank of India is the central bank of the country entrusted with
monetary stability, the management of currency and the supervision of the
financial as well as the payments system.
Established in 1935, its functions and focus have evolved in response to the
changing economic environment. Its history is not only intrinsically
interwoven with the economic and financial history of the country, but also
gives insights into the thought processes that have helped shape the
country's economic policies.
The Reserve Bank of India is the central bank of the country. Central banks
are a relatively recent innovation and most central banks, as we know them
today, were established around the early twentieth century.
The Reserve Bank of India was set up on the basis of the recommendations
of the Hilton Young Commission. The Reserve Bank of India Act, 1934 (II
of 1934) provides the statutory basis of the functioning of the Bank, which
commenced operations on April 1, 1935.
The RBI has 22 regional offices, most of them in state capitals like Bhopal,
Hyderabad, Jaipur, Nagpur, Kolkata etc.
Indian Financial Sector
The Bank began its operations by taking over from the Government the
functions so far being performed by the Controller of Currency and from the
Imperial Bank of India, the management of Government accounts and public
debt. The existing currency offices at Calcutta, Bombay, Madras, Rangoon,
Karachi, Lahore and Cawnpore (Kanpur) became branches of the Issue
Department. Offices of the Banking Department were established in
Calcutta, Bombay, Madras, Delhi and Rangoon.
Burma (Myanmar) seceded from the Indian Union in 1937 but the Reserve
Bank continued to act as the Central Bank for Burma till Japanese
Occupation of Burma and later up to April, 1947. After the partition of
India, the Reserve Bank served as the central bank of Pakistan up to June
1948 when the State Bank of Pakistan commenced operations. The Bank,
which was originally set up as a shareholder's bank, was nationalized in
1949.
The RBI was established by legislation in 1934, through the RBI Act of
1934. The RBI started functioning from April 1st 1935. This represented the
culmination of a long series of efforts to set up an institution of this kind in
the country. The RBI was originally constituted as a Shareholders’ Bank
with a share capital of Rs.5 Crore. In view of the need of close integration
between its policies and those of the government, it was nationalized in
1949.
Indian Financial Sector
With liberalization, the Bank's focus has shifted back to core central banking
functions like Monetary Policy, Bank Supervision and Regulation, and
Overseeing the Payments System and onto developing the financial markets.
The sequences of events leading to the formation of the RBI are summarized
in the figure:
Presidency Bank
In India, the urgent need for a central banking institution was recognized
when the 3 presidency banks – Bank of Madras, Bank of Bombay & Bank
of Bengal were amalgamated in 1921 to form the Imperial Bank.
Indian Financial Sector
CENTRAL BOARD
The Reserve Bank's affairs are governed by a central board of directors. The
Board is appointed by the Government of India in keeping with the Reserve
Bank of India Act. The Board of Directors is comprised of:
The Governor & Deputy Governor hold office for such periods not
exceeding 4 years as may be fixed by the Central Government at the time of
their appointment and are eligible for reappointment. The Government
official holds office during the pleasure of the Central Government. The
Governor, in his absence, appoints a deputy Governor to be the chairman on
Indian Financial Sector
the Central Board. Meetings of the Central Board are required to be held not
less than 6 times in each year & at least once in a quarter.
LOCAL BOARDS
For each of the 4 regional areas of the country, there is a Local Board with
headquarters in Kolkata, Chennai, and Mumbai & New Delhi. Local Boards
consist of 5 members each, appointer by the Central Government for a term
of 4 years. The Local Board members elect from amongst themselves the
chairman of the Board. The Regional Directors of the bank offices in
Kolkata, Chennai, and Mumbai & New Delhi are the ex-officio secretaries
of the Local Boards at the Centers. The functions of Local Boards are
reviewed by the Central Board from time to time.
Indian Financial Sector
Its functions include advising the Central Board on local matters and
representing territorial and economic interests of local cooperative and
indigenous banks & to perform such other functions as delegated by Central
Board from time to time.
The Governor is the Chief Executive Architect of the RBI. The Governor
has the powers of general superintendence and direction of affairs and
business of the Bank. The Executive General Managers are in between the
Deputy Governors and Chief General Managers of central office
departments.
MAIN FUNCTIONS
CORE FUNCTIONS:
Issue of Foreign Pa
Banker to Banker to Monetary & Clearing
Currency Exchange Sy
Government Banks Credit Policy Hose Agent
Notes Management Man
Indian Financial Sector
MONETARY AUTHORITY:
DEVELOPMENTAL ROLE
ISSUER OF CURRENCY
The Reserve Bank of India ensures good quality coins and currency notes in
adequate quantity by:
• Issuing and exchanges or destroys currency and coins not fit for
circulation.
• Mopping up notes and coins unfit for circulation
• Advising the Government on designing of currency notes with the
latest security features.
The Reserve Bank of India is mainly empowered with authority under the
Foreign Exchange Management Act (FEMA) 1999 to regulate foreign
exchange operation. As such, rules and regulations relating to non-resident
accounts are issued by the RBI. The RBI also formulates policies to
facilitate external trade and payments, facilitates foreign investments in
India and Indian investments abroad and promotes orderly development of
foreign exchange markets
The RBI acts as a Banker to the Government under section 20 of the RBI
Act of 1934. Section 21 provides that the Government should entrust its
money remittance, exchange and banking transactions in India to the RBI.
The RBI maintains accounts of central and state governments. It performs
merchant banking function for the central and the state governments. It also:
PAYMENT SYSTEMS
BANKERS' BANK
Bank of India Act subject to fulfilling conditions laid down under Section 42
(6) of the Reserve Bank of India Act 1934..
The Reserve Bank of India performs this function under the guidance of the
Board for Financial Supervision (BFS). The Board was constituted in
November 1994 as a committee of the Central Board of Directors of the
Reserve Bank of India.
OBJECTIVE
The Board is constituted by co-opting four Directors from the Central Board
as members for a term of two years and is chaired by the Governor. The
Deputy Governors of the Reserve Bank are ex-officio members. One Deputy
Governor, usually, the Deputy Governor in charge of banking regulation and
supervision, is nominated as the Vice-Chairman of the Board.
BFS MEETINGS
BFS through the Audit Sub-Committee also aims at upgrading the quality of
the statutory audit and internal audit functions in banks and financial
institutions. The audit sub-committee includes Deputy Governor as the
chairman and two Directors of the Central Board as members.
Executive Directors
Shri V.K. Sharma Financial Markets Department of Rural Planning & Credit
Department Currency Department
Management (Shri B.P.Vijayendra,
(Shri R Gandhi, CGM)
CGM)
Indian Financial Sector
Urban Banks
Department
(Shri
A.K.Khound,CGM)
Department of
Banking Supervision
(Shri
S.Karuppasamy,
CGM-in-Charge)
Shri V.S. Das Secretary's Central Security Cell Department of
(Also Central Department (Major General Administration &
Public Information (Smt. Grace E. (Retd.) Personnel
Officer ) Koshie, Soli N. Pavri, Management
CGM & Secretary) Security Adviser ) (Shri Prabal Sen,
Principal CGM)
Department of
Communication Human Resources
(Alpana Killawala, Development
CGM) Department
(Shri Deepak
Singhal, CGM)
Rajbhasha Department
(Smt Roopam
Mishra,
General Manager)
Shri Department of Non- Premises Customer Service
G.Gopalakrishna Banking Supervision Department Department
(Shri A Narayana (Shri (Shri G. Jaganmohan
Rao, CGM) S.Venkatachalam, Rao,CGM)
CGM, Technical )
Foreign Exchange Department of
Department Information
(Shri Salim Technology
Gangadharan, (Dr.A.M.
CGM-in-Charge) Pedgaonkar, CGM)
Department of
Payment and
Settlement Systems
(Shri G.
Indian Financial Sector
Padmanabhan,CGM)
Shri H.R. Khan Department of
Expenditure
Department of & Budgetary Control
Government
& Bank Accounts (Smt Deepa
(Shri S.V.Raghavan, Srivastava
CGM-in-Charge)
CGM in - Charge)
Department of
External
Investments &
Operations
(Smt. M
Hemachandra,
CGM)
Internal Debt
Management
Department
(Dr.K.V.Rajan,CGM)
Shri D.K.Mohanty Monetary Policy
Department
(Dr.Janak Raj,
Adviser-in-Charge)
Department of
Economic
Analysis & Policy
Department of
Statistics &
Information
Management
(Dr. A.K. Ray,
Officer-in-Charge)
Financial Stability
Unit
(Shri Chandan
Sinha,
Officer on Special
Duty)
Shri H.N.Prasad, Deposit Insurance
Chief Executive and Credit
Officer Guarantee
Corporation
COMMERCIAL BANK
Indian Financial Sector
SCHEDULED BANKS
Scheduled banks are which are included in the second schedule of The
Banking Regulation Act 1949, other are non schedule bank
(a) must have paid up capital and reserve not less than Rs 5 lakh.
(b) it must also satisfy the RBI that its affairs are not conducted in a manner
detrimental t the interests of its depositors. Scheduled banks are required to
maintain a certain amount of reserves with the RBI they in return , enjoy the
facility of financial accommodation and remittance at concessional rates
from the RBI.
and small entrepreneurs. They now carry all types of banking business
generally within one to five districts. The RRB can be set up provided by
public sector bank sponsor them . the ownership capital of these banks is
held by the central govt. (50 %) ,concerned state govt. (15 %), and the
sponsor bank (35%) . they are in effect owned by the govt. and there is a
little local participation in ownership and administration of these bank also .
further they have a large number of branches.
CLASSIFICTION OF NBFC:
Investment trust are close ended organization, unlike UTI and they have
a fixed amount of authorized capital and a stated amount of issued
capital. Investment trust provides useful service through conserving and
managing property for those who, for some reasons or other cannot
manage their own affairs. Investor of moderate means are provide
facilities for diversification of investment, expert advice on lucrative
investment channels, and supervision of their investment. From the point
of view of the economy, they help to mobilize small savings and direct
tem to fruitful channels. Thy also have a stabilizing effect on stock
market. Unlike in other countries, they render manifold function such as
financing, underwriting, promoting and banking.
NIDHIS:
Indian Financial Sector
Mutual benefit funds or nidhis, as they are called in India, are joint stock
companies operating mainly in south India, particularly in Tamil Nadu.
The source of their funds are share capital, deposits from their members,
and the public. The deposit are fixed and recurring. Unlike other
NBFC’S nidhis also accepts demand deposit to some extent. The loans
given by this institution are mainly for consumption purposes. These
loans are usually secured loans, given against the security of tangible
asset such as house property , gold jewelry, or against share of
companies, LIC policies, and so on. The terms on which loans are given
are quite moderate. The notable points about these institutions are :
MERCHANT BANKS:
Indian Financial Sector
In India the merchant banking service are provided by the commercial banks,
All Indian Financial Institutions, private consultancy firms & technical
consultation organizations.
Hire purchase involves a system under which term loan for purchases of
goods and services are advanced to be liquidated in stages through a
contractual obligation. The goods whose purchases are thus financed may be a
consumer goods or producer goods or may be simply services such as air
travel.
In the recent past, banks also have increased their business in his field of
installment credit and loans.
undertake other activities like consumer credit, car finance, etc. their
predominant activity is leasing.
The term “venture capital” suggest taking risk in supplying capital. However
supply of risk capital may not be a prime function in certain cases the
emphasis may be on supporting technocrats in setting up projects or on
portfolio management. The term venture capital fund is usually used to denote
mutual fund or institutional investors that provide equity finance or risk little
known, unregistered highly risky, small private businesses, especially in
technology-oriented and knowledge intensive business or industries which
have long development cycles and which usually do not have access to
conventional source of capital because of the absence of suitable collateral
and the presence of high risk. VCFs play an important role in supplying
management and marketing expertise to such units.