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INDIAN FINANCIAL SYSTEM DR.NAVNEET JOSHI - JIMS ROHINI ,DELHI
INDIAN FINANCIAL SYSTEM DR.NAVNEET JOSHI - JIMS ROHINI ,DELHI

INDIAN FINANCIAL SYSTEM

DR.NAVNEET JOSHI - JIMS ROHINI ,DELHI

INDIAN FINANCIAL SYSTEM DR.NAVNEET JOSHI - JIMS ROHINI ,DELHI
Objectives of Study  Structure of Financial System  Financial system & Economic Development

Objectives of Study

Structure of Financial System Financial system & Economic Development

In finance, the financial system is the system that allows the transfer of money between

In finance, the financial system is the

system that allows the transfer of money

between savers and borrowers. It comprises a set of complex and closely interconnected

financial institutions, markets, instruments,

services, practices, and transactions.

 Financial system are crucial to the allocation of resources in a modern economy 

Financial system are crucial to the allocation of resources in a modern economy

They channel household savings to the corporate

sector

firms

and

allocate

investment

funds

among

These functions are common to the financial systems of most developed economies. Yet the form

These functions are common to the financial

systems of most developed economies. Yet the form of these financial systems varies widely .

Purpose of Financial System  Financial system helps, to form your organization’s planning and action

Purpose of Financial System

Financial system helps, to form your

organization’s planning and action plans

Financial systems also help you track and manage the resources required to successfully complete

your work

These tips provide basic practices you will need to build financial sustainability in your organization

Why financial system is important ?  Financial system and capacity help the organization to

Why financial system is important ?

Financial system and capacity help the organization to make sound decisions based on cash flow and available resources

Most governments require that registered,

charitable organizations create accounts that

track income and expenses

 Funders require reports that demonstrate that grants were used for intended purposes  Monitoring

Funders require reports that demonstrate that grants were used for intended purposes

Monitoring funds, or comparing actual income and expenses versus budgeted amounts, helps managers ensure that the necessary funds are in place to complete an activity

 Establishing financial controls and clear accounting procedures help ensure that funds are used for

Establishing financial controls and clear accounting procedures help ensure that funds are used for intended purposes

Transparency, clear planning and realistic projections contributes to the credibility of the organization

In other words, financial system may be said to be made up of all those

In other words, financial system may be said to be made up of all those channels through which savings become available for investment .

Financial system is crucial significance to capital formation. The Process of capital formation involves three

Financial system is crucial significance to

capital

formation.

The

Process

of

capital

formation involves three distinct ,although inter-

related activities :

Savings

Finance

Investment

Organization Of Financial system Financial Markets Financial Financial Intermediar-ies Assets/Instru-ments
Organization Of Financial system Financial Markets
Organization Of Financial
system
Financial
Markets

Financial

Financial

Intermediar-ies

Assets/Instru-ments

Financial Intermediaries Banks NBFC’s Mutual Funds Insurance Organizations • Assets Finance companies • Housing

Financial Intermediaries

Financial Intermediaries Banks NBFC’s Mutual Funds Insurance Organizations • Assets Finance companies • Housing

Banks

NBFC’s

Financial Intermediaries Banks NBFC’s Mutual Funds Insurance Organizations • Assets Finance companies • Housing

Mutual Funds

Insurance

Organizations

Assets Finance companies Housing Finance Companies Venture Capital funds Merchant Banking Organizations Credit Rating Agencies Stock Broking Firms Custodial services Depositories

Financial Markets Money Market • Call Market • T-Bills Market • Bills market • CP

Financial Markets

Financial Markets Money Market • Call Market • T-Bills Market • Bills market • CP Market

Money

Market

Call Market T-Bills Market

Bills market

CP Market CD Market Repo Market

Capital/Securit y Market

Market • CD Market • Repo Market Capital/Securit y Market Primary/New issue market Secondary/Stock Market/Exchange

Primary/New issue market

Secondary/Stock

Market/Exchange

Financial Assets/Instruments Primary/Direct Indirect D e r i v a t i v e s

Financial

Assets/Instruments

Financial Assets/Instruments Primary/Direct Indirect D e r i v a t i v e s E

Primary/Direct

Indirect

Derivatives

Primary/Direct Indirect D e r i v a t i v e s E q u
E q u i t y S h a r e s Preference shares •
E q u i t y S h a r e s Preference shares •
E q u i t y S h a r e s Preference shares •
E q u i t y S h a r e s Preference shares •

Equity Shares

Preference shares

Mutual Fund Units Security Receipts Securitize Debt Instruments

Debentures

Innovative Debt Instruments

Debt Instruments Debentures Innovative Debt Instruments • Convertible Debentures • Non-Convertible Debentures

Convertible Debentures Non-Convertible Debentures Secure Premium Nodes Warrants

Forward

Futures

Options

Debentures • Non-Convertible Debentures • Secure Premium Nodes • Warrants Forward Futures Options
Debentures • Non-Convertible Debentures • Secure Premium Nodes • Warrants Forward Futures Options
Organization of Indian Financial System Phase- I Pre – 1951 Phase- II 1951 To Mid
Organization of Indian
Financial System
Phase- I
Pre – 1951
Phase- II
1951 To Mid
Eighties
Phase- III
Post-Nineties

Phase- I Pre 1951

Before 1951 the industry had very restricted access to out side savings .the financial system

was not responsive to opportunities for industrial

investment .Such a financial system was clearly incapable of sustaining a high rate of industrial

growth ,particularly the growth of new and

innovating enterprises.

Organization of Indian Financial System (phase-II) Private/Gover nment Ownership of Financial Institutions

Organization of Indian Financial

System (phase-II)

Organization of Indian Financial System (phase-II) Private/Gover nment Ownership of Financial Institutions

Private/Gover

nment

Ownership of

Financial

Institutions

Fortification

of

Institutional

structures

Investor

Protection

Participation By Financial

Institutions in

Corporate

Management

Private/Government Ownership of Financial Institutions Nationalization of: • RBI (1948) • SBI (1956) • LIC

Private/Government Ownership of Financial Institutions

Private/Government Ownership of Financial Institutions Nationalization of: • RBI (1948) • SBI (1956) • LIC

Nationalization of:

RBI (1948) SBI (1956) LIC (1956) (245) Banks (1969-14,1980-6) GIC (1972)

New Institutions:

DFI’s ()

UTI (1964)

Fortification Of Institutional structures DFIs: • IFCI (1948,1993) • SFCs (1971) • ICICI (1994) •

Fortification Of Institutional

structures

Fortification Of Institutional structures DFIs: • IFCI (1948,1993) • SFCs (1971) • ICICI (1994) • IDBI

DFIs:

IFCI (1948,1993)

SFCs (1971)

ICICI (1994) IDBI (1964) SIDCs SIIC (1964)

IIBI

Banks:

Diversification

of Forms of

Financing Enlargement of Functional Coverage

Innovative

Banking

LIC

(1956)

(245)

UTI

(1964)

Investor Protection Capital Issues (control) Act (1947) Securities Contracts(r egulation) Act (1956)

Investor Protection

Investor Protection Capital Issues (control) Act (1947) Securities Contracts(r egulation) Act (1956)

Capital

Issues

(control)

Act

(1947)

Securities

Contracts(r

egulation)

Act

(1956)

Monopol-

ies and Restricti-ve

Trade

Practices

Act

(1970)

Comp-

anies Act

(1956)

Foreign

Exchange

Regulati-on

Act

FERA

(1973)

Organization of Indian Financial System (phase-III) Privatization of Financial Institutions • Banks • Mutual

Organization of Indian Financial

System (phase-III)

Organization of Indian Financial System (phase-III) Privatization of Financial Institutions • Banks • Mutual

Privatization of Financial Institutions

Banks

Mutual Funds Insurance co.

(1)

Reorganizatio n of structure

(2)

Financial Markets

(3)

Investor

Protection:

SEBI

(4)

Reorganization of Structure (2) DFIs / PFIs (i) Banks ( i i ) NBFCs (iii)

Reorganization of Structure

(2)

Reorganization of Structure (2) DFIs / PFIs (i) Banks ( i i ) NBFCs (iii) Mutual

DFIs /

PFIs

(i)

Banks

(ii)

NBFCs

(iii)

Mutual

Funds

(iv)

Banks - 2(ii) Prudential Norms: • Credit/Advance Portfolio • Investment Portfolio • Capital Adequacy

Banks - 2(ii)

Banks - 2(ii) Prudential Norms: • Credit/Advance Portfolio • Investment Portfolio • Capital Adequacy

Prudential

Norms:

Credit/Advance

Portfolio

Investment

Portfolio

Capital

Adequacy

Management of Non-

Performing Assets :

Debt Recovery Tribunals Corporate Debt Restructuring Securitization, Reconstruction of Financial Assets & Enforcement of Security Interest

Risk

Management

Asset Liability Management

Credit Risk Management

Operational

Risk

Management

Financial Markets (3) Money M a r k e t Capital Market Primary Market Stock

Financial Markets

(3)

Financial Markets (3) Money M a r k e t Capital Market Primary Market Stock Exchange

Money

Market

Capital Market

Financial Markets (3) Money M a r k e t Capital Market Primary Market Stock Exchange
Primary Market Stock Exchange
Primary Market Stock Exchange

Primary Market

Primary Market Stock Exchange

Stock Exchange

Primary Market Stock Exchange
IDBI The Industrial Development Bank of India Limited commonly known by its acronym IDBI is

IDBI

The Industrial Development Bank of India Limited

commonly known by its acronym IDBI is one of

India's leading public sector banks and 4th largest

Bank in overall ratings. RBI categorized IDBI as an "other public sector bank".

It was established in 1964 by an Act of

Parliament to provide credit and other facilities for the development of the fledgling Indian industry. It

is currently 10th largest development bank in the

world in terms of reach with 1228 ATMs, 725 branches and 486 centers.

IFCI The government established The Industrial Finance Corporation of India (IFCI) on July 1, 1948,

IFCI

The government established The Industrial

Finance Corporation of India (IFCI) on July 1,

1948, as the first Development Financial Institution in the country to cater to the long-

term finance needs of the industrial sector.

IFCI was changed in 1993 from a statutory corporation to a company under the Indian Companies Act, 1956

ICICI ICICI Bank is India's second-largest bank with total assets of US$ 81 billion at

ICICI

ICICI Bank is India's second-largest bank

with total assets of US$ 81 billion at March 31, 2010

The Bank has presence in 18 countries. ICICI Bank offers a wide range of banking

products and financial services to corporate and

retail customers through a variety of delivery channels and through its specialized subsidiaries in

the areas of investment banking, life and non-life

insurance, venture capital and asset management.

At the state level, the machinery of the State Industrial Development Corporations ( SIDCs )

At the state level, the machinery of the State Industrial Development Corporations (SIDCs )

/State Industrial Investment Corporations (SIICs)

were geared up to meet the financial needs, in terms of the requirements of the Third Five Year Plan.

In 1971, with the functional reorientation of the development banks, the Industrial Reconstruction Corporation of India (IRCI) LTD. Was jointly set up

by the IDBI, BANKS and LIC to look after the

rehabilitation of sick mills.

It was renamed as the Industrial Reconstruction Bank of India ( IRBI )in 1984 .It

It was renamed as the Industrial Reconstruction Bank of India (IRBI)in 1984 .It was converted into a full-fledged public financial institution (PFI) and was renamed as the Industrial Investment Bank of India (IIBI)in 1997.

SFC’s Gujarat State Financial Corporation (GSFC) is a pioneer term lending development financial institution in

SFC’s

Gujarat State Financial Corporation (GSFC) is a

pioneer term lending development financial

institution in the State of Gujarat.

Financial

It

is

created

under

the

State

Corporation Act, 1951 passed by Parliament. GSFC’s

mandate is to provide finance to small and medium scale enterprises. Formed in 1960, GSFC has

sanctioned loans and advances of over Rs.4400

crores; out of which, it has disbursed over Rs.3,300

crores to 47,000 units in the state.

IIBI Industrial Investment Bank Of India Kolkata was established in the year 1985. It offers

IIBI

Industrial Investment Bank Of India Kolkata was established in the year 1985. It offers financial products and facilities. IIBI Kolkata engages in a varied of fund based and non-fund based actions, adding project finance, short length, non-project, asset-backed financing in the form of underwriting/direct subscription, deferred payment guarantees, and working capital/other short-term loans to companies in the country and globally.

FINANCIAL SYSTEM & ECONOMIC DEVELOPMENT

FINANCIAL SYSTEM & ECONOMIC DEVELOPMENT

FINANCIAL SYSTEM & ECONOMIC DEVELOPMENT
FINANCIAL SYSTEM & ECONOMIC DEVELOPMENT
The Economic Development of a country depends, inter alia, on the financial system. The larger

The Economic Development of a country depends, inter alia, on the financial system. The

larger the proportion of the financial assets

(money and monetary assets) to real assets (physical goods and services), the greater the

scope for economic growth in the long run. For

growth to take place, investment is necessary which flows from the financial system.

Economic Development Savings & Investment or capital formation Surplus Spending Deficit Spending Economic Units
Economic Development
Savings & Investment or capital formation
Surplus Spending
Deficit Spending
Economic Units
Economic Units
Income Minus (consu-
Income Minus (consu-
mption + own Investment)
mption + own Investment)
(consu- mption + own Investment) mption + own Investment) Surplus or savings Deficit or Negative Savings
(consu- mption + own Investment) mption + own Investment) Surplus or savings Deficit or Negative Savings
Surplus or savings Deficit or Negative Savings Financial System
Surplus or savings Deficit or Negative Savings Financial System

Surplus or savings

Surplus or savings Deficit or Negative Savings Financial System
Surplus or savings Deficit or Negative Savings Financial System

Deficit or Negative Savings

Surplus or savings Deficit or Negative Savings Financial System

Financial System

mption + own Investment) mption + own Investment) Surplus or savings Deficit or Negative Savings Financial
Feel free to contact :- joshinavneet21@gmail.com Dr.Navneet Joshi Asst. Professor JIMS, Rohini, Delhi
Feel free to contact :- joshinavneet21@gmail.com Dr.Navneet Joshi Asst. Professor JIMS, Rohini, Delhi

Feel free to contact :-

joshinavneet21@gmail.com

Dr.Navneet Joshi

Asst. Professor

JIMS, Rohini, Delhi