Barter

Money Lender

Indigenous banks
Chit funds

Co operative Movement

Co operative Society
Co operative Bank

Joint Stock Bank

Commercial Banks

Investment Banks

Insurance companies
STOCK EXCHANGES OF INDIA

NSE

BSE

MAJOR STOCK EXCHANGES IN THE WORLD

ORLD

NYSE

LSE

NASDAQ

SSE

TSE

HKSE

Specialized Institutions

Market operations

Merchant Banking

Evolution of Financial System

Barter
Money lender
Nidhis/ Chit funds
Indigenous Banking

Societies

Co operative Movement

Banks

Joint Stock Banks

Commercial Banks
Nationalization

Investment Banks
Development of Financial Institutions
Insurance Companies
Stock Exchanges

Market Operations
Specialized Financial Institutions
Merchant Banking
Universal banking

Structure of A Financial System

Organized

Non Organized
PFRDA

Regulators

Money Lenders
IRDA

RBI

SEBI

Local Bankers

Financial Instruments
Money Market
Instrument

Traders

Capital Market
Instrument

Landlords
Financial Markets

Pawn Brokers
Forex
Market

Capital
Market

Financial
Intermediaries

M0ney
market

Credit Market

Chit funds

Financial market
Role of Financial Market
Savings Mobilization
National Growth
Entrepreneurship Growth
Industrial Growth
Functions
a.
Intermediary Functions
1.
Transfer of resources
2.
Enhancing income
3.
Productive usage
4.
Capital formation
5.
Price determination
6.
Sale mechanism
7.
Information
b. Financial Function
1.
Providing the borrowers with funds.
2.
Providing the lenders with earning assets.
3.
Providing the liquidity in the market.

A Financial markets can be distinguished along the two major dimensions

1 Primary and secondary
2. Money and Capital market
Money Market
A market where Short term funds are borrowed and lent is called
money market. Money Market is a market for Short term financial
assets, which are near substitutes for money. The instruments dealt
within the money market are liquid and can be turned over quickly at
low transaction cost and without loss.

Objectives
Characteristics
Short term fund
No fixed place
Brokers
Close substitute for money
Period of one year
Sub markets

Importance
Source of Capital
Ideal investment
Effective Monetary Management
Economic development
Efficient banking System
Facilitating Trade
Helpful to the Government
Segments or Sub Markets
Call money Market
Collateral Loan Market
Bill Market
Acceptance market
Discount Market
Financial Institutions
Commercial banks
NBFCs
Acceptance Houses
Central bank

Characteristics or Requirements for a Developed

Money Market

Developed Banking and Financial System

Powerful Central bank
Integrated interest Structure
Specialized Sub Markets
Efficient Co ordination
High sensitivity
Large Number of Instruments and Dealers
Cheap Remittance Facilities
Adequacy of Funds
Highly organized Banking System
A large volume of international trade
Rapid and Massive industrial development
Political Stability
Freedom of Investment

The important money market instruments are

1. Call/Notice Money
2. Treasury Bills
3. Treasury Bonds
4. Banker's Acceptance
5. Repurchase Agreement
6. Certificate of Deposit
7. Commercial Papers

Global Money Markets

London Money Market
Genesis

Banking system
Accepting Houses

Structure

Discount Houses
Bill Brokers

New York

Money Market

Wall street

Federal Reserve System

Interconnected Markets
Government Securities

Local Market
Commercial Banks
Open Market

Role played by RBI

RBI

Questions
1.
Mention and explain the overview of financial market
with structured diagram.
2.
Explain the role of RBI in the developing the money
market.
3.
Define the term money market. What are its features?
4.
State the general functions of Money market.
5.
Write a note on Money market instruments.
6.
State the financial institutions that operate in a money
market.

Capital Market
The capital market is designed to finance the longterm investments. The transactions taking place in
this market will be for periods over a year.

HARSHAD SCAM

Characteristics
Securities Market
Security prices
Participants
Location
Functions
Allocation
Liquidity
Indicative Function
Savings and Investment
Transfer
Merger

Indian Capital Market

Market

Primary

Secondary

Equity shares

Instruments

Equity

Preference
shares

Intermediaries

Debt

ADR/GDR
Deep
Debentures
Discount
Zero
bonds
coupon
bonds

Regulator

Stock Exchanges
Banks
Investment Trusts
and Companies
Specialized
Financial
Institutions
Mutual funds
NBFCs
International
Finance investors
and institutions

SEBI

Indian Capital Market- Evolution and Growth

Infrastructure Stage
New Issues Stage
The SEBI Stage
New Financial Services
Committees/ Working Groups
Structural Formation
Constituents of Indian Capital Market
1.
Gilt edged Market
2. Industrial Securities Market

Financial Institutions
1.
Venture Fund
2.
Mutual Funds
3.
Factoring Institutions
4.
Credit Rating institutions
5.
OTCEI
6.
NSEI
7.
NCDS
8.
National Securities Depositories Limited
9.
SHCIL

Financial Instruments of the Capital market

1.
2.
3.
4.
5.
6.
7.

8.
9.
10.
11.
12.
13.
14.

Commercial Paper
Certificate of deposit
Secured Premium Notes
Non Convertible Debenture (NCD)
Zero coupon Bonds
Zero Interest Fully convertible Debentures
Deep Discounts
Stock invest
Equity shares with detachable warrants
Equi pref Shares
Preference shares with warrants attached
Euro issues
Non Voting right shares
Other innovative instruments

Role of Capital Market In India

1.
Capital Formation
2. Economic Growth
3. Development of Backward areas
4. Generates employment
5. Long term Capital to Industrial Sector
6. Generation of Foreign Capital
7. Developing the role of Financial institutions
8. Investment opportunities

Role played by SEBI

SEBI

Advantages of Financial Markets

Questions
1.

2.

3.

What role does capital market play in the development

of Indian economy?
Mention and explain briefly the financial instruments
of financial markets.
Explain the role of SEBI in the developing the Capital
market.