Академический Документы
Профессиональный Документы
Культура Документы
PRESENTED BY:
Aakash Raval(151401)
Aashish Janardan(151402)
Abhishek Gulyani(151403)
Akshat Narayan Singh(151404)
Financial System
Function of Financial
System
The financial system helps production,
capital accumulation, and growth by:(i) encouraging savings
(ii) mobilising them and
(iii) allocating them among alternative uses
and users.
Each of these functions is important and the
efficiency of a given financial system
depends on how well it performs each of
these functions.
HISTORY OF INDIAN
FINANCIAL SYSTEM
HISTORY Cont.
The question that comes to our mind is If we had such a glorious
history of being materially wealthy and prosperous, then what was
the reason for that?
Well, the question may have many answers. One very possible answer is
the socio-economic architecture installed during the time of Emperor Ashoka,
that made it possible for the Indian civilization to generate enormous wealth.
If we explore the creation of this socio-economic architecture, we would
discover that it was the knowledge of the Arthashastra, written by Chanakya
(Kautilya) around 2300 years ago, that formed the foundation of Emperor
Ashokas rule. The Arthashastra is knowledge of Material Wealth it is a
science of liberation from poverty and of entering the much-deserving world
of well-being and prosperity.
Interestingly, todays education system is bereft of this practical science of
being wealthy and prosperous. Hence, there is a dire need for financial
literacy - having a fusion of modern finance and the ancient wisdom of
Chanakyas Arthashastra. The Game Chanakyas Chakkravyuh addresses this
very need. This game is conceptualized on books Corporate Chanakya and
Kautilya's Arthashastra and helps its players throughout the world realize
their full potential to earn abundantly.
STRUCTURE
Financial assets
These are divided into 2 sub-categories:(a) Primary securities are financial claims against real-sector
units, for example, bills, bonds, equities etc. They are
created by real-sector units as ultimate borrowers for
raising funds to finance their deficit spending.
(b) The secondary securities are financial claims issued by
financial institutions or intermediaries against themselves
to raise funds from public. For examples, bank deposits, life
insurance policies, UTI units, IDBI bonds etc.
Financial Markets
The Indian Financial system (financial markets) is broadly
divided under four heads:
(i)The Indian money market is the market in which short-term
funds are borrowed and lent. The money market does not deal in
cash, or money but in bills of exchange, grade bills and treasury
bills and other instruments. Trading in money markets is done
over the counter and is wholesale.
(ii)The capital market in India on the other hand is the market for
the medium term and long term funds.
(iii)Forex Market - The Forex market deals with the multicurrency
requirements, which are met by the exchange of currencies.
Depending on the exchange rate that is applicable, the transfer of
funds takes place in this market. This is one of the most
developed and integrated market across the globe.
Money Market
The money market is divided into two:
1. Unorganized Market
Unorganized market consists of:
Money
interest.
Indigenous Bankers: They operate like money lenders. They also accept
deposits from public.
Chit Funds: These collect funds from members and provide loans to
members and others.
2. Organized Money Market
Organized Markets work as per the rules and regulations of the RBI. RBI
keeps a strict control over the Organized Financial Market in India.
Organized Market consists of: Treasury Bills, Commercial Paper (CP),
Certificate Of Deposit(CD), Call Money Market, Commercial Bill Market.
Capital Market
In this market, government securities are bought and sold. The securities
are issued in the form of bonds and credit notes. The buyers of such
securities are Banks, Insurance Companies, Provident funds, RBI and
Individuals. These securities may be of short-term or long term.
3. Long-Term Loans Market
Financial Institutions
FINANCIAL
INSTRUMENTS
1.
2.
3.
4.
5.
Call/Notice Money
Treasury Bills
Term Money
Certificate of Deposit
Commercial Papers
The loans are of short-term duration (1 to 14 days). Money lent for one day
is called call money; if it exceeds 1 day but is less than 15 days it is
called notice money. Money lent for more than 15 days is term money
The main function of the call money market is to redistribute the pool of
day-to-day surplus funds of banks among other banks in temporary deficit
of funds.
These bills are short-term liabilities (91-day, 182-day, 364day) of the Government of India
It is a promise of the government to pay the stated amount
after expiry of the stated period from the date of issue
They are issued at discount to the face value and at the end
of maturity the face value is paid
The rate of discount and the corresponding issue price are
determined at each auction
RBI auctions 91-day T-Bills on a weekly basis, 182-day TBills and 364-day T-Bills on a fortnightly basis on behalf of
the central government
Certificates of Deposit
CDs are short-term borrowings issued by all scheduled banks and are
freely transferable by endorsement and delivery.
Introduced in 1989.
Maturity of not less than 7 days and maximum up to a year. FIs are allowed
to issue CDs for a period between 1 year and up to 3 years.
Subject to payment of stamp duty under the Indian Stamp Act, 1899.
Commercial Papers
Financial Intermediation
Secondary
Market to
securities
Corporate
Investment Capital Market, advisory
Bankers
Credit Market
services, Issue
of securities
Subscribe to
Underwriter Capital Market, unsubscribed
s
Money Market portion of
securities
Issue securities
Registrars,
to the investors
Depositorie
on behalf of the
Capital Market
s,
company and
Stock
Exchange
Capital Market
Financial Disintermediation
(1) the investing of funds that would normally have been placed in a
bank or other financial institution (financial intermediaries)
directly into investment instruments issued by the ultimate users
of the funds. Investors and borrowers transact business directly
and thereby bypass banks or other financial intermediaries.
(2) The elimination of intermediaries between the first case providers
of capital and the ultimate users of capital, withdrawal of funds
from financial intermediaries such as banks, thrifts, and life
insurance companies in order to invest directly with ultimate
users.
Conclusion
Indias
THANK YOU