introduction to Indian financial system

1. Introduction

2. Suppliers of Funds
Individuals
Businesses
Governments
Demanders of Funds
Individuals
Businesses
Governments
THE FINANCIAL SYSTEM

3. Transferring CapitalTransferring Capital
 Direct Transfer of Funds
saver

4. Transferring CapitalTransferring Capital
 Direct Transfer of Funds
saver
firm

5. CashCash
Transferring CapitalTransferring Capital
 Direct Transfer of Funds
saver
firm

6. CashCash
SecuritiesSecurities
Transferring CapitalTransferring Capital
 Direct Transfer of Funds
saver
firm

7. Suppliers of Funds
Individuals
Businesses
Governments
Demanders of Funds
Individuals
Businesses
Governments
THE FINANCIAL SYSTEM
Private Placement
Funds
Securities

8. Transferring CapitalTransferring Capital
 Indirect Transfer using a Financial
Intermediary
saver

9. Transferring CapitalTransferring Capital
 Indirect Transfer using a Financial
Intermediary
financial
intermediary
saver

10. FundsFunds
Transferring CapitalTransferring Capital
 Indirect Transfer using a Financial
Intermediary
financial
intermediary
saver

11. FundsFunds
Transferring CapitalTransferring Capital
 Indirect Transfer using a Financial
Intermediary
financial
intermediary firm
saver

12. FundsFunds
Transferring CapitalTransferring Capital
 Indirect Transfer using a Financial
Intermediary
FundsFunds
financial
intermediary firm
saver

13. FundsFunds
Transferring CapitalTransferring Capital
 Indirect Transfer using a Financial
Intermediary
FundsFunds
financial
intermediary firm
saver
FirmFirm
SecuritiesSecurities

14. FundsFunds
Transferring CapitalTransferring Capital
 Indirect Transfer using a Financial
Intermediary
IntermediaryIntermediary
SecuritiesSecurities
FundsFunds
FirmFirm
SecuritiesSecurities
financial
intermediary firm
saver

15. Financial Institutions
Commercial Banks
Insurance Companies
Mutual Funds
Provident Funds
Non Banking Financial
Institutions
Suppliers of Funds
Individuals
Businesses
Governments
Demanders of Funds
Individuals
Businesses
Governments
Funds
Deposits/shares
Funds
Securities
THE FINANCIAL SYSTEM
Private Placement
Funds
Securities

16. Transferring CapitalTransferring Capital
 Direct Transfer using Financial
Market
saver

17. Transferring CapitalTransferring Capital
 Direct Transfer through Financial
Markets
saver
firmFinancial Markets

18. FundsFunds
Transferring CapitalTransferring Capital
 Direct Transfer through Financial
Markets
saver
firmFinancial Markets

19. FundsFunds
Transferring CapitalTransferring Capital
 Direct Transfer through Financial
Markets
FundsFunds
saver
firmFinancial Markets

20. FundsFunds
Transferring CapitalTransferring Capital
 Direct Transfer through Financial
Markets
FundsFunds
SecuritiesSecurities
saver
firmFinancial Markets

21. FundsFunds
Transferring CapitalTransferring Capital
 Direct Transfer through Financial
Markets
SecuritiesSecurities
FundsFunds
SecuritiesSecurities
saver
firmFinancial Markets

22. Financial Institutions
Commercial Banks
Insurance Companies
Mutual Funds
Provident Funds
Non Banking Financial
Institutions
Suppliers of Funds
Individuals
Businesses
Governments
Financial Markets
Money Market
Capital Market
Demanders of Funds
Individuals
Businesses
Governments
Private Placement
Funds
Deposits/shares
Funds
Securities
Funds
Loans
Securities
Funds
Securities
THE FINANCIAL SYSTEM
Funds

23. Financial Institutions
Commercial Banks
Insurance Companies
Mutual Funds
Provident Funds
Non Banking Financial
Institutions
Suppliers of Funds
Individuals
Businesses
Governments
Financial Markets
Money Market
Capital Market
Demanders of Funds
Individuals
Businesses
Governments
Private Placement
Funds
Deposits/shares
Funds
Securities
Funds
Loans
Funds
Securities
Funds Securities
Funds
Securities
THE FINANCIAL SYSTEM

24. The Indian Financial System

25.  Formal financial system – organized,
institutional and regulated
 Informal financial system
Advantages
Low transaction costs
Minimum default risk
Disadvantages
Wide range of interest rates
Higher rates of interest
Unregulated
Types of Financial
System

26.  Financial Institutions
 Financial Markets
 Financial Instruments
 Financial Services
Components of the Financial
System

27. The Indian Financial System, 2e -- Pathak
Copyright©2008DorlingKindersleyIndiaPvt.Ltd
Financial Institutions
Banking
Non-banking

28. Financial Markets
Types
 Money Market – A market for short-term debt
instruments
 Capital Market – A market for long-term equity
and debt instruments
Segments
 Primary Market – A market for new issues
 Secondary Market – A market for trading
outstanding issues

29. Financial Instruments
Types
Primary
Secondary
Distinct Features
Marketable
Tradable
Tailor-made

30. Financial Services
Major Categories
Funds intermediation
Payments mechanism
Provision of liquidity
Risk management
Financial engineering- Financial engineers use various
mathematical tools in order to create new investment strategies. The
new products created by financial engineers can serve as solutions
to problems or as ways to maximize returns from potential
investment opportunities.

31. Mobilise and allocate savings
Monitor corporate performance
Provide payment and settlement systems
Optimum allocation of risk bearing and
reduction
Disseminate price related information
Offer portfolio adjustment facility
Lower the cost of transactions
Promote the process of financial deepening
and broadening
Functions of Financial
System

32. Key Elements of a Well-
functioning Financial System
A strong legal and regulatory
environment
Stable money
Sound public finances and public debt
management
A central bank
Sound banking system
Information system
Well-functioning securities market