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Indian Financial System

The document discusses India's financial system. It defines the financial system and its key sub-systems and institutions like markets, instruments, services, and regulatory bodies. It also describes various financial markets in India like money markets, debt markets, equity markets, primary markets, and secondary markets. Money markets are for short-term funds and include organized markets through banks and unorganized markets. Capital markets are for long-term funds and include primary market issues and stock/bond markets. The Indian financial system has become more integrated and stable through reforms but still faces weaknesses to address.

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Arvindra Sinha
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53 views13 pages

Indian Financial System

The document discusses India's financial system. It defines the financial system and its key sub-systems and institutions like markets, instruments, services, and regulatory bodies. It also describes various financial markets in India like money markets, debt markets, equity markets, primary markets, and secondary markets. Money markets are for short-term funds and include organized markets through banks and unorganized markets. Capital markets are for long-term funds and include primary market issues and stock/bond markets. The Indian financial system has become more integrated and stable through reforms but still faces weaknesses to address.

Uploaded by

Arvindra Sinha
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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INDIAN

INDIANFINANCIAL
FINANCIAL
SYSTEM
SYSTEM
BY:- Avinash pareda
Arvindra pal sinha
Mridu pawan Bora
Deepak
Kaushik
1
Financial System

• An institutional framework existing in a country to enable


financial transactions

• Sub-systems
– Financial markets
– Financial instruments
– Financial services
– Financial institutions

• Regulation is another aspect of the financial system (RBI,


SEBI, IRDA, FMC)
2
Financial Markets

Defined as the market in which financial assets


are created or transferred.

These assets represent a claim to the payment of a sum


of money sometime in the future and/or periodic
payment in the form of interest or dividend.

3
Classification of financial market

Debt market
Nature of claim
Equity market

Money market
Maturity of claim
Capital market

Seasoning of Primary market


claim Secondary market

Cash or spot market


Timing of delivery
Forward or future market

Organizational Exchange –traded market


structure
Over-the-counter market
4
Debt Market- This market refers to the
purchase and sale of debinstruments like bonds,debentures,deposits etc. All
these instruments have fixed interest payment.
Equity Market-
It is a market for dealing with purchase and selling of shares of
companies.
Money Market-
It is the market for trading short term financial instruments which
maturity is within one year.
Eg: Govt. treasury bills
Capital Market
This is market for trading long term financial instruments, which
maturity period is more than one year.
Eg: Bonds, debentures etc.

5
Primary market :
The primary market is where newly issued shares of stocks or bonds are sold
for the 1st time. Usually, these securities are sold by investment banks who handle
the offering directly to their customers or to the customers of their selling groups.

secondary markets
The secondary market is where the securities held by investors are sold,
usually through organized exchanges or in the over-the-counter market.

Spot market:
where the issue is sold for an immediate cash payment based on the strength of
the issuer.

6
Future/ Derivative market:
derivative market is a market where the traded contracts stipulate
payments in the future and are based on an underlying asset or a
benchmark, such as a stock index.
Exchange -traded market:
It refers to trade in financial securities as listed in the exchange.
Organized exchanges aggregate all bid and ask prices for listed
securities and display the highest bid and the lowest ask price.
over-the-counter (OTC) market :
It is the largest market both in the number of transactions and in the
number of securities sold.
Most of the securities actually sold in the OTC market are usually illiquid
and thinly traded.

7
Financial Markets

• Money Market- for short-term funds (less than a


year)
– Organized (Banks)
– Unorganized (money lenders, chit funds, etc.)

• Capital Market- for long-term funds


– Primary Issues Market
– Stock Market
– Bond Market

8
Organized Money Market
• Call money market
• Bill Market
– Treasury bills
– Commercial bills
• Bank loans (short-term)
• Organized money market comprises RBI,
banks (commercial and co-operative)

9
Call money market

• Is an integral part of the Indian money market


where day-to-day surplus funds (mostly of
banks) are traded.

• call money

• notice money

• term money
10
Money Market Instruments
• Certificates of Deposit
• Commercial Paper
• Inter-bank participation certificates
• Inter-bank term money
• Treasury Bills
• Bill rediscounting
• Call/notice/term money

11
Primary Markets Secondary Markets
When companies need financial resources The place where such securities are traded
for its expansion, they borrow money from by these investors is known as the
investors through issue of securities. secondary market.

Securities issued Securities like Preference Shares and


a) Preference Shares Debentures cannot be traded in the
b) Equity Shares secondary market.
c) Debentures
Equity shares is issued by the under writers Equity shares are tradable through a
and merchant bankers on behalf of the private broker or a brokerage house.
company.
People who apply for these securities are: Securities that are traded are traded by the
a) High networth individual retail investors.
b) Retail investors
c) Employees
d) Financial Institutions
e) Mutual Fund Houses
f) Banks
One time activity by the company. Helps in mobilising the funds for the
investors in the short run.

12
Conclusion
• Financial system is fairly integrated, stable,
efficent.
• Weaknesses need to be address.
• The reforms have been more capital centric in
nature.
• Foreign capital flows and foreign exchange
reserves have increased but absorption of
foreign capital is low.

13

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