INDIAN FINANCIAL SYSTEM

AN OVERVIEW
 PRIMARY FUNCTION
• To mobilize savings and deploy them
productively.
• The players are called Intermediaries who help
to transfer the wealth from savers to users,
investors and support services providers
 Components of a Financial system
• Institutions
• Regulators
• Instruments dealt with
• Supporting service Institutions like Brokers,
custodians, advisory
 Structure of Financial Markets
• Unorganised Sector:
• Money lenders
• Indigenous bankers
• Chit funds
• Nidhis( NBFCs registered with RBI u/s 620-A and deals with
members only)
• Self help groups
• ORGANISED SECTOR:
• Capital market
• Money market
• Forex market
• Derivatives market
 Players in Financial market
• Commercial Banks
• Development Financial Institutions
• NBFCs
• FIIs
• MFIs
• Cooperative Banks
• RRBs
• PE funds
• Insurers
• Post Offices
• Mutual Funds
• DFHI
 Regulators
• Reserve Bank of India – for Banks, NBFC, FIs etc.
• SEBI – for capital markets
• IRDA – for insurance
• NABARD – for RRBs
• Registrar of cooperative societies and RBI for Co-
op banks
• PFRDA for Pension funds
• MUDRA BANK for Micro finance institutions
 Service Providers
• Merchant Bankers/Investment Bankers
• Stock Brokers
• Stock Exchanges
• Clearing corporations
• Depositories
• Credit Rating Agencies
• Credit Information Bureau (CIBIL)
• DICGC
• ECGC
• Market Research Organizations
• DFHI
 Instruments
• Capital market – Debt( bonds) and Equity(
Shares)
• Money market – Short term maturity
instruments like T-bill, commercial papers,
Repos
• Derivatives – Forwards, Futures, options,
swaps etc.
 International sources/instruments

• ADRs
• GDRs
• ECBs
• Participatory Notes issued by FIIs
 FINANCIAL SERVICES
• THE SERVICES PROVIDED BY THE FINANCIAL
INTERMEDIARIES ARE CALLED THE FINANCIAL
SERVICES
 VARIOUS FINANCIAL SERVICES –
provided by banks
• COMMERCIAL BANKING
• INVESTMENT BANKING
• BANCASSURANCE
• OTHER BANKING SERVICES LIKE CREDIT CARDS, DEMAT
ACCOUNTS, TRADING ACCOUNT, GOLD AND BULLION
and other Commodities trading etc.
• LIFE, GENERAL AND HEALTH INSURANCE SERVICES
• MUTUAL FUNDS- bank sponsored and non-bank
sponsored
 OTHER FINANCIAL SERVICES
• FACTORING SERVICES
• CREDIT RATING
• FORFAITING
• LEASING AND HIRE PURCHASE
• VENTURE CAPITAL SERVICES
• FINANCIAL DERIVATIVES
• COMMODITIES TRADING
• ASSET SECURITISATION
• FDI and FPI services
 Role of DFHI( Discount and finance
House of India)
• Set up in 1988 by RBI and public sector banks
with 100 crores capital.
• Objectives:
• Provide liquidity to money market instruments
• Provide safe and risk free short-term
investments avenues to institutions
• Facilitates money market transactions of small
and medium sized institutions that are not
regular participants in the market.
 Functions of DFHI
• To discount, rediscount, purchase and sell treasury bills,
trade bills, bills of exchange, commercial bills and
commercial papers.
• To play an important role as a lender, borrower, or broker in
the inter-bank call money market
• To promote and support company funds, trusts and other
organizations for the development of short term money
markets
• To advise government, banks, and financial institutions in
evolving schemes for growth and development of money
market.
• THE DFHI PARTICIPATES IN THE CALL, NOTICE AND TERM
MARKETS A BORROWER AND LENDER.