Financial Market in India

Introduction

 Financial market refers to a market place, where creation and trading of

financial asset, such as shares, debentures, bonds, currencies, etc. take place

 The financial markets enable efficient transfer and allocation of resources

for productive activities in the economy

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Functions of financial
market

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 Financial market helps provide access of funds to those that need
it for consumption or productive activity.
 Financial market provide a way for aggregation of funds from a
large number of investors and make it available for those who
need them.
 An efficient financial market ensure that the transfer of funds
happens at a cost that makes it attractive for savers to save and
lend and for user to borrow funds.
STRUCTURE OF INDIAN
FINACIAL MARKET

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 Indian financial system

Financial Financial Financial Financial

Market Institution Instrument Services

Treasury Bill
Capital Money
Market Market Call Money Market

Commercial Bill

Commercial Paper

Equity Debt
Certificate of Deposit
Market Market
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Cash Management
 Money Market
 As money become a commodity, the money market
become a component of the financial market.

 The money market is the market for the financial assets

that are close substitute for money.

 It is a market for overnight to short term fund and

instrument having maturity period of one or less than one
year.
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Function

 Financing trade
 Financing industry
 Profitable investment
 Self sufficiency of commercial bank

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INSTRUMENT
Treasury Bill
Call Money Market
Commercial Bill

Commercial paper

Certificate of deposit

Cash Management Bill

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 Treasury Bills

 It deals in T-bills of short term duration 14 days, 182

days,91 days,364 days.
 They are issued by the government and largely held by
RBI.
 The rate of interest for T-bills is determined by the
market depending on demand and supply of fund in the
money market.

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 Call money market

 Thecall money market is a market for very short

term fund repayable on demand with a maturity
period varying between one day to a for night.
 The money that is lent for one day in this market
is known as a call money.

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 Commercial Bill

 Deals in a bill of exchange, a seller draws a bill of

exchange on the buyer to make payment within a certain
period of time.
 The bill can be domestic bill or foreign bill of exchange

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 Commercial paper

 The scheme of cp was introduced in 1990 for short term

financing issue.
 As per RBI guideline cps can be issue on the following
condition:
• The minimum tangible networth of the company should be
at least Rs 4cr.
• The working capital limit should have been sanctioned by
a bank or financial institution.

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 Certificate of Deposit

 Cds were introduced In 1989.

 Cds are short term borrowing in the form of the

promissory notes having a maturity not of more than 15
days up to a maximum of 1 year. Cd is subject to payment
of stamp duty under indian stamp act, 1899(Central act).

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 Capital Market

 The capital market is the market for securities,

where companies and government can raise long
term fund. The capital market includes the stock
market and the bond market.

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 Role of capital market

 Mobilization of saving
 Capital formation
 Provision of investment avenue
 Service provision
 Speed up economic growth and development

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 THANK YOU

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