FINANCIAL SERVICES

FINANCIAL MARKETS
 Wherever a financial transaction takes place, it is
deemed to have taken place in the financial market.
 Financial markets are pervasive throughout the
economic system.
 Financial markets can be referred to as those centre
and arrangements which facilitate buying and
selling of financial assets, claims and services.
 Organised market
 Unorganised market 
Archana S
Unorganized markets

 In these markets, there are a number of money lenders,

indigenous bankers, and traders etc. who lend money to the
public.
 Indigenous bankers also collect deposits from the public.
 Private finance companies, chit funds etc. whose activities
are not controlled by the RBI.
 RBI has taken steps to bring private finance companies and
chit funds under its strict control by issuing non-banking
financial companies (Reserve Bank) Directions, 1998.
 Financial instruments have not been standardized

Archana S
Organized Markets

 standardized rules and regulations governing their

financial dealings.
 High degree of institutionalization and

instrumentalisation.
 These markets are subject to strict supervision and

control by the RBI or other regulatory bodies.

Classified as
 Capital Market

 
 Money Market
Archana S
CAPITAL MARKET

 Capital market is a market for financial assets which have

a long or indefinite maturity.
 It deals with long-term securities which have a maturity
period of above one year.
 Capital market may be further divided in to three;

 Industrial Securities Market

 Government Securities Market
 Long-term Loans Market
 
Archana S
 i. Industrial Securities Market
 It is a market for industrial securities namely;

i) equity shares or ordinary shares,

ii) preference shares
iii) debentures or bonds.
 Market where industrial concerns raise capital or

debt by issuing appropriate instrument

subdivided in to: 
 Primary Market or New issue market

 Secondary Market or Stock exchange

Archana S
Primary market deals with those securities which are
issued to the public for the first time.
3 ways to raise capital
 Public issue

 Rights issue

 Private placement

 Secondary market is a market for secondary sale of

securities.
 Stock exchanges regulated under Securities Contract

Regulation Act, 1956

Archana S
ii. Government Securities Market
 It is otherwise called Gilt-edged securities market.

 It is a market where government securities are traded.

 Government securities:-short-term and long-term.

 Long-term securities are traded in this market while short-

term securities are traded in the money market.

 E.g securities issued by central Govt, state Govt, semi govt

authorities ( city corporations, port trust, state electricity

boards, PSE)
 
Archana S
iii. Long-term Loans Market
 Development banks and commercial banks play a

significant role in this market by supplying long-

term loans to corporate customers.
Long-term loans market can be classified in to:
 Term loans Market

 Mortgages market

 Financial Guarantees Market

Archana S
 Term loans market
- Long term & medium term loans to corporate
customers
 Development banks operate

 E.g IDBI, IFCI, ICICI

 Helps in identifying investment opportunities,

encourage entrepreneurs

Archana S
 Mortgages Market
 Supply mortgage loan to individual customers

 Loan against an immovable property

 Equitable mortgage

 Legal mortgage

 E.g HUDCO

Archana S
 Financial Guarantees Market
 Finance provided against the guarantee of a reputed

person in financial circle

 On non repayment , liability falls on the guarantor

 Provided by development banks, commercial banks

 ECGC( Export credit guarantee corporation)

Archana S
THANK YOU

Archana S