financial system and markets

PowerPoint Presentation: 

THE FINANCIAL SYSTEM http://www.facebook.com/mr.fortyseven

System: 

System System is a set of inter-related components working together to achieve some purpose http://www.facebook.com/mr.fortyseven

Financial System: 

Financial System Financial System Financial Instruments Financial Markets Financial Services Financial Institutions Commercial Banks NBFCs Provident Funds Industrial Banks Debentures / Bonds Shares Certificate of Deposits (CDs) Commercial Paper (CPs) Mutual Funds Mutual Fund Units Public DepositS PDs) Insurance Policies Government Bonds Money Market Capital Market Merchant Banking Project Consultancy http://www.facebook.com/mr.fortyseven

Functions of Financial System: 

Functions of Financial System Payment system Mobilisation of savings Size transformation Maturity transformation Risk transformation Provision of liquidity Cost reduction Price information Financial advice http://www.facebook.com/mr.fortyseven

PowerPoint Presentation: 

Savers / Lenders  Householders  Business Firms  Government  Foreigners Investors/Borrowers  Householders  Business Firms  Government  Foreigners Financial Markets  Money Market  Capital Market  Over-the-Counter Market Financial Institutions  Banks  Provident Funds  Insurance Companies  Mutual Funds  NBFCs Funds Loans Funds Funds Funds Securities: Shares/Bonds Deposits/Policies/Units F u n d s Funds S e c u r i t i e s Private Placement Mode Securities Securities: Shares/Bonds Flow of Funds http://www.facebook.com/mr.fortyseven

Assets and Financial Assets: 

Assets and Financial Assets Assets are the rights of owners Fixed assets can be seen and can be touched (Tangible) http://www.facebook.com/mr.fortyseven

Classification of Financial Assets: 

Classification of Financial Assets Financial Assets Non-Marketable Marketable Bank Deposits Insurance Schemes Post Office Certificates Shares Equity Shares M F Units Govt. Securities Debe -ntures Preference Shares http://www.facebook.com/mr.fortyseven

Return on Financial Assets: 

Return on Financial Assets Bonds Debentures Debt Preference share Equity share Dividend Interest http://www.facebook.com/mr.fortyseven

Functions of Financial Markets: 

Functions of Financial Markets Price information Marketability/Liquidity Reduction of Transaction cost Promotes savings and investments http://www.facebook.com/mr.fortyseven

Distinguish between Money Market and Capital Market: 

Distinguish between Money Market and Capital Market Points of Difference Money Market Capital Market 1.Maturity of Funds Less than one year Above one year 2.Instruments Call Money market, Treasury Bills (TBs) Market, Commercial Bills (CBs) market, Commercial Papers (CPs) market, Certificate of Deposits (CDs), Banker’s Acceptances (Bas), Repurchase Agreements (Repos), Money Market Mutual Funds (MMMF), etc. Equity Shares, preference shares, debentures, Government securities and loans 3. Existence of Secondary market No Yes 4. Place of Market No specific place Stock Exchanges http://www.facebook.com/mr.fortyseven

Financial Instruments: 

Financial Instruments Securities issued to public to raise funds Example – Equity Share – Reference Share – Debenturers – Commercial papers – Certificate of Deposits etc., http://www.facebook.com/mr.fortyseven

Financial Intermediaries: 

Financial Intermediaries FIs that act as bridge between savers and investors and provides needed funds to investors Example: Banks NBFCs http://www.facebook.com/mr.fortyseven

Structure of Indian Financial Intermediaries: 

Structure of Indian Financial Intermediaries Structure of Financial Intermediaries in India RBI SEBI IRDA Mutual Funds Venture Capital Funds Private Sector Insurance Companies Public Sector Insurance Companies Public and Pvt. Commercial Banks All India Development Banks Specialised Financial Institutions Exim Bank, IFCI Refinance Institutions NABARD, NHB NBFCs http://www.facebook.com/mr.fortyseven

Regulatory Institutions: 

Regulatory Institutions RBI SEBI IRDA NABARD NHB http://www.facebook.com/mr.fortyseven

Reserve Bank of India (RBI): 

Reserve Bank of India (RBI) Objectives The objectives of establishment (Central Bank) of RBI are to: – Maintain the internal value of the nation’s currency; – Preserve the external value of the currency; – Secure reasonable price stability; and – Promote economic growth through increasing employment, output and real income. Functions The functions of RBI may be classified into two categories: a) Traditional functions, and b) Developmental functions a) Traditional Functions : – RBI acts as a lender of last resort; – It acts as a banker to banks; – It issues currency and operates the clearing system for banks; – It supervises the operations of credit institutions; http://www.facebook.com/mr.fortyseven

PowerPoint Presentation: 

– It acts as the custodian of the foreign reserves; – It formulates and implements monetary and credit policies; – It moderates the fluctuations in the exchange value of the rupee. b) Developmental Functions : – The prime developmental function is to integrate the unorganized financial sector with the organized financial sector; – It encourages opening of semi-urban and rural branches; – It provides education and training to banking personnel of commercial and co-operative banks; – It influences the allocation of credit; – It promotes the collection pooling and dissemination of credit information among banks; – It promotes the establishment of new institutions. RBI Contd….. http://www.facebook.com/mr.fortyseven

Securities Exchange Board of India (SEBI): 

Securities Exchange Board of India (SEBI) Objectives The SEBI has been entrusted with both the regulatory and developmental functions. The following are the objectives of SEBI: – Investor protection with a view to get steady flow of savings into capital market; – Ensuring fair practices by the issues of securities by which corporations can raise resources of least cost; – Promotion of efficient services by brokers, merchant bankers, and other intermediaries with a view to make them competitive and professional; – Development and regulation of securities market. http://www.facebook.com/mr.fortyseven

PowerPoint Presentation: 

Functions a) Regulatory Functions – Registration and Regulation of capital market intermediaries (Brokers, sub-brokers, and other players in the market); – Register and regulate the working of venture capital funds and Collective Investment Schemes including mutual funds; – Regulate the business in Stock Exchanges and any other securities market; – Promoting and regulating Self Regulatory Organisations (SRO); – Prohibition of all fraudulent and unfair trade practices relating to securities market; – Prohibition of insider trading and takeover bids and imposing penalties for such practices; SEBI Contd….. http://www.facebook.com/mr.fortyseven

PowerPoint Presentation: 

– Registering and regulating the working of depositors, custodians of securities, FIIs, credit rating agencies; – Regulating substantial acquisition of shares and takeover of companies. – Development Function of SEBI is to promote investors education, training intermediaries and conduct research and publish information b) Developmental Functions – Promote investors’ education; – Training of intermediaries; – Promotion of fair practices and code of conduct for all SRO’s – Conduct research and publishing information useful to all market participants. SEBI Contd….. http://www.facebook.com/mr.fortyseven

Insurance Regulatory Development Authority: 

Insurance Regulatory Development Authority Functions – To exercise all powers and functions of controller of insurance; – Protection of the interests of the policyholders; – To issue, renew, modify, withdraw or suspend certification of registration; – To specify requisite qualifications and training for insurance intermediaries and agents; – To promote and regulate professional organisations connected with insurance; – To conduct inspection / investigations etc.; – To regulate investment of funds and margins of solvency; – To prescribe method of insurance accounting; – To adjudication upon disputes; – To conduct inspection and audit of insurers, intermediaries and other organisations concerned with insurance. http://www.facebook.com/mr.fortyseven