Chapter - 06(ECONOMIC TREND)

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Chapter - 06:

Chapter - 06 Economic Trends

THE INDIAN FINANCIAL SYSTEMS:

THE INDIAN FINANCIAL SYSTEMS INDIAN MONEY MARKET A money market may be defined as the market for lending and borrowing of short-term funds. The Indian money market consists of two parts: the unorganised and the organised sectors. The unorganised sector consists of an indigenous banker who pursues the banking business on traditional lines and non-banking financial companies (NBFCs). The organised sector comprises the Reserve Bank of India (RBI), the State Bank of India (SBI) and its associate banks, the 20 nationalised banks, and other private sector banks, both Indian and foreign.

The Composition of the Indian Financial System:

The Composition of the Indian Financial System The Indian financial system which refers to the borrowing and lending of funds or to the demand for and supply of funds, consists of two parts, viz., the Indian Money Market and the Indian Capital market. The Indian money market is the market in which short-term funds are borrowed and lent. The capital market in India, on the other hand, is the market for medium and long-term funds.

The Composition of the Indian Banking System:

The Composition of the Indian Banking System The organised banking system in India can be broadly divided into three categories, viz., the central bank of the country known as the Reserve Bank of India (RBI), the commercial banks, and the cooperative banks.

INDIAN CAPITAL MARKET:

INDIAN CAPITAL MARKET The supply of funds for the capital market comes largely from individual savers, corporate savings, banks, insurance companies, specialised financing agencies, and the government.

CALL MONEY MARKET:

CALL MONEY MARKET One important sub-market of the Indian money market is the Call Money Market, which is the market for short-term funds. This market is also known as “money at call and short notice”.The locations of call money centres in India are given in Box 6.2. This market has actually two segments, viz., (a) the call market or overnight market and (b) short notice market. The rate at which funds are borrowed and lent in this market is called the “call money rate”. Call money rates are market determined, that is, by demand for and supply of short-term funds. The public sector banks account for about 80 per cent for the demand (i.e., borrowings), and foreign banks and Indian private sector banks account for the balance of 20 per cent of borrowings. Non-banking financial institutions, such as IDBI, LIC, GIC, and so on, enter the call money market as lenders and supply up to 80 per cent of the short-term funds. The balance of 20 per cent of the funds is supplied by the banking system. Although some banks operate both as lender and borrowers, others are either only borrowers or only lenders in the call money market.

FUNCTIONS OF THE INDIAN FINANCIAL SYSTEM: PROMOTION OF CAPITAL FORMATION:

FUNCTIONS OF THE INDIAN FINANCIAL SYSTEM: PROMOTION OF CAPITAL FORMATION

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