indianfinancialsystem-124825019661-phpapp01 (2)

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What is Financial System?

A financial system is a set of complex and

closely connected on interlined institutions

,agents , practices ,markets ,transactions ,

claims and liabilities in the economy.


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Financial SystemFinancial System of any country consists offinancial markets, financial intermediation and

financial instruments or financial products

Suppliers of funds(Mainly households)Flow of financial services

Incomes , and financial

claims

Seekers of funds(Mainly business firms

and government)

Flow of funds (savings)


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Components of Indian financial system

yFinancial institutions

yFinancial market

yFinancial instruments

yFinancial services


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Financialinstitutions

Banking

Non-banking

Mutual fund

Insurance & housingfinance


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Financial Markets

Moneymarket

primary secondary

Capitalmarket

Primary secondary


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Financial

instruments

Negotiator

Short term

Middle term

Long term

Non-negotiator

Primarysecurities

Secondary

securities


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Financialservices

Banking services

Ins rance services

M t al f nd

Merchant banking

Vent re capital

Ho sing finance


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Function of financial systemy Monitor the investment performance

y Allocation of risk

y Information available

y Minimize situation

y

Reduction of cost

y Availability of information


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Deficiencies of Indian financial systemy Monopoly market structure

y Inactive market

y Imprudent financial practices

y Dominance of development bank in industrial

finance

y Lack of cordination


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Financial Regulators


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Financial Regulatorsy Securities and Exchange Board of India (SEBI)

y Reserve Bank of India

y Ministry of Finance


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Security Exchange Board of India(SEBI)

ySecurities and Exchange Board of India

(SEBI) was first established in the year1988

y Its a non-statutory body for regulating

the securities markety It became an autonomous body in 1992


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Functions Of SEBIy Regulates Capital Market.

y Checks Trading of securities.

y Checks the malpractices in securities market.


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Functions Of SEBIy It enhances investor's knowledge on market by

providing education.

y It regulates the stockbrokers and sub-brokers.

y To promote Research and Investigation


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Reserve Bank of Indiay Established on April 1, 1935 in accordance with the

provisions of the RBI Act, 1934.

y The Central Office of the Reserve Bank has been inMumbai.

y It acts as the apex monetary authority of the country.


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Functions Of RBI

Monetary Authority:

y Formulation and Implementation of monetarypolicies.

y

Maintaining price stability and ensuring adequateflow of credit to the Productive sectors.

Issuer of currency:

y Issues and exchanges or destroys currency and coins.

y Provide the public adequate quantity of supplies ofcurrency notes and coins.


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Regulator and supervisor of the financial system:

y Prescribes broad parameters of banking operationsy Maintain public confidence, protect depositors' interest

and provide cost-effective banking services.

Authority On Foreign Exchange:

y Manages the Foreign Exchange Management Act, 1999.y Facilitate external trade, payment, promote orderly

development and maintenance of foreign exchangemarket.

Cont..


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Conclusion

y The financial system is fairly integrated, stable,efficient.

y Weaknesses need to be addressed.

y The reforms have been more capital centric innature.

y Foreign capital flows and foreign exchange reserves

have increased but absorption of foreign capital islow.


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Thank you

indianfinancialsystem-124825019661-phpapp01 (2)

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