STRUCTURES
1. Regulatory Bodies (RBI/SEBI/IRDA/PFRDA)
2. Financial Intermediotories 3. Financial Markets 4. Financial Assets / Instruments
PHASES
* Upto 1951 Pvt. Sector * 1951 to 1990 Public Sector * Early Ninties Privatisation * Present Status Globalisation
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Nationalisation
RBI 1948
1956 (take-over of Imperial Bank of India) 1956 (Merges of over 250 Life Insurance Companies) 1969 (14 major banks with Deposits of over Rs. 50 Crs.nationalised) 1980 (6 more Banks) Insurance 1972 (General Insurance Corp. GIC by New India, Oriental, united and National
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Development
Directing the Capital in confirmity with Planning priorities Encouragement to new entrepreneurs and small set-ups Development of Backward Region IFCI (1948) State Finance Corporation (1951) Purely Mortgage institution IDBI (1964) As subsidiary of RBI to provide Project / Term Finance ICICI (1966) Channellising of Foreign Currency Loan from World Bank to Pvt. Sector and underwriting of Capital issues. SIDCs & SIIC State Level Corporations for SME sector UTI (1964) to enable small investors to share Industrial Growth IRCI (1971) to take care of rehabilitation of sick-mills promoted by IDBI, Banks & LIC-Name changed to IIBI in 1997.
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NCC (1968) National Credit Council to assess the demand of Credit & determine priorities for grant of Loans, advances, investment & requirements of priority sector (presently 40%) Credit Guarantee Scheme (1960) for SSI Finance upto 75% of defaulted amount or guarantee amount whichever is lower with ceiling of Rs. 7.5 Lacs for W/Cap & Rs. 2.5 Lacs for T/L per borrower. Agriculture Finance Corp. (AFC) for financing agriculture projects and help Banks. Lead Districts (580) Service Area Approach. Scrapped in 2006. ARC (1963) Agriculture Refinance Corp. for refinance of medium & long term loans. ECGC (1964) FOR Export Performance
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Commercial Banks Continued old way of Deposit Banking & short term credit to trade Selective Credit Control (Control through quantum, rate of interest margin etc). Extensive Branch Expansion. (4000 in 1969 now over 5,00,000) Refinance Facility to share risk & also cost of Banks funds (Nationalisation. Objectives of Madame Indira Gandhi)
Better needs of Economic development Create job opportunities Fulfilment of Plan objectives Servicing maximum population by Branch expansion Setting up Committees. Tandon (1974) to regulate Bank Credit & follow-up Bank Credit to Priority Sector. (substantial increase)
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LIC Mobilised massive long term funds & single largest organisation with large long term savings. Dominant role in underwriting issues and direct push of industrial activities. LIC helped in price stabilization during downswing (e.g. mid 2008 when market faced crisis due to turmoil in global finance market). Premium Amount (Rs. in Crs.) Rs. 87108 Crs.* Life Insurance Policies Nos. 5.09 Crs. Nos. of Agents/Selling fore 10,00,000+ Rent Income Rs. 7000 Crs. p.a. * The largest Pvt. Sector ICICI prudential is Rs. 6813 Crs. (less than 10%)
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PROTECTION TO INVESTORS
Building up confidence of investors shattered due to distrust in Pvt. Ltd. Redesigning Legal & Administrative set up of Companies. * Ban on Forward Trading * Abolition of Managing Agency System STEPS TAKEN (LEGAL/ADMINISRTATIVE) Companies Act 1956 to regulate Companies, Capital Structure. Capital Issues (Control) Act, 1947 implemented through CCI in MOF to regulate Capital Issues & Foreign Investment (repealled in 1992) Securities Contract (Regulation) Act, 1956 enforced through Directorate of Stock Exchange under MOF to regulate Capital Market. MRTPA (1970) to avoid (a) concentration of economic power and (b) Control monopolistic and restrictive trade practices. FERA (1973) to regulate foreign investment & foreign business.
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v. Organisational Deficiencies.
Organisational Deficiencies
(i) Institutional Structure * Banks, LIC, UTI, Collected Savings directly from investors * DFI/PFI like IDBI, IFCI, ICICI, SFCs etc. got funds from sponsers like RBI/GOVT. * Term Finance moved to Big Industries
(ii)
(iii) Form of Financing * Term Loan (Debt) was main part of financial structure with little part of equity Capital * Sometimes Institution became more sympathetic & permitted more than desired finance in case of strain / default. * Position of IFCI, IDBI, ICICI, & most of the SFCs became precarious.
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NBFC
NBFC under RBI governance to finance retail assets and mobilise small/medium sized savings. Very large NBFCs are emerging (Shri Ram Transport Finance, Birla, Tata Finance, Sundaram Finance, Reliance Finance, DLF, Religare etc.
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Govt. holding reduced even by upto 40% Setting up of Universal Banks (from CASA to Corp. Finance) One-stop Banking. Capital Adequacy. (Basel II accepted) 9% Assets classification (Regular, Problem, Anxiety, Causing, Non-Performing) and Provisioning norms identified/reviewed & revised. NPA classification substandard, Doubtful & Loss Assets. Focus on Non-Fund Business like L/C, Guarantees, Acceptance, FOREX etc. Promoting Signature-based and consultancy services like Project Counselling, Merchant Banking, New Issues Management, Capital Market related activities, Merger & Acquisitions, debt syndication, trusteeship of debts, sponsoring Mutual Funds, Wealth Management, Sales & Services of insurance (both life & non-life) products etc. New Private Sector Banks (AXIS, YES, HDFC, KOTAK MAHINDRA etc.) CAMELS Rating (C-Capital Adequacy, A-Asset Quality, M-Management, EEarning, L-Liquidity, & S-Systems & controls).
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- FIIs are allowed to invest & participate in public issues of Debt & Equities within sectoral limits fixed by the Govt.
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CAPITAL MARKET
NSE set up as FIRST automated Exchange.(turnover now is Rs. 65000 Crs. p.d.) Total 2500 + V-SATs in 191 cities; 1242 Members (1096 Corporates) Depositories Promoters Participants Centers No. of Clients NSSDL IDBI, UTI, NSE, SBI etc. 282 1015 1 Cr. CDSL BSE, HDFC, SBI, BOI, BOB etc. 483 6469 60.37 Lacs Custodian
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IFCI
IDA
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MONEY
STOCK
BOND Main Players Commercial Banks Corporations Non Bank Financial Institutions. Central Bank and other Govt. Agencies. Venture Funds/PE Funds Hedge Funds University Funds Trusts & Foundations and charitable Societies Endowments. HNI.
LOAN
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Treasury Bonds Debt Bonus Equity (with/without Voting Rights) Commercial Paper/Debentures etc. Euro & Petro Bonds. Gold/Silver Deep Discount Bond/Coss Border Bonds /instruments.
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July 1944
UNO
To Settle Political disputes/ Conflicts. Bilateral dialogues.
IMF
To promote international monetary cooperation, exchange stability and to address to temporary liquidity problems of members.
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Forex Market
Insurance Life/General
RBI
RBI
SEBI
IRDA
RBI
RBI/SEBI
REGULATORY AUTHORITY
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