Presentation Topic:-

- Indian Financial System -

Indian Financial System
It comprises of following sections -:
 Functions of Financial System
 Financial Markets
 Financial Intermediaries
 Financial Assets
 Financial Services
 Regulatory System
 Organized Indian Financial System

Regulators Financial Financial Financial

Instruments Markets Intermediaries

Forex Capital Money Credit

Market Market Market Market

Primary Market

Secondary Market

Money Market Capital Market

Instrument Instrument
Financial System
 Indian Capital Market

Market Instruments Intermediaries Regulator

SEBI
•Brokers
•Investment Bankers
Primary Secondary •Stock Exchanges
•Underwriters

Equity Hybrid Debt

Players

CRA Corporate Intermediaries Individual Banks/FI FDI /FII

Functions of Financial System
 Provides payment system for the exchange of goods &
services.
 Enables the pooling of funds for undertaking large scale
enterprises.
 Provides a mechanism for spatial & temporary transfer
of resources.
 Provides a way for managing uncertainty & controlling
risk.
 Helps in dealing with the incentive problem when one
party has an informational advantage.
Functions of Financial Markets
It plays a very pivotal role in allocating resources in an
economy by performing following functions -:
 It facilitates price discovery
 Provides liquidity to financial assets
 Helps considerably in reducing the cost of transactions
 Allows people to do more with their savings than they
would otherwise could
Financial Intermediaries
They are the firms that provides services & products
that consumers may not be able to get more efficiently
by themselves in financial markets.
There are several advantages of these firms -:
 Diversification
 Lower transaction cost
 Economies of scale
 Confidentiality
Key Financial Intermediaries
Financial Assets/Instruments

 Money Market Instruments

 Capital Market Instruments
 Hybrid Instruments
 Financial Services

Some firms provides financial services based on either

fund based or on fee based
Fund based services -:
 Leasing
 Hire-Purchase
 Factoring
Fee based services-:
 Merchant Banking
 Credit Rating
 Depository
Regulatory System
The two major regulatory arms of Government of India
are -:
 Reserve Bank of India (RBI)
It was formed in 1935 in accordance with the
provisions of the Reserve Bank of India Act, 1934.
Though originally privately owned, the RBI has been
fully owned by the Government of India since
nationalization in 1949. It is Central Bank of India.
 Securities Exchange Board of India (SEBI)
SEBI was formed in 1992 to ensure the effective
regulation of the market, to protect the interests of
investors and for promoting the development of the
securities market.
Functions of Reserve Bank of India
 Provides currency and operates the clearing system for
the banks.
 Formulates & implements monetary & credit policies.
 It functions as Banker’s bank.
 It supervises the operations of credit institutions.
 It regulates foreign exchange transactions.
 It influences the allocation of credit.
 Promotes the development of new institutions.
Functions of SEBI
 Regulates the business in stock exchanges & any other
securities market.
 Register & regulate the capital market intermediaries.
 Register & regulate the working of mutual funds.
 Prohibit fraudulent & unfair practices in securities
market.
 Prohibit insider trading in securities.
 Promote investor’s education & training of
intermediaries of securities market.
 Regulate substantial acquisition of shares & takeovers
of companies.
THANK YOU