Indian Financial System
Indian Financial System
Indian Financial System
Financial System
An institutional framework existing in a country to
enable financial transactions
Three main parts
Financial assets (loans, deposits, bonds,
equities, etc.)
Financial institutions (banks, mutual funds,
insurance companies, etc.)
Financial markets (money market, capital
market, forex market, etc.)
Regulation is another aspect of the financial
system (RBI, SEBI, IRDA,)
FUNCTIONS OF FINANCIAL
SYSTEM
The
Financial Assets/Instruments
account
Credit market Instruments-bonds, mortgages
Common Stocks
Money market funds and mutual funds
Pension funds
Financial Derivatives
Purchase of
Govt. Bonds
Savers
Savers
Save
salary
Mutual funds
buys
diversified
portfolio of
stocks
Financial
Intermediaries
Investors
Business
borrows
Financial Institutions
Includes
Institutions
Financial Markets
Money
Organised (Banks)
Unorganised (money lenders, chit funds, etc.)
Capital
money market
Bill Market
Treasury bills
Commercial bills
Bank
loans (short-term)
Organised money market comprises RBI,
banks (commercial and co-operative)
Call
Bill Market
Certificates of Deposit
Commercial Paper
Inter-bank participation certificates
Inter-bank term money
Treasury Bills
Bill rediscounting
Call/notice/term money
CBLO
Market Repo
Certificates of Deposit
Commercial Papers
Market Repos
Bank Nationalization an
important milestone
Nationalization was perceived as a major step
in achieving the socialistic pattern of society
July 19, 1969 14 major banks were
nationalized
1980 6 more banks were nationalized
A detailed scheme of objectives, regulations,
management etc., was drawn-up for these
banks
BANK
NON-BANKING FIS
INSTITUTIONAL BANKS
COMMERCIAL BANK
SPECIALIZED BANKS
Many
Special banking
Special
INSTITUTIONAL BANKS
IFCI
SFCS
IDBI
ICICI
NABARD
HDFC
The
Narasimham Committee
Committee recommends
Indigenous bankers
Development Oriented
Banking
mobilisation:
Expansion
Profitability of Banks(1)
Reforms
Rising
Suggestions (contd)
NPA Management
The
Narasimham Committee
recommendations were made, among other
things, to reduce the Non-Performing Assets
(NPAs) of banks
To tackle this the government enacted the
Securitization and Reconstruction of Financial
Assets and Enforcement of Security Act
(SARFAESI) Act, 2002
Enabled banks to realise their dues without
intervention of courts
SARFAESI Act
Gilt-edged market
Industrial securities market (new issues and stock
market)
Financial Intermediaries
Merchant Banks
Mutual Funds
Leasing Companies
Venture Capital Companies
There