financial system& rbi sebi final
TRANSCRIPT
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Indian Financial System
&
Role of RBI and SEBI
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FINANCIAL SYSTEM
A financial system performs the following functions:
-It serves as a link between savers and investors
-It assists in the selection of the projects to be financed and also reviewsthe performance of such projects periodically.
-It provides payment mechanism for exchange of goods and services.
-It provides a mechanism for the transfer of resources across geographicboundaries.
-It provides a mechanism for managing and controlling the risk involved inmobilizing savings and allocating credit.
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-It promotes the process of capital formation by
bringing together the supply of saving and the
demand for investible funds.
-It helps in lowering the cost of transaction andincrease returns. Reduce cost motives people to
save more.
-It provides you detailed information to the
operators/ players in the market such as individuals,
business houses, Governments etc.
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COMPONENTS OF INDIAN FINANCIAL
SYSTEM
1. Financial institutions
2. Financial Markets
3. Financial Instruments/Assets/Securities
4. Financial Services.
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Financial
Institutions
Regulators Intermediaries
-RBI
-SEBI
Banking Non-Banking
Commercial
Banks
-Public Sector Banks-Private Sector Banks
-Foreign Banks
Cooperative
Banks
Development
Banks
-IFCI
-SFC
Specialized
Banks
-EXIM-SIDBI
Organized Un-organized
-Asset Finance Companies
-Investment Companies
-Loan Companies
-Indigenous Bankers
-Chit Funds
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MONEY MARKETS
As per RBI definitions A market for short terms financial
assets that are close substitute for money, facilitates the
exchange of money in primary and secondary market.
Short term funds (less than one year)
Financial instruments with high liquidity & short maturities
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OBJECTIVES OF MONEY MARKETS
To provide a parking place to employ short term surplusfunds.
To provide room for overcoming short term deficits.
To enable the central bank to influence and regulate
liquidity in the economy through its intervention in this
market.
To provide a reasonable access to users of short-term
funds to meet their requirement quickly, adequately at
reasonable cost.
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MONEY MARKET INSTRUMENTS
T-Bills Short-term debt obligation issued by the government to
finance government activities
Issued for the following tenors 91-days, 182-days and 364-
days
T-bills are zero-coupon bonds
Certificate of Deposits
A CD is a time deposit with a bank
CDs have specific maturity date & interest rate
Minimum Amount Rs 1 lac and in multiples of Rs. 1 lac
withdraws money before its maturity date is subject to a
penalty.
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Repos
It is a transaction in which two parties agree to sell and
repurchase the same security
Repos have terms ranging from 1 night to 30 days
CBLO
An obligation by the borrower to return the money borrowed,at a specified future date
Maturity period ranging from one day to ninety Day
CALL Money Market Refers to short term funds ranging from overnight to
maximum of14 days
NDS CALL
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CAPITAL MARKET
The market where investment instruments like
bonds, equities and mortgages are traded isknown as the capital market.
The primal role of this market is to makeinvestment from investors who have surplus
funds to the ones who are running a deficit.
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The capital market offers both long term andovernight funds.
The different types of financial instruments that
are traded in the capital markets are:
1. Equity instruments
2. Credit market instruments,
3. Insurance instruments,
4. Foreign exchange instruments,
5. Hybrid instruments and
6. Derivative instruments.
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NATURE OF CAPITAL MARKET
The nature of capital market is brought out bythe following facts:
It Has Two Segments
It Deals In Long-Term Securities It Performs Trade-off Function
It Creates Dispersion In Business
Ownership
It Helps In Capital Formation
It Helps In Creating Liquidity
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There are two types of capital market:
Primary market,
Secondary market
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PRIMARY MARKET
It is that market in which shares, debentures
and other securities are sold for the first time
for collecting long-term capital.
This market is concerned with new issues
.Therefore, the primary market is also called
NEW ISSUE MARKET.
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SECONDARY MARKET
The secondary market is that market in which the
buying and selling of the previously issued
securities is done.
The transactions of the secondary market are
generally done through the medium of stock
exchange.
The chief purpose of the secondary market is to
create liquidity in securities
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FINANCIAL INSTRUMENTS
A real or virtual document representing a
legal agreement involving some sort of
monetary value.
In today's financial marketplace, financial
instruments can be classified generally as
equity based, representing ownership ofthe asset, or debt based, representing a
loan made by an investor to the owner of
the asset
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TYPES OF INSTRUMENTS
Cash instruments
Derivative instrument
Foreign Exchange instrument
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CASH INSTRUMENTS
Cash instruments are financial instruments whose value
is determined directly by markets.
They can be divided into securities, which are readilytransferable, and other cash instruments such as loans
and deposits, where both borrower and lender have to
agree on a transfer.
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DERIVATIVES INSTRUMENT
Derivative instruments are financial instruments which
derive their value from the value and characteristics of
one or more underlying assets.
They can be divided into exchange-traded derivatives and
over-the-counter (OTC) derivatives.
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CHARACTERISTIC
Financial instruments can be thought of as easily
tradable packages of capital, each having their own
unique characteristics and structure.
The wide array of financial instruments in today's
marketplace allows for the efficient flow of capital
amongst the world's investors.
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FINANCIAL INSTRUMENTS IN INDIA
Debentures
Equity Shares
Preference Shares Commercial Paper
Call Money Market
Certificate of Deposits
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FINANCIAL SERVICES
Provided by finance companies
Management of money
FINANCIAL INDUSTRY 2009-10
Financial services, banking and insurance grew up 9.7% in 2009-10
According to data from Bloomberg, India's market cap as a percentage of
world market cap was 2.8 per cent as on December 31, 2009
India is the fifth largest life insurance market globally and the segment is
growing at a healthy 32-34 % annually, according to the Life Insurance
Council
Indian bank loans represented a rise of19.1 %, while deposits were up
14.3 %from the previous year
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TYPES OF FINANCIAL SERVICES
Banks
Commercial banks
Investment banks
Banking services
Deposits Loans
Cheques
Debit and credit cards
ATM
Electronic fund transfers
Foreign exchange services
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INVESTMENT SERVICES
ASSET MANAGEMENT
HEDGE FUND MANAGEMENT
FOREIGN EXCHANGE SERVICES
Currency exchange
Wire transfer
Foreign Currency banking
INSURANCE
INTERMEDIATION OR ADVISORY SERVICES
VENTURE CAPITAL
ANGEL INVESTMENT
CONGLOMERATES
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RESERVE BANK OF INDIA
Established on 1st April 1935
Apex financial institution of the countrys financial system
Entrusted with the task of control, supervision, promotion,
development and planning
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OBJECTIVES OF THE RBI
Regulate the issue of Bank notes
Keeping of reserves with a view to securing monetary
stability in India Operate the currency and credit system of the country
to its advantage
Maintaining financial stability and credit
Assist the planned process of development of the
Indian economy
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FUNCTIONS OF THE RBI
Issuing currency notes, i.e to act as a currency authority
Serving as banker to the Government
Acting as bankers bank and supervisor
Monetary regulation and management
Exchange management and control
Collection of data and their publication
Miscellaneous developmental and promotional functions and activities
Agricultural Finance
Industrial Finance
Export Finance
Institutional promotion
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SECURITIES AND EXCHANGE BOARD
OF INDIA
Established in the year 1988 and became an
autonomous body in 1992
Basic Functions..to protect the interests of investors in securities
and to promote the development of, and to regulate
the securities market and for mattersconnected
therewith or incidental thereto
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FUNCTIONS OF SEBI
Regulates Capital Market
Checks Trading of securities
Checks the malpractices in securities market It enhances investor's knowledge on market by
providing education
It regulates the stockbrokers and sub-brokers
To promote Research and Investigation
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OBJECTIVES OF SEBI
To protect the interests of investors in securities
To promote the development of Securities Market
To regulate the securities market For matters connected therewith or incidental
thereto