ch 1-over view of indian financial system
TRANSCRIPT
8/6/2019 Ch 1-Over View of Indian Financial System
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OVER VIEW OF INDIANFINANCIAL SYSTEM
R. Raghavendra Rao,Dept. of Commerce
8/6/2019 Ch 1-Over View of Indian Financial System
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Learning Objectives
IntroductionBrief Picture of Financial System
Components of a Indian Financial SystemDeficiencies of Indian Capital MarketEmergence of SEBI as a Market Regulator
Objectives and Reforms taken by SEBI tocontrol Indian Capital Market.
R. Raghavendra Rao,Dept. of Commerce
8/6/2019 Ch 1-Over View of Indian Financial System
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Introduction
What is Finance?Finance is the science of application andmanagement of funds.Finance is referred to as Funds or Capitalneeded for a particular economic activity.The three sectors in Indian Finance purview are
Government SectorCorporate SectorHouse-Hold Sector
R. Raghavendra Rao,Dept. of Commerce
8/6/2019 Ch 1-Over View of Indian Financial System
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There are sectors with surplus funds andthere are those with a deficit.A financial system or financial sector functionsas an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit.
R. Raghavendra Rao,Dept. of Commerce
8/6/2019 Ch 1-Over View of Indian Financial System
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R. Raghavendra Rao,Dept. of Commerce
8/6/2019 Ch 1-Over View of Indian Financial System
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The word "system", in the term "financialsystem", implies a set of complex and closelyconnected or interlinked institutions, agents,practices, markets, transactions, claims, andliabilities in the economy.
R. Raghavendra Rao,Dept. of Commerce
8/6/2019 Ch 1-Over View of Indian Financial System
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Components of Indian FinancialSystem
FINANCIAL MARKETSFINANCIAL INTERMEDIARIES
FINANCIAL INSTRUMENTS/ASSETS
R. Raghavendra Rao,Dept. of Commerce
8/6/2019 Ch 1-Over View of Indian Financial System
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R. Raghavendra Rao,Dept. of Commerce
8/6/2019 Ch 1-Over View of Indian Financial System
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What are Financial Markets?A Financial Market can be defined as the market in which financialassets are created or transferred.Financial Assets or Financial Instruments represents a claim to thepayment of a sum of money sometime in the future and /orperiodic payment in the form of interest or dividend.Types are---Money MarketsCapital MarketsCredit MarketForex Market
R. Raghavendra Rao,Dept. of Commerce
8/6/2019 Ch 1-Over View of Indian Financial System
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MONEY MARKET
More specifically, Money Market providesshort-term finance (for a period less than 1year.) The parties involved in Money Marketsare Central Bank, Commercial Banks, FIs,Mutual Funds and Primary Dealers.The main instruments are ---
Call/Notice Money Markets,Treasury Bills,Repos, Certificate of Deposits, CommercialPapers (CP), Banker s Acceptance etc..
R. Raghavendra Rao,Dept. of Commerce
8/6/2019 Ch 1-Over View of Indian Financial System
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Call Money - For OvernightNotice Money- For a period of 14 days
Term Money- More than 14 days
Treasury Bills- 91/182/364 days zero risk and guaranteedreturn bills issued by Govt. aloneCommercial Paper - An unsecured Promissory Note issued byHighly rated Corporate, Banks, FIs for a period of minimum 30
days to 1 year. The minimum net worth should not be lessthan Rs 4 Crore. They are used to meet the required workingcapital needs and generally offered at discount rates on facevalue.
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Certificate of Deposits- It is a kind of promissory note issued by ScheduledCommercial Banks/FIs but offer higher interestrates within the Umbrella Limit fixed by RBIin 1989. They are generally for 3 months to 5years. They are transferrable in the secondary
market. The rate of interest depends onMarket.
R. Raghavendra Rao,Dept. of Commerce
8/6/2019 Ch 1-Over View of Indian Financial System
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Banker s Acceptance - It is a kind of creditInvestment guaranteed by Banks It is simply abill of exchange drawn by a Company andaccepted by Bank. The maturity period isgenerally of 90 days. It is highly used in Exportand Import transactions and the seller can sell
these instruments in the secondary market toliquidate his receivables.
R. Raghavendra Rao,Dept. of Commerce
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Financial Assets/Instruments
Money Market InstrumentsCapital Market Instruments
Shares,Bonds,Debentures,Derivatives etc..
R. Raghavendra Rao,Dept. of Commerce