final ppt mfs

8/6/2019 Final Ppt MFS

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A Study on Indian FinancialA Study on Indian Financial

System and its current ScenarioSystem and its current Scenario

Presented by:-

Nasreen ShaikhNaresh Kumar

James Nathaniel

Raghavendra Kumar

Manoj Kumar Ch


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FinanceFinance

y Finance in our simple understanding it is

perceived as equivalent to 'Money'.

y But finance exactly is not money, it is the

source of providing funds for a particular

activity

y Thus public finance does not mean the

money with the Government, but it refersto sources of raising revenue for the

activities and functions of a Government


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Definition of FinanceDefinition of Finance

y The science of the management of money

and other assets

y The management of money, banking,

investments, and credit


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Financial SystemFinancial System

Consists of

y Financial markets

y

Financial intermediation andy Financial instruments or financial

products


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Indian Financial SystemIndian Financial System

y The economic development of a nation is

reflected by the progress of the various

economic units

Corporate sector

Government and

Household sector

y While performing their activities these

units will be placed in a

surplus/deficit/balanced budgetary

situations


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Role of Indian Financial SystemRole of Indian Financial System

y There are areas or people with surplus fundsand there are those with a deficit.

y A financial system or financial sector

functions as an intermediary and facilitatesthe flow of funds from the areas of surplus tothe areas of deficit.

y A Financial System is a composition of

various institutions, markets, regulations andlaws, practices, money manager, analysts,transactions and claims and liabilities


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Flow of FundsFlow of Funds


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Indian Financial SystemIndian Financial System

Non- OrganizedOrganized

Money lenders

Local bankers

Traders

Landlords

Pawn brokers

Chit Funds

Regulators

Financial Institutions

Financial Markets

Financial services

8


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Schematic representation ofSchematic representation of

the financial systemthe financial system

FinancialSystem

Banks, FinancialInstitutions,Insurance,NBFCs

Companies (Allindustries &

PSUs)

Exports

ForeignInvestments in

India

UnorganizedBusiness Sector

Agriculture

Individuals

Indian companiesInvesting in

Foreign markets

Imports

Government


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Constituents of a Financial

System


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FINANCIAL MARKETS

y A Financial Market is the place where

financial assets are created or transferred

y Financial Assets or Financial Instruments

represents a claim to the payment of a

sum of money sometime in the future and

/or periodic payment in the form of

interest or dividend


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Types of MarketsTypes of Marketsy Money Market- The money market ifs a wholesale debt market for

low-risk, highly-liquid, short-term instrument. Funds are availablein this market for periods ranging from a single day up to ayear. This market is dominated mostly by government, banks andfinancial institutions.

y Capital Market - The capital market is designed to finance the

long-term investments. The transactions taking place in this marketwill be for periods over a year.

y Forex Market - The Forex market deals with the multicurrencyrequirements, which are met by the exchange ofcurrencies. Depending on the exchange rate that is applicable, thetransfer of funds takes place in this market. This is one of the most

developed and integrated market across the globe.y Credit Market- Credit market is a place where banks, FIs and

NBFCs purvey short, medium and long-term loans to corporate andindividuals.


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FINANCIAL INTERMEDIATION

y There should be a proper channel within the financial system toensure such transfer. To serve this purpose, Financialintermediaries came into existence.

y Financial intermediation in the organized sector is conducted by awide range of institutions functioning under the overall surveillance

of the Reserve Bank of Indiay The role of the intermediary was mostly related to ensure transfer of

funds from the lender to the borrower.

y This service was offered by banks, FIs, brokers, anddealers. However, as the financial system widened along with thedevelopments taking place in the financial markets, the scope of its

operations also widenedy Some of the important intermediaries operating ink the financial

markets include; investment bankers, underwriters, stock exchanges,registrars, depositories, custodians, portfolio managers, mutualfunds, financial advertisers financial consultants, primary dealers,satellite dealers, self regulatory organizations, etc


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FINANCIAL INSTRUMENTSFINANCIAL INSTRUMENTS

Money Market Instruments

y A market for short-term money and financial assets that

are near substitutes for money

y A period up to one year and near substitutes to money is

used to denote any financial asset which can be quickly

converted into money with minimum transaction cost


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Some of the important money

market instrumentsCall /Notice-Money Market

y Call/Notice money is the money borrowed or lent

on demand for a very short period

y Intervening holidays and/or Sunday are excluded forthis purpose

y Money borrowed on a day and repaid on the next

working day, is "Call Money". When money is

borrowed or lent for more than a day and up to 14days, it is "Notice Money". No collateral security is

required to cover these transactions.


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Inter-Bank Term Money

y Inter-bank market for deposits of maturity

beyond 14 days is referred to as the term

money market.

y The entry restrictions are the same as

those forCall/Notice Money except that,

as per existing regulations, the specifiedentities are not allowed to lend beyond 14

days.


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Treasury Bills.

y Treasury Bills are short term (up to one year)borrowing instruments of the union

government.y It is an IOU of the Government.

y A promise by the Government to pay a statedsum after expiry of the stated period from the

date of days.y The rate of discount and the corresponding

issue price are determined at each auction.


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Commercial Paper

yNote in evidence of the debt obligation of theissuer

y On issuing commercial paper the debtobligation is transformed into an instrument

y CP is thus an unsecured promissory noteprivately placed with investors at a discount

rate to face value determined by marketforces. CP is freely negotiable byendorsement and delivery.


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Capital MarketCapital Market & Instruments& Instruments

y The capital market generally consists ofthe long term period

y More than one year period, financial

instrumentsy In the equity segment Equity shares,preference shares, convertible preferenceshares, non-convertible preference shares

etc and in the debt segment debentures,zero coupon bonds, deep discount bondsetc.


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Hybrid InstrumentsHybrid Instruments

y Hybrid instruments have both the features

of equity and debenture.

y Examples are convertible debentures,

warrants etc.


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Defects of Money MarketDefects of Money Markety Lack of Integration

(Organized & Unorganized sector)

y Lack of Rational Interest Rates structure

(too Many Interest Rates)

y Absence of an organized bill market

(Bill Market 1952 and 1970)

y Shortage of funds in the Money Market

(Lower Income, Lower Savings and lack of Banking Habits)

y Inadequate banking facilities

(Suffers huge losses and poor efficiency)


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Financial RegulatorsFinancial Regulators

y Securities and Exchange Board of India(SEBI).

y Reserve Bank of India.

y IRDA.

y Ministry of Finance.


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Functions OfFunctions Of RBIRBIRegulator and supervisor of the financial system:

y Prescribes broad parameters of banking operations

y Maintain public confidence, protect depositors'interest and provide cost-effective bankingservices.

Authority On Foreign Exchange:

y Manages the Foreign Exchange Management Act,1999.

y Facilitate external trade, payment, promoteorderly development and maintenance of foreignexchange market.


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Monetary Authority:

y Formulation and Implementation of monetary policies.

y Maintaining price stability and ensuringadequate flow of credit to the Productivesectors.

Issuer of currency:

y

Issues and exchanges or destroys currencyand coins.

y Provide the public adequate quantity of supplies of currency notes and coins.


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Security Exchange Board ofSecurity Exchange Board of

India (SEBI)India (SEBI)y Securities and Exchange Board of India

(SEBI) was first established in the year

1988.

y Its a non-statutory body for regulating the

securities market.

y It became an autonomous body in 1992.


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Functions Of SEBIFunctions Of SEBI

y Regulates Capital Markets.

y Checks Trading of securities.

y Checks the malpractices in securities market.

y It enhances investor's knowledge on market byproviding education.

y It regulates the stockbrokers and sub-brokers.

y To promote Research and Investigation of frauds.


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ConclusionConclusion

y In India money market is regulated by Reserve bank of Indiaand Securities Exchange Board of India (SEBI) regulatescapital market.

y Capital market consists of primary market and secondarymarket.

y All Initial Public Offerings comes under the primary marketand all secondary market transactions deals in secondarymarket.

y Secondary market refers to a market where securities aretraded after being initially offered to the public in the primarymarket and/or listed on the Stock Exchange.

y Secondary market comprises of equity markets and the debtmarkets. In the secondary market transactions BSE and NSE

plays a great role in exchange of capital market instruments


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Thank You !!!!Thank You !!!!

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