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System
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Financial System
Existence of a well organized financial
system
Promotes the well being and standard of
living of the people of a country
Money and monetary assets
Promotes investment
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Financial System of any country consists
of financial markets, financial
intermediation and financial instruments
or financial products
Flow of funds (savings)
Seekers of funds
Suppliers of funds
(Mainly business firms
Flow of financial services (Mainly households)
and government)
Incomes , and financial
claims
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Indian Financial System
Un-Organized
Organized
Money lenders
Regulators
Local bankers
Financial Institutions
Traders
Financial Markets
Landlords
Financial services
Pawn brokers
Financial Instruments
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Organized Indian Financial System
Primary Market
Secondary Market
SEBI
•Brokers
•Investment Bankers
Primary Secondary •Stock Exchanges
•Underwriters
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Financial Markets
Process used
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Why Capital Markets Exist
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Role of Capital Markets
Mobilization of Savings & acceleration of Capital
Formation
Promotion of Industrial Growth
Raising of long term Capital
Ready & Continuous Markets
Proper Channelisation of Funds
Provision of a variety of Services
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Capital Market Instruments
Equity Debt
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Factors contributing to growth of Indian Capital Market
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Factors contributing to growth of Indian Capital Market
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Indian Capital Market deficiencies
Lack of transparency
Physical settlement
Variety of manipulative practices
Institutional deficiencies
Insider trading
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Money Market
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Money Market
It is a place for Large Institutions and government
to manage their short-term cash needs
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Defects of Money Market
Lack of Integration
Treasury Bills
Commercial Paper
Certificate of Deposit
Commercial Bills
Term Money
1. Primary Segment
2.Secondary Segment
Call Money Market
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FINANCIAL INSTRUMENTS
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1. Call Money Market
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4. Certificate of Deposits
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5. Commercial Paper
CP is a note in evidence of the debt obligation of the issuer. On issuing
commercial paper the debt obligation is transformed into an
instrument.
CP is thus an unsecured promissory note privately placed with
investors at a discount rate to face value determined by market forces.
CP is freely negotiable by endorsement and delivery. A company shall
be eligible to issue CP provided - (a) the tangible net worth of the
company, as per the latest audited balance sheet, is not less than Rs. 4
crore; (b) the working capital (fund-based) limit of the company from
the banking system is not less than Rs.4 crore and (c) the borrowal
account of the company is classified as a Standard Asset by the
financing bank/s. The minimum maturity period of CP is 7 days.
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Capital Market Instruments
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Equity Market
1 .Primary Markets
Helps companies in raising funds through issue of
securities like shares and debentures.
Governed by SEBI (Securities and Exchange Board of
India).
Methods of issuing securities in Primary Market:
– Public Issue
– Rights Issue
– Bonus Issue
– Private Placement
– Bought-out Deals
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International Capital
Markets
Development attributed to following factors:
investors’ need to avoid taxes in their own country
and to ensure protection against depreciating home
currencies.
emergence of new technologies in the area of
financial services, development and deregulation of
financial markets
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Equity Instruments
GDR:
instruments which possess a number of underlying shares held by the
custodian domestic bank of the company.
The GDRs are traded on a foreign stock exchange, issued to the non-resident
investors.
The GDR’s are denominated in the foreign currency and the underlying shares
are denominated in the local currency of the issuer.
The GDR’s are considered as common equity of the company and are entitled to
dividends and voting rights.
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ADR
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Euro Bonds
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Foreign Bonds
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Yankee bonds
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Samurai Bonds
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Bull Dog Bonds
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Shibosai Bonds
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Forex Markets
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Equity Market
2. Secondary Market
Securities already issued in the primary market are traded
in the secondary market. Provides liquidity to the securities
held by the investors.
Provides liquidity to the securities held by the
investors.
Operates through stock exchanges that regulate the trading
activities in this market.
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Equity Market
3. Derivatives Market
Financial derivative is a product derived from the market of an
underlying asset.
Participants:
– Hedgers
– Speculators
– Arbitrators
Types of Derivatives:
– Futures
– Options
- Caps
- floors and Collars
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Debt. Market
Government of India, public sector units and corporations
together comprise as dominant issuer of debt markets in
India. Local governments, mutual funds and international
financial institution issue debt instruments as well but very
infrequently. The Central Government mobilizes funds
mainly through issue of dated securities and T-bills. Bonds are
also issued by government sponsored institutions like the
development financial institutions (DFIs) like IFCI and IDBI,
banks and public sector units. Some, but not all, of the PSU
bonds are tax-exempt. The corporate bond market comprise of
commercial papers and bonds. In recent years, there has been
an increase in issuance of
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Financial Institution
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Financial Institution
Financial Institutions
Industrial Development Bank of India (IDBI)
Industrial Finance Corporation of India (IFCI )
Industrial Investment Bank of India (IIBI)
Export and Import Bank of India
State Financial Corporations
State Industrial Development Corporations
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Non-banking financial institution
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Hire Purchase Finance Companies
Lease Finance Companies
Housing Finance Companies
National Housing Bank : Wholly owned by subsidiary of
RBI, Aim is to promote housing finance Institution at
local & regional levels, It refinance housing loans to
scheduled commercial & co operative banks, housing
finance companies etc.
Venture Capital Funding Companies
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DEVELOPMENT FINANCE INSTITUTION
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FINANCING ACTIVITIES
Project Activities
Financial Services
Corporate advisory Services
Corporate advisory Services to Foreign Investors
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PROMOTIONAL ACTIVITIES
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DISADVANTAGES
The reasons to this dismal state of affairs of the company are as follows
Operational Inefficiency
Political Interference
Traditional sector financing
Higher provisioning for Non –performing assets
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The steps taken for the revival of IFCI are as follows:
IFCI constituted an expert committee in 2001
To formulate a medium-to long term strategic plan for IFCI in the
emerging new business environment
The committee has laid down the road map plan for the next five years
It has made recommendations covering a wide range of structural and
operational areas
It has strengthened its risk management techniques and is putting in
efforts to bring down the NPAs to a manageable level, through
corporate debt structuring
It has initiated action against defaulters and has filed suits against
defaulter companies
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INDUSTRIAL DEVELOPMENT BANK OF INDIA
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IDBI has undertaken several initiatives to reposition itself as a universal
Bank:-
In April 2001, IDBI appointed Boston consulting Group India Private
Limited (BCG) as consultant to draw up a road map for conversion into
a universal bank
Formation of high level risk management committee to develop overall
risk management policy
The bank has constituted a credit risk management group to evaluate
credit risk both at the transaction level and also at the portfolio level
It has pioneered the setting up of Asset Reconstruction Company
(India) Limited (ARCIL) in 2002 in association with select banks and
financial institutions
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IDBI-SERVICES
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IIBI
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IDFC
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NABARD
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SIDCS
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EXIM BANK
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SFC
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SIDBI
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Products And Services of SIDBI
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Financial Regulators
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Financial Regulators
Ministry of Finance
IRDA
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Security Exchange Board of India
(SEBI)
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Functions Of SEBI
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Functions Of SEBI
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Objectives of SEBI
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The Recent Initiatives
Undertaken
Sole Control on Brokers
For Underwriters
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Reserve Bank of India
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Functions Of RBI
Monetary Authority:
Formulation and Implementation of monetary
policies.
Maintaining price stability and ensuring adequate
flow of credit to the Productive sectors.
Issuer of currency:
Issues and exchanges or destroys currency and coins.
Provide the public adequate quantity of supplies of
currency notes and coins.
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Functions Of RBI
Regulator and supervisor of the financial system:
Prescribes broad parameters of banking operations
Maintain public confidence, protect depositors' interest
and provide cost-effective banking services.
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Functions Of RBI
Developmental role:
Performs a wide range of promotional functions to
support national objectives.
Related Functions:
Banker to the Government: performs merchant banking
function for the central and the state governments.
Maintains banking accounts of all scheduled banks.
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Monetary Measures
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Objectives Of MoF
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Recommendations
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Recommendations
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Recommendations
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IRDA
Agent Training
Institute EXAM Agent Registration Agents
Portal
Ins. Co.
(Development
Officer)
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IRDA Function….
Data Correction Approval (License)
• Shows list of data correction requests by DPs
• IRDA can approve these requests
Cancellation Approval (License/Certificate)
• Shows list of license cancellation requests
• IRDA can approve or reject
• IRDA can cancel with or without refund
Recall Cancellation Approval
• Shows list of license recall cancellation requests
• IRDA can approve or reject
Termination Approval
• Shows list of license termination requests by Corporate DP
• IRDA can approve or reject termination requests
Terminate License
• IRDA can terminate individual/corporate license
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Thank you
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