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Introduction to Indian Financial System. Significance and Definition. Purpose and Organisation. Liberalisation of the Financial System. 2. International Journal of Management and Social Sciences Research (IJMSSR) ISSN: 1 Volume 1, No. 1, October Indian Financial System. 1 | Indian Financial System. Dr.R.K. Sreekanth. FINANCIAL SYSTEM. Introduction. In its simple meaning the term 'finance' refers to monetary resources & the.

Indian Financial System Pdf

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The Indian Financial olhon.info - Ebook download as PDF File .pdf), Text File . txt) or read book online. PART B - (5 x 16 = 80 marks). (a). Describe the structure of the Indian Financial System. Or. (b). Elaborate the characteristics of Indian capital market. The financial system performs its basic activities through the components and involves. Chapter 1 The Indian Financial System. Solved Question Papers. INDIAN.

India's financial system : an overview of its principal structural features

Another 6 private banks were nationalised in At present, the number of public sector banks is It is a three-tier banking structure i with the State Cooperative Bank operating in each state as an apex bank, ii at the district level, the central cooperative hanks, and iii at the village level, the primary agricultural credit societies. Although public sector commercial banks is the dominant banking sector, privately- owned banks are nonetheless important in the liberalised regime.

Following the Narasimham Committee recommendations made in and in , private banks are now being allowed to operate. In addition, there are some foreign banks operating in India with little or no restrictions now. Finally, regional rural banks have been functioning since to meet the credit needs of the rural people. At present, the number of regional banks stands at The other side of the Fig. The main three elements of other financial institutions are: i insurance sector, ii mutual funds, and iii development banks.

Finally, as the name suggests, development banks provide long-term capital to industries in a rather non-conventional way. Finally, in the realm of industrial finance, there is an institution called capital market that provides long-term funds to both public and private sector units. Security market is the most important component of the capital market that deals in both corporate and government or gilt-edged securities. By the end of eighties, the consistently than those with weaker systems.

The Indian financial sector had registered tremendous growth financial sector plays a central role in organizing and in volume and variety. This included the stock market, coordinating an economy; it makes modern economic mutual funds, non-banking finance companies and other society possible. For every real transaction there is a institutions. All trade banking sector.

Some of the reasons for this are high involves both the real and the financial sector. The reserve requirements, administrated interest rates, directed financial sector has a vital role in promoting efficiency and credit, poor supervision, lack of competition and political growth as it intermediates in the flow of funds from those interference.

The efficiency of easing of external constraints such as administrative intermediating depends on the width, depth and diversity structure of interest rates and reserve requirements of of the financial system. In the first case, it is a mechanism in aid of the cost; industrial system as we know it. A FINANCIAL SYSTEM is the whole congeries of institutions and of institutional arrangements which have The principal financial institutions fall into the been established to serve the needs of modern economy: to following four categories:- meet the borrowing requirements of business firms; individuals and government; to gather and to invest i Depository institutions - Financial institutions whose savings; and to provide a payment mechanism.

The primary financial liabilities are deposits in checking institutions may be publicly owned or privately owned, or savings accounts. It includes commercial banks, may be partnerships or corporations, may be specialized or savings and loan associations, mutual savings banks non-specialized in character. Whatever their legal or and credit unions. These intermediaries acquire funds It is important to realize that the brokerage activity at periodic intervals on a contractual basis.

Because does not require the broker to buy and sell or hold in they can predict with reasonable accuracy how much inventory the financial asset that is the subject of they will have to pay out in benefits in the coming trade.

The institutions about losing funds.

A financial market is a market where financial assets iii Investment Intermediaries - Intermediaries falling and financial liabilities are bought and sold. Financial under this type provide a mechanism through which markets perform the essential economic function of small savers pool funds to invest in a variety of channeling funds from savers who have an excess of funds financial assets and therefore result in to spenders who have a shortage of funds.

Diversification, here, means shown schematically in figure below:- spreading and therefore lowering risk by holding shares or bonds of many different companies.

This category includes-finance companies, mutual funds, and money market mutual funds. Households Financial Borrowers-Spenders 2. Business firms Markets 1. Business firms 3. Government 2. Government 4. Households 4. Foreigners Figure: 1 Flow of funds through the financial system.

The short-term securities have smaller fluctuations in prices than long-term securities, i Classification by Nature of Claim : making them safer investments.

As a result, corporation and banks actively use this market to a Debt Markets - A debt market is a market where earn interest on surplus funds they expect to have debt instruments are exchanged.

Indian Financial System Introduction

The most only temporarily. Capital market securities, by the borrower to pay the holder of the such as stocks and long-term bonds, are often instrument fixed amounts at regular intervals held by financial intermediaries such as insurance until a specified date the maturity date , when a companies and pension funds, which have little final payment is made.

A debt instrument is short uncertainty about the amount of funds they will term if its maturity is less than a year and long have available in the future. Debt instruments with a maturity between one and ten iii Classification by Organizational Structure: years are said to be of intermediate term. The second method of to organize exchanges, where buyers and sellers raising funds is by issuing equities which are of securities or their agents or brokers meet in claims to share in net income and the assets of a one central location to conduct traders.

The and is willing to accept their prices. Because primary markets for securities are not well known over-the-counter dealers are in computer contact to the public because the selling of securities to and know the prices set by one another, the OTC initial buyers takes place behind closed doors.

Sellers in this market also include venture capital firms.

Indian Financial System

Whereas An asset is something that provided its owner with investment banks only assist in selling their expected future benefits. Financial assets are assets, such stock, venture capital firms often are partnerships as stocks or bonds, whose benefit to the owner depends on that invest their own money in return for part the issuer of the asset meeting certain obligations. These ownership of a new firm. Security brokers and dealers are crucial to a well-functioning secondary market.

Examples of secondary market are stock money market assets and capital market assets.

Money market securities were, a great part of its highways into good pastures and i-Xplore International Research Journal Consortium www. The modern financial and monetary system has ii Between and the mid-eighties reflecting the developed around commercial banks.

Economic history of various developed countries like USA. Japan, Britain, Germany, etc. It was incapable of sustaining a high level of key agents the other being entrepreneurship in the whole capital formation and accelerated pace for industrial process of development.

B Com : Structure of Indian Financial System - Interdisciplinary Issues in Indian Commerce System

Alexander Gerschenkron highlighted the important role Phase II: to Mid-Eighties the banking system played in European economic development. Alexander Gerschenkron looks at banks as During the second phase, the mixed economy model a substitute for deficiencies in the original accumulation of with growing accent on ambitious industrialization liquid wealth in moderately backward economies. The main and redistribute them into more useful channels. Thus, broad groups: banks constitute the lifeblood of the economy.

The process of economic development is Phase III: Post Nineties invariably accompanied by a corresponding and parallel growth of financial organizations.

Planned characterized by profound transformation. India inherited an extremely weak banking the Indian financial system is witnessing capital market- structure at the time of independence. The number of oriented developments. The capital market has emerged as banks in existence then was , an unwieldy number not the main agency for the allocation of resources. The amenable for closer monitoring and control. They had essence of these developments is the fact that the Indian branches mostly in urban areas.

Only some banks, financial system is poised for integration with the savings especially in the south, were having branches in smaller pool in the domestic economy and abroad.

There were 15 exchange banks operating in Bombay, Madras and Calcutta financing the foreign trade. Commercial banks were generally characterized by conservatism, rigidity and lack of Although evidence regarding the existence of money farsightedness, during the period of traditional banking lending operations in India is found in the literature of the which broadly continued up to year Vedic times, i.

From this time period can be, for purposes of exposition, divided into onwards, India possessed a system banking, which three broad phases: admirably fulfilled her needs and proved very beneficial, although its methods were different from those of modern A. Phase of Banking Consolidation: Phase of Innovative Banking: Phase of Prudential Banking: Since early nineties. They began to A.URI: All papers reproduced by permission. Financial markets comprise two distinct types of markets: The Indian government, therefore, initiated deregulation in the s by relaxing the entry barriers, removing restrictive clauses in the Monopolies and Restrictive Trade Practices MRTP Act, allowing expansion of capacities, encouraging modernisation of industries, reducing import restrictions, raising the yield on long-term government securities, and taking measures to help the growth of the money market.

Enter the email address you signed up with and we'll email you a reset link. The Government ownership. The instrument-wise analysis of financial flows reveals the aggregate preference pattern of various sectors for different financial instruments.

Find out more. It reflects the relationship between the financial structure and the realasset structure of the economy.

Often, financial institutions actively involved in the capital market are also involved in the money market. The household sectors saving is increasingly distributed between financial assets such as deposits, insurance policies, and shares and debentures rather than in the form of currency.