Financial System 

 

INTRODUCTION:

     This is about the financial system and institutions which constitute it are discussed. Banking systems and the large organizations which is forming the banking system is elaborated. Insurance related organizations and other financial instruments are also discussed which makes the financial markets and change business environment.

• Financial system
• Financial institutions definition
• Financial instruments
• Financial instruments type
• Financial market
• Function Financial market
• Money market
• Function Money market
• Capital market 
•  Securities Act 1956
• Function SEBI

Financial System

A financial system is a composition of various institutions , markets, regulations, laws, practices money management, analysts and transactions. the system to allocate savings efficiently in an economy to ultimate users either for investment in real assets or for consumption."

Financial institutions definition 

• All Indian financial institutions is a group composed of development financial institution and investment that play a pivotal role in the financial market . 
• Financial institutions give a physical presence to the system. They provide financial infrastructure. They encourage savings and make for its optimal allocation.

Financial instruments 

      Any instrument by which any organisation takes money from market people or other organisation is called financial instruments. 

Financial instruments type 

Financial market 

       Financial market is a market for creation and exchange of financial assets. 

 

  

Function Financial market 

• Mobilization of saving and channelizing them into most productive use
• Facilitate price discovery
• Provide equity to financial assets
• Reduce the cost of transaction 

Money market 

Market for short term funds meant for use for a period of up to one years

Common I institution: RBI, SBI 

Function Money market 

• It provides fund to needy
• It uses surplus funds
• Help government
• Help in monetary policy
• Promotion liquidity and safety 

Capital market 

• The part of a financial system concerned with raising capital by dealing in shares, bonds , and other long –term investments. 
• Stock exchange and regulation  
• Securities contracts (regulation)Act 1956 says that stock exchange means anybody of individuals, it is a market for sales and purchase of previously used or second hand share. 
• Capital Markets existence and etficient operations may strongly eifect investment in a country through effective and useful channelization of capital resources so as to motivate enterprising investors. Capital markets operate on a global scale now days. The capital markets are comprised of institutions and individuals who channelize the long term supply and demand for the capital.

Securities Act 1956 

          The securities and exchange board of India (SEBI) established by the central government directs the stock market and regulates the dealing on the stock exchanges as well. After the formation of 1956 act exchanges recognized by government can function.

Function SEBI 

• Regulation of the business in stock exchanges and other securities market
• Promotion and regulation ,self-regulatory organization
• Promotion of investor education 
• Promoting of intermediaries