Tuesday, 19 November 2019

Unit 1: Indian Financial System


                                              Unit 1: Indian Financial System     

The financial system is the system that allows the transfer of money between savers and borrowers.

It is a set of complex and closely interconnected financial institutions, markets, instruments, services, practices, and transactions.

India has a financial system that is regulated by independent regulators in the sectors of banking, insurance, capital markets, competition and various services sectors.

In a number of sectors Government plays the role of regulator.

RBI is regulator for financial and banking system, formulates monetary policy and prescribes exchange control norms.

The commercial banking sector comprises of public sector banks, private banks and foreign banks.

Indian Financial System     The public sector banks comprise the 'State Bank of India' and its seven associate banks and nineteen other banks owned by the government and account for almost three fourth of the banking sector.

India has a two-tier structure of financial institutions with thirteen all India financial institutions and forty-six institutions at the state level.

All India financial institutions comprise term-lending institutions, specialized institutions and investment institutions, including in insurance.

State level institutions comprise of State Financial Institutions and State Industrial Development Corporations providing project finance, equipment leasing, corporate loans, short-term loans and bill discounting facilities to corporate.

Non-banking Financial Institutions provide loans and hire-purchase finance, mostly for retail assets and are regulated by RBI.
RBI also regulates foreign exchange under the Foreign Exchange Management Act (FEMA).

SEBI) established under the Securities and Exchange aboard of India Act, 1992 is the regulatory authority for capital markets in India.

Insurance sector in India has been traditionally dominated by state owned Life Insurance Corporation and General Insurance Corporation and its four subsidiaries.

Insurance Development and Regulatory Authority (IRDA) is the regulatory authority in the insurance sector under the Insurance Development and Regulatory Authority Act, 1999.

Commercial Paper: Are the unsecured promissory notes with a fixed maturity, usually, between seven days and three months, issued in bearer form and on a discount basis.

Deposits: Are sums of money placed with a financial institution, for credit to a customer's account.

Intangible Asset: By contrast, represents legal claims to some future benefit.

Loan: Loan is a specified sum of money provided by a lender, usually a financial institution, to a borrower on condition that it is repaid, either in instalments or all at once, on agreed dates and at an agreed rate of interest.

Tangible Asset: Is one whose value depends on particular physical properties, such as buildings, land, machinery, etc.

Treasury Bills: Are government securities that have a maturity period of up to one year.

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