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FINANCIAL SYSTEM
ORGANIZATION / STRUCTURE OF
FINANCIAL SYSTEM
FINANCIAL INTERMEDIARIES
TYPES OF FINANCIAL
INTERMEDIARIES
Financial
Intermediarie
s
Banks
NBFCs
Mutual Funds
Insurance
Organizations
3. MUTUAL FUNDS
4. INSURANCE ORGANIZATIONS
FINANCIAL MARKET
COMPONENTS OF FINANCIAL
MARKET
Financial
Market
Money
Market
Capital/
Securities
Market
Primary
Market
Secondary/
Stock Market
MONEY MARKET
A market for dealing in monetary assets of short
term nature, less than one year.
enables raising up of short term funds for meeting
temporary shortage of fund and obligations and
temporary deployment of excess fund.
Major participant are: RBI and Commercial Banks
Major objectives:
equilibrium mechanism for evening out short term
surpluses and deficits
focal point for influencing liquidity in economy
access to users of short term funds at reasonable
cost
COMPONENTS OF MONEY
MARKET
Money
Market
Call
Market
T-bills
Market
Bills
Market
CP
Market
CD
Market
Repo
Market
CAPITAL MARKET
SECONDARY MARKET/
STOCK MARKET
A market for old/existing securities.
a place where buyers and sellers of securities can
enter into transactions to purchase and sell shares,
bonds, debentures etc.
enables corporates, entrepreneurs to raise
resources for their companies and business
ventures through public issues.
has physical existence
vital functions are:
nexus between savings and investments
liquidity to investors
continuous price formation
FINANCIAL INSTRUMENTS :
TRADED
IN
FINANCIAL
ASSETS/SECURITIES
OR INSTRUMENTS
Financial
Instruments
Primary Securities
Indirect Securities
Derivatives
PRIMARY SECURITIES
Securities issued by the non-financial
economic units
Warrants:
Non
INDIRECT SECURITIES/
FINANCIAL ASSETS:
Issued
by financial intermediaries.
such as units of mutual funds, policies of
insurance companies, deposits of banks,
etc.
Better suited to small investors
Benefits of pooling of funds by
intermediaries
Convenience, lower risk and expert
management.
DERIVATIVES
Derivative
Derivative
s
Forward
Contract
Indirect
Securities
Options
FORWARD CONTRACT
FUTURE CONTRACT
OPTIONS