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The document provides a structured summary of a syllabus on Financial System and Economic Development, covering five units. Key topics include the role of financial markets, regulatory frameworks, money and capital markets, foreign exchange, banking, non-banking financial companies, insurance, mutual funds, and pensions. Each unit outlines essential concepts, instruments, and regulatory bodies relevant to the financial system in India.

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4 views5 pages

Topic Summary

The document provides a structured summary of a syllabus on Financial System and Economic Development, covering five units. Key topics include the role of financial markets, regulatory frameworks, money and capital markets, foreign exchange, banking, non-banking financial companies, insurance, mutual funds, and pensions. Each unit outlines essential concepts, instruments, and regulatory bodies relevant to the financial system in India.

Uploaded by

nehaj7mbafm
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Here's a brief, structured summary of each unit from your syllabus on Financial

System and Economic Development. This format is ideal for presentations, exam prep,
or detailed note-making:

📘 Unit I: Financial System and Economic Development


🔹 Financial Markets – Introduction
Facilitate savings, investments, capital formation.
Types: Money Market (short-term) & Capital Market (long-term).
🔹 Financial Intermediation
Acts as a bridge between savers & borrowers.
Includes banks, insurance firms, mutual funds.
Encourages efficient resource allocation.
🔹 Regulatory Aspects & Institutional Framework
Key regulators:
RBI – Monetary policy, banking regulation.
SEBI – Capital market regulation.
IRDAI – Insurance sector.
PFRDA – Pension sector.
Regulation ensures transparency, stability & investor protection.
🔹 Primary Financial Institutions in India
RBI: Central bank, monetary stability.
NABARD: Rural credit.
SIDBI: MSME financing.
EXIM Bank: Export-Import facilitation.
NHB: Housing finance regulation.
IFCI: Long-term industrial finance.
LIC/GIC: Insurance-based investments.
🔹 Interest Rate – Basic Components
Real interest rate + Inflation premium + Risk premium
Influenced by: Inflation, monetary policy, demand-supply of credit.

📘 Unit II: Money Market & Capital Market


🔹 Clearing Corporation of India Ltd. (CCIL)
Ensures settlement of trades in government securities, forex, and money
markets.
Reduces counterparty risk.
🔹 Money Market Instruments
Treasury Bills (T-Bills): Short-term govt securities (91/182/364 days).
Commercial Papers (CPs): Short-term unsecured corporate debt.
Certificates of Deposit (CDs): Bank-issued time deposits.
Commercial Bills: Trade-related short-term bills.
CBLO (Now replaced by Triparty Repo): Collateralized short-term
borrowing.
🔹 Capital Market
Primary Market: New securities issued (IPOs, FPOs).
Secondary Market: Trading of existing securities (e.g., NSE, BSE)
Instruments: Shares, debentures, bonds, derivatives.

📘 Unit III: Foreign Exchange Market


🔹 Concept & Organization
Market for currency trading.
Types: Spot, Forward, Futures, Options, Swaps.
24-hour decentralized OTC market.
🔹 Features
Highly liquid, global, speculative.
Sensitive to geopolitical & economic factors.
🔹 Size
Over $7 trillion traded daily globally
India’s market growing due to globalization.
🔹 Regulatory Framework in India
Regulated by RBI under FEMA, 1999.
Monitors forex reserves, exchange rate management.
🔹 Participants
Banks: Primary dealers.
Brokers: Intermediaries.
Corporates: For hedging, transactions.
RBI: As a market regulator and stabilizer.

📘 Unit IV: Banking & NBFCs


🔹 Financial Institutions (FIs) & Banks
Commercial Banks: Provide loans, deposits, payment services.
Payment Banks: Limited services (e.g., Paytm, India Post).
Small Finance Banks: Focus on unbanked regions.
Microfinance Institutions (MFIs): Small loans to low-income groups.

🔹 Alternative Delivery Channels

ATMs, Internet Banking, Mobile Banking, POS, UPI.


🔹 NBFCs

Non-Banking Financial Companies (e.g., Bajaj Finance, Muthoot).



Provide loans, asset financing, investments.



Types: Asset Finance, Investment, Infrastructure Finance, Microfinance.



RBI Guidelines:

o

Registration, capital adequacy, disclosure norms.


o
o

Can’t accept demand deposits.


o

🔹 Role in Project Financing


Long-term loans to infrastructure, real estate, MSMEs.



Complement banks in credit delivery.


📘 Unit V: Insurance, Mutual Funds & Pension


🔹 Insurance

Risk transfer mechanism.

Types: Life, General, Health, Crop.



Re-Insurance: Insurers insuring their risk (e.g., GIC Re).



Bancassurance: Banks selling insurance products.


🔹 Mutual Funds

Pool of investor money managed by professionals.



Types:

o

Open-ended vs. Closed-ended


o
o

Equity, Debt, Hybrid, ELSS, ETFs


o

🔹 Pension Sector

OPS: Old Pension Scheme – Defined benefit, govt-funded.



NPS: National Pension System – Contribution-based, market-linked.



Regulated by PFRDA.

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