STRUCTURE OF INDIAN

FINANCIAL SYSTEM

Financial Markets
PARTICIPANTS OF PROJECT
Name : Roll Number :
 Raj Sodha - 3436
 Deepak Makwana - 3430
 Nirajkumar Gupta - 3414
 Akash Masuk - 3431
Contents
 Introduction
 Structure of IFS
 Constituents of IFS

-Financial markets
-Financial institution
-Financial assets/instruments
-Financial services
 Types of Financial Services

-Bank
-Insurance
-Mutual funds
-Merchant banking
-Venture capital
 Current scenario of our IFS
Introduction
 The financial system of a country is an important tool for
economic development of the country, as it helps in creation
of wealth by linking savings with investments.
 It facilitates the flow of funds form the households (savers) to
business firms (investors) to aid in wealth creation and
development of both the parties.
 The financial system of a country is concerned with:
-Allocation and Mobilization of savings
- Provision of funds
- Facilitating the Financial Transactions
-Developing financial markets 
- Provision of legal financial framework
- Provision of financial and advisory services
 A Financial System consists of various financial Institutions,
Financial Markets, Financial Transactions, rules and
regulations, liabilities and claims etc.
Structure of IFS
 Organizational structure of financial system includes
components . i.e- financial markets, financial instruments
and market participants.
 Financial markets provide channels for allocation of savings
to investment. These provide a variety of assets to savers as
well as various forms in which the investors can raise funds
and thereby decouple the acts of savings and investment.
 The financial markets have 2 major components, money
market and capital market.
 Money Market – Deals with the
assets involved in short-term
borrowing and lending with original
maturities ranging from a period of
one year or even lesser time frames.

 Capital Market – Market where

business enterprises or government
entities raise fund for long term
using the weapon of securities or
debts. It includes the Stock market
(equities) and Bond Market (debt) for
fund raising.
Constituents of IFS
1.Financial markets
 Financial market is a mechanism that allows people to
indulge themselves in the buying and selling i.e. trade
of financial securities (for example stocks and bonds),
commodities (for example precious metals) at prices
that reflect the market’s effectiveness.
Following are the verticals of financial market:
1) Capital Market 
2) Commodity Market – Commodity is a good for which there
is a demand by the people thus commodity market is the market
where such goods are traded.
3) Money Market 
4) Derivative Market – The derivative market is the financial
market meant for derivatives. The financial instruments like the
futures contracts or options, which are derived from other forms
of assets, are traded in these markets.
5) Insurance Market – Deals with the trading of insurance
policies.
6) Futures Market – A vertical in financial market where people
can trade standardized futures contracts which is a contract to
buy specific number of quantities of a commodity or financial
instrument at a specified price with the delivery of the
commodity or financial instrument set at a specified time in the
future. 
7) Foreign Exchange Market – Also known as Forex is a
global, worldwide decentralized financial market meant only for
the trading of currencies.
2.Financial institution
  Financial institutions are intermediaries of financial markets
which facilitate financial transactions between individuals and
financial customers.
It simply refers to an organization (set-up for profit or not for profit)
that collects money from individuals and invests that money in
financial assets such as stocks, bonds, bank deposits, loans etc.
 There can be two types of financial institutions:
Banking Institutions or Depository institutions – These are
banks and credit unions that collect money from the public in
return for interest on money deposits and use that money to
advance loans to financial customers.
Non- Banking Institutions or Non-Depository institutions – These
are brokerage firms, insurance  and mutual funds companies that
cannot collect money deposits but can sell financial products to
financial customers.
o Financial Institutions may be classified into three categories:
>Regulatory – It includes institutions like SEBI, RBI, IRDA etc.
which regulate the financial markets and protect the interests of
investors.
>Intermediaries – It includes commercial banks such as SBI,
PNB etc. that provide short term loans and other financial
servicesto individuals and corporate customers.
>Non – Intermediaries – It includes financial institutions like
NABARD, IDBI etc. that provide long-term loans to corporate
customers.
3.Financial assets/instruments
 Financial assets include cash deposits,
checks, loans, accounts receivable,
letter of credit, bank notes and all other
financial instruments that provide a
claim against a person/financial
institution to pay either a specific
amount on a certain future date or to
pay the principal amount along with
interest.
4. Financial services
 Financial Services are concerned with the design and
delivery of financial instruments and advisory services to
individuals and businesses within the area of banking and
related institutions, personal financial planning, leasing,
investment, assets, insurance etc.
 It involves provision of a wide variety of  fund/asset based
and non - fund based/advisory services and includes all
kinds of institutions which provide intermediate financial
assistance and facilitate financial transactions between
individuals and corporate customers.
Types of Financial
Services
 1.Banks
 A bank is an institution that deals in money and its
substitutes and provides other financial services. Banks
accept deposits and make loans and derive a profit from the
difference in the interest rates paid and charged,
respectively.
 Banks are critical to our economy. The primary function of
banks is to put their account holders' money to use by
lending it out to others who can then use it to buy homes,
businesses, send kids to college.
2.Insurance
 Insurance is a means of protection from financial loss. It is a
form of risk management, primarily used to hedge against
the risk of a contingent or uncertain loss.
 An entity which provides insurance is known as an insurer,
insurance company, insurance carrier or underwriter. A
person or entity who buys insurance is known as an insured
or as a policyholder.
 The insured receives a contract, called the insurance policy,
which details the conditions and circumstances under which
the insurer will compensate the insured. The amount of
money charged by the insurer to the insured for the
coverage set forth in the insurance policy is called
the premium.
3.Mutual Funds
 Mutual funds are an ideal investment vehicle for regular
investors who do not know much about investing. Investors
can choose a mutual fund scheme based on their financial
goal and start investing to achieve the goal. 
 A mutual fund collects money from investors and invests the
money on their behalf. It charges a small fee for managing
the money. 
4.Merchant Banking
 A merchant bank is a company that deals mostly in
international finance, business loans for companies
and underwriting. 
 These banks are experts in international trade, which makes
them specialists in dealing with multinational corporations.
 A merchant bank may perform some of the same services as
an investment bank, but it does not provide regular banking
services to the general public.
5.Venture capital
 Venture capital is financing that investors provide to startup
 companies and small businesses that are believed to have 
long-term growth potential.
 Venture capital generally comes from well-off investors, investment
banks and any other financial institutions. However, it does not
always take just a monetary form; it can be provided in the form of
technical or managerial expertise.
Current scenario of our
IFS
 As per the Reserve Bank of India (RBI), India’s banking
sector is sufficiently capitalized and well-regulated. The
financial and economic conditions in the country are far
superior to any other country in the world. Credit, market and
liquidity risk studies suggest that Indian banks are generally
resilient and have withstood the global downturn well.
 Market size- The Indian banking system consists of 27
public sector banks, 22 private sector banks, 44 foreign
banks, 56 regional rural banks, 1,589 urban cooperative
banks and 93,550 rural cooperative banks, in addition to
cooperative credit institutions. Bank credit grew at 12.64 per
cent year-on-year to Rs 85.511 lakh crore (US$ 1,326.78
billion) on May 11, 2018 from Rs 75.91 lakh crore (US$
1,131.47) on May 12, 2017.
 Investments/developments – Key investments and developments in
India’s banking industry include:

>the bank recapitalization plan by Government of India is expected to push

credit growth in the country to 15 per cent and as a result help the GDP
grow by 7 per cent in FY19
>The total value of mergers and acquisition during FY17 in NBFC
diversified financial services and banking was US$ 2,564 billion, US$
103 million and US$ 79 million respectively
 Government Initiatives –

>A new portal named 'Udyami Mitra' has been launched by the Small
Industries Development Bank of India (SIDBI) with the aim of improving
credit availability to Micro, Small and Medium Enterprises' (MSMEs) in
the country.
>Mr Arun Jaitley, Minister of Finance, Government of India, introduced 'The
Banking Regulation (Amendment) Bill,2017', which will replace the
Banking Regulation (Amendment) Ordinance, 2017, to allow the
Reserve Bank of India (RBI) to guide banks for resolving the problems
of stressed assets.
Conclusion
 Enhanced spending on infrastructure, speedy implementation of
projects and continuation of reforms are expected to provide
further impetus to growth. All these factors suggest that India’s
banking sector is also poised for robust growth as the rapidly
growing business would turn to banks for their credit needs.
 Also, the advancements in technology have brought the mobile
and internet banking services to the fore. The banking sector is
laying greater emphasis on providing improved services to their
clients and also upgrading their technology infrastructure, in order
to enhance the customer’s overall experience as well as give
banks a competitive edge.
 Mr. Bill Gates, Co-founder of Microsoft Corp, has stated that India
will move quite rapidly to a digital payments economy in as little as
seven years, based on the introduction of digital payment banks
combined with other things like direct benefit transfers, universal
payments interface and Aadhaar.