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Overview of Financial Systems and Markets

The document discusses the financial system, which allows the transfer of money between savers and borrowers. It comprises interconnected financial institutions, markets, instruments, services, and transactions. The key components of the financial system are financial institutions, markets, instruments, and services. Financial markets are where financial claims are bought and sold, and they are classified as primary markets for new issues and secondary markets for existing securities. Financial instruments represent claims to future payments, and include assets like securities. Financial services facilitate the transfer of funds and include activities like banking, insurance, and mutual funds.

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49 views20 pages

Overview of Financial Systems and Markets

The document discusses the financial system, which allows the transfer of money between savers and borrowers. It comprises interconnected financial institutions, markets, instruments, services, and transactions. The key components of the financial system are financial institutions, markets, instruments, and services. Financial markets are where financial claims are bought and sold, and they are classified as primary markets for new issues and secondary markets for existing securities. Financial instruments represent claims to future payments, and include assets like securities. Financial services facilitate the transfer of funds and include activities like banking, insurance, and mutual funds.

Uploaded by

singhbenipal93
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd

FINANCIAL SYSTEM

By
Debraj (308)
Avtar (304)
Ajay (301)
Pavani (306)
Teja (302)
Financial System
The financial system is the system that allows the
transfer of money between savers and borrowers.
It comprises a set of complex and closely
interconnected financial institutions, markets,
instruments, services, practices, and transactions.
FINANCIAL
SYSTEM

INFORMALIZ
ED/UNORGA
FORMALIZED
/ORGANIZED
NIZED F.S.
F.S.
• MINISTRY OF • INDIVIDUAL
FINANCE MONEY
• RBI LENDERS
• SEBI • CHIT FUNDS
• OTHER • LOCAL
REGULATORY BROKERS
BODIES
Elements of Financial System

Financial System

Financial Financial Financial Financial


institutes markets instruments services
Financial System
FINANCIAL SYSTEM

Financial Financial Financial Financial


Institutions Markets Instruments Services

Regulatory Banking Non-Banking Intermediaries Non-


Others
Intermediaries
Functions of Financial System
 To link the savers & Investors and thereby help in
mobilizing and allocating the savings efficiently &
effectively.
 To achieve optimum allocation of risk bearing.
 Provides price related information.
 Provides Financial services such as Insurance,
Pension etc.
 Helps in the creation of financial structure that
lowers the cost of transactions.
 Helps in promoting the process of financial
deepening & broadening.
Financial markets
Financial markets are the centers or arrangements
that provide facilities for buying and selling of
financial claims and services either directly or
through intermediaries and dealers on
organized exchange or off-exchanges.

Financial markets classified into


 Primary and
 secondary markets
Primary or direct markets:
Primary markets deals in the new financial claims
or new securities and they are known as new
issue markets. these mobilizes savings and
supply fresh capital to business units
Secondary or indirect markets:
The secondary markets deal in securities already
issued or existing or outstanding. They do
indirectly by rendering securities issued on
primary markets.
Financial markets are also classified as
 Money markets and
 capital markets
 Money markets:
Money markets deals in the short-term
claims(i.e period of maturity is one year or less
than one year) eg: stock market
 Capital markets:
Capital markets does so in the long-term
claims(maturity above 1yr) eg: equity, debt markets
Depending on basic purpose these are also
classified into various types.
1)organized and unorganized
2)formal and informal
3)official and parallel
4)domestic and foreign
Financial instruments
1) Financial assets:
Which represents a claim to the
payment of a sum of money sometimes in
future & a periodic form payment in the form
of interest or dividend
2) Financial securities:
 primary(direct)
 secondary(indirect)
Contd…

Primary securities:
which are issued by the ultimate
investors directly to the ultimate savers as
ordinary shares and debentures
Secondary securities:
which are issued by the financial
intermediaries to the ultimate savers as bank
deposits, units, insurance policies and so on.
Certain types of securities include are
 Ownership securities
 Debt securities
Investment characteristics of securities include are
 Liquidity
 Reversibility
 Transferability
 Transactions costs
 Maturity period
Financial services

 Financial services is one of the important


element of financial system which aim at
transfer of funds.
 Financial services means the services which are
financial in nature.
 Eg: banks, money lenders, bills discounting,
financial institutions etc.
Types of financial services
 Leasing
 Factoring
 Insurance
 Mutual funds
 Issue management
 Leasing:
the process of financial appraisal in lease
transaction generally involves 3 steps
1)Appraisal of client in terms of financial strength
and credit worthiness
2)Evaluation of securities offered.
3)Financial evaluation of the proposal.
 Factoring:
factoring means to get the things done or
to make or to do.
 Factoring in the outright purchase of credit
approved account receivables with the factor
assuming bad debt losses.
Thank you

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