commecial_mkt

7/31/2019 commecial_mkt

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PRODUCT MARKETS:Markets that exchange final goods and services,

that is, the output that is combined into grossdomestic product.The buyers of this production----household, business, government, and foreign.

The seller of this production -business sector.A substantial part of macroeconomics is devotedto explaining how and why gross domesticproduct exchanged through product marketsrises or falls.macroeconomic markets---

resource markets and financial markets, Productmarkets


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Gross Production Product markets take center stage in the macroeconomic analysis ofthe economy.provide a direct indication of the level of aggregate output, or gross

domestic product.suggests how and why the level of aggregate output changes as

the economy moves through the ups and downs of business cycles.light on the macroeconomic problems of inflation andunemployment. Gross ProductionThe product markets exchange final goods and services, what iscommonly specified as gross domestic productgross domestic product is the total market value of all final goods

and services produced in the domestic economy over a given period.The product markets only exchange final production.They exclude raw materials or intermediate goods that are subject tofurther processing before resold.


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Buyers and SellersThe demand side of the product markets is commonly and conveniently categorized

by the particular macroeconomic sector making the expenditure-- household,business, government, and foreign.The corresponding expenditures made by these four sectors areconsumption expenditures, investment expenditures, government purchases, and

exports. Household Consumption : The household sector undertakes consumption

expenditures for consumer goods. This is the vast majority of aggregate productionthat is used to satisfy wants and needs. The acquisition of consumer goods by thehousehold sector is the ultimate goal of economic activity.Business Investment : The business sector makes investment expenditures oncapital goods, which add to the economy's production capabilities. Investmentexpenditures tend to be the most volatile expenditure running through the product

markets.Government Purchases : The government sector is responsible for governmentpurchases of goods used to pursue assorted government functions such as nationaldefense, education, and law enforcement.Foreign Exports :

Foreign Imports :


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Resource markets.macroeconomic markets ,resource , financial. & Resource

MarketsThe services of the four factors of production- -labor, capital,land, and entrepreneurship- -are traded through resourcemarkets.Resource markets , also termed factor markets, are used by the

business sector to acquire the factor services needed forproductionPayment for these factor services then generate income

received by the household sector, which owns the resources.Note only factor services are exchanged through resourcemarkets, not the actual factors.Financial Markets : The commodities exchanged throughfinancial markets are legal claims. Legal claims, or financialinstruments, represent ownership of physical assets, capital, aswell as other goods. Because the exchange of legal claimsinvolves the counter flow of income, those seeking to saveincome bu le al claims and those wantin to borrow income sell


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The Circular Flow The product markets at the top of the flow directproduction from the business sector to thehousehold sector in exchange for paymentflowing in the opposite direction. The resourcemarkets at the bottom of the flow direct factor

services from the household sector to thebusiness sector in exchange for payment flowingin the opposite direction.The circular flow indicates that the income usedby the household sector to purchase goods

through the product markets is obtained byselling factor services through the resourcemarkets. It also indicates that the revenue usedby the business sector to pay for factor servicesobtained through the resource markets is

generated by selling goods through the productmarkets.


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The Circular Flow Household Income Income

Product Markets Goods products

Resource Markets Factor ServicesLand , Labor

Capital

EntrepreneurshipBusiness Markets Revenue


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Aggregate Equilibrium

Demand in the aggregate product market reflects theexpenditures made by buyers in the individual markets. Andsupply in the aggregate product market reflects the totalproduction sold in the individual markets. Equilibrium in the

aggregate product market is an essential aspect ofmacroeconomic analysis.This exists if total expenditures on gross domestic product isequal to the total amount of gross domestic product available.

However, this does not mean every individual product market isin equilibrium. One might have a bit of a shortage and anothera bit of a surplus. As long as the shortages and surplusesbalance out, meaning aggregate production is equal toaggregate expenditures , then the aggregate product market isin equilibrium


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A commercial bank

A commercial bank (or businessbank ) is a type of financial institution and intermediary.

It is a bank that provides transactional ,savings, and money market accountsand that accepts time deposits


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The role of commercial banks

processing of payments by way of telegraphictransfer, internet banking, or other meansissuing bank drafts and chequesaccepting money on term depositslending money by overdraft, installment loan, or othermeansproviding documentary and standby letter of credit,guarantees, performance bonds securitiesunderwriting commitments and other forms of offbalance sheet exposuressafekeeping of documents and other items in safedeposit boxes


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commercial banks

distribution or brokerage , with or withoutadvice, of insurance , unit trusts andsimilar financial products as a financialsupermarket

cash management and treasury banking and private equity financing

traditionally, large commercial banks alsounderwrite bonds, and make markets incurrency, interest rates, and credit-related securities, but today largecommercial banks usually have aninvestment bank arm that is involved in

the mentioned activities.
http://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Brokeragehttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Unit_trusthttp://en.wikipedia.org/wiki/Cash_managementhttp://en.wikipedia.org/wiki/Treasuryhttp://en.wikipedia.org/wiki/Merchant_bankinghttp://en.wikipedia.org/wiki/Private_equityhttp://en.wikipedia.org/wiki/Private_equityhttp://en.wikipedia.org/wiki/Merchant_bankinghttp://en.wikipedia.org/wiki/Merchant_bankinghttp://en.wikipedia.org/wiki/Treasuryhttp://en.wikipedia.org/wiki/Cash_managementhttp://en.wikipedia.org/wiki/Unit_trusthttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Brokeragehttp://en.wikipedia.org/wiki/Sales


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Types of loans granted bycommercial banks

Unsecured loanare monetary loans that are not secured against the

borrower's assets . These may be available from financialinstitutions under many different guises or marketing

packages:Bank overdraft :---- An overdraft occurs when money iswithdrawn from a bank account and the available balancegoes below zero. In this situation the account is said to be

"overdrawn". If there is a prior agreement with the accountprovider for an overdraft, and the amount overdrawn is withinthe authorized overdraft limit, then interest is normallycharged at the agreed rate. If the POSITIVE balance exceedsthe agreed terms, then additional fees may be charged andhigher interest rates may apply.


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Types of loans granted bycommercial banks

Corporate bonds credit card debtcredit facilities or lines of creditpersonal loans What makes a bank limited liability companyA corporate bond is a bond issued by acorporation. It is a bond that a corporation issues toraise money in order to expand its business. Theterm is usually applied to longer-term debtinstruments, generally with a maturity date falling atleast a year after their issue date. (The term"commercial paper" is sometimes used for

instruments with a shorter maturity.)
http://en.wikipedia.org/wiki/Corporate_bondhttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Personal_loanshttp://en.wikipedia.org/wiki/Personal_loanshttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Corporate_bond


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commercial letter of credit A standard, commercial letter of credit (LC[1]) is a documentissued mostly by a financial Institution used primarily in tradefinance , which usually provides an irrevocable paymentundertaking.The letter of credit can also be payment for a transaction,meaning that redeeming the letter of credit pays an exporter.Letters of credit are used primarily in international tradeinternational trade .transactions of significant value, for deals

between a supplier in one country and a customer in another
http://en.wikipedia.org/wiki/Letters_of_credithttp://en.wikipedia.org/wiki/Letters_of_credit


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commercial letter of credit (LC)

After a contract is concluded between buyer and seller,buyer's bank supplies a letter of credit to seller.Seller consigns the goods to a carrier in exchange for a billof lading.

Seller provides bill of lading to bank in exchange forpayment. Seller's bank exchanges bill of lading for paymentfrom buyer's bank. Buyer's bank exchanges bill of lading forpayment from the buyer.

Buyer provides bill of lading to carrier and takes delivery ofgoods.


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(LC)They are also used in the land development process toensure that approved public facilities (streets,

sidewalks, storm water ponds, etc.) will be built. Theparties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whomthe applicant is a client, and the advising bank ofwhom the beneficiary is a client. Almost all letters ofcredit are irrevocable, i.e., cannot be amended orcanceled without prior agreement of the beneficiary, theissuing bank and the confirming bank, if any. Inexecuting a transaction, letters of credit incorporatefunctions common to Traveler's cheques . Typically, thedocuments a beneficiary has to present in order toreceive payment include a commercial invoice , bill oflading , and documents proving the shipment wasinsured against loss or damage in transit.
http://en.wikipedia.org/wiki/Advising_bankhttp://en.wikipedia.org/wiki/Advising_bankhttp://en.wikipedia.org/wiki/Advising_bankhttp://en.wikipedia.org/wiki/Advising_bankhttp://en.wikipedia.org/wiki/Traveler's_chequehttp://en.wikipedia.org/wiki/Commercial_invoicehttp://en.wikipedia.org/w/index.php?title=Bill_of_lading&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Bill_of_lading&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Bill_of_lading&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Bill_of_lading&action=edit&redlink=1http://en.wikipedia.org/wiki/Commercial_invoicehttp://en.wikipedia.org/wiki/Traveler's_chequehttp://en.wikipedia.org/wiki/Traveler's_chequehttp://en.wikipedia.org/wiki/Advising_bank


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Financial Documents

To receive payment, an exporter or shipper mustpresent the documents required by the letter of credit.Typically, the payee presents a document proving thegoods were sent instead of showing the actual goods.The Original Bill of Lading (OBL) is normally the

document accepted by banks as proof that goods havebeen shipped. However, the list and form of documentsis open to imagination and negotiation and mightcontain requirements to present documents issued by

a neutral third party evidencing the quality of the goodsshipped, or their place of origin or place.


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Financial Documents Financial Documents Bill of Exchange , ----Co-accepted DraftCommercial Documents Invoice , Packing list -----Shipping Documents Transport Document , InsuranceCertificate, Commercial,

Official or Legal Documents Official Documents License, Embassy legalization, Origin Certificate, InspectionCertificate,Transport Documents Bill of Lading (ocean or multi-modal or Charter party), Airwaybill, Lorry/truck receipt, railway receipt, CMC Other thanMate Receipt, Forwarder Cargo Receipt, DeliverChallan...etcInsurance documents Insurance policy, or Certificate but not a cover note.
http://en.wikipedia.org/wiki/Negotiable_instrumenthttp://en.wikipedia.org/wiki/Invoicehttp://en.wikipedia.org/wiki/Shipping_listhttp://en.wikipedia.org/w/index.php?title=Bill_of_lading&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Bill_of_Lading&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Bill_of_Lading&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Bill_of_lading&action=edit&redlink=1http://en.wikipedia.org/wiki/Shipping_listhttp://en.wikipedia.org/wiki/Invoicehttp://en.wikipedia.org/wiki/Negotiable_instrument


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Call Money/Notice Money

All banks Institutions can participateFunds Are lent for 1 day-14 days FromSat-Mon

Borrowers lenders current account inthe RBITimely quick Debit,credit operationsInterest rate highly Volatile(2-3%70%)High riskTemporary parking place for funds onshort term basis


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Commercial Bills

Used for credit extension by banks tocustomersBanks can rediscount the bills & readymoneyBill Should arise out of trade /commercialtransactions(RBI)Maturity date should not fall within

90days from the date of rediscountingLess volatility in interest rate in billrediscounting market then in the callmoney


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Treasury Bills 182 daysShort term Govt. Security introduced in 1986

It is issued at discount by RBI& F/V is paid toholder on maturityEvery fortnight RBI invite bids for 182 daystreasury billSuccessful bidders collect letter of acceptance&deposit amt with apex bank within 24 hrsAll banks, ,institutions, local bodies,corporations. individuals, can submit bidsEligible for SLR requirement for banksHandy instrument for banks for conversion from

cash to treasury & vise versa


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Commercial PapersShort term negotiable instrument issued by

companies redeemable at par to the holderson maturityScheme introduced in 1990 by RBIIssued by Companies in the form PromissorynotePeriod of C.P. 15-365 daysMaxi amt for which cp can be released islimited to 100% of working capital sanctionedby companies bankA C.P issue of minimum size Rs 25lakh

Good investment for short term cash surplus


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Underwriting services

It is a financial service covering therisk of non subscription to the newissues in the capital market

I t is a contract between the issuer ofsecurities and the underwriter to theeffect that the latter assures the

subscription from the public to theextent of the amount agreed upon .


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Financial system

Organized MarketsRBIBanksMoney Market/stock Capital MarketBullion MarketUnorganized MarketMoney LendersBrokers ,Traders, Landlords


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Financial System

Financial SystemA trading in liquidityCash,(RBI)Credit (Banks)lending and borrowings,claims on money(Financial Markets)


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Segments of Money Market

RBI as a lender of Last Resort,Banks,LIC,UTI,Financial Markets,Mobilization of savingsand promotion of investment .Sectors Household sector/ForeignSector/Business Sector/Govt Sector

Markets Primary Sector, Secondary, TertiaryMarket


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