Financial System The financial system in a country refers to the institutional framework

existing to enable financial transactions to be carried out in a smooth manner

Any Financial System has three main segments

1) Financial institutions -banks, mutual funds, insurance companies etc

2) Financial markets -money market, debt market, capital market, forex market, derivative markets

3) Financial products -loans, deposits, bonds, equities , different types of financial derivatives etc

FINANCIAL SERVICES

MARKETS & REGULATORS

S E B I

C A P ITA L M A R K E T

R B I

M O N E Y M A R K E T

A M F I

M U TU A L F U N D S

IR D A

IN S U R A N C E

Reserve Bank of India - 1• Reserve Bank of India was established on 1st April

1935, after the enactment of the Reserve Bank of India Act 1934 (RBI Act).

• The RBI was initially privately owned but was nationalized in 1949 by the enactment of the Banking Regulation Act.

• Banking Regulation Act,1949 (BR Act)gave wide powers to RBI as regards to establishment of new banks/mergers and amalgamation of banks,opening of new branches,etc

• BR Act,1949 gave RBI powers to regulate,supervise and develop the banking system in India

RBI’s Major Functions

• Supervisory & Regulatory

• Promotional & Developmental

• Refinance Activities

RBI’s Major Functions

• Supervisory & Regulatory

• Promotional & Developmental

• Refinance Activities

RBI’s Major Functions

SUPERVISORY & REGULATORY

IS S U A N C EO F

C U R R E N C YN O TE S

C R E D ITC O N TR O L

E X C H A N G EC O N TR O L

TR A N S F E RO F F U N D S

RBI’s Major Functions

• Supervisory & Regulatory

• Promotional & Developmental

• Refinance Activities

RBI’s Major Functions

PROMOTIONAL & DEVELOPMENTAL

B an ker toG overn m en t

B an ker toB an kers

E xp orts

In d u s try

A g ricu ltu re

F in an ce Tra in in g

RBI’s Major Functions

• Supervisory & Regulatory

• Promotional & Developmental

• Refinance Activities

RBI’s Major Functions

REFINANCE ACTIVITIES

L E N D E R O F L A S T R E S O R T R E F IN A N C E O P E R A TIO N S

Securities & Exchange Board of India (SEBI)

• SEBI was constituted on April 12/1988, and obtained the statutory powers in March,1992

SEBI’s functions:• To protect the interests of investors• To recognize the business in stock exchanges and

other security markets• To supervise and regulate work of intermediaries,

such as stock brokers merchant bankers/custodians depositories/bankers to the issues

Association of Mutual Funds in India (AMFI)

• AMFI is an association as a non profit organization.

• AMFI represents mutual funds in India and working for healthy growth of the Mutual Funds.

• AMFI conduct examinations for MF executives as part of their training activities

Insurance Regulatory & Development Authority (IRDA)

• The regulator for insurance business in India is IRDA.

• IRDA was established in 2000IRDA’s functions:• To regulate, promote and ensure orderly

growth of the insurance business and reinsurance business in India

• To protect the interests of policy holders

Banks in India

Legal frame workof

Banks

Banking Regulation Act,1949

Reserve Bank of India

Act,1934

Banking Regulation Act,1949 (BR Act)-1

- BR Act covers banking companies and cooperative banks, with certain modifications. - BR Act is not applicable to a) primary agricultural credit societies b) land development banks- BR Act allows RBI (Sec 22) to issue licence for banks

BANKING -Definition• Section 5 (b) of Banking Regulation Act 1949 defines

banking as “ acceptance of deposits of money from the public for the purpose of lending or investment”

• Under Section 49A of the Act , no person other than a Bank is authorised to accept deposits which can be withdrawn by cheques except SB Schemes run by government or a firm notified by the government.

• Section 6 (1) gives the list of permissible business• Section 8 gives details of activities that are prohibited

Reserve Bank of India Act,1934(RBI Act)-1

- RBI Act was enacted to constitute the Reserve Bank of India- RBI Act has been amended from time to time- RBI Act deals with the constitution, powers and functions of RBI

Reserve Bank of India Act,1934(RBI Act)-2

- RBI Act deals with:- incorporation, capital management and business of banks- central banking functions- financial supervision of banks and financial institutions- management of forex/reserves- control functions : bank rate,audit,accounts- penalties for violation

Classification of Banks-1CentralBankRBI

Public Sector Banks

New PrivateSectorBanks

Old PrivateSector

Foreign Banks

Co-operativeBanks

RegionalRural Banks

Classification of Banks-2

PUBLIC SECTORBANKS

STATE BANK OF INDIA

SBI

SBI ASSOCIATEBANKS

NATIONALISEDBANKS

WHOLESALE BANKINGProvision of services by banks to the like of large corporate clients, mid-sized companies, real estate developers and investors, international trade finance businesses, institutional customers (such as pension funds and government entities/agencies), and services offered to other banks or other financial institutions.. Wholesale banking is different from retail banking, in that the former focuses more on corporate style entities and high value transactions, while the latter is focused on providing financial services to individual consumers.