Indian Financial System0

8/8/2019 Indian Financial System0

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` To make a historical account of Indian Financial

system before and after liberalization;

` To appreciate the evolutionary process for having

attained the present phase;` To evaluate each component of the system in a

global context; and

` To loot at your business decisions in the context of

prevailing financial system of a state.


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` Most banks were state-owned` Banks, pension funds and

insurance companies wereforced to buy State Issuedbonds - primary investment.

` Bombay Stock Exchange was

closed market. Run by Brokersfor the benefit of its members.There was no right governanceand regulation.

` There was no single derivativemarket.

` All financial transactions were

controlled by the RBI andMinistry of Finance


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Socialistic Model Weapons

` Strict entry barriers in every sub-

industry.

` Difficult to start a bank, a mutual

fund, a brokerage firm, an

insurance company, a pension

fund, a securities exchange orsub-broking firm.

` Foreign firms were restricted to

touch any one of these parts

` Comprehensive capital control

and restrictive legislations

` Look at a typical bureaucrats ofyester years as perceived

Big Villains were` MRTP act, 1969

` The Capital Issues

(control) act, 1947

` Indian Companies Act,

1956

` Industries Act, 1956

` Foreign Exchange

Regulation Act, 1973


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Individuals,Firms, State

Surplus Units MoneyMarketDebtMarket

EquityMarket

DerivativeMarket

ForexMarket

Free Financial

System

Equity

BondsHybridMoney MarketInstruments

All are customized

Vehicles

Individuals,Firms,

State Deficit Units


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` Market driven

` All players with integrity and accountability

` Innovators and Creators flourish

` Contributes favorably to the Economy` No greedy

` Global but not taking external shocks

` State facilitates rather than suppresses


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Liberalization Facilitators

` Eighteen to Three Scheduled Industries

` Eight Hundred to Fifty SSI` MRTP not active` Capital Issues Act repealed

` Foreign ExchangeRegulation Act repealed

` Insurance, BankingIndustries open its gates forPrivate Players

` MNC allowed

` Banking Regulation Actsimplified

` Security Exchange Boardconstituted

` Foreign ExchangeManagement Act passed

` Companys Act subject toscrutiny

` Private players allowed todo insurance and bankingbusiness

` SEZs opened` FDI encouraged


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` Lender's risk has dwindledsubstantially

` Liquidity position is improved

` Return is certain on his savings

(either fixed or variable)` Lender gets impetus to save

` He will get accurate informationfrom specialized financialinstitutions.

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Lenders botheration with respectto selecting a prompt borrower isreduced


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` Borrower certainty in risingfunds is soared

` He needs make less effortand minimum time inquesting for an ultimatelender.

` In whatsoever fashion heneeds funds he canprocure

` He can seek professionalsand specialized assistance

from specialist in the field.


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` 1. Banking financial institutes (RBI, Commercialbanks and co-operative banks)

` 2. Development banks (all India financial instituteslike IDBI, IFCI)

` 3. Investment financial institutes (LIC,GIC,UTI,since 2000 Private insurance companies likeSunLife, Allianz Bajaj, ICICI Prudential etc. )

` 4. Non-Banking financial institutes (SBI capitalservices, Merchant banking companies Hire-purchase companies, etc.,)

` 5. Postal department Financial services (Recurringdeposits, NSC, KVP, Postal Life-Insurance etc.).


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Documents

Indian Financial System0