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PGDM - SEMESTER II

PRESENTATION

ON

FINANCIALSYSTEM

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Introduction of Financial System

Role/Functions of Financial System

Structure of a Financial System

Financial Markets

Financial Intermediates

Financial Instrument

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The word "system", in the term "financial system", implies a setof complex and closely connected or interlined institutions,agents, practices, markets, transactions, claims, and liabilities inthe economy. The financial system is concerned about money,credit and finance-the three terms are intimately related yet aresomewhat different from each other. Indian financial systemconsists of financial market, financial instruments and financialintermediation

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It serves as a link between savers and investors. It helps in

utilizing the mobilized savings of scattered savers in moreefficient and effective manner. It channelizes flow of saving intoproductive investment.

It assists in the selection of the projects to be financed andalso reviews the performance of such projects periodically.

It provides payment mechanism for exchange of goods andservices.

It provides a mechanism for the transfer of resources acrossgeographic boundaries.

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It provides a mechanism for managing and controlling the risk

involved in mobilizing savings and allocating credit.It promotes the process of capital formation by bringingtogether the supply of saving and the demand for investiblefunds.

It helps in lowering the cost of transaction and increase

returns. Reduce cost motives people to save more.

It provides you detailed information to the operators/ playersin the market such as individuals, business houses,Governments etc.

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Meaning :

A Financial Market can be defined as the market in which financialassets are created or transferred. As against a real transaction thatinvolves exchange of money for real goods or services, a financialtransaction involves creation or transfer of a financial asset. Financial

Assets or Financial Instruments represents a claim to the payment ofa sum of money sometime in the future and /or periodic payment inthe form of interest or dividend.

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T ypes ofFinancial Market.

Capital Market - The capital market is designed to finance thelong-term investments. The transactions taking place in this market

will be for periods over a year.

Money Market - The money market ifs a wholesale debt market forlow-risk, highly-liquid, short-term instrument. Funds are available inthis market for periods ranging from a single day up to a year. Thismarket is dominated mostly by government, banks and financialinstitutions.

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T ypes ofFinancial Market.

Forex Market - The Forex market deals with the multicurrencyrequirements, which are met by the exchange ofcurrencies. Depending on the exchange rate that is applicable, thetransfer of funds takes place in this market. This is one of the mostdeveloped and integrated market across the globe.

Credit Market - Credit market is a place where banks, FIs andNBFCs purvey short, medium and long-term loans to corporate andindividuals

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Intermediary Market Role

Stock Exchange Capital MarketSecondary Market tosecurities

Investment ankersCapital Market, Credit

Market

Corporate advisory

services, Issue of securities

UnderwritersCapital Market, MoneyMarket

Subscribe to unsubscribedportion of securities

Registrars, Depositories,Custodians Capital Market

Issue securities to theinvestors on behalf of thecompany and handle sharetransfer activity

Primary Dealers SatelliteDealers

Money MarketMarket making ingovernment securities

Forex Dealers Forex MarketEnsure exchange ink

currencies

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Money Market Instruments :

Call / Money

Treasury Bills

Term Money

Certificate Of Deposit

Commercial Paper

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