Home JAIIB Indian Financial system- An overview

Indian Financial system- An overview

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PPB Unit-01

A financial system means – structure that Mobilizes  capital from  surplus sectors and Allocates  the same to needy sectors.

Savings are transformed into investments by Intermediaries

Commercial Banks: –includes PSBs, foreign banks, old and new private sector banks. –Acceptance of deposits from the public for the purpose of lending or investment is the main area of activity.

NBFCs: –allowed to raise deposits from the public & lend through various instruments including leasing, hire purchasing & bill discounting etc. –Licensed and supervised by RBI.

Primary Dealers (PDs): –deals in govt. securities both primary and secondary market. –Basic responsibility is to provide markets for govt. securities and strengthen the govt. security market. 

Financial Institutions:  – provide long term funds for industry and agriculture. –Under control of Reserve Bank. –Raise resources through long term bonds from financial system and borrowings from international financial institutions.

Cooperative Banks: –set up to replace money lenders of rural credit, – serve the needs of agriculture and allied activities, rural industries, trade and industry in urban area.  •

Payment and Settlement System:  –Maintenance of clearing houses at various centers, –creation of currency chests in different geographical areas and –creation of the mechanism for electronic transfer of funds. •

Management of Govt. debt:  –Central Bank manages the issue and servicing of govt. debt.  –This involves  decision reg., price ,  volume to be raised, tenure of debt . 

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