Indian Financial System:

Financial System

The combination of institutions, markets, instruments [products] and services that enable flow of money around the world
The financial system is the system that allows the transfer of money between savers and borrowers.
It comprises a set of complex and closely interconnected institutions, markets, instruments and services (including practices, and transactions) which fosters savings and channels them to most efficient use

Significance of Financial Systems

They are crucial to the allocation of resources in a modern economy
They channel household savings to the productive/ corporate sector and allocate investment funds among competing firms/users
They allow smoothing of consumption by households and expenditures by firms and promote savings
They enable households and firms to share risks
They promote financial product innovation
They promote orderly sustainable economic growth and global integration

The above functions are common to the financial systems of most developed economies. Yet the form of these financial systems varies widely across countries
The word "system", in the term "financial system", implies a set of complex and
closely connected or interlined institutions, agents, practices, markets, transactions, claims, and liabilities in the economy
The financial system is concerned about money, credit and finance-the three terms are intimately related yet are somewhat different from each other

A Financial System:

Which is inherently strong
Which is functionally diverse
Which display efficiency, flexibility and innovation

is critical to our national objectives of creating a market-driven, productive and competitive economy. Financial System consists of Financial Markets, Financial Instruments and Financial Institutions [& Intermediaries] and Financial Services

The system consists of:

Savers: Individuals , Corporate, Institutions, etc
Users: Government, Institutions, Corporate ,Self Help Groups [SHGs],Small and Medium Enterprise [SMEs], NGOs, etc
Institutions & Intermediaries: Banks, Exchanges, Clearing Houses, Brokers, etc
Markets: Financial Markets, Real Estate Markets, Commodities Markets [at Primary & Secondary, Wholesale & Retail and Organized & Unorganized levels]

Institutions in the Financial System:

Institution which collects funds from the public and places them in financial assets, such as deposits, loans, and bonds, rather than tangible property
In financial economics a financial institution is an institution that provides financial services for its clients/members by acting as financial intermediaries
Financial institutions are highly regulated by government in most countries

The three major types of Institutions are:

Deposit taking institutions that accept and manage deposits and make loans like banks, cooperative credit societies, housing finance companies, non banking finance companies [NBFCs]
Insurance companies and pension funds
Underwriters, depositories, brokers, etc

Role of Institutions in the Financial System:

They provide service as intermediaries of the financial markets
They are responsible for transferring funds from investors to companies in need of those funds
They facilitate the flow of money through the economy by promoting savings, pooling resources, providing loan and in the process mitigate risks
They aid in realization of full potential of economy by impartially enforcing property rights, at low transaction costs and with transparency
They ensure that the financial markets operations are free, fair, competitive and transparent
They promote market efficiency by wide dissemination of information, reduction of transaction costs and allocation of capital to most productive uses
They promote reforms and liberalization which contribute to significant and effective growth of the financial systems

Types of Institutions in the Financial System:

Regulators: SEBI
Central/reserve bank: RBI
Commercial bank: SBI
Development finance institutions: I&LFS
Merchant/Investment bank: Citi bank
Exchange: NSE
Special purpose institutions: NABARD, ARCIL
Credit rating agency: CRISIL
Insurance [life and non-life] company: LIC, ICICI Lombard
Depository and depository participant: NSDL, HDFC Bank
Non Banking Finance Companies [NBFCs] (Shriram Finance)
Housing Finance Companies (HDFC Ltd)
Rural and Agricultural banks(NABARD)
Mutual Funds [UTI Mutual Fund]

Financial Instruments:

Are instruments having monetary value or recording a monetary transaction
They are cash, evidence of an ownership interest in an entity, or a contractual right to receive/deliver cash or another financial instrument
They are contracts that give rise to both a financial asset for one company and a financial liability or equity instrument for the counterparty
They are debt instruments which are loans with an agreement to pay back funds with interest
They are contracts [Ex. Forward contract] designed to hedge price risks in a financial/commodity market
They denote any form of financing medium like bills of exchange, bonds, shares

Categories of Financial Instruments:

Cash instruments are financial instruments whose value is determined directly by markets [Ex. shares, bonds, fixed deposit receipts] and which are readily transferable [ Ex. shares, bonds] or negotiable like bills of exchange, cheque
Derivative instruments which derive their value from the value and characteristics of one or more underlying assets [options, futures, swaps]. They can be divided into exchange traded or over the counter [OTC] traded
They can be categorized depending on whether they are equity based like shares (reflecting on ownership of the issuing entity) or debt based like bonds (reflecting a loan from the investor to the issuing entity).
Debt instrument can be further classified into short term (less than one year) or long term
Foreign exchange transactions are of different type involving exchange/transfer of currencies

Financial Instruments:

They are the second component of the financial system
They represent claims on a stream of income and /or particular assets
The maturity and sophistication of financial system depends on the availability of a variety of instruments to suit the investment needs of wide variety of investors
Multiplicity of instruments represents financial product innovation
Growth of financial instruments is indicative of maturity and stability of the financial system and extent of financial reach and financial inclusion

Types of Financial Instruments:

· Treasury bill [T-bills] , Government bonds [G-sec,Gilts]

Bonds of PSUs and private corporate
Convertible and non-convertible bonds/debentures
Deep discount/ zero coupon bonds/debentures
Inflation linked bonds
Tax savings/ tax free bonds
Mutual fund units
Pass through/ pay through certificates [PTCs]
Commercial paper [CP], Certificate of Deposit [CD], Term deposit and Intercorporate deposit
Bills of exchange, Promissory note, hundi etc
Credit default swaps [CDS], Collateralized debt obligation [CDO],Forward rate agreements [FRA],etc

Financial Markets:

In economics, a financial market is a mechanism that allows people to easily buy and sell (trade) financial securities (stocks, bonds, etc)
A generic term for the markets in which financial instruments are traded
Financial instruments have no intrinsic value of themselves without financial markets
A category of markets for the exchange of capital and credit
They are institutions acting as intermediaries between suppliers and users of money. They are wholesale and retailers of funds
The financial markets are where those wanting funds are matched with those having surplus funds

Role of Financial Markets

Well developed Financial Markets are required for creating a balanced financial system
The primary function of the Financial Markets is to facilitate the transfer of funds from surplus sectors [lenders] to deficit sectors [borrowers]
Financial markets trade in assets / securities where the investors seek highest return for a given level of risk and users of funds attempt to borrow at lowest rate possible
The above interaction in a properly functioning Financial Market ensures the flow of capital to the best user

The Financial Markets facilitates

Price discovery
Provision of liquidity
Low cost of transactions AND
Access to information

Perfect Financial Market

A Perfect Financial Market is only a concept
It is a benchmark for evaluating the operations of a financial market which has no taxes, no transaction costs, no regulations
It has perfectly divisible assets, existence of a number of buyers and sellers and easy & free access to information.
In a perfect market trading is costless and access to the financial markets is free,
No single trader can have significant impact on market prices
Trading on the basis of insider information is prohibited.
In real world the market is characterized by imperfections

But markets can be efficient internally if the cost of imperfections is small and assets prices still convey information about the company. The external efficiency is facilitated by liquid markets.

The characteristics of liquid market are depth, breadth and resiliency

The market has depth if adequate buy and sell orders are placed around the traded price.
The orders forthcoming should have adequate volume which gives breadth to the market
The response of orders to price change renders the market resilient
The availability and trading in variety of financial instruments renders the financial markets dynamic and innovative and offers scope for risk diversification /risk taking.

Financial Services

It refers to services provided by the finance industry.
It is the umbrella market segmentation term for banking, insurance, and securities
The finance services industry encompasses a broad range of organizations that deal with the management of money & financial instruments and financial advisory. Among these organizations are banks, investment banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, depositories, custodians, government sponsored enterprises etc.
The financial services industry form a large group of companies in terms of earnings and market capitalization in many countries

Types of Financial Services:

Regulatory and investor protection: SEBI
Commercial, merchant & investment banking: SBI
Stock and other exchanges: NSE, NCDEX
Mutual fund services: ICICI AMC
Life and non-life insurance services: LIC, Tata AIG
Lease and other finance: I&LFS, IDFC
Currency exchange: Thomas Cook
Depository ,Depository participant : NSDL, HDFC Bank
Credit rating: ICRA
Portfolio, Investment management: Enam

The Indian Financial System

Indian financial system has developed:

In the first stage [from 1951 to mid 1980 ] on the background of planned economic development , controlled economy and strict government regulation

In the second stage [mid 1980 to mid 1990 ] the growth has been on the basis of partial decontrol in various sectors of the economy and partial relaxation of government controls in the financial sector
In the current stage the liberalization, deregulation and globalization of the Indian economy and the strong banking and financial sector reforms since mid 1990 are having significant implications for the future course and growth of Financial System in India

The Indian financial system can be broadly classified into two groups:

Organized Sector – organized provider of funds and organized user of funds
Unorganized Sector – unorganized provider of funds and unorganized user of funds

Organised Sector:

v Provider of funds – Banks,Financial Institutions,Mutual Funds,etc

v User of funds – Corporate,Government,PSUs

Unorganised Sector:

v Provider of funds – Individuals,Money Lenders,Pawn Brokers,Private Chit Funds

v User of funds – Farmers,Rural and Urban Artisans,Traders and SMEs,etc

The leading players in the Financial Sector Market in India are;

Providers of Funds	Borrowers /Users of Funds
Individuals	Government & Government Agencies
Government & Government Agencies	PSUs
Banks and Financial Institutions	Banks and FIs
Foreign Institutional Investors [FIIs]	Mutual Funds
Foreign Direct Investment [FDIs]	Pension and Insurance Funds
Private Equity /Venture Funds	Corporate
Mutual Funds	SMEs, NGOs, SHGs
International finance agencies	Individuals
Pension Funds and Insurance Funds
Public Sector Undertakings [PSUs]
Corporate

Institutions in the Indian Financial System can be classified on the following basis:

Ø Function /Philosophy

Commercial Banking: SBI, ICICI Bank
Development Finance: I&LFS, IDFC, NABARD,SIDBI,SIICOM
Insurance and Pension Fund: LIC,NewIndia Assurance,ICICI Prudential, HDFC Sunlife
Merchant/Investment Banking:HSBC Bank, Citi Bank
Housing Finance: HDFC,GRUH,NHB
Agricultural and Rural Finance: NABARD,RRB
Reconstruction of impaired assets:ARCIL[Asset Reconstruction Company]
Mutual Fund – HDFC , Kotak
Islamic Banking – Various Banks
Bankers Bank and Governments Bank - RBI
Supervisory – RBI, SEBI
Regulatory – SEBI, IRDA
Self Regulatory – FEDAI, AMFI,IBA,FIMMDA
Intermedairy – NSDL, Karvy, Primary Dealers,Brokers
Exchange – NSE, BSE,
Non-Banking Finance Company – GE Finance,Shriram Finance,Peerless Finance
Educational – National Institute of Banking Management, IGIDR,IDRBT
Depository: NSDL,CDSL
Depository participants: HDFC bank, ICICI Bank
Credit rating: CRISIL, FITCH

Institutions in the Indian Financial System can be classified on the following basis:

Ø Ownership and Organisation

Government owned – RBI, NABARD
Public sector – SBI and other Nationalized Banks
Private sector – ICICI Bank, HDFC Bank
Foreign Sector – Citi Bank, HSBC Bank
Co-operative Sector-Various Urban and Rural Cooperative Banks
Organized Sector – RBI,SBI,NSE
Un Organized Sector – Money Lenders, Private Chit Funds, Nidhi Funds

Ø Location /Spread

National / All India level – RBI , SBI
Regional / State-level – UCB,RRB ,MIDC, SIICOM,Gramin Bank

Ø Levels and Volume

Primary – NSE for IPOs
Secondary – NSE,BSE for secondary market deals in equities / debts
Wholesale – Whole Sale Debt Market Segment for G-Sec
Retail – Retail market for Foreign Exchange transactions between Banks and Clients

Instruments in the Indian Financial System

Ø The most basic instruments are the Securities [equity and debt]

Ø The equity comprise of

Shares [including ADR,GDR and IDR]
Rights Issue/ Rights Shares
Bonus Shares
Preferred Stock/ Preference shares Cumulative Preference Shares

Cumulative Convertible Preference Shares, Participating Preference Share

Ø The debt instrument comprise of

Government / State Government bonds /securities [G-sec/Gilts]
Treasury Bills [T-bill]
Public Sector Bonds
Corporate bonds/debentures

The financial markets and the financial institutions have introduced variety of innovative financial instruments:

Hybrid instruments for Tier I / II Capital of banks
Participating debentures
Partially / fully convertible debentures
Convertible debentures redeemable at premium
Zero partially convertible debentures with detachable warrants
Floating rate bonds/warrants
Zero coupon convertible notes
Secured premium notes with detachable warrants
Zero coupon bonds, deep discount bonds, easy and exit regular income and retirement bonds, step –up liquid bonds, growth bonds, index bonds, inflation linked bonds, capital gains bonds
Foreign Currency Convertible Bonds [FCCB],Global Depository Receipts/Shares [GDR/GDS],American Depository Receipts [ADR/ADS]
Securitized asset-backed securitization [ABS] and Mortgaged Backed Securitization Bonds [MBS] , Pass Through Certificates [PTC]
Security Receipts : receipt or other security issued by a securitization company or reconstruction company
Derivative Instruments – Options, Futures, Swaps [Interest Rate Swaps, Cross Currency Swaps, Quanto Swaps, Forward Rate Agreements], Credit Derivatives,

STRIPS – Separate Trading of Registered Interest and Principal Securities

Markets in the Indian Financial System

The Major Financial Markets* are

Ø Money Market

Ø Capital Market

Ø Foreign Exchange Market

Ø Credit Market

Ø Securitization Market

*The above financial markets besides dealing in basic products also deal in Derivatives [Ex. options and futures] and Structured Finance [Ex. Capital protected term deposit with part/full return linked to Nifty index or Gold index]

The other types of Financial /Non-Financial Markets

Ø Insurance Market

Ø Pension fund Market

Ø Commodities Market

Ø Real Estate Market

In an economy the financial and non-financial markets are closely inter-linked

Money Markets

It is the center for dealings in monetary assets of short term nature upto 1 year
It has both organized and unorganized components.
The major players in the organized markets are RBI, Banks, Financial Institutions, Insurance & Pension Funds, Mutual Funds, Corporate ,Securities Trading Corporation of India, Discount and Finance House of India , NBFCs, FIIs
RBI plays a dominant role in the money markets through its open market operations, issuance of T-bills, Liquidity adjustment facilities [LAF] comprising of Repos/ Reverse Repos and Monetary stabilization System
RBI is the chief regulator and supervisor of the money market
Key money market instruments are Treasury Bill [T-bill14,28,91,182 & 364 days],Commercial Paper [CP7 to 364 days], Certificate of Deposit [CD],

Call Money (MIBOR/MIBID-overnight to upto 1 year) linked instruments, etc

The unorganized sector consists of indigenous bankers, money lenders and mainly caters to the needs of rural people and small borrowers.
The role of the unorganized sector is on the decline diminished with increase in coverage of the organized banking sector and increase in flow of credit to small borrowers on the back of RBI’s guidelines

Capital Market

· It is a market for long-term debt and equity shares. In this market, the capital funds comprising of both equity and debt are issued and traded

· This also includes private placement sources of debt and equity as well as organized markets like stock exchanges

· Capital market can be further divided into primary and secondary markets

· The primary and secondary markets has components of both wholesale and retail markets

· Primary Market

v The primary markets deals with issue of new instruments by both the government sector and corporate Sector

v The chief instruments in the primary market comprises of Shares [initial / follow-on Public Offer (IPOs)] issued by corporate and public sector undertakings , Bonds issued by central and state governments ,public sector units and other entities and Debentures issued by corporate and other entities

v The capital formation takes place in the primary market. In the primary market, securities are offered to public for subscription for the purpose of raising capital or fund.

· Secondary Market

Ø Secondary market is an equity /debt trading avenue in which already existing/pre- issued securities are traded amongst investors

Ø Secondary market could be either auction or dealer market. While stock exchange is the part of an auction market, Over-the-Counter (OTC) is a part of the dealer market

Ø The secondary market provides the vital components of liquidity, tradedability, transferability, price discovery, depth, breadth and information flow

Ø An active secondary market actually promotes the primary market and capital formation because it provides an assured continuous market to the investors

Ø The secondary market provides an efficient platform for trading of securities

Ø For the management of the company, secondary equity markets serve as a monitoring and control conduit—by facilitating value-enhancing control activities, enabling implementation of incentive-based management contracts, and aggregating information (via price discovery) that guides management decisions.

There is a symbiotic relationship between the primary and secondary market.

The major players in the primary market are also significant players in the secondary market

The capital market consists of 23 stock exchanges including the National Stock Exchange [NSE], Bombay Stock Exchange [BSE], Over the Counter Exchange of India [OTCEI] and Interconnected Stock Exchange of India Ltd [ISEIL] where existing equity and debt instruments are traded

With a view to protect investors interest and orderly development of the capital of the capital market Securities and Exchange Board of India [SEBI] regulates the capital market and intermediaries

The leading Intermediaries in the Capital Market are:

Merchant Banks	Lead Banks
Book running Lead Managing Banks	Registrars
Depositories & Depository participants	Brokerage Firms
Primary Dealers / Satellite Dealers	Clearing Houses
Banks	Underwriters
Credit Rating Agencies	Trustees to Debenture/Bonds

The Seven new derivative products suggested by SEBI are:

1. Mini contracts on equity indices

2. Options with longer life

3. Volatility index and F & O contracts

4. Options on futures

5. Bond indices and F& O contracts

6. Exchange traded currency (foreign exchange) futures

7. Options and exchange traded products

Ø The idea of the above is to have more products in the Indian markets
so that the market would grow and growth would protect the investors

Ø The new products will provide investors with large range of risk mitigation

Ø The above products can create more activity in the Indian on-shore markets

· Foreign Exchange Market:

v Trading in currencies take place in this market

v It encompasses all transactions involving the exchange of different monetary units for each other

v It also deals in foreign exchange derivatives like options, futures and swaps

v The inter-bank transactions play a major role which account for 90% of the volume traded. The rest can be ascribed to customers needs, import/export and other receivables

v The foreign exchange market is intimately linked to the interbank or call money market .This is also fostered by permitting banks to borrow and deposits fund abroad

v It is not a physical place. It is a network of banks, dealers, brokers, corporate, individuals who are dispersed throughout the country

v It is essentially on Over the Counter trade [OTC]

v RBI and SEBI jointly regulate the exchange traded currency swaps

v The efficiency of the financial system and integration with global financial system depends to a large extent how cheaply and quickly foreign exchange transactions can be effected

· Credit Market

v Credit market refers to market for loans, lease finance and other financial
products [like letter of credit [LC], bank guarantee [BG] etc.

v This market is a vital source for investors [ who otherwise are not able
to/competent to invest in money & capital markets] and for borrowers [ who otherwise are not able to /eligibleparticipate in money and capital markets]

v Bank savings and fixed deposit accounts offer investors the best,easy and safe avenue for investors

v And to every type of borrower [ individual, rural/urban labor,SME,NGO,SHG,corporate] banks offer vide variety of loans and financial support/advisory

v Besides banks provide thru ATM operated credit/debit cards easily accessible alternate source of credit

v Through LC & BG and by offering escrow/nostro/vostro/correspondent & various funds transfer facilities banks promote business and economic transactions globally 24X7

v Banks [ banks in various sectors like public, private, foreign, cooperative, rural, urban,gramin,housing finance,agricultural finance,industrial finance,etc] are the backbone of credit market

v Credit availability thru credit market fosters productivity, flexibility and innovation in the financial and economic system besides sharing the risks with other financial markets

v The net work of banks in the credit market promotes financial inclusion and financial awareness absolutely essential for effective equitable economic growth

· Securitization Market

It is an very important segment of the Indian Financial System. This market mainly caters to Mortgaged Backed Securitisation [MBS] and Asset Backed Securitisation [ABS] covering loan asset categories such as housing loans, credit card receivables, Consumer loans ,receivables from new old motor vehicles, etc. Prepayment protection is incorporated through issuance of Pass Through Certificates [PTC].The issuance volume grew by 121% to Rs.308 billion during FY 2005 over previous year.

Major Issues in Indian Financial System

The position of Indian Financial System in the pre-reform period I.e prior to 1990

Were as follows

v Economy was closed and controlled with Government and Government Sector playing a dominant role

v Government ‘s dominated the ownership of Banks and Financial Institutions - ownership, regulation, borrowing became intertwined

v Government’s policies regulated the borrowing and lending pattern of the Financial Sector and commercial decision took a back seat

v Government was both a major borrower and also provider of funds

v The Financial Sector essentially catered to the massive needs of planned development where the public sector played a dominant role

v Financial intermediaries fully met the credit for productive needs at the cost of safety and security of the saver – borrowers defaulted on loans without any adverse action -NPA levels ranged high at 14.3% gross and 7.4% net

v Lack of proper pricing of factor endowments -The cost of capital was artificially kept low which had serious repercussions on the viability of the Indian financial sector

v In a capital scarce economy interest rate was used to encourage the use of capital and discourage financial savings

v Interest rate was strictly regulated and not related to market determined rates.

v Government ran high fiscal deficit and then automatically monetized the deficit financing by printing notes through RBI

v Government imposed prohibitive reserve requirement [pre-emption in the form of CRR and SLR] as high as 53.5%

v Excessive structural and micro regulation inhibited financial innovation and increased transaction costs

v The Financial Sector was plagued by inadequate level of prudential regulation, lack of transparency and inadequate disclosures

v Money Market and Capital Market was poorly developed

v Outdated technological and institutional structures made capital markets and rest of financial system inefficient

v Indian industry /business was very much dependent on borrowed funds at cheaper rate of interest and was unable to adjust to market related interest rate

v The unorganized sector of borrowers had to borrow at very high rate of interest and stiff terms and had to depend on unorganized sector for funds

v The other serious problems in the financial system were the lack of flexibility in intermediary behavior and the segmentation of various markets and sets of financial intermediaries.

Forces which impacted IFS in the pre-reform period [< 1990] were as follows:

Controlled economy: Economy was closed and controlled with Government and Government Sector playing a dominant role
Govt’s ownership: Govt.dominated the ownership of Banks and Financial Institutions – ownership, regulation, borrowing became intertwined
Govt’s regulation: Govt. regulated the borrowing and lending pattern of the Financial Sector and commercial decision took a back seat
Govt. major player: Government was both a major borrower and also provider of funds
Main focus on planned development: The Financial Sector essentially catered mainly to the massive needs of planned development where the public sector played a dominant role
Borrower centric & saver ignored: Financial intermediaries fully met the credit for productive needs at the cost of safety and security of the saver – borrowers defaulted on loans without any adverse action - NPA levels ranged high at 14.3% gross and 7.4% net
Cost of capital artificially low: Lack of proper pricing of factor endowments -The cost of capital was artificially kept low which had serious repercussions on the viability of the Indian financial sector
Misuse of interest rate tool: In a capital scarce economy interest rate was used to encourage the use of capital and discourage financial savings
Interest rate regulated: Interest rate was strictly regulated and not related to market determined rates.
High fiscal deficit: Government ran high fiscal deficit and then automatically monetized the deficit financing by printing notes through RBI
Prohibitive reserve rates: Government imposed prohibitive reserve requirement [pre-emption in the form of CRR and SLR] of as high as 53.5%
Excessive regulations: Excessive structural and micro regulation inhibited financial innovation and increased transaction costs
Inadequate prudential regulation: The Financial Sector was plagued by inadequate level of prudential regulation, lack of transparency and inadequate disclosures
Underdeveloped markets: Money Market and Capital Market was poorly developed
Outdated technology & systems: Outdated technological and institutional structures made capital markets and rest of financial system inefficient
Overdependence on cheap borrowings: The Indian industry was very much dependent on borrowed funds at cheaper rate of interest and was unable to adjust to market related interest rate
High cost of unorganized sector: The unorganized sector of borrowers had to borrow at very high rate of interest and stiff terms and had to depend on unorganized sector for funds
Behavior & segmentation of intermediaries: The other serious problems in the financial system were the lack of flexibility in intermediary behavior and the segmentation of various markets and sets of financial intermediaries.

Factors which could positively impact growth and development of IFS:

Reduce the excessive reliance on banking systems: financial systems in emerging market and developing economies have been dominated by their banking systems. Excessive reliance on the banking system, however, makes the financial system vulnerable to shocks and exacerbates the crises
Expeditious development of financial markets and enhancement in the role of central bank and other regulators
Development of vibrant & efficient money market to enable RBI to convey
impulses of monetary policies to real economy
Development of credit market on sound lines to meet the increasing credit
demands on the basis of proper credit risk analysis
Development of deep and liquid government securities market both
primary and secondary
Development of vibrant foreign exchange market with proper market
structure, players and instruments
Development of vibrant, deep and liquid capital markets. Enhancement in
the roles of private equity market and corporate debt market
Development of currency-bond-derivative nexus and effective well defined
and properly regulated market structure and trading platform for the same
Facilitate effective smooth integration of financial markets locally and globally. Measures to strengthen the process of integration of various segments of financial markets
Address squarely and effectively issues with regard Fiscal Responsibility Management [FRBM] and role of Govt. and RBI [triple role of RBI]
Expedite the process of capital account convertibility
Reduction in the rate of reserves [CRR and SLR] and reduction in interest
rates
Effective and time-bound implementation of Basel II norms by Banks and FIs
Strict enforcement of prudential regulations by banks and FIs
Increase in spread of banking and other financial services and reduction in the costs of such services
Financial inclusion to spread banking culture amongst masses and ensure credit to the needy
Reduction the scope and impact of unorganized finance sector
Gradual calibrated increase in FDI investment, FIIs flows and investment
by Indian entities and household in abroad

MyNotes

Sunday, 1 July 2012

Indian Financial System 1