This PPT for Financial Markets and Institutions - Introduction

2. VIVEKANANDA COLLEGE
College with Potential for Excellence
Reaccredited With ‘A’ Grade (CGPA 3.59 out of 4) by NAAC
Residential &Autonomous - A Gurukula Institute of Life Training
Affiliated to Madurai Kamaraj University
Tiruvedakam West, Madurai-625 214
Tamil Nadu
PG and Research Department of Commerce

3. Vivekananda College
Tiruvedakam West
Madurai
PG & Research Department of
Commerce

4. Financial Markets and Institutions
Date: 08.12.2020 (Friday)

5. Dr.K.CHELLAPANDIAN
M.Com., MBA., M.Sc (Psy)., M.Phil., B.Ed., PGDCA., DGT., Ph.D., NET
Assistant Professor of Commerce
Vivekananda College
Tiruvedakam West
Madurai

6. Dr.K.CHELLAPANDIAN
M.Com., MBA., M.Sc (Psy)., M.Phil., B.Ed., PGDCA., DGT., Ph.D., NET
Vivekananda College
Tiruvedakam West
Madurai
Assistant Prof
in Commerce

7. Financial Markets and Institutions

8. SEMESTER – IV
(For those who join in June 2018 and after)
PART – III : Core Course Theory
Course Title : FINANCIAL MARKETS AND SERVICES
Course Code: 41CT41 Hours per week: 6 Credit: 4
CIA: 25 Marks ESE: 75 Marks Total Marks: 100
UNIT-I [18 Hours]
Financial System – Functions - Development of Financial System in India - Financial
Markets – Classification –– Financial Instruments – Money Market – Features –
Composition of Money Market – Features of Indian Money Market.
UNIT-II [18 Hours]
Capital Market – Types - New Issues Market – Functions of New Issue Market –
Methods of New Issues – Secondary Market – Organisation and Functions of Stock
Exchange – Method of Trading in a Stock Exchange -Listing of Securities – Advantages
of Listing – Procedure for Listing – OTCEI – NSE – SEBI – Functions of SEBI
UNIT-III [18 Hours]
Financial Services – Meaning – Fee Based Services – Fund Based Services – Credit
Rating Agencies – Mutual Funds – Classification of Funds - Asset Securitisation
UNIT-IV [18 Hours]
Leasing and Hire Purchase – Housing Finance – Credit Cards – Venture Capital.
UNIT-V [18 Hours]
Merchant Banking – Services of Merchant Banking – Progress of Merchant Banking in
India – Factoring, Forfaiting and Bill Discounting - Benefits – Functions - Drawbacks
TEXT BOOK:
Gorden and Natarajan., “Financial Markets and Institutions”, Himalaya Publishing House,
New Delhi. 2013.

9. THE FINANCIAL SYSTEM IN INDIA
Introduction:
 The economic development of any country depends upon the
existence of a well organised financial system.
 It is the financial system which supplies the necessary
financial inputs for the production of goods and services which in
turn promote the well-being and standard of living of the people
of a country.
 Thus, the 'financial system' is a broader term which brings
under its fold the financial markets and the financial institutions
which support the system.

10. Introduction….
 The major assets traded in the financial system are money
and monetary assets.
 The responsibility of the financial system is to mobilise the
savings in the form of money and monetary assets and invest
them to productive ventures.
 An efficient functioning of the financial system facilitates the
free flow of funds to more productive activities and thus
promotes investment.
 Thus, the financial system provides the intermediation
between savers and investors and promotes faster economic
development.

11. Functions of the Financial System
1. Ensures Liquidity
2. Mobilisation of Savings
3. Settlement of Commercial Transactions
4. Implementation of Economic Policies of Government
5. Risk Transformation Function

12. 1. Ensures Liquidity
The financial system provides liquidity in respect of many
financial assets like equity, debt instruments etc. This encourage
investors to invest in financial assets. Indirectly this help corporate
to raise funds from financial markets through issue of financial
instruments. The financial system ensures liquidity for many of
these financial assets through strengthening secondary market.

13. 2. Mobilisation of Savings
The financial system encourage individuals, corporate, and
others to save for the purpose of economic development. The
financial intermediaries play a significant role in mobilization of
savings & making available funds to the entrepreneurs for
investments. The household & corporate sectors saves through
use of different financial products. For example, household
sector uses bank deposit products & mutual funds products for
the savings.

14. 3. Settlement of Commercial Transactions
The financial system facilitates settlement of commercial
transactions & financial claims arising out of sale & purchase of
goods & Services. For this money is used as an instrument which is
legally recognized. Therefore values of all transactions including sale
& purchase of goods and services are expressed in terms of money
only. Over a period of time, the financial system has evolved other
instruments like cheques, demand drafts, credit card etc. for
settlement of economic transactions.
These instruments are recognized by law as a substitute for
money. In view of this, market participants use new instruments like
credit and debit card as well as new facilities like internet banking
and mobile banking for settlement of business and commercial
transactions

15. 4) Implementation of Economic Policies of Government
The presence of strong financial system helps the
Government to frame appropriate economic policies for increasing
savings & investment, achieving desired economic growth in industry
and agriculture sector, etc.
It also facilities government borrowings from the domestic
market for meeting planned budgetary expenditures. It also helps
Government to attract foreign capital for its investment in
domestic market.

16. 5. Risk Transformation Function
The financial system not only facilitates to execute business
and commercial transactions but also helps to manage risk in such
transactions. On account of deregulation of financial markets,
participants are exposed to various market risk. The financial
system offers various financial products like derivative etc. to
manage risk in commercial transactions.
The players who are part of financial system use variety of
derivative products or financial contracts like forward futures,
options and swaps to manage variety types of risk in commercial and
business transactions.

17. FINANCIAL COMPONENTS
An understanding of the financial system requires an
understanding of the following important concepts:
(i) Financial assets.
(ii) Financial intermediaries.
(iii) Financial markets.
(iv) Financial rates of return.
(V) Financial instruments.

25. Your valuable feedback and questions are welcome to this mail id
kchellapandian@vivekanandacollege.ac.in
&
kc.nithish@gmail.com

26. Thank You
By
Dr.K.CHELLAPANDIAN
Assistant Professor of Commerce
Vivekananda College
Tiruvedakam West
Madurai – 625 234
Tamil Nadu