Financial Management Institutions in India
- 2. FINANCIAL INSTITUTIONS ďFinance refers to funds needed to carry out production activities. ďFunds are needed for meeting current requirements or day to day expenses and for buying capital goods. ďA business unit, factory or a workshop needs funds for paying wages and salaries, for buying raw materials, etc.
- 3. FINANCIAL INSTITUTIONS ⢠Financial institution is an institution or organization that provides financial services for its clients, members and society. ⢠Financial institutions include banks, credit unions, insurance companies, asset management firms, and stock brokerages, among others. ⢠These institutions are responsible for distributing financial resources in a planned way to the potential users. ⢠Act as financial intermediaries. ⢠Most financial institutions are regulated by the Government.
- 4. Role of Financial Institutions
- 5. Functions of Financial Institution ⢠Intermediary services ⢠Depository Services ⢠Credit Provision ⢠Investment Services. ⢠Risk Management ⢠Payment and Settlement Services ⢠Asset Management ⢠Financial Advisory
- 6. Type of Financial Institutions Two major categories: 1. Banking financial company(BFCs) 2. Non banking financial company(NBFCs) ď§Banking institutions can deal with banking instruments like cheque, draft, pay order. ď§Non banking institutions can not use these instruments.
- 7. Financial Institutions ⢠Central Banks ⢠Retail and Commercial Banks ⢠Credit Unions ⢠Savings and Loan Associations ⢠Investment Banks and Companies ⢠Brokerage Firms ⢠Insurance Companies ⢠Mortgage Companies
- 8. CENTRAL BANKS ď A central bank is a public institution that usually issues the currency, regulates the money supply and controls the interest rates in a country. ď Central Banks oversee the commercial banking system of their respective countries. ď In contrast to a commercial bank, a central bank possesses a monopoly on printing the national currency, which usually serves as the nation's legal tender. ď Eg: RBI
- 9. ďThe Reserve Bank of India was established in 1935 as a private shareholder's bank. It is the apex bank in the banking structure and leader of the money market. Major functions : ⢠Monopoly of currency issue ⢠Banker to the Government ⢠Banker's Bank ⢠Credit control RESERVE BANK OF INDIA
- 10. COMMERCIAL BANKS ⢠Commercial banks offer a wide range of corporate/individual financial services that address the specific needs of people/enterprises. ⢠They provide deposit, loan and trading facilities but will not service investment activities in financial markets. ⢠The term commercial bank is used to differentiate these banks from investment banks, which are primarily engaged in the financial markets. ⢠Commercial banks are also differentiated from retail banks that cater to individual clients only. For eg: Citigroup
- 11. BANKING INSTITUTIONS ⢠Banking institutions are those institutions which provide banking and other financial services to their customers and society such as ⢠Accepting deposits ⢠Providing loans ⢠Cash management services ⢠Portfolio management services
- 12. BANKING INSTITUTIONS Indian banking system consists of the following divisions A)Public sector banks 1) State Bank of India 2) Nationalized banks - 11 B)Private sector banks a)Indian private banks - 21 b)Foreign private banks - 46
- 13. BANKING INSTITUTIONS C)Co-operative banks 1) Urban cooperative banks - 1469 2) State cooperative banks - 33 3) Central cooperative banks - 352 D)Regional rural banks - 43
- 14. BANKING INSTITUTIONS A)Public sector banks 1) State bank of India- State bank of India was established under SBI act 1955, initially 100% stake of SBI owner was Reserve bank of India. 2) Nationalized banks- Nationalized bank was established under Banking company act 1970,1980, 100% ownership of nationalized bank held by government of India.
- 15. BANKING INSTITUTIONS B)Private sector banks 1)Indian private bank- Banks governed by Indian financial institutions like ICICI bank, HDFC bank 2)Foreign private bank- Banks governed by foreign institutions like Standard Chartered(USA) bank, HSBC
- 16. BANKING INSTITUTIONS C)Co-operative banks- These type of banks are governed by co-operative societies 1)Urban co-operative societies- These type of banks are governed by urban co-operative society. 2)State co-operative banks- These type of banks work on state level. 3)Central co-operative banks- These type of banks work on district level.
- 17. BANKING INSTITUTIONS D)Regional rural banks- RRB banks were established under RRB act 1976. These banks are closely related with the commercial banks which are specified by the central government with lead bank scheme.
- 18. Non Banking Financial Company (NBFCs) â˘NBFCs at present consist of a heterogeneous group of institutions that cater to a wide range of financial requirements. â˘These type of companies are involved in promoting new company, expansion and meeting the financial requirement of the company for economic development