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Indian Financial System

Notes Institutions Regulated by the Reserve Bank of India

The institutions regulated by the RBI are:
 Nationalised Commercial Banks
 Specialised Banks

 Registered Finance Companies
 Registered Finance Leasing Establishments
 Micro-Finance Institutions.

Institutions Not Regulated by the Reserve Bank of India

Certain financial institutions are not regulated by the Reserve Bank of India. These include
securities firms, investment banks and mutual funds which come under the purview of the SEBI,
Insurance Companies and Insurance Brokers which are regulated by the IRDA, etc.

Financial Markets

The Financial Market, which is the market for credit and capital, can be divided into the Money
Market and the Capital Market. The Money Market is the market for short-term interest- bearing
assets.

Example:
1. Treasury bills
2. Commercial paper
3. Certificates of deposits

The major task of the Money Market is to facilitate the liquidity management in the economy.
The Capital Market is the market for trading in medium – long term assets.

Example:
1. Treasury bonds
2. Private debt securities (bonds and debentures)

3. Equities (shares)
The main purpose of the Capital Market is to facilitate the raising of long-term funds.

Did u know? The main issuers in the
1. Money Market are the Government, banks and private companies, while the main
investors are banks, insurance companies and pension and provident funds.
2. Capital Market are the Government, banks and private companies, while the main
investors are pension and provident funds and insurance companies.

The Financial Market can be also be classified according to instruments, such as the debt market
and the equity market. The debt market is also known as the Fixed Income Securities Market and
its segments are the Government Securities Market (Treasury bills and bonds) and the Private

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