Page 10 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 1: Financial System

the policyholders, to regulate, promote and ensure orderly growth of the insurance industry Notes
and for matters connected therewith or incidental thereto.

Financial Institutions

The financial system consists of many financial institutions. While most of them are regulated
by the Reserve Bank, there are some which it manages just indirectly.
Institutions regulated by the Reserve Bank of India

The institutions regulated by the RBI are:
1. Nationalised Commercial Banks

2. Specialised Banks
3. Registered Finance Companies
4. Registered Finance Leasing Establishments
5. 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.

Examples: 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.

Examples: 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.

LOVELY PROFESSIONAL UNIVERSITY 5