Components of Financial System in English.............

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Write the components of financial system.

Components of Financial System

Components of the financial system can be discussed as under:

1. Financial Institutions :

Financial institutions collect savings from the savers. They provide credit and other financial services. Financial institutions deals in deposits, loans, securities etc. Financial institutions can be divided as under:

(i) Financial Intermediaries: These financial institutions, do mediatorship between lenders and borrowers e.g. commercial banks, credit societies, co-operative banks etc. are intermediaries between moneylenders and borrowers.

Financial intermediaries are of following two types:

Banking institutions / Intermediaries (BIS) – Commercial banks, co operative banks,
Non-banking financial institutions / intermediaries (NBFIs) Life Insurance Corporation of India (LIC), Unit Trust of India, Mutual funds etc.

(ii) Non-Financial Intermediaries: They purchase financial assets and sell other type of financial assets.

(iii) Regulatory Institutions: This is the apex monetary and banking institution of the country. In India, Reserve Bank of India is regulatory institution of the country.

2. Financial Markets:

Financial market is related to those places where dealing is made in financial assets. Depository institutions like banks etc. accept deposits while non-depository institutions make insurance against risk.

Following are the types of financial markets:

Organised Financial Markets: These work in the modern style These are controlled by monetary officers. These are of the following two types :

(a) Money Market: Short-term funds are dealt here.

Following are the main components (sub-markets) of money market –

Call money market
Bill market
Treasury bills market

Following are participants of organised money market:

Reserve Bank of India (RBI)
Scheduled banks.
Co-operative banks
General Insurance Corporation of India (GIC)
Securities Trading Corporation of India (STCI)
Foreign Exchange Bank
Unit Trust of India (UTI)
Life Insurance Corporation of India (LIC).

(b) Capital Market: Various financial institutions provide long term. fund by collecting individual savings. Capital market is controlled by the Securities and Exchange Board of India.

Following are the main institutions :

Industrial Credit and Investment Corporation of India (ICICI),
Industrial Finance Corporation of India (IFCI),
Industrial Reconstruction Board of India (IRBI),
Industrial Development Bank of India IDBI,
General Insurance Corporation of India (GIC),
Small Industries Development Bank of India (SIDBI),
Mutual Funds (MFs),
Merchant bankers,
State Industrial Development Corporations (SIDCs)
State Financial Institutions,
Leasing companies,
Commercial bank, etc.

Following are the types of capital market.

There are two types of capital market:

(i) Government Security Market or Gilt-Edged Securities Market: The Central Government, state governments and local bodies sell their securities to public, financial institutions, banks etc. these securities or bonds are supported by the RBI.

(ii) Industrial Security Market: It deals in new and old industrial securities.

New issues market or primary market
Old issue or secondary market.

(iii) Unorganised Financial Market: it contains indigenous bankers etc.

3. Financial Instruments:

These are those instruments which as financial etc. represents financial claims on assets. These are also called securities. These are as under:

Bills of exchange
Depository certificates
Short call credit
Treasury bills
Industrial securities etc.

4. Financial Services:

Some institutions like risk capital companies, merchant banking, factoring institutions, provide financial services. Following institutions provide financial services :