2. Contents
1. Financial Intermediation.
i. Financial Intermediation
ii. Financial Intermediaries and its functions.
2. Financial System.
i. Indian Financial System
ii. Financial Institutions
iii. Financial Markets
iv. Financial Assets
v. Financial Services
3. 1. Financial Intermediation
Financial intermediation is the process that involves the movement of funds from
lenders to borrowers. Here financial intermediaries acts as a factor in this case,
managing the cash flow.
Examples – Banks, Insurance firms, market, etc.
4. Financial Intermediaries
A financial intermediary is an entity that acts as
the middleman between two parties in a
financial transaction.
It facilitates the channeling of funds between
depositors and borrowers indirectly.
Example :-
Depositor give funds to an intermediary institution
(such as IDBI Bank), and that institution gives those
funds to borrower. This may be in the form of loans
and advances.
DEPOSITOR BORROWER
Figure (i): Financial Intermediary
5. Functions of financial Intermediaries
A financial intermediary performs the following functions:
Regulation of economy.
Providing loans.
Investments.
Risk Management
6. The financial system enables lenders and borrowers to exchange funds.
India has a financial system that is controlled by independent
regulators in the sectors of insurance, banking, capital market and
various sectors.
The following are the major components of Indian financial system
• Financial Institution
• Financial Markets
• Financial Assets
• Financial Services
2. FINANCIAL SYSTEM
8. Financial Institutions
A financial institution is a company engaged in the business of dealing
with financial and monetary transactions such as deposits , loans ,
investments and currency exchange. For example commercial banks ,
investment banks, Insurance firms etc.
9. Financial Markets
Financial markets refer to the institutional arrangements for dealing in
financial assets and credit instruments of different types such as
currency, cheques, bank deposits, bills, bonds etc.
10. Financial Assets
A financial asset is a liquid asset that gets its value from a contractual
right or ownership claim. Cash, stocks, bonds, mutual funds, and bank
deposits are all are examples of financial assets.
11. Financial Services
The term financial services can be defined as “activities, benefits, and
satisfactions, connected with the sale of money, that offer to users and
customers, financial related value. within the financial services industry
the main sectors are banks, financial institutions, and non-banking
financial companies.
