types of financial intermediaries

1. DAZZLING DAFFODILS
MACRO ECONOMICS
JAYALAKSHMI.S
CHITRA.M.V
SHWETHA.N.T
MANASA.H.B
SHRAVANI.R
SPOORTHI.A.S
VINDHYA.N.S

2. FINANCIAL
INTERMEDIARIES

3. OVERVIEW
 What are Financial Intermediaries?
 Functions Performed
 Role
 Types of Financial Intermediaries in
India.

4. What are
Financial Intermediaries?
Financial intermediaries are the institutions that connect
borrowers and lenders by accepting funds from lenders
and loaning funds to borrowers.
Financial intermediation consists of channelling funds
between surplus and deficit agents.
The classic example of a Financial Intermediary is a
bank that transforms bank deposits into bank loans.

5. Functions Performed
by
Financial Intermediaries
Maturity Transformation-
Converting short term liabilities to long
term assets.
Risk Transformation-
Converting risky investments into
relatively risk free ones.
Convenience Denomination-
Matching small deposits with large loan and
large deposits with small loans.

6. Role of
Financial Intermediaries
Transfer of funds from savers to investors
Types of Investments
a. Direct Investment
For example, purchasing a portfolio of
stocks and bonds
b. Indirect Investment
For example, purchasing an equity claim
issued by an investment company

7. Continued…
Providing Maturity Intermediation
Reducing Risk Through Diversification
Reducing Costs of Contracting and
Information Processing
Providing a Payments Mechanism

8. TYPES OF
Financial Intermediaries

9. TYPES OF
Financial Intermediaries
1.Reserve Bank of India(RBI)
2.Commercial Banks
3.Savings Bank
4.Life Insurance
5.General Insurance
6.Trusts
7.Investment Companies
8.Mortgage Banks
9.Government Lending Institutions

10. 1. RESERVE BANK OF
INDIA
EVOLUTION
• Established on 1st April 1935 under
Reserve Bank of India Act, 1934
•Its head quarters is in Mumbai.
•226 offices in which 4 are located in metropolitan
cities.

11. INTRODU
CTION The RBI is the apex financial
institution of our banking
systems.
 Central arch–pillar of the monitory and fiscal
framework in our country.
 Supervises, regulates and controls the
functioning of the commercial banks in our
country.

12. RBI works as a central bank where commercial banks are
account holders and can deposit money.RBI maintains
banking accounts of all scheduled banks.
The RBI controls and supervises the overall operations of
all banks in India. These banks may be:
- Public sector banks
- Private sector banks
- Foreign banks
- Co-operative banks, or
- Regional rural banks
RBI – BANKER’S BANK

13. MAIN FUNCTIONS
OF RBI
MONETARY
AUTHORITY
MANAGER OF
EXCHANGE
CONTROL
ISSUER OF
CURRENCY
DEVELOPMENTAL
ROLE
RELATED
FUNCTIONS

14. MONETARY AUTHORITY
The RBI formulates,
implements and monitors
the monetary policies.
Maintaining price stability and ensuring an
adequate flow of credit to productive sectors.
The RBI controls the monetary supply,
monitors economic indicators like Gross Domestic
Product and takes measures to check on Inflation.

15. MANAGER OF
EXCHANGE CONTROL
Foreign exchange is a system of
converting one nation’s currency
into another and of transferring
money from one country to
another.
RBI regulates foreign exchange through
Foreign Exchange Management Act, 1999
(FEMA)

16. Facilitates
external
trade and
payments
Promotes for the orderly
development and
maintenance of FOREX
market in India
Consolidates
and amends
the law
relating to
foreign
exchange
FOREIGN
EXCHANGE
MANAGEMENT
ACT,1999

17. ISSUER OF CURRENCY
Section 22 of the RBI Act, gives authority to the RBI
to issue currency notes. The RBI also takes action
to control circulation of fake currency.
The bank issues and exchanges
currency notes and coins and destroys
the same when they are not fit for
circulation.

18. DEVELOPMENTAL
ROLE
The Central Bank performs a wide range of
promotional functions to support national
objectives and industries.
The RBI faces a lot of inter-sectoral and
local inflation-related problems. Some of
this problems are results of the dominant
part of the public sector.

19. RELATED FUNCTIONS
It acts as a banker to the central and state
Government.
Example:
In 1988 The National Housing Bank(NHB) was
established to promote private real-estate
acquisition.
It also maintains banking accounts of all
scheduled banks.

20. REPO
BANK RATE
REPO RATE
REVERSE REPO RATE
CASH RESERVE RATIO (CRR)
STATUTORY LIQUIDITY RATIO(SLR)
BASE RATE
SAVINGS DEPOSIT RATE
TERM DEPOSIT RATE
8.50%
6.75%
6.50%
4%
21.50%
10%-
10.25%
4%
8% - 9%
Policy Rates, Reserve Ratios, Lending and
Deposit Rates as on 2015

21. WHY did RBI announce for the
withdrawal of currency notes
issued before 2005?

22. The Reserve Bank of India’s move to withdraw currency
notes issued before 2005 is going to be a major exercise
for the banking sector.
It will kill two birds with one stone:
-Rationalization of currency notes with better security
features and
-Flushing out of unaccounted money stored in bank and
personal lockers.
People across the country will have to exchange 36,984
million pieces of notes issued before 2005, which is
valued at Rs 3,61,229 crore .

23. 2. COMMERCIAL
BANKSCommercial bank is a type of bank that
provides services such as accepting
deposits, making business loans and
offering basic investment products.

24. Role of
COMMERCIAL BANKS
 Banks promotes capital formation- Accepts
deposits.
 Investment in new enterprises-
For entrepreneurs.
 Promotion of trade and industry-
Bank Instruments.
 Development of agriculture and SSIs in
Rural areas.

25.  Balanced development of different regions-
Transfer of surplus.
 Influencing economic activities-
Availability of Credit.
 Implementation of monetary policy-
Price stability and promotes Economic Growth.
 Monetisation of the economy-
Non-monetised to Monetised.
 Export promotion cells-
Encourages Exports for economic

28. FUNCTIONS OF
COMMERCIAL BANKS
PRIMARY
FUNCTIONS
SECONDARY
FUNCTIONS

31. 3. SAVINGS BANKS
A savings bank is a financial
institution, whose primary function
is accepting savings deposits and
paying interests on those deposits.

32. FUNCTIONS OF SAVINGS
BANKS
 Assemble capital of the community, conserve idle
wealth, and having aggregated into sizable funds,
loan it to business enterprises.
 Has the capacity to save but not to use funds for
themselves or to invest.
 They promote thrift of money.
Builds up independence and stability of character
and improves social and political life of the
community.

33. The rate of interest payable is very nominal on
saving accounts. At present it is between 4% to
6% p.a. in India.
A minimum amount has to be kept on saving
account to keep it functioning.
Generally, equated monthly installments (EMI)
for housing loan, personal loan, car loan, etc., are
paid (routed) through saving bank account.

34. Savings Bank
a. Name of Scheme Savings Bank A/c
b. Scheme available At all branches
c. Eligible Individual - Single Accounts, Two or more
individuals in Joint Accounts , Illiterate Persons
Blind persons, Minors, Associations, Clubs,
Societies, etc. Trusts, Institutions/Agencies
specifically permitted by the RBI
d. Initial Deposit Rs.500/- for Cheque book operated and
Rs.100/- for non cheque book a/cs,
For Pensioners Rs.100/- and Rs.10/- respectively
for cheque book and non cheque book a/cs

35. e. Incentives 1.For Cheque Operated Accounts –
Free 50 Cheque Leaves P.A
2.No Ledger folio/ Transaction
charges
3.Free GLOBAL DEBIT CUM ATM
Card (Annual Charges applicable
from next year) with free Star
Sandesh (SMS) on debit
transactions
4.Free Internet Banking facility
5.Free Fund Transfer Through
Internet Banking
6.Unlimited Internet & ATM
transactions (Only at BOI ATMs)

36. f. Product available specially
to BOI customers
BOI-National Swasthya Bima Policy
floater mediclaim policy of NICL available
at low premium
7.Free access to BOI ATMs under Cash
Tree
8.Free SMS and Telebanking,
9.Personalised cheque book on request at
select centres
10.Free utility bills payment facility through
E-pay

37. TYPES OF ACCOUNTS
A. Savings Account
The main objective of saving account is to promote
savings.
There is no restriction on the number and amount of
deposits. However, in India, mandatory PAN (Permanent
Account Number) details are required to be furnished for
doing cash transactions exceeding र50,000.
Withdrawals are allowed subject to certain restrictions.
The money can be withdrawn either by cheques or
withdrawal slip of the respective bank.

38. B. Fixed deposits
-It is a financial institution where a sum is
given to bank.
- The entity pays specified percentage of
interest for the time duration of the deposit.
- Fixed deposit can be opened for a minimum
period of 7 days to a maximum of 10 years.
- In this case the deposit cannot be withdrawn
before the maturity date.

39. C. Recurring Deposit Account
- Certain fixed amount is accepted every month
for a specified period and the total amount is
repaid with interest at the end of particular fixed
period.
-Develops regular saving habit among the public.
- The period of deposit is minimum of six months
and maximum of 10 years.

40. Insurance is an arrangement by
which a company or the state
undertakes to provide a guarantee
of compensation for specified loss,
damage, illness, or death in return
for payment of a specified
premium.

42. 4. LIFE INSURANCE
Life insurance in a contract between the insured
and the insurer, where the insurer promises to
pay a designated beneficiary a sum of money in
exchange for a premium, upon the death the
insured person.
First life insurance entity in India:
Oriental Life Insurance Company in 1818 –
Established in Calcutta

43. Objectives of LIC of India
1) To spread and provide life insurance to the
masses at a reasonable cost.
2) To spread life insurance widely and in
particular to the rural areas.
3) To maximize mobilization of people’s
savings by making insurance linked savings
adequately attractive.

44. 4) To conduct business with utmost
economy and with the full realization that
the money belongs to the policy holders.
5) To act as a trustees of the insured
public in their individual and collective
capacities.
6) To meet the various life insurance
needs of the community that would arise
in the changing social and economical
environment.

45. 4 I’s OF INSURANCE
SERVICE
INTANGIABILITY
INCONSISTENCY
INSEPARABILITY
INVENTORY

46. INTANGIABILITY
Insurance is a guarantee against risk
Guarantee and risk – Intangible
Insurance is a Service - Intangible
INCONSISTENCY
Service Quality is inconsistent.
Such an inconsistency can be reduced
through standardization and training.

47. INSEPARABILITY
Services are produced and consumed
simultaneously.
INVENTORY
No inventory can be maintained for services.

49. 5. GENERAL INSURANCE
General Insurance is an assurance to make
good the loss on happening of a certain event
on consideration of a premium.
• Motor insurance
• Fire insurance
• Health insurance
• Marine insurance

50. MOTOR INSURANCE
- For cars, trucks and other road vehicles.
- Protection against physical damage or
bodily injury and liability arising there from.
FIRE INSURANCE
- Commercial policy
- Covers building, offices, machinery, contents and
personal belongings in
accordance with the
policy.

51. HEALTH INSURANCE
- Against the risk of incurring
medical and surgical expenses.
- Premium should be paid according to
the policy, covers for a period of 1 year,
normally. Policy is renewable.
MARINE INSURANCE
-Covers loss or damage of
ships or cargo by which the property
is transferred, acquired or held
between the point of origin and the
final destination.

52. SOME GENERAL INSURANCE COMPANIES IN INDIA

53. 6. TRUST
- Trust means Management of assets of
Individuals / Group of Individuals / Institution
- The assets are typically held in the form of
a trust, a legal instrument that spells out who
the beneficiaries are and what the money can
be spent for.
- Main source of income is normally donations
made by public and Government Institutions.
-Administration of Trust including its assets are
done by TRUSTEEs.

54. TYPES OF TRUSTS
REVOCABLE
TRUST
IRREVOCABLE
TRUST
- Assets are owned by
Trustee.
- Settler has a power of
revocation, hence has
control over the property.
- No tax advantage.
-Ex: Trust created for
administration of a minor’s
property.
-Kartha of a HUF
- Used for charitable purposes
as well as management of
inheritances.
- Trustee has the control over
the property.
- Charitable activities have tax
benefits for the donors under
80G of IT Act.
-Ex: Ashakta Poshaka Sabha

56. 7. INVESTMENT COMPANIES
- INDIA – 5th biggest economy in the world
– Preferred hub for investment projects
among foreign investors.

57. TOP 10
INVESTMENT
COMPANIES IN
INDIA

58. -Collaboration between Bajaj Finserv and
Allianz SE.
-Renowned asset management company.
-Provides Life, general and travel
insurance in more than 70 nations.
-Customized services offered : Insurance
and Investment solutions.
-Administers wealth over a trillion.

59. -Provides Services : Mutual Fund and
Portfolio Management.
-Has an excellent track record.
-Has assets worth over USD 381.40
-Supervision across the globe and offices in
around 20 nations.

60. -India’s recognised fiscal service provider.
-Offers investment solutions across India
and is expanding its business operations in
international locations.
-At present has more than 1500 branches
spread across 350 Indian cities.

61. Shah Monetary Groups
-Initiated in the year 2004
-Distributes trade of individual business, finance
and home finance.
-Finance is given through several monetary
institutions, banks
-The group also offers fiscal, tax relief and
finance enhancement to its corporate and non
corporate clients.

62. -Chief activity is to offer investment
supervision facilities to its clients.
-It functions through its subordinate Stanrose
Mafatlal Lubechem Ltd.
-Involved in inter-corporate endowments,
fund market operations and financing.

63. -Endorsed by Tata Sons.
-Established to help sponsorship new firms and
schemes besides the investment activities.
-It is now involved in the allocation of mutual funds
and other endowment linked securities.

64. Toss monetary services Pvt. Ltd.
-Certified associate of National Stock
Exchange.
-It is a recognised stock broking and
Investment Management consultation firm in
India.
-Offers consultation services in monetary
sector.

65. Veronica money services Pvt. Ltd.
-An Integrated investment firm.
-Involved in locating and investing the firms
facing fiscal crunch and assists to grow
financially.
-Assisted by professionals.
-The firm manages the sick company until it
attains profitability stage

66. Indian Investment Centre
-A certified group operating under the
managerial control of Ministry Of finance.
-Endorses NRI Investment as well as foreign
private investment.

67. J.M capital Management Pvt. Ltd.
-Manages capital for both organizational
and individual investors present in India as
well as abroad.
-Has one of the biggest distribution
channels with each symolising a large
segment of retail customers.

68. 8. MORTGAGE BANKS
Mortgage -
A legal agreement that conveys the conditional ri
ght of ownership on an asset or property by
its owner (the mortgagor) to a lender
(the mortgagee) as security for loan.
Mortgage bank – state licensed banking entity
that makes Mortgage loans directly to
consumers.

69. 9. GOVERNMENT LENDING
INSTITUTIONS IN INDIA
- THE RBI
-THE COMMERCIAL BANKS
-THE CREDIT RATING AGENCIES
-THE SEBI
-INSURANCE COMPANIES
-THE SPECIALIZED MONETARY
INSTITUTUIONS IN INDIA