II.

CAPITAL MARKET

1 2 3 4
Govt. Dated Industrial Development Finance Institutions Financial
Securities Securities Market (DFIs) Intermediaries
Market

 IPO (for new  All India Financial Institutions  Investment Banks

stocks) viz. IFCI, IIBI, etc.
 Stock  Sectoral Finance/Refinance  Merchant Banks
Exchanges Institutions like SIDBI, NHB,  Mutual Funds
(for old IIFCL, REC, PFC, IRFC, TFCI etc.
Though, Technically it is stocks)  State Finance Corporations  Leasing Companies
part of Capital Market, but
this Market along with  Venture Capital
Treasury Bills & Cash
Management Bills is called
“ Govt. Securities Market”
and regulated by RBI.
 1. G–SECs (GOVERNMENT SECURITIES)

DATED TREASURY CASH MANAGEMENT

SECURITIES BILLS BILLS

State Govts can also

issue Govt. Securities up
1 Year to to a maximum period of Up to Up to
40 years 10 years. But they are 364 days 90 days
known as State
Development Loans
(SDLs). They are also
managed by RBI MONEY
CAPITAL
MARKET MARKET
INSTRUMENTS INSTRUMENTS
GOVERNMENT
SECURITIES
 1. G–SECs (GOVERNMENT SECURITIES)

FEATURES OF G–SECs

 If the security is more than 1 year, it is called Dated Security.

 All the securities are managed by RBI only.
 Auction held electronically on PDO-NDS platform ( Public Debt Office – Negotiated Dealing
System).
 They can also be purchased through primary dealers in secondary market.
 Minimum subscription for T-bill is Rs.25,000 and Dated Security is Rs.10,000.
 Normally SCBs, FIs participate in auction of G-Secs.
 If the State Governments borrow money, they are known as State Development Loans (SDLs)
and RBI also manages them. These are also eligible for SLR. They will carry less interest in
comparison to Dated Securities of Central Govt.
 2. INDUSTRIAL SECURITIES MARKET

 This is one of the segments of the financial

market.
 Headquarters is in
 Long term capital is raised.
Mumbai
 Instruments used are shares, bonds, debentures
 Established in 1988.
etc.
 Securities regulator (SEBI), stock exchanges,
different share indices like SENSEX, NIFTY are
associated with this.
 A company becomes Public Limited from Private
Limited by issue of shares to public.
 Shares are issued through IPO (Initial Public
Offering).
 2. INDUSTRIAL SECURITIES MARKET
 An individual can purchase shares through IPO or through Stock Exchanges.
 Hence, it can be divided into Primary Market (issue of shares through IPOs)
and Secondary Market (trading of shares).

SECURITIES MARKET

PRIMARY MARKET SECONDARY MARKET

 Companies go for expansion by raising  It is institutional set up where shares,
funds through IPOs. bonds, debentures are traded.
 Companies take the help of investment  First Stock Exchange was established in
banks to work as underwriters (to Antwerp, Belgium in 1631.
render services like pricing,  In India BSE and NSE are the main stock
establishing market etc.). exchanges.
 2. INDUSTRIAL SECURITIES MARKET
STOCK EXCHANGES

BSE NSE

 It is Bombay Stock Exchange Ltd.  It is National Stock Exchange of India Ltd.

 Initial name was “the Native Share and Stock Brokers’  Established in 1992.
Association” (1875).  Sponsors are DFIs including IDBI, LIC, GIC etc.
 Asia’s first Stock Exchange.  CNX-NIFTY is the Index of the 50 top shares
 SENSEX (Sensitive Index) is the 30 Stock Index of BSE and from 24 sectors.
is widely regarded as the benchmark.  Base year 1995, Base Index 1000.
 BSE SME is the platform for Small and Medium  EMERGE is the SME platform of NSE.
Enterprises from 2012.  CNX-NIFTY was developed by Ajay Shah and
 Base year 1978-79 and Index is 100 as on 1st April, 1979. Susan Thomas.
 II. CAPITAL MARKET

1 2 3 4
Govt. Dated Industrial Development Finance Institutions Financial
Securities Securities Market (DFIs) Intermediaries
Market

 IPO (for new  All India Financial Institutions  Investment Banks

stocks) viz. IFCI, IIBI, etc.
 Stock  Sectoral Finance/Refinance  Merchant Banks
Exchanges Institutions like SIDBI, NHB,  Mutual Funds
(for old IIFCL, REC, PFC, IRFC, TFCI etc.
Though, Technically it is stocks)  State Finance Corporations  Leasing Companies
part of Capital Market, but
this Market along with  Venture Capital
Treasury Bills & Cash
Management Bills is called
“ Govt. Securities Market”
and regulated by RBI.
 3. DEVELOPMENT FINANCE INSTITUTIONS (DFIs)

DFIs
 Primarily intended to fulfill capital requirements of Industry /
GENERAL SECTORAL Infrastructure.
IFCI NABARD
 In other words, to take care of “Project Finance”.
ICICI SIDBI

IDBI NHB  After independence, banks were not in a position to lend for industry
IIBI REC
PFC
/ long term projects due to lesser deposits.
NSIC
 However, after economic reforms of 1991, Industries have got other
IRFC
EXIM BAK sources of tapping funds at cheaper rates and also the base of funds
ECGC

TFCI
for commercial banks increased rapidly.

DFIs include Finance Firms, Refinance Firms and Firms for Technology
Transfer also.
 3. DEVELOPMENT FINANCE INSTITUTIONS (DFIs)

DFIs
 High Power Committee on DFIs headed by S.H. Khan
submitted its report in April 1998, which felt that the dividing
GENERAL SECTORAL
IFCI NABARD
line between commercial banking and development banking
SIDBI
ICICI got blurred and suggested merger of both towards “Universal
IDBI NHB

IIBI REC Banking”. Govt. approved the recommendation.

PFC

NSIC
 Hence DFIs lost their relevance and some of them merged
IRFC with their own commercial banks like ICICI Bank and IDBI
EXIM BAK

ECGC Bank.
TFCI
 However, sector specific FIs still in existence taking care of
specific sectoral needs like SIDBI, NHB, NABARD, REC, IRFC etc.
 3. DEVELOPMENT FINANCE INSTITUTIONS (DFIs)

DFIs
IFCI
GENERAL SECTORAL  It is Industrial Finance Corporation of India.
IFCI NABARD
 Headquarters is in New Delhi.
ICICI SIDBI

IDBI NHB  It is the first DFI established by GOI.

REC
IIBI
PFC
 Started on 1st July,1948.
NSIC
 Got access to low-cost funds of RBI.
IRFC
EXIM BAK  Name changed to IFCI Ltd in Oct, 1999.
ECGC

TFCI
 Primarily to cater for industrial finance.
 Now, it lost its relevance.
 3. DEVELOPMENT FINANCE INSTITUTIONS (DFIs)

DFIs ICICI
 It is Industrial Credit and Investment Corporation of India.
GENERAL SECTORAL
 Started its operations in 1955.
IFCI NABARD

ICICI SIDBI
 It is in the private sector.
IDBI NHB
 Out of all the DFIs, it achieved spectacular success.
IIBI REC
PFC  It established ICICI Bank in 1994.
NSIC

IRFC
 Subsequently, ICICI Limited merged with ICICI Bank in 2002 to
EXIM BAK
facilitate “Universal Banking” as recommended by Khan Committee.
ECGC

TFCI  At present, it is the largest private sector bank in India.

 Hence ICICI is no more in existence as DFI.
 3. DEVELOPMENT FINANCE INSTITUTIONS (DFIs)
IDBI
DFIs
 Established as DFI under IDBI Act on 1st July, 1964.
 Started as a wholly owned subsidiary of RBI, but the ownership
GENERAL SECTORAL
was transferred to GOI.
IFCI NABARD

ICICI SIDBI  Headquarters is in Mumbai.

NHB
IDBI
 It is Government owned institution.
IIBI REC
PFC  For 40 years, it served as a premier Project Finance Organization.
NSIC

IRFC  IDBI was changed to IDBI Ltd and with effect from Oct 1, 2004, it
EXIM BAK
has been functioning as a Bank.
ECGC

TFCI  IDBI Ltd became IDBI Bank Ltd in 2008. Now it is another
‘Universal Bank’ and IDBI as a Financial Institution no more exists.
 3. DEVELOPMENT FINANCE INSTITUTIONS (DFIs)

DFIs IIBI
 It is GOI owned institution established in 1971.
GENERAL SECTORAL  HQ is in Kolkata.
NABARD
IFCI
 Initially started as Industrial Reconstruction Corporation of
ICICI SIDBI

IDBI NHB India Ltd to rehabilitate sick companies.

IIBI REC
PFC  It became Industrial Reconstruction Bank of India Ltd. in
NSIC
1985.
IRFC
EXIM BAK  It became Industrial Investment Bank of India Ltd. in 1997.
ECGC

TFCI  It is no more in existence.