205FIN: FINANCIAL MARKETS

AND BANKING OPERATIONS

Subject Core (SC) Course – Financial Management

• CO205FIN.1 REMEMBERING RECALL the structure and components of Indian financial system
through banking operations & Financial Markets.
• CO205FIN.2 UNDERSTANDING UNDERSTAND the concepts of financial markets, their
working and importance.
• CO205FIN.3 APPLYING ILLUSTRATE the working and contribution of Banks and NBFCs to the
Indian Economy.
• CO205FIN.4 ANALYSING ANALYZE the linkages in the Financial Markets.
• CO205FIN.5 EVALUATING EXPLAIN the various banking and accounting transactions.
• CO205FIN.6 CREATING DEVELOP necessary competencies expected of a finance professional.
 SYLLABUS

• 1. Basic Concepts of Indian Financial System: Structure and Components: Indian financial system in India,
Role of financial system in economic development. Introduction to financial Institutions – Banking – Non
Banking Institutions. Role and Functions of Banks and their Contribution to Indian Economy. Introduction to
Financial Markets, Functions and Classification. Money Market, Capital markets, Bond markets, Commodity
markets, Money markets, Derivatives markets, Futures markets, Foreign exchange markets, Crypto currency
market
• 2. Money Market: Structure and components: Participants in Indian Money Market, Money Market
Instruments, Structure of Money Market, Role of central bank in money market; Players in the Indian Money
Market, The reforms in Indian Money Market.
• 3. Capital Market: Components & Functions of Capital Markets, Primary & Secondary Market Operations,
Capital Market Instruments - Preference Shares, Equity Shares, Non-voting Shares, Convertible Cumulative
Debentures (CCD), Fixed Deposits, Debentures and Bonds, Global Depository receipts, American Depository
receipts, Global Debt Instruments, Role of SEBI in Capital Market
 TO BE CONTD…

• 4. Banks and NBFCs: Types of Banks & NBFCs: Central Bank, Nationalized & Co Operative
Banks, Regional Rural Banks, Scheduled Banks, Private Banks & Foreign Banks, Mudra
Bank, Small Finance Banks, Specialized Banks, NBFCs. Types of Banking: Wholesale and
Retail Banking, Investment Banking, Corporate Banking, Private Banking, Development
Banking.
• 5. Concepts in Banking and Accounting of transactions: Accounting in banks, Electronic
Banking, Role of Technology in Banking services - ATM, NEFT, RTGS, IMPS, ECS, MICR,
etc. Lending Practices, Principles of Sound Bank Lending, Financial reporting and control.
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 FINANCIAL INSTITUIONS

• The Financial Institutions act as a mediator between the investor and the borrower. The investor’s savings are
mobilised either directly or indirectly via the Financial Markets.
• The main functions of the Financial Institutions are as follows:
• A short term liability can be converted into a long term investment
• It helps in conversion of a risky investment into a risk-free investment
• Also acts as a medium of convenience denomination, which means, it can match a small deposit with large loans
and a large deposit with small loans
• The best example of a Financial Institution is a Bank. People with surplus amounts of money make savings in their
accounts, and people in dire need of money take loans. The bank acts as an intermediate between the two.
• The financial institutions can further be divided into two types:
• Banking Institutions – This includes banks and other credit unions which collect money from the public against
interest provided on the deposits made and lend that money to the ones in need
• Non-Banking Institutions– Insurance, mutual funds and brokerage companies fall under this category. They cannot
ask for monetary deposits but sell financial products to their customers.
 FINANCIAL INSTITUONS

• Further, Financial Institutions can be classified into three categories:

• Services provided by Asset Management and Liability Management Companies. They help to get the
required funds and also make sure that they are efficiently invested.
• The financial services in India include:
• Banking Services – Any small or big service provided by banks like granting a loan, depositing
money, issuing debit/credit cards, opening accounts, etc.
• Insurance Services – Services like issuing of insurance, selling policies, insurance undertaking and
brokerages, etc. are all a part of the Insurance services
• Investment Services – It mostly includes asset management
• Foreign Exchange Services – Exchange of currency, foreign exchange, etc. are a part of the Foreign
exchange services
• The main aim of the financial services is to assist a person with selling, borrowing or purchasing
securities, allowing payments and settlements and lending and investing.
 FINANCIAL MARKETS

• The marketplace where buyers and sellers interact with each other and participate in the trading of money, bonds, shares and
other assets is called a financial market.
• The financial market can be further divided into four types:
• Capital Market – Designed to finance the long term investment, the Capital market deals with transactions which are taking
place in the market for over a year. The capital market can further be divided into three types:
• (a)Corporate Securities Market
• (b)Government Securities Market
• (c)Long Term Loan Market
• Money Market – Mostly dominated by Government, Banks and other Large Institutions, the type of market is authorised for
small-term investments only. It is a wholesale debt market which works on low-risk and highly liquid instruments. The
money market can further be divided into two types:
• (a) Organised Money Market
• (b) Unorganised Money Market
• Foreign exchange Market – One of the most developed markets across the world, the Foreign exchange market, deals with
the requirements related to multi-currency. The transfer of funds in this market takes place based on the foreign currency rate.
• Credit Market – A market where short-term and long-term loans are granted to individuals or Organisations by various
banks and Financial and Non-Financial Institutions is called Credit Market
 FINANCIAL INSTRUMENTS

• The products which are traded in the Financial Markets are called Financial Assets. Based on the different requirements
and needs of the credit seeker, the securities in the market also differ from each other.
• Some important Financial Assets have been discussed briefly below:
• Call Money – When a loan is granted for one day and is repaid on the second day, it is called call money. No collateral
securities are required for this kind of transaction.
• Notice Money – When a loan is granted for more than a day and for less than 14 days, it is called notice money. No
collateral securities are required for this kind of transaction.
• Term Money – When the maturity period of a deposit is beyond 14 days, it is called term money.
• Treasury Bills – Also known as T-Bills, these are Government bonds or debt securities with maturity of less than a year.
Buying a T-Bill means lending money to the Government.
• Certificate of Deposits – It is a dematerialised form (Electronically generated) for funds deposited in the bank for a
specific period of time.
• Commercial Paper – It is an unsecured short-term debt instrument issued by corporations.