Indian financial institutions. Different kinds of organizations that act as intermediaries and facilitators in financial transactions at the individual and corporate levels are included in the term financial institutions. Thus, it covers both the institutions providing finance and the investing institutions. They are the ones who channelize the saving and allocate the funds in the most optimum manner.
Indian financial Institutions categories :
Indian financial institutions are classified into three different categories:
1. Regulatory :
Regulatory are the ones who provides rules and guidelines for a particular market. It comprises of RBI, SEBI, IRDA, AMC Etc. Primarily, an investor would want the funds to be under the control and to be safe to invest. This assurance is rendered by the regulatory authority that is regulating the particular market. For example, money market instruments are regulated by the RBI whereas capital market instruments are regulated by SEBI.
2. Intermediaries :
Intermediaries are the ones who fulfill the short-term requirement of funds of corporate as well as the individual clients. They comprise of banking as well as non-banking intermediaries. For example, banks like SBI, PNB, etc. whereas examples of non-banking intermediaries comprise of GIC, UTI, LIC, ETC.
other important services like credit rating, leasing, merchant banking, hire-purchasea are also provided by these financial intermediaries. These services are required while creating a new firm, during expansion and the economic growth. These are the following four types :
a) Commercial bank :
These bank hold deposits on behalf of the customers and thus ensure the safety of the funds. The primary purpose was thus to hold the same for the customers who don not wish to hold the same on their own . As a result, the need for the customers to keep funds in the form of cash has reduced and he can thus use the services of credit cards, cheques, netbanking for entering into any financial transaction. These banks also provide loans to individuals and businesses for long – term purposes and also for financing the working capital requirements.
b) Non-banking Financing Institutions (NBFI)
A Non-Baking Financign Institution / Intermediary has alternate roles in different parts of the world:
a) It is an institutions which is not just a bank but is engaged in the function of finance
b) Financial institutions who do not accept demand deposits
c) Financial institutions who do not accept any depost.
c) Investment Companies:
They may be called a truest or a corporation which facilitates an individual to invest in different diversified and professionally manged securities by arranging pool of funds from other investors. The individual need not invest in single company stocks but can rather purchase units directly from the investing company which are well diversified. For example, UTI And Mutual Fund.
d) Insurance Companies:
They create a risk pool by way of collection of premium from the people at large who wishes to buy a prtoection either for a person or for a property. It helps to mitigate the loss and preserve the wealth and meet out the uncertainties. By insuring large groups, risk is spread over the entire insured and even in the event of paying claims,they end-up with sufficient amount of profits unless there is a natural calamity or disaster.
3) Non- Intermediaries:
They are engaged in providing funds on long term basis to individuals as well as corporate clients. They comprise of institutions who are lending on term basis. For example, Finacial corporations and investment institutions like IDBI, NABARD, IFCI, etc.
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