Now, we will be starting up with the Notes and Quizzes Subject wise and chapter wise starting up with the Paper 1 Subject – Principles & Practices of Banking PART A – INDIAN FINANCIAL SYSTEM (In Continuation)
EQUITY AND DEBT MARKET
Marketability of corporate securities, i.e., bonds, debentures and convertible debentures, enables corporates to raise debt, while debenture holders enjoy very high liquidity. All securities quoted on stock exchanges and freely bought and sold on these exchange can be issued only after obtaining approval of the capital market regulator viz., SEBI.
A stock exchange is duly approved by the regulators to provide sale and purchase of securities on behalf of investors. The stock exchanges provide clearing house facilities for netting of payments and securities delivery. Clearing houses guarantee all payments and deliveries. Securities include equities, debt and derivatives.
Only brokers approved by the capital market regulator can operate on the stock exchange. Brokers perform the job of intermediating between buyers and sellers of securities. They help build-up an order book, carry out price discovery and are responsible for brokers’ contracts being honored. The services are subject to brokerage.
Equity and Debt Raisers
Companies wishing to raise equity or debt through stock exchange have to approach a capital market regulator with the prescribed applications and a performa prospectus for permission to raise equity and debt and to get the listed on a stock exchange.
Investment Bankers (Merchant Bankers)
Merchant banks undertake a number of activities such as undertaking the issue of stocks, fund raising and management. They also provide advisory services and counsel on mergers and acquisitions etc. They are licensed by the capital market regulators.
Foreign Institutional Investors (FIIs)
FII is an investor or investment fund that is from or registered in a country outside of the one in which it is currently investing. FIIs are foreign-based funds authorized by the Capital Market Regulator to invest in the Indian equity and debt market through stock exchanges.
Depositories hold securities in dematerialized (Demat) form (as opposed to physical form), maintaining accounts of depository participants who, in turn, maintain sub-accounts of their customers. On instructions of the stock exchange clearing house, supported by documentation, a depository transfers securities from the buyers to sellers accounts in electronic form.
A mutual fund is a form of Collective Investment that pools money from investors and invests in Stocks, Debt and other Securities. It is a less risky investment option for an individual investor. Mutual funds require the regulators’ approval to start and asset management company (the fund) and each scheme has to be approved by the regulator before it is launched.
Registrars maintain a register of share and debenture holders and process share and debenture allocation, when issue are subscribed. Registrars too need regulator’s approval to do business.
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA)
It is an agency of Government of India for insurance sector supervision and development. It’s a regulator for insurance business, both general and life assurance. It regulates all aspects of insurance business, including licensing of insurance companies, framing regulations, approving products, about the conduct of business and supervising all insurance activities in the country etc.
THE MULTI COMMODITY EXCHANGE OF INDIA LIMITED (MCX)
The Multi Commodity Exchange of India Limited (MCX), India’s first listed exchange, is a state-of-the-art, commodity futures exchange that facilities online trading, and clearing and settlement of commodity futures transactions, thereby providing a platform for risk management. The Exchange, which started operations in November 2003, operates within the regulatory framework of the Forward Contracts (Regulation) Act, 1952.
MCX offers trading in varied commodity futures contracts across segments including bullion, ferrous and non-ferrous metals, energy, agri-based and agricultural commodities. The Exchange focuses on providing commodity value to participants with neutral, secure and transparent trade mechanisms, and formulating quality parameters and trade regulations, in conformity with the regulatory framework.
LET US SUM UP
The financial system comprises a group of intermediaries, markets and instruments that are related to each other. It provides a system by which saving are transformed into investments. The RBI (Reserve Bank of India), being the Central Banking Authority, exercise monetary control and supervises the banking institutions. Different institutions such as Commercial Banks, Non-Banking Financial Companies, Mutual Funds, Insurance companies, primary dealers, brokers, depositories and insurance agents, also different markets such as the capital market and the money market are part of the financial system. The three regulatory authorities viz., RBI, SEBI and IRDA are controlling and supervising the banking, capital market and insurance sectors respectively.
Financial Market, Monetary control, Primary Dealers, Financial Institutions, Payment and Settlement System, Cash Reserve Ratio, Statutory Liquidity Ratio.
Principles & Practices of Banking, (Paper 1)
To see the Syllabus and Chapters of this subject, kindly follow the below link –
We will post Quizzes based on the Notes after finishing the PART A means Chapter 1 which we will include Objective type questions based on the exam pattern.
IIBF has Released the Schedule/Exam dates for JAIIB and DB&F exams and the registration to apply for the same has been started.