Financial Sector 3: Financial Instruments Video Lecture | General Knowledge (GK) for LIC AAO Exam (English) - Banking Exams

at every one a man puts audrey from it
bullseye dot-com and this is the third
and final lecture on financial systems
in India so let us try and understand
what are exchanged not Falls so it is a
marketplace in which securities
commodities derivatives and other
financial instruments are traded no
exchange platforms can exist both in the
real as well as the virtual world so as
far as the virtual world is concerned
there are most of the exchange is done
in the electronic or digital form
through d-mat or dematerialized accounts
today the various functions performed by
exchange platforms are to ensure fair
and orderly trading of various
securities in order to ensure this they
have to function under the regulation of
various bodies like CB RBI etc next is
efficient dissemination of price
information now this is very important
as far as any exchange platform is
concerned that the correct price is
reflected or passed on to everyone in
the market now with the advent of d-mat
account and electronic trading again
this task has become very easy the
various examples of domestic exchanges
in the country are BSC that is the
Bombay Stock Exchange Tennessee National
Stock Exchange and OTC I that is the
over-the-counter Exchange of India as
far as international exchanges are
concerned some of the prominent ones are
Nasdaq that is the stock exchange in USA
as well as Elysee that is London Stock
Exchange in Britain
next we talk about the functions
performed by financial institutions
financial institutions act as
intermediaries which facilitates both
functioning of the financial system by
making investors and borrowers meet so
they act as an interface on a connecting
point between investors and various
borrowers also they provide services to
entities seeking advices on various
issues ranging from restructuring to
diversification plans so beyond acting
as an
interface or a connecting point between
investors and borrowers financial
institutions also provide certain
advisory services for example
restructuring if a company is not able
to repay back it's known the loan
conditions will be restructured for
example the period of payment may might
be extended or the rate of interest
might be lowered and further
diversification plants so this involves
diversification of portfolio whether a
company or an individual should invest
his money in stocks or bonds also the
actors middlemen between savers and
borrowers so the various types of
financial institutions are all-india
financial institutions or a IFIs
so institutions like nabad seve etc they
are regulatory or India financial
institutions furthermore there are other
institutions like IFC I IDBI etc which
are other types of financial
institutions then there are certain
state-level financial institutions which
function at the level of different
states in the country then there are
other or local level financial
institutions in the country further all
Indian financial institutions are
divided in various categories so there
are all India Development Bank's so for
example una bod again you have various
investment institutions refinance
institutions for example the recently
introduced mudra bank is a refinance
institution there are certain
specialized financial institutions which
are functioning or which are catering to
the financial needs of specific sector
like the power sector so example that
you could take care of a takeover here
is powerful arms corporation or Pfc and
there are certain other financial
institutions as well but when you talk
about the state-level financial
institutions there are state finance
corporations which provide loans for
within the state for specific
purposes furthermore there are state
Industrial Development Corporation's
which provide loans and advisory
services to develop industry within the
state now at the national level there
are certain other financial institutions
as well so first one is export Credit
Guarantee Corporation of India it was
founded in the year of 1957 and it is
under the Ministry of Commerce
so what ECG see does this so ECDC
provides insurance as well as loans to
exporters of the country next we have is
the DI c GC that is deposit insurance
credit Guaranty Corporation of India it
was established in the year 1978 and is
currently functioning as a subsidiary of
RBI some major function of the ICGC
is it ensures all the deposits that are
made in the bank which are of values
less than 1 lakh rupees so whether they
be current accounts fixed face deposits
saving account etc all these accounts of
less than 1 lakh rupee is ensured by the
ICGC
next we take a look at the category of
financial institution called the NP FC
that is non banking financial company it
is a financial institution that provides
banking services but does not hold a
banking license so what this means is
that NBF C's cannot accept deposits like
other banks however there are certain
categories of financial institutions
that are not included in and VF seals so
NDF C do not include any institution
whose principal business is agricultural
activity industrial activity trading for
sale or purchase construction of
immovable property so the main
regulating body for NDF C in the country
yes there is a pike of India 9 so RBI
regulates NB FCS which are
the business of lending acquisition of
shares stocks bonds etcetera
our financial easing what hire-purchase
the next important concept within the
financial sector in the country is
financial instrument so financial
instrument is any claim against the
person or any institution for payment at
a future date of a sum of money and/or
the periodic payment in the form of
interest or dividend right so it is any
financial claim against the individual
or a company so if this can be the form
of shares bonds etc so financial
instruments like shares and bonds are
marketable untradable in the primary
market as well as the secondary market
so as we saw in the earlier lecture if a
company wants to raise new equity it
will do so in the primary market in the
form of initial public offering or IPO
furthermore these financial instruments
like shares can be traded in the
secondary market like stock exchanges so
examples include bonds debentures etc so
the various types of financial
institutions that we have discussed they
are involved in providing financial
services like borrowing and funding
lending and investing buying and selling
of securities payments and settlement
and managing risk exposures in the
financial market so financial
institutions earn money by providing
these services
examples include credit rating so
various credit rating agencies in the
country exist which provide a credit
rating to various corporations or
companies in India on the basis of these
ratings the rate of interest at which
these companies can borrow is decided
leasing as well as higher purchase now
let us take a look at the different
financial regulators operating in the
Indian market now these financial
regulators regulate the functioning of
financial system in the country they
make rules on how the financial systems
or banking or other financial
institutions should work they monitor
their functioning and also they might
penalize in
case they break any rules so the major
institutions are can be classified under
two broad categories so first our
statutory bodies
now stretch statutory body is any body
which is created by law in the country
so first and foremost is the Reserve
Bank of India or the RBI the RBI is the
apex body controlling the functioning of
financial system in the country RBI is
empowered to create further new
organizations or dedicate some of its
power to new organizations however it
does remain the apex or the primary
regulator of financial system in the
country next is semi or security and
exchanges Board of India it is mainly
concerned with regulating the stock
markets in the country furthermore we
have IRDA and it is the primary body
regulating the companies which are
offering insurance related products in
India there are other bodies which are
functioning under different ministries
in the country first is MF MC that is
forwards market commission so this is
the primary regulator as far as
derivatives market in India are
concerned so it was earlier functioning
under the Ministry of Consumer Affairs
food and public distribution however
recently it has been merged under semi
Anna's autonomous today next is an
organization called PF RDA
hottest pension funds Regulatory and
Development Agency so this is an
organization which is managing all the
funds which are collected under the
various pension schemes of the
government and it is functioning
directly under the Ministry of Finance
of the Union Government so in the year
2011 a very important committee was
formed by the Government of India called
the FS LRC FSL RC stands for financial
sector legislative reforms committee
this particular committee was headed by
justice BM shri krishna a former or
retired judge of the Supreme Court of
India right so this particular committee
was formed by Government of India to
examine the regulatory structure and
laws the one in the financial sector of
India so basically the idea was how to
make the financial sector better by
introducing reforms or new laws in the
financial sector the shield krishna
committee gave very far-reaching
recommendations with regard to reforms
of the financial sector so it said that
this should be a single regulator called
unified financial agency which should be
regulating the whole financial sector of
the country so irda p fi da etc would be
subsumed under single organisation
called the unified financial agency next
justice being dis not recommended that
another body that is financial addressed
agency fre should be formed this should
be a single agency in which all the
complaints related to financial systems
should be registered as far as financial
redress an agency is concerned all the
complaints are to be registered with fre
however if the banks want to and test
any particular complaint then the
appropriate authority decide on the
complaint would be the financial sector
Appellate Tribunal or the FS 80
furthermore shri krishna committee also
recommended formation of other three
minor regulatory agencies the
recommendations of the chicest our
committee came under a lot of debate
because it recommended that the powers
of Reserve Bank of India should be
limited only to monetary policymaking
and all the other regulatory powers
should be transferred to the unified
financial agency so that brings me to
the end of this particular video lecture
so in this video lecture we studied the
different important components or terms
related to financial
systems for example the exchange
platforms financial regulators financial
instruments financial services and in
the in the end we also saw certain major
recommendations made by the FS LRC thank
you very much