Overview of Indian Financial System

<p>Securities and Exchange Board of India (A)</p> Signup and view all the answers

<p>Long-term government securities (B)</p> Signup and view all the answers

<p>State Governments (C)</p> Signup and view all the answers

<p>Government securities (A)</p> Signup and view all the answers

<p>Financing government deficits (C)</p> Signup and view all the answers

<p>Consumer loans market (D)</p> Signup and view all the answers

<p>Municipal bonds (D)</p> Signup and view all the answers

<p>Reserve Bank of India (D)</p> Signup and view all the answers

<p>It is secured against immovable property (D)</p> Signup and view all the answers

<p>IDFC First Bank (B)</p> Signup and view all the answers

<p>Primary Dealers (A)</p> Signup and view all the answers

<p>To meet short-term borrowing requirements (B)</p> Signup and view all the answers

<p>They are issued for long-term investment. (C)</p> Signup and view all the answers

<p>91-day, 182-day, 364-day (B)</p> Signup and view all the answers

<p>Reserve Bank of India (RBI) (B)</p> Signup and view all the answers

<p>Ad hoc Treasury Bills (D)</p> Signup and view all the answers

<p>Short-term loan market (B)</p> Signup and view all the answers

<p>Commercial Banks (A)</p> Signup and view all the answers

<p>To finance everyday operations of a company (A)</p> Signup and view all the answers

<p>CDs are negotiable money market instruments. (C)</p> Signup and view all the answers

<p>Cash credit is generally sanctioned for a longer period than overdraft. (B)</p> Signup and view all the answers

<p>To regulate the short-term lending practices for financial stability. (D)</p> Signup and view all the answers

<p>Scheduled commercial banks and selected All-India Financial Institutions (C)</p> Signup and view all the answers

<p>3 years (B)</p> Signup and view all the answers

<p>They allow withdrawal beyond the account balance up to a preset limit. (A)</p> Signup and view all the answers

<p>It is a short-term borrowing arrangement primarily for businesses. (B)</p> Signup and view all the answers

<p>Companies, Primary Dealers, All-India Financial Institutions, and Non-Banking Financial Companies (A)</p> Signup and view all the answers

<p>7 days (A)</p> Signup and view all the answers

<p>At discount to face value (B)</p> Signup and view all the answers

<p>A3 (B)</p> Signup and view all the answers

<p>It regulates the CP market and issues guidelines for their issuance. (C)</p> Signup and view all the answers

<p>Lower than bank rates (A)</p> Signup and view all the answers

<p>Their interest rate is determined by market forces. (C)</p> Signup and view all the answers

<p>The quality and variety of financial services directly impact the efficiency of the financial system. (D)</p> Signup and view all the answers

<p>Indigenous bankers operate as banks and provide loans. (C)</p> Signup and view all the answers

<p>NBFIs do not have to maintain a specified cash reserve ratio. (B)</p> Signup and view all the answers

<p>Deregulation allowed a large number of foreign banks to enter India. (A)</p> Signup and view all the answers

<p>They primarily depend on their personal funds. (A)</p> Signup and view all the answers

<p>They represent financial claims on assets. (B)</p> Signup and view all the answers

<p>Citi Bank (B)</p> Signup and view all the answers

<p>NBFIs cannot receive demand deposits. (C)</p> Signup and view all the answers

<p>Operating under a banking license. (A)</p> Signup and view all the answers

Methods for companies to raise capital by issuing new securities to the public.

Selling securities to the general public to raise capital.

Existing shareholders are given the first opportunity to buy new securities.

Market for trading previously issued securities.

Market for trading government securities, mostly long-term.

Banks from other countries operating branches in India, having head offices in their home countries.

Private firms or individuals acting as banks, accepting deposits and lending money.

Individuals or businesses relying solely on their funds to lend money, often unregulated.

Financial entities not covered by the Banking Regulation Act but by the Companies Act, restricted from certain banking functions.

Documents or certificates (electronic or paper), representing claims on assets, helping with financial transactions.

Deposits that can be withdrawn at any time, a feature of banking institutions.

Reduction or removal of government rules and controls (in banking in this case).

Entities (like banks) that connect savers and borrowers, facilitating money transfers.

Financial instruments issued by the government (central, state, or semi-government) for borrowing funds.

Government of India bonds, a specific type of government security.

Mutual funds that invest primarily in government securities (G-Secs).

Market for government securities, known for its low risk.

Long-term loans provided to companies by banks or specialized institutions.

A loan secured against real estate property.

Financial institutions that provide medium and long-term loans to businesses.

Methods by which the central bank controls liquidity by buying or selling securities.

Loans designed for short-term financing needs, usually with a maturity of less than a year. They are often used to meet working capital requirements or cover temporary cash flow gaps.

A type of short-term loan where businesses can borrow up to a pre-set limit and withdraw funds as needed. Often used in manufacturing and trading.

A short-term loan provided to individuals and businesses, allowing them to overdraw their account balance up to a set limit.

A short-term loan, typically for less than a year, specifically designed to fund a company's daily operations, such as inventory purchases and payroll.

A large-denomination, interest-bearing time deposit issued by banks and financial institutions. CDs are traded in the money market, making them a form of short-term lending.

In India, CDs can be issued by scheduled commercial banks (excluding regional and local banks) and selected All-India Financial Institutions (AIFIs) that have been permitted by the Reserve Bank of India.

The minimum amount for a CD in India is Rs. 1 lakh, and it is issued at a discount to face value.

The maturity period for CDs ranges from 7 days to 1 year for banks and FIs, while for AIFIs it ranges from 1 year to 3 years.

Commercial bills are short-term debt instruments issued by companies to finance their working capital needs. They are similar to promissory notes and are typically used for short-term trade financing.

The Discount Market is a market where commercial bills are bought and sold at a discount to their face value. Investors buy bills at a lower price and receive the full face value at maturity, earning a return.

Commercial banks, Non-Banking Financial Companies (NBFCs), and Primary Dealers are key players in the Discount Market. They buy and sell commercial bills, providing liquidity and funding to the market.

The Trade Receivables Discounting System (TReDS) is a platform that enables small businesses to sell their unpaid invoices to investors, thus improving their access to finance.

Treasury Bills (T-Bills) are short-term government securities issued by the Reserve Bank of India (RBI) on behalf of the Government. They are used to meet short-term borrowing needs and are considered highly liquid.

Treasury Bills are issued in three maturity periods: 91 days, 182 days, and 364 days. These different maturities provide diverse options for investors based on their investment horizons.

Treasury Bills are issued through auctions conducted by the Reserve Bank of India (RBI). This ensures transparency and competitive pricing in the market.

The Short-Term Loan Market is a market where companies borrow for short periods to meet their working capital requirements. Commercial banks are major players in this market, providing loans to companies.

A certificate of deposit (CD) is a savings instrument offered by banks that allows individuals to earn a fixed interest rate on their deposits for a specific period, typically ranging from a few months to several years.

The interest rate on CDs is determined by market forces, influenced by factors like prevailing conditions in the money market and the overall economic environment.

Reserve requirements are regulations that dictate the percentage of deposits banks must hold in reserve, either in the form of cash or with the central bank. These requirements are aimed at maintaining liquidity and stability in the financial system.

Commercial Paper (CP) is a short-term, unsecured debt instrument issued by companies with strong credit ratings to raise funds for operational purposes. CPs are typically issued for maturities ranging from a few days to 1 year.

In India, commercial paper can be issued by companies, primary dealers, all-India financial institutions (AIFIs), and non-banking financial companies (NBFCs) with a minimum credit rating of 'A3' or equivalent.

The minimum value of a CP is Rs. 5 lakhs (INR 500,000), which is a significant sum, reflecting the nature of this type of financing.

CPs are usually bought by institutional investors such as banks, mutual funds, and insurance companies, seeking short-term investment opportunities with potential for higher returns than bank deposits.

The interest rate on CPs is set by market forces based on factors like prevailing interest rates, the issuer's creditworthiness, and overall market sentiment.