Financial Institutions and Markets, BCom III Sem, RG Kedia College of Commerce, Osmania University

Introduction  The Debt Market is a financial market where long-term debt instruments are traded. These instruments, such as bonds and debentures, are used by governments and corporations to raise capital for a period typically longer than one year . In this market, the issuer promises to repay the borrowed amount (principal) along with interest to the investor. 💰 Evolution of the Debt Market in India The Indian debt market has undergone a significant transformation from being an underdeveloped, government-dominated market to a more dynamic and mature one. Its evolution can be understood through the following key phases and developments: Pre-1990s: The market was largely informal and illiquid. It was dominated by a handful of institutional investors, and government securities formed the bulk of the trading. Transactions were often opaque and lacked an organized structure. Reforms in the 1990s: Following the economic liberalization of 1991, major reforms were initiated to deve...

What is the Money Market? The money market is a part of the financial market where short-term funds (≤ 1 year) are borrowed and lent. It helps governments, banks, and companies manage their immediate cash needs . 💡 Example: The Indian Government sells Treasury Bills (91 days) to raise funds. Infosys issues Commercial Paper (180 days) to pay suppliers. Key Features of Money Market ( How it differs from stock/capital markets) Short-Term Focus Money market deals in instruments that mature within one year, unlike the stock or capital markets which focus on long-term securities like shares and bonds. Example: A 91-day Treasury Bill is a typical money market instrument. Highly Liquid Instruments can be quickly converted into cash, making it easier for banks and companies to manage day-to-day needs. Example: Mutual funds often park surplus money in Commercial Papers (CPs) or T-Bills because they can easily sell them. Low Risk Most issuers are the gover...

Introduction to Banking Banking refers to the business activity of accepting deposits from the public and lending those funds to individuals, businesses, and governments. Banks act as financial intermediaries, facilitating the flow of funds from savers to borrowers in the economy. In simple terms, a bank is an institution that: Accepts money from people who have surplus funds (depositors), And lends that money to those who need funds (borrowers), While also providing various financial services like payments, fund transfers, and investments. The definition as per Banking Regulation Act, 1949 : “Banking means accepting, for the purpose of lending or investment, deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order, or otherwise.”   Functions of Banks Accepting Deposits – Savings, Current, Fixed Deposits. Granting Loans and Advances – Personal loans, business loans, overdrafts. Credit Creation – By ...

 Introduction to  Financial System A financial system is a network of institutions, markets, instruments, and services that facilitate the flow of funds in an economy. It acts as a link between savers (those who have surplus funds) and borrowers (those who need funds) . The primary goal of a financial system is to ensure that savings are efficiently mobilized and allocated to the most productive uses. A well-functioning financial system is critical for economic growth, as it supports investment, consumption, and public policy by ensuring smooth and secure financial transactions. Example: When a person deposits money in a bank, and the bank lends that money to a business for expansion, the financial system has performed its function. Functions of a Financial System A financial system performs several key functions that contribute to the growth and stability of an economy: a) Mobilization of Savings It encourages individuals and institutions to save by providing safe ...