Wednesday, April 29, 2015

Financial Market Entities


Financial Market Entities


1.  Commercial Banks
Commercial banks include Public Sector Banks (PSB), Private Sector Banks and Foreign Banks. The main activity of these banks are acceptance of deposits from the public for the purpose of lending or investment.

2.  Cooperative Banks
Coop Banks are also allowed to raise deposits and provide advances from and to public. Urban Cooperative Banks (UCBs) are controlled by respective state governments and RBI, while other Coop banks are controlled by NABARD and state governments. Except for certain exemptions in paying a higher interest on deposits, the UCBs regulatory framework is similar to the other banks.

3.  Non-Banking Financial Companies (NBFCs)
NBFCs are allowed to raise money as deposits from the public and lend through various instruments including leasing, hire purchase, bill discounting, etc. These are licensed and supervised by RBI.

4.  Primary Dealers (PDs)
PDs deals with government securities both in Primary market and Secondary market. Their basic responsibility is to provide markets for government securities and strengthen the government securities market.

5.  Financial Institutions (FIs)
FIs are those developmental institutions that provide long-term funds for industry and agriculture. FIs raise their resources through long-term bonds from the financial market and borrowings from international FIs.

6.  Payment and Settlement System / Clearing Houses / Currency Chests
An efficient and effective Payment and Settlement system is a necessary condition for a well running financial system. Maintenance of Clearing Houses at various centers, creation of currency holding chests in different geographical areas and creation of the mechanism for electronic transfers of funds (EFT) are vital activities undertaken by RBI.

7.  Stock Exchanges
A stock exchange is duly approved by capital market regulator 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. Securities include equities, debt, derivatives, etc.

8.  Brokers 
Only brokers are approved by capital market regulator to operate on the stock exchange. Brokers perform the job of intermediary between buyers and sellers of securities. They help build-up an order book, carry out price discovery and are responsible for broker's contracts being honored. The services are subject to brokerage.

9.  Equity and Debt Raisers
Companies wishing to raise equity or debt through stock exchanges have to approach the capital market regulator with the prescribed applications and a proforma for permission to raise equity and debt and get them listed on a stock exchange.

10.  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 (M&A), etc. They are licensed by capital market regulator.

11. Foreign Institutional Investors (FIIs)
FIIs are foreign-based funds authorized by capital market regulator to invest in the Indian equity and debt market through stock exchanges.

12.  Depositories
Depositories hold securities in demat form (not in physical form), maintain accounts of Depository Participants (DPs), 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.

13.  Mutual Funds (MFs)
An MF 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. MFs require the regulators' approval to start an Asset Management Company (AMC) and each scheme has to be approved by the regulator before it is launched.

14.  Registrars
Registrars maintain a register of share and debenture holders and process share and debenture allocation, when issues are subscribed. Registrars too need regulator's approval to do business.



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