Financial Market in India:Meaning, Structure, Types, Instruments (2024)

FAQs

What is the structure of financial market in India? ›

The Indian financial market is made up of a variety of markets, including the stock market, the bond market, the derivatives market, the foreign exchange market, and the money market. Financial intermediation is the process of bringing these two groups together.

The types of financial instruments are debentures and bonds, receivables, cash deposits, bank balances, swaps, caps, futures, shares, bills of exchange, forwards, FRA or forward rate agreement, and more.

The credit market, the money market, the foreign exchange market, the debt market, and the capital market are the key financial markets in India.

The Indian financial system is broadly classified into two broad groups: i) Organised sector and (ii) unorganised sector. "The financial system is also divided into users of financial services and providers. Financial institutions sell their services to households, businesses and government.

The Indian monetary market has two broad categories – the organized sector and the unorganized sector. Organized Sector: This sector comprises of the governments, the RBI, the other commercial banks, rural banks, and even foreign banks. The RBI organizes and controls this sector.

Nearly 70% of India's GDP is driven by domestic consumption; country remains the world's fourth-largest consumer market. Apart from private consumption, India's GDP is also fueled by government spending, investments, and exports. In 2022, India was the world's 8th-largest importer and the 10th-largest exporter.

The Indian financial system is what drives the funds between savers and investors. All services from banks, funds, insurance, pensions, etc., come under the financial system. These services benefit India's citizens. The Indian financial system directs funds from the people who want to save and invest.

There are various types of financial instruments, from traditional options like stocks and bonds to more complex derivatives and commodities. Each financial instrument plays a vital role in investment strategies, risk management, and capital allocation.

Basic examples of financial instruments are cheques, bonds, securities. There are typically three types of financial instruments: cash instruments, derivative instruments, and foreign exchange instruments.

Today, India is considered a mixed economy: the private and public sectors co-exist and the country leverages international trade.

Who controls Indian financial market? ›

SEBI: The market regulator in the Indian capital market is the Securities and Exchange Board of India (SEBI).

Capital Market – Structure

Capital markets structure is made of primary and secondary markets. Primary markets consist of companies that issue securities and investors who purchase those securities directly from the issuing company. These securities are called Initial Public Offerings (IPO).

The structure of the Indian financial system can be broadly divided into two parts: the organized sector and the unorganized sector. Organized sector includes formal financial institutions such as banks, insurance companies, NBFCs, mutual funds, stock exchanges, and pension funds.

Ans: Financial institution, financial assets, financial service, financial market, and Money. Ans. The elements of the Indian financial system comprise a total of two elements- i) organized markets and ii) unorganized markets.

Classification of Banks in India

Commercial Banks can be further classified into public sector banks, private sector banks, foreign banks and Regional Rural Banks (RRB). On the other hand, cooperative banks are classified into urban and rural. Apart from these, a fairly new addition to the structure is a payments bank.

Financial market structure is about how legislation, technology, and trading rules and traditions influence trading strategies and market quality, such as efficiency and liquidity.

This segment of the economy is made up of a variety of financial firms including banks, investment houses, lenders, finance companies, real estate brokers, and insurance companies. As noted above, the financial services industry is one of the most important sectors of the economy.

Financial market introduces borrower and suppliers together so that investment objectives of both can be met. Financial environment emerges when different individual and institutional investors enter in this market with different investment objectives.

Ans. The elements of the Indian financial system comprise a total of two elements- i) organized markets and ii) unorganized markets.