Fis

financial system INDIA

India has a financial system that is regulated by independent regulators in the sectors of banking, insurance, capital markets, competition and various services sectors. In a number of sectors Government plays the role of regulator.

Ministry of Finance, Government of India looks after financial sector in India. Finance Ministry every year presents annual budget on February 28 in the Parliament. The annual budget proposes changes in taxes, changes in government policy in almost all the sectors and budgetary and other allocations for all the Ministries of Government of India. The annual budget is passed by the Parliament after debate and takes the shape of law.

Reserve bank of India (RBI) established in 1935 is the Central bank. RBI is regulator for financial and banking system, formulates monetary policy and prescribes exchange control norms. The Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934 authorize the RBI to regulate the banking sector in India.

India has commercial banks, co-operative banks and regional rural banks. The commercial banking sector comprises of public sector banks, private banks and foreign banks. The public sector banks comprise the �State Bank of India� and its seven associate banks and nineteen other banks owned by the government and account for almost three fourth of the banking sector. The Government of India has majority shares in these public sector banks.

India has a two-tier structure of financial institutions with thirteen all India financial institutions and forty-six institutions at the state level. All India financial institutions comprise term-lending institutions, specialized institutions and investment institutions, including in insurance. State level institutions comprise of State Financial Institutions and State Industrial Development Corporations providing project finance, equipment leasing, corporate loans, short-term loans and bill discounting facilities to corporate. Government holds majority shares in these financial institutions.

Non-banking Financial Institutions provide loans and hire-purchase finance, mostly for retail assets and are regulated by RBI.

Insurance sector in India has been traditionally dominated by state owned Life Insurance Corporation and General Insurance Corporation and its four subsidiaries. Government of India has now allowed FDI in insurance sector up to 26%. Since then, a number of new joint venture private companies have entered into life and general insurance sectors and their share in the insurance market in rising. Insurance Development and Regulatory Authority (IRDA) is the regulatory authority in the insurance sector under the Insurance Development and Regulatory Authority Act, 1999.

RBI also regulates foreign exchange under the Foreign Exchange Management Act (FERA). India has liberalized its foreign exchange controls. Rupee is freely convertible on current account. Rupee is also almost fully convertible on capital account for non-residents. Profits earned, dividends and proceeds out of the sale of investments are fully repatriable for FDI. There are restrictions on capital account for resident Indians for incomes earned in India.

Securities and Exchange Board of India (SEBI) established under the Securities and Exchange aboard of India Act, 1992 is the regulatory authority for capital markets in India. India has 23 recognized stock exchanges that operate under government approved rules, bylaws and regulations. These exchanges constitute an organized market for securities issued by the central and state governments, public sector companies and public limited companies. The Stock Exchange, Mumbai and National Stock Exchange are the premier stock exchanges. Under the process of de-mutualization, these stock exchanges have been converted into companies now, in which brokers only hold minority share holding. In addition to the SEBI Act, the Securities Contracts (Regulation) Act, 1956 and the Companies Act, 1956 regulates the stock markets.

Insurance Regulatory & Development Authority http://www.irdaindia.org/

SEBI http://www.sebi.gov.in/HomePage.jsp

RBI http://www.rbi.org.in/

Website of Commercial Banks in India http://www.ficci.com/ficci/index.htm

  1. Financial institutions,India
          • Andhra Pradesh State Financial Corporation (APSFC)
          • Andhra Pradesh State Minorities Finance Corporation Limited (APMFC)
          • Credit Guarantee Fund Trust for Small Industries (CGTSI)
          • Delhi SC/ST/OBC, Minorities and Handicapped Finance and Development Corporation Limited (DSFDC)
          • Economic Development Corporation Limited, Goa
          • Export-Import Bank of India
          • Himachal Pradesh Financial Corporation (HPFC)
          • Indian Railway Finance Corporation Limited (IRFC)
          • Indian Renewable Energy Development Agency Limited (IREDA)
          • Industrial Development Bank of India (IDBI)
          • Industrial Investment Bank of India Limited (IIBI)
          • Madhya Pradesh Financial Corporation (MPFC)
          • National Minorities Development and Finance Corporation (NMDFC)
          • National Safai Karamcharis Finance and Development Corporation (NSKFDC)
          • National Scheduled Castes Finance and Development Corporatioin (NSFDC)
          • North Eastern Development Finance Corporation (NEDFI)
          • Related LinksPower Finance Corporation Limited
          • Rajasthan Finance Corporation (RFC)
          • Rural Electrification Corporation Limited
          • Scheduled Caste/Scheduled Tribes, Other Backward Classes, Minorities and Handicapped Financial and Development Corporation Limited, Dadra and Nagar Haveli, Daman and Diu
          • Small Industries Development Bank of India (SIDBI)
          • Tamil Nadu Industrial Investment Corporation Limited
          • Unit Trust of India (UTI)
          • Uttar Pradesh Financial Corporation (UPFC)
  2. Who is bhind?

Reliance shares went up firmly on August 1, 2 and in early going of August 3. Then came the killer. Anil Ambani�s angry and emotional speech, wiped out 80 Sensex points in minutes. Indian stock market and Reliance the blue chip of India was in free fall. The stock operators reported well organized solid but systematic sell off in Reliance.

A massive 10 million shares of Reliance got sold in less than an hour. Who were behind this? Some people made enormous money knowing very well what was coming, says some experts.

Fairly extraordinary pattern of selling ensued. T. Rowe Price was indeed the biggest seller that day and as many as eight FII entities registered with the Securities and Exchange Board of India (SEBI). It was the biggest seller on August 3 and it got rid of a whopping 3.1 million RIL shares in a single day.

Two other big sellers were � Goldman Sachs Investments Mauritius, which sold a massive 19,34,000 shares and Merrill Lynch Variable Securities Fund based in Mauritius which sold 4,56,000 shares and seems to have cleaned out its entire portfolio. Kopthal Mauritius Investments Ltd, which is well known to the regulators, also sold a hefty 4,77,000 shares.

The bigger surprise however was that Reliance Growth Fund sold 1,03,740 shares and Reliance Equity Opportunities Fund sold 2,10,000 shares first and another 3,00,000 shares later.

  1. Gold may skyrocket when banks and financial institutions go belly up in the next several years

Fred Day
Mar. 11, 2007

Any financial turmoil is accompanied with fabulous gain in gold. But this one is somewhat different. There is a stealth deflation that is causing the trouble. Deflation does not help gold in the long run but in the short run it can be a great asset.

The stock market and gold market will first start going down in tandem. After a while investors will realize that there is something really bad in the financial system and things are breaking apart badly.

At that point the banks will start failing, the FDIC will be in trouble. People will be confused in the main street. Gold will de-link itself with the stock market. The panic will make common people buy gold. Gold will skyrocket as stocks and real estate continue collapsing. Some analytic models say gold can reach $1500 an ounce for a brief period. Longer term however, gold will fall because of deflation.

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