FINANCIAL

INSTITUTIONS
A Financial institution [FI] is a company engaged in the business
of dealing with financial and monetary transaction ,such as
deposists,loans investment and currency exchange.
Financial institutions, otherwise known as banking
institutions, are corporations which provide services as
intermediaries of financial markets. Broadly speaking, there are
three major types of financial institutions;
1. Depository institutions – deposit-taking institutions that accept
and manage deposits and make loans,
including banks, building societies, credit unions, trust
companies, and mortgage loan companies;
2. Contractual institutions – insurance companies and pension
funds
3. Investment institutions – investment
banks, underwriters, brokerage firms.
Financial institutions can be categorized as follows:
 Deposit Taking Institutions
 Finance and Insurance
Institutions
 Investment Institutions
 Pension Providing Institutions
 Risk Management Institutions

At the same time, there are several governmental financial

institutions assigned to regulatory and supervisory functions.
These institutions have played a distinct role in fulfilling the
financial and management needs of different industries, and have
also shaped the national economic scene.
Deposit-taking financial organizations are known as commercial
banks, mutual savings banks, savings associations, loan
associations and so on.
FUNCTIONS OF FINANCIAL
INSTITUTION :-
1.The major function of financial institution is to facilitate the allocation
and development of economic resources bothin space and time within an
uncertain environment .
2. Financial institution play the role of intermediaries that facilitate flow.
3. They issuse claim to their customers that have characterstics different
from those of their owm assests .
4.They provide large volumes of finance on the basis of small or unit
capital .
5.They distributes risk through diversification and thereby reduce it for
savers as in case of mutual funds .
6. They offer savers alternateforms of deposists according to their liquidity
preferences ,and provide borrowers with loans of requisite maturities.
7. Provides payment system – the transfer of goods and services has
become convenient ,fasterand economical .
8. Provisions for liquiditiy – throughtheir brokerage function ,they provide
an organized market ,the investor can find a buyer for his debt or
ownership claims .
9. Cash Checks , Issuse Credit Cards ,Safe-Deposists Boxes ,E- Banking
……e.t.c.

IMPORTANCES OF FINANCIAL
INSTITUTION :-
1- Granting of credit
 2- Creation of credit
3- Challalize funds into productive investment
4- Provision of finance to the Government
5- Protecting the funds of deposister
6- Provision of remittance facilities
7- Provision of medium ofexchange
8- Discharge of social responsibility
9- Innovative services

PROBLEMS OF FINANCIAL
INSTITUTIONS –
1. Political instability
2. Lack of Awareness
3. Lack of investment climate
4. Lack of investment company and merchant banks
5. Lack of information about the loaners
6. Failure to produce collateral
7. Legal problem to realize loan
8. Complex and time consuming procedure to sanction loans
9. Government interference
10. Lack of supervision
11. Default culture
12. Failure to reach the loan to the needy
13. Problem of determining priority
14. Problem of determining the amount of credit
15. Rate of interest

Classification of
financial institutions :

A -Banking institution:-
A bank is an institution that accept deposists of money from the public
,which are repayable on demand and withdraw able by cheques .
The banking institution of India play a major role in the economy of the
country . The banking institutions are the providers of deposistory and
transaction services . These activities are the major sources of creating
money .The banking institution are the major sources of providing loans
and other credit facilities to the clients .
Types of Banking Institution-
1.Commercial Bank-
A commercial bank is an institution that provides services such as
accepting deposits, providing business loans, and offering basic
investment products.The main function of commercial bank is to accept
deposit from the public for the purpose of lending money to the borrowers.
Commercial bank can also refer to a bank, or a division of a large bank,
which more specifically deals with deposit and loan services provided to
corporations or large/middle-sized business - as opposed to individual
members of the public/small business.
 Types of Commercial Banks –
PUBLIC SECTOR BANK PRIVATE SECTOR BANK FOREIGN BANK

State Bank of India ICICI Bank Ltd. Hong Kong and

Corporation Bank Bharat Overseas Shanghai Banking
Bank of baroda Bank Ltd. Corporation [HSBC]
Punjab National Bank Global Trust Bank Citibank
Bank of India ING Vysya Bank Amercian Express Bank
Oriental Bank of Standard and
Commerce Chartered Bank
Grindlay Bank

2.Cooperative bank
Cooperative banking is retail and commercial banking organized
on a cooperative basis. Cooperative banking institutions take
deposits and lend money in most parts of the world.
Cooperative banking, as discussed here, includes retail banking
carried out by credit unions, mutual savings banks, building
societiesand cooperatives, as well as commercial banking services
provided by mutual organizations (such as cooperative
federations) to cooperative businesses .
Types of Cooperative Banks -
RURAL COOPERATIVE CREDIT URBAN COOPERATIVE
INSTITUTION CREDIT INSTITUTION
1-SHORT TERM :- 1-Scheduled UCBs:-
State cooperative Banks Multi –State
District cooperative Banks Single State
Primary Aricultural credit 2- Non - Scheduled UCBs :-
Socities Multi –State
2-LONG TERM:- Single State
State Cooperative
Agriculture and Rural
Development Banks
[SCARDBs]
Primary Cooperative
Agriculture and Rural
Development Banks
[ PCARDBs]
 B. Non Banking financial institution:-
A non-bank financial institution (NBFI) or non-bank financial
company (NBFC) is a financial institution that does not have a full
banking license or is not supervised by a national or international
banking regulatory agency. NBFI facilitate bank-related financial
services, such as investment, risk pooling, contractual savings,
and market brokering. Examples of these include insurance
firms, pawn shops, cashier's check issuers, check
cashing locations, payday lending, currency exchanges,
and microloan organizations. Alan Greenspan has identified the
role of NBFIs in strengthening an economy, as they provide
"multiple alternatives to transform an economy's savings into
capital investment which act as backup facilities should the
primary form of intermediation fail."
Some non banking financial institutions are :-
1- Investment company [IC]
2- Assest Finance Company [AFC]
3- Non- Banking Financial Company [NBFC]
4- Infrastructure Finance Company [IFC]
5- Loan Companies [ LC]
6- Systematically Important Core Investment Company
[ CIC-ND-SI]
7-India bull housing Ltd.
8-Aditya Birla Finance Ltd.
9- LIC Housing Finance Ltd.
10-Bajaj Finsery
CATEGORIES OF FINANCIAL
INSTITUTIONS:-
Financial Institution are divided into two categories :-
1- Regulatory Institutions-
Reserve Bank of India [RBI]
Securities and Exchange Board of India [SEBI]
Central Board of Direct Taxes [ CBDT]]
Central Board of Exise and Customs
2- Intermediaries –
Unit Trust of India [UTI
Industrial Development Bank of India [1964]
Small industries Development Bank of India [1990]
Industrial finance corporation of india [1971]
Export –Import of India [EXIM Bank]
Life Insurance Corporation of India
Industrial Credit and Investment Corporation of
India [1955]
National Bank for Agriculture and Rural Development[1982]
National Housing Bank [NHB]
General Insurance Corporation of India [1972]
 Major Financial
Institutions :-
In today's financial services marketplace, a financial institution
exists to provide a wide variety of deposit, lending and investment
products to individuals, businesses or both. While some financial
institutions focus on providing services and accounts for the
general public, others are more likely to serve only certain
consumers with more specialized offerings.
To know which financial institution is most appropriate in serving a
specific need, it is important to understand the difference between
the types of institutions and the purposes they serve. The major
categories of financial institutions include central banks, retail and
commercial banks, internet banks, credit unions, savings and
loans associations, investment banks, investment companies,
brokerage firms, insurance companies and mortgage companies.

Central Banks -
A central bank is the financial institution responsible for the
oversight and management of all other banks. In the United
States, the central bank is the Federal Reserve Bank, which is
responsible for conducting monetary policy and supervision and
regulation of financial institutions. Individual consumers do not
have direct contact with a central bank; instead, large financial
institutions work directly with the Federal Reserve Bank to provide
products and services to the general public.

Retail and Commercial Banks-

Traditionally, retail banks offered products to individual consumers
while commercial banks worked directly with businesses.
Currently, the majority of large banks offer deposit accounts,
lending and limited financial advice to both demographics.
Products offered at retail and commercial banks include checking
and savings accounts, certificates of deposit (CDs), personal and
mortgage loans, credit cards, and business banking accounts.

Internet Banks -
A newer entrant to the financial institution market is the internet
bank, which works similarly to a retail bank. Internet banks offer
the same products and services as conventional banks, but they
do so through online platforms instead of brick and mortar
locations.

Credit Unions -
Credit unions serve a specific demographic per their field of
membership, such as teachers or members of the military. While
products offered resemble retail bank offerings, credit unions are
owned by their members and operate for their benefit.

Savings and Loan Associations-

Financial institutions that are mutually held and provide no more
than 20% of total lending to businesses fall under the category
of savings and loan associations. Individual consumers use
savings and loan associations for deposit accounts, personal loans
and mortgage lending.

Investment Banks and Companies-

Investment banks do not take deposits; instead, they help
individuals, businesses and governments raise capital through the
issuance of securities. Investment companies, more commonly
known as mutual fund companies, pool funds from individual and
institutional investors to provide them access to the broader
securities market.

Brokerage Firms -
A brokerage firm assists individuals and institutions in buying and
selling securities among available investors. Customers of
brokerage firms can place trades of stocks, bonds, mutual
funds, exchange-traded funds (ETFs) and some alternative
investments.

Insurance Companies -
Financial institutions that help individuals transfer risk of loss are
known as insurance companies. Individuals and businesses use
insurance companies to protect against financial loss due to death,
disability, accidents, property damage and other misfortunes.

Mortgage Companies -
Financial institutions that originate or fund mortgage loans
are mortgage companies. While most mortgage companies serve
the individual consumer market, some specialize in lending options
for commercial real estate only.
1
 DEVELOPMENT
INSTITUTION:-
ALL INDIA DEVELOPMENT FINANCE
INSTITUTION :-
1- Industrial Development Bank of India [1964]
2- Small industries Development Bank of [1990]
3- Industrial finance corporation of india [1971]
4- Industrial Credit and Investment Corporation of
India [1955]
5- National Bank for Agriculture and Rural Development[1982]

STATE LEVEL DEVELOPMENT FINANCE

INSTITUTION :-
1-State Financial Corporation [SFCs]
2-State industrial Development Corporation [SIDCs]
3-Delhi Finance Corporation
4- Gujarat Industrial Investment Corporation Ltd.
5 - Haryana Finance Corporation
6-Himachal Pradesh Financial Corporation
7-Karnataka State Financial Corporation
8-Kerala Financial Corporation……………e.t.c.

INVESTMENT INSTITUTIONS:-
1-Unit Trust of India [ 1963]
2-Brokerage Firms
3- Life Insurance Companies [1956]
4- Mortgage Company
5-Commercial Bank.
6- General Insurance Company [1972]
7- Kotak Mahindra Bank Limited [2003]
8- Yes Bank Limited[2004]
9- Deutsche Bank [ German investment bank ][1870]

-
CONCLUSION
The financial service in india consists of various Financial
institution [FIs] such as finance companies,commercial banks,
securities funds and investment banks ,mutual funds and
insurance companies …etc
Financial Institution is a very essential part of financial system.
Financial Institution play a vital role in economic
development,Indian financial institution are very strong b ut its
operation is very poor quality we, Indian make very good plan but
in implication we are lacking in somewhere.
We have full range of financial institution but we can not use in
effective manner.
 CONTENT
S.No. Particular Page No.

1. Financial Institution – 1-2

Introduction
Functions of Financial
2. 3
Institution
Importances of Financial
3. institution 4
4 Problems of Financial
Institution 5-8
5. Classification of Financial 9
Institution
6.
10-11
Categories of FI
7. Development and
Investment Institution 12-14
8. Major FI 15
9. Conclusion 16
 BIBLIOGRAPHY
www.google.com
www.yahoo.com
From Books and Internet