Lec 35 | Part 2 | Indian Financial Management System | JKSSB | CA MOHAMAD LATEEF (AIR - 35 CA FINAL)

Lec 35 | Part 2 | Indian Financial Management System | JKSSB | CA MOHAMAD LATEEF (AIR - 35 CA FINAL) Link of Book : https://drive.google.com/file/d/1_XpT... 2. Financial Assets The products which are traded in the Financial Markets are called Financial Assets. Based on the different requirements and needs of the credit seeker, the securities in the market also differ from each other. A financial asset is a non-physical asset whose value is derived from a contractual claim, such as bank deposits, bonds, and stocks. Financial assets are usually more liquid than other tangible assets, such as commodities or real estate, and may be traded on financial markets Some important Financial Assets have been discussed briefly below: A. Call Money – When a loan is granted for one day and is repaid on the second day, it is called call money. No collateral securities are required for this kind of transaction. B. Notice Money – When a loan is granted for more than a day and for less than 14 days, it is called notice money. No collateral securities are required for this kind of transaction. C. Term Money – When the maturity period of a deposit is beyond 14 days, it is called term money. D. Treasury Bills – Also known as T-Bills, these are Government bonds or debt securities with maturity of less than a year. Buying a T-Bill means lending money to the Government. E. Commercial Paper – It is an unsecured short-term debt instrument issued by corporations which have maturity between 7 days and 1 year. CP can be issued in denominations of Rs.5 lakh or multiples thereof. F. Certificate of Deposit - These are unsecured negotiable money market instruments, which usually offer higher returns than Bank term deposits, are issued in demat form or as Usance Promissory Notes against funds deposited at a bank or other eligible financial institution. There are several institutions that can issue CDs. Banks can offer CDs which have maturity between 7 days and 1 year. 3. Financial Services Services provided by Asset and Liability Management Companies (e.g., SBI Mutual Funds, LIC). They help to get the required funds and also make sure that they are efficiently invested. The financial services in India include: A. Banking Services – Any small or big service provided by banks like granting a loan, depositing money, issuing debit/credit cards, opening accounts, etc. 54 | P a g e B. Insurance Services – Services like issuing of insurance, selling policies, insurance undertaking and brokerages, etc. are all a part of the Insurance services C. Investment Services – It mostly includes asset management (Shares & Mutual funds) D. Foreign Exchange Services – Exchange of currency, foreign exchange, etc. are a part of the Foreign exchange services The main aim of the financial services is to assist a person with selling, borrowing or purchasing securities, allowing payments and settlements and lending and investing. 4. Financial Markets The marketplace where buyers and sellers interact with each other and participate in the trading of money, bonds, shares and other assets is called a financial market. The financial market can be further divided into four types: A. Capital Market – The capital market is a market for financial assets which have a long or indefinite maturity. Generally, it deals with long term securities which have a maturity period of above one year. The capital market can further be divided into three types: i. Industrial/ Corporate Securities Market ii. Government Securities Market iii. Long Term Loan Market Money Market – Money market is a market for dealing with financial assets and securities which have a maturity period of upto one year. In other words, it is a market for purely short term funds. The money market may be subdivided into four. They are: i. Call money market - The call money market is a market for extremely short period loans say one day to fourteen days. ii. Commercial bills market- It is a market for Bills of Exchange arising out of genuine trade transactions. In the case of credit sale, the seller may draw a bill of exchange on the buyer. The buyer accepts such a bill promising to pay at a later date specified in the bill. The seller need not wait until the due date of the bill. Instead, he can get immediate payment by discounting the bill. iii. Treasury bills market- It is a market for treasury bills which have ' short - term ' maturity. A treasury bill is a promissory note or a finance bill issued by the Government. iv. Short term loan market- It is a market where short - term loans are given to corporate customers for meeting their working capital requirements. Commercial banks play a significant role in this market. Commercial banks provide short term loans in the form of cash credit and overdraft