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8/3/2019 India & Malaysia Financial System
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Academic Project
On
Comparison of Indian financial system with Malaysian finance system
Submitted to: Submitted By:
Dr. Sanjay Rastogi Laxmikant sharma
JKBS/PGDM/AICTE
Sudesh sharma
JKBS/PGDM/AICTE
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DECLARATION
We (Laxmi Kant Sharma & Sudesh sharma) declare that the Project Work entitled Comparison of Indian financial system with Malaysian financesystem is our own work and conducted under the supervision of Dr.
sanjay rastogi .
We further declare that to the best of our knowledge, the Project does notcontain any part of any work which has been submitted for the award of anydegree either in this College/ University/ Deemed University without propercitation.
Laxmi Kant SharmaSudesh Sharma
JKBS/PGDM/AICTE
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ACKNOWLEDGEMENT
Some works are so typical that are impossible for a person to
complete it alone. Summer Internship Project is one of them. I would not
be able to complete my work without the help of my respected Company
Guide, Faculty Guide, my college and workplace colleagues and my
family members. So it is my obligation to thank all of them.
We have had the honor of having been associated & working under theable & stimulating guidance of Mr. Sanjay Rastogi Faculty of Finance.
The Project work was undertaken under their keen supervision and theProject has been prepared by me. We express sincere feeling of gratitudeand respect for their inspiring help throughout the work. Without hisesteemed and valuable help and guidance it would not have beenpossible for me to accomplish my job. We are gratefully indebted to them.
And finally I would like to offer my
heartiest prayer to the God and my friends who have given me mental
and spiritual strength to complete this research work.
Laxmi Kant Sharma
Sudesh sharma
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INDIAN FINANCIAL SYSTEM
IFS and its Functions: -
System that allows the transfer of money between savers and borrowers
It channels household savings to the corporate sector
Allows asset - liability transformation
It helps in risk transformation by diversification
Indian Financial System consists of: -
1. Banking sector.2. Capital market.3. Money market.
Structure of Banking in India
Scheduledbank
Commercialbank
Public sector(27)
Nationalizedbanks (19)
State bank of India & its
associates (8)
Private sector(30)
Foreign banks(40)
Regional Ruralbanks (196)
Co-operativebank
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Commercial banks
Public sector banks are those where government holdings are more than 50%while nationalized banks are those banks which were nationalized on July 19,
1969. Thus all nationalized banks are public sector banks.So one can say public sector bank=Nationalized bank+ SBI + SBI associates +IDBI Thus in total 27 PSBs are there.
As on December 31 st, Public sector banks recorded a rise of 24.1% when compareto 16.9% in the last year.
Private sector Banks
Private sector banks are those banks in which majority of stake is held byprivate individuals and not by government
The first private bank in India was Indus land Bank
IDBI ranks the 10 th largest development bank in the world as private banksin India
As on December 31 st, Private sector banks recorded a rise of 28% whencompare to 8.4% in the last year.
Foreign Bank
Banks from other countries which have branches in a country.
Citi Bank opened its branch in India in 1902
The foreign banks have brought forth some innovations and changes in thebanking industry of the country. The banking industry is now morecompetitive and customer friendly than before.
As on December 31 st, foreign banks recorded a rise of 19.8% whencompared to a decline of 8% in the last year.
Regional rural bank
The banks provide credit to the weaker sections of the rural areas,particularly the small and marginal farmers and small entrepreneurs
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RRBs was set up by the government of India on October 2, 1975
The total authorized capital was earlier fixed at Rs. 1 crore which is nowraised to Rs. 5 crore
The RRBs are under control of NABARD which is in charge of layingdown policies for the RRBs .
Capital Market in India
CapitalMarket in
India
Governmentsecurity (Gill-
edged market)
Industrialsecuritymarket
New issuesmarket
and
Old issuemarket
Developmentfinancial
Institution
IFCI
ICICISFCs
IDBI
IIBI
UTI
FinancialIntermedia
ries
Merchant banks
Mutual funds
Leasingcompanies
Venture capitalist
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Gilt Edged Market and Types
This market refers to the market for government securities which are of thebest quality.
Credible instrument used by government for meeting its financialrequirement.
Types:-
1. Dated Securities with a fix maturity date2. Zero coupon bonds3. Partly paid stock 4. Treasury Bills
Industrial security market
An initial public offering (IPO ), referred to simply as an "offering" or"flotation", is when a company (called the issuer ) issues common stock or shares to the public for the first time.
Indias largest IPO is from Coal India L td which raised upto Rs.15000 crore.
A stock exchange is an entity that provides "trading" facilities for stock brokers and traders to trade stocks, bonds, and other securities.
Recent changes by SEBI
Investment limit in IPO is increased from 1 lakh to 2 lakh.
SEBI decides IPOs should be listed with in 12 days .
SEBI introduced spot delivery system for derivatives from April 1 st 2011.
Pre open market introduced by SEBI.
Merchant banks
Merchant bankers assist corporate in raising capital.
They assist in issue of Shares, syndicating loans, public issue of debentures.They do not provide funds.
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They only assist. They also actively arrange working capital, appraisalProjects scrutinize & persuade merger proposals.
Mutual Funds
A mutual fund is a professionally managed type of collective investmentscheme that pools money from many investors and invests typically ininvestment securities.
Types of mutual Funds
1. Open - ended schemes2. Close ended schemes
Lease financing and hire purchase
Leasing is a process by which a firm can obtain the use of a certain fixedassets for which it must pay a series of contractual, periodic, tax deductiblepayments.
A hire-purchase contract allows the buyer to hire the goods for amonthly rent.
A hire purchase is termed an installment plan .
Venture capital Financing
Venture capital is risk financing available in the form of equity
A venture capitalist also provides management support and acts as a partnerand advisor to the entrepreneur
Methods of venture financing1. Equity Contribute 49% of the total equity capital2. Conditional loan Amount repayable in form of royalty, No interest
charged3. Income notes Charges both interest and royalty on sales
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The Financial System Structure in Malaysi
Financial System
Financial Institutions Financial Market
Banking System
1. Bank Negara Malaysia2. Bank Institutions
Commercial Banks Finance Companies Merchant Banks Islamic Banks
3. Others Discount Houses Representative
offices of foreign
Banks
Non-Bank FinancialIntermediaries
1. Provider & Pension Funds2. Insurance Companies
(including Takaful)3. Development finance
Institutions4. Saving Institutions.
National Saving Banks Co-operative societies
5. Others Unit Trusts
Pilgrims Fund Board Housing Credit Institutions CagamasBerhad Credit Guarantee
Corporation Leasing Companies Factoring Companies Venture Capital Companies
Money & Foreign ExchangeMarket1. Money market2. Foreign exchange Market
Capital Market1. Equity Market2. Bond Market
Public Debt Securities Private debt Securities
Derivatives Market1. Commodity Futures2, KLSE CI Futures3. KLIBOR Futures
Offshore Market
1. Labuan International OffshoreFinancial Center (IOFC)
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Banking System
Consists of Bank Negara Malaysia (Central Bank of Malaysia BNM) ,banking institutions ( commercial banks, finance companies, merchant bank
and Islamic banks) and a miscellaneous group ( discount house andrepresentative office of foreign banks).
Largest of financial system, accounting for >70% of the total assets of thefinancial system.
Rapid expansion of largest group of institutions in banking system grew anaverage rate 19.7% (1988-97) but decline by 5.6% (during Asian Financialcrisis). recover after 2000.
Bank Negara Malaysia Established on 26 January1959 under the Central Bank of Malaya Ordinance
1958. Objectives of BNM are as follows:
To issue currency and keep reserves to safeguard the value of the currency;
To act as a banker and financial adviser to the Government;
To promote monetary stability and a sound financial structure; and
To influences the credit situation to the advantage of Malaysia.
The objectives of BNM, in essence, encapsulate the importance of promoting economic growth with price stability and maintaining andfinancial stability.
The introduction of the Banking and Financial Institutions Act 1989(BAFIA) on 1 October 1989 extended BNMs powers for the supervisionand regulation of financial institutions and depositing taking institutions whoalso engaged in the provisions of finance and credit.
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Commercial Banks
The commercial banks are largest and most significant providers of funds inthe banking system.
Since they are involved in deposit-taking activities, they are required tooperate within the ambit of the provisions of the Banking and FinancialInstitutions Act 1989 (BAFIA) under direct supervision of Bank NegaraMalaysia.
Current 22 commercial banks (exclude Islamic banks) of which 13 arelocally incorporated foreign banks.
Commercial Banks
The main functions of commercial banks are to provide:
1. The mobilization of saving , deposits, surplus and idle funds throughsavings accounts, currents accounts, fixed deposit accounts, negotiableinstruments of deposits and through other banking, financial andinvestment instruments.
2. The provision of services and facilities for their customers and others
members of the public to collect/receive and transfer/pay money inMalaysian ringgits or in other foreign currencies, both locally andinternationally. Commercial banks are also authorized to deal in foreignexchange and are the only financial institutions allowed to providecurrent account facilities.
3. The lending of money under various from of overdrafts, loan andadvances, and the financing instruments to private individuals anddifferent forms of business enterprises and other organizations forpersonal consumption, investments, working capital requirements and forother productive and economically viable purpose and activities.
4. The provision of banking services and facilities to stimulate, assist andencourage productive and profitable utilization of available funds forinvestments and promotion of exports.
5. The financing of government project and activities through subscriptionsto Treasury Bills, Cagamas Bonds, Government securities, and so on.
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Commercial Banks
No Name Ownership
1 Affin Bank Berhad Local
2 Alliance Bank Berhad Local
3 AmBank (M) Berhad) Local
4 Bangkok Bank Berhad Foreign
5 Bank of America Malaysia Berhad Foreign
6 Bank of China (Malaysia) Berhad Foreign
7 Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad Foreign
8 CIMB Bank Berhad Local
9 Citibank Berhad Foreign
10 Deutsche Bank (Malaysia) Berhad Foreign
11 EON Bank Berhad Local
12 Hong Leong Bank Berhad Local
13 HSBC Bank Malaysia Berhad Foreign
14 J.P. Morgan Chase Bank Berhad Foreign
15 Malayan Banking Berhad Local
16 OCBC Bank (Malaysia) Berhad Foreign
17 Public Bank Berhad Local
18 RHB Bank Berhad Local
19 Standard Chartered Bank Malaysia Berhad Foreign
20 The Bank of Nova Scotia Berhad Foreign
21 The Royal Bank of Scotland Berhad Foreign
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22 United Overseas Bank (Malaysia) Bhd Foreign
Merchant Banks
Merchant banks emerged in the Malaysian banking scene in the 1970s,marking an important milestone in the development of the financial systemalongside the corporate development of the country.
They play a role in the short-term money market and capital raisingactivities including financing specializing in syndication, corporate financeand management advisory services, arranging for the issue and listing of shares, as well as investment portfolio management.
There are currently 9 merchant banks in Malaysia.
No List of Merchant Banks in Malaysia
1 Affin Merchant Bank Bhd.
2 Alliance Merchant Bank Bhd.
3 Arab-Malaysian Merchant Bank Bhd.
4 Aseambankers (M) Bhd.
5 Commerce International Merchant Bank Bhd.
6 Southern Investment Bank Bhd.
7 Public Merchant Bankers Bhd.
8 RHB Sakura Merchant Bankers Bhd.
9 Utama Merchant Bank Bhd.
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Islamic Banks
In Malaysia, separate banking legislation and banking regulation exists sideby side with those for the conventional banking system. The legal basis forthe establishment of Islamic banks was the Islamic Banking Act (IBA),which came into effect on 07 April 1983. The IBA provides BNM withpowers to supervise and regulate Islamic banks, similar to the case of otherlicensed banks.
The banking activities of Islamic banks are based on Syariah principles (theIslamic principles). The first Islamic bank was Bank Islam Malaysia Bank (paid-up capital RM80million) which commenced operations on 1 July1983. On 1 October 1999, a second Islamic bank, namely Bank MualamatMalaysia Berhad was established. Apart from Islamic banks, other financialinstitutions also offer Islamic banking services thro ugh the Islamic BankingScheme
In term of products, all Islamic banking entities are offers banking productsbased on the Islamic principles.
No. Name Ownership
1 Affin Islamic Bank Berhad L
2 Al Rajhi Banking & Investment Corporation (Malaysia) Berhad F
3 Alliance Islamic Bank Berhad L
4 AmIslamic Bank Berhad L
5 Asian Finance Bank Berhad F
6 Bank Islam Malaysia Berhad L
http://www.bnm.gov.my/index.php?ch=13&cat=banking&type=IB&sort=title&order=deschttp://www.bnm.gov.my/index.php?ch=13&cat=banking&type=IB&sort=title&order=deschttp://www.bnm.gov.my/index.php?ch=13&cat=banking&type=IB&sort=lf&order=aschttp://www.bnm.gov.my/index.php?ch=37&pg=600&ac=80&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=626&ac=82&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=677&ac=90&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=603&ac=81&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=630&ac=83&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=95&ac=26&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=95&ac=26&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=630&ac=83&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=603&ac=81&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=677&ac=90&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=626&ac=82&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=600&ac=80&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=13&cat=banking&type=IB&sort=lf&order=aschttp://www.bnm.gov.my/index.php?ch=13&cat=banking&type=IB&sort=title&order=desc8/3/2019 India & Malaysia Financial System
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7 Bank Muamalat Malaysia Berhad L
8 CIMB Islamic Bank Berhad L
9 EONCAP Islamic Bank Berhad L
10 Hong Leong Islamic Bank Berhad L
11 HSBC Amanah Malaysia Berhad F
12 Kuwait Finance House (Malaysia) Berhad F
13 Maybank Islamic Berhad L
14 OCBC Al-Amin Bank Berhad F
15 Public Islamic Bank Berhad L
16 RHB Islamic Bank Berhad L
17 Standard Chartered Saadiq Berhad F
Discount House
Discount House began operations in Malaysia since 1963.
Generally, the discount house specialize in short-term money marketoperations and mobile deposits from the financial institutions andcorporations in the form of money at call, overnight money and short termdeposits.
The funds mobilized are invested in Malaysian Treasury Bills, MalaysianGovernment Securities (MGS), banker acceptance (Bas), negotiablecertificates of deposits (NCDs), Cagamas bonds and Floating RateNegotiable Certificate of Deposits (FRNCDs), as well as to provide anactive secondary market for these activities.
http://www.bnm.gov.my/index.php?ch=37&pg=96&ac=27&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=583&ac=76&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=599&ac=79&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=588&ac=77&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=693&ac=92&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=592&ac=78&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=669&ac=88&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=698&ac=95&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=696&ac=94&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=577&ac=75&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=694&ac=93&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=694&ac=93&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=577&ac=75&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=696&ac=94&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=698&ac=95&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=669&ac=88&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=592&ac=78&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=693&ac=92&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=588&ac=77&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=599&ac=79&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=583&ac=76&cat=banking&type=IBhttp://www.bnm.gov.my/index.php?ch=37&pg=96&ac=27&cat=banking&type=IB8/3/2019 India & Malaysia Financial System
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Conclusion
Almost both nations financial system are same. Regulation is done by central bank in both nations.
Discounts houses is the new terminology in Malaysia financesystem.
Bursa Malaysia Berhad is the stock market of Malaysia. Private equity and venture capital play a vital role in Indian finance
system. In India public banks has around 70 % contribution in banking
system but In Malaysia other banks has major share holding inbanking system. Mutual Funds also major contributors in Indian share market as
well as economy but in Malaysia there are no such funds.
Bibliography
Rbi.gov.in
www.bnm. gov