india & malaysia financial system

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=desc


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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=IB


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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

india & malaysia financial system

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