An institution which accepts deposits, makes business loans, and offers related services.
Commercial banks also allow for a variety of deposit accounts, such as checking, savings, and time deposit.
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These institutions are run to make a profit and owned by a group of individuals.
While commercial banks offer services to individuals, they are primarily concerned with receiving deposits and lending to businesses.
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In financial economics, a financial institution acts as an agent that provides financial services for its clients or members.
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Financial institutions generally fall under financial regulation from a government authority.
Financial institutions provide a service as intermediaries of the capital and debt markets.
They are responsible for transferring funds from investors to companies, in need of those funds.
The presence of financial institutions facilitates the flow of monies through the economy.
Some examples of financial institutions are – Export-Import Bank of India (Exim Bank), Industrial Development Bank of India (IDBI), Industrial Finance Corporation of India (IFCI), National Bank for Agriculture and Rural Development (NBARD), Reserve Bank of India, Small Industries Development Bank of India (SIDBI).
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A mutual fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective.
The mutual fund will have a fund manager who is also known as the portfolio manager and is responsible for investing the pooled money into specific securities (usually stocks or bonds) and collects the dividend or interest income.
The investment proceeds are then passed along to the individual investors.
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“A mutual fund is a professionally-managed form of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.”
When we invest in a mutual fund, we are actually buying shares (or portions) of the mutual fund and become a shareholder of the fund.
Mutual funds are one of the best investments ever created because they are very cost efficient and very easy to invest in (we don’t have to figure out which stocks or bonds to buy).
Common mutual fund companies are – Reliance Mutual Funds, LIC Mutual Fund, Fund Unit Trust of India, Tata Mutual Fund, SBI Mutual Funds and much more like these.
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The capital market is the market for medium and long term funds. It refers to all the organizations, institutions and instruments that provide long term funds.
The organizations and institutions which constitute the capital market include the new issue market, the stock exchange, the mutual funds, insurance companies, investment banks.
The capital market mainly focuses on meeting long term financial needs of the business sector.
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The business enterprise utilizes this market to procure finances for long term investments, such as buying plant ,machinery ,buildings, etc. funds in the capital market are raised by issuing a wide variety of securities which includes :-
• Equity shares or ownership securities
• Debentures or creditor ship securities
• Preference shares or securities having preferential claims
• Other innovative securities which are variant s securities, with new features added to provide a wider choice to investors.
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