Financial Intermediation

- Financial Intermediation is a systematic channel within the financial system to ensure the transfer of financial assets to the ultimate investor in order to garner the requisite amount.
- Financial intermediation in the organized sector is conducted by a wide range of institutions functioning under the overall surveillance of the Reserve Bank of India.
- In the initial stages, the role of the intermediary was mostly related to ensure transfer of funds from the lender to the borrower. This service was offered by banks, Fls, brokers, and dealers.
- However, as the financial system widened along with the developments taking place in the financial markets, the scope of its operations also widened.
- Some of the important intermediaries operating in the financial markets include; investment bankers, underwriters, stock exchanges, registrars, depositories, custodians, portfolio managers, mutual funds, financial advertisers financial consultants, primary dealers, satellite dealers, self regulatory organizations, etc.
- Though the markets are different, there may be a few intermediaries offering their services in more than one market e.g. underwriter. However, the services offered by them vary from one market to another.
Financial Intermediary
Market
Role
Stock Exchange
Capital Market
Secondary Market to securities
Investment Bankers
Capital Market, Credit Market
Corporate advisory services, Issue of securities
Underwriters
CapitaI Market
Issue securities to the investors on behalf of the company and handle share transfer activity
Primary Dealers Satellite DeaIers
Money Market
Market makmg in government Securities
Forex Dealers
Forex Market
Ensure exchange ink currencies