Bank Theory

Capital Markets and Stock Exchanges Primary Market The Primary Market deals with the issuance of new securities. Corporates, governments, and other institutions raise funds through the sale of equity or debt instruments to investors. The primary market facilitates capital formation directly. Secondary Market The Secondary Market involves trading of securities previously issued in the primary market. It provides liquidity to investors and helps in price discovery. Stock exchanges are vital platforms for secondary market transactions. Stock Exchanges in India Major stock exchanges in India include the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Both are regulated by the Securities and Exchange Board of India (SEBI) to ensure transparent and fair trading practices. Financial Products/Instruments in the Secondary Mar...

Money Markets and Capital Markets Money markets and capital markets are integral components of the financial system. Money markets focus on short-term borrowing and lending (typically up to one year), while capital markets deal with long-term investments and financing. Call Money, Notice Money, and Term Money Call Money: Loans repayable on demand, typically with a maturity of 1 day. Notice Money: Loans with a maturity of 2-14 days. Term Money: Money lent for a fixed term of over 14 days. Mathematical Example: Suppose a bank lends ₹5,000,000 as call money at an interest rate of 3% p.a. for 2 days. Interest = Principal × Rate × Time = ₹5,000,000 × (0.03/365) × 2 = ₹821.92 Treasury Bills (T-Bills) Treasury Bills are short-term debt instruments issued by the government, typically for 91, 182, or 364 days, sold at a discount and redeemed at face...