FinancialInstitutionsIndian Financial SystemFinancial InstitutionsA financial institution is aninstitution which collectsfunds from the public andplaces them in financialassets, such as deposits,loans, and bonds, ratherthan tangible property.Functions of Financial Institutions Liability-Asset transformation: They issue claims totheir customers that have characteristics different fromthose of their own assets. Size- transformation: They provide large volumes offinance on the basis of small deposits or unit capital. Risk transformation: They distribute risk throughdiversification and thereby reduce it for savers as in thecase of mutual funds. Maturity transformation :They offer savers alternateforms of deposits according to their liquidity preferences,and provide borrowers with loans of requisite maturitiesClassification of FIsBanking and Non banking.Regulatory institutions* RBI* SEBIBanking institutionsA bank is an institution thataccepts deposits of moneyfrom the public, which arerepayable on demand andwithdraw able by cheques.Their deposit constitute amajor part of the nationalmoney supply.Non Banking Financial Institutions(NBFC) NBFCs help to bridge thecredit gaps in several sectorswhich traditional institutionare unable to fulfill.NBFCs are more flexiblein their operations andquick in decision-making.Activities of NBFCs1.Equipment leasing2. Hire Purchase3.Bill discounting4.