Functionally, there are two types of financial institutions in Indian capital market namely, developmental institutions and investment institutions.
Of the major players, the investment institutions like LIC,GIC and UTI, the bulk of the activity is generated by the UTI by its mobilization of savings from the public through its various schemes.
Now we shall see various institutions and their functions enriching the capital market.
United Trust of India (UTI)
Main objectives are:
- To mobilize savings particularly from the low and middle income groups
- To channelize these savings into productive investment
- To provide an assured income to savers
It provides the savers with expert investment service, portfolio management and assured income.
The UTI mobilizes the savings through the sale of its units and operates a number of schemes with varied characteristics to suit the requirements of savers and investors. These characteristics include income, capital appreciation, liquidity through repurchase, an element of insurance etc.
The UTI can sell and purchase the units issued by it, investing, acquire, hold or dispose of securities. Keep money on deposit with the scheduled banks and undertake related functions incidental or consequential to that. All the units issued by the UTI are of the value of Rs. 10 each. These units were put on sale at face value and thereafter at prices fixed daily by the UTI. Units can be purchased in ten or multiples of ten. Important functions are summarized as
- Underwriting new issues
- Make direct subscription to public issues or private placements
- Keep deposits with banks and companies.
- Operate in the money market by subscribing to Treasury bills, commercial bills etc
- It can partake in the interbank market as a lender or borrower of short term funds. It can borrow from RBI or the Government in case of need.