What is the meaning of finance?
29 December 2021
Banks and Money Markets
2 January 2022
What do financial institutions do?
the financial institution deals with finance-related services. These are gaining popularity day by day nowadays. The attractive rate of returns on the customer’s investment is very demanding. It also provides specialized services like hire purchase and leasing, etc. The simple and organized procedure of the institutions is becoming very complementary. It provides a broad range of business opportunities. The goal of all the institutions is different and they provide different services and have different levels of risk associated with it. All the financial institutions have unique features and it works in a specialized way. The financial institution is gaining immense popularity in broadening the finance-related services in the country.
What is the role and feature of financial institutions?
Promoting the direct investment by the customers and making them understand the risk associated with that as well
Helping in forming the liquidity of the stock in case of an emergency in the financial markets
Reducing the cost of financial services provided
· Advising the customers on how to deal with the equity and the other securities bought and sold in the market.
· Helping to improvise decision making because it follows a systematic approach to calculate all the risks and rewards.
A crucial part of this issue is related to the performance or the policy of administration and management of these institutions. In this section, whether these institutions adopt policies such as banks or other institutions, will be processed:
Financial institutions work like banks in some ways. They give loans and advances to the customers and also set a platform for the customers to do some investments. The customers get exciting offers and returns from them and therefore these institutions are gaining popularity. It also provides consultancy services to the clients on their investments related to the financial markets where the huge amount of risk is involved. Moreover, the customers who are handing over their hard-earned monies to such institutions should check for the history and origin of this financial institution.[1]
Their Institutional Framework
Financial institutions serve as the intermediary that allocates resources from savers to investors across economic sectors. Due to the close linkage with domestic and external economic sectors, (for example: the BOT, Thailand is one of the great development success stories. Due to smart economic policies it has become an upper middle income economy and is making progress towards meeting the Sustainable Development Goals[2].) therefore supervises financial institutions with the objectives to ensure the followings:
1. Financial institutions serve the need of real economy efficiently,
2. Financial institutions are competitive,
3. Individual financial institution and the overall financial institution system remain sound and stable.
In obtaining the three aforementioned objectives, the following institutional frameworks have been drawn:
· to ensure that financial institutions are and have proper risk management system
· to enhance overall efficiency of financial institutions
· to ensure good corporate governance of financial institutions
· to ensure fairness of financial institutions in doing business with their customers, and
· to supervise financial institutions in order to safeguard economic and financial stabilities
Operational policies
Operational policies provide the detail of the activities that contribute to programs and overall interventions (including degrees of discretion etc.) that achieve the objective of the legislation. They provide context and parameters to support discretionary decision making
Advantages
The financial institutions help in the upliftment of the economies of our country.
It has been proved to be more successful in terms of return earned by the customers since the rate of return is higher compared to any other place.
It is also a smart way to invest money and keep the money rotated in the finance market.
It provides financial services to the customers.
The repayment facility is also very well managed in the financial institutions.
It also provides underwriting facilities.
Disadvantages
The process is very complex for some customers because they try to indulge in various businesses and end up making confusion for themselves.
In case of default done by the management of the financial institutions, the customers will have to face major worse circumstances. The money which they have invested may not be recovered. Sometimes the principal amount is not assured to be recovered because the government in case of default announces a certain sum of money which will be repaid and most of the time the amount of government declares to be repaid is very less in comparison to the principal amount of the investment made.
written by the Legal Institute of tamadon kohan rey
