General Awareness about Mutual Funds and Venture Capital Funds
The Indian capital market is the market for long term loanable funds as distinct from money market which deals in short term funds. It refers to all the facilities and institutional arrangements for borrowing and lending "Term funds" medium term and long term funds. In principal capital market loans are used by industries mainly for fixed investment. It does not deal in capital goods, but is concerned with raising money capital for purpose of investment.
Mutual Funds:
A Scheme of Money Market Mutual Funds (MMMFs) Las introduced by the RBI in April 1992. The objective of the scheme was to provide an additional short-term avenue to the individual investors. With a view to making the scheme more flexible, the RBI permitted certain relaxations in November 1995. The new guidelines allow banks, public financial institutions and also the institutions in the private sector to set up MMMFs. The ceiling of Rs. 50 crore on the size of MMMFs stipulated earlier, has been withdrawn. The prescription of limits on investments in individual instruments by MMMFs are allowed to issue units to corporate enterprises and other.
The scheme was further liberalised in 1997-98 and the MMMfs were permitted to make investments in rated corporates and others. MMMFs were permitted to make investments in rated corporate bonds and debentures with residual maturity of upto one year.
The MMMFs have been brought under the purview of the SEBI regulations since March 2000. Banks are now allowed to set up MMMFs only as a separate entity in the form of trust. Currently, there are three MMMFs in operation.
Venture Capital Funds (VCF):
The Union Budget for 1999-2000 stressed the need of higher investment in venture capital activity. As it is difficult to access capital market to rise funds for technology development on demonstration especially for small and medium industries, the VCF has a major role to play in this area.
The National Venture Funds for software and IT industry (NVFSIT) launched in the current financial year merit mention in this context. NVFSIT is managed by the Small Industrial Development Bank of India (SIDBI), Venture Capital Ltd. (SVCL) which is a wholly subsidiary of the IDBI.
The SEBI Committee on venture capital headed by Shri K.B. Chandrasekhar who is the chairman of Exodus Communication Inc, was set up in July, 1999 examined the implements to the growth of VCF. He has suggested several measures to facilitate the growth of venture capital activity in India.
Capital market deals in the lending and borrowing of long-term and medium-term credit. Indian capital market has witnessed a radical transformation within a period of just over one decade. Because of such reforms, the Indian capital market is now ranked in the top league.
Important Links:
- Important Topic Money & Banking for Upcoming Bank Tests
- General Awareness about SEBI (Stock Exchange Board of India)
- Structure of Indian Banking System for Upcoming Competitive Exams
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