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Financial Intermediaries

Financial Intermediaries

  • Meaning:- An organization or individual that serves as a middleman between the parties involved in a financial transaction is referred to as a financial intermediary. The intermediaries enable it to be simpler for funds to move between borrowers and lenders, which enables the economy to allocate capital more effectively. 
  • Types of Financial Intermediaries:- 
  1. Commercial banks- Commercial banks serve as financial middlemen in the economy, mobilizing savings and transferring them to lucrative investments. Commercial banks connect savers and borrowers in the financial markets, acting as intermediaries. They receive deposits from depositors and lend money to borrowers while collecting interest. Utilizing savings and allocating money for profitable investments, fosters economic expansion and this is done through commercial banks. 
  2. Merchant Bankers- Between their clients and the financial markets, merchant bankers function as an intermediary, assisting with raising funds, managing risks, and decisions regarding investments. In India, merchant bankers also support the syndication of loans for commercial borrowers and maintain regulatory compliance with the rules of SEBI.
  3. Brokers- A broker is an individual or organization that coordinates transactions between buyers and sellers across multiple financial marketplaces. In exchange for a commission or an agreed-upon amount of fees, they assist their customers or companies buy and sell multiple kinds of securities.
  • Role of Financial Intermediaries:- Risk sharing, cost savings, and scale economies are a few benefits of financial intermediaries.
    For instance, they can make use of economies of scale to cost-effectively maintain data and profiles and properly assess the credit profiles of potential borrowers. They lower the costs associated with the numerous financial transactions that an individual investor would otherwise need to complete.

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Attention Investors :

Prevent Unauthorised transactions in your account. Update your mobile numbers/email IDs with your stock brokers. Receive information of your transactions directly from Exchange on your mobile/email at the end of the day..... Issued in the interest of investors. | KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary. |We do proprietary trading occasionally |Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 01, 2020. |Check your securities / MF / bonds in the consolidated account statement issued by NSDL/CDSL every month ........... Issued in the interest of Investors.