How to Map Any Financial System, One Step at a Time
A financial system looks unmanageable from outside because everything in it happens at once. The seven step routine works by refusing to answer four questions at once. Who is involved. The work each one does. Who sets the conditions each one works under. The change each one makes to the money passing through. The four are separate questions, and a sheet that answers them all at the same time answers none of them well. Seven steps, taken in order, hold them apart.
Consider the sheet a household would draw if somebody asked where its money actually sits. A savings account here, a recurring deposit there, a policy somebody has been paying premiums on for nine years, a loan against the house, a broker account with three holdings in it. The starting point would not be which authority supervises each of those. The starting point would be what each arrangement is and what it does for the household, and the authority would be reached afterwards, at the point somebody wanted to know where a complaint goes. The household instinct is correct, and the routine set out below is that instinct written down and pointed at a whole system instead of one household.
One invented system, six institutions and four unnamed roles. Suvarna Commercial Bank Limited, Rukmini Finance Limited, Chandrika Life Insurance Limited, Vaidehi Asset Managers Limited, Kaveri Stock Exchange Limited with its clearing corporation, and Setu Payments Limited. All six are made up. A depository, a custodian, a registrar and a broker also reach the sheet, each entered under the work it does and given no name.
Two ends carry the whole map, and both are named identically at every step: one is the surplus side and one is the deficit side. Every route, every party and every claim on the finished sheet is described by where it sits between those two.
The seven steps are set out below in the order they are taken, with what each one puts on the sheet and what it costs to leave it out. The order of the steps is the only part of this routine that cannot be varied, so read the third column before the second.
What are the two ends of the system being mapped?
Step one is two lines and nothing else. The first line names who in this system took in more than it spent over the period under examination. The second line names who wanted to spend more than it took in over the same period. Two lines are the whole of step one. The only thing that makes step one hard is the pull towards writing down a kind of party instead of a position.
Households, businesses, governments and the rest of the world all turn up on both lines. A household putting money aside for a wedding sits on the surplus sideThe side of a period that takes in more than it spends, and therefore has money it is not using. The surplus side is a position for a period, not a description of anybody's character or wealth. this year and on the deficit sideThe side whose plans for the same period run ahead of what it brings in, so it needs money from elsewhere to close the difference. next year, when it borrows against the house it has just bought. A business coming out of a good season sits on the surplus side; the same business building a second unit sits on the deficit side. So the line does not read households. The line reads households, over this period, on this side.
Where it is found: whatever record the map is drawn from will show who is holding money it is not spending and who is asking for money. A position only holds for a period, so the period goes beside each line. A sheet without a period on it will be read next year as though it still applied. Every route, every party and every claim still to be written down is described by where it sits between those two lines, and nothing else on the sheet can be placed until both ends are named.
When the line cannot be filled: the line goes on the sheet anyway and stays empty. If the source covers only the side that borrows, that is a finding about the source, and it belongs on the sheet at step one where it is visible rather than at step seven where it looks like an afterthought. A sheet with one end missing is not half a map; it is a map whose other half cannot be read.
A household saved through the whole of one year and borrowed against its house the next. Which line does it go on at step one?
Which routes run between the two ends, and how many claims sit on each?
Two lines again, and this time a number beside each. The direct route carries one: a single claim running between the two ends. The intermediated route carries two: one claim on each side of the institution standing in the middle. Counting is the entire step. Why either route exists, what either one costs and which one anybody prefers are questions for elsewhere, and step two turns only on how many claims each route puts on the sheet.
The count looks trivial and is worth more than anything else written at this stage. Deposits of Rs 1,92,000 crore at Suvarna Commercial Bank Limited, invented, and advancesThe word a bank uses for the money it has lent out and is waiting to be repaid. Advances are a claim the bank holds, and they sit on the opposite side of its books from deposits, which are a claim held against the bank. of Rs 1,44,000 crore from the same bank are two claims. The two figures are not one claim seen twice, and they are also not two separate pools of money sitting in a vault. One is what Suvarna Commercial Bank owes; the other is what Suvarna Commercial Bank is owed. A sheet that records the count at step two is a sheet on which nobody later adds Rs 1,92,000 crore to Rs 1,44,000 crore and reports the sum as the size of anything.
Where it is found: the routes come out of the parties listed at step three, so in practice step two gets drawn roughly now and tidied once step three is finished. Redrawing step two after step three is expected, and it is not a fault in the order. The count is far easier to get right on an empty sheet than on a full one, so the one thing the order does not allow is skipping step two.
Step two reaches Suvarna Commercial Bank Limited, where Rs 1,92,000 crore came in as deposits and Rs 1,44,000 crore went out as advances. What goes on the sheet?
The parties in a system are about to be listed. Should they be grouped by who oversees them, or by what each one does?
Which parties stand between the two ends, and what goes on each line?
One line per party, and every line has the same three parts in the same order: what it takes, what it gives, and who it owes. Not what it is called. Not who supervises it. Not how large it is. Three parts, same order, every line, including the lines where all three seem obvious.
Writing every line in the same three parts is why step three works. A line written in the same three parts as every other line can be set beside any other line and read straight across. A line written in whatever words came to mind at the time cannot be set beside anything. A line in three parts makes two parties comparable at step six, and by step six nothing survives of what was left out. So the line goes down even when the party seems too obvious to need one.
Here is step three run on the invented system, with the figures recomputed at the line that uses each one.
| The party | What it takes | What it gives | Who it owes |
|---|---|---|---|
| Suvarna Commercial Bank Limited, invented | Deposits of Rs 1,92,000 crore | Advances of Rs 1,44,000 crore | Its depositors |
| Rukmini Finance Limited, invented | Borrowings of Rs 14,400 crore raised in the market, and no deposits at all | Lending of Rs 18,000 crore | The lenders who funded it |
| Chandrika Life Insurance Limited, invented | Premiums, held as policyholder funds of Rs 72,000 crore | Cover, and a payment when a policy falls due | Its policyholders |
| Vaidehi Asset Managers Limited, invented | A mandate over Rs 1,80,000 crore that never reaches its own balance sheet | Management of that money for a blended fee of 0.55 per cent of it | Nobody. It owes no part of the Rs 1,80,000 crore |
Three of those four lines carry a second figure that the line itself asks for, and each one is a division that can be done on paper. Rukmini Finance Limited borrowed Rs 14,400 crore against net worthWhat would be left over for the owners of a business if everything it holds were turned into money and everything it owes were paid off. Whatever is left over takes the first hit when something goes wrong. Its size therefore matters more than it looks. of Rs 3,600 crore, and Rs 14,400 crore over Rs 3,600 crore is 4.0 times its net worth. Chandrika Life Insurance Limited holds policyholder fundsMoney an insurer is holding because policyholders paid it in, set against the payments it expects to make to them later. The insurer holds it; the policyholders have the claim on it. of Rs 72,000 crore against net worth of Rs 7,200 crore, and Rs 72,000 crore over Rs 7,200 crore is 10.0 times its net worth. Vaidehi Asset Managers Limited charges 0.55 per cent of the Rs 1,80,000 crore it manages, and 0.55 per cent of Rs 1,80,000 crore is Rs 990 crore of revenue. Against costs of Rs 594 crore that leaves Rs 396 crore, and Rs 396 crore over Rs 990 crore of revenue is an operating margin of 40.0 per cent of revenue.
Notice which fact each line is carrying. The fact is never the size. Rukmini Finance Limited takes no deposits, and that single phrase in the second column is the whole of what separates its line from the line above it. Vaidehi Asset Managers Limited owes nobody any part of the assets under managementMoney managed on behalf of other people. The manager decides where it goes and charges for deciding. The money is not the manager's and does not sit on the manager's own balance sheet., and that is what its fourth column has to say out loud, because a reader who sees Rs 1,80,000 crore and no qualifier will file it as something the manager holds.
When a line cannot be filled: the party's name goes down, the columns that can be filled are filled, and the reason goes inside the column that cannot. A line with two of three parts filled and a reason in the third is a usable line. A line quietly completed with what a party of that sort usually does is not a line at all, it is a guess with a name attached.
Rukmini Finance Limited lends Rs 18,000 crore and takes no deposits. Which version of its step three line is the usable one?
Which parties carry, match, record and settle rather than judge?
A second section opens on the sheet, underneath the first, with the test written at the top of it in words before a single party goes into it. The test is one sentence: does this party take a view on whether a borrower will repay. If it does not, the party belongs in this section and not in the one above.
Anything that matches one side of a trade to the other, stands between two matched sides, holds securities, keeps the record of who holds what, or moves the money leg of a transaction goes here. The reason for a separate section rather than a column is that these parties will behave differently at step six, and a section keeps them together where that can be checked across all of them.
Here is step four run on the same invented system. Kaveri Stock Exchange Limited matched Rs 48,00,000 crore of turnoverThe total value of everything traded through a venue over a period. Turnover counts what changed hands, not what anybody earned, and the venue keeps only a fraction of it. in the stated year and earned Rs 156 crore on a transaction fee of 0.00325 per cent of that turnover. Its clearing corporation is a separate entity and gets a separate line: it holds marginMoney put up in advance against a position and held by somebody else until the position is closed. Margin is not a payment. The money sits there ready to meet a failure. of Rs 11,000 crore against a settlement guarantee fundResources a clearing corporation keeps aside so that one member failing to pay does not become everybody else's problem. The fund is held for the failure that has not happened yet. of Rs 2,750 crore, and Rs 11,000 crore over Rs 2,750 crore is 4.00 times the fund. The depository, the custodianA party that holds securities on behalf of somebody else and does nothing with them except keep them safe and hand them over when told to. and the registrar go on the sheet by the job each one does, with no figures against them, since this record carries none for any of the three. Setu Payments Limited moved 1,200 crore transactions carrying Rs 3,60,000 crore, and Rs 3,60,000 crore over 1,200 crore transactions is Rs 300.00/- on the average payment.
The exchange and the clearing corporation are two entities, and the second exists for a reason the first cannot cover, so they get two lines and never one. A sheet that merges them has lost the reason there are two of them, and no later step on the sheet can put that back.
Apply the step four test to a clearing corporation that stands between the two matched sides of every trade. Which section does it go in?
Who licenses or registers each party, and where can anybody check it?
Two columns get added to the sheet at this step, and only one of them ever gets filled in.
The first column is the authority. Against each line already on the sheet, write the body that licenses or registers that party, and write the site where anybody at all can go and look it up. The Reserve Bank of India at rbi.org.in. The Securities and Exchange Board of India (SEBI) at sebi.gov.in. The Insurance Regulatory and Development Authority of India (IRDAI) at irdai.gov.in. The Pension Fund Regulatory and Development Authority (PFRDA) at pfrda.org.in. The Deposit Insurance and Credit Guarantee Corporation at dicgc.org.in goes against whatever a depositor is covered for. A sheet that names the same body three different ways has recorded three weak entries instead of one strong one. Write the authority the same way every time it appears.
The second column is the requirement row, and the instruction that surprises people runs like this: the row is drawn and left empty, with the authority printed inside the empty row. The capital a party must hold, the liquidity it must keep, the margin it must collect, the cover a depositor has, the conditions on which anybody is registered at all, the time a trade takes to settle. A row is drawn for each one the sheet needed. None of them is filled.
Then write the reason at the foot of the step: each of these is set by the authority named inside the row, and each of them changes. Whoever picks the sheet up next then reads the empty rows as a design rather than as work somebody did not finish. A requirement typed in from recollection is not merely old on the day it moves, it is wrong. A filled row looks finished and an empty row does not, so the wrongness is the hardest kind to catch.
Step five draws a row and prints an authority inside it. The row carries no value. Every row listed below is set by the authority sitting in it, every one of them moves, and a reference that typed a value into any of them would be wrong on the morning it changed rather than merely elderly. Each row is taken to the site beside it before anybody relies on it.
| The row the sheet wants filled | Who fills it, and where to check |
|---|---|
| Which authority licenses or registers each party listed | Reserve Bank of India, rbi.org.in; SEBI, sebi.gov.in; IRDAI, irdai.gov.in; PFRDA, pfrda.org.in |
| The register in which anybody may look up a party's licence or registration | SEBI, sebi.gov.in |
| What a depositor gets back should a bank fail, and the limits sitting on that | Deposit Insurance and Credit Guarantee Corporation, dicgc.org.in |
| The capital, liquidity and margin each party on the map must clear | Reserve Bank of India, rbi.org.in; SEBI, sebi.gov.in |
| The conditions on which an insurer is registered | IRDAI, irdai.gov.in |
| The conditions on which a pension arrangement and its intermediaries are registered | PFRDA, pfrda.org.in |
| How long a securities trade takes to settle | SEBI, sebi.gov.in |
Add a second market to this map and it becomes seven more rows underneath these, with a different set of authorities printed inside them. Nothing above it has to be rewritten.
The sheet needs a row for what a depositor gets back should a bank fail. What goes in it?
Vaidehi Asset Managers Limited manages Rs 1,80,000 crore. Which transformations will its line carry at step six?
What does each party transform, and which ones transform nothing?
Three columns and a dash. Add columns headed size, maturity and risk, and against every line already on the sheet put a mark where the column applies and a dash where it does not. Step six is the step most readers skip, and it is the step that does the most work.
The three marks are defined before they are used, and they are defined once. Size means small amounts go in and large amounts come out. Maturity means money repayable sooner is funding commitments that run longer. Risk means the party stands between two sides and a failure lands on its own capital. Nothing else earns a mark. A party that is merely large does not get a size mark for being large.
Run against the invented system, Suvarna Commercial Bank Limited marks all three. Rukmini Finance Limited marks size and risk. Chandrika Life Insurance Limited marks size and risk. The Rs 1,80,000 crore Vaidehi Asset Managers Limited manages is not owed by it, and no failure in that money lands on its own capital, so Vaidehi Asset Managers Limited marks none of the three. And every line in the plumbing section marks none.
The row of dashes across the plumbing section is where the step pays for itself. The dash is a finding and not a gap: carrying, matching, recording and settling change nothing about the money except where it is, and a dash written in says somebody applied the test rather than that somebody ran out of time. Six lines of dashes in a row is the correct output of this step, not a sign that it went wrong.
When a cell cannot be filled: the cell stays empty with the reason written into it, exactly as at step seven, rather than reaching for a mark that feels about right. A cell reading nothing recorded here about what this party funds is honest. A mark placed because the party looked like the one above it is not.
What could not be established, and why is that a finding?
Last section on the sheet, and the one people leave off. Every row attempted and left unfilled goes here, with the reason written inside the blank itself rather than in a note somewhere else on the sheet. A figure nobody publishes. A party whose registrationThe permission a party needs before it is allowed to do what it does. Registration is a public fact, so it is one of the few things on a sheet like this that anybody can go and verify. could not be found. A route the source in use does not cover at all.
Run on the invented system, step seven produces four empty rows. Four empty rows make it by some distance the most instructive part of the whole exercise. How much new money reached issuers over the period could not be established. This record carries no issuance figure, and none may be supplied from recollection. No figure for what households saved exists here, so the size of the surplus side could not be established. No base is recorded on which to strike a capital ratio, so none could be struck for any party on the sheet, and the requirement itself is set by the Reserve Bank of India at rbi.org.in. No national figure of any kind is recorded here, so how large this system is relative to anything at all could not be stated.
A sheet with no blanks on it has usually been completed from recollection, and a blank carrying its reason can be checked by the next person to pick it up while a filled row nobody can trace cannot. That is the whole argument for this step, and it is worth holding on to when somebody looks at the finished sheet and asks why four rows are empty.
The run produced four blanks out of the rows it attempted. Is that a worse sheet than one with every row filled?
What does the finished sheet look like, run end to end?
The whole output appears below, in the order the seven steps produced it. The shape below carries across to a system nobody has seen before, and the only thing that changes is what goes in the cells.
| Section | Line | What it says |
|---|---|---|
| Step one | The two ends | Households and businesses, both on the surplus side and the deficit side in different periods, with the period written beside each |
| Step two | The routes | Direct route, one claim. Intermediated route, two claims, one on each side of the institution |
| Step three | Suvarna Commercial Bank Limited | Takes deposits of Rs 1,92,000 crore, gives advances of Rs 1,44,000 crore, owes its depositors. Marks size, maturity and risk |
| Step three | Rukmini Finance Limited | Takes borrowings of Rs 14,400 crore at 4.0 times its net worth of Rs 3,600 crore and no deposits, gives lending of Rs 18,000 crore, owes its funders. Marks size and risk |
| Step three | Chandrika Life Insurance Limited | Holds policyholder funds of Rs 72,000 crore at 10.0 times its net worth of Rs 7,200 crore, owes its policyholders. Marks size and risk |
| Step three | Vaidehi Asset Managers Limited | Manages Rs 1,80,000 crore it does not owe, at a blended fee of 0.55 per cent giving revenue of Rs 990 crore against costs of Rs 594 crore, an operating margin of 40.0 per cent of revenue. Marks none |
| Step four | Kaveri Stock Exchange Limited | Matched Rs 48,00,000 crore of turnover in the stated year, earning Rs 156 crore at 0.00325 per cent of turnover. Marks none |
| Step four | its clearing corporation | A separate entity. Holds margin of Rs 11,000 crore against a settlement guarantee fund of Rs 2,750 crore, which is 4.00 times the fund. Marks none |
| Step four | the depository, the custodian, the registrar | On the sheet by the job each does, with no figures, because this record carries none. Each marks none |
| Step four | Setu Payments Limited | Moved 1,200 crore transactions carrying Rs 3,60,000 crore, which is Rs 300.00/- on the average payment. Marks none |
| Step five | Every line above | Carries its authority and site, with every requirement row drawn and left empty and the authority printed inside it |
| Step seven | New money reaching issuers | Empty. No issuance figure exists in this record |
| Step seven | The size of the surplus side | Empty. No figure for what households saved exists in this record |
| Step seven | A capital ratio for any party | Empty. No base recorded, and the requirement is set by the Reserve Bank of India at rbi.org.in |
| Step seven | The size of this system relative to anything | Empty. No national figure of any kind may be stated here |
Fourteen filled lines and four empty ones is a finished sheet, not an unfinished one. Every figure in it belongs to an invented institution, every division in it can be done on paper, and the four empty rows say out loud what nobody was able to establish.
What happens when a system is mapped by rule setter instead of by function?
The failure this routine exists to prevent, and it comes from a sensible instinct
A reader opens a blank sheet and groups the parties by which authority oversees each one. Grouping by authority is a natural place to start. The list of authorities is the one list that is easy to find, and it feels official in a way that a home made column of what it takes, what it gives and who it owes does not.
Two things go wrong immediately, and both are visible on the finished sheet. Kaveri Stock Exchange Limited and Vaidehi Asset Managers Limited land in the same group, though one matched Rs 48,00,000 crore of turnover and transforms nothing at all while the other manages Rs 1,80,000 crore belonging to other people. And Suvarna Commercial Bank Limited and Chandrika Life Insurance Limited land in different groups. Both take money on their own promise, put it to work and owe it back later. The two are doing the same job with a different promise attached to it.
The cost is a sheet that answers the question who supervises whom, perfectly well, and cannot answer who does what. The routine was drawn for the second question. The two are different sheets and only one of them was asked for. The fix is the order of the steps and nothing else: function at step three, authority at step five, never the other way round.
How does anybody actually use a sheet like this?
The sheet tells a credit analyst which questions belong to which party, so an analyst handed an unfamiliar market runs the routine before reading a single set of accounts. When a line at step three says takes borrowings raised in the market and no deposits, she knows to go and look at what happens to that party when the market that funds it closes for a week, and she knows not to ask that question of the line above it. The sheet does not answer anything. The sheet routes her questions.
A household uses the same seven steps on a much smaller sheet and gets something surprisingly practical out of step five. Once every line carries the authority that registers it and the site where anybody may check it, the household knows where a complaint about each of its own arrangements would actually go, and it knows which of them a registration can be verified for before any money moves. Step five is the step that turns a diagram into something that can be acted on, precisely because it carries names and sites rather than values.
Somebody putting money to work uses step six and almost nothing else. Two lines can look alike on size and be completely different on what they transform, and the marks column is the shortest way to see it. A party marking risk is standing between two sides with its own capital behind it; a party marking none is not, whatever the figure beside its name. The distinction between a party standing between two sides and a party doing neither is worth more than the figure, and it takes one column to record.
Which two steps must never swap places, and what happens on the sheet if they do?
The boundary around this routine. Why any of these parties exists and what each one does in depth are covered separately, each worked in full where it belongs. How a bank earns, how a broker is paid, how an insurer prices a policy, how a trade becomes a completed settlement and how a payment travels are each covered separately, and a preview of any of them here would compete with the treatment that does the job properly.
The comparison of the two routes and the comparison of the two arrangements are both covered separately. A financial claim, seen from both of its sides at once, is covered separately. Reading an institution's condition off its own figures is covered separately as well.
Every capital, liquidity, licensing, cover, margin and settlement condition this routine touches belongs to the authority printed inside its row, and the sheet carries the name and the site in place of the value. The sheet ranks nothing either: two lines sit beside each other so that what each party does can be read straight across, and a description of what a party does is not a judgement on the party.
Where were the authorities in step five checked?
Step five sends the reader to a register rather than to a recollection. Five authorities hold the requirements the sheet leaves empty, and the address beside each name does the work a value would otherwise do. Every requirement, condition, cover and period belonging to them is set at the site beside it, and every one of them moves.
| Named at | What to read there | Site | Confirmed |
|---|---|---|---|
| Reserve Bank of India | Who may run a bank, a finance company or a payment system, and the conditions attached to each | rbi.org.in | 23 August 2026 |
| SEBI | Registration of exchanges, clearing corporations, depositories, brokers and asset managers, and the registers that make each of them checkable | sebi.gov.in | 23 August 2026 |
| IRDAI | Registration of insurers and the margin an insurer holds above its liabilities | irdai.gov.in | 23 August 2026 |
| PFRDA | Registration of pension arrangements and the intermediaries around them | pfrda.org.in | 23 August 2026 |
| Deposit Insurance and Credit Guarantee Corporation | What a depositor is covered for when a bank fails, and what that cover does not reach | dicgc.org.in | 23 August 2026 |
Suvarna Commercial Bank Limited, Rukmini Finance Limited, Chandrika Life Insurance Limited, Vaidehi Asset Managers Limited, Kaveri Stock Exchange Limited with its clearing corporation, and Setu Payments Limited are invented.
Educational material. Not advice on any investment, tax, budget or market position.