Indian Financial System

The Term “Financial System” defines the economy of the country. It consists of the relationship between financial  market participants like investors and savers. Basically, It is a tool for developing the economy of the Country. The Financial system is a system that allows to exchange money b/w lenders, investors and borrowers. It operates at the level of national or global. The fund of financial systems is allocated to their needy areas like Banks, Financial market, and education system of India to get their utility and benefits in terms of Ideal Money. It’s all the wealth process of India to maintain and develop the economy. The following concerns about Financial System of the india are:

  • Provision of Fund,
  • Facilitating the Financial terms,
  • Developing Financial markets,
  • Allocations and Mobilisation of saving,
  • Provision of Financial and advisory services, and
  • Provision of Legal Financial framework.

It plays a very vital role in terms of the economy of India. The Financial System has some rules and regulations, liabilities and claims regarding disturbing the funds in the financial market. The financial systems encourage both for saving and investments and also helps in allocation of risk. It helps to set up a business. The Financial System increased the rate and volume of saving through the provision of various financial institutions. The financial system helps to promote the development of weaker sections of India through the respectives Banks. It ensures smooth financial transactions through RBI and SEBI etc. It protects the investors to invest their fund. There are some financial intermediators of Financial system of India such as:

  • Cooperative Banks,
  • Commercial Banks,
  • Regional Rural Banks,
  • Development Banks,
  • Mutual Fund companies, and
  • Insurance Companies.

Article 280 of the constitution of India, the president of India is appointed one chairman and four members to maintain the financial system of India for every five years. First Finance commission chairman was K.C. Niyogi for 1951-1955 and present finance commission chairman is N.K. Singh for 2017-2025. The GDP growth is 6.8% per annual change(2018). The Gross domestic products are 6.72 lakhs crore USD. So, System has many financial component of Indian Financial System such as:

  • Financial Institutions like

(Banking and Non-banking),

  • Financial Markets i.e

(Organised and Unorganised),

  • Financial Assets/ Instruments, and
  • Financial Services i.e

(Fund based services and free based services)

These institutions have further divisions like: organised market consist of capital market and money markets and commercial banks private banks and public banks etc. These institutes help for further development and maintain the economy of india. It generates the links between investors and savers of the institute. The financial fund helps to flow the smooth business. It provides services for customers and clients.

Financial Institute like Bank is a typical financial institute that lends money to borrowers, for their business development and for startups. It creates revenue and accepts deposits. It is also used to collect money from individuals and investors as a financial asset such as stocks, bonds, bank deposits, loans etc. And Non-Bank are mutual companies, brokerage firms and insurance companies etc who provide the loan to the borrowers at interest rate. So, Financial institutes such as:

  • Regulatory- RBI, IRDA, SEBI etc,
  • Intermediaries- PNB, SBI etc,
  • Non- Intermediaries- NABARD, IDBI etc.

Financial markets consist of all buyer and seller participants in trading of assets such as shares, bonds and currencies etc. Capital Market is a long term investment securities to access their income and benefits to the developing economy. Whereas, the Money market is short term investments having the benefits of it.

Financial Assets/Instruments consist of some components such as Credit card, Debit Card, Cheque, loans, account receivable, insurance, and other factors, which are provided by the banks to the claims against the financial institute to pay a specific amount.

Financial Services are based on two factors such as: Fund based services and Fee based services. It concerns all design and delivery of services which are provided by the institute. Fund advisory Services components are Leasing, Hire purchasing, factoring, Insurance and discounting etc. And, Fee advisory Services components are Issue Management, Merchant Banking, credit rating, and Debt Restructuring stock broking, etc.