Indian Financial Systems

Question 1 : Explain the Indian Financial Systems.

Answer :

The economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and household sector. While performing their activities these units will be placed in a surplus /deficit/balanced budgetary situations.

The financial system or the financial sector of any country consists of:-

• Specialized & non specialized financial institution

• Organized &unorganized financial markets and

• Financial instruments & services which facilitate transfer of funds.

Procedure & practices adopted in the markets, and financial inter relationships are also the parts of the system. These parts are not alwaysmutually exclusive. For example, the financial institution operates infinancial market and are, therefore a part of such market. The word system in the term financial system implies a set of complex and closely connected or inters mixed institution, agents practices, markets, transactions, claims, &liabilities in the economy. The financial system is concerned about money, credit, & finance – the terms intimately related yet somewhat different from each other. Money refers to the current medium of exchange or means of payment. Credit or Loan is a sum of money to be returned normally with Interest it refers to a debt of economic unit. Finance is a monetary resources comprising debt & ownership fund of the state, company or person.

FEATURES OF FINANCIAL SYSTEM

• It provides an Ideal linkage between depositors savers and Investors Therefore it encourages savings and investment.

• Financial system facilitates expansion of financial markets over a period of time.

• Financial system should promote deficient allocation of financial resources of socially desirable and economically productive purpose.

• Financial system influence both quality and the pace of economic development.

ROLE OF FINANCIAL SYSTEM

The role of the...