Finance System

THE FINANCIAL SYSTEM

The financial system consists of variety of institutions, markets and instruments that are related in the manner shown in the below figure, it provides the principal means by which saying are transformed into investment. Given its role in the allocation of resources, the efficient functioning of the financial system is of critical importance to a modern economy. Financial manager negotiate loans from financial institutions, raises resources in financial marked and invests surplus funds in financial market. In very significant way he manages the interface between the form and its financial environment.

Financial System placed a very important role in the development of a country. Through Financial System, entire money or money equals are channelized in such a way so that each sector of economy like industry, agriculture and services can be developed rationally. Financial sector development is the locomotive force for economic development of a country.

ORIGIN OF THE WORK ‘BANK’

According to some economists the word ‘Bank’ has been derived from the German word BANC which means a Joint Stock Firm while others say that it has been derived from the Italian world ‘BANCO’ which means a heap or mound.

There is still another group of people who believe that word bank has been derived from the Greek work ‘BANQUE’ which means a bench. In the olden days, Jews entered into money transactions sitting on benches in a marked place. When a banker was not in a position to meat his obligations, the on which he was carrying on the money business was broken into pieces and the was taken as bankrupt. Thus both the words Bank or bankrupt are said to have origin from the word ‘Banque’.

DEFINITION OF BANK

According to Oxford English Dictionary, Bank is, “An establishment for custody of money received from or on behalf of, its customers. Its essential duty is the payment of the orders given on it by the customers, its profit mainly from the...