A financial system of any
country comprises of end users, financial institutions like banks, markets (national
stock exchange / other stock exchanges), bond market etc. These institutions together
with the users compile the financial system.
Indian financial sector
The Indian financial sector is diversified
and is undergoing fast expansion. The rapid growth is both in terms of development
of existing financial service firms as well new entities coming into the
The financial sector consists of
commercial banks, non-banking financial companies, pension funds, insurance
companies, mutual funds, co-operatives, and other smaller monetary entities.
A new entity like the payment banks is
added to the types of institutions functioning in the sector. Though, the
monetary sector in India is mainly a banking sphere with commercial banks making
more than 64% of the total assets that is held by the Indian financial system.
The financial system is qualified by the presence of incorporated, coordinated and governed financial markets, as well as institutions. These markets and institutions meet both the short term plus long term financial necessities of the household in addition to the corporate sector. Both financial markets and financial institutions operate in close combo with each other.
Indian financial system
The Indian financial system is arranged
into 2 major segments – Formal and Organised Financial System regulated by the
ministry of finance, SEBI, RBI and other regulatory bodies and the Un-Organised
Un-organised financial system comprises of Individual moneylenders other private financial institutions, etc. Apart from this one can also find groups who collect money and lend it to the poor and needy. They collect interest for this service from those who borrow money. This sector also includes the local brokers, chit fund companies, non-bank financial companies, and investment companies
Working of Indian financial
Indian Financial System speeds the rate as well as volume of savings via
the provision of several fiscal instruments and well-organized mobilization of
savings. It helps in raising the national end product of the country by rendering
funds to corporate customers to enhance their business. It assists in the
economic development and raises the living standard of the people. The sector
also promotes the growth of the weaker section through rural development banks as
well as co-operative societies.
Indian monetary system has experienced structural shift over the past decade. It
has gained strength, efficiency as well as stability due to the aggregate
result of competition, regulatory measures, plus policy environment. Competition,
consolidation plus convergence are the most important drivers of the banking
sector and this has helped in raising the quality of the working of the
financial system on the whole.