INDIAN FINANCIAL SYSTEM

FINANCIAL SYSTEM
THE FINANCIAL SYSTEM OR FINANCIAL SECTOR OF ANY
COUNTRY CONSIST OF SPECIALISED AND NON
SPECIALISED FINANCIAL INSTITUTIONS ,ORGANISED AND
UNORGANISED FINANCIAL MARKETS,AND FINANCIAL
INSTRUMENTS AND SERVICES, WHICH FACILITATE
TRANSFER OF FUNDS.

FINANCIAL SYSTEM / SECTOR PROVIDES

NECESSARY FINANCIAL INPUTS FOR THE PRODUCTION OF
GOODS AND SERVICES FOR PROMOTING WELL BEING
AND STANDARD OF LIVING OF THE PEOPLE OF A
COUNTRY.
 FUNCTIONS
 Free flow of funds to productive activities.
 Assist capital formation of a country.
 Mobilise savings of savers.
 Stimulates capital formation and economic
growth.
 Provides liquidity.
 Intermediary between saver and investor.
 COMPONENTS
 FINANCIAL INTERMEDIARIES :
They are the sources of finance to industry. It
act as a link between saver and investor which
result in institutionalisation of personal
savings.
 FINANCIAL MARKETS :
They are the centers which provide facilities
for buying and selling financial claims and
services.
 FINANCIAL ASSETS/INSTRUMENTS :
It represents claim against future income and
wealth of others. Financial instruments possess
liquidity, marketability and maturity period.
 INDIAN FINANCIAL SYSTEM
 System of borrowing and lending funds.
 Demand and supply of funds of all individuals,
institutions, companies and govt.
 Consist of two parts :
 Indian money market
 Indian capital market
 Landmarks in growth…
 Nationalisation of financial institutions.
 Nationalisation of insurance sector.
 Establishment of financial institutions.
 Development ……
 RBI was nationalised in 1948.
 July 1st 1955 state bank of india estblished.
 1969 14 commercial banks were nationalised.
 Life insurance corporation (LIC) was
established.
 1972 govt of India nationalised general
insurance business .
 1948 Industrial Finance Corporation was
established.
 National Industrial Development Corporation.
 ICICI in1955.
 Refinance Corporation for Industry Ltd (RCI).
 IDBI,SIDC,NABARD ….
 THE NEW ECONOMIC POLICY
 1991 liberalisation and globalisation transformed
closed economy to open economy.
 Private sector was allowed in insurance sector.
 Introduction of derivative instruments like
index/stocks/interest/futures and swaps.

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