Indian Financial System

Indian Financial System -

Functions of the financial system

- Provision for liquidity.

- Mobilizing and allocating the saving efficiently and effectively.

- Monitoring the performance of the investment.

Provide price related information.

- Helps in the creation of financial structure that lowers cost of transaction.

- Helps in the process of financial deepening and broadening.

Indian Financial System Broadly divided under 2 heads

- Organised

- Unorganised

Organised in the sense it contains

- Regulators like MoF, SEBI, RBI, IRDA

- Financial Institutions

- Financial Instruments

- Financial Services

Urorganised Contains

- Money lenders

- Local Bankers

- Traders

- Landlords

- Pawn Brokers too,

Now what is known to be financial systems,

They are business organisations serving as a link between savers and investors and help in credit allocation process. They provide three transformational services

- Liability, asset and size transformation

- Maturity transformation.

- Risk transformation..

Fianncial Markets

what is that -

It is a mechanism for trading of financial product under a policy framework. Main participant are borrowers, lenders and financial intermediaries.

Their important characteristics are,

- Large volume of transaction at a very high speed

- There are various segments of financial markets

Scope of instant arbitrage

- Highly volatile

- Closely monitored and supervised

Functions of Financial Markets -

- Enabling economic units to exercise their time preference

- Separation, distribution, diversification and reduction of risk

- Efficient payment mechanism

- Providing information about companies

- Enhancing liquidity of financial claim.

- Portfolio management

Financial Markets can be Classified into,

Capital Market and Money Market