CH 1: INDIAN FINANCIAL SYSTEM

Financial System

A financial system is a structure that is available in an economy to mobolise the capital from various surplus sectors of the economy and allocate the same to the various needy sectors. The financial system comprise a mixture of intermediaries, markets and instruments that are related to each other. It provides a system by which savings are tranformed into investments.

FINANCIAL SYSTEM
FINANCIAL SYSTEM

Central Banking Authority: (RBI in India)

  1. Monetary Control (CRR, SLR, REPO)
  2. Supervisary functions
  3. Management of Govt Debt
  4. Banker to Government
  5. Banker to Banks
  6. Manager of Foreign Exchange

Capital Markets Regulatory Authority: (SEBI in India)

  1. Equity market and Debt Market Supervision and control
  2. Supervision over stock exchanges, Brokers, FII, MFs, Depositories etc.,

Insurance and Pension Regulators: (IRDAI & PFRDA in India)

  1. Regulating and supervising insurance business, insurance brokers
  2. Framing rules and regualting pension funds

Let us sum up:

The financial system comprise a mixture of intermediaries, markets and instruments that are related to each other. It provides a system by which savings are tranformed into investments. RBI, SEBI and IRDAI are controlling  and supervising the banking, capital marketing and insurance sectors respectively.

References:

  • “Principles & Practices of Banking”, Tata McGraw-Hall, New Delhi.
  • Bhole L M, “Financial Institutions and markets”, Tata McGraw-Hall, New Delhi, 1999.

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