The Indian financial system is one of the most important components of the economy that are responsible for supporting the growth and the funds in the country. The system mainly comprises the ideas related to development and growth by the wisely decision-making process for both savings and investments fields. The Indian financial system is a formative idea that comprises multiple components and a specific structure that is responsible for utilizing the cash flow statements.
Discussion
3.1 Indian financial system
The Indian financial system comprises multiple components and the structure that clarifies the involvement of the rules and policies to keep up with the investment and the savings. India is among the largest economies and in the 5th position based on its nominal GDP. The Indian financial system is related to the pecuniary facilities for the trade and transfer systems. The independent pillars of the financial context in India comprise ‘insurance’, ‘liabilities’, ‘banking’, ‘transactions’, ‘capital and stock markets’, ‘claims’, and ‘investments’. The financial system of India comprises production, capital collection, mobilization, allocation, and encouragement of savings. The financial system of India is formative but ideal for managing the whole structure of the overall economy. Along with the ideal effects, the challenges are visible in this context as well.
3.2 Structure of Indian financial system
The structure of the Indian financial system comprises a total of two elements- i) organized markets and ii) unorganized markets.The financial system is related to the institution that involves the financial markets and services related to the institution for enabling the corporate activities to facilitate the transfer of finance and management of accounts. The classification of the structure of the Indian financial system provides the aspects related to the financial institutions and their intervention. An ordinary financial system comprises 4 parts such as i) money, ii) financial instruments, iii) financial institutions, and iv) central banks. The institution of the Indian financial system has maintained the ‘profit-making public sector undertaking’ since 1969 that has supported the structure of the Indian financial system and functional structure of the commercial banks.
3.3 Components of Indian financial system
The components of Indian financial system has a total of 5 parts,
- Financial institution- It is one of the prime components of the Indian financial system that mediate between the lenders and the money borrowers. The various commercial markets are the key components that intensify the savings of the lenders. Financial institutions are known for their establishment of safe investment-related ideas. The process of both short and long durations of the liability is also a part of this context. The financial institution has two types that have major involvement in society; banking and non-banking sectors.
- Financial assets- the financial money has different parts and those are,
- Call money- In the Indian financial system, the concept of call money is related to assurance that indicates the next day payment of a lent loan.
- Notice money- this asset indicates the lending format of loan for more than 1 day and less than a period of 14 days.
- Term money- this is related to mature money that is a fixed amount that is going to mature within 14 days from the deposit day.
- Treasury bills- maturity money and its activation for less than a year and that deposit sum belong to the government as a security token. Based on the bills related to Indian finance this loan format is granted as executed.
- Deposit certificate- Electronic funds are managed with this kind of asset management format for both deposit and withdrawal.
- Commercial proofs- this is used for corporate sectors and for the short period of debts.
- Financial service- the main objective of the financial service is related to counseling for convincing people about selling and purchasing a property. Financial service comprises,
- Banking- Account opening, providing loans, accepting debits, credit and debit card distribution are under this sector.
- Insurance- Different kinds of insurance for sales and purchase and for the brokerage deals these sectors are well-known.
- Investment- Asset investment and deposit are related to this part.
- Foreign exchange- This financial sector deals with currency exchanges, fund transfers, and so on.
- Financial market- Financial market deals with the bond exchange, share, investment, and so on. This market of India has 4 types,
- Capital market- Deals with trade transactions and has three specific types,
- Corporate Securities
- Government Securities
- Long Term Loan
- Money market- Deals with short time investments and has two major areas,
- Organized Money Market
- Unorganized Money Market
- Foreign exchange market- Responsible for foreign money management.
- Credit market- It involves individuals and organizations for short and long-term loans.
- Money- Involved with purchase and sales factors.
Conclusion
The Indian financial system is complicated for the structural presentation of the policies and regulations that are generally ideal for engaging the concept of personal and commercial investments. The financial system in India is versatile and every component has sub-components that critically handle all kinds of economic involvement of both deposit and withdrawal. The financial system of India comprises both investors’ and services users’ involvement so the betterment of the service for service users could be initiated. The prime characteristics of the Indian financial system compromise the monopoly of finance and provide a brief aspect related to the capital market.
