Indian Financial System Structure: Financial systems can be explained as institutional arrangements upon which financial surpluses in the economy are put together and transferred to deficit spenders. Every country has its own financial system that they use to run their economy. India is also not left behind when it comes to financial systems since they have a financial market that is divided into two i.e. Indian Money Market and Indian Capital Market in the Epf India Website.
The Indian Money Market is a type of market where you can borrow or lend short term loans. This money market does not make use of the cash system to perform any transaction. Instead, it relies on Grade Bills, Bills of Exchange, Treasury Bills and any other bill that you term appropriate. Indian Capital Market on the other hand is an institutional arrangement for lending and borrowing medium term and long term funds. Indian Capital Market does not deal with capital goods since they only have an interest in raising capital money. The Indian Capital Market includes the following institutions:
- Commercial Banks
- Special Financial Institutions like IDBI, IFCI, ICICI, SIDCS etc.
- Provident Fund Societies.
- Insurance Companies i.e. GIC and LIC
Indian Financial System Functions
The Indian Financial System is important especially when it comes to keeping the economy in check. Below are some of the functions of Indian Financial System.
- Encourage Savings
The Indian Financial System enhances savings by providing different types of financial assets as a store of value. This value is usually aided by services of financial markets and different intermediaries. Financial assets do not require frequent management as is the case with most tangible assets. This action has made it possible for the separation of ultimate ownership together with management of tangible assets thus encouraging savings.
The Indian Financial System classifies savers into domestic, household sector, public sector and corporate sector. The household sector is the most dominant in India since it comprises of people from all scope of life. It is then followed by the domestic sector, private sector and corporate sector. The public sector savings is relatively low and thus makes a small percentage of the total domestic savings.
- Mobilising Savings
The Indian Financial System plays a crucial role when it comes to mobilising savings. This takes place when savers decide to opt for financials assets be it bank deposits, life insurance policies, Equity shares, Post Office Savings, bills or bonds.
- Allocation of Funds
One of the most important functions of the Indian Financial Market is allocating funds in a smooth and efficient manner. With the changes in technology, it has now become easier for financial markets to develop thus helping when it comes to credit allocation.
It is important that you know more about the Indian Financial System especially if you are a keen follower of the economy. This action ensures that you are up to date with any change that will occur in the economy. You will therefore never encounter any difficulties when it comes to mobilising savings or maximising your savings for future use.