What is Financial System? Characteristics of Indian Financial System


Structure of Indian Financial System What is Financial system?

The Financial system is a process of allowing net savers to lend funds to net spenders. A financial system is also a network of financial institutions, financial markets, financial instruments, and financial services to facilitate the transfer of funds and make sure the flow of the investment in the economy.

Definition of Financial System

According to Dhanilal, 

“Financial system is the set of interrelated and interconnected components consisting financial institutions, markets and securities.”

Significance of Financial System

  • Financial System helps the economy to grow.
  • Financial System brings investment.
  • Financial System creates a bridge between investors and companies.
  • Financial system helps in fiscal discipline and control of the economy.
  • Financial System brings accountability for investors.

Limitations of Indian Financial System

  • Indian Financial system has a monopoly in their industry.
  • India Financial system has inactive capital market.
  • India Financial system has a lack of coordination with Financial Institutions.
  • India Financial system has  Dominance of Development Banks in Industrial Financing.
  • Indian Household is not aware of investment.

Characteristics of Indian Financial System

  • To growth of the economy, Financial system helps to grow the economy of the country. it improves lifestyle and standard of living of the host country.
  • To brings investment, When the financial insitution work properly, it brings investment to the host country. Because it provides trust to the investors to invest in the country.
  • To encourage savings, When the people started earning, they started saving and investing.
  • To Allocation of Funds, When the saving and investments starts in the economy. it gives oppurtunities to banks to allocate the funds properly.

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Structure of Indian Financial System