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.”

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.

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.

Characteristics of Indian Financial System

  • To growth of the economy.
  • To brings investment.
  • To encourage savings.
  • To Allocation of Funds.

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Also read :
Structure of Indian Financial System


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