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Global Marketing Business > Blog > Finance > All to Know About Indian Financial Structure
All to Know About Indian Financial Structure
Finance

All to Know About Indian Financial Structure

mbglobal
Last updated: 2022/03/16 at 5:15 AM
mbglobal Published March 16, 2022
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Table of Contents

  • Indian Financial Structure
  • Indian Financial System: Overview
  • Components of the Indian Financial System
    • 1. Financial Institutions
    • 2. Financial Assets
    • 3. Financial Services
    • 4. Financial Markets

Indian Financial Structure

Indian Financial Structure is one of the most critical aspects of the economic development of our country. This structure manages the flow of money between the people (household savings) in the country and those who invest it wisely (investors/entrepreneurs) for the benefit of both parties.

Contents
Indian Financial StructureIndian Financial System: OverviewComponents of the Indian Financial System1. Financial Institutions2. Financial Assets3. Financial Services4. Financial Markets

This is an important topic related to the various government exams conducted in the country, and applicants should read this article carefully and prepare accordingly.

In this article, you will study the Indian financial structure, its components, and how it contributes to a country’s economic growth. Also, you will get some sample questions about the Indian financial system later in this article.

Indian Financial System: Overview

The services provided to a person by different financial institutions, including banks, insurance companies, pensions, funds, etc., make up the financial system.

The following are the characteristics of the Indian financial structure:

  • It plays a vital role in the country’s financial development since it encourages savings and investment.
  • Helps mobilize and distribute savings
  • Facilitates the growth of financial institutions and markets
  • Plays a crucial role in capital formation
  • Helps create a connection between the investor and the saver.
  • It also deals with the provision of funds
  • The main objective of the financial system of a country is to administer and control the mechanism of production, distribution, exchange, and possession of assets or financial instruments of all kinds.
  • Later, we will discuss the various components of the financial system in India.

Components of the Indian Financial System

The Indian financial system has four main parts. This contains:

  1. Financial institutions
  2. The Financial assets
  3. Financial services
  4. And also, Financial markets

Let’s analyze each component of the system in detail.

1. Financial Institutions

The Financial institutions act as intermediaries between the investor and the borrower. Investor savings are mobilizing directly or indirectly through financial markets.

The main functions of financial institutions are the following:

  • A short-term liability can be turning into a long-term investment.
  • Helps turn a risky investment into a risk-free investment.
  • It also acts as a convenient name; H. can combine a small deposit with extensive credits and a large deposit with small credits

The finest example of a financial institution is a bank. People with excess cash save on their accounts, and people who need money urgently apply for loans. The bank acts as an intermediary between the two.

Although, Financial institutions can be divide into two types:

  • Depository or banking institutions: This includes banks and other credit unions that collect money from the public in exchange for interest on deposits made and lend that money to those in need.
  • Non-Bank or Non-Depository Institutions: Insurance companies, mutual funds, and brokerage firms fall into this category. They cannot request cash deposits but rather sell financial products to their clients.

Furthermore, financial institutions can be divide into three categories:

  • Regulators: institutions that regulate financial markets, such as RBI, IRDA, SEBI, etc.
  • Intermediaries: commercial banks that provide loans and other financial aid, such as SBI, BOB, PNB, etc.
  • Non-Intermediate Companies: institutions that provide financial assistance to corporate clients. Includes NABARD, SIBDI, etc.

2. Financial Assets

Products trading in financial markets are known as financial investments. Due to the different requirements and needs of the loan applicant, the values ​​in the market also differ from each other.

Some vital financial assets have been briefly discussing below:

  • Call Allotment: When a loan is made for one day and is repaid on the second day, it is called a call allotment. No insurance is require for this type of transaction.
  • Pay Per Notice: When a loan is made for more than one day and less than 14 days, it is called pay per notice. No insurance is require for this type of transaction.
  • Term Deposit: If a deposit has a term of more than 14 days, it is called a term deposit.
  • Treasury Bills: also known as treasury bills, they are government bonds or debt securities with a term of less than one year. Buying a T-Bill means borrowing money from the government.
  • Certificate of Deposit – This is a dematerializing form (electronically generating) for funds that have been depositing with the bank during a specifying period.
  • Commercial Paper: it is an unsecured short-term debt instrument issuing by companies.

3. Financial Services

Asset and liability management company services. They help raise the necessary funds and also ensure that they are investing efficiently.

Financial services in India include:

  • Banking Services: any small or large service provided by banks, such as lending, depositing money, issuing debit/credit cards, opening an account, and so on.
  • Insurance Services: services such as the issuance of insurance, the sale of policies, insurance companies and brokers, etc. they are part of insurance services.
  • Investment Services: mainly includes asset management.
  • Currency Exchange Services: currency exchange, currency exchange, etc. is part of the currency exchange services

The primary purpose of financial services is to help a person sell, lend or buy securities, facilitate payments and settlements, and loans and investments.

In addition, you can read more helpful posts at leadmarketingbusiness

4. Financial Markets

The market where buyers and sellers interact, and trade money, bonds, stocks, and other assets is known as the financial market.

The financial market can be distributing into four types:

  • Capital Market: The capital market is used to finance long-term investments and deals with transactions in the market for more than one year. The capital market can be dividing into three types:

(a) Corporate securities market

(b) Government securities market

(c) And also, Long-term loan market

The money market can be divided into two types: • Money market is dominating mainly by governments, banks, and other large institutions and is only approve for short-term investments. It is a wholesale fixing income market that uses low risk and high liquidity instruments.

(a) Organized money market

(b) Unorganized money market

  • Foreign Interchange Market: One of the most industrialized markets in the world, the Forex market, deals with requirements related to multiple currencies. The transfer of money in this market is carrying out at the exchange rate.
  • Credit Market: a market in which various banks and financial and non-financial institutions provide short and long-term credit to individuals or organizations is known as a credit market.
  • In addition, you can read more helpful posts at worldmarketingtips

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mbglobal March 16, 2022
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