structure of financial system Related: Introduction to Indian Financial System

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structure of financial system Related: Introduction to Indian Financi...

... A financial system may be defined as a set of institutions, instruments and markets which promotes savings and channels them to their most efficient use. It consists of individuals (savers), intermediaries, markets and users of savings (investors).Financial System • A financial system functions as an intermediary between savers and investors. It facilitates the flow of funds from the areas of surplus to the areas of deficit. It is concerned about the money, credit and finance. • A financial system may be defined as a set of institutions, instruments and markets which promotes savings and channels them to their most efficient use. It consists of individuals (savers), intermediaries, markets and users of savings (investors).

3. Financial Institutions • They are business organizations dealing in financial resources. • They collect resources by accepting deposits from individuals and institutions and lend them to trade, industry and others. • This means financial institutions mobilize the savings of savers and give credit or finance to the investors.

4. On the basis of the nature of activities, financial institutions may be classified as: 1.Banking financial institutions • Banking institutions mobilize the savings of the people. • They provide a mechanism for the smooth exchange of goods and services. • They extend credit while lending money. • They not only supply credit but also create credit.

5. Contd.. 2. Non-banking financial institutions • The non-banking financial institutions also mobilize financial resources directly or indirectly from the people. • They lend funds but do not create credit. Companies like LIC, GIC,UTI, Development Financial Institutions. • Non-banking financial institutions can be categorized as investment companies, housing companies, leasing companies, hire purchase companies, specialized financial institutions

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