Role Of Indian Financial System

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The term financial system stands for a set of complex and closely connected or interlined institutions, agents, transactions, liabilities, and claims in the economy. It is related with money, credit and finance- three terms thought to be related with each other but somewhat different from each other. It provides a mechanism through which savings can be converted into investments and it mobilises the surplus funds and utilizes them efficiently and effectively for productive purposes. It is characterized by the integrated and organised regulated firms that help in meeting short term and long term financial needs of all the sectors. Therefore it is said that financial system plays a significant role in economic growth of the country.
The financial
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Group of people operating as associations. These associations have their own rules and
3. Partnership firms consisting non financial intermediaries such as finance, chit fund companies, investment etc.
The Reserve Bank of India (RBI) is the main institution in the financial system as it is the main regulator of credit. It is India’s central institution, controlling the monetary policy of India. It plays a very important role in the development strategies of the government of India. The bank is active in promoting the financial inclusion policy. It is also a leading member of Alliance for Financial inclusions (AFI).The main components in the Indian Financial System are-
• The financial institutions- These are the intermediaries who provide smooth functioning of the financial system by helping investors and borrowers meet. The main activity of these is buying, selling or holding of financial assets. It includes insurance companies, investment banks, broker-dealers, pension funds and mutual funds.
• The financial markets- It is a market where financial assets and liabilities are sold and bought. Financial market performs the essential functions in the economy such as channelizing funds from savers who have in excess to spenders who have a shortage. It includes currency markets, money markets, derivative markets, and capital
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The manager who invests the money collected, called investment manager, into the type of assets that are having same objective as the objective of the scheme. For example, a person interested in Equity fund would invest in Equity or Equity related instruments and a person interest in Debt fund would invest in Debentures, Bonds, etc.
A mutual fund may be a variety of professionally managed collective investment schemes that pool cash from several investors to get securities. Whereas there 's no legal definition of the term investment trust, it is mostly applied solely to those collective investments that are regulated and sold-out to the overall public. They 're generally said as "investment companies" or "registered investment companies" Most mutual funds are open-ended, that means stockholders can purchase or sell shares at any time by redeeming them from the fund itself, instead of on associate

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