A

Project report on
Specialization

A Study Analysis of New Financial Reforms

A Project Submitted to University of Mumbai

in Partial Fulfilment of Semester IV

For the award of

Masters of Management Studies

in

Finance

By

SUNNY NANDKUMAR JADHAV

Roll. No: 2022022

Under the Guidance of

Prof. Minal Patil

ROHIDAS PATIL INSTITUTE OF MANAGEMENT STUDIES

(Affiliated to University of Mumbai, Approved by AICTE, New Delhi)

Mahavidyalaya Marg, Navghar Road, Bhayander East Thane 401105

 Shree Shankar Narayan Educational Trust

Rohidas Patil Institute of Management Studies

(Affiliated to University of Mumbai, Approved by AICTE, New Delhi)

MahavidhyalayaMarg, Navghar Road, Bhayandar East, Thane – 401105.

CERTIFICATE

This is to certify that SUNNY NANDKUMAR JADHAV is a bonafide student of our Institute
and the dissertation entitled A Study Analysis of New Financial Reforms submitted by her is in
partial fulfillment of the semester IV for the Degree of MASTER OF MANAGEMENT
STUDIES in Finance by the University of Mumbai during the Academic Year 2022-24.

Place: Bhayandar, Thane Dr. VANITA MALIK

Date: Director
Rohidas Patil Institute of Management Studies
 GUIDE’S CERTIFICATE

This is to certify that the Dissertation entitled A Study Analysis of New Financial Reforms is a
Bonafede record of independent research work done by SUNNY NANDKUMAR JADHAV,
Roll. No. 2022021 under my supervision during Academic year 2022-2024, submitted to the
University of Mumbai in partial fulfilment of Semester IV for the Degree of MASTER OF
MANAGEMENT STUDIES in Finance.

Place: Bhayandar, Thane. _____________________

Date : Prof. Minal Patil
 DECLARATION

I Yogita Dinesh Devera hereby declare that the dissertation A Study Analysis of New Financial
Reforms submitted to the University of Mumbai in partial fulfilment of the semester IV for the
Degree of MASTER OF MANAGEMENT STUDIES in Finance is an original work and that
the dissertation has not previously formed the basis for the award of any other degree, Diploma,
Associate ship, Fellowship or other title.

Place:Bhayander, Thane _____________________

Date: SUNNY N JADHAV

 EVALUATION OF DISSERTATION

1. Name of the Candidate : Yogita Dinesh Devera

2. Registration / Seat Number : 2021012

3. Name / Code of the subject : Specialization

4. Title of the Dissertation : A Study Analysis of New Financial Reforms

5. Evaluation:

Parameters Maximum Marks

Sr. No.
Marks Awarded

1 Situation analysis and Problem definition 10

2 Literature Review (secondary data) 10

3 Methodology of study 20

4 Data Analysis (Primary and Secondary data) 20

5 Conclusions and recommendations 15

6 Guide’s assessment of project progress 10

7 Viva Voce 15

Total 100

6. Name & Address of the Evaluator:

7. Signature of Evaluator with Date:

8. Signature of the Head of the Institution with seal:

 ACKNOWLEDGEMENT

Apart from my efforts, the success of any project depends largely on the encouragement and
guidelines of many others. I take this opportunity to express my gratitude to the people who have
been instrumental in the successful completion of this project.

I would thank the Management of the Institute for providing valuable resources viz. Library,
Computers with Internet facility which is an essential pre-requisite in the successful completion
of the project.

I would like to show my greatest appreciation to Prof. Minal Patil, I can’t thank enough for
his/her tremendous support and help. I feel motivated and encouraged to execute my project
under his/her mentorship. Without his/her guidance this project would not have materialized.

The support received from all the respondents was vital for the success of the project. I am
grateful for their time and efforts.
 Summary

The financial sector reforms are the steps taken to make changes in banking sector, capital
market, government debt market, foreign exchange market, etc. The financial sector plays
important role in the functioning of the economy and society in the world. The constituents of
financial sector include banks, financial institutions, markets, and instruments which mobilize the
resources. The main aim of financial sector reform is to allocate the resources efficiently,
increase the returns on investment and accelerate growth in the sector.

In this report, we will study financial enterprises in which financial sector is being regulate
nationally and internationally. In this study we will so how regulations, policy and private
initiatives in fiancé sector lead to sustainable development. The financial sector reform refers to
steps taken to reform the banking systems, capital market, government debt market, foreign
exchange, etc. It also refers to the part of the economy which consists of firms and institutions
that have the responsibility to provide financial services to the customers of the commercial and
retail segments. Financial sector includes commercial banks, non-banking financial companies,
investment funds, money market, insurance, pension companies and real estate. Financial sector
is the base of the economy which is essential for the mobilization and distribution of financial
resources.
 Index

Sr. No Topic Page

No.

1 Introduction 9

2 Literature Review 36

3 Research Methodology 43

4 Data Interpretation 46

5 Findings 55

6 Suggestions 56

7 Conclusion 57

8 References 58

9 Annexure 59
 Introduction

Financial Reforms

The financial sector refers to the part of the economy which includes firms and institutions that
have the responsibility to provide financial services to the customers of the commercial and retail
section. The financial sector can include commercial banks, non-banking financial institutions,
investment firms, insurance, money market, pension companies, and real estate, etc. Financial
sector consider as the base of the economy which is essential for the mobilization of the financial
resources.

The financial sector reforms refers to steps taken to reform the banking system, capital market,
government debt market, foreign exchange market, etc. An organised financial sector is
necessary for the mobilization of household savings and their proper utilization in productive
sector. Financial sector reforms means to improve the efficiency of resources and ensure
financial stability and to maintain confidence in the financial system by increasing its efficiency.

Financial sector reforms have been long regarded as an important part of agenda in developing
countries. Reforms of the financial sector was recognized from beginning, as an integral part of
the economy. The Financial sector reform starts its work in early 1990s, by means of which the
Indian economy has achieved high growth in the macro-economic and financial stability. The
economic reform has touched every segment of the economy.
History of Financial Sector

The story of Indian Financial sector can be portrayed in term of three different phases—the first
phase were from 1950s to 1960s associated with Laissez Faire but underdeveloped banking; the
second phase covered 1970s and 1980s began the process of financial development across the
country under the government auspicious but was accompanied by a degree of financial
repression; and the third phase since 1990s been characterized by calibrated financial deepening
and liberalization.

Indian Financial Sector 1950-1990

At the time of Independence in 1947, India had 97 scheduled private banks, 557 “non-scheduled”
banks organized as joint stock companies, and 395 cooperative banks. At the time of India’s
independence, the organized banking sector comprised three major types of players, namely the
Imperial Bank of India, joint stock banks (includes both joint stock English and Indian Banks),
and the foreign owned exchange banks.

The decade 1950s and 1960s was featured by limited access to finance of the productive sector
and large number of banking failures. Such dissatisfaction led the government to nationalize
fourteen private sector banks in 1969. Later six more commercial banks were nationalized in
1980. Thus by 1980s the Indian banking sector was considerably nationalized, with associated
effects of crowding out of credit to the private sector.

Besides commercial banks, there were four other types of financial institutions in the Indian
financial sector: Development Finance Institutions (DFI), co-operative banks, regional rural
banks and post-offices.

DFIs were established over much of the developing world, usually encouraged by external
agencies. The source for those DFIs was raised from domestic bond market, from institutions like
World Bank, refinance window of the RBI and government budgetary provisions. Accumulation
of Non-performing assets, DFI would not liable for long run. As effect, the IDBI and ICICI have
been converted into commercial banks and NABARD continuing as refinance institutions with
the support from the government.
Regional Rural Banks (RRBs) were established in 1975 as a local banks in different states of
India. They are co-owned by Central and State governments and public sector banks. RRBs are
structured as commercial banks and established with the objective of developing the rural
economy. While these are tools for financial inclusions, their high cost-income ratios and non-
performing assets have been the area of concern.

The Post Office Savings Bank (POSB) contributing significantly to financial sector on the
deposit side. However the viewers of financial inclusion in India often count only bank accounts
and ignore the coverage of post office accounts. The POSB offers only deposits and remittance
facility but not any credit account to account holders.

The Bombay Stock Exchange, the first stock exchange in India, was founded in 1875. But by
modern standards, the Indian equity market was still quite underdeveloped till about late 1980s.
It was governed by an regulatory structure where the Controller of Capital Issues (CCI) in the
Finance Ministry was effective equity market regulator. Government bonds were available on tap
at a fixed coupon and primarily catered to financing of the government.

In similar track, Insurance in India had a long history. The life insurance business was
nationalized in 1956 by incorporating Life Insurance Corporation of India (LIC), which had
monopoly in the insurance business till late 1990s when Insurance sector was opened for private
sector. The general insurance business was nationalized in 1972 when 107 insurers were grouped
into just for government owned companies.
 Commercial Banks

Banks Co-operative Banks

Payment Banks &

Small Finance Banks

Financial
Institutions
Development Banks

Insurance Companies

Non-banks
Mutual Funds

Non-Banking
Financial Companies

Others (Pension Funds,

Primary Dealers)

Thus, by the end of 1980s, the financial sector in India was virtually owned by the government
with nationalized banks and insurance companies and public sector mutual funds. Reforming the
financial sector was very important part of Indian economic reforms initiated in early 1990s.
Thus, over the years Indian financial sector has emerged as a substantial segment of the economy
comprising financial institutions and various markets.
Financial Sector in India since the 1990s

With the initiation of reforms and the transition to indirect, market based instruments of
monetary policy in the 1990s, the RBI made conscious efforts to develop an efficient, stable and
liquid money market by making favorable policy environment through adequate institutional
changes, instruments, technologies and market practices. Elements of financial reforms in India
include significant reduction of financial repression; dismantling of the complex interest rate
structure to enable the process of price discovery; providing operational and functional autonomy
to public sector institutions; preparing financial system for increasing international competition;
promoting financial stability. All these measures were designed to create an efficient, productive
and profitable finance sector.

Information technology played important in the transformative journey of Indian financial sector.
Technology enabled more effective, lower cost and real time delivery of financial services,
through the establishment of modern systems.

Reforms measures introduced across sectors as well as within each sector were planned in a way
so as to reinforce each other. The major aim of reform was to create an effective, productive and
profitable financial service industry operating within the environment of operating flexibility and
functioning. While these reforms introduced, the world economy witnessed significant changes.
Later steps were taken for strengthening of the financial system and introduction of structural
improvements.

The financial sector reform refers to steps taken to reform the banking systems, capital market,
government debt market, foreign exchange, etc. It also refers to the part of the economy which
consists of firms and institutions that have the responsibility to provide financial services to the
customers of the commercial and retail segments. Financial sector includes commercial banks,
non-banking financial companies, investment funds, money market, insurance, pension
companies and real estate. Financial sector is the base of the economy which is essential for the
mobilization and distribution of financial resources.
Since 1991, structural reforms have been implemented in India, in several sectors including
financial sector, trade, industry, foreign investment, exchange rate, monetary and fiscal policy.
To introduce reform at a constant pace combined with effective and appropriate regulations and
policies. Today, all those reforms are getting reflected in the confidence of the economy, as
experienced by the sustained growth in the agriculture, revival of industry, reduction in the
inflation rate and stability in the external sector, high export performance and increased foreign
capital inflows.

Financial sector reforms also depend on budget balance. If the government fund requirements
keep increasing, large borrowing programme would impact the level of interest rates and
magnetization of deficit, if market does not meet full requirements. Financial sector intermediates
between savers and investors and also maintain the payments.
Reform in Financial Sector in India

Banking Reforms
Commercial banking constitutes the largest segment of the Indian financial system. General
approach of financial sector reform process to establish regulatory convergence among
institutions involved in similar activities, given the large systematic implications of commercial
banks. Many of the regulatory norms were initiated first for commercial banks and were later
extended to other financial intermediaries.

After the nationalization of major banks starting in 1969, the Indian banking system became
government owned by early 1990s. Special importance were placed on building up the risk
management capabilities of the Indian banks. Measures also initiated to ensure flexibility,
operational autonomy and competition in the banking sector. Active steps been taken to improve
the institutional arrangements includes legal framework and technological system in which the
financial institutions and market operate. Keeping in mind the crucial role of effective
supervision in the creation of an efficient and stable banking system, the supervisory system.

Banking sector reforms consist of two phases, first involved recapitalization of banks from
government resources to bring them up to appropriate standards. In the second phase, increase in
capitalization has been done through diversification of ownership to private sector up to a limit of
49%, thereby keeping majority ownership and control with the government. With such wide
ownership most of the banks have been publicly listed; it was designed to introduce greater
market discipline in bank management and greater transparency. The introduction of new private
sector banks and increase in number of foreign bank branches, provided new competition.

In 1991, Rajiv Gandhi introduce LPG (Liberalisation, Privatisation and Globalization) Policy.
This lead to the addition of Global Banks in the country. The foreign direct investment were also
opened. This also led to relaxation in many previous policies of the government. The licensing,
formation process , taxation, etc became more flexible for banking companies.
In 1990s the Government of India formed a high level committee to improve the functioning of
financial institutions in India. Hence the Narasimham Committee were introduced. It works in
two phases.
1. The Narasimham Committee 1991 – First Phase
It was first committee of India to suggest acts and reforms for an improved banking system. M.
Narasimham was the chairman of this committee, thus the name of committee justify the name. It
was formed right after the economic crisis. The first phase of the reform focused on improving
the policy framework, institutional framework and financial health.
 Policy framework improvement- this includes deregulation of interest rates, reducing Cash
Reserve Ratio to the standard, phasing of Statutory Liquidity Ratio, scope of priority sector
lending by linking the lending rates to the advances.
 Institutional framework improvement- this focused on strengthening the supervisory systems
and creating a competitive environment.
 To improve the financial soundness of the banking sector certain norms were suggested and
steps were taken for the proportion of NPAs.
 New private sector banks were allowed to raise capital contribution from foreign institutional
investors up to 20% and from Non-Resident Indian up to 40%, this lead to increase
competition.
2. The second Narasimham Committee 1998 – Second Phase
This committee is an extension of the first one. It was introduce to overview the reforms
introduced in the first committee. Second committee suggest- Development Finance Institution,
Stronger banking system, the idea of Non-performing assets, capital adequacy, Rural and Small
Industrial Credits and tightening of provisions. The second phase of the banking sector reforms
concentrate on reinforcing the very foundation of the banking system by restructuring of the
banking industry, development of human resources, and technological advancement.
On the recommendation of the committee following reforms taken:
 New Areas & Instruments: New areas where opened up for investments such as: insurance,
credit cards, asset management, gold banking, investment banking, etc. New instruments also
introduced like: Interest rate swaps, currency forward contracts, etc.
 Risk Management: Banks have started committees to measure and supervise various risks.
Infrastructure Technology also strengthens for payment and settlement systems with
electronic fund transfer, fund management system, etc.
 Increase in Foreign Direct Investment Limit: The limit of Foreign Direct Investment in
Indian banking sector were increased from 49% to 74%.
 Adoption of Global Standards: The best in business international practices in accounting
systems, corporate governance, payment & settlement systems, etc. been adopted by Indian
 financial sector. Banks also introduced E-banking, online banking, telephone banking,
internet banking, etc.

 E-Banking
Online Banking also known as internet banking or e-banking, is an electronic payment system
that facilitates customers of banks or other financial institutions to conduct financial transactions
through its institutional websites/ portals. The traditional model for banking sector has been
through branch banking. The first bank to launch internet banking was ICICI Bank, followed by
CITI Bank and HDFC in 1999.
E-banking services include:
o ATMs (Automated Teller Machines)
o NEFT (National Electronic Fund Transfer)
o Smart card
o Mobile Banking.
Importance of Banking sector reforms
 These banking reforms aim to remove the external restriction on banks like high interest
rates, reserve requirements (CRR and SLR), and continuous changes in interest rates. It
makes the banking sector more adaptive and flexible.
 They are easy to smoothen the process of the bank formation in India. It is to promote healthy
competition for better productivity. And also foreign direct investment is another area of
focus to improve the economy.
 The merging of banks in India is the main focus again. It is done to improve efficiency and
productivity of banking sector. These reforms have improved the functioning of the Indian
banking systems.
 Consolidation of banks and new players to bring competition, innovation and productivity
which will bring economies of scale.
Debt Market Reforms
Major reforms have been carried out in the government securities debt market. In fact, it is
probably correct to say that a functioning government securities debt market was really initiated
in the 1990s. The system had to essentially move from a strategy of pre-emption of resources
from banks at administered interest rates and through monetization towards a more market
oriented system. Instructions of a “statutory liquidity ratio” (SLR), i.e., the ratio at which banks
are required to invest in approved securities was used as the main instrument of pre-emption of
bank resources in the pre-reform period. The high SLR requirement created a captive market for
government securities, which were issued at low interest rates. After the initiation of reforms, this
ratio has been reduced in phases to the statutory minimum level of 25 per cent. Over the past few
years numerous steps have been taken to expand and strengthen the Government securities
market and to raise the levels of transparency. Automatic monetization of the Government’s
deficit has been phased out and the market borrowings of the Central Government are presently
undertaken through a system of auctions at market-related rates.
Measures taken for reforms:
 Administered interest rates on the government securities were replaced by an auction process
for price finding.
 Automatic monetization of fiscal deficit through the issue of Treasury Bills whenever needed
was phased out.
 Primary Dealers (PD) were introduced as market makers in the government securities market.
 For ensuring transparency in the trading of government securities, Delivery versus Payment
(DvP) settlement system was introduced
 Repurchase agreement (repo) was introduced as a tool of short-term liquidity adjustment.
Subsequently, the Liquidity Adjustment Facility (LAF) was introduced.
 91-day Treasury bill was introduced for managing liquidity and benchmarking. Zero Coupon
Bonds, Floating Rate Bonds, Capital Indexed Bonds were issued and exchange traded interest
rate futures were introduced.
 Foreign Exchange Investors were allowed to invest in government securities under limit.
 Introduction of automated screen based trading in government securities.
Debt market reform process is that setting up of such a market which is not easy and needs a
great deal of proactive work by the relevant authorities. An appropriate institutional framework
has to be created for such a market to be built and operated in a systematic manner. Legislative
provisions, technology development, market infrastructure such as settlement systems, trading
systems have all to be developed.
Foreign Exchange Market Reforms

The Indian foreign exchange market had been stiffly controlled since the 1950s, along with
increasing trade controls designed to foster import substitution. Consequently, both the current
and capital accounts were closed and foreign exchange was made available by the Reserve Bank
of India through a complex licensing system. The task facing India in the early 1990s was
therefore to gradually move from total control to a functioning foreign exchange market. The
move towards a market-based exchange rate regime in 1993 and the subsequent adoption of
current account convertibility were the key measures in reforming the Indian foreign exchange
market.

The Indian foreign exchange market has operated in a liberalized environment for more than a
decade. A cautious and carefully calibrated approach was followed while liberalizing the foreign
exchange market and the focus was on gradually dismantling controls and providing an enabling
environment to all entities engaged in external transactions.

The Indian approach to opening the external sector and developing the foreign exchange market
in a phased manner from current account convertibility to the ongoing process of capital account
opening is perhaps the most striking success relative to other emerging market economies. There
have been no accidents in this process, the exchange rate has been market determined and
flexible and the process has been well-calibrated. The capital account is effectively convertible
for non-residents.

Exchange rate reforms have proceed gradually beginning with a two- stage cumulative
devaluation of rupee by about 20 per cent effected in July 1991. Subsequently, the Liberalised
Exchange Rate Management System (LERMS) was introduced in 1992, which was later replaced
by the Unified Exchange Rate System (UERS) in 1993. The net result was an effective
devaluation of the rupee by around 35 per cent in nominal terms and 25 per cent in real terms
between July 1991 and March 1993.

The principal features of the current exchange rate regime in India can be briefly stated as
follows:
i. The rates of exchange are determined in the market.

ii. The freely floating exchange rate regime continues to operate within the framework of
exchange control.

iii. Current receipts are surrendered (or deposited) to the banking system, which in turn, meets
the demand for foreign exchange.

iv. RBI can intervene in the market to modulate the volatility and sharp depreciation of the rupee.
It effects transactions at a rate of exchange, which could change within a margin of 5 per cent of
the prevailing market rate.

v. The US dollar is the principal currency for the RBI transactions.

Capital Market Reforms

Capital market is defined as financial market that works as a root of demand and supply of debt
and equity. The capital market deals with the capital securities such as equity or debt offered by
the private business entities and also undertakings of government in India. The capital market is
the source of funds for corporate and government and it also provides opportunity to savers to
invest their long term savings.

The capital market is the place where buyers and sellers participate in the trade of assets such as
equities, bonds, currencies and derivatives. The capital market comprises of two segments:
primary and secondary market.
The Primary market deals with the issuance of new securities. Government, corporates can obtain
funds through the sale of new stocks or bonds.
The secondary market is the market where previously issued securities and financial instruments
such as stock, bonds, derivative are bought and sold.

The major role of the capital market is to raise funds for banks, corporations and government
while providing a platform for the trading of securities. The fundraising is regulated by the
performance of the stock within the capital market. The organizations of the capital market issue
stocks and bonds to raise funds. Investors can invest in the capital market by purchasing offered
stocks and bonds. It is important for investors to understand market before investing in the
capital market.

Some of the major reforms regarding capital market are given below:
1. Establishment of SEBI
The most important measures of capital market reform is the setting up of Securities and
Exchange Board of India. It was established in 1988 and got legal status in 1992. It was primarily
set up to regulate the activities of merchant bank and also to work as a promoter of the stock
exchange. SEBI also control the operations of mutual funds and acts as a regulatory of new issue
activities of the companies. The main objective of the SEBI is to protect the interest of the
investors in securities market.
Regulation of stock market is important to ensure that:
 The equity market operates in fair and orderly.
 The brokers and the professionals of the stock market deals fairly with their customers.
 The corporate firms who raise funds through market provide all the information about the
organization to the investors which are needed to make right investment decisions.

SEBI has introduced various regulations for the functioning of capital markets.

2. Setting up of Private Mutual Funds

The promotion of mutual funds has also improved the Indian capital market. Different types of
mutual funds are available to general public for investment. SEBI regulate the working of the
mutual funds and AMCs have to publish their net present value every day. Association of Mutual
Funds in India (AMFI) were formed in 1995, it represents all the Indian mutual fund industry
which were registered under SEBI. Mutual fund industry provides wider range of options for
investment to the investors. Many private sector institutions such as Tata, Reliance, ICICI have
set up their mutual funds to raise funds from the public. Mutual funds raise funds by selling units
to the public and raised funds are invested in equities and debenture of companies. Investment in
mutual funds carries less risk as compare to equity market.
3. Opening up to foreign capital
An important reform has been the opening up of the Indian capital market for Foreign
Institutional Investments (FII). That is, the FII can buy securities of private Indian companies in
the Indian stock market and also can invest in government securities. This step was taken to
attract the foreign capital investment. The foreign investment promotion board, consisting of the
Finance and foreign affairs, Secretaries of Industries have allowed more direct foreign
investment in different sector. Under the Foreign Exchange Regulation Act, a company which
has 40% equity participation by foreigners in a FERA company. This limit has been changed and
now the foreign companies are allowed to have 51% equity participation.
After the new financial reforms, the Indian corporate sector were allowed to raise funds in the
international capital market through:
 American Depository Receipts (ADR)
 Global Depository Receipts (GDR)
 Foreign Currency Convertible Bonds (FCCB)
 External Commercial Borrowings (ECB).

Similarly, Overseas Corporate Bodies (OCB) and Non-Resident Indians were allowed to invest
in the equity market in India. The FERA Act has been amended is now known as Foreign
Exchange Management Act (FEMA). The Foreign Exchange Management Act has given more
encouragement to non-resident investors. The percentage of NRI investment in Indian companies
increased from 5% to 24%.
In the year 1991, India faced an
shortage of foreign exchange and then
finance department adopted certain
methods to improve the foreign
exchange reserves. It allowed the
investment by NRIs in Indian
company. This resulted in more
inflow of foreign funds in India.
4. Banks and Capital Market
To strengthen the Indian capital market the banks were allowed to lend against various capital
market instruments such as corporate shares and bonds to individuals. This is made in accordance
with certain norms regarding capital adequacy, transparent transactions and duration of the loan.

5. Online trading in Indian Capital Market

Some of the leading stock market in India introduced computer based system for the trading
activities. The brokers can engage and do trading on online basis. The online computer terminals
enable the public and the brokers can read and understand the prevailing price of the stock in the
market at any time. The online system has bought transparency to the transactions in the market.
That prevents the manipulation in the opening and closing prices of shares by the brokers in the
market.
6. National Stock Exchange
A new stock market called National Stock Exchange were introduced which has large number of
companies listed under it. It is a big competitor and even able to influence the Bombay Stock
Exchange. The National Stock Exchange deals in shares of the companies throughout India. The
prices prevailing in the market is a benchmark for the stock prices. It has paved the way for all
the companies equities being traded through single market. NSE was the first exchange in the
country which provide modern fully automated screen based electronic trading system which
offered easy trading facilities. It was the first dematerialized electronic exchange in India.

7. Demating of shares in Indian capital market

The introduction of dematerialization has resulted in improving transactions of securities.
Dematerialization is the system under which physical shares converted into electronic mode. At
first the shares of individual investors are held by stock holding companies and a pass book is
given to individual investors. The companies concerned are also informed for making due
changes in the share register. So demating of shares in electronic mode has prevented blank
transfer and speculations. Now Every transaction in the market is not only recorded but also it
generated revenue to the government is the form of registration and stamp charges. Every shares
purchased or sold have to go for registration and hence bogus share transfer were not possible.
8. Introduction of Merchant Bankers
Merchant bankers have been introduced and permitted to take part in the stock market. Merchant
bankers not only help companies in capital budgeting but also guide also guide foreign investors
in the purchase of securities. The functions and operations of merchant banker are regulated by
SEBI. The merchant bankers through financial markets help some of Indian companies to obtain
fresh capital, also helps the newly started companies in the issue of shares.

9. Future trading in the Indian Capital market

Future trading is a contract to buy or sell a particular financial instrument on the future date at a
specific price. This enables the parties to transfer according to changes in the price from one
person to another. In every future contract, there is buyer and seller. And if one makes a profit in
a particular contract, the other person may try to minimise the loss through some other contract.
Thus, future market provides scope for the traders to minimise their losses or the risks in trading
of financial instruments.

10. Period of settlement in Indian Capital Market

SEBI has introduced T+2 system for the settlement of transaction in Indian Capital Market.
According to this system, all the transactions done in the capital market should be completed
within days excluding the date of trading. All this have improved the working of stock market in
India.
For instance, suppose one has traded for equity shares of State Bank of India on Monday then
market have to the settlement of this transaction till Wednesday.
 Reforms List of Reforms and Acts of India
S. Banking Acts and Year Description
No. Reforms
1 Societies Registration Act 1860 This act allows seven or more people related to any
literary, scientific, or charitable purpose to form a
society or an association. It is to promote a formal
organization in the country.
2 Negotiable Instrument Act 1881 This act defines and amends the law relating to
negotiable instruments like – the promissory note, bill
of exchange, and cheques.
3 Indian Trusts Act 1882 This act helps to recognize what is a trust and who is
legally a trustee by law and gives a proper definition
for them.
4 The Bankers’ Books 1891 This act allows bankers to use their ledgers and books
Evidence Act as evidence to show their clear records.
5 Indian Stamp Act 1899 This act is related to introducing and amending laws
related to stamp duty and transaction.
6 Co-operative Societies Act 1912 This act consolidates and amends the law relating to
the democratic and smooth functioning of registered
co-operative societies.
7 Provident Funds Act 1925 This act makes it mandatory to provide pension or
provident funds to employees of different
organizations.
8 Indian Partnership Act 1934 This act clarifies the definition of a partnership
between two or more persons who share the profits of
a business run by all or by one person only.
9 The Reserve Bank of India 1934 This act led to the formation of the Reserve Bank of
Act India in 1935.
10 Insurance Act 1938 This act regulates the insurance sector and provides a
legal framework to monitor industry framework.
11 Central Excise Act 1944 This act forms and regulates law-related to excise
duty on goods and services.
12 Public Debt Act 1944 This act forms and provides a legal framework for the
 maintenance of government securities.
13 International Monetary 1945 This act led to the formation of the International
Fund and Bank Act Monetary Fund.
14 Employees’ State Insurance 1948 This act allows employees to enjoy certain benefits in
Act case of sickness, maternity, and employment injury.
15 The Industrial Finance 1948 This act led to the establishment of the Industrial
Corporation of India Act Finance Corporation of India to provide long term
loans and finances to the industrial sector.
16 The Banking Companies 1949 This act monitors and restricts banking company’s
(Legal Practitioner Clients’ transactions by legal practitioners.
Accounts) Act
17 The Industrial Disputes Act 1949 This act is to solve industrial disputes related to
certain banking and insurance companies.
18 The Banking Regulation 1949 This act is responsible for regulating all banking
Act companies in India.
19 Chartered Accountants Act 1949 This is responsible for regulating the profession of
Chartered Accountants in India.
20 Contingency Fund of India 1950 This act led to the establishment of the Contingency
Act Fund of India.
21 The State Financial 1951 This act led to the establishment of State Financial
Corporations Act Corporations.
22 Employees Provident Fund 1952 This act makes it mandatory to provide pension funds
and Miscellaneous and deposit-linked insurance funds for employees
Provisions Act working in factories and other institutions.
23 The Reserve Bank of India 1953 This act provides provisions for certain high
(Amendment and Misc. denomination banknotes.
Provisions) Act
24 The Industrial Disputes 1955 This act is to provide modification to the decision of
(Banking Companies) the Labour Appellate Tribunal.
Decision Act
25 The State Bank of India Act 1955 This act led to the Reserve Bank of India acquiring a
controlling interest in the Imperial Bank of India.
26 Life Insurance Corporation 1956 This act led to the establishment of the Life Insurance
Act Corporation of India.
27 Companies Act 1956 This act led to the enabling of company formation by
 registration and sets out the basic duties of companies.
28 Central Sales Tax Act 1956 This act provides provisions for important goods in
interstate commerce and lays down tax restrictions on
them.
29 The State Bank of India 1959 This act led to the transfer of eight banks that
(Subsidiary Banks) Act belonged to princely states into SBI subsidiaries.
30 The Subsidiary Banks 1959 This act provides the constitution, management, and
General Regulation control of the subsidiary banks formed in India.
31 The Deposit Insurance and 1961 This led to the establishment of a Corporation for
Credit Guarantee providing insurance of deposits and guaranteeing of
Corporation Act credit facilities.
32 Customs Act 1962 This act is for the formation and amending the laws
related to customs.
33 Unit Trust of India Act 1963 This act led to the formation of the Unit Trust of India
as a public sector investment institution.
34 Limitation Act 1963 This act provides a time limit for different lawsuits
within, which an individual can approach the court for
justice.
35 Nationalization of Banks 1964 This act led to the nationalization of 14 major
Act commercial banks in India. Though this process took
place in 1969.
36 Banking Laws (Application 1965 This amendment made the Banking Regulation Act,
to Co-operative Societies) 1949 applicable to cooperative banks as well.
Act
37 Banking Companies 1969 This act allows the acquisition and transfer of certain
(Acquisition and Transfer banking companies for national development.
of Undertaking) Act
38 The Nationalized Banks 1970 This amendment provides management and
Scheme miscellaneous provisions for the functioning of
Nationalized Banks.
39 The Regional Rural Banks 1976 This act led to the establishment of Regional Rural
Act Banks of India.
40 Foreign Contribution Act 1976 This act regulates and monitors the acceptability and
utility of foreign contributions by individuals or
 associations.
41 The Export-Import Bank of 1981 This act led to the establishment of the Export-Import
India Act Bank of India to provide financial benefits and
security to the importer and exporters of the country.
42 The National Bank for 1981 This act led to the establishment of the National Bank
Agriculture and Rural for Agriculture and Rural Development to provide
Development Act and regulate credit facilities for small businesses like
agriculture, handicraft, etc.
43 Chit Fund Act 1982 This act is responsible for providing laws and
regulations related to chit funds and matters around it.
44 Sick Industrial Companies 1985 This act allows the detection of nonperforming or
(Special Provisions)Act potentially sick companies. It helps them to revive, if
possible, or their closure.
45 Shipping Development 1985 This act led to the abolition of the Shipping
Fund Committee Act Development Fund Committee.
46 Banking Companies Rules 1985 This amendment led to the addition of certain
regulations related to Nomination.
47 The National Housing Bank 1987 This act led to the establishment of the National
Act Housing Bank to monitor and promote housing
finance institutions in India.
48 SIDBI Act 1989 This act led to the establishment of the Small
Industries Development Bank of India. The idea is to
co-ordinate and support the functioning of this
industry.
49 SIDBI General Regulations 1990 This act laid down regulations for the smooth
functioning of the Small Industries Development
Bank of India.
50 Securities and Exchange 1992 This act is to monitor and regulate the securities
Board of India Act market of India.
51 The Special Court Act 1992 This act led to the establishment of a Special Court for
transaction-related offenses in securities and matters
related to it.
52 The Industrial Finance 1993 This act led to the repealing of The Industrial Finance
Corporation Act Corporation as a Statutory Corporation. It made it a
 public limited company under the Companies Act.
53 Recovery of Debts due to 1993 This act led to the formation of laws for the ruling and
Banks and Financial recovery of debts due to banks and financial
Institutions Act institutions.
54 Debts Recovery Appellate 1994 This led to the introduction of certain provisions for
Tribunal Rules debt recovery called Debts Recovery Tribunals.
55 Industrial Reconstruction 1997 This act allows the transfer of the undertakings of
Bank Act particular banking companies to control the economy
and its development.
56 Foreign Exchange 1999 This act provides provisions and amends for foreign
Management Act exchange management.
57 Insurance Regulatory and 1999 This act led to the establishment of the Insurance
Development Authority Act Regulatory and Development Authority of India.
58 Prevention of Money 2002 This act provides provisions to prevent money
Laundering Act laundering cases and the consequences of such cases.
59 Fiscal Responsibility and 2002 This act provides provisions for financial discipline. It
Budget Management Act aims to reduce the fiscal deficit and improve
macroeconomic and fund management by achieving a
balanced budget.
60 The Securitization and 2002 This act allows the auction of properties to recover
Reconstruction of Financial loans by the banks.
Assets and Enforcement of
Security Interest Act
61 Industrial Development 2003 This act made the Industrial development Bank a
Bank Act company registered under the Companies Act, 1956,
and continued its banking business.
62 Credit Information 2005 This act provides provisions for the regulation of
Companies Act credit information companies and ensures efficient
distribution of credit.
63 Government Securities Act 2006 This act provides provisions for improving the
government securities market and its management.
64 The Banking Ombudsman 2006 This act allows customers to complain if they are not
Scheme happy with banking services.
64 Factoring Act Rules 2011 This act provides a formal definition to the Factoring
 Business in India.
66 SARFAESI (Central 2011 This act made the central registry a part of the
Registry) Rules SARFAESI Act 2002 to prevent money laundering
and other financial frauds.
67 Securities Law 2014 This amendment allows the Security and Exchange
(Amendment) Act Board of India to go after fraudulent investment
schemes, especially Ponzi schemes.
68 The Regional Rural Banks 2014 This amendment allowed the government to authorize
(Amendment) Act and issue the capital of Regional Rural Banks.
69 The Insurance Laws 2015 This amendment provides IRDAI with more
(Amendment) Act flexibility in its functioning to work more efficiently.
70 The Companies Act 2015 This amendment allows the formation of companies
(Amended) without a minimum paid-up capital.
 Objectives of the Study

 To understand the need of the reforms in the financial sector.

 To study the impact of reforms in financial sector.

 To study if there is any scope for improvement or changes in the made in the financial system
 Need & Scope of the Study

Need
 Reforms play an important role any sector be it internal or external.
 It is a formulate structure how particular sector in the economy are expected to operate.
 Reform policy helps a sector to excel and grow better in the economy.
 Reform should be made to make the sector to work more efficiently with the prospective of
providing benefit to the sector.

Scope
 A good financial reform helps in smooth functioning of the sector.
 It improves the productivity and results in better output.
 New reforms will open environment facilitates creativity and innovation.
 Literature Review

1. Monetary and financial reforms in India: a practitioner’s perspective

Author – Dr. Y V Reddy
Year of Issue – 2020
The objective of this paper is to review the monetary and financial reforms in India also identify
the emerging issues and explore the prospective for further reform. The first part focused towards
to a brief background on the need for reforms taken up in 1991-92. At first, stable and
appropriate policies which govern the management of the external sector is important. As part of
the process, a policy framework was developed to liberalise the external sector, move towards
total convertibility on current account, encourage non debt credit inflows while containing all
external debts and make the exchange rate largely market determined.

The second part focused to the financial sector as whole, especially in the banking sector. The
major element of financial sector reforms has been a set of measures aimed at strengthening
banking system as well as ensuring safety through transparency and public credibility. Monetary
management in terms of instruments and framework has experience significant changes,
reflecting the transition of economy. The two main objectives of monetary policy are to maintain
price stability and ensuring availability of proper credit to productive sectors in the economy.

In all instances of serious uncertainties, the existence of harmonious relations between the
Government and the central bank become critical and appropriate coordination is extremely
useful. While it is difficult to anticipate or assess the uncertainties, there may be advantages in
taking the risk of early action than late action. While in a rapidly changing world of uncertainties,
commitment to ideology can prove to be a drag on policy, especially in emerging countries,
which are attempting structural transformation, it has been demonstrated by events the world
over as well as by the Indian experience, that when the going is good, government is perceived to
be a problem but when the going gets tough, effective public policy may be the only solution. As
such, the state has a pivotal role in stabilizing the economy when there is a spell of stormy
weather.
Monetary policy is increasingly focused on efficient discharge of its objective including price
stability, and this no doubt would help poverty alleviation indirectly, while the more direct attack
on poverty alleviation would rightfully be the preserve of fiscal policy. Monetary and financial
sector policies in India should perhaps be focusing on growth, mainly consisting of direct anti-
poverty interventions are addressed mainly by fiscal and other governmental activitie
2. Financial Sector Reforms in India: Policies and Performance Analysis
Author : Rakesh Mohan
Year of Issue: 2004

In this paper researcher indicates the financial sector reforms in India with different policies
adopted by the government to bring stability and adequacy in financial sector. Specifically, this
paper limits itself to the impact analysis of financial sector reforms in the areas where the
Reserve Bank of India has had a dominant role. These include the banking sector, foreign
exchange and government securities markets and also the conduct of monetary policy.

India has more than a decade of financial sector reforms during which there has been
considerable transformation in the whole financial system. The sector was characterised by
interest rates, large resources by the authorities, directing major portion flow of funds to and
from financial intermediaries. Separation of activities of different types of financial
intermediaries eliminated the competition among existing financial intermediaries. One of the
successes of the Indian financial sector reform has been the maintenance of financial stability and
avoidance of any major financial crisis during the reform period.

Financial sector reforms in India were initiated early in the reform cycle. Complementary
measures in other areas including fiscal and external sector provided the crucial support to the
financial sector reform process. In order to deepen the financial sector reforms further, it is
essential that significant reform measures are initiated in other segments of the economy
including real sectors. Since the early 1990s, India as well as the world economy have undergone
a structural transformation. An enduring development has been the changed perception about
India both internally and from the rest-of-the-world. While India assumes a more pivotal role in
the global arena, internally the country needs to reassess the future course of restructuring
process.
3. Indian Financial Sector after a decade of Reforms
Author : Prof. Jayanth R. Verma
Year of Issue : 2003

This paper begins with a critical review of financial sector reforms in some key areas. It then
goes on to assess the impact that these reforms have had on the corporate sector and on retail
investors. The paper outlines the unfinished agenda of reforms in the financial sector.

One of the early successes of the reforms was the speed with which exceptional financing was
mobilized from multilateral and bilateral sources to avert what at one stage looked like a
imminent default on the country's external obligations. Subsequently, devaluation, trade reforms
and the opening up of the economy to capital inflows helped to strengthen the balance of
payments position. Substantial reserves were built up out of non-debt-creating capital inflows.

An even more important question is whether the banks' lending practices have improved
sufficiently to ensure that fresh lending does not generate excessive non-performing assets
(NPAs). That should be the true test of the success of the banking reforms. The first decade of
reforms therefore included the following banking reforms: Capital base of the banks was
strengthened by recapitalization, public equity issues and subordinated debt, Prudential norms
were introduced and progressively tightened for income recognition, classification of assets,
provisioning of bad debts, marking to market of investments, Pre-emption of bank resources by
the government was reduced sharply, New private sector banks were licensed and branch
licensing restrictions were relaxed.

Private sector insurance companies started operating in India in 2000, several years after the first
proposal to allow their entry. The Insurance Regulatory and Development Authority (IRDA) has
been set up as the apex regulator for this sector. It is still too early to assess the likely impact of
the new players. The IRDA could play a catalytic and facilitating role here though the restrictive
features of the Insurance Act would restrict its freedom.

The initial burst of economic reforms included a major reform in the capital market – the
abolition of capital issues control and the introduction of free pricing of equity issues in 1992.
Simultaneously the Securities and Exchange Board of India (SEBI) was set up as the apex
regulator of the Indian capital markets. The secondary markets for stocks witnessed more change
and reform than most other components of the financial sector:
 Online Trading
 The settlement of securities become electronic
 Rolling settlement on a T+5
 A derivative market was established
4. Stock Market Participation: The role of Human Capital
Author: Kartik Athreya, Felicia Ionescu, Urvi Neelkantan.
Year of Issue : 2018

In this research paper the author talk about human capital investment. Human capital investment
is significant for most people, while stock market participation is limited. Returns to human
capital depend on human traits and will and returns to stocks. In this study researcher
demonstrate the variety in human capital returns, explains why many do not invest in stocks,
when young.

Household participation in stock is limited, especially at young age, despite the high returns
offered by stock market. The expected return on stocks determined on competitive markets and
do not change with the amount invested. This paper demonstrate that when the increase of
earnings requires costly investment in human capital. This model observed stock market
participation behaviour, by both income and wealth groups. Human capital returns may exceed
returns to financial assets, especially for those individuals with high ability but low human
capital. Individual with low current earnings but potential to increase their earnings may
prioritise human capital accumulation above all.

This paper demonstrate that human capital investment decisions across households can
substantially explain aggregate data of household portfolio, in particular participation in the stock
market. An entirely standard model of household portfolio choice delivers aggregate stock
market participation without appeal to transactions costs, borrowings, or a positive correlation
between stock market and human capital returns. This report suggests that the presence of human
capital as an investment option.

The stock market clearly offering higher average rate of return than the risk free savings, may
still not affect participation of households due to the exposure stock market create.
5. Effects of Demonetization: Evidence from 28 Slum Naighbourhoods in Mumbai
Author :
Deepa Krishnan & Stephen Siegel
Year of Issue : 2017

This survey was taken were more than 200 families living in 28 slum or lower income
neighbourhoods in Mumbai in early December 2016 to examine the impact of demonetization
decision by the Indian government. The survey obtains changes in families income, expenditure
and savings following the policy announcement. The effects varies significantly across different
families, in particular between those receiving a regular salary and those who are not. The report
shows significant difference between past savings behaviour and expected future savings
behaviour, with the expected use of bank accounts increasing and decreasing in the use of cash as
storage of value.

On the night of 8 Nov, 2016, the Indian government made a surprise announcement on television
that currency notes of Rs. 500 and Rs. 1000 denomination were to be withdrawn from the market
with immediate effect. The scheme popularly called ‘Notebandi’, was announced by Indian
Prime Minister Narendra Modi to end the menace of black money and corruption.

The sample survey families include 214 families living in 28 slum or lower-income
neighbourhoods of Mumbai, provide an information about how demonetization has affected
some of the communities in India. The result provide some initial understanding the immediate
and long-term effect of the demonetization on the urban poor. First, the survey found that there
was drop in income of families. There was average 10% drop in their monthly income. The drop
in income is associated with drop in consumption as well as changes in the savings of the family.

Based on the respondents, how lower income families manage their savings in the future might
differ significantly from the past. Use of bank accounts expected to increase, while use of cash is
expected to decrease as a storage option. Most of the respondents thinks that policy overall is
positive.
6. Monetary Policy under Financial Exclusion
Author : Amartya Lahiri & Rajesh Singh
Year of Issue : 2015

The researcher in this investigates the welfare implications of monetary policy rules in a small
open economy which access to world capital market. Financial market access is costly and
induces segmentation of households into non-traders who never participate and traders who only
participate into asset market. Policy interventions justify the existence of frictions in factor,
goods or asset markets which prevent market allocations from achieving the best.

Monetary policy is an asset market instrument, policy interventions purchasing power between
those that participate in asset markets and those who don’t. The paper studies alternative
monetary policy rules such as money growth rules, inflation targeting rules to compare the
outcomes of the sticky prices. The normal implications of monetary policy is model with
segmented assets markets remain unexplored. While access to asset markets is costly it is also
useful as it allows households to smooth consumption. There is separation of households into two
types: trading and non-trading households. The fixed cost of shipping resources between goods
and assets market further splits trading households into active and inactive households. Trading
households choose the time and size of portfolio based on their cost and income realizations.
 Research Methodology

The study is based on both data sources primary and secondary data sources.

A) Primary data: - Primary data is the original and fresh data collected to make report, it gives
qualitative information. The primary data is collected through direct interaction with the
investors and also through questionnaire which was shared on mails, messages, etc.
The questionnaire survey was designed to know the current preference and decision making of
individuals while selecting or investing in mutual funds. The questionnaire was designed on Google
forms and sent to likely respondents through various modes like social media WhatsApp, E-mail, etc.
The responses were received from respondents were analysed and the results are discussed in this paper.

Process Description Diagram

Designed questionnaire for survey

Distribute questionnaire with the help of

whatsapp, email, etc

Got Responses

Analysis of Data

B) Secondary data: - The secondary information which is required was collected from the
company’s database and websites and also from broachers of mutual funds. The secondary
 data can be collected from number of sources both internal and external such as documents,
records, books and so on.
Sources of data collection:
 Internet
 Different type of research paper
 Newspaper / Articles
 Reports
 Projects

C) Target Audience: - The target audience of the project is the investors, Intermediatory and the
Financial Institutions.
 Limitations

1. Lack of coordination between different financial institutions

2. Monopolistic market structures
3. Dominance of development banks in industrial financing
4. Inactive and erratic capital market
 Data Interpretation
Data from Questionnaire
1. Gender

Gender

Female
Male
Other

Gender Female Male Other Total

Data in 22 22 - 44
Numbers
Data In % 50 50 - 100

In this report we received the responses from 44 respondents for their views on financial sector in
India, specifically digitalisation in financial sector and also there view on effects of
demonetization. Out of this 44 respondents 22 are female whereas 22 are male.
2. Age

Age

20-24
25-28
29-32
Above 32

Age 20-24 25-28 29-32 Above 32 Total

Data in 20 10 8 6 44
number
s
Data in 45.45 22.73 18.18 13.64 100
%

In this report we found that there is significant difference in the ages of respondents. As we can
from the reports 45% of the total respondents are below the age 24. Whereas 22% are between
the age of 25-28 years. In this report we are discussing about financial sector reforms and it’s
good that young people are focusing on financial sector more.
3. Do you think reforms in financial sector plays important role?

Reforms playes important role in financial sector

Yes
No
May be

Reforms Yes No May be Total

in
Financial
Sector
Data in 44 - - 44
Numbers
Data in % 100 - - 100

The study indicates that the reforms plays important role in financial sector. All the respondents
also think that changes in system always make it work more effectively and efficiently. As we
can understand from the data collected that all respondents thinks that the reforms are must in
any sector.
 4. Do you think that LPG transform Indian economy?

LPG transform Indian economy

Yes
No
May be

LPG Yes No May be Total

transform
Indian
economy
Data in 42 - 2 44
Numbers
Data in % 95.45 - 4.55 100

In this survey we observe that almost 96% of total respondents think that LPG (Liberalization,
Privatization and Globalization) played important role in transformation of Indian economy. LPG
impacted the Indian economy in positive way. As more private companies came into existence
and many public limited companies converted into private limited. Also globalization makes way
for foreign companies to invest in Indian economy.
5. As per you reform in which financial segment has affected the Indian economy most?

Segment that affect Indian Economy most

Banking & Finance

Insurance
Capital Market

Segment that affect Banking & Finance Insurance Capital Market

Indian economy
most
Data in Numbers 42 17 22
Data in % 51.85 20.99 27.16

As per the data received, 52% of the total respondents think that reforms in banking & finance
segment have influenced the Indian economy most, followed by capital market reforms and
insurance which stand at 21% and 27% respectively. Banking sector influenced the most as most
of the people in India have accounts with the banks especially after that announcement of
Pradhan Mantri Jan Dhan Yojana. Hence banking transactions increased in Indian economy.
6. Did demonetization of currency changed the behaviour of human capital structure?

Demonetization of Currency

Yes
No
May be

Demonetization of currency were announced by Indian Prime Minister Mr Narendra Modi on

November 8, 2016. As per data collected, we can observed that the human capital structure has
changed after that. 84% of the total respondents think that demonetization changed the behaviour
of individual in the area of managing capital. Whereas 2% thinks that it haven’t affected the
human behaviour and 14% are neutral about the same.
7. As per your opinion, What changes happened in human capital structure after the
demonetization policy?

Changes happened in Human Capital structure

Increase in Bank
account transac-
tio
Decrease in
usage of Physi-
cal Cash
Changes in saving
pattern of indi-
vidual

Changes Increase in Bank account Decrease in usage of Changes in saving

happened in transaction physical cash pattern of
Human Capital individual
Structure
Data in number 28 29 19
Data in % 36.84 38.16 25

In this survey we found that there is significant change in the human capital structure after
announcement of demonetization. Many of people changed their way of transactions from
physical to digital (net-banking and online payment). As we can understand from the data
received, 37% of the respondents think that there is increase in bank transaction. Also 39%
respondents think that percentage of physical cash usage has down.
8. Does digitalization in financial sector changed the framework of economy?

Digitalization changed framework of economy

Yes
No
May be

Digitalizatio Yes No May be Total

n changed
framework of
economy
Data in 41 1 2 44
Numbers
Data in % 93.18 2.27 4.55 100

Digitalization has impacted heavily the living of individuals. Digitalization enables everyone to
do all finance related transaction from anywhere, anytime. So it provides wide range products for
individuals. As per the responses received, 93% of the respondents think that digitalization have
changed the framework of the Indian economy, whereas 2% says it haven’t make any impact on
economy.
 9. Does digitalization changed the thinking of individual in doing transactions?

Digitalization changed thinking of individuals doing transac-

tions

Yes
No
May be

Digitalization changed Yes No May be Total

thinking of individuals
doing transaction
Data in Numbers 42 1 1 44
Data in % 95.45 2.27 2.27 100

Digitalization has impacted heavily the living of individuals. Digitalization enables everyone to
do all finance related transaction from anywhere, anytime. So it provides wide range products for
individuals. Online payment system plays important role in changing thinking of individual while
doing financial transactions. Online mobile banking and other mobile payment applications
(Paytm, Google Pay, etc) have made it more convenient for individual in doing financial
transaction.
 Findings

 Financial reforms have changed the dilemma of Indian financial structure over the period of
time.
 Many reforms in all possible segment of financial sector have made it more effective and
convenient to use.
 Digitalization was the most crucial reforms which changed the whole structure of the
financial structure of the economy.
 E-Banking system made it easy for individual to do financial transactions on the move. That
enables people to do financial transaction from anywhere without visiting financial
institutions that reduce time consumption.
 Use of paper money also decreased after the announcement of demonetization which prevents
corruption and black money transactions.
 Digitalization in capital market reduced paper work for transaction and transfer of securities.
Dematerialization of share makes it easy of intermediaries to transfer shares from one
account to other account.
 Involvement from foreign countries in Indian economy facilitates India to learn and
implement new things which brings new ideas and information, which will benefit Indian
economy to grow.
 Suggestions

 It is observed that demonetization have change the human capital structure especially in
terms of transactions and saving patterns of individuals.
 Indian banking sector is in the verge of merger of different banks under one roof, but this
process is taking more time consuming. RBI have to make that process more faster than usual
as it should be done quickly.
 Financial sector have is experiencing digitalization in all financial transactions, but for KYCs
and registration it goes with physical documentation. Finance department should take into
consideration the online registration process in full flow especially in this Covid period.
 Department have to give proper guidance and education about online systems to all the
people, that will make India a well-trained digital hub which will make financial transaction
more smoother.
 Changes are required to made as they will give better result for future.
 Conclusion

From this research report we can conclude that reforms in financial sector makes it more
effective, efficient and stronger which helps in strengthen the Indian economy. Financial sector
reforms enable banking, insurance, capital market to grow. In banking system, digitalization
plays important role in the financial transactions which includes transfer of funds, online
payment system, etc. Net-banking, mobile banking, online payment application makes it easier to
do transaction on the move from anywhere and at any time. It provide 24*7 transaction service
for individual.

In capital market, dematerialisation of shares makes it easy to do transfer of shares from one end
to other end with the help of T+2 transaction business cycle. All segment trading is available for
investors from one platform which is more secured and smooth as compare to old paper based
system. Investor can invest in stocks, derivatives, commodities, currencies, mutual funds, bonds
from single dedicated platform for investments.

Foreign direct investment makes it possible for foreign investor to invest in Indian economy and
also Indian investor to spend their money in foreign market.
 References

 http://www.ijstm.com/images/short_pdf/1486402502_D539ijstm.pdf

 https://accountlearning.com/25-recent-changes-in-indian-capital-market/

 https://www.bis.org/review/r020425d.pdf

 https://neostencil.com/upsc-indian-economy-financial-sector-reforms
 Annexure

 Name

 Gender
o Female
o Male
o Other

 Age
o 20-24
o 25-28
o 29-32
o Above 32

 Do you think reforms in financial sector plays important role?

o Yes
o No
o May be

 Do you think that LPG transform Indian Economy

o Yes
o No
o May be

 As per you, reform in which financial segment has affected the Indian economy most?
o Banking & Finance
o Insurance
o Capital Market

 Did demonetization of currency changed the behaviour of human capital structure?

o Yes
o No
o May be

 As per your opinion, What changes happened in human capital structure after the
demonetization policy?
o Increase in bank account transaction
o Decrease in usage of physical cash
o Changes in saving pattern of individual
o Other

 Does digitalization in financial sector changed the framework of economy?

o Yes
o No
o May be

 Does digitalization changed the thinking of individual in doing transactions?

o Yes
o No
o May be

 How will you rate the digital process in banking system?

(1 being the lowest and 10 being the highest)
1 2 3 4 5 6 7 8 9 1
0