INDIAN FINANCIAL

SYSTEM
FINANCIAL

SYSTEM

Meaning of Financial
System
The term financial system is a set of
inter- related activities/services
working together to achieve some
predetermined purpose or goal.
It includes different markets, the
institutions, instruments, services
and mechanisms which influence the
generation of savings, investment
capital formation and growth.

Meaning of Financial
System
Provides for efficient flow of funds from
savings to investment by bringing savers
and borrowers together via financial markets
and financial institutions.
The financial system is the collection of
markets, institutions, law, regulations, and
techniques through which Bonds, stocks, and
other securities are traded, interest rates are
determined, and financial services are
produced and delivered around the world.

Functions of Financial System

Saving Mobilization
Facilitated Investment
Transforming Maturities
Separation, distribution, diversification and reduction of risk
Reducing information and transaction costs
Disseminates information
Provision of liquidity
Balancing savings and investment
Portfolio Management
Facilitates Exchange
Other functions may include
Globalization
Diversification
Financial engineering

Saving Mobilization
Financial intermediaries draw attention to the
benefits of saving
Financial institutions co-ordinate peoples
decision to save surplus out their incomes by
offering them opportunities or alternative options
for converting their savings into financial assets.
They offer them variety of financial instruments
with various maturity periods, liquidity and
attractive rate of return on them.

Facilitates Investment
Provision and allocation of funds among
various business units who need resources for
investment.
Financial institution facilitate investment
rather than directly encourage it.

Transforming Maturities
Offers various types of transformation services
Transformation of financial claims so as to suit
the preferences of both savers and borrowers
Transfers funds directly as well as indirectly