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Indian Financial System

Notes 11. …………………..are those whose principle activity is to arrange leasing of assets.
12. ………………………..credit is defined as a system under which term loans for purchase of
goods and services are advanced to be fractionally liquidated through a contractual
obligation.
13. …………………agencies are properly individual organizations which are given assignment
to find the credibility of debt and equity issues in terms of the risk involved in them.
14. Development banking is the financing of projects assessed on the basis of their viability to
generate cash flows to meet the interest and ………………..obligation.

15. ………………………….were introduced to meet the need for extending credit to the weaker
section of the society.

8.8 Summary

 Banking, per se, commercial banking, has a long history. Starting its journey from the
traders of Rome, it traces its way to the modern day prime intermediation.
 The history of banking is by far the history of the State Bank of India, being the oldest bank
in the country.
 The post-independence economic scenario forced the Government of India to nationalize
the banks. These banks acted as a major source of institutional support for the Indian
financial system.
 NBFCs occupy a large segment of Indian financial system. They have evolved over age.
Starting from small mutual benefit organizations, today they are there in almost all walks
of life, touching millions of people of the country.
 The most common of them are equipment leasing, hire purchase and housing finance
companies. These companies offer public deposit as well as provide loans to business
houses.
 It has been observed that there were hardly any regulations on these organizations.

 In order to regulate them and protect investors' interests, several committees and groups
were established by the Government of India. Based on the recommendation of these
committees, there have been several liberalization and control steps to make these
organizations more accountable and vibrant.
 The role played by all these leading development banks in the promotion of large scale,
medium, small scale and micro and cotton industries is commendable. The establishment
of these banks has facilitated and supported the promotion of industry.
 By providing the entrepreneurs by means of project assistance, planning, capital
requirements, training, marketing and special assistance to promote exports and imports
finance etc.
 These banks have taken up a variety of new activities as desired by the Govt. of India from
time to time to establish business in production and service sectors.
 The SIDCs are primarily conceived as development institutions they have not built up a
well-developed organizational framework to undertake challenging tasks to develop
small and medium industries as desired by the Central Government.
 To improve their functioning they have to equip with technological competencies to
project guidance and to undertake economic potential surveys to identify new sectors of
development, which can provide more employment. Gaining of such expertise is important

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