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Unit 9: Indian Currency System

Notes
Figure 9.2: Money Supply

Source: http://tablet.idfcmf.com/FundDocuments/Money-Multiplier.pdf

Caselet Indian Financial System: A Young Entrepreneur’s
Dilemmas

his caselet primarily used to understand different constituents of a country’s financial
system– in this case, India’s financial system. Written from the generalised
Texperiences, the case study’s learning outcomes revolve around Subodh Agarwal,
the protagonist of the case study. This helps in debating the changes that occurred in the
Indian financial system after the economic reforms in 1991 through the next decade and
half. This case also enables discussion on the rules and regulations that a start-up company
has to adhere to, both to float the company and also to raise capital.

Indian financial system has undergone a sea change with the ushering in of the economic
reforms in 1991. Vibrancy, vitality and the vigour of financial system to a large extent
reflect and decide the economic health of a country. Rapid growth of the economy and
maturing financial system have perfectly complemented each other, while the regulators
– majorly RBI and SEBI – have kept a tight vigilance fostering balanced growth. The Indian
financial markets are not byzantine compared to the western financial markets, but are
also not as premature as some financial markets in developing nations. Regulators have
done a splendid job in achieving a fine balance, which was well demonstrated by the way
the Indian financial institutions with stood the global financial meltdown.
Self Assessment

Fill in the blanks:
1. India has progressively opened up its marketplaces through economic changes by
…………………… government reins on investment and foreign trade.
2. …………………… designates how much banks are lending out instead of keeping with
themselves.

3. Variations in …………………… will have influence on the money supply.
4. Reserve ratio, currency to deposit ratio, credit-deposit ratio are the factors determining
…………………….

5. Reserve Bank of India makes reserve money via bank assets by increasing ……………………

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