Page 6 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Rupesh Roshan Singh, Lovely Professional University
Unit 1: Indian Financial System

Unit 1: Indian Financial System Notes

CONTENTS
Objectives
Introduction

1.1 Components/Key Elements of Indian Financial System
1.2 Functions of Financial System
1.2.1 Linking Surplus and Deficit Spending Units

1.2.2 Providing Payment System
1.2.3 Managing Risks
1.2.4 Price Information
1.3 Nature and Role of Financial System
1.4 Nature and Role of Financial Instruments

1.5 Summary
1.6 Keywords
1.7 Review Questions

1.8 Further Readings

Objectives

After studying this unit, you should be able to:
 Learn the concept of Indian financial system;

 Explain the key elements related to Indian financial system;
 Discuss the nature and functions of Indian financial system;
 Understand role of financial system and financial instruments;
 Understand components of Indian financial system.

Introduction

The financial system or the financial sector of any country consists of (a) specialized and non-
specialised financial institutions (b) organized and unorganized financial markets and (c) financial
instruments and services which facilitate transfer of funds. Procedures and practices adopted in
the markets and financial interrelationships are also parts of the system. The financial system is
concerned about money, credit, and finance-the terms intimately related, somewhat different
from each other. Money refers to the returned medium of exchange or means of payment. Credit
or loan is a sum of money to be returned normally with interest; it refers to a debt of economic
unit. Finance is monetary resources comprising debt and ownership funds of the state, company
or person. Figure 1.1 shows a typical structure of financial system in any economy.

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