The Indian financial system is comprised of financial institutions, markets, and instruments. Financial institutions like banks mobilize savings from individuals and institutions and lend them out. They are classified as banking or non-banking institutions. Financial markets facilitate the buying and selling of financial claims and services. Capital markets help raise resources through instruments like stocks and bonds. Financial services also emerged to intermediate and facilitate transactions for investors. Overall, the financial system plays a vital role in economic development by encouraging savings and investment, linking savers to investors, and helping with capital formation and risk allocation.

1. INDIAN FINANCIAL
SYSTEM

2. Introduction
Financial System is a set of institutional arrangements through which
financial surpluses in the economy are mobilised from surplus units and
transferred to deficit spenders.
The institutional arrangements include all conditions and mechanisms
governing the production, distribution, exchange and holding of financial
assets or instruments.

3. CLASSIFICATION OF IFS

4. Financial Institutions
• They are business organizations dealing in financial resources.
• They collect resources by accepting deposits from individuals and institutions
and lend them to trade, industry and others.
• Financial institutions mobilize the savings of savers and give credit or finance
to the investors.
On the basis of the nature of activities, financial institutions may be classified as:
1.Banking financial institutions
2. Non-banking financial institutions

5. Financial markets
They are the centres or arrangements that provide facilities for
buying and selling of financial claims and services.
• Financial markets exist wherever financial transactions take place.
Eg- Derivative market and capital market.

6. Financial Instruments and Services
They are used for raising resources for corporate activities
That are used for raising capital through the capital market are known as ‘capital
market instruments’.
Financial Services - The development of a matured financial system in the
country, especially after the early nineties, led to the emergence of a new sector.
Its objective is to intermediate and facilitate financial transactions of
individuals and institutional investors.

7. Features
It plays a vital role in economic development of country
It encourages both savings an investment
It links savers and investors
It helps in Capital formation
It helps in allocation of Risk
It aids in Financial deepening and broadening