1. What is a Financial System?
The term financial system encompasses the institutions, the financial markets, market participants,
financial instruments and a host of financial services, rules and procedures and the market
regulator.
In simple terms Financial System is an institutional framework existing in a country to enable
financial transactions & intermediation of funds.
State the Functions of Financial system.
The main function of Financial system is the collection of savings and their distribution for
industrial investment, thereby stimulating the capital formation and, accelerating the
process of economic growth.
The process of capital formation involves three distinct, inter related activities. They are
* Savings * Finance and * Investments
The volume of capital formation to economic development depends upon the effective
mobilisation of savings, the efficiency of the financial organisation /system and the
channelisation of these savings into the most desirable forms of investment.
An overview of Indian Financial System
