Thursday, February 27, 2014

Organizational structure of the Indian Financial System

Organizational structure of the Indian Financial System

The economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and household sector.  While performing their activities these units will be placed in a surplus/deficit/balanced budgetary situations.
There are areas or people with surplus funds and there are those with a deficit.  A financial system or financial sector functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit.  A Financial System is a composition of various institutions, markets, regulations and laws, practices, money manager, analysts, transactions and claims and liabilities.

The structure of the Indian financial system may be summarized in the following way:
Broadly the Indian Financial System may be divided into organized and unorganized segments.
The organized market consist of :-
1. commercial banks,
2. developmental banks,
3. co-operation bank,
4. post banks,
5. office saving banks,
6. stock marketing etc.

Unorganized marketing operations consist of:
1. Hundies,
2. Money lending,
3. Chit funds etc.

They operate mainly in rural areas also unrecognized money market activity are quite significant.
There is no precise estimate of the size of the generally expected that the estimate of the size of the unorganized money market transactions would decline over time.  As per the figure the Indian financial system consist of an impressive network of banks and financial institutions and a wide range of financial instruments. There has been a considerable unending and deeding of the Indian financial system, participation the as tow decades.
Banking operations in India are controlled by the Reserve Bank of India (which, as we have instructed is also the official central banks of government). The primary role of RBI is to maintain a monetary equilibrium balance in the economy by formulating various policies from time to time and contradictory the financial instrument of the economy.
The balance sheet identifies for the RBI is as follows:
“Monetary liabilities (ML) + Non monitorial liabilities (NML) = Financial assets (FA) + other assets”.
If net Non Monetary liabilities (NNML) = NML - other assets.
Then the ML = FA - NNML. The monetary liabilities of RBI are also called as Reserve Monetary.