Economy Chapters

1. Economy and Economics2. Characteristics of Indian Economy3. Agriculture and Land Development4. National Income5. Planning6. Unemployment7. Trade and Commerce8. New Economic Policy9. Indian Financial System10. Indian Fiscal System11. Banking in India12. Tax System13. Industry14. Foreign Trade15. Glossary of Economic and Financial Terms16. Some Noteworthy Facts17. Socio Economic and Caste Census 2011

Indian Financial System

The Indian Financial System is the set of institutions, instruments, and markets that facilitate the transfer of funds from savers to borrowers, supporting economic growth.

Definition

The Indian Financial System comprises financial institutions, financial markets, financial instruments, and financial services that enable the flow of funds in the economy.

Components of Financial System

  • Financial Institutions: Banks, Non-Banking Financial Companies (NBFCs), Insurance Companies, Mutual Funds.
  • Financial Markets: Capital Market, Money Market, Foreign Exchange Market.
  • Financial Instruments: Shares, Debentures, Bonds, Treasury Bills, Commercial Papers.
  • Financial Services: Credit rating, Portfolio Management, Underwriting, Leasing.

Functions of Financial System

  • Mobilization of savings and channeling them into productive investments.
  • Facilitation of payments and settlements.
  • Provision of liquidity to investors.
  • Risk management through insurance and hedging instruments.
  • Efficient allocation of resources in the economy.

Previous Year Questions

  • SSC CGL 2020: What is the main function of the financial system?
  • Mobilization of savings and channelizing them into investments.
  • HSSC 2021: Name one component of the financial system.
  • Financial Institutions.
  • RRB JE 2019: Which market deals with short-term funds?
  • Money Market.
  • SSC CHSL 2021: Define capital market.
  • Market for long-term funds and securities like shares and debentures.
  • HSSC 2020: What are financial instruments?
  • Documents representing claims on assets like shares and bonds.
  • SSC MTS 2020: Name a financial service provided by the financial system.
  • Credit rating.
  • RRB NTPC 2021: What role do NBFCs play?
  • Providing financial services similar to banks but without banking license.
  • SSC GD 2019: What is liquidity in financial markets?
  • Ease with which assets can be converted to cash.
  • HSSC 2019: Name a primary financial institution in India.
  • Reserve Bank of India (RBI).
  • SSC CGL 2021: What is the function of insurance companies in the financial system?
  • Providing risk coverage and financial security.
  • RRB JE 2020: What is a treasury bill?
  • Short-term government securities for borrowing.
  • SSC MTS 2019: Define underwriting.
  • Guaranteeing the purchase of securities issued by companies.
  • HSSC 2021: What is the role of mutual funds?
  • Pooling investors’ money to invest in diversified securities.
  • SSC CHSL 2020: Which body regulates the Indian financial system?
  • Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI).
  • RRB NTPC 2019: What is the difference between primary and secondary markets?
  • Primary market issues new securities; secondary market trades existing securities.
  • SSC GD 2021: What is portfolio management?
  • Managing investments to meet specific financial goals.
  • HSSC 2020: Name one money market instrument.
  • Commercial Paper.
  • SSC CGL 2019: What is the role of the financial system in economic development?
  • Efficient allocation of resources and mobilization of savings to boost growth.
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