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    Structure of Ifs

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    Tanima Dey
    The document summarizes the structure and evolution of the Indian financial system in 3 phases: 1) Prior to 1951 - Characterized by unplanned economic development with closed industrial entrepreneurship and a lack of financing options. 2) 1951 to the mid-1980s - A period of planned economic growth led by the government. Many new public financial institutions were established. 3) Post-early 1990s - A transition to a more liberalized, globalized, and deregulated system in response to policy reforms. The structure of the Indian financial system became more aligned with other developed countries.

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    Structure of Ifs

    Uploaded by

    Tanima Dey
    21 views2 pages
    The document summarizes the structure and evolution of the Indian financial system in 3 phases: 1) Prior to 1951 - Characterized by unplanned economic development with closed industrial entrepreneurship and a lack of financing options. 2) 1951 to the mid-1980s - A period of planned economic growth led by the government. Many new public financial institutions were established. 3) Post-early 1990s - A transition to a more liberalized, globalized, and deregulated system in response to policy reforms. The structure of the Indian financial system became more aligned with other developed countries.

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    structure of ifs

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    The document summarizes the structure and evolution of the Indian financial system in 3 phases: 1) Prior to 1951 - Characterized by unplanned economic development with closed industrial entrepreneurship and a lack of financing options. 2) 1951 to the mid-1980s - A period of planned economic growth led by the government. Many new public financial institutions were established. 3) Post-early 1990s - A transition to a more liberalized, globalized, and deregulated system in response to policy reforms. The structure of the Indian financial system became more aligned with other developed countries.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    21 views2 pages

    Structure of Ifs

    Uploaded by

    Tanima Dey
    The document summarizes the structure and evolution of the Indian financial system in 3 phases: 1) Prior to 1951 - Characterized by unplanned economic development with closed industrial entrepreneurship and a lack of financing options. 2) 1951 to the mid-1980s - A period of planned economic growth led by the government. Many new public financial institutions were established. 3) Post-early 1990s - A transition to a more liberalized, globalized, and deregulated system in response to policy reforms. The structure of the Indian financial system became more aligned with other developed countries.

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    © All Rights Reserved
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    of 2

    35

    FINANCIAL SYSTEM

    investors purchase securities directiy iO


    Lower Risk: The degree of risk becomes very high if Financial intermediaries
    market, because the absence of diversification of securities.
    the financial and
    risk of capital depreciation pox
    diversity investments widely and it results in reducing the
    dividends.
    To invest in financial markets, one has to acquire skill, knowledge, training
    Evpert Management: deficiencies by
    in the field of investment. Large investors can identify most
    and experiene due to financial
    eperts.
    engaging experts. But avail different types of facilities
    small investors cannot
    engaging demonstrate a
    itations. The professional managers of financial intermediaries can
    and other limita
    investors in the
    superiorpertormance to that of the individual investors, They place the small
    investors.
    same position in the matter of
    expert management as large institutional
    Economies to
    6. intermediaries
    Scale
    : provide economies of scale to investors. Financia
    Indirect securities
    are continuously buying and selling primary securities, so economies or o e

    not available to borrovwer or to an individual saver but are available to financial intermediaries.
    Ultimately they exploit economies of scale in lending and borrowing.
    economic
    Channelisation ot Savings : Financial intermediaries play a crucial role in the
    development by directing savings in tune with development priorities. They are directing
    individual savings into investments which are more favourable to economic development
    whereby
    They are acting as sponsoring, encouraging or discriminating among various industries
    sectoral balance is attected. These specialised institutions keep up mobilisation of savings
    uninterrupted with foreign exchange by channelising the funds obtained from international agencies
    ike World Bank and International Finance Corporation.

    19 Structure of Indian Financial System


    Before independence different private institutions invested their money in industries and business
    enterprises. Private ownership firms dominated that period. Financial system was mostly
    as there was no control of government. Control over financial sectors introduced after
    unorganised
    Reserve Bank of India Act was passed in 1935.
    In the post-independence period, reconstruction of industry and setting up of new industry were
    Spedally emphasised During the 1st and 2nd five-year plan development financial institutions
    on.
    were set-up to assist the industries more at the initiative of the government. Among these institutions
    IFCI, IDBI,ICICI are notable. In 1964, Unit Trust of India was established to invest the money from the
    Small and medium savers in igh income institutions. In 1956, Life Insurance Corporation of India
    was nationalised for the expansion of insurance business. In 1972, General Insurance Corporation of
    India was nationalised for the expansion of general insurance business. In banking sector, Banking
    Regulation Act was passed in 1949. In 1956 and 1957, Reserve Bank of India Act was amended. In
    1969, commercial banks were nationalised to get public confidence in banking system.
    After 1991, reforms of financial system was started in India. For the internal reforms of different
    public sectors, Narasimham Committee headed by ex-governor of Reserve Bank of India was formed.
    In 1992, Securities Exchange Board of India (SEBI) was set-up for maintaining transparency of
    transactions in stock market and protection of investors. For the control and development of insurance
    business IRDA was established in 1999. Private institutions were allowed in insurance and banking
    business. Controlling rules and regulations of foreign exchange have been made flexible to encourage
    foreign exchange, rules offoreign export have been changed, licencing system has been abolishedin
    many cases. So, structural changes of Indian financial system came up.
    36 INDIAN FINANCIAL SYSTEM

    ne evolution of the Indian financial svstem., from the viewpoint of exposiion mayoe aivided
    three phases:
    nase l:Up to 1951, i.e., on the eve of the initiation of planned economic development ha_b
    taken. The main features of Pre-1951 industrial financing organisations were-(a) closed-ci-
    ardcter ot industrial entrepreneurship, (b) lack of issue houses, (c) restricted access or indust
    tO Outside
    savings, (d) low rate of industrial growth, and (e) lack of new entrepreneurship
    Acruaiuy pre-1951 phase of the Indian financial system was characterised by unplanned econon
    development.
    2. Phase I
    : Between 1951 and the mid-eighties i.e. the imperatives of
    by government. The mixed economy model had a planned
    economic
    was initiated grow
    evolution of the second significant bearing th=
    on
    phase of Indian financial system. Government controls over the
    system was the main highlight
    of this finania
    phase.
    During this phase many new financial institutions were established like IFCI, IDBI,
    and NABARD. ICICI, SFC=
    3. Phase III After early nineties
    :
    responding to the requirements of liberalised, globalised and
    deregulated economic environment with the introduction of the new industrial
    in India since the
    beginning of the nineties the organisation and structure of policy
    Indian
    resolution
    finandal
    system underwent a significant transformation. In 1999, Insurance
    Authority Act was passed to allow private sector, insurance Regulatory Development
    and
    business in India. Many private sectors banks were companies to enter into insurance
    established during this phase.
    Like any other
    developed countries, the structure of Indian financial system more or less
    same. Indian financial the
    system comprises also of main five components (a)
    institutions, (b) Indian financial markets, () Indian financial Indian financal
    services, and (e) Indian financial market regulators. instruments, (d) Indian financial

    20 Financial Institutions of India


    Financial institutions in the structure of Indian financial system a r e - () intermediary banking
    institutions, (2) non-banking intermediary institutions, (3) non-depository financial incties
    and (4) other financial institutions.

    20.1 Intermediary Banking Institutions


    Reserve Bank of India is at the top of Indian banking system. Besides scheduled
    commerdal
    31st March, 2013 are
    1. Public sector banks are 26. Among these nationalised banks are 20 and State Bankads
    its associate banks are 6. of In
    2. Private sector banks are 20. Among these old private banks are 13 and new privaeh
    3. Foreign banks are 43. banks
    4. Regional rural banks are 50.
    5. Among scheduled cooperative banks, urban cooperative banks 32 and sta
    fative
    are 50.
    Besides these above mentioned banks, there are (a) exchange banks, (b) sav
    office savings banks, and (d) land development banks.

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