INDIAN FINANCE SYSTEM
Savings mobilization and promotion of investment are functions of the stock and capital markets, which are a part of the organized Finance system in India. The objective of all economic activity is to promote the well being and standard of living of the people, which depends on the income and distribution of income in terms of real goods and services in the economy. The production of output, which is vital to the growth process in the economy, is a function of the many inputs used in the productive process. These inputs are material inputs (in the form of physical materials, viz., raw materials, plant, machinery, etc.), human inputs (in the form of labor and enterprise) and Finance inputs (in the form of capital, cash and credit). The easy availability of Finance inputs promotes the growth process through proper coordination between human and material inputs.
The Finance inputs emanate from the Finance system, while real goods and services are part of the real system. The interaction between the real system (goods and services) and the Finance system (money and capital) is necessary for the productive process. Trading in money and monetary assets constitute the activity in the Finance markets and are referred to as the Finance system.Finance System: The term “liquidity” is used to refer to cash, money and nearness to cash. Money and monetary assets are traded in the Finance system. Thus, provision of liquidity and trading in liquidity are the major functions of the Finance system. While cash creation is the function of the RBI, banks do credit creation and Finance institutions including the RBI, banks and term-leading institutions, deal in claims on money or monetary assets.
These institutions are all a part of the Finance system. Sector-wise, government and business sectors are the major borrowers whose investment is always greater than savings. On the other hand, in India the household and foreign sectors are the net savers, with savings exceeding investment. The Finance system provides the intermediation between investors and helps the process of specialization and sophistication in the Finance infrastructure, leading to greater Finance development that is prerequisite for faster economic development.
Savings mobilization and promotion of investment are functions of the stock and capital markets, which are a part of the organized Finance system in India. The objective of all economic activity is to promote the well being and standard of living of the people, which depends on the income and distribution of income in terms of real goods and services in the economy. The production of output, which is vital to the growth process in the economy, is a function of the many inputs used in the productive process. These inputs are material inputs (in the form of physical materials, viz., raw materials, plant, machinery, etc.), human inputs (in the form of labor and enterprise) and Finance inputs (in the form of capital, cash and credit). The easy availability of Finance inputs promotes the growth process through proper coordination between human and material inputs.
The Finance inputs emanate from the Finance system, while real goods and services are part of the real system. The interaction between the real system (goods and services) and the Finance system (money and capital) is necessary for the productive process. Trading in money and monetary assets constitute the activity in the Finance markets and are referred to as the Finance system.
Finance System: The term “liquidity” is used to refer to cash, money and nearness to cash. Money and monetary assets are traded in the Finance system. Thus, provision of liquidity and trading in liquidity are the major functions of the Finance system. While cash creation is the function of the RBI, banks do credit creation and Finance institutions including the RBI, banks and term-leading institutions, deal in claims on money or monetary assets.
These institutions are all a part of the Finance system. Sector-wise, government and business sectors are the major borrowers whose investment is always greater than savings. On the other hand, in India the household and foreign sectors are the net savers, with savings exceeding investment. The Finance system provides the intermediation between investors and helps the process of specialization and sophistication in the Finance infrastructure, leading to greater Finance development that is prerequisite for faster economic development.
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