Indian Financial System - Overview
The Indian Financial System is the backbone of our country's economy. It acts as a bridge between people who save money and people who need money for business. The system helps move funds from 'surplus units' (savers) to 'deficit units' (investors). This process is called financial intermediation. Without this system, it would be very hard for companies to build factories or for people to buy houses.
Concepts (3)
FSDC is a high-level body set up by the government. It is not a statutory body (not created by a specific law). Its main job is to maintain financial stability and coordinate between different regulators like RBI and SEBI.
FSDC is a high-level body set up by the government. It is not a statutory body (not created by a specific law). Its main job is to maintain financial stability and coordinate between different regulators like RBI and SEBI. It also focuses on financial literacy and inclusion. The Union Finance Minister is its Chairperson. It helps in 'macroprudential supervision', which means looking at the big picture of the economy to spot risks.
This is a critical function of the Central Bank (RBI). When a commercial bank faces a sudden 'liquidity crisis' (runs out of cash to pay depositors) and cannot borrow from anywhere else, the RBI steps in.
This is a critical function of the Central Bank (RBI). When a commercial bank faces a sudden 'liquidity crisis' (runs out of cash to pay depositors) and cannot borrow from anywhere else, the RBI steps in. The RBI provides funds to keep the bank running. This prevents a panic among the public. Note: This support is for banks, not for private companies or trade bodies. Example: During a financial panic, if Bank A cannot get a loan from Bank B, it goes to the RBI.
The Money Market handles short-term lending and borrowing, usually for a period of up to one year. It deals with instruments like Treasury Bills. The Capital Market is for long-term funds, usually for more than one year.
The Money Market handles short-term lending and borrowing, usually for a period of up to one year. It deals with instruments like Treasury Bills. The Capital Market is for long-term funds, usually for more than one year. It includes the Stock Market (shares) and the Bond Market (debt). Example: A 91-day Treasury Bill is a money market tool, while a 10-year Government Bond is a capital market tool.
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Start Lesson: FSDC (Financial Stability and Development Council)