How Financial Institutions works in India?

First let’s understand — What is a Financial Institution?

A financial system consists of financial institution, financial market and financial instrument. The mix of financial institutions, financial market financial instrument called it financial structure. Commercial Bank, Development financial institutions, Mutual funds, Insurance company, Investment companies, and Stock exchanges are part of the formal financial system, which is India regulated by the securities and exchange board of India and the Reserve bank of India. Commercial Bank, which is also include foreign bank and private bank are the predominant segment. Co-operative banks, which are organized on the UNIT banking principle, are mainly rural based although there are urban co-operative banks also operative in urban areas.

Additionally NBIFS, government owned post office also mobilizes deposits, but they do not undertake landing activity. Besides, there is an extensive network of all India and state development banks catering to agriculture, industry, housing and exports. Also there exists several financial institutions like UTI, LIC, GIC and its subsidiaries mutual fund, investment and loan companies and equipment leasing and hire purchase companies, that are engaged in mobilizing resources and providing financial services in medium as well as long term investment. The National Bank for Agriculture and Rural Development (NABARD), the Industrial Bank of India (IDBI), Export-Import Bank (EXIM) and the National Housing Bank (NHB) has been established to serve as apex banks in their specific area of responsibilities and concern. The four important term-lending institution namely IDBI (Which was converted in to commercial bank) ICICI (which was merge with ICICI Bank) IFCI (which has ceased operation) and IRBI dominate the term –landing market and provide medium and long term — financial assistance to corporate sector.

Much progress has given rise to a variety of industrial organization such as a financial institutions like IDBI ,IFCI, ICICI , IRBI, STCI, LIC, GIC, SCICI, HUDCO, NHB, as well as state level institution work.

Some important roles of a Financial Institution in India:

1. It accelerates the rate and volume of saving provision of various financial instruments.
2. It helps economic development and raising the standard of living the people.
3. It helps to promote the development of weaker section of the society through rural development banks and co-operative societies.
4. It protects the interest of investors and ensures smooth financial transaction through regularity bodies such as RBI, SEBI etc.
5. It helps corporate customer to make better financial decision by providing effective financial as well as advisory service.

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