Indian Financial System Notes
Subject Overview
Indian Financial System surveys the structure, institutions, markets and services that make up India's financial ecosystem — the regulatory framework and reforms, commercial/
Subject at a glance
4
Units
35
Topics
4
Credits
4
Infographics
Unit-wise Syllabus
4 units — open any unit for detailed topic-wise notes, diagrams and important exam questions
- Meaning
- nature
- scope
- role
- functions and components of the financial system
- evolution and growth of the Indian financial system
- regulatory framework
- overview of financial sector reforms in India
Financial institutions
Banks, NBFCs, insurers
Financial markets
Money, capital, forex, derivatives
Financial instruments
Bills, bonds, shares
Financial services
Merchant banking, rating, leasing
Regulators
RBI, SEBI, IRDAI, PFRDA
Study guide
This unit covers the meaning, nature, scope, role and functions of the financial system, its evolution in India, the regulatory framework and financial sector reforms. Learn the roles of the RBI, SEBI, IRDAI and PFRDA.
- Meaning
- structure
- role and functions of commercial banks
- co-operative banks
- non-banking financial institutions
- insurance companies
- mutual funds and depositories
Commercial banks
Deposits and loans
Co-operative banks
Member-owned
NBFCs
Lending without full banking licence
Insurance companies
Life and general
Mutual funds
Pooled investment
Study guide
You study financial institutions: commercial and co-operative banks, NBFCs, insurance companies, mutual funds and depositories. Compare banks and NBFCs in a table.
- Structure
- role and functions of the Indian money market
- capital market
- debt
- equity
- derivatives and forex markets
- treasury bills
- commercial bills
- certificates of deposit
- gilt-edged securities
- equity/preference shares
- forwards
- futures
- options and swaps
Maturity
Up to one year
More than one year
Instruments
T-bills, CPs, CDs, call money
Shares, debentures, bonds
Purpose
Short-term liquidity
Long-term investment
Regulator
RBI
SEBI
Study guide
You study the money, capital, debt, equity, derivatives and forex markets, and instruments from treasury bills and commercial bills to certificates of deposit, gilts, shares, forwards, futures, options and swaps. Learn which instrument belongs to which market.
- Merchant banking's role in issue management
- credit rating agencies — role
- functions and regulatory framework
- stock brokerage types and regulation
- leasing
- hire-purchase and financial guarantees
AAA
Highest safety
Lowest
AA, A
High to adequate safety
Low
BBB
Moderate safety
Moderate: lowest investment grade
BB and below
Speculative to default
High
Study guide
You study financial services: merchant banking, credit rating agencies, stock broking, leasing, hire purchase and financial guarantees. Understand the role of a merchant banker in an IPO.
Why Indian Financial System Matters
The financial system is how money moves in the economy, and this paper is the foundation for careers in banking, broking, insurance and fintech, and for banking and NET exams.
How to Prepare for Indian Financial System
- Prepare a chart of regulators and what each regulates.
- Follow the money market and RBI announcements.
- Learn derivative instruments with simple numerical examples.
Indian Financial System: Frequently Asked Questions
Who regulates the Indian financial system?
The RBI regulates banks and money markets, SEBI regulates securities markets, IRDAI regulates insurance and PFRDA regulates pensions.