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Introduction
A financial system means the structure that is available in an economy to mobilize the capital from various surplus sectors of the economy and allocate and distribute the same to the various needy sectors.
The transformation of Savings into Investments and Consumption is facilitated by the active role played by the financial system. The process of transformation is aided by various types of financial assets suiting the individual needs and demands of both the investors and spenders. The offering of these diverse types of financial assets is supported by the role of financial intermediaries who invariably intermediate between these two segments of investors and spenders. Examples of intermediaries are banks, financial institutions, mutual funds etc. The place where these activities take place could be taken to connote financial market.
3. Management of Government debt 4. Banker to government 5. Lender of last resort to banks 6. Regulating money markets through monetary instruments
Commercial Banks
Commercial Banks include public sector banks, foreign banks and private sector banks. Acceptance of deposits from the public for the purpose of lending or investment is the main area of activity.
NBFCs
NBFCs are allowed to raise monies as deposits from the public and lend monies through various instruments including leasing, hire purchase and bill discounting etc. These are licensed and supervised by the Central Banking Authority. Central Bank prescribes that no NBFC can operate without a valid license from the Central Banking Authority.
Primary Dealers
Primary Dealers are known as PDs. They deal in government securities and deal in both the primary and secondary markets. Their basis responsibility is to provide markets for government securities and strengthen the government securities market.
Cooperative Banks
These are allowed to raise deposits and give advances from and to the public. Urban Cooperative Banks are controlled by state governments and RBI, while other cooperative are controlled by NABARD and State Governments. Except for certain exemptions in paying a higher interest on deposits, the Urban Cooperative Banks regulatory framework is similar to the other banks.
4. Banker to government: Most of the Central Banks maintain an account, government deposit and carry out their cash management through the issue of bonds and treasury bills. 5. Lender of last resort to banks: The Central bank provides liquidity support on a temporary basis through the facility of repurchase (REPO) of securities to banks to meet their short term liquidity requirements. 6. Regulating money markets through monetary instruments (CRR. SLR, BANK RATE , REPO RATE)
Pensions
Framing rules for pension funds Regulating all pension funds