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Innovation and creativity evaluation of Apple Corporation EssayEconomic growth and development of any pastoral depends upon a well-knit fiscal system. monetary system comprises, a adjust of sub-systems of pecuniary institutions pecuniary markets, pecuniary instruments and serve which help in the formation of capital. thereof a fiscal system provides a mechanism by which savings are transformed into investments and it can be said that financial system fulfill an significant piece in economic growth of the country by mobilizing surplus funds and utilizing them effectively for productive purpose.The financial system is characterized by the front of integrated, organized and regulated financial markets, and institutions that meet the short term and huge term financial needs of both the household and corporate sphere of influence. Both financial markets and financial institutions play an important role in the financial system by rendering various financial services to th e community. They operate in fuddled combination with all(prenominal) other. monetary SystemThe word system, in the term financial system, implies a set of complex and closely connected or interlined institutions, agents, practices, markets, transactions, claims, and liabilities in the economy. The financial system is concerned about money, credit and finance-the three terms are intimately related up to immediately are somewhat different from each other. Indian financial system consists of financial market, financial instruments and financial intermediation Role/ Functions of fiscal System A financial system performs the following functions* It serves as a link between savers and investors. It helps in utilizing the mobilized savings of scattered savers in more efficient and effective manner. It channelises flow of saving into productive investment. * It assists in the extract of the projects to be financed and also reviews the performance of such projects periodically. * It p rovides payment mechanism for exchange of goods and services. * It provides a mechanism for the transfer of imagings across geographic boundaries.It provides a mechanism for managing and haughty the put on the line involved in mobilizing savings and allocating credit. * It promotes the carry through of capital formation by bringing together the supply of saving and the demand for investible funds. * It helps in operose the cost of transaction and increase returns. Reduce cost motives people to save more. * It provides you detailed information to the operators/ players in the market such as individuals, business houses, G all overnments and so forth Components/ Constituents of Indian Financial system The following are the four main components of Indian Financial system 1.Financial institutions 2. Financial Markets 3. Financial Instruments/Assets/Securities 4. Financial Services. Financial institutions Financial institutions are the intermediaries who facilitates smooth functioni ng of the financial system by making investors and borrowers meet. They mobilize savings of the surplus units and allocate them in productive activities shiny a better rate of return. Financial institutions also provide services to entities seeking advises on various issues ranging from restructuring to diversification plans.They provide whole range of services to the entities who want to raise funds from the markets elsewhere. Financial institutions act as financial intermediaries because they act as middlemen between savers and borrowers. Were these financial institutions may be of Banking or Non-Banking institutions. Financial Markets Finance is a prerequisite for modern business and financial institutions play a vital role in economic system. Its through financial markets the financial system of an economy works. The main functions of financial markets are.To facilitate creation and allocation of credit and liquidity 2. to serve as intermediaries for mobilization of savings 3. to assist process of balanced economic growth 4. to provide financial convenience Financial Instruments Another important constituent of financial system is financial instruments. They represent a claim against the future income and wealth of others. It will be a claim against a person or an institutions, for the payment of the some of the money at a specified future date. Financial ServicesEfficiency of emerging financial system vaingloriously depends upon the quality and variety of financial services provided by financial intermediaries. The term financial services can be defined as activites, benefits and satisfaction connected with sale of money, that offers to users and customers, financial related value. Pre-reforms Phase Until the early nineties, the role of the financial system in India was primarily restricted to the function of channeling resources from the surplus to deficit sectors.Whereas the financial system performed this role reasonably well, its operations came to be attach by some serious deficiencies over the years. The banking sector suffered from lack of competition, low capital base, low Productivity and lavishly intermediation cost. After the nationalization of large banks in 1969 and 1980, the Government-owned banks dominated the banking sector. The role of technology was minimal and the quality of service was not given adequate importance. Banks also did not follow proper risk management systems and the prudential standards were weak.All these resulted in poor asset quality and low profitability. Among non-banking financial intermediaries, development finance institutions (DFIs) operated in an over-protected environment with most of the funding approaching from assured sources at concessional terms. In the insurance sector, there was little competition. The mutual fund industry also suffered from lack of competition and was dominated for dour by one institution, viz. , the Unit Trust of India. Non-banking financial companies (NB FCs) grew rapidly, but there was no regulation of their asset side.Financial markets were characterized by control over pricing of financial assets, barriers to entry, high transaction costs and restrictions on movement of funds/participants between the market segments. This apart from inhibiting the development of the markets also affected their efficiency. Financial Sector Reforms in India It was in this backdrop that wide-ranging financial sector reforms in India were introduced as an integral part of the economic reforms initiated in the early 1990s with a view to improving the macroeconomic performance of the economy.The reforms in the financial sector focused on creating efficient and stable financial institutions and markets. The approach to financial sector reforms in India was one of gradual and non-disruptive progress through a consultatory process. The Reserve Bank has been consistently working towards setting an enabling regulatory framework with prompt and effective sup ervision, development of technological and institutional infrastructure, as well as changing the interface with the market participants through a consultative process.Persistent efforts have been made towards adoption of international benchmarks as appropriate to Indian conditions. While certain changes in the legal infrastructure are yet to be effected, the developments so far have brought the Indian financial system closer to global standards. The reform of the interest regime constitutes an integral part of the financial sector reform. With the onset of financial sector reforms, the interest rate regime has been largely deregulated with a view towards better price discovery and efficient resource allocation.Initially, steps were taken to develop the domestic money market and freeing of the money market rates. The interest rates offered on Government securities were progressively raise so that the Government borrowing could be carried out at market-related rates. In respect of ba nks, a major effort was undertaken to simplify the administered structure of interest rates. Banks now have sufficient flexibility to decide their stay and lending rate structures and manage their assets and liabilities accordingly.At present, apart from savings account and NRE deposit on the deposit side and export credit and small loans on the lending side, all other interest rates are deregulated. Indian banking system operated for a long time with high reserve requirements both in the form of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). This was a consequence of the high fiscal deficit and a high degree of monetisation of fiscal deficit. The efforts in the recent period have been to lower both the CRR and SLR.The statutory token(prenominal) of 25 per cent for SLR has already been reached, and while the Reserve Bank continues to pursue its medium-term objective of reducing the CRR to the statutory minimum level of 3. 0 per cent, the CRR of SCBs is currently di ctated at 5. 0 per cent of NDTL. As part of the reforms programme, due attention has been given to diversification of ownership leading to greater market accountability and amend efficiency. Initially, there was infusion of capital by the Government in public sector banks, which was followed by expanding the capital base with equity participation by the undercover investors.This was followed by a reduction in the Government shareholding in public sector banks to 51 per cent. Consequently, the share of the public sector banks in the aggregate assets of the banking sector has come come out from 90 per cent in 1991 to around 75 per cent in2004. With a view to enhancing efficiency and productivity through competition, guidelines were laid down for establishment of new banks in the private sector and the foreign banks have been allowed more liberal entry. Since 1993, twelve new private sector banks have been set up.As a major step towards enhancing competition in the banking sector, f oreign direct investment in the private sector banks is now allowed up to 74 per cent, subject to conformity with the guidelines issued from time to time. Conclusion The Indian financial system has undergone structural transformation over the past decade. The financial sector has acquired strength, efficiency and constancy by the combined effect of competition, regulatory measures, and policy environment. While competition, consolidation and convergence have been recognized as the key drivers of the banking sector in the coming years