Financial system in India

Elementary – There are three main parts of the financial system in India (A) Central Bank in India- Reserve Bank of India.

(b) Public sector banks in India.

(c) Development Banking in India.

(a) Reserve Bank of India

It was established in the year 1935. Its total capital was Rs 5 crore which was divided into 5 shares of Rs 100 each. It is managed and administered by a central governing board, which consists of a total of 20 members. Its head office is in Mumbai.

Function of Central Bank

Reserve Bank is the central bank in India, so it performs the following functions as a central bank.

(1) note-issue

(2) To act as a Government banker—

(a) Sending money abroad on the orders of the government.

(b) Transfer of Government funds.

(c) Taking government payments and making payments on behalf of the government.

(d) To make arrangements for foreign exchange for the government.

(e) To arrange public debts for the government.

(f) To give loans to the State Governments.

(g) To act as economic advisor to the government.

(h) To act as a representative of the government.

(3) To act as a bank of banks.

(a) Obtaining license for establishment.

(b) Management and Operations.

(c) Allowing branch expansion and branch transfer

(d) to observe.

(e) To check the final accounts.

(f) Keeping liquid funds.

(g) Acting as an ultimate lender.

(h) To act as a clearing house of banks

(i) Works related to winding up and merger.

(j) Establishment of a Banking Development Department for the development of banks.

(4) Credit control.

(5) Foreign exchange arrangement.

(6) Compilation and publication of all data related to the Indian economy.

(b) Public Sector Banks in India

Banks in India perform the following functions in the public sector.

(a) State Bank of India.

(b) Nationalized and other commercial banks.

(c) Co-operative and Land Development Bank.

(d) Regional Rural Bank.

(e) National Bank for Agriculture and Rural Development.

(c) Investment and Development in India

(a) Hesitancy of Indian capital.

(b) Balanced industrial development.

(c) Development of healthy capital market.

(d) Project planning.

(e) To develop small scale industries.

(f) Inability of commercial banks.

(g) Achievement of industrial goals set in a planned economy.