Importance Of Financial System

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The development and economic growth of any country depends upon a well-structured financial system, which helps in the formation of a capital. Financial System is a set of institutional arrangements through which financial surpluses in the economy are mobilised from surplus units and transferred to deficit spenders. The institutional arrangements include all conditions and mechanisms governing the production, distribution, exchange and holding of financial assets or instruments of all kinds and the organisations as well as the manner of operations of financial markets and institutions of all descriptions. The financial system is characterised by the presence of integrated, organized and regulated financial markets and institutions that meet…show more content…
Promotion of liquidity: The major objective of financial system is the provision of money and monetary assets for the production of goods and services. There should not be any shortage of money for productive ventures. 2. Link between savers and investors: One of the important objectives of financial system is to link the savers and investors and thereby helps in mobilizing and allocating the savings effectively and efficiently. By acting as an efficient medium for allocation of resources, it permits continuous upgradation of technologies for promoting growth on a sustained basis. 3. Information available: It provides price- related information which is a valuable assistance to those who need economic and financial…show more content…
The larger the number of near-money assets, the more developed is the money market. 5. Integrated Interest-Rate Structure: Another important characteristic of a developed money market is that it has an integrated interest-rate structure. The interest rates prevailing in the various sub-markets are integrated to each other. A change in the bank rate leads to proportional changes in the interest rate prevailing in the sub-markets. 6. Adequate Financial Resources: A developed money market has easy access to financial sources from both within and outside the country. In fact, such a market attracts adequate funds from both sources, as is the case with the London Money Market. 7. Remittance Facilities: A developed money market provides cash and cheap emittance facilities for transferring funds from one market to the other. The London Money Market provides such remittance facilities throughout the world. 8. Miscellaneous Factors: Besides the above noted features, a developed money market is highly influenced by such factors as restrictions on international transactions, crisis, boom, depression, war, political instability,
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