Indian Financial Structure Analysis

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The structure of the Indian financial system was monolithic in nature at the initial stage of economic development. However, over the years it has grown into a developed multilateral wing. It has grown vertically as well as horizontally. The structure of Indian financial system changed in three phases, starting from the pre-1951 phase when Indian economy was underdeveloped. But during the period from 1951to the mid-1980s, significant changes took place such as government control over the financial system, establishment of financial institutions such as IDBI, IFCI, ICICI, NIDC, SIDBI, LIC, UTI and GIC. The post-1990s phase witnessed liberalization and globalization, resulted in economic reforms and responded to a deregulated and globalized economic…show more content…
The growth of financial institutions is an indicator of the economic development of a county. These institutions are largely influenced by prevailing political and economic environments. With the liberalization/deregulation/globalization of the Indian economy, the financial system has undergone massive change in its structure. The changes or evolution in the structure of the Indian financial system can be studied in three phases as follows: Phases Dominance of Sectors or Reforms 1. Pre-1951 phase Private Sector 2. From 1951to the mid1980s phase Public Sector 3. Post-1990s phase Privatization 4.Present Status Globalization 1.Pre-1951 Phase During this phase, the organizations of the Indian financial system had a close resemblance with the financial organization in a traditional economy. The pre-1951 phase was characterized by the following: • Characteristics of Pre-1951 Phase: (i)It had a semi-organized and narrow industrial securities market. (ii)Absolute control of money lenders. (iii)There was no laws and total dominance of private sector. (iv)There were no separate issuing institutions. (v)Main concentration was on traditional agricultural. (vi) Per capita output was low and…show more content…
Nationalization: The beginning of the transfer of ownership from private to government control took place when the RBI was nationalized through the Reserve Bank (Transfer of Public Ownership) Act, 1948, and the entire capital was acquired by the central government. This was followed by the setting up of the State Bank of India by taking over the then Imperial Bank of India in the year 1956. Along with this, six more commercial banks with a deposit base of Rs 50 crores or more were nationalized in 1980 to complete the phase of nationalization of commercial banks. In the same year, 245 life insurance companies were nationalized and merged into state owned LIC. Yet, another measure which deserves mention in this connection was the setting up of the General Insurance Corporation (GIC) in 1972, as a result of the nationalization of general insurance

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