» Indian Financial System is a system in which People, Financial Institutions, Banks, Industrial Companies and the Government demand for fund and the same is supplied to them.
» There are two parts of Indian Financial System-first demand side and second supply side. The representative of demand side can be Individual investor, Industrial and Business Companies, Government etc. and the representative of supply side will be Banks, Insurance Companies, Mutual Fund and other Financial Institutions.
» The Indian financial system, which refers to the borrowing and lending of funds or to the demand for and supply of funds of all individuals, institutions, companies and of the Government consists of two parts, viz., the Indian money market and the Indian capital market.
» The Indian money market is the market in which short-term funds are borrowed and lent. The capital market in India, on the other hand, is the market for medium-term and long-term funds.
» The Indian financial system performs a crucial role in economic development of India through saving-investment process, also known as capital formation.
» The financial system is, commonly, classified into: (a) Industrial finance, (b) Agricultural finance, (c) Development finance and (d) Government finance.
» Devaluation means lowering the official value of the local money in terms of foreign currency or gold.
» Balance of Payments (BOP) is a systematic record of all the economic transactions between one country and the rest of the world in a given period.
» Balance of Trade (BOT) is the difference between the value of goods exported and the value of goods imported per annum. Services not included in BOT.
» BOP is divided in current account and capital account.
» EXIM Policy 2000-01 introduced Special Economic Zones Scheme (SEZ).
» 1994-95, Indian Rupee was made fully convertible on current account.
» Fiscal Policy is the policy relating to public revenue and public expenditure and allied matters.
» Usually, the Indian money market is classified into organised sector and the unorganised sector.
» The unorganised sector consists of indigenous bankers including the non-banking financial companies (NBFCs). Besides, these two, there are many sub-markets in the Indian money market.
» The organised banking system in India can be broadly divided into three categories, viz., the central bank of the country known as the Reserve Bank of India, the commercial banks and the co-operative banks which includes private sector and public sector banks and also foreign banks.
» The highest financial institution in organized sector is Reserve Bank of India and in addition to this Banks of Public Sector, Banks of Private Sector, Foreign Banks and other financial institutions are also part of organized sector.
» The Reserve Bank of India regulates and controls the money of the country.
» The RBI was established under the Reserve Bank of India Act, 1934 on 1st April, 1935 with a capital of Rs. 5 crore. It was nationalised on 1st January, 1949; on the recommendation of Parliamentary Committee in 1948. It is the Central Bank of India.
» The Reserve Bank of India is the supreme monetary and banking authority in the country and has the responsibility to control the banking system in the country. It keeps the reserves of all commercial banks and hence is known as the "Reserve Bank". Its financial year is 1st July to 30th June.