Financial

Markets &
Institutions
DR ASHNEET KAUR
A financial system (within the scope of finance) is a system
that allows the exchange of funds between lenders,
investors, and borrowers.
Financial systems operate at national, global, and firm-
specific levels.
They consist of complex, closely related services, markets,
and institutions intended to provide an efficient and regular
linkage between investors and depositors.
Money, credit, and finance are used as media of exchange in
financial systems.
Components of Financial System
Financial Markets

Financial Services

Financial Institutions

Financial Instruments
Financial System
Savers of Thus financial system may be defined as “a set of
Money markets and institutions to facilitate the exchange of
assets and risks.”

Efficient functioning of the financial system

enables proper flow of funds from investors to
productive activities which in turn facilitates
investment
Users of
Money
Objectives of the financial system

To create a structured payment system

To give money the time value as it deserves

To reduce risks and compensate for the same through offering products and
services
To enable the most efficient economic resource allocation 

To maintain market stability in the economic sector

Components of Financial System
Financial Markets
Financial markets are the centre that facilitate buying and selling of financial instruments, claims or
services.

It caters the credit needs of the individuals, firms and institutions.

It deals with the financial assets of different types such as currency deposits, cheques, bills, bonds etc.

It is defined as a transmission mechanism between investors and the borrowers through which transfer
of funds is facilitated.

It consists of individual investors, financial institutions and other intermediaries who are linked by a
formal trading rules and communication network for trading the various financial assets and credit
instruments
•Financial markets refer broadly to any marketplace
where the trading of securities occurs.
•There are many kinds of financial markets, including
(but not limited to) forex, money, stock, and bond
markets.
•These markets may include assets or securities that are
either listed on regulated exchanges or else trade over-
the-counter (OTC).
•Financial markets trade in all types of securities and are
critical to the smooth operation of a capitalist society.
•When financial markets fail, economic disruption
including recession and unemployment can result.
Indian Financial System

The Financial From 1951- Mid From 1990

Sytem Upto Eightees onwards
1951