UNIT -1

INTRODUCTION
Financial service is an essential segment of financial system. Financial services are
the foundation of a modern economy. The financial service sector is indispensable for the
prosperity of a nation.
MEANING OF FINANCIAL SERVICES
Financial services may be defined as the products and services offered by financial
institutions for the facilitation of various financial transactions and other related activities
INDIAN FINANCIAL SYSTEM
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.
A modern financial system may include banks (operated by the government or private
sector), financial markets, financial instruments, and financial services. Financial systems
allow funds to be allocated, invested, or moved between economic sectors.
DEFINITION OF FINANCIAL SYSTEM
Financial system may be defined as “a set of markets and institutions to
facilitate the exchange of assets and risks.”
FUNCTIONS OF FINANCIAL SYSTEM
The financial system of a country performs certain valuable functions for the
economic growth of that country. The main functions of a financial system may be briefly
discussed as below,
1. Saving function: An important function of a financial system is to mobilise savings and
channelize them into productive activities. It is through financial system the savings are
transformed into investments.
2. Liquidity function: The most important function of a financial system is to provide money
and monetary assets for the production of goods and services. Monetary assets are those
assets which can be converted into cash or money easily without loss of value. All activities
in a financial system are related to liquidity-either provision of liquidity or trading in
liquidity.
3. Payment function: The financial system offers a very convenient mode of payment for
goods and services. The cheque system and credit card system are the easiest methods of
payment in the economy. The cost and time of transactions are considerably reduced.
4. Risk function: The financial markets provide protection against life, health and income
risks. These guarantees are accomplished through the sale of life, health insurance and
property insurance policies.
5. Information function: A financial system makes available price-related information. This
is a valuable help to those who need to take economic and financial decisions. Financial
markets disseminate information for enabling participants to develop an informed opinion
about investment, disinvestment, reinvestment or holding a particular asset.
6. Transfer function: A financial system provides a mechanism for the transfer of the
resources across geographic boundaries.
7. Reformatory functions: A financial system undertaking the functions of developing,
introducing innovative financial assets/instruments services and practices and restructuring
the existing assts, services etc, to cater the emerging needs of borrowers and investors
(financial engineering and re engineering).
8. Other functions: It assists in the selection of projects to be financed and also reviews
performance of such projects periodically. It also promotes the process of capital formation
by bringing together the supply of savings and the demand for investible funds.
Role and Importance of Financial System in Economic Development
1. It links the savers and investors. It helps in mobilizing and allocating the savings
efficiently and effectively. It plays a crucial role in economic development through
saving-investment process. This savings – investment process is called capital
formation.
2. It helps to monitor corporate performance.
3. It provides a mechanism for managing uncertainty and controlling risk.
4. It provides a mechanism for the transfer of resources across geographical boundaries.
5. It offers portfolio adjustment facilities (provided by financial markets and financial
intermediaries).
6. It helps in lowering the transaction costs and increase returns. This will motivate
people to save more.
7. It promotes the process of capital formation.
8. It helps in promoting the process of financial deepening and broadening. Financial
deepening means increasing financial assets as a percentage of GDP and financial
broadening means building an increasing number and variety of participants and
instruments.
 In short, a financial system contributes to the acceleration of economic development.
It contributes to growth through technical progress.
CHARACTERISTICS OR NATURE OF FINANCIAL SERVICES
From the following characteristics of financial services, we can understand their
nature,
1. Intangibility: Financial services are intangible. Therefore, they cannot be
standardized or reproduced in the same form. The institutions supplying the financial
services should have a better image and confidence of the customers. Otherwise, they
may not succeed.
2. Inseparability: Both production and supply of financial services have to be
performed simultaneously. Hence, there should be perfect understanding between the
financial service institutions and its customers.
3. Perishability: Like other services, financial services also require a match between
demand and supply. Services cannot be stored. They have to be supplied when
customers need them.
4. Variability: In order to cater a variety of financial and related needs of different
customers in different areas, financial service organisations have to offer a wide range
of products and services.
This means the financial services have to be tailor-made to the requirements of
customers. The service institutions differentiate their services to develop their
individual identity.
5. Dominance of human element: Financial services are dominated by human element.
Thus, financial services are labour intensive. It requires competent and skilled
personnel to market the quality financial products.
6. Information based: Financial service industry is an information based industry. It
involves creation, dissemination and use of information. Information is an essential
component in the production of financial services.
IMPORTANCE OF FINANCIAL SERVICES
The successful functioning of any financial system depends upon the range of
financial services offered by financial service organisations. The importance of financial
services may be understood from the following points:
1. Economic growth: The financial service industry mobilises the savings of the people, and
channels them into productive investments by providing various services to people in general
and corporate enterprises in particular. In short, the economic growth of any country depends
upon these savings and investments.
2. Promotion of savings: The financial service industry mobilises the savings of the people
by providing transformation services. It provides liability, asset and size transformation
service by providing huge loan from small deposits collected from a large number of people.
In this way financial service industry promotes savings.
3. Capital formation: Financial service industry facilitates capital formation by rendering
various capital market intermediary services. Capital formation is the very basis for economic
growth.
4. Creation of employment opportunities: The financial service industry creates and
provides employment opportunities to millions of people all over the world.
5. Contribution to GNP: Recently the contribution of financial services to GNP has been
increasing year after year in almost countries.
6. Provision of liquidity: The financial service industry promotes liquidity in the financial
system by allocating and reallocating savings and investment into various avenues of
economic activity. It facilitates easy conversion of financial assets into liquid cash.
STRUCTURE/COMPONENTS OF INDIAN FINANCIAL SYSTEM
INTRODUCTION
Financial structure refers to shape, components and their order in the financial system.
The Indian financial system can be broadly classified into formal (organised) financial system
and the informal (unorganised) financial system. The formal financial system comprises of
Ministry of Finance, RBI, SEBI and other regulatory bodies. The informal financial system
consists of individual money lenders, groups of persons operating as funds or associations,
partnership firms consisting of local brokers, pawn brokers, and non-banking financial
intermediaries such as finance, investment and chit fund companies.
 Financial institutions,
 Financial markets,
 Financial instruments and
 Financial services.
I. FINANCIAL INSTITUTIONS
Financial institutions are the participants in a financial market. They are business
organizations dealing in financial resources. They collect resources by accepting deposits
from individuals and institutions and lend them to trade, industry and others. They buy and
sell financial instruments. They generate financial instruments as well. They deal in financial
assets. They accept deposits, grant loans and invest in securities.
On the basis of the nature of activities, financial institutions may be classified as: (a)
Regulatory and promotional institutions, (b) Banking institutions, and (c) Non-banking
institutions.
1. Regulatory and Promotional Institutions
Financial institutions, financial markets, financial instruments and financial services
are all regulated by regulators like Ministry of Finance, the Company Law Board, RBI, SEBI,
IRDA, Dept. of Economic Affairs, Department of Company Affairs etc. The two major
Regulatory and Promotional Institutions in India are Reserve Bank of India (RBI) and
Securities Exchange Board of India (SEBI). Both RBI and SEBI administer, legislate,
supervise, monitor, control and discipline the entire financial system. RBI is the apex of all
financial institutions in India.
2. Banking Institutions
Banking institutions mobilise the savings of the people. They provide a mechanism
for the smooth exchange of goods and services. They extend credit while lending money.
They not only supply credit but also create credit. There are three basic categories of banking
institutions. They are commercial banks, co-operative banks and developmental banks.
3. Non-banking Institutions
The non-banking financial institutions also mobilize financial resources directly or
indirectly from the people. They lend the financial resources mobilized. They lend funds but
do not create credit. Companies like LIC, GIC, UTI, Development Financial Institutions,
Organisation of Pension and Provident Funds etc. fall in this category. Non-banking financial
institutions can be categorized as investment companies, housing companies, leasing
companies, hire purchase companies, specialized financial institutions (EXIM Bank etc.)
investment institutions, state level institutions etc.
II. FINANCIAL MARKETS
Financial markets are another part or component of financial system. Financial market
deals in financial securities (or financial instruments) and financial services. Financial
markets are the centres or arrangements that provide facilities for buying and selling of
financial claims and services. Financial transactions include issue of equity stock by a
company, purchase of bonds in the secondary market, deposit of money in a bank account,
transfer of funds from a current account to a savings account etc.
CLASSIFICATION OF FINANCIAL MARKETS
There are different ways of classifying financial markets. There are mainly five ways
of classifying financial markets. On this basis,
1. Debt Market and Equity Market
 Debt market: This is the financial market for fixed claims like debt
instruments.
 Equity market: This is the financial market for residual claims, i.e., equity
instruments.
2. On the Basis of Maturity of Claims: It can classify into money market and capital market.
 Money market: A market where short term funds are borrowed and lend is called
money market. It deals in short term monetary assets with a maturity period of one
year or less. Liquid funds as well as highly liquid securities are traded in the money
market. Examples: Treasury bill market, call money market, commercial bill market
etc. The main participants in this market are banks, financial institutions and
government. In short, money market is a place where the demand for and supply of
short term funds are met.
 Capital market: Capital market is the market for long term funds. This market deals
in the long term claims, securities and stocks with a maturity period of more than one
year.The stock market, the government bond market and derivatives market are
examples of capital market. In short, the capital market deals with long term debt and
stock.
3. On the Basis of Seasoning of Claim: Financial markets are classified into primary market
and secondary market.
 Primary market: Primary markets are those markets which deal in the new securities.
Therefore, they are also known as new issue markets. These are markets where
securities are issued for the first time. In other words, these are the markets for the
securities issued directly by the companies. The primary markets mobilise savings and
supply fresh or additional capital to business units. In short, primary market is a
market for raising fresh capital in the form of shares and debentures.
  Secondary market: Secondary markets are those markets which deal in existing
securities. Existing securities are those securities that have already been issued and
are already outstanding. Secondary market consists of stock exchanges. Stock
exchanges are self regulatory bodies under the overall regulatory purview of the Govt.
/SEBI.
4. On the basis of structure or arrangements: Financial markets can be classified into
organised markets and unorganized markets.
 Organised markets: These are financial markets in which financial transactions take
place within the well established exchanges or in the systematic and orderly structure.
 Unorganised markets: These are financial markets in which financial transactions
take place outside the well established exchange or without systematic and orderly
structure or arrangements.
5. On The Basis of Timing of Delivery: Financial markets may be classified into cash/spot
market and forward / future market.
 Cash / Spot market: This is the market where the buying and selling of commodities
happens or stocks are sold for cash and delivered immediately after the purchase or
sale of commodities or securities.
 Forward/Future market: This is the market where participants buy and sell
stocks/commodities, contracts and the delivery of commodities or securities occurs at
a pre-determined time in future.
6. Other Types of Financial Market: Apart from the above, there are some other types of
financial markets. They are foreign exchange market and derivatives market.
 Foreign exchange market: Foreign exchange market is simply defined as a market in
which one country’s currency is traded for another country’s currency. It is a market
for the purchase and sale of foreign currencies.
 Derivatives market: The derivatives are most modern financial instruments in
hedging risk. The individuals and firms who wish to avoid or reduce risk can deal
with the others who are willing to accept the risk for a price.
A common place where such transactions take place is called the derivative
market. It is a market in which derivatives are traded. In short, it is a market for
derivatives. The important types of derivatives are forwards, futures, options, swaps,
etc.

III. FINANCIAL INSTRUMENTS

 Financial instruments refer to those documents which represent financial claims on
assets. As discussed earlier, financial asset refers to a claim to the repayment of a certain sum
of money at the end of a specified period together with interest or dividend. Ex: Bill of
exchange, Promissory Note, Treasury Bill, Government Bond, Deposit Receipt, Share,
Debenture, etc. Financial instruments can also be called financial securities. Financial
securities can be classified into:
1. Primary or direct securities.
2. Secondary or indirect securities.

1. Primary Securities: These are securities directly issued by the ultimate investors to
the ultimate savers, e.g. shares and debentures issued directly to the public.

2. Secondary Securities: These are securities issued by some intermediaries called

financial intermediaries to the ultimate savers, e.g. Unit Trust of India and mutual
funds issue securities in the form of units to the public and the money pooled is
invested in companies.

Again these securities may be classified on the basis of duration as follows :

(A) Short-term securities
(B) Medium-term securities
(C) Long-term securities

 Short-term securities are those which mature within a period of one year. For
example, Bill of Exchange, Treasury Bill, etc.

 Medium-term securities are those which have a maturity period ranging between one
and five years like Debentures maturing within a period of 5 years.

 Long-term securities are those which have a maturity period of more than five years.
For example, Government Bonds maturing after 10 years.

CHARACTERISTIC FEATURES OF FINANCIAL INSTRUMENTS

Financial instruments explain the following characteristic features,

1. Most of the instruments can be easily transferred from one hand to another
without many cumbersome formalities.
2. They have a ready market i.e., they can be bought and sold frequently and thus
trading in these securities is made possible.
 3. They possess liquidity, i.e., some instruments can be converted into cash
readily. For instance, a bill of exchange can be converted into cash readily by
means of discounting and rediscounting.
4. Most of the securities possess security value, i.e., they can be given as security
for the purpose of raising loans.
5. Some securities enjoy tax status, i.e., investment in these securities are
exempted from Income Tax, Wealth Tax, etc., subject to certain limits.
6. They carry risk in the sense that there is uncertainty with regard to payment of
principal or interest or dividend as the case may be.
7. These instruments facilitate future trading so as to cover risks due to price
fluctuations, interest rate fluctuations etc.
8. These instruments involve less handling costs since expenses involved in
buying and selling these securities are generally much less.
9. The return on these instruments is directly in proportion to the risk undertaken.
10. These instruments may be short-term or medium term or long-term depending
upon the maturity period of these instruments.
IV FINANCIAL SERVICES
Financial services refer to services provided by the finance industry. The finance
industry consists of a broad range of organisations that deal with the management of money.
These organisations include banks, credit card companies, insurance companies, consumer
finance companies, stock brokers, investment funds and some government sponsored
enterprises.
SCOPE/STREAMS OF FINANCIAL SERVICES
Financial service institutions render a wide variety of services to meet the equirements
of individual users. These services may be summarized as below,

1. Provision Of Funds: 4. Consultancy Services:

1. Venture Capital 1. Project Preparatory Services
2. Banking Services 2. Project Report Preparation
3. Asset Financing 3. Project Appraisal
4. Trade Financing 4. Business Advisory Services
5. Credit Cards 5. Valuation Of Investments
 6. Factoring And Forfeiting 6. Credit Rating
2. Managing Investible Funds: 7. Merger, Acquisition And Reengineering
1. Portfolio Management 5. Market Operations:
2. Merchant Banking 1. Stock Market Operations
3. Mutual And Pension Funds 2. Money Market Operations
3. Risk Financing: 3. Asset Management
1. Project Preparatory Services 4. Registrar And Share Transfer Agencies
2. Insurance 5. Trusteeship
3. Export Credit Guarantee 6. Retail Market Operation
7. Futures, Options And Derivatives
6. Research And Development:
1. Equity And Market Research
2. Investor Education
3. Training Of Personnel
4. Financial Information Services

KINDS AND SCOPE OF FINANCIAL SERVICES

The financial services can be broadly classified into two functions,

1. Fund based services 2.Non-fund services (or fee-based services
FUND BASED SERVICES
The fund based or asset based services include the following,
1. Underwriting
2. Dealing in secondary market activities
3. Participating in money market instruments like CPs, CDs etc.
4. Equipment leasing or lease financing
5. Hire purchase
6. Venture capital
7. Bill discounting.
8. Insurance services
9. Factoring
10. Forfeiting
11. Housing finance
12. Mutual fund
NON-FUND BASED SERVICES
Today, customers are not satisfied with mere provision of finance. They expect more
from financial service companies. Hence, the financial service companies or financial
intermediaries provide services on the basis of non-fund activities also. Such services are also
known as fee based services. These include the following,
1. Securitisation
2. Merchant banking
3. Credit rating
4. Loan syndication
5. Business opportunity related services
6. Project advisory services
7. Services to foreign companies and NRIs.
8. Portfolio management
9. Merger and acquisition
10. Capital restructuring
11. Debenture trusteeship
12. Custodian services
13. Stock broking
 The most important fund based and non-fund based services (or types of services)
may be briefly discussed as below
FUND BASED SERVICES

1. Equipment leasing/Lease financing

A lease is an agreement under which a firm acquires a right to make use of a capital
asset like machinery etc. on payment of an agreed fee called lease rentals. The person
(or the company) which acquires the right is known as lessee.
2. Hire purchase and consumer credit
Hire purchase is an alternative to leasing. Hire purchase is a transaction where
goods are purchased and sold on the condition that payment is made in instalments.
The buyer gets only possession of goods. He does not get ownership. He gets
ownership only after the payment of the last instalment.
3. Bill discounting
Discounting of bill is an attractive fund based financial service provided by the
finance companies. In the case of time bill (payable after a specified period), the
 holder need not wait till maturity or due date. If he is in need of money, he can
discount the bill with his banker. In short, discounting of bill means giving loans on
the basis of the security of a bill of exchange.
4. Venture capital
Venture capital simply refers to capital which is available for financing the
new business ventures. It involves lending finance to the growing companies. It is the
investment in a highly risky project with the objective of earning a high rate of return.
In short, venture capital means long term risk capital in the form of equity finance.
5. Housing finance
Housing finance simply refers to providing finance for house building. It \
merged as a fund based financial service in India with the establishment of National
Housing Bank (NHB) by the RBI in 1988. It is an apex housing finance institution in
the country. Till now, a number of specialised financial institutions/companies have
entered in the field of housing finance. Some of the institutions are HDFC, LIC
Housing Finance, Citi Home, Ind Bank Housing etc.
6. Insurance services
Insurance is a contract between two parties. One party is the insured and the
other party is the insurer. Insured is the person whose life or property is insured with
the insurer. That is, the person whose risk is insured is called insured. Insurer is the
insurance company to whom risk is transferred by the insured. It is a contract
between the insurer and insured under which the insurer undertakes to compensate
the insured for the loss arising from the risk insured against.
7. Factoring
Factoring is an arrangement under which the factor purchases the account
receivables (arising out of credit sale of goods/services) and makes immediate cash
payment to the supplier or creditor. The financial institution (factor) undertakes
the risk. For this type of service as well as for the interest, the factor charges a fee for
the intervening period. This fee or charge is called Factorage.
8. Forfaiting
Forfaiting is a form of financing of receivables relating to international trade.
Forfaiting is a technique that helps the exporter sells his goods on credit and yet
receives the cash well before the due date. he exporter need not bother about
collection of export bill. He can just concentrate on export trade.
9. Mutual fund
 Mutual funds are financial intermediaries which mobilise savings from the
people and invest them in a mix of corporate and government securities. The mutual
fund operators actively manage this portfolio of securities and earn income through
dividend, interest and capital gains.
NON-FUND BASED/FEE BASED FINANCIAL SERVICES
1. Merchant banking
Merchant banking is basically a service banking, concerned with providing
non-fund based services of arranging funds rather than providing them.SEBI
(Merchant Bankers) Rule, 1992 has defined a merchant banker as, “any person who is
engaged in the business of issue management either by making arrangements
regarding selling, buying or subscribing to securities or acting as manager, consultant,
advisor, or rendering corporate advisory services in relation to such issue
management”.
2. Credit rating
Credit rating means giving an expert opinion by a rating agency on the relative
willingness and ability of the issuer of a debt instrument to meet the financial
obligations in time and in full. It measures the relative risk of an issuer’s ability and
willingness to repay both interest and principal over the period of the rated
instrument. In short, credit rating means assessing the creditworthiness of a company
by an independent organisation.
3. Stock broking
Now stock broking has emerged as a professional advisory service. Stock
broker is a member of a recognized stock exchange. He buys, sells, or deals in
shares/securities. It is compulsory for each stock broker to get himself/herself
registered with SEBI in order to act as a broker.
4. Custodial services
In simple words, the services provided by a custodian are known as custodial
services (custodian services). Custodian is an institution or a person who is handed
over securities by the security owners for safe custody. Custodian is a caretaker of a
public property or securities. Custodians are intermediaries between companies and
clients (i.e. security holders) and institutions (financial institutions and mutual funds).
5. Loan syndication
Loan syndication is an arrangement where a group of banks participate to
provide funds for a single loan. In loan syndication, a group of banks comprising 10
 to 30 banks participate to provide funds wherein one of the banks is the lead manager.
This lead bank is decided by the corporate enterprises, depending on confidence in the
lead manager.
6. Securitisation
Securitisation is defined as a process of transformation of illiquid asset into
security which may be traded later in the opening market. In short, securitization is
the transformation of illiquid, non- marketable assets into securities which are liquid
and marketable assets.

IMPORTANCE IN DEVELOPMENT OF ECONOMY

INTRODUCTION

The financial system of a country is an important tool for economic development of

the country. It helps in creation of wealth by linking the savings with investments. It also
facilitates the flow of funds from the households (savers) to business firms (inventors) to aid
in wealth creation and development of both the parties. Not only that, the financial system of
a country is concerned with the allocation of savings, provision of funds, facilitating the
financial transactions, developing the financial markets, provision of legal financial
framework and provision of financial and advisory services in the country.

The following important points will be discussed as the financial system to develop
the economic development in the country.

1. Savings-investment relationship
To attain economic development, a country needs more investment and production.
This can happen only when there is a facility for savings. As, such savings are channelized to
productive resources in the form of investment. Here, the role of financial institutions is
important, since they induce the public to save by offering attractive interest rates.

2. Growth of Capital Market

Every business requires two types of capital namely, fixed capital and working
capital. Fixed capital is used for investment in fixed assets, like plant and machinery. While
working capital is used for the day-to-day running of business. It is also used for purchase of
raw materials and converting them into finished products.
3. Foreign exchange market
 It enables the exporters and importers to receive and raise the funds for settling
transactions. It also enables banks to borrow from and lend to different types of customers in
various foreign currencies. The market also provides opportunities for the banks to invest
their short term idle funds to earn profits. Even governments are benefited as they can meet
their foreign exchange requirements through this market.
4. Government Securities market
Financial system enables the state and central governments to raise both short-term
and long-term funds through the issue of bills and bonds which carry attractive rates of
interest along with tax concessions. Thus, the capital market, money market along with
foreign exchange market and government securities market enable businessmen, industrialists
as well as governments to meet their credit requirements
5. Infrastructure and growth
Economic development of any country depends on the infrastructure facility available
in the country. In the absence of key industries like coal, power and oil, development of other
industries will be hampered. It is here that the financial services play a crucial role by
providing funds for the growth of infrastructure industries. Private sector will find it
difficult to raise the huge capital needed for setting up infrastructure industries.
6. Development of trade
The financial system helps in the promotion of both domestic and foreign trade. The
financial institutions finance traders and the financial market helps in discounting financial
instruments such as bills. Foreign trade is promoted due to per-shipment and post-shipment
finance by commercial banks. They also issue Letter of Credit in favour of the importer.
Thus, the precious foreign exchange is earned by the country because of the presence of
financial system

7. Employment growth is boosted by financial system

The presence of financial system will generate more employment opportunities in the
country. The money market which is a part of financial system provides working capital to
the businessmen and manufacturers due to which production increases, resulting in
generating more employment opportunities. With competition picking up in various sectors,
the service sector such as sales, marketing, advertisement, etc., also pick up, leading to more
employment opportunities.
8. Venture capital
 There are various reasons for lack of growth of venture capital companies in India.
The economic development of a country will be rapid when more ventures are promoted
which require modern technology and venture capital. Venture capital cannot be provided by
individual companies as it involves more risks.
9. Maintain balanced growth
Economic development requires a balanced growth which means growth in all the
sectors simultaneously. Primary sector, secondary sector and tertiary sector require adequate
funds for their growth. The available funds will be distributed to all the sectors in such will be
a balanced growth in industries, agriculture and service sectors.
10. Fiscal policy and control of economy
The government on its part can raise adequate resources to meet its financial
commitments so that economic development is not hampered. The government can also
regulate the financial system through suitable legislation so that unwanted or speculative
transactions could be avoided. The growth of black money could also be minimized.
11. Balanced regional development
Through the financial system, backward areas could be developed by providing
various concessions. This ensures a balanced development throughout the country and this
will mitigate political or any other kind of disturbances in the country. It will also check
migration of rural population towards towns and cities.

12. Attracting foreign capital

Financial system promotes capital market. A dynamic capital market is capable of
attracting funds both from domestic and abroad. With more capital, investment will expand
and this will speed up the economic development of a country.
13. Economic Integration
Financial systems of different countries are capable of promoting economic
integration. This means that in all those countries, there will be common economic policies,
such as common investment, trade, commerce, commercial law, employment legislation etc.
14. Political stability
The political conditions in all the countries with a developed financial system will be
stable. Unstable political environment will not only affect their financial system but also their
economic development.
15. Uniform interest rates
 The financial system is capable of bringing a uniform interest rate throughout the
country by which there will be balanced movement of funds between centers which will
ensure availability of capital for all kinds of industries
16. Electronic development
Due to the development of technology and the introduction of computers in the
financial system, the transactions have increased manifold bringing in changes for the all-
round development of the country. The promotion of World Trade Organization (WTO) has
further improved international trade and the financial system in all its member countries.