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28 Corporate Finance BRILLIANT’S

The main function of financial system is to \$m`Z|{e`b {gñQ>_ H$m _w»` H$m`© gaßbg goŠQ>g©
pool the resources from the surplus sectors and go g§gmYZm| H$mo àmßV H$aZm VWm S>o{\${gQ> goŠQ>g© _| CÝh|
redistribute them to the deficit sectors. It means
nwZ… {dV[aV H$aZm h¡& BgH$m AW© h¡ {H$ \$m`Z|{e`b
that financial system works as a link between {gñQ>_ \§$S²>g Ho$ godg© VWm grH$g© Ho$ ~rM EH$ g§nH©$ Ho$
savers and seekers of funds and successfully
ê$n _| H$m`© H$aZm VWm CÝh| AÀN>o [aQ>Ýg© àXmZ H$aHo$
converts savers into investors by offering
better returns to them. godg© H$mo grH$g© _§o g\$bVmnyd©H$ n[ad{V©V H$aZm h¡&
Flow of funds
(savings)
Suppliers of Seekers of
Funds funds
(e.g. Household) (e.g. Business firms)
Flow of financial
Services (Int.)

Indian financial system is characterized B§{S>`Z \$m`ZopÝe`c {gñQ>_ H$mo \$m°_©c VWm BÝ\$m°_©c
by coexistence and co-operation between for- \$m`ZopÝe`c {gñQ>_ Ho$ ~rM gh-ApñVËd VWm gh`moJ
mal and informal financial system. Ûmam àX{e©V {H$`m OmVm h¡Ÿ&

Formal Financial System \$m°_©c \$m`ZopÝe`c {gñQ>_
Formal financial system is characterized \$m°_©c \$m`ZopÝe`c {gñQ>_ EH$ Am°J}ZmBÁS>,
by the presence of an organized, institutional B§ñQ>rQ²>`yeZc VWm ao½`ycoQ>oS> {gñQ>_ H$s CnpñW{V Ûmam
and regulated system which caters to the fi- àX{e©V {H$`m OmVm h¡ Omo AW©ì`dñWm H$s AmYw{ZH$ gr_m
nancial needs of the modern sphere of economy.
It comes under the purview of the Ministry of H$s \$m`ZopÝe`c Amdí`H$VmAm| H$mo nyam H$aVm h¡Ÿ& `h
Finance (MoF), the Reserve Bank of India (RBI), {dÎm _§Ìmc`, ^maVr` [aOd© ~¢H$, ^maVr` à{V^y{V Ed§
the Securities and Exchange Board of India {d{Z_` ~moS>© VWm AÝ` ao½`ycoQ>ar ~m°S>rO Ho$ H$m`©joÌ Ho$
(SEBI) and other regulatory bodies. AÝVJ©V AmVm h¡Ÿ&

Informal Financial System BÝ\$m°_©c \$m`ZopÝe`c {gñQ>_
It is an unorganized, non-institutional and `h AW©ì`dñWm Ho$ nmaån[aH$ VWm J«m_rU n[a{Y _|
non-regulated system dealing with the tradi- H$m`© H$aZo AZAm°J}ZmBÁS>, Zm°Z-B§ñQ>rQ²>`yeZc VWm Zm°Z-
tional and rural sphere of the economy. The in- ao½`ycoQ>oS> {gñQ>_ h¡Ÿ& BÝ\$m°_©c {gñQ>_ H$mo H«o${S>Q>g© VWm S>oãQ>g©