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                  BRILLIANT’S          Conceptual Framework of Finance Functions                     29


                  formal system is characterized by flexibility of  Ho$ ~rM Am°naoeZ VWm BÝQ>a\o$g gå~ÝYm| H$s âcopŠg{~{cQ>r
                  operations and interface relationships between  Ûmam àX{e©V {H$`m OmVm h¡Ÿ& Bg_| g{å_{cV h¢:
                  the creditor and the debtor. It consists of:
                    Individual  money  lenders  such  as        B§{S>{dOwAc _Zr coÝS>g© O¡go {H$ n‹S>mogr, gå~ÝYr,
                      neighbours, relatives, traders, store-own-  ì`mnmar, ñQ>moa _m{cH$ Am{XŸ&
                      ers etc.
                    Groups of persons operating as funds or     \$ÊS²>g `m Egmo{gEeÝg Ho$ ê$n _| H$m`© H$aZo dmco
                      associations, which work under their own    ì`{ŠV`m| H$m g_yh Omo ñd`§ Ho$ {Z`_m| Ho$ AYrZ H$m`©
                      rules.
                                                                  H$aVo h¢Ÿ&
                    Partnership firms consisting of local bro-   ñWmZr`  ~«moH$g©  VWm  Zm°Z-~¢H$  \$m`ZopÝe`c
                      kers and non-banking financial interme-     BÝQ>a_r{S>`arO H$mo g{å_{cV H$aZo dmcr nmQ>©Za{en
                      diaries  such as  finance, investment  and  \$åg© O¡go {H$ \$m`ZoÝg, BÝdoñQ>_oÝQ> VWm {MQ> \$ÊS>
                      chit fund companies.                        H$ånZrO&

                  Components  of  Formal  Financial           \$m°_©c \$m`ZopÝe`c {gñQ>_ Ho$ KQ>H$
                  System
                      Formal financial system consists of four    \$m°_©c \$m`ZopÝe`c {gñQ>_ KQ>H$m| Ho$ Mma ^mJm| go
                  segments or components. These are:          {_cH$a ~Zm h¡Ÿ& `o h¢:

                      1. Financial  Intermediaries: It  includes  1. \$m`Z|{e`b B§Q>a_r{S>EarO… `h CZ B§ñQ>rQ²>`ye§g
                  those institutions, which act as a link between  H$mo gpå_{bV H$aVm h¡ Omo B§ñQ>rQ²>`yeZb B§Q>ad|eZ Ûmam
                  the "giver of fund" and "user of fund" through  '\§$S> XoZo dmbo' VWm '\§$S> Cn`moJ H$aZo dmbo' Ho$ ~rM EH$
                  institutional  intervention,  such  as  banks,  g§nH©$ Ho$ ê$n _| H$m`© H$aVm h¡ O¡go {H$ ~¢Šg, B§í`moa§og
                  insurance organizations, mutual funds etc. All  Am°J}ZmBOoe§g, å`yMwAb \§$S²>g Am{X& `o g^r B§ñQ>rQ²>`ye§g
                  these  institutions  receive  deposits and  give
                                                              {S>nm°{OQ²>g àmá H$aVo VWm bmoZ XoVo h¢& {Og àH$ma do
                  loans. The way they receive the deposits and
                                                              {S>nm°{OQ²>g àmßV H$aVo VWm {Og àH$ma bmoZ XoVo h¢ dh
                  provide loans vary depending upon the nature
                                                              CZHo$ ì`mnma H$s àH¥${V Ho$ AmYma na {^ÝZ hmoVm h¡&
                  of  their business.  For example,  a  bank  may
                                                              CXmhaU Ho$ {bE EH$ ~¢H$ _| ì`pŠV`m| VWm ì`mnma g§ñWmAm|
                  have typical  saving  and  current account  to
                  receive deposit and give short and long-term  go {S>nm°{OQ²>g àmßV H$aZo VWm Aën Ed§ XrKm©d{Y F$U XoZo
                                                              Ho$ {bE {d{eï> goqdJ VWm H$a§Q> AH$mC§Q> hmo gH$Vo h¢&
                  loans to individuals and business firms. On the
                  other hand, an insurance company may receive  Xÿgar Amoa EH$ B§í`moa|g H§$nZr nm°{bgrO na àr{_`_ Ho$
                  premium on policies as deposit and take part  ê$n _| {S>nm°{OQ> àmßV H$a gH$Vr VWm H¡${nQ>b _mH}$Q> `m
                  in the capital market or debt market.       S>oãQ> _mH}$Q> _| ^mJ bo gH$Vr h¡&
                      On the basis of nature of activities, finan-  J{V{d{Y`m| H$s àH¥${V Ho$ AmYma na \$m`Z|{e`b B§ñQ>rQ²>`y-
                  cial institutions may be classified as:     eÝg H$mo {ZåZ{b{IV àH$ma go {d^m{OV {H$`m Om gH$Vm h¡…
                   (i) Regulatory and promotional institutions:  (i) ao½`yboQ>ar VWm à_moeZb B§ñQ>rQ²>`yeÝg…  B§{S>`Z
                      All the components of Indian financial sys-  \$m`Z|{e`b {gñQ>_ Ho$ g^r KQ>H$m| H$mo ao½`yboQ>g©
                      tem are regulated by regulators like; Min-
                      istry of Finance, the Company Law Board,    O¡go {dÎm _§Ìmb`, H§$nZr bm° ~moS>©, RBI, SEBI, IRDA,
                      RBI, SEBI, IRDA, Dept. of economic affairs,  {S>nmQ>©_|Q> Am°\$ BH$moZm°{_H$ A\o$`g©, {S>nmQ>©_|Q> Am°\$
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