NAME :-

GHELANI TARUNA B.

ROLL NO:- 46 SUB. :TOPIC :FINANCE MARKET PHASES OF FINANCIAL SYSTEM

COLLEGE:- SSCCM

SIGNATURE OF STUDENT

SIGNETURE OF FACULTY

PHASES OF FINANCIAL SYSTEM

In planning for the future, it is important to have a clear and consistent objective for finance. The key objective of the financial system is the provision of the financial services at prices that reflect their cost. Building financial institution, financial markets and financial instrument is, therefore , a continuing process. Different institutions provide services that are both complementary to and competitive with each other. In the evolution of the financial system has been attempted. Although the financial system in India broadened and financial services deepened over the years, it is still inadequate, inefficient and indifferent.

The evolution of financial system in developing countries reflected their diverse political and economic histories. Latin America and the Mediterranean countries, politically independent since at least the first quarter of the nineteenth century, suffered frequent bouts of financial instability. These prevented the emergence of mature financial system. In contrast, developing countries in Africa and Asia, under colonial rule until the end of world war II, enjoyed relative financial stability but their financial system suffer from colonial neglect and stagnation.

Government has played a large role in the creation and broad basing of the financial system and financial deepening in the country. The government has exerted its influence over the flow of credit, interest rates, credit control and direction. It is also a big borrower as well as regulator of the financial system.

The financial system went through the following stages: (1) (2) (3) Phase one Phase two Phase three All the three phases are describe as under:

PHASE I
The Indian financial system (IFS) before 1951 was similar to the theoretical modal of financial organization. The traditional economy as given by R.L. Benelte, According to him traditional economy is an economy in which per capital output is law and constant. L.C. Gupta described this pass as follows:- The principle feature of the pre-independence industrial and financial organizations are the close circle characters of industrial entrepreneurship is semi organized and has a narrow industrials market in the long term financing of the industry in absence of participation by intermediaries. During this phase the industries not have a full access to outside saving In this system their was no chance of high rate of industrial growth Agriculture was the mainstay of the economy.

PHASE II
In the 2nd phase the organization financial system under went to see a change due to plan economic development in broad economic and social context. To secure economic growth with social justice under the directive principles of state policy, the scheme of planned economic development was started in 1915. The introduction of planning has held development in public and private sector. There was a need for and alignment of financial me chemist with priorities laid down by government economic policies. In other words planning signified the distribution of resources by the financial system to be in conformity with priority of 5 year plans. The main elements of financial organization can be categorized as follows : (i) (ii) (iii) (iv) public or private ownership of financial institutions protection investor futuristic planning of institution structure participation of financial institution in corporate. Many financial institution were created. The year 1969 was a major year of change. important implications for

financial system with the adoption of modern economy as the pattern of

Where major commercial banks were nationalized. In 1972, GIC was set up The biggest mutual fund of that time UTI was also created during this period. A well developed financial system evolved due to the creation of new institution and modification in structure and policies of existing financial system. Industrial credit got a heavy boost. A new generation of investors and entrepreneur came into the picture. ICICI was created in 1955 represented as a land mark in diversification of developed banking in India. During this period IDBI,SIDBI,and other institutions along with LIC played a major role in granting credit. The companys Act 1956 regulated &encouraged the setting up of industrial enterprise. A no of laws like FERA, MRTP were created and investors protection was given a boost. A vast infrastructure was created which laid the foundation of modern growth of Indian reduced. industry and dependence of agriculture was also

PHASE III
This phase was marked by lounching new economic policies in 1991. Mager economic changes took place in fiscal and economic sides. The Government control over many sectors was liberalized. Rupee was made partly convertible and services sector industries specially the I.T. sector created a vibrant economy. The contribution of agriculture sector to GDP was reduced to 45% by creating aver new of opportunities.

Many new laws were drafted to reflect these changes. The capital market, Bills market, Call money market also developed and flourished.

The formation was laid for modern India which has got a GDP of almost 9%. The stock market is booming and has crossed 15,000 marks. And the confidence of foreign investors in the Indian market was high.