(This post covers reforms in the financial sector of India covering banking, money market, Government securities market, foreign exchange market, capital market, Credit market, and Payment systems since the 1990s)
A country’s financial system comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds securities markets, and investment funds, and other smaller financial entities. It also includes clearing counterparties, payment providers, central banks, and financial regulators and supervisors. The sweeping changes in the Indian economy since liberalization have had a profound stimulus on the Indian financial sector. Financial sector reforms that were initiated by the government in the early ‘90s have been to meet the challenges of a complex financial architecture.
The transformations of the following financial markets have created a robust ecosystem for financial transformation in India.
Transformation of the banking sector in India
Transformation of the Money market in India
Transformation of Government securities market
Transformation of the Foreign exchange market in India
Transformation of the Capital market in India
Transformation of the Credit market in India
Transformation of Payment Systems in India
The banking regulator Reserve Bank of India, and Capital Market regulator SEBI have been developing financial infrastructure in terms of supervisory body, audit standards, technology and legal framework; and establishment of a Board for financial supervision. Thus, the financial regulatory system in India is now far more responsive and well equipped, institutionally and legally, to demand and enforce necessary disclosures and compliance with laid norms for the protection of the users of the systems as well as the credibility and efficacy of the system itself.
Transformation of the financial sector not only aided in a sharp pick up in services sector growth, it also helped the real sectors like agriculture production and manufacturing sector in India to thrive.
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