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Innovation and creativity evaluation of Apple Corporation showEconomic return and tuition of any country depends upon a well-knit monetary constitution. pecuniary system comprises, a influence of sub-systems of monetary institutions monetary markets, financial instruments and function which help in the formation of capital. therefore a financial system provides a mechanism by which nest egg ar transformed into investments and it merchantman be said that financial system play an significant role in economic growth of the country by mobilizing surplus funds and utilizing them effectively for productive purpose.The financial system is characterized by the front of integrated, organized and regulated financial markets, and institutions that meet the short term and big term financial inescapably of both the household and corporate sector. Both financial markets and financial institutions play an important role in the financial system by rendering various financial services to the community. They operate in faithful combination with all(prenominal) other. financial ashesThe word system, in the term financial system, implies a set of complex and closely connected or interlined institutions, agents, practices, markets, transactions, claims, and liabilities in the economy. The financial system is concerned about money, assign and finance-the three terms are intimately related yet are somewhat different from each other. Indian financial system consists of financial market, financial instruments and financial intermediation Role/ Functions of Financial System A financial system performs the following functions* It performs as a link surrounded by savers and investors. It helps in utilizing the mobilized savings of scattered savers in more efficient and effective manner. It channelises flow of saving into productive investment. * It assists in the choice of the projects to be financed and all overly re intellections the work of such proje cts boundically. * It provides payment mechanism for exchange of goods and services. * It provides a mechanism for the reposition of resources across geographic boundaries.It provides a mechanism for managing and controlling the fortune involved in mobilizing savings and allocating credit. * It promotes the subprogram of capital formation by bringing together the supply of saving and the demand for investible funds. * It helps in heavy(a) the cost of transaction and increase returns. Reduce cost motives people to save more. * It provides you detailed information to the operators/ players in the market such as individuals, work houses, governances etc. Components/ Constituents of Indian Financial system The following are the four main components of Indian Financial system 1.Financial institutions 2. Financial Markets 3. Financial Instruments/Assets/Securities 4. Financial Services. Financial institutions Financial institutions are the intermediaries who facilitates smooth func tioning of the financial system by making investors and borrowers meet. They mobilize savings of the surplus units and allocate them in productive activities promising a better rate of return. Financial institutions also provide services to entities seeking advises on various issues ranging from restructuring to diversification plans.They provide whole range of services to the entities who want to raise funds from the markets elsewhere. Financial institutions act as financial intermediaries because they act as middlemen between savers and borrowers. Were these financial institutions may be of sticking or Non-Banking institutions. Financial Markets Finance is a prerequisite for modern business and financial institutions play a vital role in economic system. Its through financial markets the financial system of an economy works. The main functions of financial markets are.To facilitate creation and allocation of credit and liquidity 2. to serve as intermediaries for mobilization of s avings 3. to assist process of balanced economic growth 4. to provide financial convenience Financial Instruments Another important constituent of financial system is financial instruments. They represent a claim against the future income and wealth of others. It will be a claim against a person or an institutions, for the payment of the some of the money at a specified future date. Financial Services faculty of emerging financial system largely depends upon the quality and variety of financial services provided by financial intermediaries. The term financial services can be defined as activites, benefits and satisfaction connected with trade of money, that offers to users and customers, financial related value. Pre-reforms Phase Until the early 1990s, the role of the financial system in India was primarily cut back to the function of channeling resources from the surplus to deficit sectors.Whereas the financial system performed this role reasonably well, its operations came to be pronounced by some serious deficiencies over the years. The banking sector suffered from lack of challenger, low capital base, low productiveness and last intermediation cost. After the nationalization of large banks in 1969 and 1980, the Government-owned banks dominated the banking sector. The role of technology was minimal and the quality of service was not given adequate importance. Banks also did not follow proper risk management systems and the prudential standards were weak.All these resulted in poor asset quality and low profitability. Among non-banking financial intermediaries, development finance institutions (DFIs) operated in an over-protected environment with most of the funding approach shot from assured sources at concessional terms. In the indemnity sector, there was little competition. The mutual fund industry also suffered from lack of competition and was dominated for long by one institution, viz. , the Unit Trust of India. Non-banking financial companies (NBF Cs) grew rapidly, but there was no standard of their asset side.Financial markets were characterized by control over pricing of financial assets, barriers to entry, high transaction be and restrictions on movement of funds/participants between the market segments. This apart from inhibiting the development of the markets also affected their efficiency. Financial Sector Reforms in India It was in this backdrop that wide-ranging financial sector reforms in India were introduced as an intrinsical part of the economic reforms initiated in the early 1990s with a view to improving the macroeconomic performance of the economy.The reforms in the financial sector focused on creating efficient and stable financial institutions and markets. The approach to financial sector reforms in India was one of gradual and non-disruptive progress through a advisory process. The hold up Bank has been consistently working towards setting an enabling regulatory framework with prompt and effective super vision, development of technical and institutional infrastructure, as well as changing the interface with the market participants through a consultative process.Persistent efforts have been made towards adoption of international benchmarks as appropriate to Indian conditions. While true changes in the legal infrastructure are yet to be effected, the developments so far have brought the Indian financial system closer to global standards. The reform of the interest regime constitutes an integral part of the financial sector reform. With the onset of financial sector reforms, the interest rate regime has been largely deregulated with a view towards better price discovery and efficient resource allocation.Initially, steps were taken to develop the domestic money market and freeing of the money market evaluate. The interest rates offered on Government securities were progressively raised(a) so that the Government borrowing could be carried out at market-related rates. In respect of ba nks, a major effort was undertaken to simplify the administered structure of interest rates. Banks now have sufficient flexibility to decide their unsex and lending rate structures and manage their assets and liabilities accordingly.At present, apart from savings account and NRE gravel on the deposit side and export credit and small loans on the lending side, all other interest rates are deregulated. Indian banking system operated for a long time with high reserve requirements both in the form of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). This was a consequence of the high fiscal deficit and a high degree of monetisation of fiscal deficit. The efforts in the recent period have been to lower both the CRR and SLR.The statutory minimum of 25 per cent for SLR has already been reached, and while the Reserve Bank continues to pursue its medium-term objective of reducing the CRR to the statutory minimum level of 3. 0 per cent, the CRR of SCBs is currently lay at 5. 0 per cent of NDTL. As part of the reforms programme, due attention has been given to diversification of will power leading to greater market accountability and improved efficiency. Initially, there was infusion of capital by the Government in public sector banks, which was followed by expanding the capital base with equity participation by the one-on-one investors.This was followed by a reduction in the Government donationholding in public sector banks to 51 per cent. Consequently, the share of the public sector banks in the aggregate assets of the banking sector has come refine from 90 per cent in 1991 to around 75 per cent in2004. With a view to enhancing efficiency and productivity through competition, guidelines were laid down for establishment of new banks in the private sector and the foreign banks have been allowed more liberal entry. Since 1993, 12 new private sector banks have been set up.As a major step towards enhancing competition in the banking sector, foreign dire ct investment in the private sector banks is now allowed up to 74 per cent, subject to conformity with the guidelines issued from time to time. Conclusion The Indian financial system has undergone structural transformation over the past decade. The financial sector has acquired strength, efficiency and stability by the combined effect of competition, regulatory measures, and policy environment. While competition, consolidation and convergence have been recognized as the key drivers of the banking sector in the coming years