Financial Institutions in India: Critical for the Growth of Economy

Playing an indispensable role in the overall development of the country, the financial sector plays a very important role in the welfare of the Indian economy. There are different types of banks, NFBC’s (Non-Financial Banking Institutes) which are known to provide various banking options for people across the country.

One of the most important constituent of the financial sector is the financial institution. These establishments focus on providing various financial transactions such as loans, deposits and investments. It is an institution where financial services are provided to people.

Most of these bodies are known to be regulated by the Government of India. In India, the RBI (Reserve Bank of India) usually takes care of all the financial institutions. The RBI is also known as the Central Bank of India and serves as a regulatory authority with regard to the functionality of different commercial banks.

In order to provide adequate supply to the different sectors of the economy, the Government of India has evolved a very well-structure of financial institutions in the country. They may broadly be categorised into All India institutions and State level institutions. 

Other then the RBI, some of the other financial institutions in India include commercial banks, credit rating agencies, specialised financial institutions, SEBI and insurance companies.

Commercial banks: These are categorised into private, commercial and public sector banks. They engage in a wide variety of activities such as acceptance of deposits, offering loans, acting as trustees, etc. Both private as well as public sector banks fall under this category. These banks can also be categorised into scheduled commercial banks and unscheduled commercial banks. 

Credit Rating Agencies: These bodies assess the condition of the financial sector and try to find out different avenues for improvement. Two of the most important credit rating agencies in India include CRISIL and ICRA.

Specialised Financial Institutions: These bodies provide assistance to different sectors, leading to the overall growth of the Indian economy. Some of the important institutions are Small Industries Development Bank of India, Export-Import Bank of India, Board for Industrial & Financial Reconstruction and National Housing Bank. These institutions serve as intermediaries of financial markets. Thus, they are responsible for the transference of   funds from investors to companies (in need of funds).They, thus facilitate the flow of money in the economy.  

SEBI: Also known as the securities and exchange board of India, this body is in charge of protecting the interest of investors. It also facilitates the functioning of the market intermediaries. This body, thus, supervises market conditions, indulges in risk management and registers institutions.

Insurance Companies: These companies are known for offering financial protection against any sort of loss. The two main categories include life insurance and general insurance. Under the latter, there is car, home, health, travel, home, liability and any other ‘non-life insurance plan. These bodies are in charge of a tremendous amount of risk management. A person is provided with equitable transfer of risk of loss from one entity to another; in exchange for a payment of a premium amount.

Summary: Financial institutions play a very important role in the growth of the economy of the nations. These bodies may be of different types such as commercial banks, credit rating agencies in India, specialised financial institutions, SEBI and insurance companies.

Resource Box: The different financial institutions in the country play a very important role in determining the economy of the nation. Some of the different types of financial institutions in India, other than the Reserve Bank of India (RBI) include commercial banks, private sector banks, SEBI, credit rating agencies and insurance companies.