Unit 1 Indian Financial System Overview

Unit 1 – Indian Financial System: An Overview

---

📘 Summary:

The Indian Financial System helps channel money from savers (like you) to borrowers (like businesses). It includes:

Intermediaries (e.g. banks, NBFCs, mutual funds)

Markets (e.g. capital market, money market)

Regulators:

RBI for banking

SEBI for capital market

IRDAI for insurance

---

🧠 Key Concepts:

Segment Role

RBI Central Bank: regulates banks, manages currency, CRR, SLR, acts as lender of last resort

Commercial Banks Accept deposits and give loans

NBFCs Financial companies, but not full-fledged banks

Stock Exchanges Platforms for trading shares & bonds

SEBI Regulates capital markets

IRDAI Regulates insurance sector

Depositories Hold shares in demat form (like CDSL, NSDL)

CIBIL Collects and shares credit information of borrowers

---

💡 RBI Tools to Control Money:

Tool Use

CRR % of deposits banks must keep with RBI (cash)

SLR % of deposits banks must invest in govt securities

Bank Rate Rate at which RBI lends to banks

Repo Rate Short-term lending rate by RBI

OMO RBI buys/sells securities to adjust liquidity

---

❓ 3 MCQs for Practice:

1. What does CRR stand for?

a) Cash Reserve Ratio ✅

b) Capital Refinance Rate

c) Credit Risk Ratio

d) Cash Return Reserve

2. Which of these is not regulated by RBI?

a) Commercial Banks

b) Cooperative Banks

c) SEBI ✅

d) NBFCs

3. What is the main purpose of SLR?

a) Boost consumer loans

b) Ensure liquidity

c) Maintain solvency ✅

d) Support foreign reserves

---

✅ Task for Today:

Revise this page in the evening

Let me know tomorrow and I’ll give you:

> Unit 2: Banking Regulation – Role & Powers of RBI