Yak Banking & Fiscal Awareness : Weaknesses Of Indian Fiscal System

Weaknesses of Indian Financial System

Friends, inwards today's Banking & Financial Awareness lesson series, nosotros shall larn close the weaknesses of Indian Financial System. After the introduction of planning, rapid industrialisation has taken place. It has inwards plough led to the increment of the corporate sector together with the Government sector. In gild to come across the growing requirements of the Government together with the industries, many innovative fiscal instruments conduct maintain been introduced. Besides, at that spot has been a mushroom increment of fiscal intermediaries to come across the ever-growing fiscal requirements of dissimilar types of customers. Hence, the Indian fiscal organisation is to a greater extent than developed together with integrated today than what it was fifty years ago. Yet, it suffers from about weaknesses equally listed below :

• Lack of Co-ordination betwixt dissimilar Financial Institutions : There are a large number of fiscal intermediaries. Most of the vital fiscal institutions are owned past times the Government. At the same time, the Government is also the controlling authorisation of these institutions. In these circumstances, the job of co-ordination arises. As at that spot is multiplicity of institutions inwards the Indian fiscal system, at that spot is a lack of co-ordination inwards the working of these institutions. 
• Monopolistic Market Structures : In India, about fiscal institutions are together with then large that they conduct maintain created a monopolistic marketplace construction inwards the fiscal system. For instance, a major constituent of life insurance occupation concern is inwards the hands of LIC. The UTI has to a greater extent than or less monopolised the usual fund industry. The weakness of this large construction is that it could atomic number 82 to inefficiency inwards their working or mismanagement or lack of drive inwards mobilising savings of Blue Planet together with and then on. Ultimately, it would retard the evolution of the fiscal organisation of the province itself. 
• Dominance of Development Banks inwards Industrial Financing : The evolution banks institute the backbone of the Indian fiscal organisation occupying an of import house inwards the uppercase market. The industrial financing today inwards Republic of Republic of India is largely through the fiscal institutions created past times the Government, both at the national together with regional levels. These evolution banks human activeness equally distributive agencies only, since, they derive most of their funds from their sponsors. As such, they neglect to mobilise the savings of the public. This would last a serious bottleneck which stands inwards the agency of the increment of an efficient fiscal organisation inwards the country. For industries abroad, institutional finance has been a result of institutionalisation of personal savings through media similar banks, LIC, pension together with provident funds, unit of measurement trusts together with and then on. But they play a less pregnant purpose inwards the Indian fiscal system, equally far equally industrial financing is concerned. However, inwards recent times attempts are beingness made to heighten funds from Blue Planet through the number of bonds, units, debentures together with and then on. It volition buy the farm a long agency inwards forging a link betwixt the normal channels of savings together with the distributing mechanism. 
• Inactive together with Erratic Capital Market : The of import business office of whatever uppercase marketplace is to promote economical evolution through mobilisation of savings together with their distribution to productive ventures. As far equally industrial finance inwards Republic of Republic of India is concerned, corporate customers are able to heighten their fiscal resources through evolution banks. So, they require non buy the farm to the uppercase market. Moreover, they don't resort to uppercase market, since it is really erratic together with inactive. Investors equally good prefer investments inwards physical assets to investments inwards fiscal assets. The weakness of the uppercase marketplace is a serious job inwards our fiscal system. 
• Imprudent Financial Practice : The ascendency of evolution banks has developed imprudent fiscal exercise with the corporate customers. The evolution banks furnish most of the funds inwards the flat of term loans. So at that spot is a preponderance of debt inwards the fiscal construction of corporate enterprises. This predominance of debt uppercase has made the uppercase construction of the borrowing concerns uneven together with lopsided. To brand matters worse, when corporate enterprises facial expression upwards whatever fiscal crisis, these fiscal institutions permit a greater occupation of debt than is warranted. It is against the traditional concept of a audio uppercase structure. 

However, inwards recent times all efforts conduct maintain been taken to activate the uppercase market. Integration is also taking house betwixt dissimilar fiscal institutions. For instance, the Unit Linked Insurance Schemes of the UTI are beingness offered to Blue Planet inwards collaboration with the LIC. Similarly, the refinance together with rediscounting facilities provided past times the IUBI aim at integration. Thus, the Indian fiscal organisation has buy the farm a developed one. 

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