Role Of Financial Institutions In India

In this assignment, a brief detail about how financial institutions works in India has been discussed. Banks present in different forms are playing a significant role in the development of this procedure. A financial institution can be operated by the government or a public limited in India. Every individual and business needs to use the financial service that is being provided by the bank and the banking operation can become more useful in handling all the transactions. Providing security of the money, detailed statements by the financial institutes help in better financial management for businesses and individuals. The role and importance of the financial institution have been briefly described in this assignment.

Brief about Financial institutes in India

Different institutions in India that have the aim to provide financial support to businesses and individuals through their services are helping in managing the financial norms. The Reserve Bank of India has control over all the government and public sector based financial institutions. Different banks may offer loans to consumers such as individuals and businesses and charge a fixed rate of internist on the provided loan as their revenue generation procedure. Hence, financial institutions have a major role in the development of the nation’s economic growth. Securing the assets such as money, bonds, and commodities is described as a vital service that is generally provided by banks in India.

Role of financial institute

Different roles of the financial services provided by banks are providing liquidity to the consumers, offering credit; allowing performing an economic activity, managing the portfolio and risk among the consumers. One of the major terms in the provided services by the Bank is allowing the consumers to perform Foreign Direct Investment through the banks in India. This term allows the clients to invest in foreign countries and grow their money with the monitoring system allowed by the associated banks. Successful financial strategies are helpful in developing nations that rely on the capability to conduct a rapid and proportional growth of acquisition in both the state and corporate sectors.

List of development financial institutions

The regulator of all financial institutes in India is called the Reserve Bank of India, and this institution has the power to control and monitor the movement of all financial institutes in Banks. The followings are the financial institutions in India:

• Small Industries Development Bank of India
• National Housing Bank
• Industrial Development Bank of India
• Industrial Finance Corporation of India
• National Bank for Agriculture & Rural Development

Financial services offered by Bank

The followings are the different roles provided by the financial services

• Services– different services that are provided by banks can be related to the development of the economic situation of a country. When a bank gives a certain loan amount to a business and they can make growth by utilization of the money, it might reflect in the nation’s GDP and businesses development of that entire industry can make the different processes of monetary development for the financial service by earning interest for the bank.
• Trust– Banks in India as financial institutions can make different services offered to their consumers such as providing security to the consumer’s assets. Clients can store different vital papers, bonds, commodities in the safes for getting security.

Advantages of Financial institute

The financial institute helps to manage the stability of a business or an individual by providing different supports such as offering credits, loans, loans against a deposit and others. The intelligent method to invest funds and keep the funds rotated in the finance market can make a higher return through the financial institution. Additionally, banks offer a rate of interest to their consumers that aim to generate more wealth based on the savings and deposits in the bank. The financial organisations assist in the uplift of the monetary aspects of the nation by supporting GDP and other specific growth.

Disadvantages of Financial institute

The money management procedure provided by financial organisations is complex in different circumstances. Calculating the rate of interest in managing the annualised profit from the invested amount, understanding the compound interest amount served by the financial institute against the savings or deposited amount. In different circumstances, the repayment offered by the banks makes the clients fall into the trap of getting a loan more than the capability and results as default makes client construct the worst situation. 

Conclusion

Conclusively, due to any financial losses banks can draw into the debts and lost the money invested by the general consumers by giving loan offerings to businesses that are not profitable. The financial institutes in India such as YES bank and the Punjab National Bank have faced this issue. There are government banks and as well as private sector banks in India. Often the government banks are relatable as the public sector bank.