Page 1 of 7

European Journal of Business &

Social Sciences

Available at https://ejbss.org/

ISSN: 2235-767X

Volume 07 Issue 01

January 2019

Available online: https://ejbss.org/ P a g e | 125

Financial Sector Reforms in India

Deepak kumar

Assistant Professor (Department of Economics)

NBGSM College, Sohna (Gurugram)

Email.Id: deepakjangraggn@gmail.com

Mob.no: 8595292999

Abstract: Financial sector reforms are considered a significant part of the plan for political

reforms in developing nations like India. This is mainly due to the fact that it is estimated to

raise the efficiency of the mobilization and distribution of resources in the economy, which in

turn will create higher growth rates. And newly these are also considered significant for

macroeconomic stability. Therefore, a well-structured financial system is needed for stable

and efficient economic growth of the economy.

Keywords: Financial reforms, Banking system, Policies.

Introduction:

Financial sector is the backbone of any economy and plays an important role in the

mobilization and allocation of the nation’s resources. The economic expansion of the country

be contingent on the being of a well-organized economic structure. The financial structure

delivers for the intermediation in the middle of savers and investors and indorses faster

economic development. The financial structure in the financial sector is worried about

money, credit and finances. Money refers to the means of exchange or current means of

payment. Credit or loan is a sum of money that must be repaid normally with interest and

refers to an economic unit debt. Moreover, finances are monetary resources that include debt

funds and property owned by the state, society or person. The main functions of the financial

sector include the provision of liquidity which is responsible for the development of the real

Page 2 of 7

European Journal of Business &

Social Sciences

Available at https://ejbss.org/

ISSN: 2235-767X

Volume 07 Issue 01

January 2019

Available online: https://ejbss.org/ P a g e | 126

sector by improving the production of goods and services. Therefore, for our study we

selected "financial sector reforms in India".

Research Methodology:

In the present study secondary data has been used which has been taken from journals,

monthly periodicals, books, research papers, newspapers, bank’s websites etc.

Objectives:

1. To examine the functions of the financial sector in Indian Economy.

2. To examine the need and relevance of reforms in Indian financial sector.

3. To discuss various financial sector reforms this took place in 1990’s.

4. To examine various recent financial sector reforms in India.

Review of literature:

Renu Bagoria (2014): The objective of this document is to conduct a relative study amongst

private sector banks and public sector banks. The different services provide by these banks

are M- Banking, Net banking, ATM etc. The data has been collected from private sector

banks like ICCI, HDFC and AXIS etc. And public sector bank IDBI and SBI etc. The study

found that the mobile banking operation over the public sector bank is wider than that of the

private sector.

E.Gordon and K. Natrajan (2014): This study makes an attempt to find out the importance

of financial sector for the enlargement of any nation be contingent on the being of a well

organised financial system. The financial system contains the financial markets and the

financial institutions that support it. The financial system provides intermediation among

savings and investment and promotes faster economic growth.

Functions of the financial sector:

Page 3 of 7

European Journal of Business &

Social Sciences

Available at https://ejbss.org/

ISSN: 2235-767X

Volume 07 Issue 01

January 2019

Available online: https://ejbss.org/ P a g e | 127

 The main functions of the financial sector are the provision of liquidity which is

responsible for the development of real sector by improving the production of goods

and services.

 Another important function is to mobilise savings and channelize them into

industrious activities.

 The third important function of the financial sector is size transformation in which the

Bonus and other financial intermediaries collect credits from a huge mainstream of

minor customers and give them as loan of a generous.

 The fourth function of financial sector is maturity transformation. Financial

intermediation accepts deposits from the public at different maturities based on their

liquidity preference and assigns them to borrowers with different maturities based on

their needs.

 In financial sector, the financial system also performs ‘Risk transformation function’

in which through the various risk mitigating tools, For example: hedging, insurance,

use of derivatives etc. The risk involved in small investments is either diverted or

distributed and promotes industrial development in the country.

 By financing trade, industry and agriculture, through financial institutions, the

financial system promotes economic development. The dynamic role of the financial

organisation in economic growth is that it inspires savings to flow towards financial

assets over physical activities and creates the greatest margin of long-term economic

growth.

 The financial sector also encourages entrepreneurial talents, by stimulating the

courage of enterprise and risk taking capability.

Need for financial sector reforms in India:

 Until the early 1990s, the Indian financial system was not as developed because

financial organizations and markets were in poor outline.

 The banking sector has suffered from be short of struggle, low capital support, low

efficiency and high intermediation prices.

 The role of technology was minimum and the excellence of the service did not receive

sufficient concentration.