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.
