Financial System consists of complex network of financial institutions, regulators, financial instruments and services as its components. In general financial system plays a crucial role in the functioning of the economy as it allows transfer of resources from savers to investors. It mobilises and usefully allocates scarce resources of a country. Indian Financial System can be classified into two types: the formal financial system and the informal financial system. Components of Financial System are Financial institutions, Financial Markets, Financial Instruments and Financial Services.
Financial institutions are institutions that mobilise savings and facilitate the transfer of funds from surplus units to deficit units
Financial Market is a place or mechanism where financial assets are sold and purchased
Financial Instrument is a contract between two parties
Financial Services ensure the smooth flow of financial activities in the economy
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