The structure of the Indian financial system is unique when compared to other major economies. This is because India relies on two sectors, organized and unorganized, to meet the financial needs of the economy.
In fact, access to credit, liquidity, and basic financial services for a large segment of the Indian population relies on informal channels, as we’ll discuss below.
This is part of our free series on banking in India, covering topics like opening an NRI bank account and the basics of banking in the country.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Structure of Indian Financial System
- What to Know Before Banking in India
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
Structure of Indian Financial System
The structure of the Indian financial system has two key sectors, the organized sector and the unorganized sector. These sectors work in tandem to provide access to credit and liquidity across a diverse economy with varying access to banking and credit.
Participants in the organized sector include the central bank, national banks, commercial banks, insurance companies, and international financial institutions licensed to operate in the country.
On the other hand, the unorganized sector of the Indian financial system includes unregulated businesses tied to financial services. These unregulated businesses include informal channels like moneylenders and pawnshops.
What to Know Before Banking in India
Banking in India is not currently something we suggest unless you have a very specific reason to bank in the country. This is true whether you’re a non-resident Indian or you’re looking at conducting business or investments in the country.
In most cases, there are other alternatives, such as banking in the UAE or Singapore, that can provide avenues to supporting activities in India while still providing access to more suitable banking options.
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Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into the structure of the Indian financial system. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
How Is the Indian Financial System Organised and Unorganised?
The Indian financial system operates through two sectors, known as organized and unorganized. Not surprisingly, the organized sector refers to the financial system that is under the control of the central bank, the Reserve Bank of India (RBI). The unorganized sector of the financial system includes informal money service providers include pawnshops and moneylenders, charging extremely high rates but offering access to credit to people that would otherwise be unable to qualify.
How Was the Indian Financial System Developed?
The Indian financial system that exists today was first developed by the British, including the establishment of the Reserve Bank of India (RBI), which is the country’s central bank. That said, the domestic financial system did not expand until after independence, including the establishment of additional financial institutions with a mandate to help expand the economy.
What Is Meant By Financial System?
Financial system refers to the interconnected institutions, markets, and government bodies that manage and facilitate the flow of money within an economy. Importantly, there are different levels to financial systems, including local, national, regional, and global.
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