Financial sector

  First Narasimhan Committee Report – 1991 To promote the healthy development of the financial sector, the Narasimhan committee made recommendations. Recommendations of Narasimhan Committee 1.    Establishment of 4 tier hierarchy for banking structure with 3 to 4 large banks (including SBI) at the top and at bottom rural banks engaged in agricultural activities. 2.    The supervisory functions over banks and financial institutions can be assigned to a quasi-autonomous body sponsored by RBI. 3.    A phased reduction in statutory liquidity ratio. 4.    Phased achievement of 8% capital adequacy ratio. 5.    Abolition of branch licensing policy. 6.    Proper classification of assets and full disclosure of accounts of banks and financial institutions. 7.    Deregulation of Interest rates. 8.    Delegation of direct lending activi...

  1. Inadequate Stock Exchanges With the phenomenal increase in the number of companies being listed every month and in the number of shareholders, the existing stock exchanges numbering 22 with Mumbai having three, are inadequate. With the phenomenal increase in the number of companies being listed every month and in the number of shareholders, the existing stock exchanges numbering 22 with Mumbai having three, are inadequate. 2. Lacks Transparency Trading transactions in stock exchanges still lack transparency. Buyers and sellers of scrips are at the mercy of brokers and sub-brokers who often quote the lowest traded rate of a script to the sellers and the highest top buyers. Thus , they pocket the maximum fraudulent gain on both the transaction maintain proper accounts, and manipulate them. 3. Stockbroking System Defective The system of stockbroking continues to be defective. The brokers have their sub-brokers and sub-broker, in turn, have their own sub-brokers who manipulate pri...

Capital market is referred to as a place where saving and investments are done between capital suppliers and those who are in need of capital. It is, therefore, a place where various entities trade different financial instruments. It is a market where both equity and debt instrument like equity shares, preference shares, debentures, bonds, etc. are bought and sold. FUNCTIONS 1) It acts in linking investors and savers 2) Facilitates the movement of capital to be used more profitability and productively to boost the national income 3) Boosts economic growth 4) Mobilization of savings to finance long term investment 5) Facilitates trading of securities 6) Minimization of transaction and information cost 7) Encourages a massive range of ownership of productive assets 8) Quick valuations of financial instruments 9) Through derivative trading, it offers insurance against market or price threats 10) Facilitates transaction settlement 11) Improvement in the effectiveness of capital allocation ...