Capital Market and Financial System in India

The financial system of a country promotes savings by providing a wide variety of financial assets to the general public. Savings collected from the household sector are pooled together and allocated to various sectors of the economy for raising production levels. If the allocation of credit is judicious and socially equitable, it can help achieve the twin objectives of growth and social justice. In India, financial markets have been developed with a specific emphasis on increasing allocative efficiency of resources and promoting financial stability. Although the capital market in India has a long history, it remained on the periphery of the financial system for a long time. Various reforms undertaken since the early 1990s by the Securities and Exchange Board of India and by the government have brought about a significant structural transformation in the Indian capital market. As a result, India’s equity market has become modern and transparent. The equity market has witnessed widespre