Financial Institutions in India

FINANCIAL INSTITUTIONS
Financial institutions are the major part of the Indian financial system. It is more
important than other component of the Financial System because all the components
of Indian Financial System are directly or indirectly related with the financial
institutions.
Financial institutions are providing various services to the economic development
with the help of issuing of the financial instruments.
Financial institutions can be classified into banking and non-banking institutions.
Banking Institutions
Banking institutions are the key part of the economic development of the nation.
Banking institutions play a major role in the field of savings and investments of money
from public and lending loans to the business concern.
Indian Banking institutions may be classified into two board categories:
(1) Commercial Banks (2) Cooperative Banks
Commercial Banks
Commercial Banks are the most important deposits mobilization and disbursers of
finance.
The main function of the commercial banks are accepting deposits and rendering
loans to the public.
Indian commercial banks can be classified into the following categories:
Scheduled Commercial Banks
Scheduled banks are those which are included in the second scheduled of Banking
Regulation Act 1934 and others are non scheduled banks. To be included in the
second scheduled of the Banking regulation act the bank full fill the following
conditions:
• Must have paid up capital and reserves of not less than Rs. five lakh.
• It must also satisfy the RBI that its affairs are conducted in a manner.
• It is required to maintain a certain amount of reserves with the RBI.
Non-Scheduled bank
Non-scheduled banks are those which have not been included in the
second schedule of the Act.
Non-scheduled banks are subject to the statutory cash reserve requirement. But they
are not required to keep them with the RBI; they may keep these balances with
themselves. They are not entitled to borrow from the RBI for normal banking
purposes, though they may approach the RBI for accommodation under abnormal
circumstances.
Non-banking Institutions
Non-banking institutions are also performing their function to improve the Indian
financial system. Non-banking Institutions can be classified
into the following two major categories:
1. Non-banking Financial Institutions.
2. Non-banking Non-financial Institutions.
NBFI
A Non Banking Financial Institution is a company registered under the Companies Act,
1956 of India, engaged in the business of loans and advances, acquisition of shares,
stock, bonds hire-purchase, insurance business or chit business but does not include
any institution whose principal business is that includes agriculture or industrial
activity or the sale, purchase or construction of immovable property.
The working and operations of NBFCs are regulated by the Reserve Bank of India (RBI)
within the framework of the Reserve Bank of India Act, 1934 (Chapter III B) and the
directions issued by it.
STATE FINANCE CORPORATION (SFC)

Central government decided to promote the Small Scale Industries and Medium Scale
Industries at the state level by establishment of State Finance Corporation under a
special Act. It is called as State Finance Corporation Act 1951. According to this act,
state government has been empowered to set up State Finance Corporation. At
present these are 18 State Finance Corporation in India.
UNIT TRUST OF INDIA
Unit trust was set up in 1964 by a special act passed in the parliament under the
name of Unit Trust of India Act 1963, for the purpose to promote and regulate the
mutual fund activities in India.
LIC
"Ensure and enhance the quality of life of people through financial security by
providing products and services of aspired attributes with competitive returns, and by
rendering resources for economic development."
NON-BANKING NON-FINANCIAL INSTITUTIONS
Non-banking non–financial institutions are providing fee based services to the public,
such as merchant banking, underwriting, counseling, etc. These institutions will not
lending any financial assistance to public but they will provide financial services.

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FINANCIAL INSTITUTIONS

Scheduled Commercial Banks

STATE FINANCE CORPORATION (SFC)

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