Financial sector
Topic: Banking, Credit Creation and Monetary Policy · NCERT: Class 11, Ch 3 "Liberalisation, Privatisation and Globalisation: An Appraisal"
Meaning
The financial sector is the set of institutions and markets that collect money from savers and pass it on to those who need it. It includes commercial banks, investment banks, stock exchanges and the foreign exchange market. It matters because farms, factories and roads all need funds, and this sector raises and moves those funds among households, firms and the government. In India, each part has its own regulator (a body that sets and enforces the rules):
- RBI: banks, NBFCs and payment systems
- SEBI: securities (share and bond) markets
- IRDAI: insurance
- PFRDA: pensions
- IFSCA (set up in 2020): the international financial services centre at GIFT City
Example
A household puts its savings in a bank or buys shares on a stock exchange. Through the financial sector, that money reaches a company building a factory or a firm importing machinery.
Don't confuse with
- Physical infrastructure: roads, railways and telecom are physical assets. The financial sector is the system that raises the money to build them.
Related concepts
- Financial infrastructure
- Financial intermediation
- Commercial banks
- Private sector banks
- Development finance institution