Limitations of the financial system in India

Limitations of the financial system in India

The following are the limitations of the Indian financial system. • The Indian Financial system has failed to meet the financial needs of small scale Industries. It has rather patroned the big industrial houses who are already well off. • The mushrooming of financial institutions has deteriorated the quality and effectiveness of the sector to some extent. • In many cases, it could not impose adequate control towards financial irregularities and frauds, often influenced by politically and economically organized pressure groups. • The Indian financial system fails to create a well defined and organized capital market. • It fails to motivate economically marginal or small entrepreneurs by providing micro credit to them. • The Indian financial system is not  flexible at the desired level. It takes abnormal time to cope with the changing situation.

^Ø   Factoring Asset Liability Management

^Ø   Leasing Housing Finance

^Ø   Forfeiting Portfolio Finance

^Ø   Hire Purchase Finance Underwriting

^Ø   Credit Card Credit rating

^Ø   Merchant Banking Interest and Credit Swap

^Ø   Book Building Mutual fund

Securities and Exchange Board of India (Merchant Bankers) Rules, 1992 ― A merchant banker has been defined as any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to securities or acting as manager, consultant, adviser or rendering corporate advisory services in relation to such issue management.

Random House Dictionary ―Merchant banker is rwritesan securitiesorganizatifor corporations, advices such clients on mergers and is involved in the ownership of commercial ventures. These organizations are sometime banks which are not merchants and sometimes merchants who are not banks and sometimes houses which are neither merchants nor banks.

Charles P. Kindleberger ―Merchant banking is the developme which frequently encountered a prolonged intermediate stage known in England originally as merchant banking. The Notification of the Ministry of finance defines A merchant banker as any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to the securities as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management.

Objectives

^Ø   Channelizing the financial surplus of the general public into productive investments avenues

^Ø   Co-coordinating the activities of various intermediaries like the registrar, bankers, advertising agency, printers, underwriters, brokers, etc., to the share issue

^Ø   Ensuring the compliance with rules and regulations governing the securities market.