The financial system plays a very very important role in the development of an economy. It is very much like the lubricating oil for the economy, to help it function smoothly. Hence it would not be wrong to se that what role is played by blood human body, that role is also played by the financial system in an economy.

As far as India is concerned RBI (Reserve Bank of India) is the apex (Top) institution which was founded in 1935 and was nationalized in 1949, when India became independent. RBI in the chief controller of issue of currency notes and coins. It also regulates and supervises all the bank i.e. public sector banks, private banks or foreign banks from RBI to operate, expand or closedown a branch in the country. Then, there are Regional rural banks which function as an auxiliary unit of people living in country side and help in mobilizing small, yet tremendous amount of deposits.

The main functions of banks are to accept deposits of all types’ current, saving Recurring and to extended credit of various type and duration; short term loan, long term loan, loan for working capital personal loans auto loans education loans and so on. now a days banks also provide many other services like providing lockers, clearing cheques  and demand drafts, accepting income tax and telephone bills, electronic transfer of founds Mutual Fund operations, insurance service etc.

Last but not the least comes the important role played by capital market .In India BSE and NSE are the two stock exchanges where shires of companies are listed and get regularly traded with the help of brokers sub brokers depository participants and custodians of shares like CDSL and NSDL. Reputed companies can offer their shares to public source their requirement of fund and expand their business. Investors have reaped huge fortune by investing in companies like Infosys, Reliance, Tata steel ,Jspl etc over a long period of time .