Describe the structure of Financial Markets of India. What legislative measures have strengthened its financial system?

Answer 2(c) Structure of Financial Markets of India The Financial System of any country comprises within its fold the financial markets and its supporting financial institutions. A well-fortified structure is able to encourage public and institutional support leading to an organized network of supporting financial markets. In India as already presented, there exist a large number of financial institutions that have grown or restructured. A closer look is now taken at the existing markets. The financial markets which exist in India are: Treasury Bill Market Call Money Market Commercial Bill Market Market for Financial Guarantees Market for Mortgages Foreign Exchange Market Government (Gilt-Edged) Securities Market and Industrial Securities Market. The structure of financial markets can be studied from different angles, namely, functional, institutional, or sectoral. The functional classification is based on the term of credit, whether the credit supplied is short-term or long-term. Accordingly, markets are called money markets or capital markets. The institutional classification tells us whether the financial institutions are organized on commercial or cooperative principles and whether they belong to the organized or unorganized sector. The sectoral classification identifies credit arrangements for various sectors of the economy: agriculture, manufacturing industry, trade and others. Functionally, financial markets are broadly sub-divided under two heads: money markets and capital markets. The former are markets in short-term funds; the latter in long-term funds. Structurally, the short-term credit market is divisible under two sectors: organized and unorganized. The organized market comprises the RBI and banks. The unorganized market is largely made up of indigenous bankers and moneylenders. The capital market deals in medium-term and long-term funds. Like the money market, the capital market also is divisible into two sectors: organized and unorganized. The organized sector comprises the stock market, the RBI, banks, development banks, LIC, GIC and subsidiaries, and the UTI. The unorganized sector is mainly made up of indigenous bankers and moneylenders, chit funds, nidhis, etc. Legislative Measures that have strengthened the financial system Companies Act, 1956: Passed to give protection to investors through improvement in allotment of shares, floatation of new companies, and terms and conditions in the capital structure. It aimed to regulate corporate organizations, channel funds, and regulate foreign capital. Securities Contract (Regulation) Act, 1956: Permitted only recognized stock exchanges to function and empowered the government to regulate them. Securities and Exchange Board of India (SEBI), 1987: Established to promote fair and efficient trading in securities, ensure transparency, and protect investors. SEBI has powers to take action against erring management, simplify share transactions, discipline new companies, standardize accounting procedures, and educate investors. Financial Sector Legislative Reforms Commission (FSLRC): Set up in 2011 to review and rewrite legislations governing India's financial system. It proposed a Draft Indian Financial Code to replace existing financial laws, focusing on consumer protection, micro-prudential regulation, resolution, capital controls, and regulators. It suggested a Unified Financial Agency (UFA) to regulate non-bank and payments-related markets. Other Legislative Measures: Central Know Your Customer (KYC) Records Registry The Negotiable Instrument (Amendment) Act, 2015 The Payment and Settlement Systems (Amendment) Act, 2015 Draft Code on Resolution of Financial Firms, 2016