Meaning of Financial Market
A financial market is an institution that facilitates
exchange of financial instruments including deposits, loans, corporate stocks,
government bonds, etc.
According to Brigham Eugene F. "The place where
people and organizations wanting to borrow money, are brought together, with
those having surplus funds is called a financial market". This definition
makes it clear that a financial market is a place where those who need money
and those who have surplus money are brought together. They may come together
directly or indirectly.
Financial market in India performs an important function
of mobilization of savings and channelizing them into most productive uses.
Role and
Functions of Financial Market
A financial market is of great use for a country as it
helps its economy in the following ways
1.
Saving mobilization : Obtaining funds from surplus units such as
households, individuals, public sector units, central government, etc and
channelizing these funds for productive purposes.
2.
Investments : The financial market plays an important role in
arranging to invest funds thus collected in those units which are in need of
funds.
3.
National growth : The financial market contributes to the national
growth by ensuring continuous flow of surplus funds to deficit units.
4.
Entrepreneurship growth : Financial markets contribute to the, development
of the entrepreneurial class by making available the necessary financial
resources.
5.
Industrial development : The components of financial markets help towards
accelerated growth of industrial and economic development of a country, thus
contributing to raising the standard of living and the society's well being.
Types of Financial Markets
The financial market consists of two major segments
a) Money market (Click here for Complete Notes on Money Market)
b) Capital market (Click here for Complete Notes on Capital Market)
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