Financial System: Meaning & Definition

Introduction:

The proper circulation of funds in an economy is necessary for the economic development of the country. Effective circulation and utilization of funds leads to the industrial development of the country thereby supporting the economic growth.  If the funds are not effectively circulated in an economy, then the funds will be frizzed which will negatively affect in the economic development thereby blocking the establishment and growth of industries. Along with the effective circulation, effective utilization of funds is also equally important. The economic development could not be possible if the circulated funds are not properly utilized in the productive sectors. Financial system helps to circulate the funds in an economy.

Meaning:

Financial system refers to set of complex and interconnected components consisting specialized and non-specialized financial institutions, organized and unorganized financial markets, financial instruments and financial services. The aim of the financial system is to facilitate the circulation of funds in an economy. it is concerned about money, credit and finance. Money refers to the medium of exchange or mode of payment. Credit refers to the amount of debt which is returned along with the interest. And the finance refers to the monetary resources comprising the ownership funds and debts of the state, company or a person.

Definition:

According to Amit, "Financial system is the integrated form of financial institutions, financial markets, financial securities and financial services which aims is to circulate the funds in an economy for economic growth."

According to amctheblogger, "Financial system is the set of interrelated and interconnected components consisting financial institutions, markets and securities."

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