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Financial System Functions Explained

The financial system serves several important functions: it provides a conduit for public savings; it develops and introduces innovative financial assets and services while restructuring existing ones; and it allows for the transfer of resources across geographic boundaries. Additionally, the financial system offers protection against various risks through risk sharing and reduction, provides mechanisms for making payments, and gives savers liquidity when they need money.

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darshan kabra
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32 views3 pages

Financial System Functions Explained

The financial system serves several important functions: it provides a conduit for public savings; it develops and introduces innovative financial assets and services while restructuring existing ones; and it allows for the transfer of resources across geographic boundaries. Additionally, the financial system offers protection against various risks through risk sharing and reduction, provides mechanisms for making payments, and gives savers liquidity when they need money.

Uploaded by

darshan kabra
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Functions of financial system

Saving Function
The system of financial markets and institutions provides a conduit for
the public savings

Reformatory Function
Undertaking the functions of developing, introducing innovative financial
assets/instruments services and practices and restructuring the existing assets,
services etc.

Transfer Function
A financial system provides a mechanism for the transfer of the resources
across geographic boundaries
Risk Function
The financial market offer protection against life, health, property, and income
risks, by permitting individuals and institutions to engage in both risk-sharing
risk reduction.

Payment Function
The financial system provides a mechanism for making payments for goods and
services, in the form of currency, checking accounts, debit cards, credit cards,
digital cash, etc.

Liquidity Function
Financial markets provide liquidity for savers who hold financial instruments
bur are in need of money.

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