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On Improving Effectiveness and Efficiency of Financial System in India

of Financial System in India V V Bhatt It is not possible to improve the effectiveness and efficiency of the financial system without a well integrated institutional and policy framework that can ensure macro-economic stability, competitive functioning of the financial markets, operational autonomy to the various financial institutions, efficient and innovative management of the constituent units of the system and the establishment of a sound framework for prudential regulation and supervision of the system that con inspire and sustain on environment of trust and confidence in the financial system. Interest rate and exchange rote policies, however sound, cannot improve by themselves the functioning of the system unless they form an integral part of such an institutional and policy framework Section I of this paper deals with the indicators of financial development and the performance of the financial system with regard to mobilisation, allocation and efficient use of resources. The basic elements of an institutional and policy framework essential for improving the effectiveness and efficiency of the financial system are, indicated in Section II. The concluding observations are made in the final section.

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