Monetary Sector Reforms in India

Abstract

The aim of this paper is to provide an overview pertaining to access of Indian monetary system and its significance and reforms. Indian Financial Market helps in promoting the savings of the economy -- helping to adopt an effective channel to transmit various financial policies. The Indian financial sector is well developed, competitive, efficient and integrated to face all shocks. In the India financial market there are various types of financial products whose prices are determined by the numerous buyers and sellers in the market. The other determinant factor of the prices of the financial products is the market forces of demand and supply. The India money market is a monetary system that involves the lending and borrowing of short-term funds. The financial system was characterised by extensive regulations such as administered interest rates, directed credit programmes, weak banking structure, lack of proper accounting and risk management systems and lack of transparency in operations of major financial market participants. Launch of equity derivatives in Indian market has been extremely encouraging and successful. The growth of derivatives in the recent years has surpassed the growth of its counterpart globally. The Notional value of option on the NSE increased from 1195.691178 lakhs USD in 2003 to 354648.1941 lakhs USD in 2013 and notional value of NSE futures increased from 14329.35627 lakhs USD in 2003 to 39228.38563 lakhs USD in 2013. India is one of the most successful developing country in terms of a vibrate market for exchange-traded derivatives. The equity derivatives market is playing a major role in shaping price discovery. Volatility in monetary asset price, integration of monetary market internationally, sophisticated risk management tools, innovations in monetary engineering and choices at risk management strategies have been driving the growth of monetary derivatives worldwide, also in India. Finally we can say there is big significance and contribution of derivatives to monetary system.