Question

In this activity, you will select a country and analyze the banking and financial system of that country. Locate a recent article (published within the last year) that discusses your selected country's banking and financial system. You can use the Hunt Library, newspapers, new stations, or other credible sources to locate an article. Analyze the article and then provide the following in your discussion.

• Analyze your chosen country's banking and financial systems.
• Describe how money is measured in your chosen country.
• Discuss the evolution of money over time as it pertains to your selected country.
• Describe the process used by the banking system to create and destroy money.

Answer 1

Banking system in India is classified into scheduled banking and non scheduled banking. The banking system in India is different from other countries. In India banking sector was started in the 18th century. State Bank of India is act as the central bank before the emergence of RBI. Reserve Bank of India is considered as the central bank, which established in 1935. RBI provide loan for other banks and maintain the records of all banks and revenue. RBI acts as banker’s bank. The scheduled banks are the banks included in the RBI Act of 1934. This includes commercial banks, Cooperative banks, Investment banks and Specialized banks. Among this, 19 public sector banks come under the commercial banks. ICICI bank, Axis bank, HDFC bank etc. were the major private sector banks in Indian economy. Cooperative banks include primary credit society, central cooperative banks and state cooperative banks.
The money in the economy measured using four alternatives; M1, M2, M3 and M4. M1 is the narrow money and it consists of currency notes held by public and the demand deposits with bank. It includes the other deposits in the bank also. M2 is same as narrow money and it is the summation of M1 and saving deposits of post office saving. Broad money is M3; consist of currency held in public, demand deposits in banks, other deposits and the time deposits of banks. M4 is the widest measure of money; include all M3 plus post office savings.
If we find the history, most of the transactions in India is based on barter system. After that there is use of metallic currency were used. There is certain value assigned on different metallic coins. This was emerged after the evasion of Mughal and other foreigners. After this the paper currency emerged. Note printing was considered as the monopoly of central bank. Bank deposit was considered as money in the economy. After 20th century there is an emergence of digital money in the market, without the physical paper notes.
In India money is created through money multiplier from banks to banks. Most of the money creator in the economy is banks. Creation of deposits in the bank considered as the most import money creation in Indian economy. The money in the economy is destroyed through imposing high rates upon it. Through giving loan to someone by banks, it is the creation of money. On the other hand, if anyone pays back the money, the opposite process will happen and the money destroyed from the market. That money will be disappeared from the money market.