Question

Identify and describe the financial functions in the financial system

Answer 1

Financial System- It is a wide network of financial institutions, financial product and services and instruments.

Financial functions in the financial system- Are as following:

1. Under financial system, banks accept deposits and lend money to those who need it, banks gives and charges interest in this process.
2. Financial system provides asset management function in which financial assets are managed.
3. It provides facility of transferring the funds anywhere in the country and world within very less time.
4. Broking companies under financial system provides facility of buying and selling shares, bonds, mutual funds, pension plan, fixed deposits etc. So this system provides many financial products and instruments to trade and invest.
5. This system provides diversification, people can diversify the risk by investing their money into different asset class group.
6. This system ensures the liquidity and smooth functioning of cash inflow and outflow.
7. This system plays significant role in economic growth through allocation of capital and reducing cost of transactions.
8. This system minimizes the risk to investors by providing number of financial markets, instruments and strategies.
9. This system ensures the reliability of financial products and services and safety of investors' money.