ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Financial market is the market that facilitates transfer of funds between investors/ lenders and borrowers/ users. It deals in financial instruments like bills of exchange, shares, debentures, bonds, etc.

Detailed explanation-2: -A financial system refers to a set of institutions such as banks, insurance companies, etc., that enable the efficient channeling of funds from savers to investors.

Detailed explanation-3: -RTGS is a funds transfer systems where transfer of money takes place from one bank to another on a “real time” and on “gross” basis. Settlement in “real time” means payment transaction is not subjected to any waiting period.

Detailed explanation-4: -Banks as Financial Intermediaries Banks act as financial intermediaries because they stand between savers and borrowers. Savers place deposits with banks, and then receive interest payments and withdraw money. Borrowers receive loans from banks and repay the loans with interest.

Detailed explanation-5: -market acts as an important link between savers and investors. The savers are lenders of funds while investors are borrowers of funds. The savers who do not spend all their income are called “Surplus units” and the investors/borrowers are known as “deficit units”.