ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The financial system is a network of institutions, markets, and contracts that brings these two groups together. Lenders put money into the financial system, which loans it out to borrowers. These borrowers pay back those loans with interest, which makes it worth the lender’s time.

Detailed explanation-2: -A lender is a financial institution that lends money to a corporate or an individual borrower with the expectation that the money will be repaid at a later date. Lenders require borrowers to pay interest on the amount borrowed, usually charged at a specific percentage of the total amount of loan.

Detailed explanation-3: -On a regional scale, the financial system is the system that enables lenders and borrowers to exchange funds. Regional financial systems include banks and other institutions, such as securities exchanges and financial clearinghouses.

Detailed explanation-4: -A financial intermediary does this by borrowing funds from the lender-savers and then using these funds to make loans to borrower-spenders. For example, a bank might acquire funds by issuing a liability to the public (an asset for the public) in the form of savings deposits.