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these costs because of the kind of business these clients bring for the bank. Banks have changed the culture of human life in India and have made life much easier for the people.

INTRODUCTION OF FINANCE SECTOR

A financial system, which is inherently strong, functionally diverse and displays efficiency and flexibility, is critical to our national objectives of creating a market-driven,productive and competitive economy. The financial system in India includes of financial institutions, financial markets, financial instruments and services. The Indian financial system is characterised by its two major segments - an organised sector and a traditional sector that is also known as informal credit market. Financial intermediation in the organised sector is conducted by a large number of financial institutions which are business organisations providing financial services to the community. Financial institutions whose activities may be either specialised or may overlap are further classified as banking and non-banking entities. The Reserve Bank of India (RBI) as the main regulator of credit is the apex institution in the financial system. Other important financial institutions are the commercial banks (in the public and private sector), cooperative banks, regional rural banks and development banks. Non-bank financial institutions include finance and leasing companies and other institutions like LIC, GIC, UTI, Mutual funds, Provident Funds, Post Office Banks etc.

REFORMS OF FINANCIAL SECTOR

The quantum of resources required to be mobilised, as the economy grows in complexity and generates new demands, places the financial sector in a vital position for promoting efficiency and momentum. It intermediates in the flow of funds from those who want to save a part of their income to those who want to invest in productive assets. The efficiency of intermediation depends on the width, depth and diversity of the financial system. Till about two decades ago, a large part of household savings was either invested directly in physical assets or put in bank deposits and small savings schemes of the Government. Since the late eighties however, equity markets started playing an important role. Other markets such as the medium to long-term debt market and short term money market remained relatively segmented and underdeveloped. In The past decades, the Government and its subsidiary institutions and agencies had an overwhelming and all encompassing role with extensive system of controls, rules, regulations and procedures, which directly or indirectly affected the development of these markets. The financial system comprising of a network of institutions, instruments and markets suffered from lack of flexibility in intermediary behavior and segmentation of various markets and sets of financial intermediaries. Well developed markets should be inter-connected to facilitate the demandsupply imbalances in one market overflowing into related markets thereby dampening shocks and disturbances. The inter connection also ensures that interest rates and returns in any market reflect the broad demand supply conditions in the overall market of savings. But such adjustment of interest rates is delayed when the intermediaries lack flexibility. On account of the historical role of the Government in controlling and directing a large part of the financial activity, such adjustments were slow and the problem needed to be ad