In India, the capital market reforms have been much easier in comparison to banking or insurance. Justify the statement giving appropriate reasons.

Published: January 27, 2017

There is a definite positive outlook of the capital market. The reasons which justify it are-

  • Establishment of SEBI- SEBI which got a legal status in 1992 is doing a wonderful job of regulating the merchant banks, controlling the operations of mutual funds, promoter of the stock exchange activities and also acting as a regulatory authority of new issue activities of companies.
  • Establishment of Creditors Rating Agencies- There have been established 3 creditors rating agencies-CRISIL, ICRA and CARE which are very well assessing the financial health of different financial institutions and agencies related to the stock market activities.
  • Rising Electronic Transactions- With the increasing technological development, the capital market has been in pace with the development and shifted from being a paper based entity to paperless transaction one.
  • Growth of Derivative Transactions- Derivative trading in the equities have been introduced in India. This has led to expansion of the capital market.
  • Commodity Trading- The Multi Commodity Exchange (MCX) is being set up in India. This has led to increase in the volume of such transactions is growing at a splendid rate.
  • Besides this, there has been setting up of Clearing Corporation of India Limited (CCIL), Venture Funds, etc. This has developed the Indian capital market.

In comparison, the banking and insurance sector has not seen the same level of growth as witnessed by the capital market because there has always been changing goalposts of the government as well as the RBI with respect to the banking reforms and IRDA with respect to insurance. Besides that, the insurance sector has been witnessing an equal level of participation from the private sector which makes it haphazard to function persistently.

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