The Transition from a Bank-led Lending Model to a Market-based Finance Model

rendering financial services, others proclaim the advantages of intermediaries.

Furthermore, according to researches, the nations with market-based financial systems are much more probable to have common Law origins when compared to the other system which is the bank-based systems. Likewise, Common Law nations tend to possess market-based financial systems even after controlling for the level of Gross Domestic Product per capita.

In addition to these, Market-based countries tend to possess much stronger shareholder rights when compared to bank-based financial systems.

While numerous factors such as government regulations as well as the guidelines affect the functioning of the financial sector, materially, by listing requirements, regulations, policies, etc., the governments of numerous countries impact accounting practices, deposit insurance & permissible practices of banks and each of the aforementioned strategies might also affect the operation of both the banks and markets as well.

India’s Equity Capital

The Indian Finance Minister has emphasized the significance of government and industry working together in order to ‘create India’s own equity capital’. The Indian government trusts in listening, working, responding and would extend all possible support, she noted.

Nirmala Sitharaman urged the industry to step forward in order to take risks and gave assurance to the industry captains of addressing issues related to competitiveness while praising the capability of start-ups to take a risk. This included high power tariffs and also the issues that are related to cumbersome/unmanageable regulatory compliances.

Officials who attended the meeting told Moneycontrol that the meeting focused on suggestions from corporate India on economic recovery, policies, and private investment.

As per one of the statements issued by the government, the finance minister expressed the government’s interest in facilitating industries that are the future of the Indian economy, during the meetings. Also, T V Somanathan – the Finance secretary stated that the Indian government trusts wealth creators.

While the meeting was attended by top officials from numerous industries one of the chief executive officers of a top company stated that, "It was a non-agenda meeting. They came to seek suggestions from industry leaders on the economy and how to take it forward."

"There were suggestions made on an array of topics, ranging from the ease of doing business, start-ups, special economic zones (SEZs), trade treaties, and infrastructure to creating a more robust private equity market," he added.

Conclusion

A clear pattern emerges after observing the financial systems across distinct income groups. Furthermore, Banks and other financial intermediaries and stock markets all grow larger, become highly active and efficient as these economies become richer, and therefore, the financial sector development becomes greater at higher income levels.