Indicator of Financial Development

What constitute the financial development is generally discussed by pointing out the in the financial institution in the financial structure of the developed and developing countries.Based on this approach some researcher have used one or more indicator to denote the degree of financial development.

• Finance ration

  The ratio of total issues of primary and secondary claim to national income

• Financial Inter -relation ratio

The ratio of financial assets to physical assets in the economy.

• Intermediation ratio

The ratio of secondary issue to primary issue ,which indicates the extent of development of financial institution

as mobilizers of funds relative to real sectors as direct mobilizers of funds.It indicate institutionalization of                   financial  activity in the economy.

• The ratio of money to income 

Higher the ratio greater the financial development because it indicate the extent of monetization and size of                  exchange economy in the nation.

• Developed Financial sector is fully integrated domestically as well as internationally .In such system risk adjusted rate of return doesn’t differ significantly in respect of investor as well as saver.
• The lower the transaction and information cost ,the higher the financial development.
• A developed financial structure is characterized by presence of strong ,active ,large sized non banking financial sector comprising stock market ,debt market ,insurance companies ,pension fund ,mutual fund etc.
• The greater the financial development ,the greater the openness of the economy reflected in high level of current account openness/convertibility ,minimum restriction on foreign ownership of assets and repatriation of earning and absence of parallel foreign exchange market.
• In a developed financial system ,private banking not the public sector banking is predominant .

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