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Merchant Banking and Financial Services, III Semester (MBA), UNIT-1

Definition of Challenges of Financial Services Sector

   Posted On :  06.10.2021 11:19 pm

There are many challenges to the financial sector reforms such as:

Lack of Qualified Personnel

The expert knowledge is essential to provide innovative financial services successfully. The trained and qualified personnel are lacking in this sector. Lack of professional personnel is impeding the growth of financial services. It is a very big challenge for the financial intermediaries. It can be overcome by way of providing proper training to the qualified personnel.

Lack of Investor Awareness

The knowledge about the new financial products and instruments is essential to investors for the success of innovative financial ideas. Lack of investor awareness can be overcome by educating prospective investors through seminars, workshops, advertisements and even through audio-visual aids.

Lack of Transparency

The traditional financial system maintains secrecy of books of accounts. The disclosure of books of accounts is mandatory as per the international accounting standards. Financial sector should adopt the transparency system.

Lack of Specialization

All financial intermediaries are providing all types of financial services and dealing in different varieties of instruments in India. Indian financial intermediaries are losing the excellence of specialization.

Lack of Recent Data

Indian intermediaries are lacking in the field of research and development. Proper data base is essential to take sound financial decisions. It paves the way for growth of financial sector. Hence, the intermediaries should concentrate on it.

Lack of Efficient Risk Management System

The international transaction involves lot of risk such as exchange rate risk, interest risk and economic and political risk. In India,the efficient risk management system is lacking. Therefore, efficient risk management system is essential to develop the growth of financial services sector.

The financial service sector is facing many challenges in its attempt to fulfill the ever growing financial demands of the economy. Some of the important challenges are:

Volatility of the market

Increasing customer expectations

Lack of technical Knowledge

Lack of Professionalism

Deficiencies in Performance appraisals

Concentration of wealth, on account of malpractices

Lack of safety

Deficiency in marketing process

Prevailing high handedness and arrogance

In the post liberalization era, the finance sector is witnessing a complete metamorphosis. Deregulation measures have included the freeing up of direct controls over ownership, liberalizing interest rates and credit allocation, deregulating foreign exchange transaction controls, freeing up the entry of new firms, and expanding and broadening the base of banking system, both for nationals and international business ventures. At the same time, non banking financial institutions, securities markets and money markets have developed to mobilize and allocate savings. Experience suggests that financial liberalization needs to be undertaken alongside macroeconomic reforms.

Conclusion

The Financial services over the years has deepened and widened. The concept of financial services continues to improve and change to keep pace with the rapid growth of the economy. Financial intermediaries are now using mobile technology in order to provide new and innovative products and services to its customers. Importantly, managing and facilitating of mobile transactions falls cheaper for banks compared to other channels, thereby allowing them to pass on the additional savings onto the customer. Thus, financial services have assumed greater importance and attract attention of the people world over.
Tags : Merchant Banking and Financial Services, III Semester (MBA), UNIT-1
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