Indian financial sector is growing at a phenomenal rate over the last decade due to New Economic Policy in 1991.

This has led to explosive growth in the banki ng sector and has opened new avenues in the banking sector. The Indian economy h as benefited with the advancement of technology & innovation over the last few y ears. The last decade has seen many positive develop ments in the Indian banking sector. The policy makers, which comprise the Reserv e Bank of Indian (RBI) Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to improve regulat ion in the sector. A few banks have established an outstanding track record of i nnovation, growth and value creation. However improved regulation, innovation, g rowth and value creation in the sector remain limited to the small part of it. Nowadays a world without stock market is unimaginable. T he financial market over the period refined banking, quantitatively and qualitat ively improved trading in stock exchanges. Financial market is a intermediar y channel between 2 groups related to saving and investment.

OBJECTIVES OF STUDY: To study the relationship between banks and financial markets. To study different types of banking services provided in financial markets. To review banking technology used in financial market with special reference to internet, electronic banking, electronic fund transfer etc. INTRODUCTION Without a sound and effective banking system in India it cannot have a healthy e conomy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external a nd internal factors. For the past three decades India's b anking system has several outstanding achievements to its credit. The most strik ing is its extensive reach. It is no longer confined to only metropolitans or co smopolitans in India. In fact, Indian banking system has reached even to the rem ote corners of the country. This is one of the main reasons of India's growth pr ocess. The banking sector is the soul-life-blood o f the financial system in India. Significant progress has been made with respe ct to the banking sector in the post liberalization period. The financial health of the commercial banks has improved manifolds with respect to capital adequacy , profitability, asset quality and risk management. Further, deregulation has op ened new opportunities for banks to increase revenue by diversifying into invest ment banking, insurance, credit cards, depository services, mortgage, securitiza tion, etc. Liberalization has created a more competitive environment in the bank ing sector. The aggregate foreign investment (FDI plus FII) limit for the privat e sector Banking has been raised to 74 percent in the recent country budget. The competition has increased within the banking sector (with the emergence of new private banks and foreign banks) as well as from other segments of the financial sector such as mutual funds, Nonbanking Finance Companies, post offices and fin ancial market.

With the expansion of commercia l banking and unprecedented development of multinational corporations, the domes tic financial markets has assumed global outlook multinational corporations, The integration of world financial and capital market with that of the Indian provi des greater benefits to both the demanders and suppliers of funds and opportunit y to diversify risk. This globalization has added depth to the market with a lar ge number of market participants. Financial sector reforms were initiated as par t of overall economic reforms in the country and wide ranging reforms covering i ndustry, trade, taxation, external sector, banking and financial markets have be en carried out since mid1991. A decade of economic and financial sector reforms has strengthened the fundamentals of the Indian economy and transformed the oper ating environment for banks and financial institutions in the country. The most significant achievement of the financial sector reforms has been the marked impr ovement in the financial health of commercial banks in terms of capital adequacy , profitability and asset quality as also greater attention to risk management. Further, deregulation has opened up new opportunities for banks to increase reve nues by diversifying into investment banking, insurance, credit cards, depositor y services, mortgage financing, securitization, etc. At the same time, liberaliz ation has brought greater competition among banks, both domestic and foreign, as well as competition from mutual funds, bonds, equity, debentures, shares, etc. Positive fallout of competition is the greater choice available to consumers, an d the increased level of sophistication and technology in banks. Government equ ity in banks has been reduced and strong banks have been allowed to access the c apital market for raising additional capital. New instruments have been introdu ced for greater flexibility and better risk management: e.g. interest rate swaps , forward rate agreements, cross currency forward contracts, forward cover to he dge inflows under foreign direct investment, liquidity adjustment facility for m eeting day-to-day liquidity Mismatch. Several new institutions ha ve been set up including the National Securities Depositories Ltd., Central Depo sitories Services Ltd., Clearing Corporation of India Ltd., Credit Information B ureau India Ltd. Technology infrastructure for the payments and settlement syste m in the country has been strengthened with electronic funds transfer, Centralis ed Funds Management System, Structured Financial Messaging Solution, Negotiated Dealing System and move towards Real Time Gross Settlement.