Fuelled by recent growth rates among large countries, India has begun its journey of an economic transformation since the liberalization process began in the early 1990’s. In the last few years, supported by a growth rate of over 7% where in the world economy was in doldrums, soaring stock market, significant foreign portfolio inflows which has surpassed inflows to any other country of developing economies and a swiftly changing financial, the Indian financial system has been witnessing an exciting era of transformation. The banking sector has seen major changes with deregulation of interest rates and the emergence of strong domestic private players as well as foreign banks. Granting of licenses to new players and introduction of payment banks with emphasis on technology driven banking is changing the course of financial system and paving new paths. But at the same time, there is evidence of credit constraints for India’s corporate and SME segment that rely heavily on trade credit. In this paper we would try to understand basics of Indian Financial System.