What is Finance?

Finance is an umbrella term for all things concerning money. It includes the management, study and analysis of money and investments.

Finance plays a very important role in today’s society and economy. It helps in trade, economic systems and the allocation of resources. Understanding finances helps people make prudent, wise financial decisions.

History of Finance in India 

Finance in India can be traced back to the 4th Century BCE – ancient India had a well-established financial system supported by lending, borrowing and a robust trading economy. 

The modern Indian banking system began to take shape in the early 20th century, which was when the sector witnessed many important milestones. 

The RBI was founded in 1935 as the central banking authority to regulate the banking sector. Securities and Exchange Board of India (SEBI) regulates and enforces policy for the capital markets.

In recent years, India has become home to the best financial technology (fintech) and advancements in digital payment technology in the world. Fintech firms like RazorpayX and Paytm have revolutionized the financial sector. 

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Types of Finance

There are many different types and uses of finance across industries and sectors. Regardless of what industry you’re operating in, you will have to deal with finance in one way or another. 

Corporate Finance

The management of money for businesses and profit-making organisations is called corporate finance. Corporate finance works to allocate financial resources efficiently, balance risk and return and achieve growth and profitability. 

There are many specializations under the umbrella of corporate finance: capital budgeting, capital structure management, working capital management, dividend policy, mergers and acquisitions, IPOs and more.

Corporate Financing is different from Corporate Finance. Corporate Financing is when a business acquires financing in the form of investment, loans or proceeds from an IPO. It is an area of focus under Corporate Finance. 

Corporate Banks help businesses acquire financing – they manage a company’s IPO or reissue of shares. They also help companies with mergers and acquisitions, which require a great deal of financial analysis and calculations. 

Corporate Finance in Real Life

The best example of corporate finance is Walmart’s acquisition of Flipkart. Both companies conducted detailed financial analyses, assessed growth prospects, and considered market dynamics to arrive at a fair value for Flipkart. 

Walmart arranged for a carefully planned mix of debt and equity to fund the acquisition – this financial structure planning is also part of corporate finance. 

Post-acquisition integration between Flipkart and Walmart is another important facet of corporate finance – analysts and bankers had to consider the synergies and operational efficiencies that could be achieved by combining Flipkart’s e-commerce expertise and market reach with its own retail expertise and global resources.

Personal Finance

Personal Finance is anything related to money planning and management for the individual. It depends largely on the income earned by the individual, his financial goals and priorities. 

Personal finance is an umbrella term for a number of needs and requirements: personal credit cards, personal loans, investments and deposit accounts and more. Banks that provide these financial services to the individual are called Retail Banks or Commercial Banks. 

Some commercial banks in India include SBI, ICICI and HDFC Bank. All these banks also provide corporate banking services, since corporate banking is the most profitable pillar of banking. 

Personal finance management helps individuals achieve financial goals, achieve financial stability and build long term wealth. It is an important skill for every individual to have, since financial stability contributes to overall quality of life and well-being. 

Public Finance

The management of public funds by governments and governmental agencies to promote economic growth, social welfare and development is called public finance. 

Public finance helps governments allocate resources, and tailor fiscal policy. It involves the management of government revenues, expenditures and debt, as well as taxation and the country’s banking system. 

The role public finance plays in society is immense: it helps prevent market failure and keeps prices in check. Economists and analysts make use of insights from public finance to understand the movement of money within the economy. 

Public finance is closely interlinked with the other tenets of finance since it influences the entire economy. 

Social Finance

When finance is used to generate positive social or environmental impact, and not primarily for a profit-making purpose, it comes under the umbrella of social finance. 

It involves deploying capital to address social issues, support sustainable development and promote positive change in society. It is used by NGOs, charitable organizations, governments and foundations. 

There are many ways that social finance manifests in the economy. When an individual or company decides to invest in a good cause, it conducts several analyses to understand the social or environmental impact of the investment. This is a kind of social finance. 

Social finance also includes loans given by banks and investors to small businesses that may or may not seem very profitable – these loans are not given with the intention of bringing in high returns, but instead to promote self-employment at the MSME level. This benefits society at large but doesn’t necessarily bring profits for the lender. 

Behavioural Finance

Behavioural finance aims to explain how individuals and markets make financial decisions. It combines psychology, finances and economics to understand human behaviour, cognitive bias and decision-making. 

Some key concepts that behavioural finance explores are cognitive biases, behavioural bias in market pricing, market bubbles and crashes, and more. Behavioural finance is used to supplement the other pillars of finance – corporate or personal in order to understand the system at a deeper level. 

By acknowledging and accounting for behavioural biases, investors and financial professionals can make more informed decisions and develop strategies that align with the realities of human behaviour.

Areas of Finance

Finance is such a widely used field that it is never used in isolation – finance is usually paired with other fields like economics, accounting and investment. 

Economics and Finance

The use of finance within the broader study of economics is vast. Economics is the study of scarce resources, and how they are allocated within a limited population. It studies how people and populations make decisions to allocate these scarce resources to satisfy their unlimited wants and needs. 

Finance and economics work together to explain, measure and predict how today’s society works. Economic principles provide the theoretical framework for financial decision-making and analysis. 

The two fields inform each other, with economic principles guiding financial strategies and financial outcomes influencing economic outcomes.

Accounting and Finance

Accounting is the recording, analysis and reporting of financial transactions. It applies to individuals, businesses and governments. Accounting creates a database of financial information from which interpretations and decisions can be made. 

Without this reliable, accurate and extensive framework of financial information, the field of finance would be non-existent. Financial data provided by accounting forms the basis for financial analysis, budgeting, financial forecasting, and decision-making in finance.

Finance uses the information provided by accounting to assess various aspects like profitability, project future performance and develop strategies to optimize financial management. 

Investment and Finance

When money is allocated to certain assets or financial instruments with the intention of generating a return or profit over time, it is an investment. 

Investment is an important part of finance – it is the best way to use idle money and keeps the economy running and people wealthy. Investors need to assess opportunities, analyze risk and reward and make informed decisions to maximise gains. 

There are many kinds of investments – stocks, bonds, real estate, commodities and more. Together, investment and finance play vital roles in optimizing financial outcomes for individuals, businesses, and institutions. 

Finance as a Science

Science is defined as a field of study that is universal, systematic and organized. It is based on theory and principles that can be proved through experimentation. 

Finance satisfies all these key characteristics, and many modern financial theories rely on hard sciences like statistics and mathematics. Without scientific backing, most financial principles and theories would not exist. 

Finance as an Art

While finance does depend on science and mathematics for a lot of its principles and theories, there is still a subjective and creative side to it. This makes finance just as much an art as it is a science. 

Finance tries to explain how people handle money, and the behaviour of humans can never be explained entirely scientifically. There will always be an element of intuition and judgement to financial decisions and thus financial policy and analysis. 

Finance as a Social Science

Since finance draws on scientific principles and mathematics – but also depends on qualitative factors like human behaviour and market sentiment, it cannot be called a pure science like chemistry or biology. Instead, it is defined as a social science. 

For example, the stock market works on the mathematical principles of demand and supply but this demand and supply depends on the irrational judgement of human beings. Many stock market crashes have happened as a result of irrational fear and panic amongst investors.

Finance Careers

There are many professional careers under the umbrella of finance. To pursue a career in finance, certain skills and qualifications are required: you will need a college degree in finance or accounting. 

An MBA or masters degree in finance is also very helpful for a successful career in finance. Budding accountants study for and have to pass an exam for Chartered Accountants. 

Here are a few careers commonly associated with finance:

Financial Analyst

A financial analyst is a professional who works to draw interpretations from financial data and help companies, individuals or organizations make decisions.

They help in decision making relating to investment, turnover, risk, financial projections and more. Their services are an absolute must wherever money is involved – which essentially is everywhere. 


An accountant creates and tracks a company’s financial information, and is responsible for the accurate, timely and reliable reporting of accounts. 

There are many sub-fields of accounting – corporate accounting, tax accounting, management accounting and more. 


An auditor ensures that financial records are accurate and reliable. They work with companies or governments to ensure accuracy, compliance, and transparency.

Auditors play a crucial role in providing independent and objective assessments of an organization’s financial practices, internal controls, and risk management processes.


A banker is someone who works for a bank in any of its various functions – lending, investments, deposits, accounts and more. 

They help with the smooth running of banks, which are play a central role in our economy. Investment bankers help businesses with mergers and acquisitions or raising capital through IPOs or reissue of shares. 

The Future of Finance

The rise of fintech, artificial intelligence and digital currencies has almost completely changed the way we see finance today. 

Fintech in particular has had a significant impact on all sectors of finance – from personal to public. Platforms like Paytm and RazorpayX have disrupted banking and payments to almost unrecognizable levels. 

Today, people make payments without involving a single bill of cash, and businesses make bulk payouts with just a single click of a mouse!

RazorpayX is a suite of financial solutions to all the problems startups and businesses face in India. Vendor payments, credit cards, payouts, and banking – RazorpayX is the bridge between financial management and banking. 

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What is the meaning of finance?

Finance is an umbrella term for all things concerning money. It includes the management, study and analysis of money and investments.

What are career opportunities in finance?

There are many professional careers under the umbrella of finance like financial analyst, chartered accountant, banker, market analyst and more.

Who is the father of finance?

Eugene F. Fama is considered the father of finance, for his research on stock markets, particularly his efficient markets hypothesis.

What are the different types of finance?

Personal finance, corporate finance, social finance and public finance are a few of the types of finance.


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