Flow of funds accounts and their uses

The Flow of Funds Accounts are compiled by many central banks all over the world, as an adjunct to the National Accounts generated by the respective National Statistical Offices. These accounts are found to be useful in analysing liquidity in the economy, degree of financial development, inter sectoral transfer of funds and the financial mechanism thereof. The matrices on inter sectoral disposition of funds have been used in financial planning and resources mobilisation. These aspects are delineated in this paper, with a brief reference to the work done in various countries. The future challenges in the Flow of Funds compilations by the Reserve Bank of India in the context of international developments in this area are also indicated towards the end of the paper.