A healthy financial sector is an essential ingredient for a strong and prosperous economy as it performs the important functions of mobilising and allocating savings to meet the funding requirements of business and industry. This in turn enables the commercial and industrial base to expand leading to higher economic activity with increased levels of output and employment. The above stated roles are performed to perfection in the developed countries where a vast web of financial institutions and financial instruments exist to channelise savings into investments. Moreover, the developed financial markets have a very effective distributive system whereby the investors reap the benefits of their investments according to set distributive rules. As against this developing economies lack an efficient financial system. This has invited many cross country and time series studies to gauge the level of financial development in the developed and developing economies.