Takes policy decisions that go beyond one regulator
Creates legislative network
RESERVE BANK OF INDIA
The RBI was established on April 1,1935 under the Reserve Bank of India Act,1934.
The pattern of central banking in India is based on the Bank of England .
RBI acts as watchdog of the entire financial system.
It is the sponsor bank for top ranking bank and financial institutions like SBI,NABARD, NHB etc.
It sits on board of all banks.
It counsels the Central and State Govt. and all public sector institutions on monetary matters.
Regulates the quantity of money supply and availability of credit for industry , business and trade .
Major role of RBI is to regulate and supervise financial intermediaries.
safety of public money
ensure productive use of funds
ensure sound and healthy banking system
stable monetary position
maintain value of rupee
ensure effective coordination and control among various participants of Indian financial system
control overall credit and price level in the country
The central bank’s basic functions are :
Promote the growth of economy
Controller of foreign exchange
* Promote liquidity * Supervise money market activities RBI Regulates Monetary Market Credit Market Forex Market Capital Market * Efficiency of resource allocation * Ensure priority sector lending * Act as debt manager for govt. *Stability of external value of Rupee *Generate confidence in monetary and exchange rate policies *Maintain foreign exchange liquidity *Determine foreign exchange rates *Regulate inter bank dealings * Regulate capital inflow and outflow *Regulate liquidity position
Two Major Charters are:
Reserve Bank of India Act , 1934
Banking Regulation act ,1949
Important tool is the Monetary Policy .
Monetary Policy refers to the use of instruments of control to regulate money supply and credit with a view to influence the level of aggregate demand for goods and services.
The objectives of monetary policy are:
Price stability and growth
Maintain orderly conditions in foreign exchange market
Curb destabilizing speculative activities
Check undue volatility in the exchange rates
The central bank makes use of two types of instruments :
Direct Instruments :
Reserve Requirements : CRR ; SLR
Administered Interest rates :changes in bank rates
Credit control: priority sector lending
Indirect Instruments :
Open market Operation
SECURITIES AND EXCHANGE BOARD OF INDIA
The Securities and Exchange Act of 1992, provides for the establishment of a board to protect the interests of investors in securities and to promote the development and regulation of the securities market.
The Board consists of :
Two members from Government of India, Ministry of Law and Finance
One member from RBI and
Two other members
The head office is at Bombay.
FUNCTIONS of the Board
Sets regulatory policy
Enforce regulatory norms and
Impose punishments on wrong doing
regulate business in stock exchanges and any other securities market
promoting investor’s education and training intermediaries of securities market
register and regulate the working of stockbrokers, sub-brokers, share transfer agents, bankers to issue , trustees of trust deeds , registrars to issue , merchant bankers ,underwriters, portfolio managers, investment advisors and other intermediaries associated with securities market
register and regulate the working of depositories, custodians of securities ,FIIs, credit rating agencies
register and regulate the working of venture capital funds and collective investment schemes, including mutual funds
prohibit fraudulent and unfair trade practices relating to securities market
prohibiting insider trading in securities
regulating substantial acquisition of shares and takeover of companies
calling for information from the corporates,
undertaking inspection ,
conducting inquiries and audits of stock exchanges, mutual funds, intermediaries and self regulatory organizations in the securities market
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA) ACT, 1999
The IRDA Act was enacted in 1999 , to provide for the establishment of the IRDA :
to protect the interests of policy holders,
to regulate ,promote and
ensure orderly growth of the industry and for matters
connected therewith/incidental thereto and also to
amend the Insurance Act 1938, the LIC Act 1956
and the GIC Act 1972.
The IRDA consists of :
Five full time members , to be appointed by the government from amongst persons of ability, integrity and standing who have knowledge/experience of life insurance/general insurance/actuarial service, finance/economics/law/accountancy/administration/
any other discipline which in the opinion of the government would be useful to it.
Four members to act between the chairperson and the five full time directors .
Powers and Functions :
These powers and functions would enable the IRDA to perform the role of an effective watchdog and regulator for the insurance sector in India:
Issue certificate of registration; review ; modify; withdraw ; suspend or cancel such registration.
Protection of interest of the policy holders in matters concerning terms and conditions of contract of insurance ; settlement of insurance claim ; insurable interest etc
Specifying requisite qualifications and practical training for insurance intermediaries and agents.
Specifying code of conduct for insurance agents , surveyors and loss assessors, actuary etc
Promoting efficiency in conduct of insurance business
Control and regulation of the rates ,terms and conditions that may be offered by insurer.
Regulating investment of funds by insurance companies; regulating maintenance of margin of solvency
Adjudication of disputes between insurers and intermediaries