THE REGULATORS IN THE INDIANTHE REGULATORS IN THE INDIAN
FINANCIAL SYSTEMFINANCIAL SYSTEM
Ministry of Finance
• Create regulators
• 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
• 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 :
• Issue note
• Banker’s bank;
• Government bank;
• Promote the growth of economy
• Controller of foreign exchange
* Efficiency of
* Ensure priority
* Act as debt
external value of
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
• Curb destabilizing speculative activities
• Check undue volatility in the exchange rates
The central bank makes use of two types of
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 :
• A Chairman
• 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 BoardFUNCTIONS of the Board
• Sets regulatory policySets regulatory policy
• Enforce regulatory norms andEnforce regulatory norms and
• Impose punishments on wrongImpose punishments on wrong doingdoing
• regulate business in stock exchanges and any other
• 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
• 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
• 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 DEVELOPMENTINSURANCE REGULATORY AND DEVELOPMENT
AUTHORITY (IRDA) ACT, 1999AUTHORITY (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 :
• A chairperson
• 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,
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
• 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
• Adjudication of disputes between insurers and