The Reserve Bank of India (RBI) is India's central banking institution, established in 1935. It regulates financial systems and monetary policy in India with the goal of maintaining price stability and economic growth. As a banker to the government and banks, the RBI performs key functions such as issuing currency, managing foreign exchange reserves, controlling money supply, and acting as lender of last resort. It also oversees banks and promotes rural/industrial development through specialized institutions. The Securities and Exchange Board of India (SEBI) regulates securities markets in India, established in 1988. Its objectives are to protect investors, regulate market functions, and promote fair practices. SEBI performs regulatory, protective, and developmental roles like monitoring company takeovers

1. BBA – SEM V (FMS)
UNIT 1

3.  Financial Regulation is a form of regulation or supervision,
which subjects financial instructions to certain requirements,
restrictions and guidelines, aiming to maintain the integrity of
the financial system. This may be handled by either a
government or non-government organization.
 The following are the objectives of financial regulations :
a. To maintain confidence in the financial system.
b. To provide protection and enhance stability of the financial
system.
c. To secure the appropriate degree of protection for consumers.
d. To reduce the extent of financial crime.

4. Reserve Bank of India (RBI)
Securities Exchange Board of India (SEBI)
Insurance Regulatory and Development
Authority of India (IRDA)
Pension Fund Regulatory and Development
Authority (PFRDA)
Ministry of Corporate Affairs (MCA)

5.  The central bank of India, RBI is also regarded as a bank of
banks owing to the functions of RBI. It was established on
April 1, 1935, under the Reserve Bank of India Act, 1934. In
the beginning, the headquarters of RBI was established in
Calcutta. However, soon after, in 1937, it was permanently
shifted to Mumbai.
 As of today, the Governor of the Reserve Bank of India is Mr
Shaktikanta Das. He is the 25th RBI Governor and all the RBI
functions are supervised by him.

7. Functions
of RBI
Banker’s
Bank
Currency
Authority
Banker to the
Government
Advisor to
the
Government
Lender of
the last
resort
Supervision
of Banks
Controller
of Money
Supply and
Credit
Foreign
Exchange
control and
management
Monetary
Data and
Publications
Promotional
Functions

8.  The preamble of the Reserve Bank of India describes
its main functions as ‘to regulate the issue of Bank
Notes and keeping of reserves with a view to securing
monetary stability in India and generally to operate the
currency and credit system of the country to its
advantage’.

9.  Currency Authority: The RBI is the only authorized
body that can issue currency in the country. So they print,
distribute and regulate the flow of currency in the
economy.
 Banker to the Government: Like individuals, firms and
companies who need a bank to carry out their financial
transactions effectively & efficiently, Governments also
need a bank to carry out their financial transactions. RBI
serves this purpose for the Government of India (GoI). As
a banker to the GoI, RBI maintains its accounts, receive
in and make payments out of these accounts. RBI also
helps GoI to raise money from public via issuing bonds
and government approved securities.

10.  Advisor to the Government: RBI acts as an adviser to
the Government not only on banking and financial
matters but also on a wide range of economic issues
including those in the field of planning and resource
mobilisation. The Bank’s advice is also sought on certain
aspect formulation of the country’s Five Year Plans etc.
 Bankers’ Bank: RBI also works as banker to all the
scheduled commercial banks. All the banks in India
maintain accounts with RBI which help them in clearing
& settling inter-bank transactions and customer
transactions smoothly & swiftly. The RBI also will
dictate interest rates and the CRR limits to the
commercial banks.

11.  Lender of the Last Resort: Often regarded as the banker of
banks, the RBI acts as a parent to all commercial banks in
India. Thus, it becomes the lender of the last resort for all
banks when they are in a crisis situation. RBI helps them by
lending money, although at higher rate of interest, to sail
through the tide of financial difficulties.
 Supervision of Banks: The RBI’s responsibilities include, in
addition to the traditional central banking functions, the
development of an adequate and sound banking system for
catering to the needs of trade, commerce, industry and
agriculture. Under the RBI Act, 1934 and the Banking
(Companies) Regulation Act, 1949, the RBI has been vested
with extensive powers of supervision and control over
commercial and co-operative banks.

12.  Controller of Money supply and credit: RBI controls the
money supply and credit created by the commercial banks in
India, in accordance with the economic priorities of the
government of India. RBI uses quantitative and qualitative
methods to control and regulate the flow of money in the
market. These are implemented by announcing monetary
policies at regular intervals. The monetary policy involves the
management of interest rates and money supply. The central
bank of India tweaks the money supply to achieve objectives
such as liquidity, inflation, and consumption.
 Foreign Exchange control and management: It is the
function of the RBI to maintain the value of the rupee in the
global economy. It does so by acting as the custodian of
foreign exchange reserves in the country. It maintains enough
reserves to battle against fluctuations.

13.  Monetary data and publications: The RBI collects and
publishes data regularly through weekly statements, monthly
bulletins, annual report on currency and finance, report on
trends and progress of banking in India. This data is very
useful to all those who are interested in the various aspects of
the Indian economy.
 Promotional Functions:
a. Promotion of Commercial Banking
b. Promotion of Co-operative Banking
c. Promotion of Agricultural and Rural Credit (National Bank
for Agriculture and Rural Development - NABARD)
d. Promotion of Industrial Finance (Industrial Development
Bank of India – IDBI, Industrial Finance Corporation of
India – IFCI)
e. Promotion of Finance for Exports (EXIM Bank)

14.  The Securities and Exchange Board of India
was established as a statutory body in the
year 1992 and the provisions of the Securities
and Exchange Board of India Act, 1992 came
into force on January 30, 1992.

17. The hierarchical structure comprises the following 9 designated
officers –
 The Chairman – Nominated by the Indian Union Government.
 Two members belonging to the Union Finance Ministry of
India.
 One member belonging to the Reserve Bank of India or RBI.
 Other five members – Nominated by the Union Government
of India.

19. The objectives of the Stock Exchange Board of India are:
1. Protection to the investors
The primary objective of SEBI is to protect the interest of people in
the stock market and provide a healthy environment for them.
2. Prevention of malpractices
This was the reason why SEBI was formed. Among the main
objectives, preventing malpractices is one of them.
3. Fair and proper functioning
SEBI is responsible for the orderly functioning of the capital
markets and keeps a close check over the activities of the financial
intermediaries such as brokers, sub-brokers, etc.

20. The main roles of the SEBI are as follows:
 To Protect the investor’s interest in the securities
market.
 To Regulate the securities market of India.
 To Promote the securities market.

21. Functions of SEBI
Protective
Functions
Regulatory
Functions
Development
Functions

22. As the name suggests, these functions are performed by
SEBI to protect the interest of investors and other
financial participants.
It includes-
 Checking price rigging
 Prevent insider trading
 Promote fair practices
 Create awareness among investors
 Prohibit fraudulent and unfair trade practices

23. These functions are basically performed to keep a check on
the functioning of the business in the financial markets.
These functions include-
 Designing guidelines and code of conduct for the proper
functioning of financial intermediaries and corporate.
 Regulation of takeover of companies
 Conducting inquiries and audit of exchanges
 Registration of brokers, sub-brokers, merchant bankers etc.
 Levying of fees
 Performing and exercising powers
 Register and regulate credit rating agency

24. This regulatory authority performs certain development
functions also that include but they are not limited to-
 Imparting training to intermediaries
 Promotion of fair trading and reduction of malpractices
 Carry out research work
 Encouraging self-regulating organizations
 Buy-sell mutual funds directly from AMC through a
broker

25.  To protect the interests of Indian investors in the securities market.
 To promote the development and hassle-free functioning of the securities
market.
 To regulate the business operations of the securities market.
 To serve as a platform for portfolio managers, bankers, stockbrokers,
investment advisers, merchant bankers, registrars, share transfer agents and
others.
 To regulate the tasks entrusted to depositors, credit rating agencies, custodians
of securities, foreign portfolio investors and other participants.
 To educate investors about securities markets and their intermediaries.
 To prohibit fraudulent and unfair trade practices within the securities market
and related to it.
 To monitor company takeovers and acquisition of shares.
 To keep the securities market efficient and up to date through proper research
and developmental tactics.

26. 1. SEBI has the authority to search any premises or place where it believes any
books of accounts, documents, vouchers, computer discs or storage devices used
in connection with the securities market are maintained and to confiscate them if
necessary, under Section 10. It has the authority under Section 11 of the Act to
issue search warrants for any location or premises occupied by a person
reasonably suspected of having committed an offence punishable under the Act,
and so on.
2. SEBI has the power to arrest without a warrant anyone who has committed
an offence punishable under the Act, according to Section 12. Any officer of
SEBI or any other police officer not lower in rank than an Assistant
Superintendent of Police may arrest without a warrant anyone who has committed
an offence punishable under the Act.
3. Power of service or attachment: SEBI, or any officer authorised by it in this
capacity, has the authority to serve a copy of any order made by it on the
concerned person through its officers, as well as attach their property pending the
outcome of any proceedings under the Act.

27. 4. Appointment of officials and others: Under Section 19, SEBI may
appoint its officers, employees, and others as necessary to carry out the
Act’s functions. It can also appoint any government or law enforcement
personnel as a SEBI officer.
5. Power to make regulations: The Board may make rules consistent
with the Act for carrying out the Act’s purposes, with the prior approval
of the Central Government, by notification in the Official Gazette. The
‘Securities and Exchange Board of India (Futures Trading) Regulations,
2004’ are the rules in question.
6. SEBI has the power to grant sanctions: Under Section 21, SEBI has
the power to grant sanctions to initiate any proceedings before the
Appellate Tribunal or even to sanction prosecution under the Act by itself.
It preserves a detailed record of all proceedings that come before it.