FM- Financial Regulations and Regulatory Institutions in India (1).pdf

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This presentation provides an overview of the financial regulations and regulatory institutions in India, including the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDA), and Pension Fund Regulatory and Development Authority (PFRDA). It discusses the roles, objectives, and significance of these institutions in maintaining financial stability and protecting investor interests. The presentation also examines key regulations and their impact on the financial system, emphasizing the importance of effective governance in fostering economic growth and ensuring a transparent and trustworthy financial market.

1. Financial Regulations and
Regulatory Institutions in India

2. RBI
The preamble of the Reserve Bank of India describes the basic functions of the re
serve bank 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; to have a modern monetary policy
framework to meet the challenge of an increasingly complex economy, to maintain
price stability while keeping in mind the objective of Growth"

3. RBI was set up in 1935 under the Reserve Bank of India Act, 1934
and commenced its operations on 1 April 1935.
Following India's independence on 15 August 1947, the RBI was
nationalized on 1 January 1949.
The general superintendence and direction of the RBI is entrusted
with the 21-member central board of directors: the governor; four
deputy governors; two finance ministry representatives (usually
the Economic Affairs Secretary and the Financial Services
Secretary); ten government nominated directors to represent
important elements of India's economy; and four directors to
represent local boards headquartered at Mumbai, Kolkata,
Chennai and the capital New Delhi.

4. The Reserve Bank of India (RBI) is India's central bank, which
controls the issue and supply of the Indian rupee.
The central bank is an independent apex monetary authority
which regulates banks and provides important financial
services like storing of foreign exchange reserves, control of
inflation, monetary policy.
RBI is also known as banker's bank.

5. OBJECTIVES OF RBI
Acts as
the
currency
authority
Reserve Bank of India as a central monetary authority of India, like in any
other Central Bank of any country, is empowered to guide, monitor,
regulate, control and promote the past, present and future of the financial
system of the country.
Controls
money
supply
and credit
Manages
foreign
exchange
Serves as a
banker to
the
government
Builds up and
strengthens
the country's
financial
infrastructure
Acts as the
banker of
commercial
bank Supervises
Banks

6. ORGANISATION AND
MANAGEMENT
The central board of directors is the main
committee of the central bank.
The Government of India appoints the directors for
a four-year term.
The board consists of a governor, and not more than
four deputy governors; four directors to represent
the regional boards; two - usually the Economic
Affairs Secretary and the Financial Ser vices
Secretary - from the Ministry of Finance and ten
other directors from various fields.

7. Difference between Central bank and Commercial Bank
BASIS FOR
COMPARISO
N
CENTRAL BANK COMMERCIAL BANK
Meaning
The bank which looks after the
monetary system of the country
is known as Central Bank.
The establishment, which
provides banking services to the
public is known as Commercial
Bank.
What is it?
It is a banker to the banks and
the government of the country.
It is the banker to the citizens of
the nation.
Governing
Statute
Reserve Bank of India Act, 1934. Banking Regulation Act, 1949.
Ownership Public Public or Private

8. Profit motive
It does not exist for making
profit for its owners
It exist for making profit for its owners.
Objective
Public welfare and
economic development.
Earning Profits
Money supply
Ultimate source of money
supply in the economy.
No such function is performed by it.
Right to print and
issue currency
notes
Yes No
Deals with Banks and Governments General Public
How many banks
are there?
Only Many

9. SEBI
The Securities and Exchange Board of India owned by
the Government of India was established on 12th April
1992 under the Securities and Exchange Board of India
Act, 1992 to protect the interests of the investors in
securities along with promoting and regulating the
securities market.
Headquartered in Mumbai, the Securities and Exchange
Board of India (SEBI) has four regional offices located in
Ahmedabad, Chennai, Delhi and Kolkata.
SEBI was initially formed in the year 1988 as a non-
statutory body for the regulation of the securities
market and later acquired statutory status on 30th
January 1992. To know more about SEBI, refer to the
table given below:

10. Formation of SEBI
The Securities and Exchange Board of India (SEBI) was first established as a non-
statutory body in 1988 for the regulation of the securities market.
It acquired the statutory powers on 30th January 1992 in accordance with the SEBI
Act 1992.
SEBI became an autonomous body on 12 April 1992 and was soon constituted as the
regulator of capital markets under the Government of India.
The headquarters of the Security and Exchange Board of India is located in Mumbai,
Maharashtra and has four regional offices in New Delhi, Kolkata, Chennai and
Ahmedabad.
During the Financial Year 2013-2014, SEBI opened several local offices in the cities
namely- Jaipur, Bangalore, Guwahati, Bhubaneshwar, Patna, Kochi and Chandigarh.

11. Structural Organization of SEBI
SEBI is an autonomous organization that works under the
administration of the Union Finance Ministry. The Security and
Exchange Board of India (SEBI) is managed by the following
members:
The chairman was nominated by the Union Government of India.1.
Two members, i.e., Officers from the Union Finance Ministry.2.
One member from the Reserve Bank of India.3.
The remaining five members are nominated by the Union
Government of India. Three of the five members should be full-
time members.
4.

12. Objectives of SEBI
Protecting the interests of all the investors in the
securities market and providing a healthy environment
to them.
Working for the regulation of the securities market by
preventing any malpractices.
Promoting the development of the securities market
with proper and fair functioning by checking over
brokers, underwriters, etc.

13. Functions
Protective Function 1.
Creating awareness
among investors
Promoting fair
practices
Prohibiting
fraudulent/ unfair
trade practices
2. Regulatory Functions
Performing and
exercising powers
Conducting
inquiries and audit
of exchanges
Levying of fees
Regulating
takeover of
companies
Registering and
regulating credit
rating agencies
3. Development
Functions
Carrying out
research and
development work
Promoting of fair
trading practices
Reducing
malpractices
within the
securities market
Imparting training
to intermediaries

14. IRDAI (also referred to as IRDA)
Insurance Regulatory and Development Authority of India (IRDAI) is an apex
regulatory body involved in regulating and developing the insurance industry in
India.
It was constituted as a statutory body as per the provisions of Insurance Regulatory
and Development Authority Act 1999. The body was created on the
recommendations of the Malhotra Committee Report. All the companies wanting
to run the insurance business in India are to be registered with the IRDAI.

15. Organisational Set-up:
The authority is a ten member body consisting of
A chairman
Five whole time members
Four part time members
All the members to the Insurance Regulatory and Development Authority of India
are appointed by the Government of India.
The IRDAI is headquartered in Hyderabad in Telangana. Prior to 2001, it was
headquartered in New Delhi.

16. Objectives of IRDA
To carry forward the interests of the policyholders.
To uphold the development of the Insurance industry.
To ensure speedy resolution of claims.
To prevent frauds and malpractices.
To ensure fair conduct on the part of the financial market and
transparency when dealing with insurance.

17. Features of IRDAI
Acts as a regulator for the insurance sector
Protects the policyholders’ interests
Entrusted under the Insurance Act to endow the certificate of
registration to new insurance companies in India
Creates new rules and policies under Section 114A of the Insurance
Act, 1938
Supervising and regulating the insurance industry’s activities to
ensure a healthy environment for the insurers and policyholders.

18. IRDA Functions
IRDAI is responsible for the registration, renewal, modification,
withdrawal, suspension or cancellation of such registration for
applicants wanting to start an insurance business in India.
Protection of the interests of the policyholders.
Specifying qualifications, the code of conduct and training for
intermediaries and agents
Specifying the code of conduct for surveyors and loss assessors
Adjudication of disputes between insurers and intermediaries

19. IRDA Functions
Supervising the functioning of the Tariff Advisory Committee
Calling for information from, undertaking an inspection of,
conducting inquiries and investigations including audit of the
insurers, intermediaries, insurance intermediaries and other
organizations connected with the insurance business
Promotion of competition so as to enhance customer
satisfaction through increased consumer choice and lower
premiums

20. Types of Insurance Policies Controlled by the IRDAI
It generally looks after the Life and Non-Life or General
Insurance. Below are a few types of insurance policies governed
by the IRDAI:
Life Insurance
Retirement
Health Insurance
Motor/ vehicle
Travel
Home
Gadgets
Property

22. Pension Fund Regulatory and
Development Authority
(PFRDA)

23. PFRDA full form is Pension Fund Regulatory and
Development Authority and was created in 2003 with the
goal of promoting, regulating, and expanding India’s
pension industry.
PFRDA is head-quartered at New Delhi with various
regional offices spread across the country.
PFRDA was initially designed for government employees
exclusively, but its services were subsequently expanded
to include all Indian nationals and NRIs, including self-
employed persons.

24. IPRDA (Interim Pension Fund Regulatory & Development Authority)
was passed by Parliament in 2003 in order to have a system in place
till the final and fool-proof system is prepared, re-approved, and
implemented with the acceptance of all political parties including the
opposition parties. And this final system i.e., PFRDA – Pension Fund
Regulatory and Development Authority was established with the
President’s assent on 19 September 2013 and was made a permanent
Act. The President was the guardian of PFRDA till Financial Year (FY)
2014-15 and it has become fully autonomous and functions
independently from FY 2014-15.
PFRDA

25. The preamble of PFRDA states that the aims of the authority is –
“to promote old age income security by establishing, developing
and regulating pension funds, to protect the interests of
subscribers to schemes of pension funds and for matters
connected therewith or incidental thereto.”
Promote pension scheme in the country by fostering mandatory as
well as voluntary pension schemes in order to serve the old age
income needs of retired personnel.
PFRDA performs the function of appointing various intermediate
agencies like Pension Fund Managers, Central Record Keeping
Agency (CRA) etc.
Functions of PFRDA

26. Educating the general public and stakeholders about the importance
of pension.
Training of intermediaries that perform the task of popularizing and
educating people about the importance of pension.
Addressing grievances related to various pension schemes in the
country.
Addressing and resolving disputes between various intermediaries
like banks and between customers and intermediaries.
Training of intermediaries that perform the task of popularizing and
educating people about the importance of pension.

27. Protect the interest of pension fund subscribers
Register and regulate intermediaries
Approve schemes, terms and conditions, and laying down norms
for management of corpus of pension funds
Establish grievance redressal mechanism for subscribers
Settle disputes among intermediaries and also between
intermediaries and subscribers
Call for information, conduct inquiries, investigation and audit of
intermediaries and other entities connected with pension funds