•Financial Regulatory

Bodies In India
•
• The financial system in India is regulated by
independent regulators in the field of
• Banking
• Insurance
• Capital Market
• Commodities Market and
• Pension Funds.
• However, Government of India plays a significant role in
• controlling the financial system in India and
• influences the roles of such regulators at least
• to some extent.
• The following are five major financial
regulatory bodies in India
• (A) Statutory Bodies via parliamentary
enactments
• Reserve Bank of India : Reserve Bank of India
is the apex monetary Institution of India.
• It is also called as the central bank of the
country.
• The Reserve Bank of India was established on
April 1, 1935 in accordance with the provisions
of the Reserve Bank of India Act, 1934.
• RBI acts as the apex monetary authority of the
country.
• The Central Office of RBI is located in Mumbai
where the Governor sits and
• is where policies are formulated.
• Though originally privately owned, since
nationalization in 1949, the Reserve Bank is fully
owned by the Government of India.
• The preamble of the reserve bank of India reads as
follows:
• To regulate the issue of Bank Notes and
• keeping of reserves imposed on the Banking
Industry
• with a view to securing monetary stability in India
and
• generally to operate the currency and credit system
of the country
• to its advantage.
 IMPORTANT SECTIONS 0F RBI Act-1934
• CHAPTER III - FUNCTIONS of RBI
• Section20. Obligation of the Bank to transact Government
business.
• 21. Bank to have the right to transact Government business
in India.
• 21A. Bank to transact Government business of States on
agreement.
• 22. Right to issue bank notes.
• 23. Issue Department.
.
• 24. Denominations of notes.
• 25. Form of bank notes.
• 26. Legal tender character of notes
• 26A. Certain bank notes to cease to be legal
tender.
• 27. Re-issue of notes.
• 28. Recovery of notes lost, stolen, mutilated or
imperfect
• 28A. Issue of special bank notes and special one
rupee notes in certain cases.
• 29. Bank exempt from stamp duty on bank notes.
• 42. Cash reserves of scheduled banks to be kept
with the Bank.
• 43. Publication of consolidated statement by the
Bank.
• 43A. Protection of action taken in good faith.
• 51. Appointment of special auditors by
Government.
• 52. Powers and duties of auditors.
• 53. Returns.
• 54. Rural Credit and Development.
• 54A. Delegation of powers.
• 54AA. Power of Bank to depute its employees to
other institutions
 RBI STRUCTURE

• Reserve Bank of India was nationalised in the year

1949.
• The general superintendence and direction of the Bank
is entrusted to Central Board of Directors of 20
members,
• the Governor and
• four Deputy Governors,
• one Government official from the Ministry of Finance,
• ten nominated Directors by the Government
 FUNCTIONS OF RBI
• 1.Bank of Issue
Under Section 22 of the Reserve Bank of India Act,
the Bank has the sole right to issue bank notes of
all denominations.
• The distribution of one rupee notes and coins and
small coins all over the country is undertaken by
the Reserve Bank as agent of the Government.
• The Reserve Bank has a separate Issue Department
which is entrusted with the issue of currency notes
 AUDIT AND INSPECTION OF BANKING
COMPANY
• Audit--The balance sheet and the profit and loss account of a
banking company have to be audited as stipulated under
Section 30 of the Banking Regulation Act.
• Every banking company’s account needs to be verified and
certified by the Statutory Auditors as per the provisions of
legal frame work.
• The powers, functions and duties of the auditors and other
terms and conditions as applicable to auditors under the
provisions of the Companies Act are applicable to auditors of
the banking companies as well.
.
 Inspection
• Special responsibility is cast on the bankauditor
• in certifying the bank’s balance sheet and
• profit and loss account since that reflects
• the sound financial position of the banking
company
• As per Sec 35 of the Banking Regulation Act,
• the Reserve Bank of India is empowered to
conduct an inspection of any banking company.
•The banking company,
• its directors and officials are required to
produce thebooks, accounts and records
•as required by the RBI inspectors,
•also the required statements and/or
information
• within the stipulated time
•as specified by the inspectors.
 SUPERVISION AND CONTROL
Board for Financial Supervision
• To have better supervision and control,
• a separate board was constituted namely
• “The Board for Financial Supervision”
• as per the provisions of the Reserve Bank of India.
• The Board has the jurisdiction over the banking
companies, Nationalised banks, State Bank of
India .
• The members of the Board are:
• Governor of the Reserve Bank of India
• as the chairperson,
• Deputy Governors of the Reserve Bank of India, and
one of the deputy governors should be nominated by
the Governor as the full time vice chairman,
• Four directors from the Central Board of the Reserve
Bank nominated by the Governor as members.
• Functions and Powers: The Board performs the
functions and exercises the powers of supervision and
inspection under the Reserve Bank of India Act, in
respect to different banking companies.
• The Board is assisted by the department of supervision.
• The Board has to report to the Central Board on half
yearly basis.
• The Board meets on a monthly basis, with at least one
meeting in a month.
 WINDING UP – AMALGAMATION AND MERGERS OF
BANKS
• A banking company may be amalgamated with another
banking company as per BR Act. 1949
• The banking companies have to prepare a scheme of
amalgamation.
• The draft copy of the scheme of amalgamation
• covering terms and conditions
• needs to be placed separately by the companies
• to their shareholders while each shareholder needs to
be given notice.
• The scheme of amalgamation should be approved by a
• resolution passed by majority of members representing
• two-thirds in value of the shareholders of each
company present in person or by proxy.
• The order of the sanction of amalgamation by Reserve
Bank will be the conclusive proof of amalgamation.
• In case the Central Government orders amalgamation
of two companies, such amalgamation would take
place after consultation with the Reserve Bank
 Winding up by High Court
• The High Court may order winding up of a banking company
on account of
• (a) The banking company is unable to pay its debts
• (b) An application of winding up had been made by the
Reserve Bank under the provisions of the Banking Regulation
Act (Sec37 and 38)
• The RBI is to make an application for winding up (under Sec
38 of BR Act) and under Sec 35 (4) if directed by the Central
Government.
•Central Government may give
•such direction winding up based on
• the report of inspection or scrutiny made by
• the Reserve Bank, and
• account of the situation that
• the affairs of the bank are being conducted
•to the detriment of the interests of the
depositors.
• In the following circumstances, the Reserve Bank of
India can apply for winding up of a banking company.
• – Non- compliance with the requirements of Sec 11
regarding minimum paid up capital and reserves.
• – Prohibition to accept fresh deposits under Sec 35(4) of
the Banking Regulation Act or Sec 42 (3A)(b) of the
Reserve Bank of India Act
• – Failure to comply with the requirements of the
applicable provisions of the Banking Regulation Act and
the Reserve Bank of India Act
• SEBI Act, 1992 :
• Securities and Exchange Board of India (SEBI)
was first established in the year 1988 as a non-
statutory body
• for regulating the securities market.
• It became an autonomous body in 1992 and
more powers were given through an ordinance.
• Since then it regulates the market through its
independent powers.
SEBI is a body of six members comprising
• the chairman,
• two members from
• Amongst the officials of the ministers of central
government
• dealing with Finance and Law.
• Two members
• who are professional and have experience or special
knowledge relating to
• securities market.
• One member from RBI.
• OBJECTIVE-
• To protect the interest of investors in securities.
• To promote the development of, and to
• regulate the securities market and for
• matters connected therewith or incidental
thereto.
• To protects the Rights and interests of
investors,
• particularly individual investors.
• To prevents trading malpractices and aims at
• achieving a balance between
• self-regulation by securities industry and
• its statutory regulation.
• To facilitating an efficient mobilization and
• allocation of resources through
• the securities markets,
• stimulating competition, and
• encouraging innovations
 FUNCTIONS OF SEBI
. Here are some of the key functions of SEBI:--
1.Regulation and Oversight:
1. SEBI formulates regulations to govern the securities market in India.
2. It oversees the functioning of stock exchanges, depositories, and other market
intermediaries to ensure compliance with the regulations.
2.Investor Protection:
1. SEBI aims to protect the interests of investors by ensuring fair and transparent dealings
in the securities market.
2. It regulates and monitors the activities of market intermediaries to prevent fraudulent
and unfair trade practices.
3.Promotion of Fair Practices:
1. SEBI promotes fair practices and ethical conduct in the securities market.
2. It prohibits insider trading and fraudulent activities that could manipulate the marke
4.Development of the Securities Market:
1. SEBI takes initiatives to develop and regulate the securities market by introducing new
financial instruments, market segments, and trading mechanisms.
2. It encourages the adoption of technology to enhance market efficiency and accessibility.
5.Registration and Regulation of Intermediaries:
3. SEBI registers and regulates various market participants, including stockbrokers, sub-
brokers, portfolio managers, investment advisers, and mutual funds.
4. It establishes guidelines for their conduct and ensures compliance.
6.Regulation of Mutual Funds:
5. SEBI regulates and supervises the functioning of mutual funds to protect the interests of
investors.
6. It sets guidelines for the establishment and operation of mutual funds and monitors their
compliance.
7.Monitoring and Surveillance:
1. SEBI monitors the securities market through surveillance systems to detect and prevent
market manipulation, fraud, and other malpractices.
2. It takes timely action against entities violating regulations to maintain market integrity.
8.Educating Investors:
3. SEBI educates investors about market risks, investment opportunities, and financial
planning through various initiatives.
4. It promotes investor awareness to empower them to make informed investment
decisions.
9.Research and Training:
5. SEBI conducts research and provides training to market participants to enhance their
skills and knowledge.
6. It aims to improve the overall competence of market intermediaries.
10.Policy Advocacy:
SEBI interacts with the government and other
regulatory bodies to advocate policies that are
conducive to the development and growth of the
securities market.
• All these functions of SEBI collectively contribute
• to the stability, integrity, and efficiency of the
• securities market in India,
• fostering investor confidence and
• protecting the interests of all stakeholders.
• The Insurance Regulatory and Development
Authority (IRDA) is a national agency of
Government of India
• and is based in Hyderabad (Andhra
Pradesh).
• It was formed by an Act of Indian Parliament
known as IRDA Act 1999,
• which was amended in 2002 to incorporate
some emerging requirements.
• Mission of IRDA as stated in the act is
• "to protect the interests of the policyholders,
• to regulate,
• to promote and
• ensure orderly growth of
• the insurance industry
• and for
• matters connected therewith or incidental thereto."
section (1), the powers and functions of the Authority
shall include, -
• issue to the applicant a certificate of registration,
• renew, modify, withdraw, suspend or cancel such
registration
• protection of the interests of the policy holders in
matters
• concerning assigning of policy,
• nomination by policy holders, insurable interest
• settlement of insurance claim,
• surrender value of policy and other terms and
conditions of contracts of insurance;
• specifying requisite qualifications,
• code of conduct and practical training for
• intermediary or insurance intermediaries and
agents
• specifying the code of conduct for surveyors
and loss assessors;
• promoting efficiency in the conduct of
insurance business;
• promoting and regulating professional
organisations connected with the
• insurance and re-insurance busines
• levying fees and other charges for carrying out the
purposes of this Act;
• calling for information from, undertaking inspection of,
conducting enquiries and investigations including audit
of the insurers, intermediaries, insurance intermediaries
and other organisations connected with the insurance
business;
• Control and Regulation of the rates,
• advantages, terms and conditions that may be offered
by insurers in respect of
• general insurance business not so controlled and
regulated by the Tariff Advisory Committee under
section 64U of the Insurance Act, 1938 (4 of 1938)
• specifying the form and manner in which
books of account shall be maintained and
statement of accounts shall be rendered
by insurers and other insurance
intermediaries;
• regulating investment of funds by
insurance companies;
• regulating maintenance of margin of
solvency;
• Adjudication of disputes between insurers and
intermediaries or insurance intermediaries
• supervising the functioning of the Tariff Advisory
Committee;
• specifying the percentage of premium income of
the insurer to finance schemes for promoting and
regulating professional organisations.
• specifying the percentage of life insurance
business and general insurance business to be
undertaken by the insurer in the rural or social
sector.
• Forward Markets Commission
(FMC) headquartered at Mumbai,
• is a regulatory authority
• which is overseen by the Ministry of Consumer
Affairs, Food and Public Distribution, Govt. of
India.
• It is a statutory body set up in 1953 under the
Forward Contracts (Regulation) Act, 1952
• This Commission allows commodity trading in
22 exchanges in India, out of which three are
national level.
• Pension Fund Regulatory and
Development Aulthority :
• PFRDA was established by Government of India
on 23rd August, 2003.
• The Government has, through an executive
order dated 10th October 2003,
• mandated PFRDA to act as a regulator for the
pension sector.
• The mandate of PFRDA is development and
regulation of pension sector in India.
•THANK YOU