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Bhagwan Mahavir College of Management A Study On Discuss the role of regulatory bodies operating in the Indian financial syatem

with examples. F.Y.M.B.A A (SEM-II) Sub: Financial Management Submitted By: Ajay Beladiya (04) Bharti Bansu (03) Submitted To:Prof. Drashti Shah Year:-2013-2014

India has a financial system that is regulated by independent regulators in the sectors of banking, insurance, capital markets, competition and various services sectors. In a number of sectors Government plays the role of regulator. Ministry of Finance, Government of India looks after financial sector in India. Finance Ministry every year presents annual budget on February 28 in the Parliament. The annual budget proposes changes in taxes, changes in government policy in almost all the sectors and budgetary and other allocations for all the Ministries of Government of India.The annual budget is passed by the Parliament after debate and takes the shape of law.

Financial Regulatory Bodies

1.Securities and Exchange Board of India (SEBI) 2. National Stock Exchange 3. Bombay Stock Exchange (BSE) 4. Reserve Bank of India (RBI) 5. Foreign Investment Promotion Board

1. Securities and Exchange Board of India (SEBI)

Securities and Exchange Board of India (SEBI) established under the Securities and Exchange aboard of India Act, 1992 is the regulatory authority for capital markets in India. India has 23 recognized stock exchanges that operate under government approved rules, bylaws and regulations. These exchanges constitute an organized market for securities issued by the central and state governments, public sector companies and public limited companies. The Stock Exchange, Mumbai and National Stock Exchange are the premier stock exchanges. Under the process of de-mutualization, these stock exchanges have been converted into companies now, in which brokers only hold minority share holding. In addition to the SEBI Act, the Securities Contracts (Regulation) Act, 1956 and the Companies Act, 1956 regulates the stock markets.

Objectives of SEBI
It tries to develop the securities market. Promotes Investors Interest. Makes rules and regulations for the securities market.

Rloe of SEBI
Regulates Capital Market Checks Trading of securities. Checks the malpractices in securities market. It enhances investor's knowledge on market by providing education. It regulates the stockbrokers and sub-brokers. To promote Research and Investigation.

Registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with securities markets in any manner Registering and regulating the working of including mutual funds Promoting and regulating self-regulatory organisation Prohibiting fraudulent and unfair trade practices relating to securities markets. Promoting investors' education and training of intermediaries of securities markets. Prohibiting insider trading in securities. Regulating substantial acquisition of shares and take-over of companies calling for information from, undertaking inspection, conducting inquiries and audits of the intermediaries and self- regulatory organizations in the securities market Performing such functions and exercising such powers under the provisions of the Securities Contracts (Regulation) Act, 1956(42 of 1956), as may be delegated to it by the Central Government. Levying fees or other charges for carrying out the purposes of this section.

National Stock Exchange (NSE)

In the year 1991 Pherwani Committee recommended to establish National Stock Exchange (NSE) in India. In 1992 the Government of India authorized IDBI for establishing this exchange. In National Stock Exchange there is trading of equity shares, bonds and government securities. India's Stock Exchanges particularly National Stock Exchange has achieved world standards in the recent years. Presently there are 24 stock exchanges in India, out of which 20 have exchanges National Stock Exchange (NSE), Over the Counter Exchange of India Ltd. (OTCEI) and Inter-connected Stock Exchange of India limited (ISE) have nationwide trading facilities.

New NSE Reference Rates

Both MIBOR (Mumbai Inter Bank Offer Rate) and MIBID (Mumbai Inter Bank Bid Rate) are the two new references rates of the National Stock Exchanges. These two new reference rates were launched on June 15, 1998 for the loans of interbank call money market. Both MIBOR and MIBID work simultaneously. The MIBOR indicates lending rate for loans while MIBID is the rate for receipts.

Roles and Responsibilities

Bombay Stock Exchange (BSE)

Bombay Stock Exchange is one of the oldest stock exchanges in Asia was established in the year 1875 in the name of "The Native Share & Stock Brokers Association".Bombay Stock Exchange is located at Dalal Street, Mumbai, India.

It got recognition in 1956 from the Government of India under Securities Contracts (Regulation) Act, 1956. Presently BSE SENSEX is recognized over the world. Trading volumes growth in the year 2004-05 has drawn the attention over the globe. As to the statistics, the total turnover from BSE transacation as in June 2006 is calculated at 72013.36 crores.

Reserve bank of India (RBI)

Reserve Bank of India is the apex monetary Institution of India. It is also called as the central bank of the country. The bank was established on April1, 1935 according to the Reserve Bank of India act 1934. It acts as the apex monetary authority of the country. The Central Office of the Reserve Bank has been in Mumbai since inception. The Central Office is 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 is as follows:

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. The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act.

Foreign Investment Promotion Board

The Foreign Investment Promotion Board is a special agency in India dealing with the matters relating to Foreign Direct Investment. This special board was set up with a view to raise the volume of investment to the country. The sole aim of the board is to create a base in the country by which a larger volume of investment can be drawn to the country.

On 18 February 2003, the board was transferred to the Department of Economic Affairs (DEA) Ministry of Finance.Important functions of the Board are as follows;
Formulating proposals for the promotion of investment. Steps to implement the proposals. Setting friendly guidelines for facilitating more investors. Inviting more companies to make investment

With regards to the structure of the Foreign Investment Promotion Board, the board comprises the following group of secretaries to the Government :
Secretary to Government Department of Economic Affairs, Ministry of FinanceChairman. Secretary to Government Department of Industrial Policy and Promotion, Ministry of commerce and Industry. Secretary to Government, Economic Relations, Ministry of External Affairs. Secretary to Government, Ministry of Overseas Indian Affairs. In the recent years, particularly after the implementation of the new economic policy, the Government has undertaken many steps to attract more investors for investing in the country. The new proposals for the foreign investment are allowed under the automatic route keeping in view the sectoral practices.