Chapter 5 :

ORGANIZATIONS FACILITATING BUSINESS

CA Foundation Course
Paper 4B – Business & Commercial Knowledge
Introduction
Regulatory Bodies

Non Funding Funding

Securities and Exchange Board of National Bank for Agriculture and

India Rural Development

Competition Commission of India

Reserve Bank Of India

Insurance Regulatory and

Development Authority of India
Securities and Exchange Board of India (SEBI):
• Established on 12th April 1988 but got its power from 1992, under the SEBI
Act passed on 30th January 1992.

• Established to regulate and develop the Indian capital market and protect
the interest of investors.

• SEBI has replaced Controller od Capital Issues which was established under
Capital Issue (Control) Act, 1947.

• Its headquarter is in Mumbai – Bandra Kurla Complex.

• Its regional offices are situated:
• North – New Delhi
• East – Kolkata
• South – Chennai
• West – Ahmedabad
Management of SEBI:
• SEBI is managed by a board comprising of:
• ONE Chairperson appointed by Central Government.
• TWO members from ministries of Central Government.
• ONE from Finance Ministry
• ONE from Ministry of Corporate Affairs
• ONE official from RBI, nominated by RBI.
• FIVE other member appointed by Central Government,
out of which at least THREE shall be whole time
members.

• SEBI needs to be responsive to needs of:

• Issuer of Security
• Investor
• Market Intermediaries
Functions of SEBI:
Legislative Draft regulations

Quasi (own) Judicial Pass judgement

Conduct investigation
Executive
and enforce action

Appeal against SEBI:

• First Appeal
• Securities Appelate Tribunal.
• Consists of THREE members and is headed by Justice
J.P. Devadhar (Former judge of Bombay High Court)
• Second Appeal
• Supreme Court
Powers of SEBI:
• For the discharge of its functions efficiently, SEBI has been vested with
the following powers:

• To approve by−laws of stock exchanges.

• To require the stock exchange to amend their by−laws.

• To inspect the books of accounts and call for periodical returns from
recognized stock exchanges.

• To inspect the books of accounts of a financial intermediary.

• To compel certain companies to list their shares in one or more

stock exchanges.
Additional Information (SEBI):

• Role in Business Facilitation:

• Enables firm to raise funds in the capital market and causes them
to institute effective mechanisms of corporate governance.

• Recent Landmark Developments:

• Issue of LODR 2015 and subsequent regulations for fostering good
corporate governance.
Competition Commission of India (CCI):
• It is a contest between organisms, individuals, businesses, etc.

Types of
Competition

Direct Indirect

Product that are close

Product having same function
substitutes compete against
compete against each other
each other

Eg: Mcdonald’s v/s Burger King, Eg: Petrol v/s Diesel, Restaurant
Pizza hut v/s Dominos v/s Ready to eat food packets
CCI:
• Benefits of Competition:
• Encourages Innovation
• Increases Efficiency
• Punishes the laggards
• Boosts choices, improves quality & reduces costs
• Ensures availability of goods and services in abundance

• Competition commission of India was established on 14th

October 2003 under the Competition Act, 2002 which was
further amended in 2007 called as Competition
(Amendment) Act, 2007.

• CCI has replaced MRTP Commission established under

MRTP Act, 1969

• CCI consists of ONE chairperson and SIX member appointed

by Central Government.
Objectives of CCI:
• To prevent practices having adverse effect on competition.
• To promote and sustain competition in markets.
• To protect the interest of consumers.
• To ensure freedom of trade.

Additional Information (CCI):

• Role in Business Facilitation:
• Ensures co-existence of large and small enterprises; prevents misuse
of dominant position in the market against other businesses.

• Recent Landmark Developments:

• CCI ordered investigation into the alleged anti competition practices of
E-commerce majors such as deep discounting, preferential listing and
promotion of certain labels and exclusive deals on certain products.
Reserve Bank of India (RBI) :

• RBI was established on 01-04-1935 under the provision of the RBI Act 1934.

• Its ownership was originally private but is owned fully by the Government
of India since 1949.

• Its central office was initially in Calcutta which later was moved to Mumbai
in 1937.

• Affairs of the RBI are governed by the Central Board of Directors appointed
by the Government of India.
Role of RBI:
• RBI being the apex monetary institution of India plays an important role in
strengthening, developing and diversifying the country’s economical and
financial structure.
• RBI is responsible for:
1. Maintenance of economic stability and assisting growth of economy.
2. Controlling the countries monetary policy.
3. Development of adequate and sound banking system, growth of
organized money and capital market.
4. Keeping inflationary trend under control and see that the priority
sector (agriculture, exports & small industries) get credit (loan) at a
cheaper rate.
5. Protecting market for government securities.
• RBI acts as an advisor to government in economic and financial policies.
• Also acts as a friend, philosopher and guide to commercial banks.
• RBI represents the country in International Economic Forums.
Functions of RBI:
1. Issuer of Currency
• RBI is the only authority to issue currency notes other than one rupee
notes, coins and subsidiary coins.
2. Banker to Government:
A) For Central Government: B) For State Government:

Do all general banking business Do all general banking business

Sell treasury bills (same as zero

Give advances repayable in 90 days
coupon bonds)

Give advances repayable in 90 days

C) Manage public debt and issue new loans.

E) Actively operates in gilt edged markets meaning high quality debt
security with high credit worthiness where chances of default in
repayment by borrower is very low.
E) Also advises government on Quantum timings and terms of new loans.
Functions of RBI:
3. Bankers Bank:
• RBI has the power to control and supervise commercial banking system
as per RBI act 1934 and Banking Regulation Act 1949.
• Schedule Banks maintain CRR with RBI and SLR with itself.
• RBI provides financial assistance to scheduled banks and state
cooperative banks such as:
• Discounting bills
• Loans and advances against securities
• Conducts inspection and calls for returns and other information from
commercial banks.
4. Custodian of Foreign Exchange Reserve:
• Maintain external value (value against foreign currency) of rupee
• Ensure normal short term fluctuation does not affect exchange rate.
• If Foreign reserves are inadequate, borrow money from International
Monetary Fund (IMF)
• Enter into exchange transactions on own and also behalf of government
• Administers exchange control and enforces provisions of FEMA.
Functions of RBI:
5. Controller of Credit:
• Credit plays an important role as it settles business transactions which
in turn affects purchasing power of public.
• Controlling credit is the principle function of RBI.
• RBI has the power to use all Qualitative and Quantitative method of
credit control.
6. Promotional Functions of RBI:
• Promoting banking habits among people.
• Mobilizing savings.
• Extending banking system territorily and functionally.
• Credit and monetary policy of economy.
• Provision of finance for agriculture, trade and small industries which is
now transferred to NABARD, EXIM and SIDBI respectively.
7. Collection and Publication of data:
• Collection and compilation of statistical information relating to banking
and other financial sectors.
Functions of RBI:
8. Business Facilitation:
• Currency Policy:
• Responsible for Remonetization and Demonetization.
• Credit Policy
• Does not fund any business but makes banking facility easy.
• Development of Financial system:
• Oversees functioning of Banking & NBFC.
Additional Information (RBI):

• Role in Business Facilitation:

• Direct role in regulation of banking and non-banking financial
intermediation business; indirectly influences the volume and
cost of credit to the business firms.

• Recent Landmark Developments:

• Remonetization (popularly known as demonetization) that banned
the currency of the then prevalent Rs. 500/- & Rs. 1000/- notes
and introduced notes of Rs. 2000/- denomination.
Insurance Regulatory and Development Authority
of India (IRDAI):
• IRDAI is an autonomous (independent) apex statutory body to regulate and
develop the insurance industry in India.

• Passed by the parliament in 1999.

• IRDAI allows:
• Private players to enter into insurance sector.
• FDI in private insurance  26%

• Insurance Bill passed in July 2014 raised the FDI  49%

• The primary duty of IRDAI as per section 14 is to regulate/promote and

ensure orderly growth of Insurance Business and Re-Insurance Business.
Missions of IRDAI:
Protect interest of and secure fair treatment of policyholders.

Speedy and orderly growth of insurance industry for benefit of

common man.

Provide long term funds for accelerating growth of economy.

Speedy settlement of genuine claims/prevent insurance fraud

and other malpractices.

Set/promote/monitor & enforce high standards of integrity (honesty),

financial soundness, fair dealing & competence (capability).
Missions of IRDAI:
Effective grievances (complaint) redressal (correct) machinery.

Promote fairness/transparency and orderly conduct (properly) in

financial markets dealing with insurance.

Build reliable management information system to enforce high

standards of financial soundness amongst market players.

Take action where such standards are inadequate or ineffectively

enforced.

Optimum amount of self regulation in day to day working of the

industry.
Powers & Functions (Section 14) of IRDAI:
• Requisite (required) qualifications code of conduct and
practical training for intermediary/insurance
intermediaries and agents.
• Percentage of life insurance business & general
insurance business to be undertaken by insurer in
rural/social sector.
Specifying • Code of conduct for surveyors and loss surveyors
(people who investigate and decide amount of loss).
• Form and manner in which BOA shall be maintained
and statements of accounts shall be rendered (given)
by insurers and other insurance intermediaries.
• Percentage of premium income of the insurer to
finance schemes.

• Efficiency in conduct of business.

Promoting • Professional organization connected with insurance and
re-insurance business.
 Powers & Functions (Section 14) of IRDAI:
• Investment of funds by insurance companies.
Regulating • Maintenance of margin solvency (value by which assets
of insurance company are more than its liabilities)

• Levying fees and other charges for carrying out

purpose of this act.
• Calling for information forms / audit on insurers /
intermediaries / and others.
Others • Control and regulate the rates / advantages / terms and
conditions of insurance business.
• Adjudicating disputes between insurers and
intermediaries.
• Supervise the functioning of Tariff Advisory Committee.
Additional Information (IRDAI):

• Role in Business Facilitation:

• Insurance is an important aid to business and IRDA ensures that
this important service efficiently enables transfer of business risks.

• Recent Landmark Developments:

• IRDAI came up with guidelines for Corona Kavach, Cvoid19-
specific health insurance policy.
National Bank of Agriculture & Rural
Development of India (NABARD):
• NABARD is the apex development bank in India.
incorporated
• Its headquarter is situated in Mumbai.
• It is entrusted with policy, planning and operations relating to the credit for
agriculture and other economic activities in rural areas.
• NABARD is active in developing financial inclusion policy.
• Financial inclusion is an effort to make everyday financial services
available to more of the world's population at a reasonable cost.
• Also it is a member of alliance for financial inclusion.
• NABARD has partnered with over 4000 organizations for rural
development.
• NABARD’s main focus is in developing cottage, small village and rural
industries.
• It reaches out to allied economies and promotes integrated development.
NABARD:
• NABARD refinances:
• State co-operative agriculture and rural development bank (SCARDB’s)
• State co-operative banks (SCB’s)
• Regional rural banks (RRB’s)
• Commercial banks.
• It encourages:
• Indian banks to lend money to Self Help Groups (SHG’s)
• Eg: Few household ladies coming together to do a small scale
business like sewing, making bags etc.
• Also promotes:
• Watershed Development
• Tribal Development
• Farm Innovation
Role of NABARD:

• Monitors and evaluates projects for which it provides finance.

• Develops and provides training facilities for rural development.

• Manages acquisition of talent through IBPS–CWE. (Institute of

Banking Personnel Selection – Common Written Exam)

• Does all that is required for rural and agricultural

development.
Important Terminologies:
• Business Facilitator – They are intermediaries that support business activities by
providing various facilities such as identification of borrowers, preliminary
information for acquiring loans, creating awareness about products, management
of money, etc.
• Freight Forwarder – A person or company who organizes shipments for the
business firms to get goods from the manufacturer or producer to a market,
customer or final point of distribution.
• Business Incubator – It helps create and grow young businesses by providing them
with necessary support and financial and technical services.
• Business accelerator – It helps a budding business quickly launch a product and
put it in the fast lane of commercial success;
• Financial consultant – An individual or a company who advises the business on the
various sources of finance - domestic as well as foreign; debt as well as equity;
short-term as well as long-term and helps it mobilize its requirements too.
• Merchandiser – Person who helps the business e.g. a fashion house obtains its
supplies- fabrics, accessories, etc.