REGULATORY BODIES OF INDIA

(RBI AND SEBI)

REPORT BY-
D. SRAVANI
SHEETAL PRACHI
REGULATORY BODIES OF INDIA

There are many financial institutions in India and we have many regulators for
regulating them in order to assure the proper functioning of the financial system
in our nation. Now, the next questions is what is financial institution? Well!
Any organization which deals in money is a financial institutions. We will be
discussing each and every one of them because it is one of the important topic
from exam point of view as well as from interview point of view.
Reserve Bank of India (RBI)

It is one of the financial regulators in India and it regulates everything related to

money. It is also known as the Central Bank Of India as well as the lender of
last resort because of the impeccable function that it performs.  It was
established on April 1, 1935 in accordance with the provisions of the Reserve
Bank of India Act, 1934. It regulates all the commercial banks in India like
public sector banks, private sector banks, RRBs, Cooperative banks and all type
of non-banking financial companies. It forms monetary policy and control the
Inflation in the country with the help of monetary policy.
Securities and Exchange Board of India (SEBI):

SEBI is another financial regulator in India which was established in the year
1988. It basically regulates the security market in Indian territory. Any company
which wants to be a part of the security market or wants to invest in the security
market has to follow the guidelines laid by SEBI.

Insurance Regulatory and Development Authority of India

(IRDAI):
The Insurance Regulatory and Development Authority (IRDA) is a national
agency of the Government of India which is a financial regulator of all private
sector and public sector insurance companies in India. It regulates the
functioning of insurance companies to direct them to work in the public interest.
It was established by an act of IRDA Act 1999, which was amended in 2002 to
incorporate some emerging requirements. The Head-Quarter is in Hyderabad.
Pension Fund Regulatory and Development Authority
(PFRDA):

Pension Fund regulatory is a pension related authority and handles all the
matters related to this sector. It   was established in the year 2003 by the Indian
Government and authorized by the Finance Ministry. Its main function is to
promote income security of old age by regulating and also developing pension
funds. PFRDA is also responsible for the appointment of different other
intermediate agencies like Pension Fund managers.
Forward Markets Commission:

Forward Markets Commission main objective is to advise the Central

government on matters of the Forwards Contract Act, 1952. It is the chief
regulator of the commodity (MCX, UCX, NMCE etc) of the Indian future
market. It’s headquarter is located in Mumbai Working in collaboration with the
Finance Ministry.

Factors Affecting Financial System

 Demand and supply is one of the factor.

 The lack of right and constructive approach to rule-making

 Financial and digital literacy among the people of the nation.

 Monopoly in the market.

 Launching innovative solutions for Supporting public good investments

like the unified payments interface (UPI), etc

Ways to Improve Financial Sector

 Financial Inclusion among the people of the nation.

 Revising the existing policies for proper functioning of the system.

 Enabling the transparency in the process of price discovery by the market

determination of interest rates that improves allocate efficiency of

resources.

 Giving the autonomous status to institutions.

Reserve Bank Of India

Meaning of RBI

The Reserve Bank of India (RBI) is the central bank of India, which was
established on Apr. 1, 1935, under the Reserve Bank of India Act. The Reserve
Bank of India uses monetary policy to create financial stability in India, and it is
charged with regulating the country’s currency and credit systems.

History of RBI
The Reserve Bank of India is the central bank of the country entrusted with
monetary stability, the management of currency and the supervision of the
financial as well as the payments system.

Established in 1935, its functions and focus have evolved in response to the
changing economic environment. Its history is not only intrinsically interwoven
with the economic and financial history of the country, but also gives insights
into the thought processes that have helped shape the country's economic
policies. Here we present some facets of the Bank's history for the layperson.
We look forward to the viewer's suggestions and comments.

Furthermore, a fascinating feature of the RBI was that at its very origin, the
Bank was viewed as assuming a unique function with regards to advancement,
particularly Agriculture. At the point when India initiated its plan attempts, the
advancement function of the Bank came into the centre, particularly in the
sixties when the Reserve Bank, from various perspectives, initiated the idea and
practice of using finance to catalyze improvement.
 
The Bank was likewise instrumental in institutional development and helped set
up institutions like the Deposit Insurance and Credit Guarantee Corporation of
India, the Unit Trust of India, the Industrial Development Bank of India, and so
on to construct the monetary infrastructure of the nation. With advancement, the
Bank's centre has moved back to core central banking purposes such as
Monetary Policy, Bank Supervision and Regulation, and Overseeing the
Payments System.
 Objectives of RBI
Before jumping towards the objectives of the Reserve Bank of India, let's see
what the preamble explains the objectives of RBI. The Preamble to the Reserve
Bank of India Act, 1934 tells about the objectives of the Reserve Bank as “to
regulate the issue of Banknotes and the keeping of reserves to secure monetary
stability in India and generally to operate the currency and credit system of the
country to its advantage.” Moreover, 
 
 The Reserve Bank of India was set up with the primary maxim of managing all
the banks in India. The goal was to hold under control the reserves as well as
the issue of banknotes. 
 Along these lines, it was done to make sure about the financial stability and in
this way to work the credit system and currency of the nation for its potential
benefit.
 The essential objective for the Reserve Bank of India is to direct the different
financial functions for India in the money market. Therefore, they concentrate
especially on issuing new notes.
 Consequently, the RBI was set up with the point of being a banker's bank and
similarly the bank for the government. It aimed to expand the economic
progress of the nation through different structures and economic policies of the
government. 
 In simple words, we can say that it's fundamental motive is to encourage the
planned system of growth of the Indian economy.
 
 
Functions of RBI
 
Now, let's move towards the functions of the Reserve Bank of India. The
fundamental functions of the RBI are to manage the money supply in the nation.
Similarly, it has been coordinated to deal with agriculture, industry, and many
more. The RBI is likewise answerable for the support of the external value of
the rupee. 
 
According to the RBI Act 1934, it performs 3 kinds of functions as that of some
other central bank. So, here we will read in detail about these three types of
functions.
1. Banking Functions
 
 Bank of Issue- The Reserve Bank has a different Issue Department which
is empowered with the issue of currency notes. Under section 22 of the
RBI Act, it has the exclusive right to issue currency notes of numerous
groups except one rupee note as it is issued by the Ministry of Finance. The
assets and liabilities of the Issue Department are kept separate from those
other Banking Department.
 
 Banker to Government- Now, coming towards the second significant
function of the Reserve Bank of India which is to work as a Government
banker, agent, and adviser. It fulfils all the banking processes of the State
and Central Government. It also tenders valuable suggestions to the
government on topics related to economic and financial policy and even
governs the public debt of the government.
 
  Bankers’ Bank- The Reserve Bank of India acts as the banker's bank and
it lends money to all the commercial banks of the country. As indicated by
the outlay of the Banking Companies Act of 1949, each scheduled bank
was needed to keep up with the Reserve Bank a money balance equal to 5
% of its demand liabilities and 2 % of its time liabilities in India. In simple
words, we can say that RBI fulfils the same functions for the other
commercial banks as the other banks fulfil their clients.
  
 Controller of Credit- We can say that the RBI is the controller of credit as
it can impact the volume of credit made by banks in India. It can do as such
by changing the Bank rate or through open market tasks. RBI uses two
techniques to prevent the extra flow of wealth in the economy that is
quantitative and qualitative techniques.
 
 Custodian of Foreign Reserve- The Reserve bank must balance out the
outer estimation of the public cash. The Reserve Bank keeps gold and
foreign currencies as reserves against note issues and also meets the
unfavourable offset of instalments with different regions. Also, it oversees
foreign currencies by the controls forced by the administration.
 
 
1. Supervisory Functions
 
The Reserve Bank Act, 1934, and the Banking Regulation Act, 1949 have
given the RBI vast powers of supervision and command over the business
and co-operative banks, connecting to licensing and foundations, liquidity
of their assets, recreation, and liquidation. The supervisory functions of the
RBI have assisted a lot in expanding the standard of banking in India.
 
 
1. Promotional Functions
 
 With monetary development accepting a new urgency since freedom, the
scope of the Reserve Bank's functions has consistently broadened. The
Bank now plays out an assortment of improvement and promotional
functions, which, at once, were regarded as out of the typical scope of
central banking.

Contribution to GDP Growth By Components-

 
Conclusion
Recently, former governor Subbarao said, “I believe the RBI under governor
(Urjit) Patel first and then under (Shaktikanta) Das acted with extreme alacrity
and haste to defuse the NBFC bubble and then to prevent the bubble from
snowballing into a crisis”.
 
RBI or Reserve Bank of India has a great role in financial markets. You may not
know that the Central Office of the Reserve Bank was originally founded in
Kolkata but was permanently moved to Mumbai in 1937. So, after reading the
blog you must have understood about Reserve Bank of India, how RBI
functions, its objectives, interesting history, and several other facts related to
Reserve Bank of India.
Securities And Exchange Board Of India

INTRODUCTION
The Securities and Exchange Board of India was established as an interim
administrative body on 12 April 1988 by the Government of India.
Its main objective was to promote orderly and healthy growth of securities and
to provide protection to the investors.

The Ministry of Finance of the Government of India has overall administrative

control over its functions. On 30th January 1992, it was given a statutory status
through an ordinance, which later on was replaced by Act of Parliament known
as Securities and Exchange Board of India Act, 1992. SEBI is considered as
watchdog of the securities market.
Reasons for the Establishment of SEBI:
During 1980s, there was tremendous growth in the capital market due to
increasing participation of public. This led to many malpractices like Rigging of
prices, unofficial premium on new issues, violation of rules and regulations of
stock exchanges and listing requirements, delay in delivery of shares etc. by the
brokers, merchant bankers, companies, investment consultants and others
involved in the securities market.

This resulted in many investor grievances. Because of lack of proper penal

provision and legislation, the government and the stock i exchanges were not
able to redress these grievances of the investors. This (necessitated a need for a
separate regulatory body, and hence Securities and Exchange Board of India
was established.

Role of SEBI:
The main objective is to create such an environment which facilitates efficient
mobilization and allocation of resources through the securities market. This
environment consists of rules and regulations, policy framework, practices and
infrastructures to meet the needs of three groups which mainly constitute the
market i.e. issuers of securities (companies), the investors and the market
intermediarie

(i) To the Issuers:

SEBI aims to provide a market place to the issuers where they can confidently
look forward to raise the required amount of funds in an easy and efficient
manner.

(ii) To the Investors:

SEBI aims to protect the right and interest of the investors by providing
adequate, accurate and authentic information on a regular basis.

(iii) To the Intermediaries:

In order to enable the intermediaries to provide better service to the investors
and the issuers, SEBI provides a competitive, professionalised and expanding
market to them having adequate and efficient infrastructure.

Functions of SEBI:
SEBI primarily has three functions-
 1. Protective Function
2. Regulatory Function
3. Development Function
Protective Functions
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
Regulatory Functions
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

Development Functions

SEBI 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

Objectives of SEBI:
Following are the main objectives of SEBI:
1. Protection:
To guide, educate, and to protect the rights and interests of the investors.

2. Competitive and Professional: Establishing a code of conduct

To make the intermediaries like merchant bankers, brokers etc. competitive and
professional by regulating their activities and developing a code of conduct.

3. Prevention of Malpractices:
To prevent trading malpractices.

4. Balancing:
To establish a balance between statutory regulation and self-regulation by the
securities industry.

5. Orderly Functioning To promote orderly functioning of stock exchange and

securities industry by regulating them.


Organizational Structure of SEBI

There are 9 members on the SEBI:

(i) A Chairman appointed by the Government,

(ii) Two members from amongst officials of the Ministry of Government of

India dealing with Finance and administration of the Companies appointed by
the Government,

(iii) One member from amongst the officials of, and nominated by RBI,

(iv) Five members of whom at least two should be whole time members
nominated by the Government. Its general superintendence, direction and
management are vested in a Board of Members which may exercise all powers
and do all acts/things which may be exercised/done by the SEBI.

The Chairman also has powers to general superintendence and direction of its
affairs and may also exercise all powers and do all acts/things exercisable/done
by it..

The Central Government reserves the right to terminate the services of the
Chairman or any member of the Board. SEBI has its head office in Mumbai and
regional offices at Delhi, Calcutta and Chennai.

Powers Of SEBI
. Powers relating to stock exchanges & intermediaries

SEBI has wide powers regarding the stock exchanges and intermediaries

dealing in securities. It can ask information from the stock exchanges and
intermediaries regarding their business transactions for inspection or scrutiny
and other purpose.

2. Power to impose monetary penalties

SEBI has been empowered to impose monetary penalties on capital

market intermediaries and other participants for a range of violations. It can
even impose suspension of their registration for a short period.

3. Power to initiate actions in functions assigned

SEBI has a power to initiate actions in regard to functions assigned. For
example, it can issue guidelines to different intermediaries or can introduce
specific rules for the protection of interests of investors.

4. Power to regulate insider trading

SEBI has power to regulate insider trading or can regulate the functions of
merchant bankers.

5. Powers under Securities Contracts Act

For effective regulation of stock exchange, the Ministry of Finance issued a

Notification on 13 September, 1994 delegating several of its powers under the
Securities Contracts (Regulations) Act to SEBI.

SEBI is also empowered by the Finance Ministry to nominate three members on

the Governing Body of every stock exchange.

6. Power to regulate business of stock exchanges

SEBI is also empowered to regulate the business of stock exchanges,

intermediaries associated with the securities market as well as mutual funds,
fraudulent and unfair trade practices relating to securities and regulation of
acquisition of shares and takeovers of companies.

SEBI Regulations
SEBI enlists laws and regulations according to the SEBI Act, 1992. All the laws
should be strictly followed by all who are directly or indirectly linked with the
stock market and other securities in India.
These regulations ensure that all the trade over stock exchanges and other
securities are done in a secured and flawless manner.
Here is the brief information on some of the highlighted SEBI laws and
regulations.
SEBI REGULATIONS ON INSIDER TRADING 
The SEBI (Prohibition of Insider Trading) Regulation, 2015 introduces new
regulations and provisions that prohibit the trading of securities by the insiders.
In all, it strengthens the legal framework thus bringing more perfection and
security in trade.
LODR REGULATION 
SEBI Listing Obligations and Disclosure Requirement, LODR Regulation offer
the provision of dealing with the mandatory compliances that are being made by
the listed companies registered with the stock exchanges of India.
ICDR REGULATION 
SEBI ICDR Regulation or Issue of Capital and Disclosure Requirements was
introduced in 2009. It governs the provision for dealing with the matter related
to capital and disclosures made by the listed companies of India.
This regulation is meant for making the trade secured, flawless and beneficial
for both the listed companies and the investors.
SEBI SAST REGULATION 
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 is
formulated to resolve the issues related to the legal and fair recovery of stock
and takeovers.

SEBI Guidelines-
SEBI also has to adhere to a list of SEBI guidelines, pertaining to areas such as-
 Employee Stock Option schemes
 Disclosure and Investor Protection norms
 Legal Proceedings
 Anti-money laundering norms
 Listing and delisting of securities
 Opening of trading terminals overseas

CONCLUSION
SEBI was introduced to bring fairness and securities in trading. Since its
establishment, it introduces new laws and regulations for bringing
improvement. This upgrades the stock market and makes it a more secure and
flawless for trading.
The best change occurred in the trading market over the year is the replacement
of physical trading with electronic trading.
It strengthens the regulatory system of the stock market. This brings
empowerment in the Indian Securities market which attracts more investors
towards trading platform.
Also, its role in the regulation of business involved in stock exchange protects
the interests of investors in trade.
In all, SEBI is a powerful body that reduces the risks of fraud in the stock
exchanges and capital market.

Sources -
Wikipedia
Bankers adda247
RBI Official Website
SEBI Official Website
Business Management Ideas
E learn Markets

BY-
D. SRAVANI
SHEETAL PRACHI