Financial Instuitions: Regulatory Bodies in India

By Stuti Mishra|Updated : June 19th, 2022

Financial sector is the most crucial part of economy and is made up of firms and institutions that provide financial services to commercial and retail customers. Financial sector in India, is regulated with the help of certain independent regulators. We have come up with the with an article on Regulatory Bodies of the Financial Sector in India. 

Table of Content

RBI (Reserve Bank of India)

Regulator:  RBI is the regulator of Banking & Finance & Money Market

Quick Facts

  • RBI is the apex monetary institution of India
  • It is also known as India's Central Bank 
  • RBI was established in April 1935 with a share capital of Rs. 5 crores on the recommendations of the Hilton Young Commission in accordance with the RBI Act, 1934.
  • The Central Office of RBI was initially established in Kolkata but was permanently moved to Mumbai in 1937
  • It was nationalized on 1 January 1949
  • RBI has 27 regional offices along with 4 sub-offices.
  • Following are the fully owned subsidiary of RBI:
    (i) Deposit Insurance and Credit Guarantee Corporation of India (DICGC)
    (ii) Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
    (iii) National Housing Bank (NHB)
  • 1st Governor of RBI: Sir Osborne Smith
  • 1st Governor of RBI after nationalization: C. D. Deshmukh
  • 1st women Deputy Governor of RBI: K.J.Udeshi.
  • RBI Emblem: Tiger and Palm tree

Officials of the Central Board

Official Directors- Governors and not more than four deputy governors.

  • Current Governor: Shaktikanta Das
  • Deputy GovernorM. K. Jain, B.P. Kanungo, and M.D Patra. 
Non-Official Directors
  • Nominated by Government: 10 Directors from various fields and 2 government Official
  • Others: 4 Directors- one each from 4 local boards

Board for Financial Supervision (BFS)

  • RBI performs its function under the guidance of the Board of financial supervision.
  • Constituted: November 1994.
  • The Board is constituted by co-opting four Directors from the Central Board and is chaired by the Governor.

Important Acts Administered by RBI

  • Reserve Bank of India Act, 1934
  • Public Debt Act, 1944/Government Securities Act, 2006
  • Government Securities Regulations, 2007
  • Banking Regulation Act, 1949
  • Foreign Exchange Management Act, 1999
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
  • Credit Information Companies(Regulation) Act, 2005
  • Payment and Settlement Systems Act, 2007
  • Payment and Settlement Systems Regulations, 2008 and Amended up to 2011 and BPSS Regulations, 2008
  • The Payment and Settlement Systems (Amendment) Act, 2015 
  • Factoring Regulation Act, 2011

Functions of RBI

1. RBI is the sole authority for the issue of currency in India other than one rupee notes and subsidiary coins. RBI is also called “Bank of Issue”.

Note:

  • Under the Section 22 of the RBI Act 1934, RBI has the sole right to issue Bank notes of all denominations except one rupee note.
  • The One Rupees notes, and coins are issued by the Central Govt., The Ministry of Finance.

2. Banker to the Government – As a Banker to the Govt. RBI performs the following functions:

  • It accepts money, makes payments, and also carries out their exchange and remittances for the Govt.
  • It makes loans and advances to the States and local authorities.
  • It also sells treasury bills to maintain liquidity in the economy.
  • It makes ways and means advances to the Governments for 90 days.
  • It acts as an adviser to the Government on all monetary and banking matters.

3. Banker’s Bank: The RBI has extensive power to control and supervise the commercial banking system under the RBI Act, 1934, and the Banking Regulation Act, 149

4. Custodian of foreign reserves: It functions as the custodian and manager of forex reserves, and operates within the overall policy framework agreed upon with the Government of India

5. Controller of credit: Credit control is generally considered to be the principal function of the Central Bank. 

6. Lender of last resort: Lender of the last resort means “Central Bank (RBI) helps all the commercial and other banks in a time of financial crises.

SEBI (Securities and Exchange Board of India)

SEBI is the regulator of Capital Market and Securities (Stock) in India.

  • Established in April 1992 under the SEBI Act, 1992.
  • Regulator for the securities market in India.
  • It is a statutory body.
  • Headquarters- Mumbai
  • Present Chairman- Ajay Tyagi
  • Headquarters: Mumbai
  • The Forwards Market Commission, the commodities market regulator, was merged with the Securities and Exchange Board of India in December 2015.

IRDAI (Insurance Regulatory and Development Authority of India)-

IRDAI is the regulator of the insurance sector in India.

  • Based on the Insurance Regulatory and Development Authority Act, 1999.
  • Established on the recommendation of the Malhotra Committee report of 1994.
  • Present Chairman: Subhash Chandra Khuntia
  • Headquarters: Hyderabad, Telangana
  • The Body consists of 10 members-
    (a) Chairman (b) Five full-time members (c) Four part-time members.

NABARD (National Bank for Agriculture and Rural Development)

NABARD is the regulator of the Financing Rural Development sector in India.

  • Established in July 1982 under NABARD Act 1981 on the recommendation of B. Sivaraman Committee.
  • It replaced RBI’s Agriculture Credit Department and Rural Planning and Credit cell.
  • It is a specialized bank for Agriculture and rural development in India.
  • It is fully owned by the Government of India
  • Rural Innovation Fund and Rural Infrastructure Development Fund have been set under NABARD.
  • Important Functions-
    (i) Recommends about licensing for RRBs and Cooperative banks to RBI.

    (ii) Refinances the financial institutions which finance the rural sector.
  • Present Chairman: Govinda Rajulu Chintala
  • Headquarter: Mumbai

SIDBI (Small Industries Development Bank of India)

SIDBI is the regulator of Financing Micro, Small, and Medium-Scale Enterprises.

  • Established: April 1990 under SIDBI Act, 1989.
  • Provide refinance facilities and short-term lending to industries and MSMEs.
  • It was incorporated initially as a wholly-owned subsidiary of IDBI.
  • Now, it is a fully independent body.
  • Present Chairman: Mohammad Mustafa
  • Headquarter: Lucknow, Uttar Pradesh

Associates/ subsidiaries of SIDBI
(i) Credit Guarantee Fund Trust for Micro and Small Enterprises- provides guarantees to banks for collateral-free loans extended to SME.

(ii) SIDBI Venture Capital Ltd

(iii) SME Rating Agency of India Ltd. (SMERA)- Provides composite ratings to SME.

(iv) ISARC - India SME Asset Reconstruction Company in 2009, as specialized entities for NPA resolution for SME.

(v) MUDRA Bank

PFRDA – Pension Fund Regulatory & Development Authority

PFRDA is the regulator of the Pension sector in India.

  • Established on August 23, 2003.
  • Aim to promote, regulate and develop the pension sector in the country.
  • Present Chairman: Supratim Bandyopadhyay
  • Headquarters: New Delhi
  • Intermediate agencies of PFRDA such as
  • Central Record Keeping Agency (CRA), Pension Fund Managers, Custodian, NPS Trustee Bank, etc.
  • PFRDA comes under the jurisdiction of the Ministry of Finance.

NHB – National Housing Bank

NHB is a regulator of Financing Housing in India.

  • Established on 9 July 1988 under the National Housing Bank Act, 1987.
  • Aim to operate as a principal agency to promote housing finance institutions both at local and regional levels.
  • Current MD & CEO: Dakshita Das
  • Present CMD: RV Verma
  • Headquarters: New Delhi
  • NHB is set up by the recommendations of the Dr. C. Rangarajan committee. 
  • NHB is a wholly-owned subsidiary of Reserve Bank of India.

EXIM (Export-Import Bank of India)

EXIM is a premier export finance institution in India.

  • Established in 1982 under the Export-Import Bank of India Act 1981.
  • CEO & Managing Director: David Rasquinha
  • Headquarters: Mumbai
  • Exim Bank is managed by a Board of Directors, which has representatives from the Government, Reserve Bank of India, the Export Credit Guarantee Corporation of India, a financial institution, public sector banks, and the business community.
  • It coordinates with the working of institutions engaged in financing the export and import of goods and services.

AMFI - Association of Mutual Funds in India

AMFI is a regulator of Mutual Funds in India.

  • Established on August 22, 1995
  • Chief Executive: N. S. Venkatesh 
  • Chairman: Nimesh Shah 
  • Headquarters- Mumbai
  • The organisation aims to develop the mutual funds market in India.

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FAQs

  • Some of the important functions of RBI have been mentioned below:

    1. It acts as a lender of last resort.
    2. It acts as a Banker to the Govt.
    3. It issues notes.
  • SEBI stands for Securities and Exchange Board of India. It regulates the security and commodity market under the ministry of Finance. It was established in 1992 and headquartered in Mumbai.

  • NABARD stands for National Bank for Agriculture and Rural Development. It is the apex regulator of rural and cooperative banks in India and is headquartered in Mumbai.

  • SIDBI stands for Small Industries Development Bank of India. It is the apex regulator of micro, small and medium enterprises in India. Its headquarters is located in Lucknow.

  • PFRDA stands for Pension Fund Regulatory and Development Authority. It is the apex regulator and supervisor of pensions in India and it is Headquartered in New Delhi.

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