Financial Regulators in India: Objectives, Regulators, Powers, Functions Commerce YouTube Lecture Handouts

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Financial Regulators in India: Objectives, Regulators, Powers, Functions | Commerce

Regulatory Agencies

Exercise regulatory or supervisory authority over a variety of activities and endeavors in India.

Financial Regulation

  • A form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the stability and integrity of the financial system.
  • This may be handled by either a government or non-government organization.
  • They play a statutory role in the financial markets through credit extension and refinancing operation activities and cater to the long-term financing needs of the industrial sector.
  • Financial regulation has also influenced the structure of banking sectors by increasing the variety of financial products available.

The Objectives of Financial Regulators

  • Market confidence – to maintain confidence in the financial system
  • Financial stability – contributing to the protection and enhancement of stability of the financial system
  • Consumer protection – securing the appropriate degree of protection for consumers
Financial Regulators

Primary Financial Regulators

  • Reserve Bank of India
  • Securities And Exchange Board of India

Reserve Bank of India (RBI)

  • Central Bank of India – Reserve Bank of India (RBI)
  • Date of Establishment – 1st April, 1935
  • ACT – Reserve Bank of India Act, 1934
  • Committee Recommendation – Hilton Young Commission
  • Headquarter – Calcutta (earlier) , Mumbai (now)
  • Regulator of Financial System in India
  • Nationalization – 1st January, 1949

PR preamble

β€œTo 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; to have a modern monetary policy framework to meet the challenge of an increasingly complex economy, to maintain price stability while keeping in mind the objective of growth.”

  • Acts as the regulatory and currency authority
  • Controls money supply and credit
  • Advisory body
  • Financial accommodation to co-operative banking sector
  • Financial supervision & ensures sound banking practices
  • Promotes specialized institutions
  • Licensing of Banks & Branch licensing
  • Acts as a lender of the last resort
  • Regulator and Supervisor of the banks, payment and settlement system
  • Serves as a banker to the Govt.
  • Manages forex
  • Acts as the banker of commercial banks
Function Wise Sites

Securities & Exchange Board of India (SEBI)

  • SEBI is the regulatory body for securities and commodity market in India under the jurisdiction of Ministry of Finance, Government of India.
  • Established on 12 April 1988, given Statutory Powers on 30 January 1992 through the SEBI Act, 1992.
  • SEBI has enjoyed success as a regulator by pushing systematic reforms aggressively and successively.
  • SEBI has to be responsive to the needs of three groups, which constitute the market: issuers of securities investors market intermediaries.
  • The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as β€œto protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected there with or incidental there to.”
Powers of SEBI
  • Drafts regulations in its legislative capacity
  • Conducts investigation and
  • Enforcement action in its executive function
  • Passes rulings and orders in its judicial capacity
  • Though this makes it very powerful, there is an appeal process to create accountability.

Functions of SEBI

For the discharge of its functions efficiently, SEBI has been vested with the following powers:

  • To approve by βˆ’ laws of Securities exchanges
  • To require the Securities exchange to amend their by βˆ’ laws
  • Inspect the books of accounts and call for periodical returns from recognized Securities exchanges
  • Inspect the books of accounts of financial intermediaries
  • Compel certain companies to list their shares in one or more Securities exchanges
  • Registration of Brokers and sub-brokers

MCQs

Q. RBI performs ________ function to protect consumers interests.

Answer: Consumer education and protection

Q. ________ is the regulatory body for securities and commodity market in India.

Answer: SEBI

Q. SEBI invites applications from eligible persons to be empanelled as ________ to conduct Investor Awareness Programs.

Answer: SMARTs

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