April 26, 2023

Financial Regulatory Bodies In India

Financial markets play an essential role in facilitating commerce, trade and boosting the economy. These also function as custodians of savings and investments of the people. Therefore, it is critical to monitor the operation of financial markets. Each industry in the Indian financial system has its own regulator. Read this article till the end to know in detail about the regulatory bodies within the Indian financial system.

Why Do We Need Financial Regulatory Bodies In India?

Financial market regulators’ key focus is to ensure that market participants act responsibly They also have to ensure that the financial system can continue functioning as an essential means of funding and credit for corporations, governments and the general public.
The main objectives of India’s financial regulators are
  • Maintaining financial stability
  • Ensuring consumer/ investor interests are protected
  • Maintaining market confidence among domestic and foreign investors
  • Reducing the occurrence of financial crime or fraud.
Financial regulation in India is built around regulating financial products or services. Therefore, we have the Reserve Bank of India (RBI) regulating fixed deposits, savings accounts and other banking products; the Securities Exchange Board of India (SEBI) which regulates equity market products, the Insurance Regulatory Development Authority of India (IRDA) which oversees insurance products and the Pension Fund Regulatory and Development Authority (PFRDA) that regulates pension products.
Let’s now take a look at some important regulatory bodies in the Indian financial markets.

Financial Regulatory Bodies in India

Reserve Bank of India (RBI)

The Reserve Bank of India (RBI) is India's central bank. It was established on April 1, 1935. Its primary function is to maintain price stability while nurturing the growth of the economy by making and implementing monetary policy. The RBI also issues, destroys and exchanges currency notes or coins as required. It also regulates credit supply, monitors bank operations and builds and maintains efficient and safe payment systems. . The RBI also regulates the foreign exchange market in India and is tasked with maintaining the value of the Indian currency. It functions as a banker to the government and the banks and its announcements impact private and public banks and the non-banking financial sector.

Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India (SEBI) protects investors' interests in securities while promoting and regulating the securities market. It was established as a statutory body in 1992. SEBI’s primary goal is to ensure a proper and fair operation of the stock markets, to safeguard shareholder rights and to guarantee the safety of their investments. Through its regulations, SEBI aims to check frauds and nurture competition. SEBI promotes safe and equitable market practices in the following ways:
  • It prohibits insider trading and unfair business practices
  • It is authorised to regulate corporate takeovers, conduct audits and ensure code of conduct for the proper operation of financial markets is being followed
  • It provides a competitive marketplace where companies can raise capital when required
  • It tracks financial intermediaries' operations, such as sub-brokers, brokers, and so on, to prevent fraud and provide a safe environment for the investors.
  • It also works to increase investor awareness through education.

IRDAI

Another financial regulator in the Indian financial sector is the Insurance Regulatory and Development Authority of India (IRDAI). The IRDAI is the body in charge of insurance regulation in India. The Insurance Regulatory and Development Authority Act of 1999 established the regulatory body.
As of 2022, India has approximately 24 life insurance and 26 general insurance companies, 5 health insurance and 12 re-insurance companies. Its mission is to protect the best interests of insurance policyholders while also developing and regulating the insurance industry. It issues regular advisories to insurance companies and informs them of the changes in rules and regulations. IRDAI's primary functions are as follows:
  • To protect policyholders' interests and to treat them fairly by ensuring speedy settlement of legitimate claims
  • To prevent insurance fraud and other malpractices and establish effective grievance redressal mechanism
  • To facilitate the growth of the insurance industry
  • To generate long-term funds for investing in the economy
  • To ensure the financial security of the insurance sector.

PFRDA

The Pension Fund, Regulatory and Development Authority (PFRDA) is India's pension market regulator. It came into being on February 1, 2014. It Initially, PFRDA served only government employees. However, its services were eventually expanded to all Indian citizens, which included NRIs as well. The PFRDA is the body tasked with regulating the National Pension System (NPS). Its subscribers include public and private sector employees and those working in unorganised sectors.
The scope of the PFRDA consists of the following:
  • Creating investment guidelines for pension funds
  • Dispute resolution between pension fund subscribers and intermediaries
  • Raising awareness about retirement and pension plans
  • Examining intermediaries and other participants for possible wrongdoing

Ministry of Corporate Affairs (MCA)

The Ministry of Corporate Affairs regulates companies in the industrial and service sectors in India. It plays a crucial role in the gathering and evaluation of corporate business data. Furthermore, it enforces the Competition Act of 2002, to prevent market malpractice and protect participants' interests.

Conclusion

The financial markets facilitate liquidity, the mobilisation of funds and the formation of capital. As a result, it plays an important role in a country's economy, allowing participants -individuals, corporates and institutions- to trade, invest and grow financially. It is the government's responsibility to offer a healthy environment and safeguard the participants' interests, which it does with the assistance of the regulatory bodies listed above.

Disclaimer

The investment options and stocks mentioned here are not recommendations. Please go through your own due diligence and conduct thorough research before investing. Investment in the securities market is subject to market risks. Please read the Risk Disclosure documents carefully before investing. Past performance of instruments/securities does not indicate their future performance. Due to the price fluctuation risk and the market risk, there is no guarantee that your personal investment objectives will be achieved.

Never miss a trading opportunity with Margin Trading Facility

Enjoy 2X leverage on over 900+ stocks

Upstox Margin Trading Facility
Apple Logo
Downloadlogo
iOS App
Google Play Logo
Downloadlogo
Android App

RELATED ARTICLES

United Bank India Mobile Banking

- Have you run out of time to visit your bank branch to make an urgent fund transfer? - Are you looking at an alternative channel for your banking transactions which is convenient, compatible, accessible, comprehensive, easy to use,quicker, free of cost, bundled service offerings and is safe and secure. - Have you lost your network connection and yet you need to view your account balance on an urgent basis?. Mobile banking channel is the answer to your needs. Case in point being, United Bank of India ( UBI). UBI is now a part of Punjab National Bank (PNB), having merged with effect from April 1, 2020. Established in 1950 in Kolkata as a regional private bank catering to the eastern and north-eastern belt, the bank was nationalised in 1969 and over the years, the bank expanded its network of branches and asset base to become a mid-sized PSB ( Public Sector Bank) to include a network of more than 2000 branches and three fully equipped overseas branches in New Delhi, Kolkata and Mumbai. In fact, UBI is among the leading banks in the states of West Bengal, Assam, Tripura and Manipur. Backed by an asset base of ₹1.52 lakh crore ( as on September, 2019), UBI offers a comprehensive portfolio of services across multiple channels, offline and online through netbanking, mobile banking such as check balance, transfer money,make utility bill payments and much more. You can avail these services 247365, even on bank holidays, public holidays, weekends and that too, free of charge.

What is Mobile Banking in India: Meaning, Features, Login, and Registration

Mobile Banking is the way through which financial transactions are made by using mobile phones. It includes a range of services from sending fraud alerts, transaction messages and usage activity to online payment of bills and fund transfer services. These services are provided by most financial institutions such as banks for the convenience of their customers. One of the greatest benefits of Mobile Banking is that customers can access banking services anywhere and everywhere. However, there are a few concerns associated with mobile banking such as security issues and limitations due to the differences between in-person banking and online banking.

What is Western Union in India and How to Transfer/Send & Receive Money Online

Western Union Money Transfer is a global leader in money transfer services. With a network of over half a million agent locations in over 200 countries and territories, Western Union makes it easy to send and receive money around the world. Customers can transfer money online, through the Western Union mobile app, or in person at an agent location. Western Union also offers bill payment services, prepaid cards, and money orders. The company has been in operation for over 150 years and is a trusted and reliable way to manage money globally.

What is Related Party Transaction - Policy & Companies Act

It is customary for organisations to conduct business with their personal and professional networks. These close associates may be substantial shareholders, subsidiaries or minority-owned businesses. A related-party transaction is a deal or preparation between two parties with a previous business connection or a mutual interest. Companies commonly form profitable partnerships with people they know or share a common interest. Though related-party transactions are legal in and of themselves, they can create conflicts of interest or other illegal conditions. Companies that are freely traded are required to declare these transactions.