Regulators of Banks and Financial Institutions in India

April 26, 2020
Regulators of Banks and Financial Institutions
SEBI Grade A Test Series

The Regulators of Banks and Financial Institutions are entrusted with responsibilities of development and regulation of financial sector. Necessity of regulatory framework for the financial system has been universally felt, primarily to safeguard the interests of a large number of savers/depositors and also to ensure proper and efficient functioning of the institutions that are part and parcel of the financial system.

Regulators of Banks and Financial Institutions

There are five major regulators of Banks and Financial Institutions in India:

  • Reserve Bank of India
  • Securities and Exchange Board of India
  • Insurance Regulatory and Development Authority of India
  • Pension Fund Regulatory and Development Authority
  • Forward Markets Commission

Reserve Bank of India (RBI)

Reserve Bank of India is the central bank of the country. It acts nerve center of the Indian financial system. It regulates all institutions that are connected with savings and capital allocation. Commercial banks and non-banking financial institutions (NBFC) are two major set of institutions that come under the regulation of RBI.

Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India (SEBI) was established to keep pace with the growing requirement of curbing unhealthy practices in fast expanding securities market and to protect interest of investors. It is designated as regulatory authority over securities market. exercises control over new issues registration and regulation of market intermediaries, regulation of mutual funds, regulating listing of securities, imposing a code of conduct on merchant bankers, underwriters, brokers, etc., prohibition of unfair trade practices, and insider trading, regulation of take-overs, etc

Insurance Regulatory and Development Authority (IRDAI)

The Insurance Regulatory and Development Authority of India (IRDAI) was established to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market.

Pension Fund Regulatory and Development Authority (PFRDA)

Pension Fund Regulatory and Development Authority (PFRDA) is a statutory regulatory body with the charter to promote, develop and regulate pension sector in India.

Forward Market Commission India (FMC)

Forward Markets Commission was chief regulatory authority for commodity futures market in India. The objectives of regulation were to exclude from forward dealings operators with insufficient financial resources and inadequate experience, and to prevent all forms of price manipulation. Forward Markets Commission (FMC) has been merged with SEBI with effect from September 28, 2015 to make the regulation of commodity futures market strong.

Quasi-Regulatory Institutions

Quasi-Regulatory Institutions are government bodies which carry out regulatory functions on specific sectors of economy. Some of the Quasi-Regulatory Institutions are:

  • National Bank for Agriculture and Rural Development (NABARD)
  • National Housing Bank (NHB)
  • Small Industries Development Bank of India (SIDBI)
  • Export-Import Bank of India (EXIM Bank)
  • Ministry of Corporate Affairs

National Bank for Agriculture and Rural Development (NABARD)

NABARD is an apex body for overseeing the agricultural finance and rural development in India. It provides financial assistance to the farm sector by way of refinance to commercial banks, State Co-operative Banks, ‘ Regional Rural Banks and, State Land Development Banks for various agriculture and allied activities, like minor irrigation, plantation and horticulture, land development, farm mechanisation, and animal husbandry.

National Housing Bank (NHB)

National Housing Bank is a wholly owned subsidiary of the Reserve Bank of India. It is the principal agency to promote housing finance ‘institutions at the regional and local levels and to provide financial and other i support to such institutions.

Small Industries Development Bank of India (SIDBI)

Small Industries Development Bank of India (SIDBI) was established after taking over IDBI’s financing activities relating to small-scale industries. It is the principal institution in the country for promotion, financing and development of industries in the tiny and small-scale sectors. It undertakes both financing activities as well as promotional activities and provides support services

Export-Import Bank of India (EXIM Bank)

Export-Import Bank of India (EXIM Bank) was set up for the purpose of financing, facilitating and promoting the foreign trade of India. It is responsible for co-coordinating the working of institutions engaged in financing exports and imports. It also renders various advisory services to exporters and other entities connected with foreign trade

Ministry of Corporate Affairs

Nidhi Companies are kind of NBFCs which operate mainly in the unorganized money market. Nidhi Companies are regulated by Ministry of Corporate Affairs (MCA).

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