Financial Regulatory Bodies
Financial sector in India has experienced a better environment to grow with the presence of higher competition. The financial system in India is regulated by independent regulators in the field of banking, insurance, mortgage and capital market. Government of India plays a significant role in controlling the financial market in India.
Ministry of Finance, Government of India controls the financial sector in India. Every year the finance ministry presents the annual budget on 28th February. The Reserve Bank of India is an apex institution in controlling banking system in the country. It's monetary policy acts as a major weapon in India's financial market.
Securities and Exchange Board of India (SEBI) is one of the regulatory authorities for India's capital market.
Broadly, there are supposed to be product-wise demarcations of regulatory space for various regulators:
Reserve Bank of India (RBI) regulates credit products, savings and remittances; the Securities and Exchange Board of India (SEBI) regulates investment products; the Insurance Regulatory and Development Authority of India (IRDAI) regulates insurance products; and the Pension Fund Regulatory and Development Authority (PFRDA) regulates pension products. The Forward Markets Commission (FMC) regulates commodity-based exchange-traded futures. Practically, as was illustrated by the recent PFRDA-IRDA conflict, since certain entities (especially insurance companies) primarily engaged in one product also offer other products, it becomes difficult to impose product-based regulation. So, essentially, most regulation turns out to be entity-based.
There are other government bodies which perform quasi-regulatory functions, including National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI), and National Housing Bank (NHB). NABARD supervises regional rural banks as well as state and district cooperative banks. NHB regulates housing finance companies, and SIDBI regulates the state finance corporations.
Securities and Exchange Board of India (SEBI)
Securities and Exchange Board of India (SEBI) was first established in the year 1988 as a non-statutory body for regulating the securities market. It became an autonomous body in 1992 and more powers were given through an ordinance. Since then it regulates the market through its independent powers.
Objectives of SEBI
As an important entity in the market it works with following objectives:
- It tries to develop the securities market.
- Promotes Investors Interest.
- Makes rules and regulations for the securities market.
Functions of SEBI
- Regulates Capital Market
- Checks Trading of securities.
- Checks the malpractices in securities market.
- It enhances investor's knowledge on market by providing education.
- It regulates the stockbrokers and sub-brokers.
- To promote Research and Investigation
SEBI In India's Capital Market
SEBI from time to time have adopted many rules and regulations for enhancing the Indian capital market. The recent initiatives undertaken are as follows:
- Sole Control on Brokers: Under this rule every brokers and sub brokers have to get registration with SEBI and any stock exchange in India.
- For Underwriters: For working as an underwriter an asset limit of 20 lakhs has been fixed.
- For Share Prices: According to this law all Indian companies are free to determine their respective share prices and premiums on the share prices.
- For Mutual Funds: SEBI's introduction of SEBI (Mutual Funds) Regulation in 1993 is to have direct control on all mutual funds of both public and private sector.