Personal Finance - Financial Regulatory Bodies in India in IPO's & MF's - The regulators in the Indian Financial Market ensure that the market participants behave in a responsible manner so that the ...
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07-09-2021 08:56 AM
Financial Regulatory Bodies in India
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The regulators in the Indian Financial Market ensure that the market participants behave in a responsible manner so that the financial system continues to work as an important source of finance and credit for corporate, government, and the public at large. They take action against any misconduct and ensure that the interests of investors and consumers are protected.
The objective of all regulators is to maintain fairness and competition in the market and provide the necessary regulations and infrastructure. In this article, we’ll discuss the various Regulatory Bodies in Indian Financial System cover.
1.Securities and Exchange Board of India (SEBI)
Securities Exchange Board of India (SEBI) was established in 1988 but got legal status in 1992 to regulate the functions of securities market to keep a check on malpractices and protect the investors. Headquartered in Mumbai, SEBI has its regional offices in New Delhi, Kolkata, Chennai and Ahmedabad.
Role of SEBI
• Protect the interests of investors through proper education and guidance
• Regulate and control the business on stock exchanges and other security markets
• Stop fraud in capital market
• Audit the performance of stock market
2.Reserve Bank of India (RBI)
The Reserve Bank of India (RBI) is India’s central bank and was established under the Reserve Bank of India act in 1935. The primary purpose of RBI is to conduct the monetary policy and regulate and supervise the financial sector, most importantly the commercial banks and the non-banking financial companies. It is responsible to maintain price stability and the flow of credit to different sectors of the economy.
Some of the main functions of RBI are:
1. It issues the license for opening banks and authorizes bank branches.
2. It formulates, implements, and reviews the prudential norms like the Basel framework.
3. It maintains and regulates the reserves of the banking sector by stipulating reserve requirement ratios.
4. It inspects the financial accounts of the banks and keeps a track of the overall stress in the banking sector.
5. It oversees the liquidation, amalgamation or reconstruction on financial companies.
6. It regulates the payment and settlements systems and infrastructure.
7. It prints, issues and circulates the currency throughout the country.
3. Insurance Regulatory and Development Authority of India (IRDAI)
Insurance Regulatory and Development Authority of India (IRDAI) regulates the insurance and re-insurance industries of India. It was established after Govt. of India passed the Insurance Regulatory and Development Authority Act, 1999. It’s headquarter is in Hyderabad, Telangana. IRDAI is a 10 member body. It consists of one chairman, 5 full-time and 4 part-time members appointed by the Government of India.
4. Pension Funds Regulatory and Development Authority (PFRDA)
The PFRDA was set up in 2013 as a sole regulator of India’s pension sector. Its services extend to all citizens, including non-resident Indians (NRIs). Its main objective is to ensure income security for senior citizens. To this end, it regulates pension funds and protects pension scheme subscribers.
PFRDA regulates the pension schemes: NPS and Atal Pension Yojana. PFRDA Act is applicable on these schemes.
The PFRDA scope includes
• Setting up guidelines for investing in pension funds
• Settling disputes between intermediaries and pension fund subscribers
• Increasing awareness about retirement and pension schemes
• Investigating intermediaries and other participants for malpractice.
5. Association of Mutual Funds in India (AMFI)
The Association of Mutual Funds in India (AMFI) was set up in 1995. It is a non-profit organization that is self-regulatory and works for the development of mutual fund industry by improving professional and ethical standards, thus aiming to make the mutual funds more accessible and transparent to the public. It spreads awareness about mutual funds to Indian investors.
AMFI ensures smooth functioning of the mutual fund industry by implementing high ethical standard and protects the interests of both – the fund houses and investors. Most asset management companies, brokers, fund houses, intermediaries etc in India are members of the AMFI. Registered AMC’s are required to follow the code of ethics set by the AMFI. These code of ethics are – integrity, due diligence, disclosures, professional selling and investment practice.
The AMFI updates the Net Asset Value of funds on a daily basis on its website for investors and potential investors. It has also streamlined the process of searching mutual fund distributors.
6. Ministry of Corporate Affairs (MCA)
The Ministry of Corporate Affairs (MCA) is a ministry within the government of India. It regulates the corporate sector and is primarily concerned with the administration of the Companies Act, 1956, 2013 and other legislations. It frames the rules and regulations to ensure the functioning of the corporate sector according to the law.
The objective of MCA is to protect the interest of all stakeholders, maintain a competitive and fair environment and facilitating the growth and development of companies. The Registrar of Companies (RoC), is a body under the MCA that has the authority to register companies and ensure their functioning as per the provisions of the law. The issuance of securities by the companies also comes under the purview of the Companies Act.
Conclusion
In this article, we discussed the Regulatory Bodies in Indian Financial System. There are many regulatory organizations in India that ensure the smooth functioning of the financial system.
RBI is the regulator of the banking sector, SEBI is the primary regulator of the stock markets, IRDA regulates the insurance industry, PFRDA regulates the pension fund industry. The AMFI sets ethical standards for the mutual fund’s industry and the MCA regulates the corporate sector according to the many legislations.
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