List of Regulatory Bodies in Indian Financial System: 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 the Indian Financial System cover.

Regulatory Bodies in Indian Financial System

Briefs about various regulators who regulate and contribute towards the development of the financial market are given below:

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1. Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India (SEBI) is a statutory body established under the SEBI Act of 1992, as a response to prevent malpractices in the capital markets that were negatively impacting people’s confidence in the market. Its primary objective is to protect the interest of the investors, prevent malpractices, and ensure the proper and fair functioning of the markets. SEBI has many functions, they can be categorized as:

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  1. Protective functions: To protect the interests of the investors and other market participants. It includes – preventing insider trading, spreading investor education and awareness, checking for price rigging, etc.
  2. Regulatory functions: These are performed to ensure the proper functioning of various activities in the markets. It includes – formulating and implementing a code of conduct and guidelines for all types of market participants, conducting an audit of the exchanges, registration of intermediaries like brokers, and investment bankers, and levying fees, and fines against misconduct.
  3. Development functions: These are performed to promote the growth and development of the capital markets. It includes – Imparting training to various intermediaries, conducting research, promoting self-regulation of organizations, facilitating innovation, etc.

To perform its functions and achieve its objectives, SEBI has the following powers:

  1. To change laws relating to the functioning of the stock exchange
  2. To access records and financial statements of the exchanges
  3. To conduct hearings and give judgments on cases of malpractice in the markets.
  4. To approve the listing and force the delisting of companies from any exchanges.
  5. To take disciplinary actions like fines and penalties against participants who involve in malpractice.
  6. To regulate various intermediaries and middlemen like brokers.


2. Reserve Bank of India (RBI)

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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 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 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 track of the overall stress in the banking sector.
  5. It oversees the liquidation, amalgamation, or reconstruction of financial companies.
  6. It regulates the payment and settlement systems and infrastructure.
  7. It prints, issues, and circulates the currency throughout the country.

The RBI is the banker to the government and manages its debt issuances, it is also responsible to maintain orderly conditions in the government securities markets (G-Sec). RBI manages foreign exchange under the Foreign Exchange Management Act, of 1999. It intervenes in the FX markets to stabilize volatility that facilitates international payments and trade, and the development of the foreign exchange market in India.

The RBI also regulates and controls interest rates and liquidity in the money markets which have a profound impact on the functioning of other financial markets and the real economy.


3. Insurance Regulatory and Development Authority of India (IRDAI) 

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The Insurance Regulatory and Development Authority of India (IRDAI) is an independent statutory body that was set up under the IRDA Act, of 1999. Its purpose is to protect the interests of the insurance policyholders and to develop and regulates the insurance industry.  It issues advisories regularly to insurance companies regarding the changes in rules and regulations.

It promotes the insurance industry but also controls the various charges and rates related to insurance. As of 2020, there are about 31 general insurance and 24 life insurance companies in India, that are registered with IRDA.

The three main objectives of IRDA are:

  1. To ensure fair treatment and protect the interests of the policyholder.
  2. To regulate the insurance companies and ensure the industry’s financial soundness.
  3. Formulate standards and regulations so that there is no ambiguity.

Some important functions of IRDA are:

  1. Granting, renewing, canceling, or modifying the registration of insurance companies.
  2. Levying charges and fees as per the IRDA Act.
  3. Conducting investigation, inspection, audit, etc. of insurance companies and other organizations in the insurance industry.
  4. Specifying the code of conduct and providing qualifications and training to intermediaries, insurance agents, etc.
  5. Regulating and controlling the insurance premium rates, terms and conditions, and other benefits offered by insurers.
  6. Provides a grievance redressal forum and protects the interests of the policyholder.

4. Pension Funds Regulatory and Development Authority (PFRDA)

Regulatory Bodies in Indian Financial System - pfrda logo

The Pension Fund Regulatory and Development Authority (PFRDA) is a statutory body, which was established under the PFRDA Act, 2013. It is the sole regulator of the pension industry in India. Initially, PFRDA covered only employees in the government sector but later, its services were extended to all citizens of India including NRI’s. Its major objectives are – to provide income security to the old aged by regulating and developing pension funds and to protect the interest of subscribers to pension schemes.

The National Pension System (NPS) of the government is managed by the PFRDA. It is also responsible for regulating custodians and trustee banks. The Central Record Keeping Agency (CRA) of the PFRDA performs record keeping, and accounting and provides administration and customer services to subscribers of the pension fund.

Some functions of PFRDA are:

  1. Conducting inquiries and investigations on intermediaries and other participants.
  2. Increasing public awareness and training intermediaries about retirement savings, pension schemes, etc.
  3. Settlements of disputes between intermediaries and subscribers of pension funds.
  4. Registering and regulating intermediaries.
  5. Protecting the interest of pension fund users.
  6. Stipulating guidelines for investment of pension funds.
  7. Formulating a code of conduct, standards of practice, terms, and norms for the pension industry.

5. Association of Mutual Funds in India (AMFI)

Regulatory Bodies in Indian Financial System- amfi logo

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 the mutual fund industry by improving professional and ethical standards, thus aiming to make mutual funds more accessible and transparent to the public. It provides spreads awareness and vital information about mutual funds to Indian investors.

AMFI ensures the smooth functioning of the mutual fund industry by implementing high ethical standards 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 AMCs are required to follow the code of ethics set by the AMFI. These codes 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 for mutual fund distributors.

6. Ministry of Corporate Affairs (MCA)

Regulatory Bodies in Indian Financial System - mca logo minstry of corporate affairs

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, of 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 facilitate the growth and development of companies. The Registrar of Companies (MCA), 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.

Closing thoughts

In this article, we discussed the Regulatory Bodies in Indian Financial SystemThere 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, and PFRDA regulates the pension fund industry. The AMFI sets ethical standards for the mutual fund industry and the MCA regulates the corporate sector according to the many legislations.

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