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Regulatory bodies in financial system

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. Here in this section we have covered major financial regulatory bodies in India's financial market.

Securities and Exchange Board of India National Stock Exchange Bombay Stock Exchange (BSE) Reserve Bank of India Major Financial Institutions in India Foreign Investment Promotion Board

Securities and Exchange Board of India 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: 1. It tries to develop the securities market. 2. Promotes Investors Interest. 3. Makes rules and regulations for the securities market. Functions Of SEBI: Find below SEBI's important functions:

1. 2. 3. 4. 5. 6.

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.

National stock exchange

In the year 1991 Pherwani Committee recommended to establish National Stock Exchange (NSE) in India. In 1992 the Government of India authorized IDBI for establishing this exchange. In National Stock Exchange there is trading of equity shares, bonds and government securities. India's Stock Exchanges particularly National Stock Exchange has achieved world standards in the recent years. The NSE India ranked its 3rd position since last four years in terms of total number of trading per calendar year. Presently there are 24 stock exchanges in India, out of which 20 have exchanges National Stock Exchange (NSE), over the Counter Exchange of India Ltd, (OTCEI) and Inter-connected Stock Exchange of India limited (ISE) have nationwide trading facilities.

New NSE Reference Rates

Both MIBOR (Mumbai Inter Bank Offer Rate) and MIBID (Mumbai Inter Bank Bid Rate) are the two new references rates of the National Stock Exchanges. These two new reference rates were launched on June 15, 1998 for the loans of inter bank call money market. Both MIBOR and MIBID work simultaneously. The MIBOR indicates lending rate for loans while MIBID is the rate for receipts.

Bombay Stock Exchange

Bombay Stock Exchange is one of the oldest stock exchanges in Asia was established in the year 1875 in the name of "The Native Share & Stock Brokers Association". Bombay Stock Exchange is located at Dalal Street, Mumbai, India. It got recognition in 1956 from the Government of India under Securities Contracts (Regulation) Act, 1956. Presently BSE SENSEX is recognized over the world. Trading volumes growth in the year 2004-05 have drawn the attention over the globe. As to the statistics, the total turnover from BSE transcation as in June 2006 is calculated at 72013.36 crores. BSE Indices: The well-known BSE SENSEX is a value weighted of 30 scrips. Other stock indices of BSE are BSE 500, BSEPSU, BSEMIDCAP, BSESMLCAP, and BSEBANKEX.

BSE 100 Index: The equity share of 100 companies from the list of 5 major stock exchanges such as Mumbai, Calcutta, Delhi, Ahmedabad and Madras are selected for the purpose of compiling the BSE National Index. The year 1983-84 is taken as the base year for this index. The method of compilation here is same as that of the BSE SENSEX. BSE 200 Index: The BSE 200 Index was lunched on 27th May 1994. The companies under BSE 200 have been selected on the basis of their market capitalisation, volumes of turnover and other findamental factors. The financial year 1989-90 has been selected as the base year. BSE 500 Index: BSE 500 Index consisting of 500 scrips is functioning since 1999. Presently BSE 500 Index represents more than 90% of the total market capitalisation on Bombay Stock Exchange Limited. BSE PSU Index: BSE PSU Index has been working since 4th June 2001. This index includes major Public Sector Undertakings listed in the Exchange. The BSE PSU Index tracks the performance of listed PSU stocks in the exchange. Companies In BSE:Companies listed on the Bombay Stock is rising very fast. As to statistics, companies listed to the end of March 1994 reached at 3,200 compared to 992 in 1980.

Reserve Bank of India

Reserve Bank of India is the apex monetary Institution of India. It is also called as the central bank of the country. The bank was established on April1, 1935 according to the Reserve Bank of India act 1934. It acts as the apex monetary authority of the country. The preamble of the reserve bank of India is as follows: " regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage." RBI Governor announces Annual Policy Statement for the year 2006-07 Reserve Bank Of India Macroeconomic & Monetary Developments in India Reserve Bank Of India (Amendment) Bill, 2005 Third Quarter Review of Annual Monetary Policy for the Year 2005-06

Assessment of Macroeconomic and Monetary Developments Stance of Monetary Policy Monetary Measures This is a list on the major financial institutions in India and their respective date of starting operations. Financial Institution Date of Starting Imperial Bank of India 1921 Reserve Bank of India April 1, 1935 Industrial Finance corporation of India 1948 State Bank of India July 1, 1955 Unit Trust of India Feb. 1,1964 IDBI July 1964 NABARD July 12,1982 SIDBI 1990 EXIM Bank January 1, 1982 National Housing Bank July 1988 Life Insurance Corporation (LIC) September 1956 General Insurance Corporation (GIC) November 1972 Regional Rural Banks Oct. 2, 1975 Risk Capital and Technology Finance Corporation Ltd. March 1975 Technology Development & Information Co. of India Ltd. 1989 Infrastructure Leasing Financial Services Ltd. 1988 Housing Development Finance Corporation Ltd. (HDFC) 1977 The Foreign Investment Promotion Board is a special agency in India dealing with the matters relating to Foreign Direct Investment. This special board was set up with a view to raise the volume of investment to the country. The sole aim of the board is to create a base in the country by which a larger volume of investment can be drawn to the country. On 18 February 2003, the board was transferred to the Department of Economic Affairs (DEA) Ministry of Finance. Important functions of the Board are as follows: Formulating proposals for the promotion of investment. Steps to implement the proposals. Setting friendly guidelines for facilitating more investors. Inviting more companies to make investment. To recommend the Government to have necessary actions for attracting more investment. With regards to the structure of the Foreign Investment Promotion Board, the board comprises the following group of secretaries to the Government: Secretary to Government Department of Economic Affairs, Ministry of Finance Chairman.

Secretary to Government Department of Industrial Policy and Promotion, Ministry of commerce and Industry. Secretary to Government, Department of Commerce, Ministry of Commerce and Industry. Secretary to Government, Economic Relations, Ministry of External Affairs. Secretary to Government, Ministry of Overseas Indian Affairs.

Reserve Bank of India (RBI) RBI is established under the Reserve Bank of India Act, 1934 to regulate general banking, foreign exchange, money market operations. RBI also monitors investment ceilings for non-resident investors in India under the Portfolio Investment Scheme (PIS). Securities and Exchange Board of India (SEBI) SEBI was established under The Securities and Exchange Board of India Act,1992, to regulate capital market intermediaries and is the Securities market regulator. SEBI is also responsible for ensuring investor protection and overseeing the operations of intermediaries such as Mutual Funds, Merchant Banks, Foreign Institutional Investors (FIIs) and Custodians, amongst others. SEBI has issued regulations for FIIs, Custodians, Depositories, Portfolio Managers, Mutual Funds, Underwriters, Merchant Bankers and other Capital Market intermediaries. In addition to registering and regulating intermediaries and service providers, SEBI is also vested with powers to issue directions to any person/persons related to the securities market or to companies in matters related to issuance of capital, transfer of securities and disclosures. Stock Exchanges: Stock Exchanges are constituted as self-regulatory organisations and are supervised by SEBI. They regulate members on most policy-related and operational issues including regulating trading to prevent excessive speculation and avoid member defaults. The regulatory measures include imposition of margins and defining price bands (circuit filters), suspension of trading in specific instruments and in extreme cases, halt trading. A Governing Board, represented by non-broker public representatives and SEBI nominees manage the day-today operations of the exchanges. BSE and NSE are the major exchanges for trading and contribute over 99% of the market share. 23 stock exchanges are granted recognition. Depositories: National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL) are recognised depositories empowered by the Depositories Act and SEBI (Depositories and Participants) Regulations. Such powers include provision of depository services through Depository Participants and enabling settlement of trades through the depository mode.