Financial regulatory bodies in India


In India, the entire financial system is controlled and regulated by independent regulatory bodies separately in the banking, commodities market, capital market, insurance, trade, telecom, electricity, and pension fund sectors. However, the Indian government, too, plays a significant role in controlling and influencing the roles of financial regulatory bodies in the country.

Financial regulatory bodies in India:

The Reserve Bank of India (RBI)

RBI was set up in April 1935 to regulate commercial banks and financial institutions operating in India. Post independence, RBI was nationalized on January 1, 1949. The Reserve Bank of India has it’s headquarter in Mumbai along with 31 offices in different locations across the country. It is the regulatory body of the entire banking system and the money market, which controls the supply of cash across the domestic boundaries. As a subsidiary regulatory body, the RBI also issues bank notes or Indian currency of all denominations.

The operations of RBI are entrusted by the 21 members of central board of director including the Governor, 4 Deputy Governor, 2 Finance Ministry Representatives (Economic Affairs Secretary and Financial Services Secretary), 10 government-nominated Directors representing Indian economy’s key elements, and 4 Directors representing local boards headquartered at Mumbai, Chennai, Kolkata, and New Delhi. Each of the local boards has 5 members representing regional interest and the interest of co-operative and indigenous banks.

Key role of RBI:
• Regulate cash flow in the market
• Monitor key indicators of economy like GDP and inflation
• Promote banking habits among individuals
• Formulate monetary policies such as bank credit, inflation control, and interest rate control

Securities and Exchange Board of India (SEBI)

Established in 1988, Securities and Exchange Board of India (SEBI) is a key financial regulatory body associated with the security markets in India. It is headquartered in Mumbai (Maharashtra) and has its regional offices in New Delhi, Kolkata, Chennai and Ahmedabad. SEBI basically monitors and controls the functions of security market in order to protect the investors’ fund, provide safety of investment, check price rigging, audit the stock market performance, regulate business on stock exchanges, and prohibit any sort of fraudulent or unfair trade activities.

With the passing of the SEBI Act in April 1992, it became an autonomous regulatory body and soon it was constituted to control the capital market as per ruling of the government. SEBI is managed by nine board members consisting of the Chairman nominated by the central government, two officers from the Union Finance Ministry, one officer from the Reserve Bank of India, and the remaining five officers are nominated by the Union government, of which three shall be whole-time members.

Insurance Regulatory and Development Authority of India (IRDAI)

IRDAI stands for Insurance Regulatory and Development Authority of India and was constituted under IRDA Act, 1999 as an independent regulatory body for insurance sector. IRDAI is headquartered in Hyderabad (Telangana) and is an autonomous regulatory body specifically for the insurance industry to regulate and promote insurance business in India.

IRDAI is controlled and managed by 10 board members including the Chairman, five whole-time members, and four part-time members appointed by the government of India. The key role of the statutory body is to safe guard the interest of insurers and policyholders, renew, modify, withdraw and suspend insurance companies’ registration, specifying the code of conduct, promoting efficiency in the insurance segment, levying fees and other related charges, regulating a margin of solvency, supervising the working committee, and specifying the percentage of premium for different insurance policies. IRDAI is one of the prominent financial regulatory bodies in India which regulates all types of life and general insurance policies.

Pension Fund Regulatory and Development Authority (PFRDA)

Pension Fund regulatory body was established in October 2003 to develop and control business in the pension sector. The primary objective of the authority was to establish stable income source for the senior citizens by developing pension related schemes. The Nation Pension Scheme (NPS) is one such scheme launched by the PFRDA in January 2004 in order to provide retirement income to the citizens. This promoted saving habits among the individuals for the post-retirement life. Initially, NPS was only available to salaried individuals, but later on the benefits of the scheme were extended to self-employed individuals and unorganized sectors with effect from May 1st, 2009.

The regulatory body consists of a Chairperson and six other officers as part of board members appointed by the government of India, of which at least three officers shall be whole-time members.

Telecom Regulatory Authority of India (TRAI)

Telecom Regulatory Authority of India (TRAI) was set up in February 1997 under Section 3 of TRAI Act. The regulatory body was established to regulate the telecommunication sector in India such as the services and tariffs. As per the amendments made in the year 2000, the functions of TRAI are controlled by two individual bodies – the Telecom Regulatory Authority of India and the Telecom Disputes Settlement and Appellate Tribunal.

TRAI board of members consists of maximum two full-time officers and maximum two part-time officers led by a Chairperson. The board members are responsible to ensure fair and transparent business environment for every player in the market. In addition, the regulatory body also issues orders related to telecommunication tariffs, interconnections, DTH (Direct to Home) services, quality of services, mobile number portability, and so on.

With emergence of smartphones and high demand among the masses, TRAI introduced its three new mobile apps (Mycall, MySpeed, and Do not disturb mobile apps) and a web portal in June 2017 in order to ensure complete transparency of the telecom services being offered by the telecom companies. The initiative is a major success as the consumers are now aware of what they are paying for and what quality of services they are getting delivered as promised by the telecom operators.