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Financial markets play a crucial role in contributing to the growth of the economy; hence it is essential to monitor the functioning of the money market. The financial system of India is regulated by several governing bodies. The objective of these financial regulators in India is to maintain fairness, parity, and functioning of financial marketing. Therefore, regulators of financial market not only set ethical standards but also maintain the stability of the financial system.
But who regulates financial system in India?
The primary financial regulator bodies in India include the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI), Small Industries Development Bank of India (SIDBI), Ministry of Corporate Affairs, etc.
Here is the list of regulatory bodies and the functions of different types of regulatory bodies in detail:
Reserve Bank of India (RBI) is the central bank of India and manages credit supply, regulates operations of banks, and helps maintain a healthy financial system. RBI is an autonomous governing body that ensures price stability in the country. In addition, it stabilizes the value of the Indian currency and ensures that the Indian financial market is stable and robust.
RBI is a regulator of money market performing the following functions:
1. The RBI maintains the infrastructures of the financial market, such as the Securities Settlement System (SSS), Real Time Gross Settlement System (RTGS), Clearing Corporation of India (CCIL), etc. Therefore, it ensures the effective functioning of these payment infrastructures.
2. Nowadays, adapting an electronic payment system is not an option but a necessity. RBI helps in the growth of payment systems and complying with international trends.
3. The RBI has access to information about the operation of payments and is authorized to conduct audits and inspections.
An autonomous body having statutory powers, SEBI plays an essential role in regulating the Indian financial market. It protects the interests of the participants and enforces a set of rules to ensure that the market functions effectively. In addition, SEBI promotes safe and fair practices in the market in the following ways:
1. It prevents insider trading and unfair trade practices.
2. It is authorized to regulate the takeover of companies, conduct audits, and set the guidelines and code of conduct to be followed for the proper functioning of financial markets.
3. One of the primary roles of this financial regulator is to monitor the activities of financial intermediaries like brokers, sub-brokers, etc., and prevent malpractices, providing a healthy environment for investors.
The Insurance Regulatory and Development Authority of India is another financial regulator of money market in India. It mainly secures the insurance sector in India. Insurance policies help people to protect their health, assets, and loved ones. If different insurance companies set different policy rules and rates, it would put the credibility of general as well as life insurance plans at stake. This is where IRDAI comes into play. IRDAI is a statutory body that promotes orderly growth and proper functioning of the insurance industry in India. It helps protect the policyholder’s interest and ensures fairness in the insurance sector.
The Ministry of Corporate Affairs is one of the financial regulators in India that regulates the functioning industrial and services sectors. It plays a significant role in the preparation and analysis of corporate business information. In addition, it administers the Competition Act of 2002, preventing malpractices in the market and safeguarding the interests of participants.
The financial market provides liquidity, funds mobilization, and capital formation. Therefore, it provides a vital role in the economy of any country, providing the participants with an opportunity to trade and grow financially. Hence, it is the government’s responsibility to provide a healthy environment and protect the interests of the participants. Financial regulators in India not only protect the rights of investors but also prevent market failures. Different regulatory bodies have different structures and frameworks with their codes of conduct to ensure the integrity and smooth functioning of the financial system in India.