Financial Institutions in India are divided in two categories. The first type refers to the regulatory institutions and the second type refers to the intermediaries.
The regulators are assigned with the job of governing all the divisions of the Indian financial system. These regulatory institutions are responsible for maintaining the transparency and the national interest in the operations of the institutions under their supervision.
The regulatory bodies of the financial institutions in India are as follows:
1-Reserve Bank of India (RBI)
The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated.
Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.
Reserve Bank of India describes the basic functions of the Reserve Bank as:
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.
2-Securities and Exchange Board of India (SEBI)
The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992.
The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as ——
“…to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto”
3-Central Board of Direct Taxes (CBDT)
4-Central Board of Excise & Customs
5- Insurance Regulatory and Development Authority – IRDA
Formed by IRDA act 1999.
To Protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental .
7.Provident Fund Regulatory Authority of India PFRDA
PFRDA was established by Government of India on 23 rd August, 2003. The Government has, through an executive order dated 10 th October 2003, mandated PFRDA to act as a regulator for the pension sector. The mandate of PFRDA is development and regulation of pension sector in India.
The National Pension System reflects Government’s effort to find sustainable solutions to the problem of providing adequate retirement income. As a first step towards instituting pensionary reforms, Government of India moved from a defined benefit pension to a defined contribution based pension system by making it mandatory for its new recruits (except armed forces) with effect from 1 st January, 2004. Since 1 st April, 2008, the pension contributions of Central Government employees covered by the National Pension System (NPS) are being invested by professional Pension Fund Managers in line with investment guidelines of Government applicable to non-Government Provident Funds.
Apart from the Regulatory bodies, there are the Intermediaries that include
the banking and non-banking financial institutions. Some of the specialized financial institutions in India are as follows:
Unit Trust of India (UTI)
Securities Trading Corporation of India Ltd. (STCI)
Industrial Development Bank of India (IDBI)
Industrial Reconstruction Bank of India (IRBI), now (Industrial Investment Bank of India)
Export – Import Bank of India (EXIM Bank)
Small Industries Development Bank of India (SIDBI)
National Bank for Agriculture and Rural Development (NABARD)
Life Insurance Corporation of India (LIC)
General Insurance Corporation of India (GIC)
Shipping Credit and Investment Company of India Ltd. (SCICI)
Housing and Urban Development Corporation Ltd. (HUDCO)
National Housing Bank (NHB)
The banking institutions of India play a major role in the economy of the country. The banking institutions are the providers of depository and transaction services. These activities are the major sources of creating money. The banking institutions are the major sources of providing loans and other credit facilities to the clients.
