B. Arun Kumar, Assistant Professor, Department ofCommerce, SNMV College Of Arts And Science, Coimbatore.M. Rahul Bansal, I-M.Com, SNMV College of Arts andScience, Coimbatore.E-mail id: [email protected]
com ABSTRACT Financialmarkets plays an important role in the growth of a country’s economy.Similarly, the financial regulators plays an important role in the growth offinancial markets. The role of the financial regulator is to implement the regulationsconsistently. For the effective control and supervision of financial markets,the regulatory authorities ensures that the participants of the market behavein a desired manner. The paper shows the work of regulatorsby defining how they see the financial market and act upon it to control andsupervising the functions.
In most cases, financial regulatory authoritiesregulate all financial activities. But in some cases, there are specificauthorities to regulate each sector of the finance industry, mainly banking,securities, insurance and pension markets. Keywords: Financial regulation, control and supervision, regulatory authorities. Introduction: Financial regulation is control orsupervision, which subjects financial institutions to certain requirements,restrictions and guidelines, aiming to maintain the integrity of the financialsystem. This may be handled by either a government or non-government organization.Financial regulation has also influenced the structure of banking sectors byincreasing the variety of financial products available. Structureof Supervision:Actsempower organizations, government or non-government, to monitor activities andenforce actions. There are various setups and combinations in place for thefinancial regulatory structure around the global.
Supervision of stock exchanges:Exchangeacts ensure that trading on the exchanges is conducted in a proper manner. Mostprominent the pricing process, execution and settlement of trades, direct and efficienttrade monitoring. Supervisionof listed companies:Financialregulators ensure that listed companies and market participants comply withvarious regulations under the trading acts. The trading acts demands thatlisted companies publish regular financial reports, ad hoc notifications ordirectors’ dealings.
Whereas market participants are required to publish majorshareholder notifications. The objective of monitoring compliance by listedcompanies with their disclosure requirements is to ensure that investors haveaccess to essential and adequate information for making an informed assessmentof listed companies and their securities. Supervisionof investment management:Assetmanagement supervision or investment acts ensures the frictionless operation ofthose vehicles. Supervisionof banks and financial services providers:Bankingacts lay down rules for banks which they have to observe when they are beingestablished and when they are carrying on their business. These rules aredesigned to prevent unwelcome developments that might disrupt the smoothfunctioning of the banking system. Thus ensuring a strong and efficient bankingsystem.
FinancialRegulatory Bodies in India:InIndia, the financial system is regulated with the help of independentregulators, associated with the field of insurance, banking, commodity market,and capital market and also the field of pension funds. On the other hand, theIndian Government is also known for playing a significant role in controllingthe field of financial security and also influencing the roles of suchmentioned regulators. You must be aware of the regulatory bodies and theirfunctions, before a final say. The most prominent of all is RBI or Reserve Bankof India. Let us look in detail about various Financial Regulatory Bodies inIndia. RBI – ReserveBanks of India: Reserve Bank of India is the apexmonetary Institution of India. It is also called as the central bank of thecountry.
It was established on April 1, 1935 in accordance with the provisionsof the Reserve Bank of India Act, 1934. The Central Office of the Reserve Bankwas initially established in Calcutta but was permanently moved to Mumbai in1937. TheCentral Office is where the Governor sits and where policies are formulated.Though originally privately owned, since nationalization in 1949, the ReserveBank is fully owned by the Government of India. ReserveBank of India (RBI) is the supreme authority of Indian financial market.
Sowhatever RBI does it is very important for the Indian market. RBI Regulates allthe financial actions of banking sectors. RBI decides the interest rate, bankrate, repo rate, SLR ratio etc. RBI creates the balance between inflation anddeflation. Inflation means high demand and less supply, deflation means lessdemand and excess supply. Both inflation and deflation are bad for the economyand financial market, so RBI monitors the conditions in the economy accordinglydecides the interest rates to maintain the economy growth.
Stock marketsinvestors and traders closely watch the RBI actions as RBI cuts the interestrate that boost up the sentiment of equity market because it increases theliquidity in the market while higher interest rate demotivate the investors toinvest in stock market. The Roleof RBI:1. Safety of public money.
2. Ensure productive use of funds.3. Ensure sound and healthy bankingsystem.4.
Stable monetary position.5. Maintain value of rupee.6.
Ensure effective coordination andcontrol among various participants of Indian financial system.7. Control over credit and price levelin the country. SEBI –Securities and Exchange Board of India: SEBI forms a major part under thefinancial body of India. This is a regulator associated with the securitymarkets in Indian Territory.
Established in the year 1988, the SEBI Act cameinto power in the year 1992, 12th April. The board comprises of a Chairman,Whole time members, Joint secretary, member appointed, Deputy Governor of RBI,secretary of corporate affair ministry and also part time member. There arethree groups, which fall under this category, and those are the investors, thesecurity issuers and market intermediaries.Ithas framed a set of regulations, bye-laws and surveillance system so as toprovide the end users with safety and transparency while dealing in securities.It has introduced many regulatory measures and code of conduct for variousintermediaries which include portfolio managers, brokers and sub-brokers,underwriters, merchant bankers and so on. The Role ofSEBI:1.Restricts illegal practices:Itforbids illegal and fraudulent practices of the firm which operate in thesecurities market.
2.Safeguard investor’s interest:Itprotects investor’s interest in the capital market through guidance and propereducation. 3.Regulate working of exchanges:Itregulates and keeps a check on the workings of stock exchanges and otheraspects of the securities market.4.
Monitor the workings of mutual funds:Itmonitors and regulates the working of mutual funds. It keeps a tightsupervision on their business operations and protects investors from any unfairpractices.5.Monitor the functioning of intermediaries:Keepsa tight check on the functioning of the intermediaries like merchant bankers,stockbrokers and other intermediaries present in the capital market.6.Regulate takeovers and acquisitions:Theyissue guidelines to regulate takeovers, mergers, and acquisition of firms toprotect investor’s interest.7.
Prohibition of insider activity:Itprohibits insider activity and also restricts undesirable practice of brokersand other agents in the capital market.8.Conducting audit:Itconducts audit, inspection and other suitable measures to keep a check on theworkings of stock exchanges and other intermediaries. IRDA –Insurance Regulatory and Development Authority: The Insurance Regulatory andDevelopment Authority of India (IRDAI) is an autonomous, statutory agencytasked with regulating and promoting the insurance and re-insurance industriesin India. IRDA Act was passed by parliament in December’1999 and it receivedpresident approval in January’2000.
The main aim of the authority is “toprotect the interest of holders of Insurance policies to regulate, promote andensure orderly growth of Insurance industry & for matters connectedtherewith or incidental thereto.” The agency’s headquarters are in Hyderabad,Telangana, where it moved from Delhi in 2001. The Role ofIRDA:1. To safeguard the interest of andsecure fair treatment to insurance policy holders. 2. To bring quick and systematic growthof the insurance industry or sector in order to provide benefits to the commonman and also to provide long term funds for accelerating growth of the economy. 3.
To set, promote, monitor and applyhigh standards of integrity, fair dealing, financial viability and capabilityof those it regulates. 4. To make sure that insurance policyholder receives precise, accurate, clear & correct information about theproducts & services provided by insurance companies & also makecustomers aware about their duties & responsibilities in this regard. 5. To ensure quick settlement of genuineclaims, to prevent insurance frauds, scams & other malpractices and put inplace operative grievance redressal machinery. 6. To boost transparency, fairness, andorderly conduct in financial markets dealing with insurance & build atrustworthy management information system in order to enforce high standards offinancial soundness amongst market players.
7. To take appropriate actions wheresuch standards do not prevail or are inadequate & ineffectively enforced. 8. To bring about optimal amount ofself-regulation in day-to-day activities of the industry reliable with the requirementsof prudential regulation. PFRDA –Pension Fund Regulatory and Development Authority: The Pension Fund Regulatory andDevelopment Authority (PFRDA) is the pension regulator of India which wasestablished by Government of India on August 23, 2003 and was authorized byMinistry of Finance, Department of Financial Services. Upon introduction of thePFRDA Bill by the Government of India in the Parliament of India and thesubsequent passage of the PFRDA Act in 2013, the Authority became a CentralAutonomous Body. Likeother financial sector regulators namely Reserve Bank of India (RBI),Securities and Exchange Board of India (SEBI), Insurance Regulatory andDevelopment Authority (IRDAI) and Insolvency and Bankruptcy Board of India(IBBI), PFRDA is a quasi-government organization having executive, legislativeand judicial powers.
PFRDA promotes old age income security by establishing,developing and regulating pension funds and protects the interests ofsubscribers to schemes of pension funds and related matters. Currently,PFRDA is regulating and administering the National Pension System (NPS) alongwith administering the Atal Pension Yojana (APY) which is a defined benefitspension scheme for the unorganized sector, guaranteed by the Government of India.PFRDA is responsible for appointment of various intermediate agencies such asCentral Record Keeping Agency (CRA), Pension Fund Managers, Custodian, NPSTrustee Bank, etc.
The Role ofPFRDA:1. Monitor the performance of thevarious intermediaries. 2.
Safeguarding the interest ofsubscribers. 3. Regulate the manner in whichsubscriber contributions are invested by PF(s) and will make all efforts toensure fair play for subscribers. 4. It ensure that all stakeholderscomply with the guidelines/ regulations issued from time to time. 5.
It creates the rules and regulations,time to time. Forexample, it makes sure that the pension funds are investing your money inprofitable assets. Also, it takes care of the resolution of your complaints. Itorders the related stakeholder to resolve the issues you are facing. Ifstakeholders do not resolve it at the given time period. Then PFRDA takesaction against them.
PFRDA is also responsible for establishing, promotion anddevelopment of the pension system. FMC – ForwardMarkets Commission: FMC is the chief regulator of thecommodity (MCX, NCDEX, NMCE, UCX etc.) of the Indian futures market.
As per thelatest news feed, it has regulated the amount of Rs. 17 trillion, under thecommodity trades. Headquarter is located in Mumbai, and the financialregulatory agency is working in collaboration with the Finance Ministry. Thechairman of FMC works together with the Members of the same organization tomeet the required ends. The main aim of this body is to advise the Central Governmenton matters of the Forwards Contracts Act, 1952. The Role ofFMC:FMCas a sole institution governing the functioning of the commodities market inIndia executes a plethora of roles. Some of the major roles that the entityperforms are henceforth: 1.The Commission counsels the Central Government on matters concerning therecognition or retraction of the previously accorded recognition from any ofthe association.
Additionally, the institution also provides advice on othermatters that surface as a result of the administration of the Forward Contracts(Regulation) Act 1952. 2.FMC time and again provides suggestions to uplift the functioning of theorganization as well as forward markets.3.
As and when required, the entity holds rights to cross-check and inspectaccounts as well as other documents of registered associations as well as theirmembers. 4.The entity also keeps a vigil on the forward commodities market and exercisessuch assigned discretionary powers that are in the interest and growth of themarkets. 5.FMC sources, collects and publishes information concerning trading conditionsfor different commodities. The details of such information generally comprisedemand, supply and price. Conclusion: Financial regulators plays an importantrole in all the fields of the financial system. Their role has an effectiveimpact on the working of the financial system.
They stabilizes the financialsystem by controlling and supervising the every activity taking place. Hence,the regulators are the very important factor for the financial system of thecountry. Bibliography and references: 1.
https://en.wikipedia.org/wiki/Financial_regulation 2. http://www.marketcalls.in/market-regulations/understanding-financial-regulatory-bodies-in-india.
html 3. http://www.onlinenifm.
com/blog/post/16/finance/rbi-role-in-indian-financial-market 4. https://www.slideshare.net/deepakalld/regulators?qid=df404d4a-d454-4dfd-a68f-505d7244d153&v=&b=&from_search=8 5. https://blog.
elearnmarkets.com/sebi-plays-an-important-role-in-our-economy/ 6. https://www.educba.com/insurance-regulatory-and-development-authority/ 7. https://www.goodreturns.
in/classroom/2013/09/what-is-forwards-markets-commission-or-fmc-and-its-role-208825.html 8. https://www.obcindia.co.in 9.