Financial Regulatory Bodies in India  

The financial system in India is regulated by independent regulators in the field of banking, insurance, capital market, commodities market, and pension funds.   However, Government of India plays a significant role in controlling the financial system in India and influences the roles of such regulators at least to some extent.The following are five major financial regulatory bodies in India:

(A) Statutory Bodies via parliamentary enactments: 

1. 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 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 nationalization in 1949,

the Reserve Bank is fully owned by the Government of India.   

It acts as the apex monetary authority of the country. The Central Office is where the Governor sits and is where policies are formulated. Though originally privately owned, since nationalization in 1949,

the Reserve Bank is fully owned by the Government of India.    The preamble of the reserve bank of India is as follows:

 "...to 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 Act, 1992 : 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. 

3. Insurance Regulatory and Development Authority : The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India and is  based in Hyderabad (Andhra Pradesh).  It was formed by an Act of Indian Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements. Mission of IRDA as stated in the act is "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 thereto."  (B) Part of the Ministries of the Government of India :       4. Forward Market Commission India (FMC) : Forward Markets Commission (FMC) headquartered at Mumbai, is a regulatory authority which is overseen by the Ministry of Consumer Affairs, Food and Public Distribution, Govt. of India. It is a statutory body set up in 1953 under the Forward Contracts (Regulation) Act, 1952  This Commission allows commodity trading in 22 exchanges in India, out of which three are national level.         5.  PFRDA under the Finance Ministry :  Pension Fund Regulatory and Development Aulthority  :PFRDA was established by Government of India on 23rd August, 2003.  The Government has, through an executive order dated 10th 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.

RBI is the central bank of India whereas SEBI is the Securities and Exchange Board of India. Both of them play vital role in Indian economy. RBI is the body responsible for maintaining bank notes in the country, to keep currency reserves to maintain monetary stability and to keep the credit and currency system of the country working efficiently. SEBI on the other hand is an autonomous body constituted in 1992 to oversee the operations of investment markets in the country. The board performs the function of a regulator to keep markets stable and efficient markets. There are obvious differences in the roles and responsibilities of two monetary bodies that will be discussed highlighting their features.RBIRBI stands for Reserve Bank of India and is the central bank of the country. It is the banker to all banks and the government of India. It was established in 1935 and was nationalized in 1949 after India got independence. It has a board of directors with a governor. RBI is the sole body in the country to issue currency notes. It maintains minimum reserves of gold and foreign currency amounting 200 crores. RBI performs all transactions of the government as it receives and makes payments on behalf of the government.Every bank in the country is required to keep a minimum cash reserve with the RBI to meet its liabilities. RBI issues licenses to all banks to carry on banking operations and has the right to cancel this licence if it deems fit. RBI also sets the lending rates for all banks which is the rate at which banks are required to distribute loans to consumers both in industry and agriculture sector.SEBIThe basic motive of the government behind setting up of an autonomous body called SEBI in 1992 was to protect the interests of investors in securities, to help in growth of securities market and to regulate it efficiently so as to attract foreign investors. SEBI has been performing these duties with zeal and efficiency. It has introduced extensive regulatory methods, stringent code of obligation, registration norms, and eligibility criteria that has helped Indian securities market tremendously.All affairs of SEBI are managed by an appointed board that comprises a chairman and 5 other members. Companies that wish to bring a public offer of more than rupees 50 lakhs are required get approval from SEBI.Of late there is news of a tug of war between these two watchdogs of Indian economy as SEBI wishes to amend the definition of securities to bring into its fold all marketable instruments. This has meant alarm bells for RBI as then currency derivatives would come within purview of SEBI bypassing RBI. SEBI has proposed to keep FD’s and insurance policies out of the amendment but it could include many more instruments currently falling under the jurisdiction of RBI. Negotiations are on between RBI and SEBI and soon a formula may be worked out to settle the issue.

In brief:RBI vs. SEBI• RBI is the central bank of India that works as a banker to banks and the government while SEBI is securities and Exchange Board of India that looks after the health of investment markets.• There has been tension between the two bodies because of proposed amendments by SEBI

NSE and BSE are two terms that are often heard in the stock market circles in India. There are some differences between the two in terms of their functioning and principles. NSE stands for National Stock Exchange whereas BSE stands for Bombay Stock Exchange.NSE happens to be the largest stock exchange in India and the third largest stock exchange in the whole world. On the other hand BSE is the oldest stock exchange in Asia. NSE is located in New Delhi and was started in the year 1992 as a tax-paying company. NSE was recognized as a stock exchange in the year 1993 under the Securities Contract Act 1956. On the other hand BSE was established way back in the year 1875.It is situated in the Dalal Street, Mumbai.The main objective of NSE is to establish trading facility nationwide for all kinds of securities. One of the chief characteristics of NSE is that it caters to the needs of all types of investors. It achieves its objective through the appropriate telecommunication network. As a matter of fact NSE was able to achieve its goal in a very short span of time.It is important to know that NSE has a listing of more than 2000 stocks from different sectors. On the other hand BSE has a listing of more than 4000 stocks from different sectors. It is equally important to know that SENSEX is the major index of BSE and it has about 30 scrips from different sectors.On the other hand NIFTY is the major index of NSE and it comprises of about 50 scrips from different sectors. Another interesting difference between NSE and BSE is that NSE shows the fluctuation of share prices of 50 listed companies. On the other hand BSE shows the fluctuation of share prices of 30 listed companies.It is interesting to note that both NSE and BSE are the stock exchanges recognized by Securities and Exchange Board of India or SEBI. In terms of the volume of the business done on a daily basis, both NSE and BSE are equal. It is true that the investor can buy the stocks from both the stock exchanges since many key stocks are traded on both the exchanges.

World Bank and IMF are two very important specialized agencies of United Nations.  To understand the roles, functioning and responsibilities of these autonomous bodies, World Bank and IMF, a brief look into history is necessary. In 1944, with World War II raging, delegates from 44 allied nations gathered in Bretton Woods, Washington, US and finalized Bretton Woods agreement which gave birth to World Bank and IMF. This agreement laid rules for commercial and financial relations between member states of the world. IMF and World Bank were set up and later joined and ratified by most of the countries of the world. All countries agreed to tie their currency with US dollar and also upon the role of IMF to look into imbalance of payments problems of the countries. In 1971, US unilaterally terminated convertibility of dollar to gold, thus bringing to an end Bretton Woods agreement. USD became the sole backing of world currencies and a source of reserve currency for all countries of the world.The difference between the World Bank and the IMF is not easy to understand. Even the founding father of the two institutions, John Maynard Keynes, the most brilliant economist of the 20th century said that the names were confusing and that bank should be called a fund, and the fund, bank.World BankWorld Bank was set up under Bretton Woods system on 27 December, 1945 in Washington D.C. An international financial institution, World Bank has an aim to reduce poverty in member states. It provides loans for economic programs to countries. It is guided by a commitment to promote foreign investment, particularly capital investment, and international trade. It provides technical and financial assistance to poor countries for development of infrastructure such as building roads, hospitals, schools etc. Nearly all countries of the world are members of World Bank.Traditionally, World Bank President comes from US.IMFIMF was also founded on 27 December, 1945 in Washington D.C with the objective of promoting global monetary cooperation and international trade. It seeks to promote employment and secure financial stability in member countries. IMF looks into macroeconomic policies of countries to see its impact on exchange rates of currencies and also the balance of payments problems of member states. It engages in providing loans at lower rates of interest thus acting as the biggest international lender. Traditionally, IMF President comes from Europe.Differences between World Bank and IMFIn recent times, the functions and roles of the two international institutions have often overlapped, so much so, that it has become difficult to demarcate the differences between the two.But broadly speaking, while IMF concerns itself with macroeconomic policies of member states, balance of payment problems, international trade policies and exchange rates of different currencies, World Bank takes up cases of different countries on individual level. It concerns itself with economic policies within a country, look for ways to improve economic conditions, and also how to correct government spending to improve the situation. World Bank takes up development projects in different countries by providing financial assistance on easy terms

Accountancy and Commerce are two subjects that are often confused in terms of their content and meaning. Accountancy is the process of communicating financial information about a business firm to related people such as managers and shareholders.On the other hand commerce is the exchange or barter of goods and services from the place of production to the place of consumption. Commerce is done to satisfy human wants.The communication in accountancy is generally in the form of financial statements. It is important to know that the information regarding statements is selected as according to its relevance to its users such as managers and shareholders. On the other hand commerce consists in the trading of entities with economic value such as goods, information, services and money.It is important to know that there are several branches or fields of accounting such as cost accounting, financial accounting, forensic accounting, fund accounting, management accounting and tax accounting. On the other hand commerce includes several systems that are in use in any given country. These systems include economic, legal, cultural, political, social and technological to name a few.Accountancy is defined as ‘the profession or duties of an accountant’. It is interesting to note that accountancy has a special definition according to the American Institute of Certified Public Accountants (AICPA). It says accountancy is ‘the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof’.On the other hand commerce is a system that has its bearing on the economic status of a country or a state for that matter. In short it can be said that commerce has its influence on the business prospects of a given country. Experts call commerce as the second wing of business which includes barter of goods from producers to users.On the contrary accountancy is described as the language of business since it is the way by which financial information pertaining to a business firm is reported to different groups of people that are directly or indirectly associated with the firm. The direct users are the managers and the shareholders whereas the indirect users are the general public and the potential investors.It is important to understand that commerce implies the abstract ideas of buying and selling whereas accountancy implies the process of reporting the financial statements.

Direct Debit and Standing Order, are two banking terms that have long been confusing among people. These banking terms direct debit and standing order are used in connection with withdrawal from your bank account. Money is automatically withdrawn in favour of another account from your account through both these instruments. Standing orders was long in use all over the world but is being replaced by direct debit for some reasons.Direct DebitDirect Debit is indeed a very smart way of paying your utility bills such as electricity, gas or house tax by allowing the bank to directly take away the amount from your bank account and transfer it to the concerned companies account. This is actually an instruction to the bank to carry out payments from your account to different accounts. This means that when the institutions authorized by you present their bills to the bank, the bank does not need your permission every now and then to make payments to them. In some cases the amount of money is same every time as is the case with EMI’s of home loan or rent, while in the cases of utilities that amount could vary all the time. Companies love to receive payments through direct debit as the payments are instant, almost as if you wired the money in their account.Standing OrderA standing order is similar to direct debit and was in vogue till not so long ago. It is also called standing instruction as it is an instruction on your part to your bank to withdraw money from your account and make payments to other accounts. These payments are always the same and take place at regular intervals. Normally SO is used to make payments for rent or EMI of your home loan. These standing orders were beneficial to the account holder as he was aware of the day and amount he needed to deposit in his account so as not to default. A standing order is applicable only when the amount to be paid is regular and also same each time.Difference between Direct Debit and Standing OrderAs is evident, both standing order and direct debit are instruments used by banks to facilitate transfer of money from the accounts of their customers to various institutions. But there are differences between the two which are as follows.In case of Standing Order, the withdrawal takes place at regular intervals and the amount of money is fixed. The amount cannot change unless you cancel the earlier Standing Order and issue a new one. On the other hand, both the amount and interval can change in case of Direct Debit.In case of Standing Order, it usually takes 3 days for the money to reach the recipients account and the transaction is free for you. In case of Direct Debit, the transaction is instant and the company receives the amount fairly quickly. As institutions receive payments quickly, they offer discounts to customers who pay through Direct Debit.Because of these reasons, Direct Debit has become very popular and is gradually replacing Standing Order all over the world.

Direct Debit Standing Order

Withdrawal interval can be changed Withdrawal takes place at regular intervals

The transaction amount can be changed The transaction amount is fixed

To change the amount of money existing SO has to be cancelled and new one issued

Speedy transaction Comparatively slow, 2 -3 days required