With the so called “innovation”
in financial products, the eco-system of the sector is getting more complex and
difficult to manage. Experts of finance and economic have to admit, reluctantly
in some cases, that these innovations make market riskier without adding
compensatory return to the system. However, the “too big to fail” banks and
financial institutions have managed to fight and win for lesser regulation as
they feel, at least argue that regulations are impediments for innovations. Nonetheless,
either covertly or overtly the who’s who of the financial sector across the
globe have realised the dire needs of stronger financial regulation.
While the countries in the
western world are still struggling ways to enforce effective and efficient
financial regulations to ensure no repetition of the blunders of 2008, emerging
nations are trying to learn from the mistakes of the western world. India
fortunately has established strong financial institutions and has managed to
attract both domestic and foreign investments into the country. According to
2012-13 report of World Economic Forum, India ranks 59 in overall competitiveness,
but 21 in financial market development. This rank is encouraging for an emerging
nation like India, especially when compared to other BRIC (Brazil, Russia,
India and China) countries. Rank of Brazil, Russia and China in financial
market development stands at 46, 130 and 54 respectively. Rankings by World
Economic Forum are collective rankings of financial market efficiency and trustworthiness
& confidence of financial market. Financial market efficiency reflects: a- availability
of financial services, b- affordability of financial services, c- financing
through local equity market, d- ease of access to loans, e- venture capital
availability. Trustworthiness and confidence in financial market is measured
by: a- soundness of banks, b- regulation of securities exchanges, c- legal
rights.
The credit of India’s sound
performance in financial market could partly be attributed to effective
functioning of financial regulators of the country. The list of financial
regulator of India includes:
- Securities
and Exchange Board of India (SEBI)
- Reserve
Bank of India (RBI)
- Ministry
of Finance (MoF)
- Ministry
of Corporate Affairs (MCA)
- Insurance
Regulatory and Development Authority of India (IRDA)
- Pension
Fund Regulatory and Development Authority (PFRDA)
Securities and Exchange Board of India (SEBI)
SEBI came into existence through Securities
and Exchange Board of India Act, 1992. The basic functions of SEBI are narrated
in the preamble of the SEBI: "...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". In the
recent times, SEBI has successfully established itself as a credible
organization in the country through effective interference in the securities
market as and when required.
Reserve Bank of India (RBI)
RBI was established in 1935 as
the central bank of India and its functions have evolved with the changing
requirements of the economic environment of the country. The primary function
of RBI include: ensuring monetary stability, currency management, supervision
of financial systems and payment systems. Financial regulator is one facet of
the multiple roles played by the central bank of the country. Other functions
of RBI include: banker to banks, banker to the government, issuer of currency,
manager of foreign exchange etc.
Ministry of Finance (MoF)
Ministry of Finance of India
operates with five different departments namely: Economic affairs, Expenditure,
Revenue, Financial services and Disinvestment. Each department is further split
into several divisions with distinct functions assigned to each of the
division. Department of Economic Affairs is responsible for formulation and
monitoring of the economic policies of the country. Matters related to public
financial management of the government of India and matters connected with
States finances come under the Department of Expenditure of the Ministry of
Finance. Department of Revenue controls aspects related to government taxes,
both direct taxes and indirect taxes. Banks, insurance and other financial
services are controlled and monitored by the Department of Financial Services.
Department of Disinvestment, the newest department of the Ministry handles
affairs related to disinvestment and privatisation of Public Sector Units (PSUs).
Ministry of Corporate Affairs (MCA)
Ministry of Corporate Affairs of
the Government of India operates with the mission “to facilitate corporate growth with enlightened regulation”. MCA is
responsible to administer the Companies Act, 1956 and all other Acts that are
related to Indian private sector. MCA visualise itself as a regulator for
corporate affairs, facilitator of business in India, integrator of various
stakeholders related to business, educator of rules and regulations related to
private business in India.
Insurance Regulatory Authority of India (IRDA)
Mission statement of IRDA clarifies
the basic functions of the institution, “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.” IRDA is governed by IRDA Act of 1999. Some of the key powers
and functions of IRDA are: protecting the interest of insurance and
re-insurance policy holders, formulating
model code of conduct for insurance surveyors and loss assessors, promoting
efficiency in the business, regulating fund investment by insurance companies,
conducting audits of insurance businesses etc.
Pension Fund Regulatory and Development Authority (PFRDA)
PFRDA came into existence in Aug,
2003 as a regulator for the pension sector. PFRDA describes itself as “ an
authority to promote old age income security by establishing, developing and
regulating pension funds, to protect the interests of the subscribers to schemes
of pension funds and for matters connected there with or incidental there to ”.
