Page 8 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 1: Indian Financial System

 Financial Markets Notes
 Financial Instruments
 Payment and Settlement Infrastructure
Let us get introduced to them one by one.

Regulatory Authorities

The main component of any financial system is the regulatory system it has. In any economy,
the financial system is regulated by the central banking authority of that country. In India, the
central bank is named as the Reserve Bank of India.

The Reserve Bank of India

The regulation and supervision of banking institutions is mainly governed by the Companies
Act, 1956, Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, Bankers'
Books Evidence Act, Banking Secrecy Act and Negotiable Instruments Act, 1881

The regulation and supervision of finance companies is done by the Banking Regulation Act,
1949 which governs the financial sector.
Individual Institutions are regulated by Acts like:

 State Bank of India Act, 1954
 The Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003
 The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993

 National Bank for Agriculture and Rural Development Act
 National Housing Bank Act
 Deposit Insurance and Credit Guarantee Corporation Act

Securities and Exchange Board of India

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 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.

Insurance Regulatory and Development Authority

Insurance Regulatory and Development Authority regulates and supervises the insurance
industry - insurance companies and their agents and insurance brokers 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.

Financial Institutions

The financial system consists of many financial institutions. While most of them are regulated
by the Reserve Bank, there are some which it manages just indirectly.

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