FINANCIAL

REGULATION

HISTORY• It was officially established by The Government of India in the year

1988 and given statutory powers in 1992 with SEBI Act 1992 being passed by the Indian Parliament. SEBI has its Headquarters are at the business district of Bandra Kurla Complex in Mumbai, and has Northern, Eastern, Southern and Western Regional Offices in New Delhi, Kolkata, Chennai and Ahmadabad respectively.

• Controller of Capital Issues was the regulatory authority before SEBI came into existence; it derived authority from the Capital Issues (Control) Act, 1947.

• Initially SEBI was a non statutory body without any statutory power. However in the year of 1995, the SEBI was given additional statutory power by the Government of India through an amendment to the Securities and Exchange Board of India Act 1992. In April, 1988 the SEBI was constituted as the regulator of capital markets in India under a resolution of the Government of India.

• The SEBI is managed by its members, which consists of following: a) The chairman who is nominated by Union Government of India. b) Two members, i.e. Officers from Union Finance Ministry. c) One member from The Reserve Bank of India. d) The remaining 5 members are nominated by Union Government of India, out of them at least 3 shall be whole-time members.

• The office of SEBI is situated at SEBI Bhavan, Bandra Kurla Complex, Bandra East, Mumbai- 400051, with its regional offices at Kolkata, Delhi,Chennai & Ahmadabad. It has recently opened local offices at Jaipur and Bangalore and is planning to open offices at Guwahati, Bhubaneshwar, Patna, Kochi and Chandigarh in Financial Year 2013 - 2014.

CONT..

DEFINITION OF '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"

The regulatory body for the investment market in India. The purpose of this board is to maintain stable and efficient markets by creating and enforcing regulations in the marketplace.

Name Designation

Upendra Kumar Sinha Chairman

Prashant Saran Whole Time Member

Rajeev Kumar Agarwal Whole Time Member

S Raman Whole Time Member

Prakash Chandra Joint Secretary, Ministry of Finance

V. K. Jairath magya Member Appointed

Anand Sinha Deputy Governor, Reserve Bank of India

Naved Masood Secretary, Ministry of Corporate Affairs

Raje Kumar Part Time Member

• The cabinet on last july approved a proposal to bring an ordinance to give more powers to the Securities and Exchange Board of India (Sebi) to protect the interests of investors.

• The capital market regulator will have powers to search and seize assets of defaulting firms, seek information from entities, and access call data records in insider trading investigations.

POWERS OF SEBI

• Power to call periodical returns from recognized stock exchanges.

• Power to compel listing of securities by public companies.

• Power to levy fees or other charges for carrying out the purposes of regulation.

• Power to call information or explanation from recognized stock exchanges or their members

• Power to grant approval to byelaws of recognized stock exchanges

• Power to control and regulate stock exchanges

• Power to direct enquiries to be made in relation to affairs of stock exchanges or their members.

POWERS OF SEBI(CONT...)

The SEBI act 1992, has entrusted with two functions they are…..

• Regulatory function • Developmental function

FUNCTIONS OF SEBI

• Regulation of stock exchange and self regulatory organization• Registration and regulation of stock brokers,

sub brokers, registrar's of all issues, merchant bankers, under writers, portfolio managers etc.• Registration and regulation of the working of

collective investment schemes including mutual funds• Prohibition of inside traders

REGULATORY FUNCTION

• Promoting investors promotion• Training of intermediaries• Conducting research and publishing information useful

to all market participants• Promotion of fair practices• Promotion of self regulatory organization.• Prohibition of fraudulent and unfair trade practices

relating to security market• Regulating substantial acquisition of share and take

over of company.

DEVELOPMENTAL FUNCTION

• Established on 1 April 1935 during the British Rule in accordance with the provisions of the Reserve Bank of India Act, 1934 to respond to economic troubles after the First World War.

• It began according to the guidelines laid down by Dr. Ambedkar.• The general superintendence and direction of the RBI is entrusted

with the 21-strong Central Board of Directors(members)—the Governor (currently Raghuram Rajan), four Deputy Governors, two Finance Ministry representative, ten government-nominated directors and four directors to represent local boards headquartered at Mumbai, Kolkata, Chennai and New Delhi. 

ORIGIN OF RBI

The first RBI notes were issued in the year 1938. Life history of RBI is 'nationalisation' in the year 1949. In the same year

the Banking Companies Act(later Banking Regulation Act) was passed. To meet the expanding currency requirements, the system of note issue

was changed in the year 1956. In the sixties the Reserve Bank, in many ways, pioneered the concept and

practice of using finance to catalyse development. The early 1970s witnessed double-digit inflation and a recession, which

were well managed by RBI. The Foreign Exchange Regulation Act, 1973 came into force to conserve

foreign exchange. Its administration was entrusted to RBI. setting up of Regional Rural Banks in 1975 as alternative agencies to

provide credit to rural people. The seeds of liberalisation were sown in the year 1980 with the setting up

of S Chakravarty Committee to review the working of monetary system.

TIME LINE OF RBI

Certificates of Deposit (CDs) and Commercial Paper (CPs) introduced in India in 1989 to widen the monetary instruments and give investors greater flexibility.

The same year Banking, Public Financial Institution and Negotiable Instruments Laws (Amendment) Act was enacted to encourage the culture of use of cheques in India.

With liberalisation, the bank's focus has shifted back to core central banking functions like monetary policy, bank supervision and regulation, and overseeing the payments system and to developing the financial markets.

In 1991, with the external payments crisis, rupee was devalued in two stages. Unified exchange rate was introduced in 1993.

The National Stock Exchange of India took the trade on in June 1994 and the RBI allowed nationalized banks in July to interact with the capital market to reinforce their capital base.

The central bank founded a subsidiary company—the Bharatiya Reserve Bank Note Mudran Limited—in February 1995 to produce banknotes

To maintain the foreign exchange market in India, Foreign Exchange Management Act was introduced in 1999.

CONT..

STRUCTURE OF RBICentral Board of Directors• The Central Board of Directors is the main committee of the

central bank. The Government of India appoints the directors for a four-year term. The Board consists of a governor, four deputy governors, fifteen directors to represent the regional boards, one from the Ministry of Finance and ten other directors from various fields.

Governors• The current Governor of RBI is Raghuram Rajan. There are

four deputy governors, Deputy Governor K C Chakrabarty, Anand Sinha, H R Khan and Urjit Patel. Deputy Governor K C Chakrabarty's term has been extended further by 2 years. Subir Gokarn was replaced by Urjit Patel in January 2013.

Supportive bodies• The Reserve Bank of India has ten regional representations:• North in New Delhi, • South in Chennai, • East in Kolkata and• West in Mumbai. • The representations are formed by five members, appointed for

four years by the central government . The institution has 22 regional offices.

• Ex. The Tarapore committee, customer service department.

CONT…

Offices and branches• The Reserve Bank of India has four zonal offices.• It has 19 regional offices at most state capitals and at a few major

cities in India.• Few of them are located in Ahmedabad, Bangalore, Bhopal,

Bhubaneswar, Chandigarh, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, Patna, and Thiruvananthapuram.

• It also has 9 sub-offices located in Agartala, Dehradun, Gangtok, Kochi, Panaji, Raipur, Ranchi, Shillong, Shimla and Srinagar.

• The bank has also two training colleges for its officers, viz. Reserve Bank Staff College at Chennai and College of Agricultural Banking at Pune. There are also four Zonal Training Centres at Mumbai, Chennai, Kolkata and New Delhi.

LEGAL FRAMEWORKUmbrella Acts • Reserve Bank of India Act, 1934• Banking Regulation Act, 1949

Acts governing specific functions • Public Debt Act, 1944/Government Securities Act

(Proposed)• Securities Contract (Regulation) Act, 1956• Indian Coinage Act, 1906• Foreign Exchange Regulation Act, 1973/Foreign

Exchange Management Act, 1999

Acts governing Banking Operations • Companies Act, 1956• Banking Companies (Acquisition and Transfer of Undertakings) Act,

1970/1980• Bankers' Books Evidence Act• Banking Secrecy Act• Negotiable Instruments Act, 1881

Acts governing Individual Institutions • State Bank of India Act, 1954• The Industrial Development Bank Act, 2003• The Industrial Finance Corporation Act, 1993• National Bank for Agriculture and Rural Development Act• National Housing Bank Act • Deposit Insurance and Credit Guarantee Corporation Act

• To manage the monetary and credit system of the country. • To stabilizes internal and external value of rupee. • For balanced and systematic development of banking in the country. • For the development of organized money market in the country. • For proper arrangement of agriculture finance.• For proper arrangement of industrial finance.• For proper management of public debts. • To establish monetary relations with other countries of the world and

international financial institutions. • For centralization of cash reserves of commercial banks. • To maintain balance between the demand and supply of currency.

MAIN OBJECTIVES OF RBI

• Bank of Issue • Banker to Government • Bankers' Bank and Lender of

the Last Resort

• Controller of Credit • Custodian of Foreign Reserves

• Supervisory functions• Promotional functions• Classification of RBIs functions

FUNCTIONS OF RBI