FINANCIAL REGULATORS IN INDIA

1. RBI; Reserve Bank of India

6 march 1934, Mumbai

2. SEBI; Securities and Exchange Board of India

12 April 1988, 4 April 1992, Mumbai, Office of controller of capital
issues under capital issue control act,1947.

3. IRDAI; Insurance Regulatory and Development Authority of India

1999, Hyderabad (HQ) Regional Office: Delhi and Mumbai, Statutory
body under MoF, regulate and licensing to insurance and re-insurance
industries.

4. MCA; Ministry of Corporate Affairs

5. PFRDA; Pension Fund Regulatory and Development Authority

2013,2014, Regulate NPS, New Delhi

6. NHB; National Housing bank

1987, New Delhi, give license to housing finance company

7. FMC; Forward Markets Commission

1952,1953, Mumbai, Regulate commodity futures markets in India

8. AMFI; Association of Mutual Funds in India

22 August 1995, Section 25 1956 companies act, Section 8 2013
companies act as non-profit organization.

9. IBBI; Insolvency and Bankruptcy Board of India.

Oct 2016, New Delhi

PENSION FUND
Retirement fund, kind of savings scheme where individual invest small part of
his salary or income into designated savings plan. PFRDA
MUTUAL FUND
Aggregate sum of money or SIP invested by individual to professional fund
manager or institution. AMFI
RE- INSURANCE
In a case of major claim events insurance company purchase insurance from
another insurance company to pass on some part of its own insurance liabilities
to another insurance company.
UNIT TRUST OF INDIA (UTI)
1ST Feb 1964 under UTI Act, 1963. Statutory public sector investment
institution. Encourage and mobilize savings in the economy. NBFC.
GENERAL INSURANCE CORPORATION OF INDIA (GIC)
Act, 1972. Mumbai. Established under1956 companies act. Provide re-insurance
facility to fire, motor, aviation, marine etc....
LIFE INSURANCE CORPORATION (LIC)
Sep 1956. Mumbai. Largest insurance company and largest institutional investor
of India.
DEVELOPMENT BANK
 New concept.
 In India emergence of development banking is post-independence.
 Origin 1822 Belgium, merchants gave loans to farmers and traders.
 Economic and Industrial development-oriented bank.
 Provide all kinds of financial assistance to business.
 Development bank is a term landing institution.
 Medium and long-term finance.
 Non-banking financial institution.
 Establish TCO (Technical Consultancy Groups), IIG (Inter Institutional
Groups), STEP (Science and Technology Entrepreneurship Parks).
 Gap filler in the economy: Short loan vs long term loan.
 Promote investment and saving habits

 Risk Faced by Development Banks:

1. Credit Risk: Comprehensive appraisal, Exposure limit
2. Market Risk: Interest rate risk, liquidity risk, FX risk.
3. Operational Risk
 Prominent Development Banks

A. IFCI; Industrial Finance Corporation of India

1948 established, July 1993 converted into public ltd. Company.
Fist development bank and first financial institution of India.

B. ICICI; Industrial Credit and Investment Corporation of India

1955 established, private sector development bank, may 2002 merged
with ICICI bank.

C. IDBI; Industrial Development Bank of India

1964 established as subsidiary of RBI. 1976 delinked from RBI.

D. SIDBI; Small Industrial Development Bank of India

1990 established. Lucknow, financial institution for small scale industries.

E. SFC; Small Financial Corporation

COMMERCIAL BANKS
 Banaque (Greek word) Banco (Italian word)
 First banking institution of India 1770, Bank of Hindustan, Calcutta.
 First commercial bank of India 1881, Bank of Oudh
 Oldest public sector bank of India 1786, Allahabad bank.
 Profit seeking business firm. Dealing in money, credit and function as a
mobiliser of savings in the economy.
 Significant money market institution gives short term loans.
 Banking financial institution.
 Banking Regulation Act, 1949.

 Functions of Commercial Banks: -

1. Accepting Deposits; Demand, Saving, Fixed
2. Advancing Loans; Cash Credit, Demand Loan, Short-term Loan
3. Use of cheque system
4. Remittance of Funds
5. Agency Services
6. General Utility Services
 Types of Banks: -
In early times credit instruments like Hundis, bankers (Mahajan, Sunar’s,
Multan, Marwari, duwatri etc.) finance traders and kings, as time pass
modern banks emerged.

Central bank
Commercial Bank
Industrial Banks
(Industrial loan companies, financial institution, accept customer deposits,
usually owned by commercial banks.)
Foreign banks
(place of effective management)
Land Development Bank/ Land Mortgage bank
(Long term loans for agriculture and rural development, 1920 Punjab first.
Act 1930)
Co-operative Bank
(State, district and urban. Work on the principle of cooperation and are
owned and operated by their members. First ACBL Anyona. Cooperative
societies act,1912)
Regional Rural Bank/ RRB
(Founded 1975. Act 1976. First Prathama bank Moradabad, UP 1975.
Schedule commercial banks. 50:15:35 CG:SG: SB. Banking and financial
services to rural and semi urban areas.)
National bank for Agriculture and Rural Development/ NABARD
(12 July 1982, handle agricultural credit functions of RBI)
Export Import Bank of India/ EXIM Bank
(Act 1981, established on 1 January 1982)
Export Credit Guarantee Corporation/ ECGC
(1957 ERIC, 1964)

 14 banks nationalization in 1969, 6 banks in 1980, 2 banks merged in 1993,

Total 12 nationalized bank in India.
 Credit/ Money Creation by Commercial Banks
 Merged banks (Find Out)
 State Bank of India1955: Imperial bank 1921bank of Bengal, Bombay,
Madras
RESERVE BANK OF INDIA (RBI)
 Monetary authority and Central bank of the country.
 Set up in 1935 under RBI act,1934.
 It is the bankers to the banks.
 Regulate both the banking and non- banking activities.
 Issue bank notes, keeping reserves, securing monetary stability, operate
currency and credit system of the country.
 Countries all banks work under its direction.
 Constitute as corporate body having perpetual succession and common seal.
 Mumbai HQ, regional office: Kanpur, Lucknow, in Uttar Pradesh
 World’s first Central bank 1844 Bank of England.
 Three training centres: M, P, C

 Organizational Structure of RBI:

Central Board of Directors 20 members
Local Board 20 members

 Functions of RBI
1. Issue of currency
2. Banker, fiscal agent, advisor of govt.
3. Custodian of foreign exchange reserves
4. Promotional function
5. Research and Development
6. Collection and Publication of data
7. Bank of Banks: Custodian of cash reserves of commercial banks lender of
last resort, clearing agent.

 Objectives of Monetary policy of RBI

1. Suitable price policy
2. Faire degree of exchange rate
3. Attainment of full employment
4. Rapid economic growth
5. Equal distribution of income and wealth

 Limitations of Monetary Policy

1. Non-monetary factors
2. Depression
3. Inflation
4. Cannot govern non-banking sectors
5. Based on backward looking approach.
 Monetary policy/ Controller of money supply and credit
FINANCIAL SYSTERM
CONSTITUENTS OF FINACIAL SYSTEM
MONEY MARKET INSTITUTIONS
CAPITAL MARKET INSTITUTION
UNORGANISED AND ORGANISED MARKET
MONEY MARKET
CAPITAL MARKET
PRIMARY MARKET
SECONDARY MARKET
BROAD, DEEP AND SHALLOW MARKET
MONEY MARKET INSTRUEMENTS
CAPITAL MARKET INSTRUMENTS

MONEY MARKET: MEANING, CHARACTERSTICS,

IMPORTANCE, CONSTITUENTS, STRUCTURE, DRAWBACKS,
IMPROVEMENTS MEASUURES.

CAPITAL MAKET:
FUNCTION, STRUCTURE, GOVT, SECURITY MARKET, IPO

 Narsimham committee 1991,1998

 SVS Raghavan committee 2000
 Bhabha Committee 1956
 Verma committee 1992
 Jalan committee 1991
 Kelkar committee
 Chalapathi Rao committee
 Khanna Committee 1997
 Y.V. Reddy Committee
 Negotiable instrument act 1881
 Cooperative societies act 1912
 Provident funds act 1925,1952,1968
 Indian Partnership act 1932
 Reserve bank of India act 1934
 Insurance act1938
 Central excise act 1944
 Employees state insurance act 1948
 Industrial finance corporation of India act 1948
 CA act 1949
 Banking regulation act 1949
 State bank of India act 1956
 LIC act 1956
 Companies act 1956
 Central sales tax act 1956
 Customs act 1962
 Unit trust of India act, 1963
 MRTP act 1969
 FERA act 1973
 RRB act, 1976
 EXIM act 1981
 NABARD act 1981
 Chit Fund act 1982
 National Housing bank act 1987
 SIDBI act 1989
 SEBI act 1992
 FEMA act,1999
 IRDA act 1999
 Money laundering act 2002
 Competition act 2002
 Companies act 2013
 History of money;
Barter system, metallic money, paper money, credit money, plastic money,
digital money.

 Classical definition: Hicks, Kent, Keynes, Crowther

M=C+DD

 Chicago approach M=C+DD+FD

 Gurely and Shaw approach

M=C+DD+FD+non-banking financial intermediaries-Debentures, Saving
bank Deposits, Shares and Bonds

 Redcliff Approach
Gurely approach + credit from unorganized sectors

C= Currency includes notes and coins

DD= Demand Deposits
FD= Fixed Deposits

 Monetary Aggregates
M0= Currency in circulation +bankers deposits with the RBI + OD with RBI
M1= C+DD with banking system + OD with RBI
M2= M1+Saving Deposits
M3= M2+ TD
M4= M3 +Total deposit with post office saving bank

 Liquidity Aggregates
L1= M3 + all deposits with the post office savings banks excluding national
savings certificates

L2= L1 + FD with development financial institutions + certificates of deposit

issued by development financial institution

L3= L2 + public deposits of non-banking financial companies.

 Money Supply= C+DD

Currency with the public and Demand deposits with commercial banks
 High Powered Money
Refers to the official currency issued by GOI and the RBI in the form of
reserves with the commercial banks and currency notes and coins with the
public.
H= C+R+OD
Currency with the public, Cash reserves with the banks, other deposits with
central bank.