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The Indian Financial System has independent regulators for different sectors. Banking, Insurance, Capital Market, Commodity Market, Pension Fund, are the major financial sectors in India. The regulators are autonomous agencies that are responsible for regulatory and supervisory activities. Each regulatory body has a unique regulatory framework to ensure the stability and integrity of the Indian financial system. Financial stability, consumer protection, maintaining market confidence, and reducing possibilities of financial crime or fraud are the main objectives of the financial regulatory bodies in India. This article covers in detail the function, role and importance of the financial regulatory bodies in India. 

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Financial Regulators in India

The major regulatory bodies in India are:

Reserve Bank of India (RBI)

The Reserve Bank of India (RBI) is the apex monetary institution in India. RBI is India’s central bank, established under the RBI Act of 1934 and is responsible for numerous functions under the Banking Regulation Act of 1949. Following are the key functions of the RBI:

Monetary Authority

Formulates, executes, and oversees monetary policy.

Objective: To maintain price stability while keeping the growth objective in mind.

Regulator and Supervisor of the Financial System

Prescribes the parameters for the functioning of India’s banking and financial system.

Objective: To maintain public confidence in the banking system, protect the interest of the depositors and also provide cost-effective banking services to everyone.

Foreign Exchange Manager

RBI manages the Foreign Exchange Management Act, 1999.

Objective: To support the orderly development and maintenance of India’s foreign exchange market and to ease overseas commerce and also payments.

Issuer of Currency

Issues, exchanges, and destroys coins that are not fit for circulation.

Objective: To provide a sufficient supply of high-quality currency notes and coins to the general public.

Regulator and Supervisor of Payment and Settlement Systems

Introduces and upgrades secure and efficient payment methods in the country to fulfil the needs of the general population.

Objective: To keep the public’s faith in the payment and settlement system.

Developmental Role

Undertakes promotion activities to assist national objectives.

  • Banker to the Government: Acts as a banker to the government and performs merchant banking functions to both state and central governments.
  • Banker to Bank: Manages accounts of all the scheduled banks.

Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India (SEBI) protects the interest of investors in securities and also promotes the development and regulates the securities market. Furthermore, it was established in 1992 under the Securities and Exchange Board of India Act, 1992.


Following are the key responsibilities of SEBI:

  • Formulates the code of conduct and guidelines for the proper functioning of the intermediaries and businesses.
  • Promotes investor education.
  • Regulates business in the stock and also other securities markets.
  • Audits the stock market performance.
  • Protects the interest of security market participants.
  • Levies fees.
  • Formulates, implements and monitors exercising powers.
  • Regulates credit rating agencies.
  • Furthermore, identifies and prohibits insider trading and unfair trade practices.

Insurance Regulatory and Development Authority of India (IRDAI)

The Insurance Regulatory and Development Authority of India (IRDAI) is the authority that regulates insurance in India. Furthermore, the regulatory body was established under the Insurance Regulatory and Development Authority Act of 1999.

Following are the duties, powers and functions of Insurance regulator:

  • Issue certificate of registration, renew, modify, withdraw, suspend, or cancel the registration.
  • Protects the interest of the policyholders
  • Specifies code of conduct, qualifications, and practical training for insurance intermediaries and agents.
  • Also, specifies the code of conduct for surveyors and loss assessors.
  • Promotes efficiency in conducting insurance business.
  • Promotes and regulates firms that deal in the insurance and also reinsurance business.
  • Levies fees and other charges for carrying out the business as per the Act.
  • Calls for information, conducts an inspection, enquires and also investigates all the related parties to the insurance business.
  • Controls and regulates the rates, terms and conditions of the insurance policies.
  • Specifies the format for bookkeeping.
  • Regulates investment of funds by insurance companies.
  • Also, regulates maintenance of margin of solvency.
  • Resolves disputes between insurers and intermediaries or insurance intermediaries.
  • Supervises the functioning of the Tariff Advisory Committee.
  • Also, specifies the percentage of premium income of the insurer.
  • Specify the percentage of life and general insurance business that the insurer will do in the rural or social sector.

Pension Fund Regulatory and Development Authority (PFRDA)

The Pension Fund Regulatory and Development Authority (PFRDA) regulates the pension scheme in India. It regulates the National Pension Scheme (NPS) and Atal Pension Yojana (APY). Also, it was established under the PFRDA Act, 2013. Also, the PFRDA covers the employees of the government, private and unorganised sectors. Furthermore, the main objective of the regulator body is to ensure income security for senior citizens by regulating and developing pension funds. At the same time, protect the interest of the pension schemes.

Following are the key functions of the Pension Fund Regulator:

  • Creates investment standards for pension funds.
  • Resolves issues between pension fund subscribers and middlemen.
  • Increases public awareness of retirement and also pension plans.
  • Registers and regulates intermediaries.
  • Protects the interest of pension fund subscribers.
  • Investigates intermediaries and other participants for possible malpractices.
  • Formulates standard practices, code of conduct and also norms for the pension industry.