Indian Financial Laws and Policy

By Chaitra Vallala, Birla Global University

Editor Yashika Malik Gitarattan International Business School, Delhi, GGSIPU


Finance sector plays a major role in every county’s economy. India’s finance sector has been expanding rapidly. Banking, insurance, pensions, stock markets and mutual funds and non banking financial companies can be said as the backbone of Indian Financial sector. There are different governing bodies which act as the apex body for these sectors and regulate them. The Indian Financial System is governed by five major bodies. they are as follows:

1. RBI as a summit money related establishment:

Built up in April, 1935 in Calcutta, the Reserve Bank of India (RBI) later moved to Mumbai in 1937. After its nationalization in 1949, RBI is by and by possessed by the Govt. of India. It has 19 territorial workplaces, significantly in state capitals, and 9 sub-workplaces. It is the backer of the Indian Rupee. RBI controls the banking and budgetary arrangement of the nation by giving expansive rules and guidelines.

Role of RBI

· Control cash gracefully

· Screen key markers like GDP and swelling

· Keep up individuals' trust in the banking and monetary framework by giving instruments, for example, 'Ombudsman'

RBI Security

· Detail financial strategies, for example, swelling control, bank credit and loan fee control

2. SEBI as an administrative body for the protections showcase:

SEBI stands for Security Exchange Board of India. It is established under SEBI Act, 1992, which makes it a statutory corporation, thereby a separate legal entity. Before SEBI, stock exchange activities were carried on by Bombay Stock Exchange (BSE), which is still a main stock exchange in India. SEBI’s Head office is in Mumbai, and has its provincial workplaces in New Delhi, Kolkata, Chennai and Ahmedabad. It supervises share market and manage the elements of protections market to keep a mind acts of neglect and secure the speculators

Role of SEBI

· It regulates capital market, stock exchange and its related intermediaries.

· Secure the premiums of financial specialists through appropriate training and direction

· Stop extortion in capital market

· Review the exhibition of financial exchange

· It develops and promote issue of securities in primary markets and trading of securities in secondary market.

· It prohibits and check for insider trading and market manipulation actives.

3. Insurance Regulatory and Development Authority of India (IRDAI)

IRDAI is an independent zenith legal body which undertakes the functions of controlling and building up the protection of business activities in India. It was set up in 1999 through a demonstration passed by the Indian Parliament. Its headquarter is in Hyderabad, Telangana. IRDA also manages and advances protection of business in India.

4. Forward Market Commission of India (FMC)

FMC is an administrative position represented by Ministry of Finance, Govt. of India. It is a legal body, established in 1953, under the Forward Contracts (Regulation) Act, 1952. The Commission permits in 22 trades in India. The FMC is presently converged with SEBI.

5. Pension Fund Regulatory and Development Authority (PFRDA)

Setup in October 2003 by Govt. of India. PERDA creates and manages the benefits division in India. The National Pension System (NPS) was propelled in January 2004 with a means to give retirement salary to all the residents. The goal of NPS is to set up benefits changes and instill the propensity for putting something aside for the retirement among the residents.

Shortcomings of Existing Laws

The current system of financial laws in India has various issues. Countless laws exist, every one of which was intended to take care of a little issue that was then common. These laws are regularly conflicting and are by large distant, from the necessities of a center pay economy. For instance, the introduction of the Reserve Bank of India Act, which was sanctioned by the British in 1934, peruses:

As it was much needed to establish Reserve Bank for India to control the issue of Bank notes and for keeping of stores with the end goal of making sure about money related strength in India and for the most part to work the cash for credit arrangement of the nation for its potential benefit; What's more, though in the current disorder of the money related frameworks of the world it is unimaginable to expect to figure out what will be reasonable , as a changeless reason for the Indian fiscal framework; Be that as it may, though it is convenient to make brief arrangements based on the current money related framework, and to leave the topic of the fiscal standard most appropriate to India to be viewed as when the worldwide financial position has gotten adequately clear and stable to make it conceivable to outline lasting measures.

Moreover despite the fact that the Act has been corrected occasionally, such an "impermanent" game plan arrangement in 1934, serving the destinations of provincial specialists, isn't probably going to be ideal for India from 2014 to 2064.

Most existing money related laws were authorized when India was an order and control economy. They are guided by the target of containing and controlling money related markets, as opposed to managing and overseeing them. The current laws are not established in a comprehension of the market disappointments that are found in fund, and the instruments through which these are tended to.

Moreover the key problems in the financial sector includes- lack of financial inclusion, a glacial pace of innovation, the growth of an unregulated shadow financial system, inflation and various barriers to capital flows, these problems need to be tackled in order to ensure smooth flow of money in the economy.

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