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Who are the different financial sector regulators in India?

Written by - Marisha Bhatt

September 19, 2022 9 minutes

The financial sector of any country is the backbone of the nation and needs to be protected at any cost to ensure stability and the continual growth of the country. We have recently seen in Sri Lanka what a financial crisis and mismanagement of the economy can do to a country. Also, the concentration of power of the entire financial sector of a country in a single hand or a single entity is detrimental to yeh interest of the nation. Therefore, there are several pillars of regulators on which the entire financial system of a country rests. 

The financial regulators of the Indian economy and their brief details are mentioned below. 

Financial sector regulators in India 

The financial sector in India is divided among many regulators charged with a specific area of operations. These operations including banking, insurance, mutual funds, pension funds, etc. are charged with ensuring the safety and security of the interest of the public at large and the transparency of operations in every aspect. 

Some of the key financial regulators of the country and their areas of operations are highlighted below. 

Banking is a core financial operation in any country and therefore needs to be protected through the strongest norms. The Central Bank of a country is charged with this task and in India, this function belongs to the RBI (Reserve Bank of India). RBI was established under the RBI Act in 1935 and is responsible for regulating and supervising a major part of the Indian financial sector. It includes supervision of the commercial banks, co-operative banks, NBFCs, etc. as well as ensuring the stability of the economy and monitoring the flow of funds in the country. The core functions of the RBI are highlighted below 

  1. Issue of banking licenses to eligible entities.
  2. Review the liquidity position of the country and take measures to keep it in check.
  3. Inspecting the financial statements of the banks and keeping the reserves maintained by them in check.
  4. Monitoring the value of the rupee and taking corrective measures in the monetary policy to protect it from severe damage, taking measures in maintaining and eventually reducing the fiscal deficit, and safeguarding the overall financial interests of the country.
  5. In charge of the issue, destroying and exchange of coins and currency notes to maintain healthy circulation of the same in the economy.

SEBI stands for Securities Exchange Board of India and is the regulatory body for the securities market in the country. The need for SEBI was seen in after the Indian financial system shook due to major frauds like the Harshad Mehta scam and several others as there was no primary protection of investors’ interests in the capital markets and their confidence was at an all-time low. SEBI was formed under the SEBI Act of 1992 and has a broad range of functions. These functions involve taking protective measures, regulatory measures, and developmental measures to create a framework that ensures a secure environment for every participant in the securities markets and safeguards their interests. 

Some of the key powers and functions of SEBI include,

  1. Prevention of insider trading and protection of interests of every participant in the securities market as well as the increasing investor awareness
  2. Creating and implementing a formal code of conduct that has to be mandatorily followed by all the participants of the market
  3. Formal registration of intermediaries, undertaking regulatory measures like periodic audits.
  4. Laying down the penal provisions for violation of the code of conduct and other provisions of the Act and implementing the same. 
  5. Providing the framework for listing and delisting of securities and regulation of the stock exchanges.

Insurance is the third biggest pillar of the financial system of our country and accounts for huge assets in the system. To regulate this sector, IRDA was formed under a legislative act. The Insurance Regulatory and Development Authority of India (IRDAI) was formed under the IRDA Act of 1999 and is in charge of regulating the insurance sector as well as the interest of its participants, especially the individual policyholders. The key functions and powers of IRDAI are highlighted below. 

  1. Protection of interests of policyholders
  2. Laying down a structured process for granting of registration of insurance companies as well as grounds for cancellation, and modification of the same.
  3. Creating a framework and designated channels for addressing any grievances and ensuring timely remedy of the same. 
  4. Conducting a periodic and detailed audit of the insurance companies and any investigation relating to any grievances of any participant in the industry. 
  5. Laying the code of conduct for the industry participants and ensuring their proper training and education from time to time. 
  6. Highlighting the margin of safety levels and ensuring the adequate maintenance of the same. 
  7. Other regulatory powers include supervising the functioning of the Tariff Advisory Committee, specifying the insurer’s premium income percentage, percentage of business in life insurance and general insurance category that can be undertaken by an insurer in the rural sector, regulating the insurance premium rates, and levy of penal provisions for violation of any rules and regulations of the Act, etc.

The Ministry of Corporate Affairs (MCA) is the regulatory body for implementing and administering the provisions of the Companies Act, 2013, and other relevant Acts of the government. MCA is essentially responsible for the framework that ensures the smooth functioning of the corporate sector while adhering to the provisions of the Act. 

The key functions and powers of the MCA include,

  1. Protection of the interest of all the participants of the corporate sector
  2. Ensuring the maintenance of a framework for a fair and competitive corporate world to promote the growth of the companies and the economy as a whole. 
  3. Provide the groundwork for the registration, cancellation, modification, and alteration of the companies and their underlying laws.
  4. Governing the issue and redemption of various securities like shares and debentures ensures the adherence to all the relevant provisions of the Act relating to the same.

Pensions are the lifeline of the retirees and India has a huge retired population that needs to be looked after. To streamline the process of regulating the pensions and disbursal of the same, PFRDA, a statutory body, was formed under the PFRDA Act, 2013. It is the acronym used for Pension Fund Regulatory and Development Authority. PFRDA extends its purview to not only the government employees but also the private sector and every citizen of the country as well as NRIs.

The core functions and powers of PFRDA are highlighted below,

  1. Regulation of the pension funds and ensuring the financial security of the pensioners.
  2. Laying down the framework for the pension schemes like NPS, Atal Pension Yojana, etc., and protecting the interest of the subscribers of such schemes. 
  3. Creating the guidelines for the formation and regulation of the pension funds
  4. Creating a process and portal for addressing the grievances of the aggrieved parties and ensuring prompt remedial response for the same. 
  5. Increasing awareness of these pension schemes and funds
  6. Laying down the process and conditions for registration and regulations of the intermediaries of the pension funds and pension schemes. 
  7. Framing the code of conduct for the pension industry as a whole and establishing fair practices for disbursal of pension funds.
  8. Framing penal provisions and implementing the same for any violation of such conduct or any provisions of the Act by any party.

What are the factors affecting the financial sector? 

Like any other sector of the economy, there are many challenges faced by the financial sector as well. The regulatory bodies try to implement various norms and regulations to navigate through these challenges and to ensure the overall financial stability of the country. Some of the key challenges of the financial sector are,

  1. Heavy NPAs crippling the banking system
  2. Rising fiscal deficit
  3. Depreciating rupee
  4. Lack of digital literacy in the country and money management ignorance at grass root levels
  5. Threats of the monopolistic markets as well as rampant corruption
  6. Rising inflation in the country due to various external and internal factors
  7. Growing cybersecurity threats

What are some of the ways to improve the financial sector?

The challenges faced by the Indian financial sector are multifold and cannot be resolved with a snap of fingers. However, a few measures that can be taken towards the same include,

  1. Increasing financial literacy among the masses even in the remotest corners of the country 
  2. Eradicating redundant policies that hamper the ease of business and pose a hindrance in attracting foreign investments
  3. Making structured efforts towards better transparency in the financial institutions and their workings as well as ensuring increased accountability even at the highest levels
  4. Reducing the trade deficit by making consistent efforts in increasing exports thereby reducing the pressure on forex reserves and ultimately the rupee
  5. Increasing the participation of small and medium sector enterprises in core sectors of the economy and ensure maximum reach of government policies and benefits for the betterment of the public at large


There are many financial regulators of the Indian economy and the respective norms set by them to govern different aspects of the financial system. These financial regulators work together to ensure the smooth functioning of the entire economy. Apart from these statutory institutions, there are many non-statutory bodies as well that maintain the sanctity of these primary financial institutions and keep oiling the wheels of the country. 


Is AMFI a statutory body?

AMFI stands for the Association of Mutual Funds in India. It is a non-statutory and self-regulatory body under SEBI that regulates the mutual fund industry in the country.

How does RBI regulate the excess inflation in the market?

When there is excess inflation in the market, RBI increases the repo rates which in turn increases the lending rates in the country and eventually keeps the inflation in ch

When was the PFRDA introduced in the country?

PFRDA was introduced in the year 2013 in the country and was extended from being limited to government employees to every citizen of the country as well as NRIs.

Who can issue the registration or cancellation certificate of an insurer?

IRDAI is responsible for the issue or cancellation of an insurer’s certificate.

Which is the governing body responsible for the issue of registration for any company?

MCA (Ministry of Corporate Affairs is responsible for the issue of registration for any company.

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