rbi gr b- ESI

 Regulators of Banks and Financial Institutions

Banking regulation act, 1949:

It is the central act that governs and regulates the various banks and Financial institutions in India. It was passed as Banking Companies act, of 1949. 
March 1, 1966- The name was changed from Banking companies act to Banking regulation act. 

  • When it was passed then it was controlled only banking companies. Later, in 1965, it also included cooperatives.   Cooperatives are formed and run by the state govt but the RBI regulates them. 
  • This act helps the RBI to:
    • License the banks
    • Control the shareholdings of the bank
    • Supervise the board and management of the bank
    • Lay down audit instructions
    • Issue directives in interest of the public good
    • Control moratorium, merger, liquidation and acquisition
    • Impose penalties
Important banking regulatory bodies

RBI:
Shaktikanta Das
Mumbai
Banking and finance

SEBI:
Madhabi puri buch
Mumbai
Stock and capital market

IRDAI:
SC Khuntia
Hyderabad
Insurance

PFRDA:
Supratim Bandyopadhyay
New Delhi
Pension

NABARD:
GR Chintala
Mumbai
Rural development

SIDBI:
Micro, Small and Medium enterprises
S. Ramann
Lucknow

NHB:
J. Ravishankar
New Delhi
Housing

Insolvency and bankruptcy board of India:
M S Sahoo
Insolvency
New Delhi

Functions of RBI:
  1. Issuance of banknotes
  2. Banker to the govt
  3. Custodian of cash reserves of commercial banks
  4. Custodian of forex reserves
  5. Controller of credit
  6. Lender of last resort
SEBI:

Estd. 12 April, 1992 under SEBI act. So, it is a statutory body owned by the GoI. 
Main functions:
Protect the interest of investors in the capital market.
Regulate the securities market. 
Branch offices: Delhi, Kolkata, Chennai

IRDAI:
IRDAI act, 1999
Autonomous statutory body
Promotes and controls the insurance and re-insurance of companies in India. 
10-member body with 5 permanent and 4 non-permanent members appointed by the GoI. 

PFRDA under Ministry of Finance
23 Aug, 2003 estd. by GoI under executive order. 
The members include: 
A chairperson
A central vigilance officer
3 whole time laws from finance, laws, and economics

Role of Indian Banks & the Reserve Bank of India in Development Process

Financial regulators in India:
RBI- Banking sector
SEBI- Capital market/ mutual funds
IRDAI- Insurance companies

Structure of banking system in India

The banking system promotes economic growth by: 
Channeling savings into investments
Improving allocative efficiency of resources
Better mobilization of resources

Types of banks in India:
Central bank- RBI
Commercial bank
Cooperative bank
Development bank

Public sector banks in India:

State bank groups and nationalized banks
75% of total deposits
70% of the total advances of all commercial banks in India
Perform core and modern banking functions


Scheduled banks

Listed in second schedule of RBI act, 1934

Banking development and nationalization of banks:
  • 1949- RBI was nationalized
  • 1955- Imperial bank of India or SBI was nationalized
  • 1969- 14 major commercial banks were nationalized
  • 1980- 6 more commercial banks were nationalized
So, the banks were the monopolies of the GoI till the economic reforms started in the 1990s. The govt wanted to promote the growth of all parts of the country by giving out loans at lower rates of interest. 

Nationalization of commercial banks

After nationalization, there was a shift from industry to agriculture. 
The bank branches rapidly grew in the rural areas as well. 
Problems- red tapism and disruptive activities of trade unions of employees of banks. 

Economic reforms of 1990s-
The banking sector was opened up to the market in a gradual fashion. 
RBI is trying to build a better technology and institution for the banks. 




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