RBI AND SEBI ROLE IN FINANCIAL SYSTEM OF INDIA

BY: LOKESH YADAV

INTRODUCTION

Role of RBI in Banking Regulation

RBI was established in Kolkata in 1935 under the RBI Act and eventually moved to
Mumbai. RBI's business is primarily managed by the Central Board of Directors. A
committee he is appointed by the central government for four years. Members of the RBI
include one Governor and four Lieutenant Governors. The BR Act of 1949 and his RBI Act
of 1934 regulating the banking system. RBI has different functions in different roles.
1. Monitor various factors of the economy such as inflation and GDP;
providing various assistance tools . Ombudsman program as described in
the article. maintain public confidence in the banking system as a whole;
Issuer of Surveillance Policy – The main objectives of monetary policy are to: (b)
bank credit management; (c) Interest Rate Management. The tools used by the RBI to
control its monitoring policies are (a) the Cash Reserve Ratio (CRR)
and the Statutory Liquidity Ratio (SLR). (b) open market operations; (c) repo rates,
bank rates and reverse repo rates;
2. Currency Issuers – Section 22 of the RBI Act authorizes the RBI to issue
currency bonds. We are also taking measures to curb the circulation
of counterfeit currency.
3. Banking System Managers and Supervisors – RBI is known as Banker of Banks
and RBI's management and supervisory functions are carried out through the
following actions:
4. Issuing licenses – detailed in this article.
Regulatory Standard – RBI issues guidelines on credit control
and administration. The Central Bank is a member of the Banking Committee on
Banking Supervision (“BCBS”). It is also responsible for implementing international
standards for capital adequacy standards and asset classification.
5. Corporate Governance – detailed in this article
KYC Code – to curb money laundering and prevent the banking system from being
used for financial services. All banks
must ensure that KYC standards are enforced before allowing anyone to open an
account.
6. Transparency Standard – All banks must disclose the fees they charge for
providing their services, and customers also have the right to know these fees.
Risk Management – RBI provides guidelines to banks to take necessary steps
to manage this risk. This is done through Basel III risk management.
Audits and Inspections – Audit and inspection processes are managed by RBI through
off-site and on-site monitoring systems. This check is based on CAMELS –
Capital adequacy ratio. Asset Quality; Management; Earnings; Liquidity and Systems
and Controls.
7. Exchange Control – RBI plays an important role in foreign exchange trading. We
conduct due diligence on all transactions, including both cash inflows and outflows.
We have an obligation to act to prevent the Indian Rupee
from depreciating. It is also working to curb the current account deficit. We also
support and encourage exports and provide many options for NRIs.
8. National Development – RBI is responsible for implementing government policies
related to the agricultural sector and development. The RBI will also allow credit
to flow to other priority sectors. Section 54 of the RBI Law deals with professional
rural development assistance.
 Preferred lending can also be considered one of the RBI's areas of focus.
Press Release - RBI regularly publishes reports and data on the entire banking sector.

SEBI'S ROLE IN REGULATION OF LISTED BANKS

Commercial banks are financial institutions that provide both commercial lending
and underwriting. They are aimed at large enterprises and HNIs. They offer a combination
of consulting and banking services.
They advise on financial, marketing, management, and legal matters. Such advisory services
assist in starting a business, raising capital, modernizing, expanding or restructuring a
business, and revitalizing hospital wards. They also help companies register,
buy and sell shares. They do not act as custodians or credit agencies for private customers.
they are just middlemen. We assist in international transactions, often involving multinational
corporations.

National Grindlays Bank introduced the Merchant Bank concept to India in 1967. In 1972,
SBI became the first Indian commercial bank to set up a separate Merchant
Banking division. To date, commercial banks in India operate as underwriters rather than full
commercial banks.

Commercial Banking Regulations

SEBI Pursuant to the SEBI Regulations, SEBI has regulated various elements of the capital
markets in the exercise of its powers under Section 30 of the SEBI Act 1992.
Merchant bankers are regulated by the SEBI (Merchant Bankers) Regulations 1992.

SEBI (Merchant Bankers) Regulations, 1992

These regulations consist of five chapters concerning definitions, compulsory registration
with SEBI, renewal of certificates and fees payable to SEBI. Capital requirements,
obligations and responsibilities, code of conduct, documents, records, procedures for
inspection by SEBI of books, procedures in case of payment default, d by SEBI)

Approval by SEBI – established criteria for obtaining approval SEBI According to:

Legal, financial or business management professional qualifications.

Available infrastructure including office space, electricity, equipment, etc.
Compliance with Capital Standards.
Classification of Merchant Bankers - SEBI classifies merchant bankers into four categories:

Category II - Advisors, Advisors, Portfolio Managers, Underwriters.

Category III – Advisors, Underwriters and Advisors only.

Category IV – Advisors or advisors in capital matters.

Subject to the above provisions, the role of underwriter for issuance can only
be performed by a Category I registered merchant his banker. From
December 9, 1997, all categories except category I have been
discontinued. A commercial banker in India must be registered with his SEBI under
Category I.
Capital Standards – SEBI mandates capital standards for merchant bankers to
register in various categories. The minimum net worth set by SEBI for Category I merchant
bankers was originally set at a value of Rs. After 1 Cr, increase to the value of Rs. 5 Cr by
constitutional amendment of 1995

Other important guidelines from the SEBI (Merchant Bankers) Regulations 1992 are:

1. Mandatory to appoint a compliance officer.

2. SEBI may dispatch personnel to inspect records, books, etc.
3. SEBI may charge an annual or renewal fee following the approval fee.
4. Underwriters also have a minimum underwriting requirement of 5% of the issue size
or Rs. 25 lakh, whichever is less.
5. Code of Conduct for Commercial Banks: Commercial banks are required to adhere to
certain strict codes of conduct.
6. Do our best to protect the interests of our investors
7. Conduct our business with a high degree of dignity, integrity and fairness
8. Conduct all our obligations in a professional and ethical manner
9. Do not discriminate against our clients
10. All things Necessary documents such as offer letters, prospectuses, etc. will be
available to all investors at the time of issuance. Advised customers as efficiently as
possible.
11. Tell SEBI about legal proceedings brought against him or her.
12. Create an internal code of conduct to regulate internal processes.
13. Be responsible for all actions of agents and employees
14. Do not create a false market.
15. Strictly comply with the rules and guidelines of
the Securities and Exchange Commission of India (Merchant
Bankers) Regulations 1992.