Institutional Structure for

Financial Regulation in
INDIA
Presentation by:-

Rajesh Sharma : 0949650

Saurabh Malik : 0954187
Mohit Chatpalliwar: 0952588
Chintan Shah : 0934708
Introduction:
In present scenario, no country can think to
survive without efficient financial structure. An
efficient financial structure can help a country to
boost its economy and provide better standard of
living to its people. Financial regulations are help
in this case; these regulations are a form of
regulations which subjects financial institutions to
certain requirements, restrictions and guidelines.
This may be handled by either a government or
non-government organization.
Roles of Financial Regulators:
To maintain confidence in the financial system.
To protect the clients interest and investigate
complaints.
To enforce applicable laws.
Control on the inflation.
Provide license to different financial services.
India has Multiple Agency Regulator Financial System.


The regulators :

Ministry of Finance (MOF)



Reserve Bank of India (RBI)



Insurance Regulatory and Development Authority (IRDA)



Securities and Exchange Board of India (SEBI)



High Level Coordination Committee on Financial and Capital Markets (HLCC)


Ministry of Finance (MOF)
Plays a role in creating regulators.
Legislative work.
Owner of Many Finance Company.
Presents Annual Budget every year.
Played supervisory role in rules and regulations
(before the reforms of nineties)
Reserve Bank Of India (RBI)
Set up under the RBI Act, 1935
Central Bank.
Regulators for deposit taking agencies.
Investment banker for the govt.
Regulators for Debt , foreign exchange markets.
Issuance of currency.
Insurance Regulatory and Development Authority
(IRDA)

Setup under the IRDA Act, 1999

Protect the interest of policy holder.

Regulate, promote and ensure growth of the

Insurance Industry.
Securities and Exchange board of India
(SEBI)
Setup under the SEBI Act, 1992.

Regulator authority of capital Markets.

SEBI can set regulatory policy, carry out

implementation as well as has the power to
enforce regulatory rules and impose
punishment on wrong-doing.
High Level Coordination Committee on
Financial and Capital Markets (HLCC)

Chaired by Governor of RBI.

Members are the top officials of other

regulators.

Coordination among various financial

regulators.
Problems with current regulatory system

Communication .
Lack Responsibility in crises.
Economies of Scale
Resource Efficiency
Market Environment
Advantage of current regulatory system

Less work pressure

Awareness of role and responsibility
Quick response
Facilitate Innovation
Bailout during 2007 Financial Crises
The economic problems of the global slowdown
began to surface in India during the mid-2008.
On December, 2008, the first bailout package
was estimated to pumped in additional funds to
the tune of Rs 40,000 crores into the Indian
economy.
The second bailout package, announced in the
beginning of January, 2009, provided the system
with additional liquidity to the extent of Rs
20,000 crore, taking the total additional fund
availability to Rs 60,000 crores.
India GDP Growth rate
The Indian economy is the twelth largest economy
in the world.
Indian economy is the fourth largest economy by
Purchasing Power Parity (PPP).
By 2008, India had established itself as the world’s
second fastest growing economy.
However in 2009, India saw a slowdown in GDP to
6.7%.
Source: trading economics
India GDP Growth Rate (Cont.)
India’s GDP in Current prices will overtake France
and Italy by 2020.
Germany , UK and Russia by 2025.
Japan by 2035.
By 2035, It was projected to be the third largest
economy of the world, behind USA and China.
India purchased 200 tons of gold of $6.7 Billon
from IMF in 2009.

Source: Goldman Sachs

India GDP Growth rate (Cont.)
The gross Domestic Product in India expanded at
an annual rate of 7.2% in last quarter.
India’s GDP is worth 1217 billion dollars or 1.96%
of the world economy, according to the World
Bank.
The economy has posted an average growth rate of
more than 7% in the decades since 1997.

Source: tradingeconomics.com
India GDP Growth rate :
12
10
8
6
4
2
0
Jan/06 Jan/07 Jan/08 Jan/09 Jan/10

 Jan 06- GDP 9.5 %

 Jan 07- GDP 9.7 %
 Jan 08- GDP 9.2 %
 Jan 09- GDP 6.7 %
 Jan 10- GDP 7.2 %
Source: tradingeconomics.com
The Annual Budget India, 2010-2011
Challenges:
 The first challenge is to maintain the GDP growth
rate to over 9% p.a., then find means to cross the
double digit growth barrier.

 To address the weakness in government system,

structure and institution at different levels of
government.

Source: Ministry of finance, India

Overview of the Indian economy
India among the first few countries in the world to
implement major reforms to minimize the fallout
of the global slowdown.

The growth rate in manufacturing sector in

December, 2009 was 18.5%, the highest in past two
decades.

Source: Ministry of finance, India

Budget Snapshot
People ownership & improving investment
environment.
Govt. plans to raise more than INR 25,000 crore
through disinvestment of PSU’s
Granting additional banking licenses to Pvt. Banks
to diversify their operations and provide more
financial infrastructure.

Source: Ministry of finance, India

Proposed laws :
Direct tax code (DTC) to be implemented from 1st
April, 2011.
Goods and Services Tax (GST) to be rolled out from
1st April, 2011.
Introduction of pending companies bill, 2009 to
replace the existing companies Act, 1956.

Source: Ministry of finance, India

Direct Taxes:
Individual Male (Below the Age 65 Years)
Up to 1,60,000 Nil
From 1,60,001 to 5,00,000 10 %
From 5,00,001 to 8,00,000 20 %
Above than 8,00,000 30 %
Individual Female (Below the Age 65 Years)
Up to 1,90,000 Nil
From 1,90,001 to 5,00,000 10 %
From 5,00,001 to 8,00,000 20 %
Above than 8,00,000 30 %

Senior Citizen (Above than 65 Years of Age)

Up to 2,40,000 Nil
From 2,40,001 to 5,00,000 10 %
From 5,00,001 to 8,00,000 20 %
Above than 8,00,000 30 %
Direct Taxes : (Cont.)
To boost investment in tourism, initial capital
investment in two star hotels construction is
allowed as deduction from the incomes.
As one time relief to housing & real estate sector,
extension of additional one year has been granted
to complete the projects to avail the deduction.
Surcharge on capital income tax has been reduced
to 7.5% from 10%.

Source: Ministry of finance, India

Direct Taxes: (Cont.)
Expenses on which, TDS is deducted during the
financial year will be allowed as deduction only if
TDS is paid before due date of filing of income tax
return.
Delay in payment of TDS will attract interest @
18% p.a. vs 12% p.a.

Source: Ministry of finance, India

Indirect Taxes :
Basic central excise duty on non petroleum products
increased from 8% to 10%.
Central excise duty on petrol & diesel increased by INR
1 per liter.
Proportionate rise in specific duty for cement and
cement clinkers.
Duty on large cars, multi utility vehicle increased by
2% to 22%, corrugated boxes and cartoons from 8% to
4%.
Source: Ministry of finance, India
THANK YOU