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 India has a financial system that is regulated by independent
regulators in the sectors of banking, insurance, capital
markets, competition and various services sectors. In a number
of sectors Government plays the role of regulator.
Ministry of Finance, Government of India looks after financial
sector in India. Finance Ministry every year presents annual
budget on February 28 in the Parliament. The annual budget
proposes changes in taxes, changes in government policy in
almost all the sectors and budgetary and other allocations for
all the Ministries of Government of India. The annual budget is
passed by the Parliament after debate and takes the shape of
law.
Reserve bank of India (RBI) established in 1935 is the Central
bank. RBI is regulator for financial and banking system,
formulates monetary policy and prescribes exchange control
norms. The Banking Regulation Act, 1949 and the Reserve Bank of
India Act, 1934 authorize the RBI to regulate the banking sector
in India.
India has commercial banks, co-operative banks and regional
rural banks. The commercial banking sector comprises of public
sector banks, private banks and foreign banks. The public sector
banks comprise the ‘State Bank of India’ and its seven associate
banks and nineteen other banks owned by the government and
account for almost three fourth of the banking sector. The
Government of India has majority shares in these public sector
banks.
India has a two-tier structure of financial institutions with
thirteen all India financial institutions and forty-six
institutions at the state level. All India financial
institutions comprise term-lending institutions, specialized
institutions and investment institutions, including in
insurance. State level institutions comprise of State Financial
Institutions and State Industrial Development Corporations
providing project finance, equipment leasing, corporate loans,
short-term loans and bill discounting facilities to corporate.
Government holds majority shares in these financial
institutions.
Non-banking Financial Institutions provide loans and
hire-purchase finance, mostly for retail assets and are
regulated by RBI.
Insurance sector in India has been traditionally dominated by
state owned Life Insurance Corporation and General Insurance
Corporation and its four subsidiaries. Government of India has
now allowed FDI in insurance sector up to 26%. Since then, a
number of new joint venture private companies have entered into
life and general insurance sectors and their share in the
insurance market in rising. Insurance Development and Regulatory
Authority (IRDA) is the regulatory authority in the insurance
sector under the Insurance Development and Regulatory Authority
Act, 1999.
RBI also regulates foreign exchange under the Foreign Exchange
Management Act (FERA). India has liberalized its foreign
exchange controls. Rupee is freely convertible on current
account. Rupee is also almost fully convertible on capital
account for non-residents. Profits earned, dividends and
proceeds out of the sale of investments are fully repatriable
for FDI. There are restrictions on capital account for resident
Indians for incomes earned in India.
Securities and Exchange Board of India (SEBI) established under
the Securities and Exchange aboard of India Act, 1992 is the
regulatory authority for capital markets in India. India has 23
recognized stock exchanges that operate under government
approved rules, bylaws and regulations. These exchanges
constitute an organized market for securities issued by the
central and state governments, public sector companies and
public limited companies. The Stock Exchange, Mumbai and
National Stock Exchange are the premier stock exchanges. Under
the process of de-mutualization, these stock exchanges have been
converted into companies now, in which brokers only hold
minority share holding. In addition to the SEBI Act, the
Securities Contracts (Regulation) Act, 1956 and the Companies
Act, 1956 regulates the stock markets.
Insurance Regulatory & Development Authority
http://www.irdaindia.org/
SEBI
http://www.sebi.gov.in/HomePage.jsp
RBI http://www.rbi.org.in/
Website of Commercial Banks in India
http://www.ficci.com/ficci/index.htm
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