Financial Regulators in India...

Reserve Bank of India(RBI)

Reserve Bank of India started its functioning from 1st April, 1935 and in the year 1949 it was nationalized. RBI's main function is to control the monetary policy of Indian currency. The main functions of RBI are as follows:

1. Regulator and Supervisor of the financial system- RBI is involved in the regulatory and supervisory role of the Indian banking system and to do so it frames broad range of parameters. This helps to get the confidence of the general public into the banking system. It keeps a check to see that there is no kind of fraud happening or supposed to happen in banking institutions.
2. Banker's Bank- For all the commercial bank that are performing action in India can open their account with RBI which acts as a central bank for them.RBI control the credit system of commercial banks through various rate/ratios. Being a central bank RBI also facilitate the banks in clearing the inter bank transaction though check clearance system or NEFT of RTGS.
3. Issuer of Currency- Only RBI holds the right to print/generate Indian currency, it has also the rights to destroy the currency which are not fit for circulation anymore. Currency is printed in Nashik district of Maharashtra.
4. Managerial of Exchange Control- RBI facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India. For keeping this check RBI uses Foreign Exchange Management Act (FEMA), 1999.
5. Detection of Fake Currency- RBI plays a very important role in detecting the fake currencies in the Indian market. For this RBI keeps on starting several awareness programs. 
6. RBI also plays a very important role in curbing inflation and also motivate the developmental programs that are running in India.

Policy Rates and Reserve Ratios

Repo Rate - This is the rate at which Central bank or RBI lends the money to commercial banks. As in when commercial banks fall in shortage of money in meeting the customers demand than in that case they need to borrow the money from RBI. When RBI don't want the money/cash to be surplus in market then it increases the rate of interest or else it decrease by some base points. Current Repo rate is 7.5%.

Cash Reserve Ratio (CRR) - CRR is nothing but the given percentage of total amount of that are deposited with bank needs to reserved/kept with RBI. Generally this may vary from 4-15%  of total of their demand and time liabilities. This is used to reduce the lending capacity of commercial banks. Current CRR rate is 4%.

Statutory Liquid Ratio (SLR) - SLR is the ratio which in forces the commercial banks to invest money to maintain liquid assets. SLR needs to maintained apart from CRR. For SLR money can be invested in gold or government bonds and securities. Current SLR rate is 21.5%.

Apart from these three rates and ratios there was another rate i.e. Reverse Repo rate and as per latest monetary policy Reverse Report will not be announce separately and that will be along with Repo rate.

Goods and Service Tax (GST)

These days a very hot topic/name is floating around us very frequently and that is Goods and Service Tax (GST). Many of us wonder what is this GST all about and why there is so much of hue and cry for this and if it is so problematic then why are we bringing that law at all. Today we will discuss about GST.

GST is a name of tax which will be replacing all the existing indirect taxes in India which are nearly 20 in numbers and amount to approx 30% in terms of taxation out of which common people even don't know the name of some of taxes that are imposed on them so once this GST is passed by both the houses of parliament(Lok sabha and Rajya sabha) it will replace all the indirect taxes. Currently GST is in force in nearly 150 countries and max rate of GST currently is in Denmark and Sweden which is 25% and lowest is in Canada which is 5%.

In India, the unified tax will take the form of a 'dual' GST, to be levied concurrently by both the Centre and States i.e. in short the unified tax will comprise of both Central and State GST. Liquor has been kept completely out of the purview of GST. Petroleum products has been excluded from the list of product that will be covered under GST for the first three years from day when GST will be adopted however, if there is any kind of loss incurred by State governments than the Central government will bear that cost.  

Benefits of GST

1. As there will be only one tax throughout India all the goods and service will be available at same price at pan India level and it will ease in doing business as mobility of products from one state to another will become easier.
2. Reduction in corruption level.
3. At least general public will be well aware of that in what respect they are paying the tax.
4. Indian GDP may increase by 2-2.5 %
5. There can be an increase of 12-15% in exports of products.
6. As the taxation system will be eased and become transparent by replacing all the indirect taxes by a new one i.e. GST so the foreign investors/companies will be attracted to do business in India which will result in more job creation.
7. In long run the price of products may come down.

What will be the rate of GST?

Till date the proposed rate at which GST will be imposed is approx 27% which is too high and will be finalized by the GST council at later stage and which may be around 18-20% as per the statement given by Finance Minister Arun Jaitley in Lower House. One percent extra can be charged by State governments from where the goods are originated.

Financial Regulators in India

Hi Friends, I am back after long and today I will be discussing about various financial regulators in India who are responsible for taking care of the money invested by us in different financial instruments such as stock exchange, Insurance,bank etc. Below is the list of such regulators:

1. Securities and Exchange Board of India.
2. Reserve Bank of India.
3. Ministry of Finance.
4. Ministry of Corporate Affairs.
5. Insurance Regulatory Authority of India.
6. PFRDA.

Securities and Exchange Board of India (SEBI)

SEBI was formed or was enacted in the year 1992 to safeguard the interest of the investors who invest their money in stock exchanges or mainly we can say in the equity market. SEBI also promote the development of securities market. SEBI has its headquarters at Bandra Kurla Complex in Mumbai and has Northern, Easter,Southern and Western Regional offices in New Delhi, Kolkata, Chennai and Ahmedabad respectively.

Functions and Responsibilities of SEBI

SEBI has the responsibility of responding or to keep check on each and every activity that is happening in securities and capital market. SEBI is responsible for the stock or the company for which the stock is going to be listed in the share market. SEBI should respond back to the concern of the investors (if any). It keeps an eye on the intermediaries that are involved in the act of trading such as brokers. In case of fraud related to trading or very high fluctuation in trading market for a particular stock/segment SEBI has the right to investigate the case and if the person/organization is found to be guilty than SEBI has the right to impose a hefty fine or penalty on that person/organization or can barred it from the activity of trading. In order to ensure that day by day SEBI is functioning in very efficient manner it has the right to make any rule and regulation related to securities and capital market without taking permission by any other other government body/agency, this is due to the statutory status provided to it by an amendment passed by Parliament of India in 1995.

Powers of SEBI

SEBI has the following powers given to it so that it can functions efficiently:

1. It has right to approve any law related to stock exchanges.
2. SEBI helps the stock exchanges to pass any amendment to an existing law.
3. It inspect the books of accounts and call for periodical returns from recognized stock exchanges.
4. It also do a time to time inspection of the books of accounts of a financial intermediaries.
5. It gives the right to a certain companies to list their shares in one or more stock exchanges.
6. All the brokers working for securities and capital market needs to be registered with SEBI.

Please wait for next blog for getting info on other regulatory bodies....