Indian Financial System - Regulators & their roles | Reforms & Developments in the Banking sector | MODULE C: INDIAN FINANCIAL ARCHITECTURE

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Indian Financial System - Regulators & Their Roles

Indian Financial System - Regulators & their roles | Reforms & Developments in the Banking sector | MODULE C: INDIAN FINANCIAL ARCHITECTURE

The Indian Financial System comprises institutions, markets, instruments, and services that facilitate the flow of funds in the economy. Financial sector regulators ensure transparency, trust, and efficiency in the system.

Role of Financial Sector Regulators in an Economy

Financial regulators maintain the integrity of the financial system by setting rules, monitoring compliance, and intervening when necessary to maintain market stability and protect consumers.

1. Reserve Bank of India (RBI)

  • Acts as the central bank and regulator of monetary policy.
  • Issues currency and manages foreign exchange reserves.
  • Regulates and supervises commercial banks, NBFCs, and cooperative banks.
  • Maintains financial stability through liquidity management and inflation targeting.

2. Securities and Exchange Board of India (SEBI)

  • Regulates the securities market (stocks, bonds, mutual funds).
  • Protects investors by enforcing transparency and fair trading practices.
  • Oversees stock exchanges and registered intermediaries.

3. Insurance Regulatory and Development Authority of India (IRDAI)

  • Regulates and promotes the insurance sector.
  • Ensures the financial soundness of insurers and protects policyholders’ interests.
  • Approves new insurance products and pricing.

4. Pension Fund Regulatory and Development Authority (PFRDA)

  • Regulates the National Pension System (NPS) and other pension schemes.
  • Ensures orderly growth of the pension sector and retirement security.
  • Registers and monitors Pension Fund Managers (PFMs).

Reforms & Developments in the Banking Sector

The Indian banking sector has undergone several reforms aimed at strengthening infrastructure, improving asset quality, and enhancing transparency.

Bad Banks

  • Entities created to take over and resolve non-performing assets (NPAs) from commercial banks.
  • The National Asset Reconstruction Company Limited (NARCL) is a key initiative in this space.
  • Helps banks clean their balance sheets and focus on fresh lending.

Infrastructure Financing

  • Long-term funding required for infrastructure projects such as roads, railways, and energy.
  • Traditionally underserved by commercial banks due to asset-liability mismatch.
  • Specialized institutions like NaBFID are being set up to address this gap.

NaBFID – National Bank for Financing Infrastructure and Development

  • Set up under the NaBFID Act, 2021 to finance infrastructure projects.
  • Acts as a Development Financial Institution (DFI).
  • Supports projects in transportation, logistics, energy, and water supply.
  • Backed by the government with initial equity and tax benefits.

EASE – Enhanced Access and Service Excellence

  • A reform initiative by the Department of Financial Services (DFS) to improve customer experience and banking performance.
  • Focuses on digital banking, customer responsiveness, responsible banking, credit off-take, and governance.
  • Implemented in multiple phases (EASE 1.0 to EASE 5.0).
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MODULE D: FINANCIAL PRODUCTS AND SERVICES
Tags: Indian Financial System, RBI, SEBI, IRDA, PFRDA, NaBFID, Bad Banks, Infrastructure Finance, EASE, Banking Reforms, Financial Sector Regulators

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