CH 12 BANKING IN INDIA

A set of 50 flashcards covering key concepts of the financial regulatory framework in India, including roles and responsibilities of various regulatory bodies.

What is the primary function of the Reserve Bank of India (RBI) in the financial regulatory framework?

The RBI regulates credit products, savings, and remittances.

How does the Securities and Exchange Board of India (SEBI) regulate India’s financial markets?

SEBI regulates investment products and ensures market transparency and investor protection.

What was the significance of merging the Forward Markets Commission (FMC) with SEBI in 2015?

The merger improved regulatory consistency and oversight of commodity futures markets.

How do product-based regulators differ from entity-based regulators in India’s financial system?

Product-based regulators focus on specific products, while entity-based regulators oversee entire organizations, like cooperative banks.

Which regulatory body supervises regional rural banks and cooperative banks in India?

NABARD supervises regional rural banks and state/district cooperative banks.

How does the Pension Fund Regulatory and Development Authority (PFRDA) contribute to India’s financial market?

PFRDA regulates pension products, ensuring financial security for the population.

What role does the Insurance Regulatory and Development Authority (IRDA) play in India’s financial market?

IRDA regulates the insurance sector, ensuring market integrity and consumer protection.

How does the Ministry of Finance (MoF) influence India's financial system?

MoF is involved in policymaking and represents India’s interests on key financial regulatory bodies.

What quasi-regulatory functions are performed by NABARD, SIDBI, and NHB?

NABARD supervises rural banks, SIDBI oversees state finance corporations, and NHB regulates housing finance companies.

What is the role of cooperative banks in India’s financial system?

Cooperative banks provide financial services like deposits and loans, but their regulation is handled by the Registrar of Cooperatives.

What does entity-based regulation mean in the context of Indian financial institutions?

Entity-based regulation focuses on overseeing the entire institution, rather than individual financial products.

What is the role of SEBI in overseeing stock exchanges and brokers?

SEBI ensures transparency, fairness, and investor protection in the securities markets.

How does India’s regulatory structure for the financial market handle overlapping responsibilities?

It has multiple regulatory bodies overseeing different financial products, leading to occasional overlaps in authority.

What challenge arose from the PFRDA-IRDA controversy in the 2010s?

The controversy highlighted difficulties in regulating entities that offer both pension and insurance products.

What role do state governments play in regulating cooperative banking institutions?

State governments regulate cooperative banks through the Registrar of Cooperatives, focusing on ownership and structure.

How did the shift of the Forward Market Commission (FMC) to the Ministry of Finance impact financial regulation?

It unified commodity market oversight under SEBI, enhancing consistency in financial market regulation.

What is the importance of the Ministry of Small Scale Industries in India’s financial system?

It provides representation on the SIDBI Board, facilitating support for small and medium-sized industries.

How does the Ministry of Urban Development contribute to financial regulation?

It provides representation on the National Housing Bank (NHB) Board, influencing housing finance policies.

What was the impact of the 2014 shift of FMC to the Ministry of Finance?

It allowed SEBI to regulate commodity markets, bringing greater coherence to financial regulation.

How does India’s multi-regulatory financial architecture affect market efficiency?

Multiple regulators can create inefficiencies and regulatory overlaps, leading to complexity in enforcement.

What is the primary function of the Registrar of Cooperatives in financial regulation?

It oversees cooperative banks, ensuring proper structure and functioning in line with state laws.

How does NABARD support India’s rural financial ecosystem?

NABARD supervises rural banks and facilitates credit for agricultural and rural development.

What role does SIDBI play in India’s small-scale industries?

SIDBI provides financial assistance and regulatory oversight to small finance institutions.

Why is there a need for product-specific regulators in India’s financial system?

Product-specific regulation ensures specialized oversight, maintaining the integrity and smooth operation of each market.

What was the role of MoF representatives on the boards of key financial bodies?

MoF representatives influence policy and decision-making, ensuring alignment with national economic goals.

How does the Securities and Exchange Board of India (SEBI) regulate investment products?

SEBI sets rules for transparency, market conduct, and investor protection in securities trading.

What challenges exist in India’s cooperative banking sector?

Regulatory fragmentation and inconsistent oversight hinder the growth and stability of cooperative banks.

How do quasi-regulatory agencies like NABARD and SIDBI influence India’s financial system?

They provide specialized oversight and support for sectors like agriculture, rural banking, and small industries.

What is the primary objective of the PFRDA in India’s pension system?

The PFRDA regulates pension products, promoting long-term savings and financial security for citizens.

What role does the Ministry of Finance (MoF) play in India’s financial market regulation?

MoF oversees major financial bodies, sets policy frameworks, and ensures coordination between regulators.

How does the Reserve Bank of India (RBI) differ from SEBI in terms of financial regulation?

RBI regulates banking and credit markets, while SEBI regulates capital markets, securities, and investor protection.

What impact did the merger of FMC with SEBI have on commodity markets?

The merger streamlined regulation, providing more oversight and improving market integrity.

How does the National Housing Bank (NHB) contribute to India's housing finance sector?

NHB regulates housing finance companies and promotes affordable housing finance.

How does India’s multi-regulatory financial system affect economic stability?

While it ensures specialized regulation, overlapping responsibilities can lead to inefficiencies and regulatory confusion.

What is the role of NABARD in supporting agricultural finance?

NABARD provides long-term loans, financial support, and oversight to regional rural banks for agricultural development.

How do cooperative banks in India differ from commercial banks?

Cooperative banks are member-based, regulated by state authorities, and focus on local community lending.

What is the significance of the IRDA’s role in India’s financial market?

IRDA regulates and develops the insurance sector, ensuring its growth and stability.

How does India’s financial market handle the challenges of overlapping regulatory functions?

Regulatory overlaps often create inefficiencies, requiring better coordination and clearer jurisdiction among agencies.

How do product-based regulations improve market transparency?

Product-based regulation ensures specialized oversight for each financial product, increasing market clarity and fairness.

How does the Ministry of Small Scale Industries contribute to India’s financial landscape?

By supporting small industries through policy-making and financial institutions like SIDBI.

What are the advantages of a regulatory framework with both product-specific and entity-based regulators?

It allows for specialized oversight while maintaining a broad regulatory framework for diverse financial institutions.

How does the Ministry of Consumer Affairs contribute to financial regulation?

It oversees sectors like commodities and consumer protection, impacting financial markets and product availability.

How does the MoF’s involvement in the SEBI Board affect financial market policies?

MoF representation ensures that financial regulations align with government economic goals and fiscal policies.

What role does the Ministry of Urban Development play in the financial market?

It influences housing policies and represents urban financial interests through NHB.

How does the RBI’s regulation of credit products contribute to India’s financial stability?

By managing interest rates, controlling inflation, and ensuring liquidity, RBI maintains financial stability.

What challenges do financial institutions face in India’s regulatory environment?

Overlapping responsibilities, complex compliance, and occasional gaps in regulatory enforcement.

What role does SEBI play in the development of India’s securities markets?

SEBI ensures the integrity of securities markets through regulations that promote fair trading and investor protection.

How did the merger of the FMC with SEBI improve India’s commodity market?

It unified regulation under SEBI, improving oversight and promoting better market practices.

How do financial sector reforms enhance India’s competitiveness in global markets?

Reforms promote transparency, encourage investment, and integrate India into global financial systems.

What impact do overlapping regulatory bodies have on India's financial market efficiency?

Overlapping regulations create complexity and inefficiency, making market processes slower and less transparent.