Financial Market Regulators in India: What they do?

financial market regulators

Financial market regulators in India ensure the smooth facilitation of all your transactions in the Indian stock market. These market regulators play a crucial role in conducting all transactions in electronic form.

Factors like the Indian capital market securities, the money market, financial services such as investment management, and other facets of the banking system are directly and indirectly connected with the securities market regulations in India.

Who are Financial Market Regulators?

Financial market regulators are government bodies or agencies appointed by ministries or the government of India to restrict and control financial institutions in the country. A financial institution refers to any organization—banks, insurance companies, or any other financial body—which participates in financial transactions like accepting deposits, extending loans, or simply exchanging money. 

Why are Financial Regulatory Bodies Important?

The primary purpose of financial market regulators is to supervise companies listed under them so that the financial system runs effectively and supports the public, government, and corporate sectors. These financial market regulators also ensure all market participants behave equally and perform their work diligently. Financial regulatory bodies ensure the integrity and stability of the financial system. 

7 financial market regulators

7 Financial Market Regulators & Their Functions

Although there are more than 7 financial market regulators in India, coming from various fields like banking, pension funds, commodity market, insurance, and the capital market, we will discuss only these financial market regulators as they are the important ones.

  1. SEBI – The Securities and Exchange Board of India regulates the capital market
  2. IRDAI – The Insurance Regulatory and Development Authority regulates the insurance sector
  3. RBI – Reserve Bank of India regulates the currency
  4. PFRDA – Pension Funds Regulatory and Development Authority regulates the Pension sector
  5. MCA – Ministry of Corporate Affairs regulates the corporate sector
  6. FMC – Forward Market Commodity regulates the forwards market 
  7. AMFI – The Association of Mutual Funds in India regulates the mutual funds industry


SEBI financial market regulator 1

SEBI (Securities and Exchange Board of India) is a financial market regulatory authority established under the Securities and Exchange Board of India Act 1992. The primary goal of SEBI is to support the working of the financial market in an orderly fashion. Also, there is a healthy environment that keeps the interests of both investors and traders intact. It is also responsible for the growth of the equity market and prevents corrupt activities in the Indian capital market. 

Functions of SEBI
  • It regulates the process for issuing securities (bonds, shares, IPOs, INVITs, etc.) as mentioned in the Securities contracts regulation Act, 1956. 
  • It regulates securities markets and financial markets, their participants, including the Stock Exchanges and the Commodity Exchange. 
  • Under its development function, SEBI is responsible for educating investors about the stock market and providing training to various intermediaries. 
  • It has the power to prohibit companies from getting listed on any stock exchange.
  • It maintains an online portal, SCORES, where people file complaints regarding scams and frauds.  
  • Checking price-fixing, preventing insider trading, promoting fair procedures, and raising financial awareness among investors are some of its safeguarding functions.
  • It regulates various intermediaries, including investors, brokers, fund managers, public limited companies, and other parties. 


IRDAI financial market regulator

IRDAI is another financial market regulator that comes under the Ministry of Finance and the Government of India. With the introduction of the Regulatory and Development Authority Act, 1999, private companies started taking part in the insurance sector. IRDAI is responsible for regulating and licensing the insurance and reinsurance companies in India. The main objective of this market regulator is to protect the welfare of and secure fair treatment of policyholders.

Functions of IRDAI
  • It provides separate licenses for life, general, and reinsurance companies. Thus, it is responsible for the insurance industry’s growth, including annual and superannuation payments. 
  • It prescribes norms for insurance companies for auditing, accounting, solvency commission to agents, etc. 
  • It finalizes premium rates for insurance, terms & conditions, and other benefits. 
  • As per the IRDA act, it can penalize companies, and suspend or cancel the insurance.  
  • It sets standards for agents and bankers for selling products. 
  • It addresses grievances redressals by insurance reimbursement. 
  • IRDA regulates and ensures that the insurance reaches rural areas and vulnerable parts of society. 


RBI financial market regulators

Established on April 1, 1935, the Reserve bank of India (RBI) refers to the central bank of India. It is a statutory body whose primary goal is to govern and manage the financial system in India. Because of that, RBI has the authority to regulate the banking sector and issue currencies. In addition, it is in charge of maintaining the insolvency, merger, or rebuilding of financial companies.

Functions of RBI
  • Monetary Authority: Established on April 1, 1935, the Reserve bank of India (RBI) refers to the central bank of India. It is a statutory body whose primary goal is to govern and manage the financial system in India. Because of that, RBI has a monopoly over the regulation of the banking sector and currency issuing. 
  • The issuer of Currency: From note printing, and removal of old coins to currency circulation, RBI ensures enough supply of quality currency notes and coins, and problems related to the Indian currency are dealt with carefully. For instance, RBI introduced demonetization in India.
  • Banker to Banks: As the central bank of India, RBI maintains and funds the banking accounts of all scheduled banks. 
  • Bank to the Government: RBI also acts as a bank to the government and funds different government schemes on behalf of the government. Therefore, RBI is also known as the bank of the government. 
  • Regulation and Supervision of the Banking Sector: RBI regulates all types of banks in India, including PSB banks, private banks, Foreign banks, NBFCs, and urban cooperative banks.
  • Foreign Exchange Management Act: The RBI also regulates the Foreign Exchange Management Act (FEMA, 1999) and foreign exchange transactions, and allows authorized persons to deal in foreign exchange.


PFRDA financial market regulators

PFRDA stands for The Pension Fund Regulatory and Development Authority. It was established under the PFRDA act, 2013 and obtained its statutory status. The main objective of this financial regulatory body is to promote and develop an organized pension system that can serve the needs of Indian citizens. PFRDA launched the National Pension Scheme (NPS) in 2003, and in 2009, it was expanded to all sections of the population. Its headquarters are located in Delhi, and regional offices are spread across India.

Functions of PFRA

PFRDA regulates and administers the National Pension System (NPS) and selects fund managers and Central Record Keeping Agencies (CRAs).

  • It facilitates mandatory and voluntary pension schemes that can benefit the income needs of a retired citizen.  
  • It regulates all public and private funds. 
  • It prescribes liquidity, auditing, and investment norms for pension funds. 
  • PFRDA protects clients and pensioners from fraud and other malpractices and listens to their grievances.  
  • Another significant responsibility of the regulatory body is to provide training to intermediates so that they can educate people about the various pension schemes in the country. 
  • As a supervising authority, it is also responsible for handling disputes between intermediaries and subscribers of pension funds. 

It helps in spreading financial awareness through its online portal


MCA financial market regulators

The ministry of corporate affairs regulates corporate affairs in the country through the Companies Act 1956, 2013, and other allied Acts and rules & regulations. Its sole purpose is to secure the smooth functioning of the corporate sector in India.

Functions of MCA
  • To protect the interest of all the stakeholders. 
  • To promote the growth and development of companies.
  • It is also responsible for fostering fair trade and competition. 
  • To install a system that would deal with fraud investigation quickly. 
  • To promote the growth of small and medium-sized enterprises and startups.
  • To facilitate e-governance to improve the quality of service delivery. 


FMC Forward market regulator

The Forward Market Commission regulates the commodity market and futures market in India. The Forward Contracts (Regulation) Act of 1952 established the FMC as a legal entity. The Central Government appoints a minimum of two and a maximum of four members to the commission.

The Government is also responsible for appointing the chairman of FMC. Its headquarters are in Mumbai, Maharastra, and the Ministry of Finance administers FMC. Commodity trading is permitted on 22 Indian exchanges, six of which are national.

Functions of FMC
  • To assist the central government in corresponding to the recognition or the withdrawal of recognition from any association.
  • To assist the central government in respect of issues coming out of the administration of the Forward Contracts (Regulation) Act 1952.
  • To observe and analyze the forward market and take necessary steps are required.  
  • To maintain a repository related to trading goods with information regarding supply, demand, and prices and address all data to the central government. 
  • To improve the working of the commission and the forward market. 
  • FMC has the powers of a deemed civil court, and it can enforce them as required. 



The Association of Mutual Funds of India (AMFI), a non-profit organization government organization, is a primary regulator of the mutual fund sector in the country. AMFI comes under SEBI, and its primary goal of AMFI is to protect the interest of investors and asset management companies. Since its incorporation, which was on August 22, 1995, AMFI has been setting various regulations that maintain the welfare of the mutual fund industry and its unitholders. 

Functions of AMFI

  • It helps in implementing norms and guidelines related to mutual funds. 
  • AMFI checks all the investors and companies under it and sees whether they all follow the regulations. 
  • Since it works closely with SEBI, AMFI must comply with SEBI’s regulations. 
  • It educates people and investors about all the risks associated with investing in mutual funds. 
  • It is a representative of the SEBI, RBI, finance ministry, and other bodies related to money market investments.
  • AMFI is also responsible for imparting education on mutual funds through workshops and online seminars as a supervising body.  
  • AMFI runs a website for potential current and future investors where it daily updates the Net Asset value of funds. 

Objectives of the Financial Market Regulators

  • Market stability: The main objective of these financial market regulators is to obtain market stability by implementing laws and procedures, which must be followed by every financial institution, as per their market regulator. 
  • Decrease in Frauds and Crimes: Abided by rules, every financial institution has to answer a supervising authority, which leads to fewer frauds and crimes.
  • Protection of Consumers and Investors Money: A financial institution grows because of its investors. Therefore, as a supervising authority, it is the job of financial regulators that financial institutions do not misuse the money of investors and consumers. 
  • Boosts Investor’s and Market’s Confidence: Since financial institutions are answerable to market regulators, it leads to reliability in the financial system. 

The Bottom Line

We have discussed financial market regulators, their objectives, and their role in achieving financial stability in the country. Financial regulatory bodies make sure all financial institutions fulfill the demand of the public and capital market participants as per the law and don’t engage in unlawful activity.  

Key Takeaways

Financial and capital markets in India are in safe hands, thanks to the regulatory stalwarts governing it efficiently.

1) SEBI ensures the security of the investors and participants in the capital market. It sets guidelines for stock exchanges. It is up to SEBI which companies list under the Stock Exchange. 

2) The foremost responsibility of RBI is to maintain the supply of currency in the country. RBI has to address all the issues related to the currency, such as printing money or removing old coins. It acts as a bank to the state banks in the country and funds them as per requirements. 

3) PFRDA runs the national pension system in the country. One of its crucial tasks is to foster awareness of pension schemes that can benefit people after retirement. In addition, PFRDA roles include pension coverage in the country’s rural areas. 

4) IRDAI keeps its eyes on the insurance sector. It can suspend, penalize, and cancel insurance companies. The regulatory body is also responsible for hearing insurance-related grievances. 

5) For the welfare of the corporate sector, MCA sets up various laws so that the companies can grow to their fullest. It also ensures the development of a healthy competitive environment. 

6) AMFI regulates the mutual fund sector in India. It promotes awareness of mutual funds among investors. AMFI is responsible for implementing guidelines related to mutual funds.

7) FMC is the leading regulator of the Futures and Forwards market. It ensures financial and market integrity. Other than that, it keeps track of the forward market, analyzes it, and gives regular updates to the central government. 

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