Regulations of Banks and Financial Institutions | RBI Grade-B Main

The financial system in India is regulated by independent regulatory bodies in different fields namely banking, capital market, insurance, commodity market, and pension funds. However, the Government of India plays an important role in influencing the regulatory framework of these institutions, at least to some extent.

Primarily, in India, the regulation of banks and financial institutions are governed by the Banking Regulation Act, 1949. It was passed as Banking Companies Act, 1949, and came into effect from March 16, 1949. Further, the name was changed to the Banking Regulation Act from March 1, 1966.

For a banking job aspirant, it is pertinent to know about the working and regulation of the financial institutions in India. From the examination viewpoint, objective questions can be asked regarding the Chairperson of regulatory bodies, the location of headquarters, year of establishment, etc.

Moreover, questions on the Banking Regulation Act and recent developments related to it can also be asked in Main and Interview.

Let us now briefly discuss the regulations of banks and financial institutions in detail:

Banking Regulation Act, 1949

Following are the important points regarding the Banking Regulation Act, 1949:

  1. It regulates all banking institutions in India. Initially, it was applicable only to banking companies, but was amended in 1965 to bring the cooperative banks under its purview. Cooperative banks are formed and run by the state government, but the licensing and regulation are under the control of the RBI.
  2. This Act gives the RBI the power to license banks, and have regulation over the shareholding; regulate the operations of banks; supervise the appointment of Board and management; lay down audit instructions; issue directives in the interest of public good; control moratorium, mergers, liquidations, and acquisitions; and impose penalties.

Important Banking Regulatory Bodies in India

Regulatory Body


(As of July 2020)


Reserve Bank of India (RBI)

Banking & Finance

Mr. Shaktikanta Das


Securities & Exchange Board of India (SEBI)

Stock & Capital Market

Mr. Ajay Tyagi


Insurance Regulatory & Development Authority of India (IRDA)


Mr. Subhash Chandra Khuntia


Pension Fund Regulatory & Development Authority (PFRDA)


Mr. Supratim Bandyopadhyay

New Delhi

National Bank for Agriculture & Rural Development (NABARD)

Financing Rural Development

Mr. Harsh Kumar Bhanwala


Small Industries Development Bank of India (SIDBI)

Financing Micro, Small & Medium Enterprises (MSMEs)

Mr. Mohammad Mustafa


National Housing Bank (NHB)

Financing Housing

Mr. Sarada Kumar Hota

New Delhi

Insolvency and Bankruptcy Board of India (IBBI)

Insolvency Proceedings

Dr. M S Sahoo

New Delhi

Let us now discuss some important regulatory bodies:

The Reserve Bank of India (RBI)

Established under the RBI Act, 1934, RBI is the central bank of India; and is vested with various responsibilities under the Banking Regulation Act, 1949. Following are some of its primary functions:

  1. Issuance of banknotes
  2. Banker to the government
  3. Custodian of cash reserves of commercial banks
  4. Custodian of foreign exchange reserves
  5. Controller of credit
  6. Lender of the last resort

Read the functions of RBI in detail here.

Securities and Exchange Board of India (SEBI)

Established on April 12, 1992, under the SEBI Act 1992, the Securities and Exchange Board of India (SEBI) is a statutory body owned by the government of India. Its primary function is to safeguard the interests of investors in securities exchange and regulate the securities market. The headquarters of SEBI is located in Mumbai and the branch offices are located at Delhi, Kolkata, and Chennai.

Insurance Regulatory and Development Authority of India (IRDAI)

Established under the Insurance Regulatory and Development Authority Act, 1999, IRDAI is an autonomous statutory body tasked with regulating and promoting the insurance and re-insurance industries in India. Headquartered in Hyderabad, it is a 10-member body consisting of Chairman, five full-time members, and four part-time members appointed by the government of India.

PFRDA under the Finance Ministry

PFRDA stands for Pension Fund Regulatory and Development Authority. Established by the government of India on August 23, 2003, by executive order, PFRDA was mandated to act as a regulator of pension funds. Headquartered in Delhi, India, it is currently headed by Mr Supratim Bandopadhyay who is the chairperson of PFRDA. The organizational structure consists of a chairperson, 3 whole-time members from finance, law, and economics along with a chief vigilance officer.

Candidates are advised to study the core objectives of each of these regulatory bodies in detail. Keep a note of the recent development in any of these bodies, as it is extremely important from the exam point of view. 

You can read more informative articles for RBI Grade-B Main Preparation under the Academic Articles section on our main website.

Should you need more assistance, you can enroll in our detailed course for RBI Grade-B Main Exam. RBI Grade B Exam 2020 is likely to be conducted in July. Make the most of your time under the able guidance of our mentors. Get in touch with our counselors to know more about our course deliverables.