Indian Financial System & Regulators — Practice

Question 1

Which regulator governs India's insurance companies?

Accepted Answer

IRDAI (Insurance Regulatory and Development Authority of India).

Question 2

In which year was RBI established?

Accepted Answer

1935, under the RBI Act.

Question 3

Is a treasury bill a money-market or capital-market instrument?

Accepted Answer

Money market — it is a short-term instrument (under one year).

Question 4

What makes a bank 'scheduled' under the RBI Act, and what advantage does scheduled status confer?

Accepted Answer

Inclusion in the Second Schedule of the RBI Act, based on meeting specific capital and management-soundness criteria. Scheduled banks gain access to RBI facilities, such as accommodation at the bank rate, that non-scheduled banks cannot access.

Question 5

What is the core functional difference between an NBFC and a licensed bank?

Accepted Answer

An NBFC cannot accept demand deposits, since it does not hold a full banking licence, even though it can lend and invest like a bank.

Question 6

Which two bodies jointly regulate a cooperative bank, and for which respective functions?

Accepted Answer

RBI regulates the cooperative bank's banking functions; the Registrar of Cooperative Societies regulates its cooperative-society functions.

Question 7

Explain RBI's Scale-Based Regulation (SBR) framework for NBFCs, including why it was introduced.

Accepted Answer

Introduced in 2021, SBR sorts NBFCs into Base, Middle, Upper and Top layers by size and systemic importance, applying progressively stricter regulatory requirements at higher layers. It was introduced because some large NBFCs had grown systemically significant enough that their failure could pose bank-like financial-stability risk, without carrying regulatory intensity proportionate to that risk — SBR corrects this mismatch.

Question 8

A question asks which regulator oversees a listed company's disclosure obligations versus which regulator oversees the same company if it also happens to be a bank. Explain the split.

Accepted Answer

As a listed company, its disclosure and capital-market obligations fall under SEBI's regulation. If it is also a bank, its banking operations (lending, deposits, capital adequacy) fall under RBI's regulation — the same entity can be subject to both regulators simultaneously, each governing a different dimension of its activity.

Practice — Indian Financial System & Regulators

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