Financial Regulators of India: RBI, SEBI, IRDAI, PFRDA and IBBI

The correct answer is B, IRDAI. The Insurance Regulatory and Development Authority of India is the statutory regulator of insurance, created under the IRDA Act 1999 after the Malhotra Committee recommended opening the sector to private and foreign capital; it licenses life, general, health and reinsurance companies and registers agents, brokers and surveyors, and its headquarters is at Hyderabad. Option A is wrong; the Securities and Exchange Board of India regulates the securities market, which means stock exchanges, depositories, brokers, merchant bankers, mutual funds and the disclosures of listed companies. Option C is wrong; the Pension Fund Regulatory and Development Authority regulates the National Pension System and the Atal Pension Yojana, and although an annuity is bought from an insurer at the end of a pension account, the insurer itself answers to IRDAI. Option D is wrong; the Reserve Bank regulates banks, non-banking financial companies and payment systems, not insurers, even where a bank sells insurance as a corporate agent.

The correct answer is B, the Hilton Young Commission. Formally the Royal Commission on Indian Currency and Finance, it reported in 1926 and recommended a central bank separate from the Imperial Bank of India; the recommendation led to the Reserve Bank of India Act 1934, and the Bank began work on 1 April 1935 with its central office at Calcutta, which moved permanently to Bombay in 1937. Option A is wrong; the Narasimham Committee reported on banking sector reform in 1991 and again in 1998, long after the Bank existed, and gave India the capital adequacy and prudential norms of the reform years. Option C is wrong; the Chakravarty Committee of 1985 reviewed the working of the monetary system and shaped monetary targeting. Option D is wrong; the Sivaraman Committee, the Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development, led to the founding of NABARD in 1982, which is the distractor most often chosen.

The correct answer is C, Hyderabad. IRDAI began in New Delhi but its office was shifted to Hyderabad in 2001, and this move is exactly why the question is asked: the candidate who assumes that every financial regulator sits in Mumbai or Delhi gets it wrong. Option A is wrong for IRDAI but is the right answer for several neighbours: the Reserve Bank of India, the Securities and Exchange Board of India, NABARD and the Securities Appellate Tribunal are all at Mumbai. Option B is wrong here, though New Delhi is the headquarters of the Pension Fund Regulatory and Development Authority, the Insolvency and Bankruptcy Board of India, the National Housing Bank and the National Financial Reporting Authority. Option D is wrong; Chennai hosts no national financial regulator, although it has a bench of the National Company Law Tribunal. For completeness, remember Lucknow for SIDBI, which is the other city that appears in these options.

The correct answer is B, 1992. The Securities and Exchange Board of India was first constituted in April 1988 as a non-statutory body with advisory functions, and it received statutory powers through the Securities and Exchange Board of India Act 1992, passed in the year the securities scam made a strong market regulator unavoidable. Option A, 1988, is the year of its creation rather than of its statutory powers, and is the most tempting wrong choice; a question that asks when SEBI was set up has 1988 as the answer, so read the stem carefully. Option C, 1995, is wrong, although an amendment of that year widened the Board powers; it is also close to the founding of the National Stock Exchange, which began trading in 1994. Option D, 2002, is wrong and belongs to a different statute, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act of that year, which is a Reserve Bank subject.

The correct answer is C, 2013. PFRDA was first created in 2003 by a resolution of the Government as an interim authority to oversee the new defined contribution pension arrangement, and it ran the National Pension System for a decade without a statute; the Pension Fund Regulatory and Development Authority Act 2013 gave it statutory standing. Option A, 2003, is therefore the year of its creation as an interim body and is the obvious trap in this question. Option B, 2008, is wrong; that year the National Pension System was opened to the public and the central recordkeeping agency and pension funds were appointed, but no Act was passed. Option D, 2016, is wrong and belongs to the Insolvency and Bankruptcy Code, under which the Insolvency and Bankruptcy Board of India began on 1 October 2016. A clean way to remember the sequence of statutes is 1934, 1992, 1999, 2013 and 2016 for RBI, SEBI, IRDAI, PFRDA and IBBI.

The correct answer is B, the Securities Appellate Tribunal. The Tribunal was set up under the SEBI Act and sits at Mumbai; since the Finance Act 2017 it also hears appeals against orders of IRDAI and of PFRDA, so one tribunal now serves three regulators. An appeal from the Tribunal goes to the Supreme Court on a question of law. Option A is wrong; the National Company Law Tribunal hears company law matters and corporate insolvency under the Insolvency and Bankruptcy Code, with appeals to the National Company Law Appellate Tribunal. Option C is wrong; the Debt Recovery Tribunal recovers the dues of banks and financial institutions and deals with the insolvency of individuals and partnership firms under the Code, with appeals to the Debt Recovery Appellate Tribunal. Option D is wrong; a High Court may be approached in writ jurisdiction in exceptional cases, but the statutory appeal is to the Securities Appellate Tribunal.

The correct answer is B, SEBI. The Forward Markets Commission had regulated forward and commodity derivative trading since 1953 under the Forward Contracts (Regulation) Act 1952 and worked under the Ministry of Finance in its last years; it was merged into the Securities and Exchange Board of India on 28 September 2015, the first merger of two financial regulators in India, and commodity derivatives exchanges now come under the Securities Contracts (Regulation) Act. Option A is wrong; the Reserve Bank regulates the currency and interest rate derivatives traded by banks, but not the commodity exchanges. Option C is wrong; IRDAI has nothing to do with commodity markets, and insurers face limits on how far they may use derivatives at all. Option D is wrong; NABARD refinances rural and agricultural credit and supervises Regional Rural Banks and cooperative banks, and although commodity markets matter to farmers, it is not a market regulator.

The correct answer is B, the Union Finance Minister. The Financial Stability and Development Council was set up in 2010 by an executive order of the Government, following a recommendation of the Raghuram Rajan Committee on financial sector reforms, and it is chaired by the Union Finance Minister with the heads of the regulators, the Finance Secretary and senior officials as members. It has no statutory powers and regulates no entity; it watches systemic risk, coordinates among regulators and takes up financial inclusion and literacy. Option A is wrong; the Governor of the Reserve Bank is a member of the Council, not its chairperson, although the Governor does chair the sub-committee of the Council. Option C is wrong; the SEBI chairperson is likewise only a member. Option D is wrong; the Prime Minister chairs several other national bodies, among them the NITI Aayog governing council, but not the FSDC.

The correct answer is B, NPCI. The National Payments Corporation of India was set up in 2008 by the Reserve Bank of India and the Indian Banks Association as a not-for-profit company under the companies law, and it operates the retail payment systems of the country, among them the Unified Payments Interface, RuPay, IMPS, NACH, AePS and the FASTag network. It is an operator and an umbrella organisation, and it is itself regulated by the Reserve Bank under the Payment and Settlement Systems Act 2007. Option A is wrong as an answer because the Insolvency and Bankruptcy Board of India is a statutory regulator, of insolvency professionals, their agencies, information utilities and registered valuers. Option C is wrong because the Pension Fund Regulatory and Development Authority is a statutory regulator of the National Pension System. Option D is wrong because SEBI is the securities market regulator. The FSDC is the other common answer to a question framed this way.

The correct answer is A, DICGC. The Deposit Insurance and Credit Guarantee Corporation is a wholly owned subsidiary of the Reserve Bank of India and insures deposits in commercial banks, local area banks, regional rural banks, small finance banks, payments banks and cooperative banks; the cover was raised to five lakh rupees per depositor per bank in 2020, and it applies to the total of savings, current, recurring and fixed deposits held in the same right and capacity. Option B is wrong; the Life Insurance Corporation sells life insurance and is itself a regulated insurer under IRDAI, with no role in protecting bank deposits. Option C is wrong; IRDAI regulates insurers but does not run the deposit insurance scheme, which is a banking arrangement under its own Act of 1961. Option D is wrong; the Small Industries Development Bank of India, at Lucknow, is the apex financier of micro, small and medium enterprises.

The correct answer is C, the one rupee note. It is issued by the Government of India under the Coinage Act and carries the signature of the Finance Secretary rather than of the Governor of the Reserve Bank; all coins are likewise issued by the Government, while the Reserve Bank only distributes them. The one rupee note is also the only note that is a rupee coin in law, which is why it is treated differently. Options A, B and D are all wrong for the same reason: notes of two, five, ten and every higher denomination are issued by the Reserve Bank of India under Section 22 of the Reserve Bank of India Act 1934, which gives the Bank the sole right of note issue in the country, and they carry the Governor signature. Candidates who remember only that the Reserve Bank is the note issuing authority miss the single exception, which is exactly why this question is set.

The correct answer is B, 1982. The National Bank for Agriculture and Rural Development began work on 12 July 1982 under an Act of 1981, on the recommendation of the Sivaraman Committee, taking over the agricultural credit functions of the Reserve Bank and the refinance business of the Agricultural Refinance and Development Corporation; it has its head office at Mumbai and supervises Regional Rural Banks and cooperative banks. Option A, 1975, is the year the first five Regional Rural Banks were set up, on 2 October, and is the distractor that catches candidates who remember only that rural credit grew in the nineteen seventies. Option C, 1990, is the year SIDBI began, on 2 April, as the apex body for small industry. Option D, 1999, belongs to IRDAI. Keep the four years apart as 1975 for Regional Rural Banks, 1982 for NABARD, 1990 for SIDBI and 1988 for the National Housing Bank.