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The role of the Reserve Bank of India (RBI) in monetary policy through the use of the bank rate, cash reserve ratio (CRR), and repo rate. It also introduces non-banking financial companies (NBFCs) and their differences with banks. context on the importance of these concepts in regulating the money supply, inflation, and liquidity in India.
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RBI has the power to maintain the monetary stability. It being the market regulator, decides the rates every quarter and it may and may not change them.
The liabilities of a bank include call money market borrowings, certificates of deposit and investment in deposits in other banks. In short, the higher the Cash Reserve Ratio, the lesser is the amount of money available to banks for lending and investing. NDTL = Demand and time liabilities (deposits) with public sector banks and other banks – deposits with other banks (liabilities)
REGISTRATION OF NBFCs: It is provided under Section 45 (i) (a) of the BRA and is regulated by RBI Act. The applicant company is required to apply online and submit a physical copy of the application along with the necessary documents to the Regional Office of the Reserve Bank of India. The application can be submitted online by accessing RBI’s secured website. Deposits company (Acceptance of deposits) Rules 1975 govern NBFCs ROLE OF NBFCs:
These are dealt in detail below (banking and NBFC is already covered):
1. Capital Market- - Capital markets are where savings and investments are channeled between suppliers and those in need. Suppliers are people or institutions with capital to lend or invest and typically include banks and investors. Those who seek capital in this market are businesses, governments, and individuals. - Capital markets are composed of primary and secondary markets. The most common capital markets are the stock market and the bond market. They seek to improve transactional efficiencies by bringing suppliers together with those seeking capital and providing a place where they can exchange securities. - Capital markets are used primarily to sell financial products such as equities and debt securities. Equities are stocks, which are ownership shares in a company. Debt securities, such as bonds, are interest-bearing IOUs. - These markets are divided into two different categories: Primary markets When a company publicly sells new stocks or bonds for the first time, such as in an initial public offering (IPO), it does so in the primary capital market. This market is sometimes called the new issues market. When investors purchase securities on the primary capital market, the company that offers the securities hires an underwriting firm to review it and create a prospectus outlining the price and other details of the securities to be issued. Secondary markets, The secondary market includes venues overseen by a regulatory body like the SEC where these previously issued securities are traded between investors. Issuing companies do not have a part in the secondary market. - The growth of an economy is measured by the growth of its capital market (aka thermometer of the economy). The status of capital market is calculated by the rise or fall in the most crucial instrument, Sensex. - The key regulating body of capital market is SEBI (Securities exchange board of India) formed by the SEBI Act 1991 2. Insurance: - It is a financial risk management tool in which the insured transfers a risk of potential financial loss to the insurance company that mitigates it in exchange for monetary compensation known as the premium. - Before 1991, there was only one Act for life insurance, i.e. LIC Act 1955 and for general insurance, i.e., GI Act 1975. It was because the government policies did not allow foreign investment in this sector. - Even now, LIC holds a dominant position in the insurance sector. However, in the General insurance sector, four public corporations were there, which were nationalised. After 1991, the market was opened and a new regulator was needed. Then the IRDA Act 1999 was passed. - The Insurance Regulatory and Development Authority (IRDA), an agency of the Government of India, is the regulatory body for the insurance sector’s supervision and development in India.
Some of the grounds on which these complaints can be filed by the aggrieved customers are-