India’s financial system is regulated by two very important institutions: the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).

Both play a key role in maintaining stability, growth, and fairness in the economy. Let’s understand them one by one.

Reserve Bank of India (RBI)

The RBI is the central bank of India, established in 1935. It regulates the flow of money in the economy and ensures financial stability. It is also called the “Banker’s Bank”.

Main Roles of RBI

1. Issuing Currency
   • Issues paper currency (except ₹1 note and coins, which are issued by the Government of India).
   • Ensures the supply of clean and secure currency.
2. Monetary Policy
   • Controls inflation and growth by adjusting interest rates.
   • Uses tools like Repo Rate, Reverse Repo Rate, CRR, SLR.
3. Regulating Banks
   • Supervises commercial banks, cooperative banks, and NBFCs.
   • Ensures safe banking practices and protects depositors.
4. Foreign Exchange Management
   • Manages Forex reserves and exchange rates.
   • Ensures smooth international trade transactions.
5. Financial Inclusion
   • Promotes schemes like Jan Dhan Yojana, digital payments, and rural banking.
6. Controlling Inflation
   • Maintains price stability while encouraging economic growth.

Securities and Exchange Board of India (SEBI)

The SEBI is the regulator of the securities market in India. It was established in 1988 and got statutory powers in 1992. Its main aim is to protect investors and ensure fair practices in the stock market.

Main Roles of SEBI

1. Regulating the Stock Market
   • Supervises stock exchanges like NSE, BSE.
   • Ensures fair trading and prevents fraud.
2. Protecting Investors
   • Makes rules so that small investors are not cheated.
   • Provides grievance redressal mechanisms.
3. Regulating Companies
   • Ensures companies follow rules when issuing shares (IPO, FPO).
   • Monitors insider trading and unfair practices.
4. Regulating Brokers & Mutual Funds
   • Registers and regulates brokers, sub-brokers, portfolio managers, mutual funds.
   • Ensures they work in the interest of investors.
5. Market Development
   • Introduces new products (Derivatives, ETFs, REITs).
   • Promotes investor education and awareness.

RBI vs SEBI – Quick Comparison

Conclusion

• The RBI ensures India’s economy runs smoothly by controlling money, credit, and inflation.
• The SEBI ensures India’s stock market is fair, transparent, and safe for investors.

Together, they strengthen India’s financial system and play a major role in economic growth.

Important Questions on RBI & SEBI

Reserve Bank of India (RBI)

1. When was the RBI established?
   → 1st April 1935 (under RBI Act, 1934).
2. Where was the RBI first headquartered?
   → Kolkata (shifted to Mumbai in 1937).
3. Who issues currency in India?
   → RBI issues all notes except ₹1 note and coins (issued by Government of India).
4. Who signs Indian currency notes?
   → Governor of RBI (except ₹1 note, which is signed by the Finance Secretary).
5. Which department of RBI issues notes?
   → Issue Department.
6. Which committee recommended the creation of RBI?
   → Hilton Young Commission.
7. Who is known as the Banker’s Bank?
   → RBI.
8. What are the main monetary policy tools of RBI?
   → Repo Rate, Reverse Repo Rate, Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR).
9. What is the current inflation target set by RBI?
   → 4% (with tolerance band of 2% to 6%).
10. Who appoints the Governor of RBI?
    → Government of India.

Securities and Exchange Board of India (SEBI)

1. When was SEBI formed?
   → 1988 (as a non-statutory body).
2. When did SEBI get statutory powers?
   → 1992 (through SEBI Act, 1992).
3. What is the main purpose of SEBI?
   → To protect investors, regulate stock markets, and ensure transparency.
4. Who is the current SEBI Chairperson (2025)?
   → Madhabi Puri Buch (first woman chairperson).
5. Where is SEBI’s headquarters located?
   → Mumbai.
6. Which markets does SEBI regulate?
   → Stock exchanges (like NSE, BSE), Mutual Funds, Brokers, IPOs, Derivatives.
7. What is insider trading?
   → Using confidential company information to trade shares illegally. SEBI regulates and punishes such acts.
8. Who protects small investors in India’s capital market?
   → SEBI.
9. What are the three main functions of SEBI?
   →
   • Regulatory (set rules for market participants),
   • Protective (safeguard investors),
   • Developmental (promote new financial products).
10. When is SEBI Day celebrated?
    → 12th April every year.