1 A financial institution is defined as:
A body corporate that, as part of its normal activities:
a) Takes money on deposit and makes advances of money; and
b) Does so under a regulatory regime, governed by the central bank (or its equivalent) of the country in which it operates, that the Minister is satisfied provides effective prudential assurance.
With the rapid growth of financial institution particularly in the 1980’s, there was a need to take an integrated view of the operations of financial institution & banks so as to provide a more comprehensive basis for the formulation of monetary & credit policies. Accordingly, a separate interdisciplinary financial institution cell [FIC] was set up in august 1990 for undertaking the monitoring of the operations of the all India financial & investment institution.
For effective and coordinated regulations and supervision over financial institution, a new division named financial institution division [F.I.D] set up under the department of supervision in June1997 and financial institutions ceased to function from that date. F.I.D has been entrusted with both regulatory as also some of the supervisory function relating to select all India financial institution. However, the regional offices of DBS carry out the inspection of the financial institutions.
The function of the division are:
• To establish an appropriate prudential regulatory framework for the select all-India Financial Institution (FIs) in keeping with the international best practices.
• To provide support in formulating of policy relating to select all-India FIs by examining various issues arising from time to time & referred to it by various agencies.
• To finalize the inspection Reports of the fIs falling within the supervisory domain of RBI & to handle the supervisory process arising from the reports.
• To exercise off-site surveillance over the operations of the select all-India FIs & to address the issues of supervisory concern emanating there form.
• To compile and furnish material in respect of the FIs for various publication of the bank & international organizations.
• To attend to matters relating to raising of resources by the FIs &
• To attend miscellaneous activities such as handling references, Parliament questions, complaints, providing support to Advisory Board on Banking.
Commercial & financial frauds (ABBCFF), foreign Delegations etc.
Industrial Development Bank of India (IDBI)
Industrial Finance Corporation of India (IFCI)
Export-Import Bank of India (Exim Bank)
Industrial Investment Bank of India LTD.
Tourism Finance Corporation of India LTD. (TFCI)
Infrastructure Development Finance Co. Ltd.
Small Industries Development Bank of India (SIDBI)
National Bank For Agriculture And Rural Development (NABARD) National Housing Bank (NHB)
The first seven institutions are collectively referred to as ‘Term Landing Institution while the three are termed as ‘Refinancing Institution’, as per the predominance of the nature of financing undertaken by them. Then details of progression of the regulatory frame for the final institution are furnished relating to regulation & supervision of all-India finance institutions.
The Three investment institution viz. LIC, GIC, and UTI do not fall within the regulatory and supervision purview of reserve bank of India as they are regulated by their sectoral regulators viz. Insurance Regulatory and Development Authority (IRDA) and securities and exchange board of India (SEBI). Reserve bank of India, however, has put an information system for obtaining from data for compiling liquidity and monetary aggregates which are used for formulating of macro economic policy.
Statutory power for regulating of financial institutions are derived from section 45L...