Indian Financial System 5

1.Role of Securities and Exchange Board of India SEBI and
   initiatives taken by SEBI*

2. Role of Reserve Bank of India [RBI] and initiatives
    taken by RBI*

Role of Securities and Exchange Board of India SEBI and initiatives taken by SEBI*

SEBI

RBI: base rate system aimed at enhancing transparency in lending and would lead to better assessment of monetary policy transmission. The base rate factors only cost and profit margin while risk and tenure premia will be charged over and above the base rate

RBI plans to reality indices two real estate indices one reflecting movements in residential property prices and other for commercial property rates to gauge the asset price movement in the country

SEBI amended the listing agreement of stock exchanges seeking more balance sheet disclosures from companies periodically: Additional disclosure thru BS by listed corporates

SEBI tightens guidelines for FIIs and sub-accounts.They will have to disclose exact structure they use to invest in India to enable sebi to identify the eventual beneficiaries behind them

IIPM- Management of Financial System

Notes on:

1.   Role of Securities and Exchange Board of India SEBI and initiatives taken by SEBI*

2.   Role of Reserve Bank of India [RBI] and initiatives taken by RBI*

( *Acknowledgement: Extract from related internet sites)

§  Role of Securities and Exchange Board of India SEBI and initiatives taken by SEBI*

§  Genesis of SEBI

Ø  In the 1980s, Indian capital markets witnessed significant changes.

Ø  During the sixth Five-Year plan (1980-85), many major industrial policy changes were introduced. These included opening up the Indian economy to foreign corporations and emphasizing a greater role for the private sector.

Ø  Many companies tapped the primary market to raise required funds from the public

Ø  With more companies raising money by issuing shares & bonds, retail investors got another investment avenue to park their surplus funds

Ø  With the increasing interest of retail investors, many dubious companies that did not have any real plans to do business raised money by issuing shares, only to vanish at a later date.

Ø  These malpractices took on significant proportions and the grievances of retail investors increased alarmingly. The investors turned to Government of India[GoI] for redressal. However, GoI was rather helpless in solving the retail investors' grievances in such large volumes because of the lack of proper penal provisions.

Ø  The government, therefore, constituted SEBI as a supervisory body to regulate and promote security markets

Ø  On April 12, 1988, the Securities and Exchange Board of India (SEBI) was established by the Government of India through an executive resolution - SEBI Act 1992' and conferred statutory powers to it -  and was subsequently upgraded as a fully autonomous body

• SEBI was established with a dual objective of protecting the rights of small investors and regulating and developing the stock markets in India.

• SEBI has been obligated to perform the aforesaid functions by such measures as it thinks fit.

• Since then, SEBI had introduced several stock market reforms. These reforms significantly transformed the face of Indian stock markets.

• The vision of SEBI is to be the most dynamic and respected regulator globally  &  to ensure that there are no issues involving investor interest and SEBI to be a benchmark for the rest of the world

• SEBI Since, its formation has:

Ø  Been instrumental in bringing greater transparency in capital issues

Ø  Become a vigilant watchdog.

Ø  Established itself as a 'regulator of consequence‘.

• Stakeholders reactions to SEBI’s performance till date has been mixed. Whilst many would agree it is that SEBI has handled the challenges exceptionally well and has performed the rather daunting task of putting in place a regulatory framework for the market against all odds. The critics view is that in spite of SEBI's capital market reforms and increasing regulatory powers over the years, it had failed miserably in stopping stock market scams casting doubt on the efficiency of SEBI as a regulatory body.
• SEBI has been criticized for being indecisive and overstepping into areas earmarked for other regulators like RBI [ especially in areas related to debt market and derivatives market] and IRDA/PFRDA [ regarding ULIP products]. But has been commended for starting exchange traded currency futures and interest rate futures together with RBI.
• According to Section 11 of SEBI Act, 1992, SEBI has been obligated to protect the interests of the investors in securities and to promote the development of and to regulate the securities market by such measures as it thinks fit.

• Based on above SEBI’s function is to ensure that:

Ø  The capital markets function efficiently, transparently and economically
in the better interests of both the issuers and the investors

Ø  The promoters should be able to raise funds at a relatively low cost.

Ø  The investors must be protected from unethical practices and their
rights must be safeguarded.

Ø  There is a steady flow of savings into the market.

Ø  There must be proper regulation and code of conduct and fair practice
 by intermediaries to make them competitive and professional.

• The measures that SEBI can take in discharge of above functions are:

Ø  Regulating the business in stock exchanges and any other securities

            markets

Ø  Registering and regulating the working of stock brokers, sub-brokers,

           share transfer agents, bankers to an issue, trustees of trust deeds,

           registrars to an issue, merchant bankers, underwriters, portfolio

           managers, investment advisers and such other intermediaries who

           may be associated with securities markets in any manner

Ø  Registering and regulating the working of the depositories, participants,

           custodians of securities, foreign institutional investors, credit rating

           agencies and such other intermediaries as SEBI may, by notification,

           specify in this behalf

Ø  Registering and regulating the working of venture capital funds and

           collective investment schemes including mutual funds

Ø  Promoting and regulating self-regulatory organizations

Ø  Prohibiting fraudulent and unfair trade practices relating to securities

           markets

Ø  promoting investors' education and training of intermediaries of

           securities markets

Ø  Prohibiting insider trading in securities

Ø  Regulating substantial acquisition of shares and take-over of
Companies

Ø  Calling for information from, undertaking inspection, conducting

           inquiries and audits of the stock exchanges, mutual funds, other

           persons associated with the securities market, intermediaries and
           self regulatory organizations in the securities market

Ø  Calling for information and record from any bank or any other authority

           or board or corporation established or constituted by or under any

          Central, State or Provincial Act in respect of any transaction in

          securities which is under investigation or inquiry by the Board

Ø  Performing such functions and exercising such powers under the

           provisions of Securities Contracts (Regulation) Act, 1956, as may be

          delegated to it by the Central Government

Ø  Levying fees or other charges for carrying out the purpose of this

          Section

Ø  Conducting research for all the above purposes

Ø  Calling from or furnishing to any such agencies, as may be specified by

SEBI, such information as may be considered necessary by it for the

           efficient discharge of its functions

Ø  Performing such other functions as may be prescribed according to Section 11A of SEBI

• Policy & other initiatives taken  by SEBI inter-alia, are:

1. DIP Guidelines, 2000 relating to book-building issues were amended
    to introduce a specific allocation of 5 per cent for Mutual Funds,
    proportionate allotment to Qualified Institutional Buyers (QIBs)
    and margin requirement for QIBs.
2. SEBI has made it mandatory to list shares within 12 days of closure of public issue ( issues opening on or after May 1, 2010), from the  current time of 22 days and the limit will be only 7 days by the end of 2010. This will reduce the investor’s exposure to market risk during the period of allocation.
3. SEBI introduced the facility of Application Supported by Blocked Amount (ASBA), a tool to reduce the overall IPO time frame and as an investor friendly method of fund transfer, whereby investor’s funds in bank accounts get debited only on share allocation and made to applicable to retail and HNIs.
4. To bring parity among the all categories of investors participating in primary market issuances SEBI is making ASBA applicable to QIBs [they will now deposit upfront 100% [previously only 10%] of application money  
5. SEBI  has also changed the time period for listed companies to file their quarterly and annual results within 45 days [previously 3 months] from the end of the quarter, to streamline the process of disclosure of financial results
6. SEBI introduced Book Building as a process by which a demand for the securities proposed to be issued by a corporate body is elicited and built up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document.

      Book should remain open for minimum of 5 days &  only electronically

      linked transparent facility is allowed to be used in case of book building.

7. Sebi had investigated certain irregularities in the transactions in the shares issued through 21 IPOs (initial public offers) during the period 2003-2005, before their listing on the stock exchanges. and initiated proceedings against these person in accordance with the SEBI Act and Regulations to disgorge illegal gains and take appropriate action including penalties.(SEBI has started disbursing around Rs 23 crore to 12.75 lakh investors from the amount disgorged in the IPO scam)
8. In order to ensure availability of floating stocks on a continuous
    basis and maintain uniformity for the purpose of continuous listing,
    SEBI (DIP) Guidelines, 2000 was amended prescribing minimum public
    shareholding of 25 per cent in case of all listed companies barring a few
    exceptions.
9. In order to ensure faster and hassle-free refunds, the facility of
    electronic clearing services [ECS] was extended to refunds arising out
    of public issues, initially at 15 centers where clearing houses are
     managed by the RBI
10. SEBI introduced on-line trading and demat of shares which did away with the age-old paper-based trading, thus bringing more transparency into the trading
11. In order to assist the investors, particularly the retail investors, in-
     principle approval was given for grading of IPOs by the rating
     agencies at the option of the issuers. SEBI will however not certify the
     assessment made by the rating agencies
12. Listed companies were advised to comply with the provision of revised
     Clause 49 of the Listing Agreement on corporate governance, including
     appointment of the independent directors by December 31, 2005
13. In order to facilitate execution of large trades without impacting the
     market, the stock exchanges were permitted to provide a separate
     trading window for block deals subject to certain conditions. BSE and
    NSE activated this window with effect from November 14, 2005.
14. In order to streamline the settlement system consistent with IOSCO
     CPSS Task Force recommendations, transactions executed on the
     stock exchanges would be necessarily settled through the clearing
     corporation/clearing house of the stock exchanges.
15. In order to expedite the Corporatization and Demutualization (C and D)
     of stock exchanges, SEBI approved and notified C and D schemes of
     19 stock exchanges during 2005-06. The NSE and OTCEI have been
     exempted from submitting C and D schemes as they were already 
     notified as corporatized and demutualised stock exchanges vide
     notifications dated March23, 2005 and September 15, 2005,
     respectively.
16. Based on recommendations of the Madhukar Committee, the SEBI
     (Mutual Funds) Regulations, 1996 were amended and a notification was
     issued on January 12, 2006 permitting mutual funds to introduce Gold
     Exchange Traded Funds (GETFs) in India subject to certain investment
      restrictions.
17. According to the SEBI Guidelines dated December 12, 2003,every
      mutual fund scheme should have at least 20 investors and holding of a
     single investor should not be more than 25 per cent of the corpus. SEBI
     clarified that this stipulation is applicable at the portfolio level. Moreover,
     if there is a breach of 25 percent limit by an investor over the quarter, a
     rebalancing period of one month would be allowed.
18. The aggregate ceiling for overseas investment by mutual funds, registered with SEBI, was enhanced from US$ 4 billion to US$ 5 billion in Sep07 and to US$ 7 billion in Apr08. The existing facility to allow a limited number of qualified Indian mutual funds to invest cumulatively up to US$ 1 billion in overseas Exchange Traded Funds. Mutual funds are also permitted to invest in ADRs, GDRs and foreign securities.
19. In order to further enhance efficacy of the surveillance function, SEBI
     decided to put in place a world-class comprehensive Integrated Market
     Surveillance System (IMSS) across stock exchanges and across
     market segments (cash and derivatives markets).
20. BSE and NSE permitted to put in place corporate bond trading
     platforms to enable efficient price discovery and clearing and settlement in a gradual manner
21. PAN was made the sole identification number for all transactions in
    securities market irrespective of the amount
22. SEBI (DIP) Guidelines amended to facilitate government companies/
    corporations, statutory authorities/ corporation or any special purpose

vehicle set up by them, engaged in infrastructure sector, to raise funds

in the Indian primary market through IPOs.

23. SEBI (DIP) Guidelines 2000 amended to facilitate development of a
    vibrant primary market for corporate bonds in India making requirement of credit rating from one credit rating agency, allowing issuance of below investment grade bonds to the public and removing structural restrictions on debt instruments
24. Mini-derivatives contract on Index ( Sensex and Nifty) introduced.
    Contract size and risk containment measures were specified. Long term options on Sensex and Nifty with tenures up to 3 years introduced and the options cycle, risk containment measures specified
25. No entry load to be charged for direct applications received by AMCs
    for investments in existing schemes with effect from January 04, 2008

and in new schemes launched on and after the said date 

26. The Investor Protection Fund (IPF)/ Customer Protection Fund (CPF)
    Guidelines were revised and comprehensive guidelines prescribed with

respect to constitution and management of the IPF/CPF, contribution to

IPF/CPF, and manner of filing/inviting claims from investors, eligible claims, determination of legitimate claims and disbursements of claims from the IPF/CPF.

27. A number of initiatives were taken for education and awareness of investors which included, inter alia, workshops, audio-visual aids, distribution of educative materials etc.
28. The Indian venture capital funds (VCFs) registered with the SEBI are permitted to invest in equity and equity-linked instruments of off-shore venture capital undertakings, subject to an overall limit of US $ 500 million and compliance with the SEBI regulations issued in this regard.
29.  SEBI has allowed all capitalists to submit an application for Indian Depositary Receipts (IDRs)[ IDRs are just like GDR s/ADRs], an instrument through which overseas companies can lift funds in the domestic market.
30. The specified broad framework for short-selling by institutional

      investors and a full-fledged securities lending and borrowing scheme
      for all market participants to be operationalised with effect from April
     21, 2008

31. SEBI has amended the listing agreement of stock exchanges seeking more balance sheet disclosures from companies periodically: Additional disclosure thru BS by listed corporate
32. SEBI has tightened guidelines for FIIs and sub-accounts. They will have to disclose exact structure they use to invest in India to enable SEBI to identify the eventual beneficiaries behind them

§  Role of Reserve Bank of India [RBI] and initiatives taken by RBI*

• (    Reserve Bank of India [RBI]

Ø  The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the beginning. The Government held shares of nominal value of Rs. 2,20,000.

Ø  Reserve Bank of India was nationalised in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks.

Ø  The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank.

Ø  The Bank was constituted for the need of following:

ü  To regulate the issue of banknotes

ü  To maintain reserves with a view to securing monetary stability and

ü  To operate the credit and currency system of the country to its advantage.

• The triple role of RBI are:

Ø  Central Bank of India

Ø  Bankers Bank / Banker of Last Resort

Ø  Debt Manager for GOI

• Functions of Reserve Bank of India

ü  The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank the Reserve Bank of India.

ü  Bank of Issue

• Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue bank notes of all denominations. The distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent of the Government. The Reserve Bank has a separate Issue Department which is entrusted with the issue of currency notes. The assets and liabilities of the Issue Department are kept separate from those of the Banking Department. Originally, the assets of the Issue Department were to consist of not less than two-fifths of gold coin, gold bullion or sterling securities provided the amount of gold was not less than Rs. 40 crores in value. The remaining three-fifths of the assets might be held in rupee coins, Government of India rupee securities, eligible bills of exchange and promissory notes payable in India. Due to the exigencies of the Second World War and the post-was period, these provisions were considerably modified. Since 1957, the Reserve Bank of India is required to maintain gold and foreign exchange reserves of Ra. 200 crores, of which at least Rs. 115 crores should be in gold. The system as it exists today is known as the minimum reserve system.

ü  Banker to Government

• The second important function of the Reserve Bank of India is to act as Government banker, agent and adviser. The Reserve Bank is agent of Central Government and of all State Governments in India excepting that of Jammu and Kashmir. The Reserve Bank has the obligation to transact Government business, via. to keep the cash balances as deposits free of interest, to receive and to make payments on behalf of the Government and to carry out their exchange remittances and other banking operations. The Reserve Bank of India helps the Government - both the Union and the States to float new loans and to manage public debt. The Bank makes ways and means advances to the Governments for 90 days. It makes loans and advances to the States and local authorities. It acts as adviser to the Government on all monetary and banking matters.

ü  Bankers' Bank and Lender of the Last Resort

• The Reserve Bank of India acts as the bankers' bank. According to the provisions of the Banking Companies Act of 1949, every scheduled bank was required to maintain with the Reserve Bank a cash balance equivalent to 5% of its demand liabilites and 2 per cent of its time liabilities in India. By an amendment of 1962, the distinction between demand and time liabilities was abolished and banks have been asked to keep cash reserves equal to 3 per cent of their aggregate deposit liabilities. The minimum cash requirements can be changed by the Reserve Bank of India.

• The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible securities or get financial accommodation in times of need or stringency by rediscounting bills of exchange. Since commercial banks can always expect the Reserve Bank of India to come to their help in times of banking crisis the Reserve Bank becomes not only the banker's bank but also the lender of the last resort.

ü  Controller of Credit

• The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume of credit created by banks in India. It can do so through changing the Bank rate or through open market operations. According to the Banking Regulation Act of 1949, the Reserve Bank of India can ask any particular bank or the whole banking system not to lend to particular groups or persons on the basis of certain types of securities. Since 1956, selective controls of credit are increasingly being used by the Reserve Bank.

• The Reserve Bank of India is armed with many more powers to control the Indian money market. Every bank has to get a licence from the Reserve Bank of India to do banking business within India, the licence can be cancelled by the Reserve Bank of certain stipulated conditions are not fulfilled. Every bank will have to get the permission of the Reserve Bank before it can open a new branch. Each scheduled bank must send a weekly return to the Reserve Bank showing, in detail, its assets and liabilities. This power of the Bank to call for information is also intended to give it effective control of the credit system. The Reserve Bank has also the power to inspect the accounts of any commercial bank.

ü  Custodian of Foreign Reserves

• The Reserve Bank of India has the responsibility to maintain the official rate of exchange. According to the Reserve Bank of India Act of 1934, the Bank was required to buy and sell at fixed rates any amount of sterling in lots of not less than Rs. 10,000. The rate of exchange fixed was Re. 1 = sh. 6d. Since 1935 the Bank was able to maintain the exchange rate fixed at lsh.6d. though there were periods of extreme pressure in favour of or against

• the rupee. After India became a member of the International Monetary Fund in 1946, the Reserve Bank has the responsibility of maintaining fixed exchange rates with all other member countries of the I.M.F.

• Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the custodian of India's reserve of international currencies. The vast sterling balances were acquired and managed by the Bank. Further, the RBI has the responsibility of administering the exchange controls of the country.

ü  Supervisory functions

ü  In addition to its traditional central banking functions, the Reserve bank has certain non-monetary functions of the nature of supervision of banks and promotion of sound banking in India. The Reserve Bank Act, 1934, and the Banking Regulation Act, 1949 have given the RBI wide powers of supervision and control over commercial and co-operative banks, relating to licensing and establishments, branch expansion, liquidity of their assets, management and methods of working, amalgamation, reconstruction, and liquidation. The RBI is authorised to carry out periodical inspections of the banks and to call for returns and necessary information from them. The nationalisation of 14 major Indian scheduled banks in July 1969 has imposed new responsibilities on the RBI for directing the growth of banking and credit policies towards more rapid development of the economy and realisation of certain desired social objectives. The supervisory functions of the RBI have helped a great deal in improving the standard of banking in India to develop on sound lines and to improve the methods of their operation.

ü  Promotional functions

ü  With economic growth assuming a new urgency since Independence, the range of the Reserve Bank's functions has steadily widened. The Bank now performs a varietyof developmental and promotional functions, which, at one time, were regarded as outside the normal scope of central banking. The Reserve Bank was asked to promote banking habit, extend banking facilities to rural and semi-urban areas, and establish and promote new specialised financing agencies. Accordingly, the Reserve Bank has helped in the setting up of the IFCI and the SFC; it set up the Deposit Insurance Corporation in 1962, the Unit Trust of India in 1964, the Industrial Development Bank of India also in 1964, the Agricultural Refinance Corporation of India in 1963 and the Industrial Reconstruction Corporation of India in 1972. These institutions were set up directly or indirectly by the Reserve Bank to promote saving habit and to mobilise savings, and to provide industrial finance as well as agricultural finance. As far back as 1935, the Reserve Bank of India set up the Agricultural Credit Department to provide agricultural credit. But only since 1951 the Bank's role in this field has become extremely important. The Bank has developed the co-operative credit movement to encourage saving, to eliminate moneylenders from the villages and to route its short term credit to agriculture. The RBI has set up the Agricultural Refinance and Development Corporation to provide long-term finance to farmers.

• As supreme banking authority in the country, the Reserve Bank of India, therefore, has the following powers:

o   It holds the cash reserves of all the scheduled banks.

o   It controls the credit operations of banks through quantitative and qualitative controls.

o   It controls the banking system through the system of licensing, inspection and calling for information.

o   It acts as the lender of the last resort by providing rediscount facilities to scheduled banks.

• Classification of RBIs functions

Ø  The monetary functions also known as the central banking functions of the RBI are related to control and regulation of money and credit, i.e., issue of currency, control of bank credit, control of foreign exchange operations, banker to the Government and to the money market. Monetary functions of the RBI are significant as they control and regulate the volume of money and credit in the country.

Ø  Equally important, however, are the non-monetary functions of the RBI in the context of India's economic backwardness. The supervisory function of the RBI may be regarded as a non-monetary function (though many consider this a monetary function). The promotion of sound banking in India is an important goal of the RBI, the RBI has been given wide and drastic powers, under the Banking Regulation Act of 1949 - these powers relate to licencing of banks, branch expansion, liquidity of their assets, management and methods of working, inspection, amalgamation, reconstruction and liquidation. Under the RBI's supervision and inspection, the working of banks has greatly improved. Commercial banks have developed into financially and operationally sound and viable units. The RBI's powers of supervision have now been extended to non-banking financial intermediaries. Since independence, particularly after its nationalization 1949, the RBI has followed the promotional functions vigorously and has been responsible for strong financial support to industrial and agricultural development in the country.

Policy & other initiatives taken by RBI inter-alia are:

1. To enable financial sector to leverage on Information Technology [IT] for  better customer service, improved housekeeping and overall systemic efficiency RBI is in the forefront for implementation of Core Banking Systems [CBS] [I.e computerization and net working of branches of banks in a large scale and also introduced ATM and Mobile banking in a big way.
2. For the establishment of safe, secure, sound and efficient payment and settlement systems in the country, inter-alia, RBI has introduced modern payment system comprising of Real Gross Settlement [RTGS], National Electronic Funds Transfer[NEFT],Electronic Clearing System[NCS for debit and credit]  and cheque truncation systems pan India in phased and progressive manner with considerable success
3. The introduction by RBI of On Line Tax Accounting System [OLTAS] for tax  payments  and Electronic Accounting System in Excise and Service Tax have revolutinsed the method of tax payment to the Government and is helping corporate and banks in better liquidity management
4. As part of the ongoing efforts to promote financial inclusion, RBI - besides exploiting the potential Electronic banking, Credit/Debit/Smart Cards, ATMs and revamping the role of Cooperative/Urban/Rural/Gramin Banks -  plans to introduce new guidelines on the Business Correspondent (BC) model who are intermediaries who carry out banking functions in villages or areas where it is not possible to open a branch.
5. RBI introduced [in 2002] Negotiated Dealing System (NDS) an electronic platform for facilitating dealing in Government Securities and Money Market Instruments to  facilitate electronic submission of bids/application by members for primary issuance of Government Securities by RBI through auction and floatation, to  provide interface to Securities Settlement System (SSS) of Public Debt Office and facilitate settlement of transactions in Government Securities including treasury bills, both outright and repos.
6. RBI followed it up with the introduction of Delivery Versus Payment System [DVP] for government securities to mitigate settlement and market related risks
7. RBI introduced [in 2005]  T+1 as the standardized settlement system for government securities and in the case of repo transactions in government securities the market participants have the choice of settling the first leg on either T+0 or T+1 basis as per their requirement.RBI also continue to resort to multiple and uniform price methods flexibly in the auction of government securities.
8. RBI was instrumental in the setting up of The Clearing Corporation of India  Ltd. (CCIL) in, 2001 for providing exclusive clearing and settlement for transactions in Money, GSecs and Foreign Exchange. The prime objective is improve efficiency in the transaction settlement process, insulate the financial system from shocks emanating from operations related issues, and to undertake other related activities that would help to broaden and deepen the money, debt and forex markets in the country.
9. Collateralized Borrowing and Lending Obligation (CBLO), a money market instrument as approved by RBI, is a product developed by CCIL for the benefit of the entities who have either been phased out from inter bank call money market or have been given restricted participation in terms of ceiling on call borrowing and lending transactions and who do not have access to the call money market. CBLO is a discounted instrument available in electronic book entry form for the maturity period ranging from one day to ninety Days (can be made available up to one year as per RBI guidelines). In order to enable the market participants to borrow and lend funds, CCIL provides the Dealing System.
10. CIBIL  India's first credit information bureau  has been established by RBI to cater to the credit information requirement of the financial sector and serves as an effective mechanism for curbing the growth of Non-Performing Assets (NPAs). CIBIL performs the role of collecting and disseminating information on suit-filed accounts and list of defaulters, being reported to RBI by banks and notified Financial Institutions (FIs).
11. With RBI [& SEBI] approval, various stock exchanges like NSE, BSE & MCX have introduced trading on currency futures and have started trading US$-INR Futures. Stock exchanges have given a nation-wide trading platform to currency market, which was until now a closed market between banks and financial institutions. With exchange traded currency futures, one can forward cover (book) export receivables, import payables, FCNR(B) loan payables to minimize risks associated with fluctuations in currency rates.
12. RBI [and SEBI] has announced introduction of Exchange Traded Interest Rate Futures (ETIRF)[government securities future], with the underlying asset being notional coupon bearing 10 year government bonds, has brought these derivative agreements under the limelight. Such instruments are meant to assist institutions in managing interest rate risk in the wake of interest rate volatility
13. RBI has  proposed the base rate system to replace the prime lending rate (PLR) for banks which takes effect from 1st April2010 to bring about more transparency in the lending operations. The base lending rate reflects the actual cost to banks that has to be covered through lending. PLR proved ineffective as banks disbursed loans at sub-PLR rates to their privileged customers.
14. RBI’s Liberalized Remittance Scheme (the Scheme as a step towards further simplification and liberalization of the foreign exchange facilities available to resident individuals) permit, resident individuals may remit up to USD 200,000 per financial year for any permitted capital and current account transactions.
15. RBI [together with GOI and SEBI] in order to boost domestic bond market has permitted FIIS to invest upto $15 billion in corporate bond market [FIIs can also invest upto $5 bln in government securities]
16. In a bid to give further impetus to overseas investments, the Reserve Bank of India has further liberalised overseas investment norms for both direct and portfolio investment. It has:

Ø  Hiked the overseas investment limit from 300 per cent of the net worth to 400 per cent of the net worth;

Ø  Hiked the limit on overseas portfolio investment by Indian companies from 35 per cent of their net worth to 50 per cent of their net worth;

Ø  Further MFs have been permitted to invest upto $7bln overseas in approved investment avenues

17. In terms of Fiscal Responsibility and Budget Management [FRBM] Act [in 2006] [a historic agreement between GOI and RBI] RBI will not automatically monetize fiscal deficit and would in post-FRBM will inter-alia reorient government debt management operations while simultaneously strengthening monetary operations
18. For the first time in the history of the RBI [in 2005] it came out with quarterly review on macroeconomic developments and stance of monetary policy [previously it was bi-annual] .The RBI's open, pre-announced quarterly review on macroeconomic developments is historic and commit the central bank to the current stance of monetary policy as it takes into account the multiple objectives of securing higher growth, price stability and financial stability.
19. RBI is playing a leading role in the implementation of Basel II norms by the Indian banks and has inter-alia, prescribed a more stringent capital adequacy of 9% [as against Basel norm of 8%] for the Indian Banks
20. RBI has introduced innovative new capital instruments to provide Indian Banks greater latitude to raise capital.RBI is allowing banks to include Investment Fluctuation Reserve [IFR] & Innovative Perpetual Debt Instrument in  Tier 1 capital and Senior Subordinated Debt in Tier 2 capital
21. RBI has introduced Base Rate System aimed at enhancing transparency in lending and would lead to better assessment of monetary policy transmission. The base rate factors only cost and profit margin while risk and tenure premia will be charged over and above the base rate
22. RBI plans to reality indices two real estate indices one reflecting movements in residential property prices and other for commercial property rates to gauge the asset price movement in the country