Regulatory Role of the RBI and SEBI

Both segments of India's financial market operate under dedicated regulators whose objectives — safety, liquidity, and investor confidence — are similar in spirit but applied to very different markets.

Role of the Reserve Bank of India (RBI) in the money market:

• Acts as the country's monetary authority, controlling the overall money supply and credit conditions through tools such as the Cash Reserve Ratio (CRR), the Statutory Liquidity Ratio (SLR), the repo rate and reverse repo rate, the bank rate, and open market operations (buying or selling government securities to adjust liquidity).
• Regulates and supervises commercial banks, co-operative banks, and non-banking financial companies operating in the organised money market.
• Manages the issuance of Treasury Bills and other government securities, and oversees the gilt-edged segment of the capital market on behalf of the government.
• Acts as banker to the banks and banker to the government, and as the lender of last resort, stepping in to provide liquidity to the banking system in periods of genuine stress.

Role of the Securities and Exchange Board of India (SEBI) in the capital market:

• Established in 1988 as a non-statutory body and given statutory powers under the SEBI Act, 1992, with the explicit mandate to protect the interests of investors in securities and to promote the development, and regulate the working, of the capital market.
• Registers and regulates market intermediaries — stock brokers, merchant bankers, portfolio managers, credit rating agencies, and mutual funds — so that investors deal only with accountable, supervised entities.
• Lays down disclosure and investor-protection norms that companies must follow when issuing securities in the primary market (such as prospectus requirements), so that investors have the information they need before subscribing.
• Oversees the functioning of stock exchanges, and works to prevent fraudulent and unfair trade practices, including insider trading, in the secondary market. …