Financial Regulators in India: SEBI, IRDAI, PFRDA, IFSCA, IBBI and FSDC for RBI Grade B Finance

Last updated: 2026-11-13 · MockMentor

The "Structure and Functions of Financial Institutions" line of the RBI Grade B Finance syllabus covers regulators as well as lenders, and questions on them appear in both the objective and descriptive papers. You may be asked when SEBI got statutory powers, who regulates the National Pension System, what IFSCA does in GIFT City, or how the Financial Stability and Development Council coordinates regulators. RBI is covered in its own chapter on the functions of RBI. This chapter covers the other regulators and the overall design of financial regulation in India.

In one line: India regulates finance sector by sector: RBI for banks, NBFCs and payments, SEBI for securities markets, IRDAI for insurance, PFRDA for pensions, IFSCA for the international financial centres and IBBI for insolvency, with the FSDC to coordinate them.

Basic concepts

• Financial regulation: rules that govern how financial firms are set up, how much capital they hold, how they treat customers and how they report.
• Supervision: monitoring regulated firms to check that the rules are followed, through inspections and reports.
• Sectoral (silo) model: separate regulators for banking, securities, insurance and pensions, as in India.
• Twin peaks model: one regulator for prudential safety and another for conduct and consumer protection, as in Australia and the Netherlands.
• Unified regulator: a single body for all financial services, as in Singapore.
• Self-regulatory organisation (SRO): an industry body given powers to frame and enforce standards for its members, under the oversight of a regulator.
• Regulatory arbitrage: moving business to the area with the lightest rules.

Why in News?

1. Parliament passed the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act in December 2025, allowing 100% foreign direct investment (FDI) in Indian insurance companies, up from 74%.
2. The Securities Markets Code Bill, 2025, which would combine the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996 into one law, was introduced in the Lok Sabha in December 2025 and referred to a parliamentary committee.
3. SEBI continued to tighten rules on equity derivatives trading by individuals after its own studies showed that most retail traders lose money in futures and options.
4. IFSCA has expanded the range of activities in GIFT City, such as fund management, aircraft leasing, ship leasing, bullion trading and global capability centres for finance.

Architecture of financial regulation in India

Some areas fall under other bodies. Chit funds are regulated by state governments, cooperative societies by state Registrars and the Central Registrar, and accounting and auditing standards by the Institute of Chartered Accountants of India (ICAI) and the National Financial Reporting Authority (NFRA, 2018), which oversees auditors of listed and large companies.

Securities and Exchange Board of India (SEBI)

Background

SEBI was set up as a non-statutory body on 12 April 1988 and given statutory powers by the SEBI Act, 1992, after the securities scam of 1992 showed the weakness of the old system run by the Controller of Capital Issues. Its headquarters are in Mumbai. The Forward Markets Commission, which regulated commodity futures, merged with SEBI in September 2015.

Structure

SEBI's board has a chairman, two members from the Ministry of Finance, one member from RBI and five other members, of whom at least three are whole-time members, all appointed by the central government.

Objectives and functions

The preamble of the SEBI Act sets three objectives: protect the interests of investors in securities, promote the development of the securities market and regulate it.

Powers

SEBI has quasi-legislative powers (to make regulations), quasi-executive powers (to inspect, investigate, search and seize) and quasi-judicial powers (to pass orders and impose penalties). Appeals against SEBI orders go to the Securities Appellate Tribunal (SAT) and then to the Supreme Court.

Major reforms by SEBI

• Screen-based trading (1994) and dematerialisation through depositories (1996).
• Rolling settlement, then T+1 settlement for all stocks (completed in January 2023), and an optional same-day (T+0) settlement for a set of stocks from 2024.
• Application Supported by Blocked Amount (ASBA) for IPOs, and UPI as a payment mode for retail applicants.
• Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, for corporate governance of listed companies.
• Business Responsibility and Sustainability Report (BRSR) for the top listed companies.
• Social Stock Exchange (2022) for non-profit and social enterprises.
• Measures to curb speculative futures and options trading by individuals (from November 2024).
• The SCORES online grievance platform and the Online Dispute Resolution (ODR) system for market disputes.

Insurance Regulatory and Development Authority of India (IRDAI)

Background

The Malhotra Committee (1994) recommended opening insurance to private companies and setting up an independent regulator. The IRDA Act, 1999 created the Insurance Regulatory and Development Authority, which became IRDAI in 2014. Its headquarters are in Hyderabad.

Structure and functions

IRDAI has a chairperson, up to five whole-time members and up to four part-time members.

• Register insurers, reinsurers and intermediaries such as agents, brokers and web aggregators.
• Protect policyholders' interests, including through rules on claim settlement and mis-selling.
• Regulate premium rates for some products and the investment of insurers' funds.
• Set solvency margins, the capital insurers must hold above their liabilities.
• Promote insurance penetration.

Recent developments

Insurance penetration in India, measured as premiums as a share of GDP, is around 4%, below the world average of about 7%.

Pension Fund Regulatory and Development Authority (PFRDA)

Background

PFRDA was set up as an interim regulator in 2003, when the government decided to move new central government employees from defined-benefit pensions to the defined-contribution National Pension System (NPS) from 1 January 2004. It became statutory under the PFRDA Act, 2013, effective February 2014. Its headquarters are in New Delhi.

Schemes regulated

PFRDA registers pension funds, the central recordkeeping agencies (Protean, KFintech and CAMS), the trustee bank and points of presence. NPS subscribers can choose how much to invest in equity, corporate bonds and government securities.

International Financial Services Centres Authority (IFSCA)

Background

An International Financial Services Centre (IFSC) is a jurisdiction that offers financial services to non-residents and residents in foreign currency, under rules similar to global financial centres. India's first IFSC is in GIFT City (Gujarat International Finance Tec-City), Gandhinagar. Earlier, RBI, SEBI, IRDAI and PFRDA each regulated parts of GIFT City. The IFSCA Act, 2019 created a single unified regulator, which started work in 2020. Its headquarters are in Gandhinagar.

Structure and role

IFSCA has a chairperson, one member each nominated by RBI, SEBI, IRDAI and PFRDA, two members from the Ministry of Finance and two whole-time or part-time members.

• Regulates banking, capital markets, insurance, funds, pensions, aircraft and ship leasing, bullion, fintech and other services in IFSCs.
• India International Exchange (India INX) and NSE International Exchange (NSE IX) operate in GIFT IFSC; the India International Bullion Exchange (IIBX) was launched in 2022.
• GIFT Nifty, the derivative contract on the Nifty 50 index, moved from Singapore to GIFT City in July 2023.
• Indian companies can list directly on IFSC exchanges, and foreign universities and fintech firms have set up in GIFT City.

Insolvency and Bankruptcy Board of India (IBBI)

IBBI was set up on 1 October 2016 under the Insolvency and Bankruptcy Code, 2016, with its headquarters in New Delhi. It regulates insolvency professionals, insolvency professional agencies and information utilities, and frames regulations for the corporate insolvency resolution process, liquidation and individual insolvency. The National Company Law Tribunal (NCLT) is the adjudicating authority for companies, and the Debt Recovery Tribunal for individuals and firms. The pre-packaged insolvency process for MSMEs was added in 2021.

Financial Stability and Development Council (FSDC)

The FSDC was set up by the government in December 2010, on the suggestion of the Raghuram Rajan Committee on Financial Sector Reforms (2008), as a non-statutory apex council.

Before the FSDC, a High Level Coordination Committee on Financial Markets (1992), chaired by the RBI Governor, did this job.

Other bodies in the regulatory system

The debate: sectoral regulators or one unified regulator?

Arguments for a unified regulator

• Financial firms now work across sectors: a bank may own an insurer, a mutual fund and a broker, so a single regulator sees the whole group.
• It reduces gaps and overlaps, and ends regulatory arbitrage.
• It allows common standards for consumer protection.

Arguments for the present model

• Each sector needs specialist knowledge.
• A single regulator could become too powerful and slow.
• India's sector regulators have built expertise and credibility.
• Coordination through the FSDC can handle most overlaps.

The FSLRC proposal

The Financial Sector Legislative Reforms Commission (FSLRC), chaired by Justice B. N. Srikrishna (2013), proposed an Indian Financial Code to replace dozens of laws. It suggested a broad twin peaks style with RBI for banking and payments, a Unified Financial Agency for all other sectors, a Financial Redress Agency for consumer complaints, a Public Debt Management Agency and a Resolution Corporation. The code was not enacted, but several ideas, such as the merger of the Forward Markets Commission with SEBI and a statutory MPC, were adopted in other forms.

Challenges in financial regulation

• Overlapping jurisdiction, such as over hybrid products, unit-linked insurance plans and cross-border investments.
• Regulating fast-growing fintech, digital lending and crypto assets.
• Protecting retail investors from mis-selling and high-risk products such as equity derivatives.
• Accountability of regulators and the quality of their rule-making.
• Enforcement capacity and delays in appeals.
• Coordination during crises, such as the IL&FS default in 2018, which affected banks, mutual funds and insurers together.

Way forward

1. Strengthen the FSDC with a clearer mandate and a small permanent secretariat.
2. Adopt good regulatory practice: consultation papers, cost-benefit analysis of new rules and periodic review.
3. Complete the consolidation of securities laws through the Securities Markets Code.
4. Develop joint frameworks for financial conglomerates and for new products.
5. Build a single grievance platform across regulators, with time-bound redress.
6. Invest in technology for supervision and market surveillance.

Possible exam and interview questions

1. Explain the regulatory architecture of India's financial sector. Is there a case for moving to a unified regulator? (620 words)
2. Discuss the role and powers of SEBI. How has it changed the Indian capital market since 1992? (420 words)
3. What is IFSCA? How can GIFT City compete with Singapore and Dubai as a financial centre?
4. Explain the composition and role of the Financial Stability and Development Council.
5. Interview: Should SEBI ban retail investors from trading in options?

Related reading: functions of RBI, equity market, and Indian financial system.

More in Finance

• Financial System
• Functions of RBI
• Banking System
• Banking Reforms
• Financial Institutions

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