In a statement on Monday, the RBI said it has been decided to harmonise the instructions on KFS for loans and advances. “This is being done to enhance transparency and reduce information asymmetry on financial products being offered by different regulated entities, thereby empowering borrowers to make an informed financial decision,” the RBI said. Key…
(This post covers reforms in the financial sector of India covering banking, money market, Government securities market, foreign exchange market, capital market, Credit market, and Payment systems since the 1990s) A country’s financial system comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds securities markets, and investment funds, and other smaller…
The financial sector in India is predominantly a banking sector with commercial banks including the public sector, private sector, cooperatives, and foreign banks accounting for more than 64% of the total assets held by the financial system. The banking regulator further permitted new private banks and entities like payment banks, and small finance banks operating…
A money market is a place where banks and other financial institutions trade in short-term debt securities such as commercial paper (CP), certificate of deposits (CDs), treasury bills (TBs), and repo in ready-forward contracts (of dated securities, and Treasury Bills). The money market provides a platform for financial institutions to borrow and lend money for…
Before the 1991 reforms, the foreign exchange market was virtually absent. Exchange earners were required to buy and sell foreign currencies through Authorised Dealers at the Reserve Bank reference rate. In this highly regulated system, very few transactions used to take place among the authorised dealers, and trades were required to be squared off by…
Government security (G-sec) is a form of security issued by the Government through a notification in the official Gazette. These securities are created by the Government to raise loans from the public or for any other purposes. A Government Promissory Note (GPN) payable to or to the order of a certain person; a bearer bond…
The Securities and Exchange Board of India (SEBI) was set up in 1988 and made the regulator of the capital market under the SEBI Act, 1992. In May 1992, the Government abolished the Capital Issues Control Act, and the functions of the capital issues controller were entrusted to SEBI. As a regulator of the Capital…
Broadly, a credit market is a market for borrowing money in the form of bank loans, bonds, etc. The credit market is also known as the debt market since it deals in fixed-income instruments like bonds, treasury bills, commercial paper, and debt offerings such as notes and securitized obligations, collateralized debt obligations (CDOs)/(mortgage-backed securities), and…
The Payment and Settlement System (PSS) Act, 2007 provides for the regulation and supervision of payment systems in India and designates the Reserve Bank of India (Reserve Bank) as the authority for that purpose and all related matters. The rapid developments in Payment Systems and technology have led to the implementation of major reforms of…
‘Corporate Debt Security’ means non-convertible debt securities, which create or acknowledge indebtedness, including debentures, bonds, and such other securities of a company or a body corporate constituted by or under a Central or State Act, whether constituting a charge on the assets of the company or body corporate or not, but does not include debt…