Difference Between RBI and SEBI

RBI vs SEBI

RBI is the central bank of India whereas SEBI is the Securities and Exchange Board of India. Both of them play vital role in Indian economy. RBI is the body responsible for maintaining bank notes in the country, to keep currency reserves to maintain monetary stability and to keep the credit and currency system of the country working efficiently. SEBI on the other hand is an autonomous body constituted in 1992 to oversee the operations of investment markets in the country. The board performs the function of a regulator to keep markets stable and efficient markets. There are obvious differences in the roles and responsibilities of two monetary bodies that will be discussed highlighting their features.

RBI

RBI stands for Reserve Bank of India and is the central bank of the country. It is the banker to all banks and the government of India. It was established in 1935 and was nationalized in 1949 after India got independence. It has a board of directors with a governor. RBI is the sole body in the country to issue currency notes. It maintains minimum reserves of gold and foreign currency amounting 200 crores. RBI performs all transactions of the government as it receives and makes payments on behalf of the government.

Every bank in the country is required to keep a minimum cash reserve with the RBI to meet its liabilities. RBI issues licenses to all banks to carry on banking operations and has the right to cancel this licence if it deems fit. RBI also sets the lending rates for all banks which is the rate at which banks are required to distribute loans to consumers both in industry and agriculture sector.

SEBI

The basic motive of the government behind setting up of an autonomous body called SEBI in 1992 was to protect the interests of investors in securities, to help in growth of securities market and to regulate it efficiently so as to attract foreign investors. SEBI has been performing these duties with zeal and efficiency. It has introduced extensive regulatory methods, stringent code of obligation, registration norms, and eligibility criteria that has helped Indian securities market tremendously.

All affairs of SEBI are managed by an appointed board that comprises a chairman and 5 other members. Companies that wish to bring a public offer of more than rupees 50 lakhs are required get approval from SEBI.

Of late there is news of a tug of war between these two watchdogs of Indian economy as SEBI wishes to amend the definition of securities to bring into its fold all marketable instruments. This has meant alarm bells for RBI as then currency derivatives would come within purview of SEBI bypassing RBI. SEBI has proposed to keep FD’s and insurance policies out of the amendment but it could include many more instruments currently falling under the jurisdiction of RBI. Negotiations are on between RBI and SEBI and soon a formula may be worked out to settle the issue.