Indian finance and banking sector regulated by the five financial bodies as follows:-

1. Reserve Bank of India

2. Security and Exchange Board of India

3. Insurance Regulatory and Development Authority India

4. Pension Fund Regulatory and Development Authority

5. What is the capital requirement in India?

6. What is the liquidity requirement in India?

7. What affects the capital requirement in India?

8. How bank liquidity got affected?

9. How the bank capital and liquidity regulations help to prevent the loss?

10. What is BASEL 3 capital requirement?

11. What is the BASEL 3 liquidity requirement?

12. Conclusion

Each institute has its own importance because of its function. But mainly the Reserve Bank of India governs all the institutes of the financial sector. Let us see the working of each institute.

1. Reserve Bank of India (RBI):-

The Reserve Bank of India is premier bank and financial activity governing institute established in the year 1935 in Calcutta. Later on it moved to the Mumbai in year 1937. The RBI has been governed by the Government of India. It has 19 regional offices. The RBI regulates the governing regulations of banks in India by issuing the broad guidelines. RBI control money flow in India. It also monitors the GDP and inflation of the country. The term ‘ombudsman’ was given by the RBI. It is useful for the customer to maintain trust in the bank. It is also used to formulate the policy of inflammation control, bank credit, and interest rate control.

2. Security and Exchange Board (SEBI):-

Security Board of India is one of the regulators for the check of malpractices and protect the investment.

The role of SEBI is to give guides to the investor. It prevents the stock market from fraud. It audits the performance of the stock market.

3. Insurance Regulatory and Authority of India (IRDAI):-

It is an autonomous and apex body to maintain or regulate the insurance industry in India. IRDAI regulates and promotes the insurance business in India.

4. Pension Fund Regulatory and Development Authority:- (PFRDA)

It maintains and regulates the pension schemes in India. The main objective of the PFRDA is to manage the reforms of savings of money among senior citizens.

5. What is the capital requirement in India?

The BASEL capital regulation is implemented in India since 1 April 2013. The appreciative translation is made to ensure the calculation of capital requirements. The Arrangement of capital requirements is used to ensure the regulations. CRAR is the ratio of a bank capital asset to its risk-weighted assets. As per the RBI regulation, the CRAR ratio must be maintained at 13 %. For the ongoing transaction, it must be 9 %.

6. What is the liquidity requirement in India?

The liquidity regulation is the process of maintaining the flow of liquidity in the banking sector. To confirm the flow of money in the market. The liquidity in India depends on the bank-specific and macroeconomics.

7. What affects the capital requirement in India?

The investment in the non-government bonds, stocks, real estate, commodities, and other alternative assets affects investment in India.

8. How bank liquidity got affected?

The bank liquidity is affected by the non-secured short asset, below-average liquidity assets, and unsecured maturities, liquidity.

9. How the bank capital and liquidity regulations help to prevent the loss?

The bank capital help to preserve the asset against withdraws or loans. It is useful to manage the bank business. The liquidity regulations help to manage the cash flow.

10. What is BASEL 3 capital requirement?

The capital requirement is used to set up for the bank and depository institution to reduce the risk of default cases of the institute. The capital requirement is used to ensure the assets holding with honoring the withdrawals. The capital requirement is based on several factors. But mainly it involves the weighted risk associated with each type of asset. The capital requirement creates a new ratio for relative strength and safety. The capital requirement also includes capital adequacy and stress test.

11. What is the BASEL 3 liquidity requirement?

The BASEL 3 liquidity requirement is used to manage and supervise the liquidity risk and ensure the implementation. The liquidity framework is used for the sound management of cash flow. To ensure the perfect regulation of the two ratios given by the BASEL report are liquidity coverage ratio and net stable funding ratio. The liquidity coverage ratio is the total stock available to the cash withdrawal. If the LCR is below the given standard value then the bank must update with the new liquidity standards. The net stable funding ratio is the quotient of the amount of available stable funding and stable funding for 1 year.

The BASEL report suggests that all banks must hold more capital and must impose the capital surcharge on the systemic firm. The bank supervisors use the stress test to calculate the efficiency of banks. The capital requirement tool is used to increase the resilience of banks and financial firms.

12. Conclusion:-

The capital and liquidity requirements are used to ensure the “no default” status. The main use of the capital and liquidity is to increase the assets holding and smooth cash flow.

The RBI in India ensures to create the trust of the customer the bank and the institution.

https://www.cfainstitute.org/en/advocacy/issues/capital-liquidity-requirements

https://www.karvyonline.com/knowledge-center/beginner/financial-regulators-in-india

https://blogs.worldbank.org/allaboutfinance/bank-capital-regulation

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Banking Professional with 16 Years of Experience. The idea to start this Blogging Site is to Create Awareness about the Banking and Financial Services.

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