Banking and Finance

Banking and finance law work are usually divided into various verticals, including projects and real estate finance, structured financing, securitisation, and insolvency advisory. Their practices in other areas of law are far better than their banking and finance departments.

Financial law is the law and regulation of the insurance, derivatives, commercial banking, capital markets and investment management sectors. Understanding Financial law is crucial to appreciating the creation and formation of banking and financial regulation, as well as the legal framework for finance generally. Financial law forms a substantial portion of commercial law, and notably a substantial proportion of the global economy, and legal billable are dependent on sound and clear legal policy pertaining to financial transactions. Therefore financial law as the law for financial industries involves public and private law matters. Understanding the legal implications of transactions and structures such as an indemnity, or overdraft is crucial to appreciating their effect in financial transactions. This is the core of Financial law. Thus, Financial law draws a narrower distinction than commercial or corporate law by focusing primarily on financial transactions, the financial market, and its participants; for example, the sale of goods may be part of commercial law but is not financial law. Financial law may be understood as being formed of three overarching methods, or pillars of law formation and categorised into five transaction silos which form the various financial positions prevalent in finance.

For the regulation of the financial markets, see Financial regulation which is distinguished from financial law in that regulation sets out the guidelines, framework and participatory rules of the financial markets, their stability and protection of consumers; whereas financial law describes the law pertaining to all aspects of finance, including the law which controls party behaviour in which financial regulation forms an aspect of that law.

Financial law is understood as consisting of three pillars of law formation, these serve as the operating mechanisms on which the law interacts with the financial system and financial transactions generally. These three components, being market practices, case law, and regulation; work collectively to set a framework upon which financial markets operate. Whilst regulation experienced a resurgence following the financial crisis of 2007–2008, the role of case law and market practices cannot be understated. Further, whilst regulation is often formulated through legislative practices; market norms and case law serve as primary architects to the current financial system and provide the pillars upon which the markets depend. It is crucial for strong markets to be capable of utilising both self-regulation and conventions as well as commercially mined case law. This must be in addition to regulation. An improper balance of the three pillars is likely to result in instability and rigidity within the market contributing to illiquidity.

Banking business and related financial services are governed primarily by the Banking Regulation Act, 1949 (Banking Regulation Act).

The Reserve Bank of India Act, 1934 (RBI Act) empowers the Reserve Bank of India (RBI) to issue rules, regulations, directions and guidelines on a wide range of issues relating to banking and the financial sector. The RBI is the central bank of India, and the primary regulatory authority for banking.

Cross-border transactions and related activities are governed by the Foreign Exchange Management Act, 1999. This provides for, among other things, certain banking and other institutions to be licensed as authorised dealers in foreign exchange.

EAD bank regulators

The primary banking regulator in India is the Reserve Bank of India (RBI). The RBI has wide-ranging powers to regulate the financial sector. These include prescribing norms for setting up and licensing banks (including branches of foreign banks in India), corporate governance, prudential norms and conditions for structuring products and services.

Its other functions include, among other things:

• Setting monetary policy.
• Regulation of money, foreign exchange, government securities markets and financial derivatives.
• Debt and cash management for the government.
• Oversight of payment and settlement systems.
• Currency management.
• Other authorities

India has several other financial sector regulators, including the:

Securities Exchange Board of India (SEBI), which is the regulatory authority for the securities market in India.

Insurance Regulatory and Development Authority of India (IRDAI), which regulates the insurance sector.

Insolvency and Bankruptcy Board of India (IBBI), which regulates the process relating to conducting insolvency proceedings under the Insolvency and Bankruptcy Code (IBC).

The RBI often liaises closely with the SEBI, IRDAI and, where required, other financial sector regulators, to regulate banking activities which interact with other financial activities.

1. Legal personality

Corporation owners pool their resources into a separate entity. That entity can use the assets and sell them. Creditors can’t easily take the assets back. Instead, they form their own entity that acts on its own.

Others

The central government, in particular the Ministry of Finance, also supervises and legislates on the functioning of banks and financial institutions. Acting through its Department of Financial Services. It:

• Monitors banking operations.
• Prescribes norms for the operation and functioning of public sector banks.
• Examines legislative measures for recovery of bank debts, and establishes judicial mechanisms for this purpose.