BUSINESS ENVIRONMENT

UNIT - II

INDIAN FINANCIAL SYSTEM - The Indian financial system is one of the most important components
of the economy that are responsible for supporting the growth and the funds in the country. The
system mainly comprises ideas related to development and growth by the wise decision-making
process for both savings and investment fields. The Indian financial system is a formative idea that
comprises multiple components and a specific structure that is responsible for utilizing the cash flow
statements.

The Indian Financial System is one of the most important aspects of the economic development of our
country. This system manages the flow of funds between the people (household savings) of the
country and the ones who may invest it wisely (investors/businessmen) for the betterment of both
parties.

INDIAN FINANCIAL SYSTEM – AN OVERVIEW

The services that are provided to a person by the various Financial Institutions including banks,
insurance companies, pensions, funds, etc. constitute the financial system.

Given below are the features of the Indian Financial system:

• It plays a vital role in the economic development of the country as it encourages both savings
and investment.
• It helps in mobilising and allocating one’s savings.
• It facilitates the expansion of financial institutions and markets.
• Plays a key role in capital formation.
• It helps form a link between the investor and the one saving.
• It is also concerned with the Provision of funds.

The financial system of a country mainly aims at managing and governing the mechanism of
production, distribution, exchange and holding of financial assets or instruments of all kinds.

COMPONENTS OF THE INDIAN FINANCIAL SYSTEM

There are four main components of the Indian Financial System. This includes:

1. Financial Institutions
2. Financial Assets
3. Financial Services
4. Financial Markets

1. Financial Institutions

DR. PRIYANKA RANA, ASSOCIATE PROFESSOR, IIMTU 1

Financial Institutions act as a mediator between the investor and the borrower. The investor’s savings
are mobilised either directly or indirectly via the Financial Markets.

The main functions of Financial Institutions are as follows:

• A short-term liability can be converted into a long-term investment.

• It helps in the conversion of a risky investment into a risk-free investment.
• Also acts as a medium of convenience denomination, which means, it can match a small
deposit with large loans and a large deposit with small loans.

The best example of a Financial Institution is a Bank. People with surplus amounts of money make
savings in their accounts, and people in dire need of money take loans. The bank acts as an
intermediate between the two.

The financial institutions can further be divided into two types:

I. Banking Institutions or Depository Institutions – This includes banks and other credit unions
which collect money from the public against interest provided on the deposits made and lend
that money to the ones in need.
II. Non-Banking Institutions or Non-Depository Institutions – Insurance, mutual funds and
brokerage companies fall under this category. They cannot ask for monetary deposits but sell
financial products to their customers.

Further, Financial Institutions can be classified into three categories:

a) Regulatory – Institutes that regulate the financial markets like RBI, IRDA, SEBI, etc.
b) Intermediates – Commercial banks that provide loans and other financial assistance such as
SBI, BOB, PNB, etc.
c) Non-Intermediates – Institutions that provide financial aid to corporate customers. It includes
NABARD, SIBDI, etc.

2. Financial Assets
The products which are traded in the Financial Markets are called Financial Assets. Based on the
different requirements and needs of the credit seeker, the securities in the market also differ from
each other.

Some important Financial Assets have been discussed briefly below:

• Call Money – When a loan is granted for one day and is repaid on the second day, it is called
call money. No collateral securities are required for this kind of transaction.
• Notice Money – When a loan is granted for more than a day and for less than 14 days, it is
called notice money. No collateral securities are required for this kind of transaction.
• Term Money – When the maturity period of a deposit is beyond 14 days, it is called term
money.
• Treasury Bills – Also known as T-Bills, these are Government bonds or debt securities with
maturity of less than a year. Buying a T-Bill means lending money to the Government.
• Certificate of Deposits – It is a dematerialised form (Electronically generated) for funds
deposited in the bank for a specific period of time.
• Commercial Paper – It is an unsecured short-term debt instrument issued by corporations.

DR. PRIYANKA RANA, ASSOCIATE PROFESSOR, IIMTU 2

3. Financial Services
Services provided by Asset Management and Liability Management Companies. They help to get the
required funds and make sure that they are efficiently invested.

The financial services in India include:

I. Banking Services – Any small or big service banks provide, like granting a loan, depositing
money, issuing debit/credit cards, opening accounts, etc.
II. Insurance Services – Services like issuing of insurance, selling policies, insurance undertaking
and brokerages, etc. are all a part of the Insurance Services.
III. Investment Services – It mostly includes asset management.
IV. Foreign Exchange Services – Exchange of currency, foreign exchange, etc. are a part of the
foreign exchange services.

The main aim of financial services is to assist a person with selling, borrowing, or purchasing securities,
allowing payments and settlements and lending and investing.

4. Financial Markets
The marketplace where buyers and sellers interact with each other and participate in the trading of
money, bonds, shares and other assets is called a financial market.

The financial market can be further divided into four types:

I. Capital Market – Designed to finance long-term investment, the Capital market deals with
transactions that are taking place in the market for over a year. The capital market can
further be divided into three types:
i. Corporate Securities Market
ii. Government Securities Market
iii. Long-Term Loan Market

II. Money Market – Mostly dominated by Government, Banks and other Large Institutions,
the type of market is authorised for small-term investments only. It is a wholesale debt
market that works on low-risk and highly liquid instruments. The money market can
further be divided into two types:
i. Organised Money Market
ii. Unorganised Money Market

III. Foreign exchange Market – One of the most developed markets across the world, the
foreign exchange market, deals with the requirements related to multi-currency. The
transfer of funds in this market takes place based on the foreign currency rate.

IV. Credit Market – A market where short-term and long-term loans are granted to
individuals or Organisations by various banks and Financial and Non-Financial Institutions
is called Credit Market

DR. PRIYANKA RANA, ASSOCIATE PROFESSOR, IIMTU 3

CONCLUSION - The Indian financial system is complicated for the structural presentation of the
policies and regulations that are generally ideal for engaging the concept of personal and commercial
investments. The financial system in India is versatile and every component has sub-components that
critically handle all kinds of economic involvement of deposit and withdrawal. The financial system of
India comprises both investors’ and service users’ involvement so the betterment of the service for
service users could be initiated. The prime characteristics of the Indian financial system compromise
the monopoly of finance and provide a brief aspect related to the capital market.

MONETARY POLICY & FISCAL POLICY - Monetary policy refers to central bank activities that are
directed toward influencing the quantity of money and credit in an economy. By contrast, fiscal policy
refers to the government's decisions about taxation and spending. Both monetary and fiscal policies
are used to regulate economic activity over time.

Monetary policy and fiscal policy are two different tools that have an impact on the economic activity
of a country.

➢ Monetary policies are formed and managed by the central banks of a country and such a policy
is concerned with the management of money supply and interest rates in an economy.
➢ Fiscal policy is related to the way a government is managing the aspects of spending and
taxation. It is the government’s way of stabilising the economy and helping in the growth of
the economy.
➢ Governments can modify fiscal policy by bringing in measures and changes in tax rates to
control the fiscal deficit of the economy.
➢ Monetary policy and fiscal policy are crucial criteria that decide the fate of the economic status
of a nation. Both are important to maintaining equilibrium in the economy.
➢ Monetary policy, created by the Federal Reserve, has the power to control the economy by
contriving the money input and rates of interest. It plays a vital role in achieving
macroeconomic policy and is mainly managed by the Central Bank.
➢ On the other hand, fiscal policy was created to gain a specific goal using targeted tax income
and spending. Government legislation is the main factor that determines fiscal policy.

Monetary Policy - Monetary policy acts as a macroeconomic policy that is under the control of the
Central Bank. The Central Bank controls money input in the economy, impacting interest rates. This
interest rate is directly related to gaining different macroscopic goals.

These goals include inflation, consumption as well as growth and liquidity. Hence, monetary policy
plays a vital role in maintaining economic growth.

Money supply in the economy and rate of interest change are two critical parameters that affect
monetary policy. Different policy tools that affect the economy are:

• Discount rate,
• Reserve requirement,
• Open market operations, and
• Interest on reserves

DR. PRIYANKA RANA, ASSOCIATE PROFESSOR, IIMTU 4

Monetary policy stimulates people and firms to invest in various economic activities. Therefore, it has
an indirect impact on a country’s economy. As there is very less political interference in monetary
policy, it can be acted upon independently.

The main risk here is that if monetary policy becomes loose, it can inversely increase the money supply
and inordinately impacts inflation. It functions on the flow of money in the economy and credit
control. If we closely observe, monetary policy is highly complex.

Fiscal Policy - British economist John Maynard Keynes (1883-1946) gave the concept of fiscal policy.
He stated that the government is responsible for maintaining the business circle and regulating the
economic product.

According to Keynesian economics, aggregate demand is a key factor in handling the production and
development of the economy. Customers’ spending, different spending during investment, the total
expenditure of the government as well as total export value combine and form aggregate demand.

In fiscal policy, government revenue collection and expenditure are used to affect the country’s
economic condition. This policy includes the aggregate supply of economic consumption and
employment. This also affects economic growth. There is a remarkable impact of changing
government spending and tax rates observed in fiscal policy. The government determines the fiscal
policy, which shows the direct effect on the economic condition of the country.

Two crucial policy tools that affect fiscal policy are:

• Taxes, and
• Public spending

The credit for a great impact on the economy goes to the tax and spending policies of the federal
government. It gives an idea about the money spent by one individual.

Two important types of fiscal policy:

• Expansionary Fiscal Policy: In this policy, public expenditure increases, whereas the
government decreases taxes.
• Contractionary Fiscal Policy: Here, public spending decreases with an increase in taxes by the
government.

In fiscal policy, the political influence is very high, affecting the equilibrium of economics. This solid
political dimension directly changes the tax rates.

Below are certain points of difference between monetary and fiscal policy -

MONETARY POLICY FISCAL POLICY

Definition

It is a financial tool that is used by the central banks It is a financial tool that is used by the
in regulating the flow of money and the interest central government in managing tax
rates in an economy revenues and policies related to

DR. PRIYANKA RANA, ASSOCIATE PROFESSOR, IIMTU 5

 expenditure for the benefit of the
economy

Managed By

Central Bank of an economy Ministry of Finance of an economy

Measures

It measures the interest rates applicable for lending It measures the capital expenditure and
money in the economy taxes of an economy

Focus Area

Stability of an economy Growth of an economy

Impact on Exchange rates

Exchange rates improve when there is higher It has no impact on the exchange rates
interest rates

Targets

Monetary policy targets inflation in an economy Fiscal policy does not have any specific
target

Impact

Monetary policy has an impact on borrowing in an Fiscal policy has an impact on the budget
economy deficit

PRIMARY & SECONDARY FINANCIAL MARKETS - Capital markets are those markets where the
trading of assets such as bonds, equity and securities take place. Capital markets deal with financial
instruments that are having a lock-in period of more than one year.

There are two types of capital markets, namely - Primary market & Secondary market.
DR. PRIYANKA RANA, ASSOCIATE PROFESSOR, IIMTU 6
Primary Market: Meaning
A primary market is a marketplace where corporations imbibe a fresh issue of shares for being
contributed by the public for soliciting capital to meet their necessary long-term funds like extending
the current trade or buying a unique entity. It plays a motivational part in the mobilisation of savings
in the economy. The primary market is where securities are created. In the primary market, companies
sell new stocks and bonds to the public for the first time, such as with an initial public offering (IPO).

Multiple types of issues made by the establishment are – Offers for sale, public issues, issues of Indian
Depository Receipt (IDR), bonus Issues, right issues, etc.

Secondary Market: Meaning

A secondary market is a prototype of the capital market where debentures, current shares, options,
bonds, treasury bills, commercial papers, etc., of the enterprises, are patronised amongst the
investors. the secondary market is where those securities are traded by investors.

The secondary market can be an auction business where the business of bonds functions through a
dealer market or the stock exchange, usually called over-the-counter.

PRIMARY MARKET VS SECONDARY MARKET

i. Securities that are issued in a market are referred to as the primary market. When the
company gets listed on an exchange and its stocks are then traded among investors, it is called
the secondary market.
ii. The primary market is also known as a ‘new issue market’ and the secondary market is known
as an ‘after issue market.’ Depending upon the demand and supply of the securities traded
the prices in the secondary market vary. But the prices in the primary market are fixed.
iii. In the primary market, investors have an option to purchase the shares directly from the
company, whereas in the secondary market, the investors buy and sell the securities among
themselves.
iv. Investment bankers do the selling in a primary market. In the secondary market, the broker
acts as an intermediary while the trading is done.
v. In the primary market, the company stands to gain from the sale of a security. While in the
secondary market, investors stand to gain any sort of capital appreciation from the securities.
vi. The securities in the primary market can only be sold once, while in the secondary market sale
and purchase is a continuous process.
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 vii. The amount that is received from the securities becomes capital for a company whereas; in
the case of the secondary market, the same reflects the income for investors.

The two financial markets -- primary market and the secondary market, play a major role in the
mobilization of money and help develop the economy. Countries with robust financial markets make
it easier for companies to access funds and grow faster.

The process to buy equity in the secondary market is simple. The following procedure is followed while
buying or selling shares in the secondary market:

1. Open Demat Account with a depository participant (DP) like IIFL.

2. Open a trading account with a broker.
3. Link your bank account with a Demat account and Trading Account.
4. The broker buys or sells the shares by executing orders on the electronic terminal.
5. A contract note is issued by the broker detailing the value of the shares purchased plus his
brokerage cost.
6. The broker collects shares via the settlement process (T+1) and makes payments on the behalf
of the investor.
7. Order gets executed on the final settlement date (T+2).

CONCLUSION
The basic difference between the primary and secondary markets lies in the type of companies and
investors. Companies looking for long-term investments for an IPO which is a function of the primary
markets, while companies that look for short-term capital use the secondary market.

PRIMARY MARKET SECONDARY MARKET

Definition

A primary market is a marketplace where A secondary market is a prototype of the capital

corporations imbibe a fresh issue of shares for market where debentures, current shares,
being contributed by the public for soliciting options, bonds, treasury bills, commercial
capital to meet their necessary long-term papers, etc., of the enterprises, are patronised
funds like extending the current trade or amongst the investors.
buying a unique entity.

Also known as

New issue market (NIM) Aftermarket

Purchasing type

DR. PRIYANKA RANA, ASSOCIATE PROFESSOR, IIMTU 8

 Direct purchase Indirect purchase

Parties to buying and selling

Buying and selling take place between the Buying and selling take place between the
company and the investors. investors.

To whom it provides financing

It provides financing to existing companies for It does not provide any kind of financing.
facilitating growth and expansion.

Intermediaries involved

Underwriters Brokers

Price levels

Remain fixed Price level varies with variations in demand and

supply

NEED & FUNCTIONS OF REGULATORY INSTITUTIONS – The Indian economy is growing with a robust
financial system and functionality. The stringent regulations are one of the reasons for such elevation
in the economic platform. The categorized bodies hold variable responsibilities for financial activities.
The regulatory bodies in the Indian system keep an eye-check on the proper functioning and report
any financial scam. For this, the bodies regulate various laws and regulations that the citizen must
follow as part of the economic system. Also, the regulatory bodies empower the economic system
with various schemes and offers which ensure fruitful outcomes.

Important Regulatory Bodies:

The Indian economic system has variable bodies which regulate the financial platform with separate
and valuable rules. With distinctive rules, these regulatory bodies in India function at the variable
platform of national and state-level organizations.

The Indian regulation system works with four central pillars of the financial system. These four
regulatory bodies maintain the financial systems and look after all the finance-related activities.

These are independent governmental bodies established by the government in order to set standards
in a specific field of activity, or operations and then enforce those standards. Regulatory agencies may
or may not function outside direct executive supervision.

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The main functions of the regulatory body are typically identified as follows:

• Regulations and guides

• Review and assessment
• Licensing
• Inspection
• Corrective actions
• Enforcement

A regulatory body also called a regulatory agency is a public authority or a government agency that is
accountable for exercising autonomous authority over some area of human activity in a regulatory or
supervisory capacity.

It is established by a legislative act to set standards in a specific field of activity, or operations, in the
private sector of the economy and to then implement those standards. Regulatory interventions
function outside executive observation.

Because the regulations that they adopt have the force of law, part of these agencies’ function is
essentially legislative; but because they may also conduct hearings and pass judgments concerning
adherence to their regulations, they also exercise a judicial function often performed before a quasi-
judicial official called an administrative law judge, who is not part of the court system.

Some independent regulatory agencies perform investigations or audits, and some are authorised to
fine important parties and order certain measures.

The notion of the regulatory agency was initiated in the USA, and it has been basically an American
establishment. The first agency was Interstate Commerce Commission (ICC), established by Congress
in 1887 to control the railroads.

It was stopped in 1996 but long served as the model of such an agency. Initially, the ICC was to serve
only as an advisory body to Congress and the courts, but it was soon granted these powers itself.
Furthermore, an independent commission could be unbiased and nonpartisan, a necessity for
impartial regulation. The ICC was the first step taken to control industries instead of taking each on a
case-by-case basis, as had been previously done.

The proclamation of governmental control in other industries led to the formation of many other
regulatory agencies modelled upon the ICC, chief among these being the Federal Trade Commission
(FTC, 1914), Federal Communications Commission (FCC, 1934), and Securities and Exchange
Commission (SEC, 1934). Additionally, regulatory powers were convened upon the ordinary executive
departments.

The functions of the FTC illustrate those of regulatory agencies in general. It supervises the packaging,
labelling, and advertising of consumer goods.

It grants licenses to those interested in export business. It also regulates the collection and circulation
of credit information. Regulatory agencies use a commission system of administration, and their terms
of office are fixed and often very long.

In all nations outside the USA, the role of regulatory agencies is taken by the regular administrative
departments of government and, in the case of utilities and public transportation, often by means of
state ownership.

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Regulatory agencies are generally a part of the executive branch of the government, or they have
statutory authority to execute their functions with oversight from the legislative branch. Their actions
are generally open to legal review. Regulatory authorities are usually established to implement
standards and safety or to oversee the use of public goods and regulate business.

Important Regulatory bodies are as under

1. Advertising Standards Council of India

2. Competition Commission of India
3. Biodiversity Authority of India
4. Press Council of India
5. Directorate General of Civil Aviation
6. Forward Markets Commission
7. Inland Waterways Authority of India
8. Insurance Regulatory and Development Authority
9. Reserve Bank of India
10. Securities and Exchange Board of India
11. Telecom Disputes Settlement and Appellate Tribunal
12. Telecom Regulatory Authority of India
13. The Food Safety and Standards Authority of India (FSSAI)
14. Central pollution control board
15. Financial Stability and Development Council
16. Medical Council of India
17. Pension Fund Regulatory and Development Authority

Issues with Regulatory Bodies in India - Populist pressure: In India political populism often
overtakes the economic agenda. This casts a shadow on regulation. There are constant interferences
in the functioning of regulatory bodies by the ruling political parties.

Eg, Interventions of government in the RBI functioning

1. Selection of non- experts: The selection of non-experts to lead the regulatory bodies may
bring lack of efficiency in the functioning of such bodies. Recently, this issue was raised when
the former Finance secretary was appointed as RBI chairman.
2. Inefficient review mechanism: The review mechanism of the functioning of the regulatory
bodies under the aegis of parliamentary committees is not very robust.

Recommendations made by Regulatory Authorities are rarely implemented.

Presence of many regulatory bodies causes overlapping of powers. For example:

➢ Environment- Central Pollution Control Board (CPCB) and National Green Tribunal (NGT).
➢ Controversy between SEBI and IRDAI over Unit Linked Insurance Policy.
➢ Education sector- All India Council for Technical Education (AICTE) and University Grants
Commission (UGC).

Several bodies set up the regulatory framework of the Indian financial system. They are all there to
ensure parity and responsibility among participants in that particular sub-sector. Every regulator is
instrumental in making sure that the interests of the investors and all other parties are not
compromised and that there is fairness in the financial system of India.

DR. PRIYANKA RANA, ASSOCIATE PROFESSOR, IIMTU 11

Financial Regulators in India:
1. SEBI: The market regulator in the Indian capital market is the Securities and Exchange Board
of India (SEBI).
2. IRDAI: The Insurance Regulatory and Development Authority (IRDA) does the same for the
insurance sector.
3. RBI: Reserve Bank of India (RBI) conducts the country’s monetary policy.
4. PFRDA: Pension Funds Regulatory and Development Authority (PFRDA) regulates pensions.
5. MCA: Ministry of Corporate Affairs (MCA) regulates the corporate sector.
6. AMFI: Association of Mutual Funds in India (AMFI).
7. RBI: Reserve Bank of India.

RBI (RESERVE BANK OF INDIA) - The central bank of India established the RBI bank in 1935. The RBI
regulates all the monetary functions and policies which act effectively in the Indian market. The RBI
has a governor under which all the officers regulate the financial market and monetary funding.

The RBI’s primary responsibility is to ensure price stability in the economy and control credit flow in
the various sectors of the economy. Commercial banks and the non-banking financial sector are most
affected by the RBI’s pronouncements since they are at the forefront of lending credit. The RBI is
the money market and the banking regulator in India.

Its functions include:

1. Printing and circulating currency throughout the country.

2. Maintaining banking sector reserves by setting reserve ratios.
3. Inspect bank financial statements to keep an eye on any stresses in the financial sector.
4. Regulating payments and settlements as well as their infrastructure.
5. Instrumental in deciding interest rates and maintaining inflation rates in the country.
6. Managing the country’s foreign exchange (FX) reserves.
7. Regulating and controlling interest rates, which affects money market liquidity.
8. RBI bank issues the license to all the active banks in India. It has a bank policy according to
which each bank body should function and follow the regulation.
9. Citizens have their financial accounts in banks. RBI holds the power to manage and check the
financial account of the bank. RBI regulates the statement, fund transactions, and all the other
details.
10. RBI balances the accurate amount of currency supply and regulates it.

SEBI (SECURITIES AND EXCHANGE BOARD OF INDIA) - It is a vital part of regulatory bodies in
India. The growing IPO market in the country is how SEBI became the regulatory body of the Indian
capital market. The SEBI holds the responsibility to maintain the balance in the stock exchange market
of India. SEBI incorporated the charge under the SEBI ACT1992. Established in 1992, SEBI was a
response to increasing malpractices in the capital markets that eroded investors’ confidence in the
market back then. As a statutory body, its functions include protective as well as regulatory ones.
There are many exciting and informative functions of SEBI. According to it, the body regulates the
stock market of India.

Protective functions: To protect investors and other participants by preventing insider trading, price
rigging, and other malfeasances. SEBI regulates the stock market and its trading with all the adjacent

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aspects in the Indian bank’s regulatory body. These functions include investment protection with
interest and the prevention of insider trading techniques. The protective functions of SEBI have the
charge to spread awareness against any deception among investment traders.

Development functions: The SEBI develops the platform of the Indian stock market by promoting the
growth aspects of investment securities methodologies. Presently, the department empowers
investors’ knowledge to attract foreign investment for economic growth. The SEBI also runs various
training programs for investment development and motivates innovation and research.

Regulation: To implement codes of conduct and guidelines for the various market participants;
auditing various exchanges, registering brokers, and investment bankers; deciding on the various fees
and fines.

Its functions include:

1. SEBI has the power to supervise the stock exchanges’ functioning.

2. It regulates the business of exchanges.
3. It has complete access to the exchanges’ financial records and the companies listed on the
exchange.
4. It oversees the listing and delisting process of companies from any exchange in the country.
5. It can take disciplinary action, including fines and penalties for malpractices.
6. It also promotes investor education.
7. It undertakes inspections and conducts audits and inquiries when it spots any wrongdoing.
8. SEBI can access all the transaction information from the exchange markets.
9. It has the power to reform the laws relative to the functioning of the stock exchange.
10. Intermediaries’ regulation.
11. SEBI can analyse the case for any malpractice and fraud report.

IRDA (THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY) - Set up in 1999, the
IRDA regulates the insurance industry and protects the interests of insurance policyholders. Since the
insurance sector is a constantly changing scene, IRDA advisories are critical for insurance companies
to keep up with changes in rules and regulations.

The IRDA has strict control over insurance rates, beyond which no insurer can go.

The IRDA specifies the qualifications and training required for insurance agents and other
intermediaries, which then must be followed by the insurer. It can levy fees and modify them as well,
as per the IRDA Act. It regulates and controls premium rates and terms and conditions that insurers
are allowed to provide. Any benefit provided by an insurer must be ratified by the IRDA. This regulator
also provides the critical function of grievance redressal in an industry where claims can be disputed
endlessly.

The IRDAI functions to regulate the functionality of insurance schemes and policyholder activities.
Insurance companies are bound to follow the rules under the RBI and function accordingly.

Its functions include:

1. IRDAI grants the license the insurance companies. It holds the power to cancel and renew the
license for functioning.
2. It is one of the bodies among regulatory bodies in India which investigates insurance claims
and charge severe punishments.

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3. IRDAI protects the interest of the policyholders with specific laws.

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