Indian Financial System Solved Question Paper 2021 Pdf [Gauahti University B.Com 5th Sem]


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Gauhati University Indian Financial System Solved Question paper 2021

Gauahti University Indian Financial System Solved Question Paper 2021 as per CBCS Pettern 


2021 (Held in 2022)

COMMERCE (Honours Elective)

Paper: COM-HE-5066 (Indian Financial System)

Full Marks: 80

Time: Three hours

The figures in the margin indicate full marks for the questions.

1. Choose the most appropriate answer from the choices given against each:                     1x10=10

(1)       “All banks are financial institutions but all financial institutions are not banks.” The statement is

(a)       True.

(b)       False.

(2)       Which of the following is not a component of financial system?

(a)       Financial institutions.

(b)       Financial instruments.

(c)        Financial services.

(d)       Financial structures and organisations.

(3)       Which of the following is not a money market instrument?

(a)       Option.

(b)       Repo.

(c)        CP.

(d)       CD.

(4)       Money market deals with

(a)       Short-term fund.

(b)       Long-term fund.

(c)        Medium-term fund.

(d)       None of the above.

(5)       Which of the following is not an NBFI?

(a)       SBI.

(b)       LICI.

(c)        UTI.

(d)       IFCI.

(6)       RBI was established in the year

(a)       1949.

(b)       1935.

(c)        1934.

(d)       None of the above.

(7)       SEBI primarily regulates which of the following?

(a)       Banking Sector.

(b)       Capital market operation.

(c)        Money market.

(d)       None of the above.

(8)       “Financial service implies the transfer of fund from surplus sector to deficit sector of the economy.” The statement is

(a)       True.

(b)       False.

(9)       Merchant banking is a

(a)       Fee-based service.

(b)       Fund-based service.

(c)        Both fee and fund-based services.

(d)       None of the above.

(10)   Write the full form of PFRDA.

Ans:- The full form of PFRDA is "Pension Fund Regulatory and Development Authority."

2. Answer the following questions in about 50 words each:           2x5=10

(a)       Give the meaning of financial system.

Ans:- The financial system refers to a network of institutions, markets, and intermediaries that facilitate the flow of funds and financial resources within an economy, including banks, stock exchanges, insurance companies, and regulatory bodies.

(b)       State two distinguishing features of Indian money market.

Ans:- Two distinguishing features of the Indian money market are its segmentation into the call money market and the term money market, and the presence of a wide range of participants, including the Reserve Bank of India, commercial banks, non-banking financial companies, and mutual funds.

(c)        Define scheduled bank.

Ans:- A scheduled bank in India is one that is included in the Second Schedule of the Reserve Bank of India Act, 1934. These banks adhere to specific regulations and enjoy certain privileges, including access to central bank facilities, which distinguishes them from non-scheduled banks.

(d)       What is factoring?

Ans:- Factoring is a financial service where a company sells its accounts receivable (outstanding invoices) to a third-party financial institution called a factor at a discount. This allows the company to receive immediate cash for its unpaid invoices, improving cash flow and reducing credit risk.

(e)       State any two investor protection measures initiated by SEBI.

Ans:- The Securities and Exchange Board of India (SEBI) has initiated two investor protection measures: First, the implementation of Know Your Customer (KYC) norms to verify the identity of investors, and second, the creation of Investor Protection Fund (IPF) to compensate investors in case of losses resulting from fraudulent activities in the securities market.

3. Answer any four of the following questions in about 200 words each:                 5x4=20

(a)       Explain various segments of Indian financial system.

Ans:- The Indian financial system is a complex structure comprising various segments that facilitate the flow of funds and financial instruments in the economy. These segments can be broadly categorized into the following:

1. Banking Sector: The banking sector includes commercial banks, cooperative banks, and regional rural banks. These institutions mobilize deposits from the public and provide loans and other financial services. The Reserve Bank of India (RBI) is the central regulatory authority for banks in India.

2. Capital Market: The capital market is divided into two segments: the primary market and the secondary market. The primary market deals with the issuance of new securities, like stocks and bonds, allowing companies to raise capital. The secondary market involves the buying and selling of previously issued securities, providing liquidity to investors.

3. Money Market: The money market consists of short-term debt instruments with maturities typically less than one year. It includes instruments like treasury bills, commercial paper, and certificates of deposit. The money market serves as a platform for short-term borrowing and lending.

4. Insurance Sector: The insurance sector includes life insurance and general insurance companies. These companies provide various types of insurance coverage to individuals and businesses, mitigating risks and providing financial security.

5. Stock Exchanges: Stock exchanges like the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) are vital components of the capital market. They facilitate the trading of equities and other securities.

6. Non-Banking Financial Companies (NBFCs): NBFCs are financial intermediaries that provide a range of financial services, such as loans, investments, and wealth management, but do not have a banking license.

(b)       On what grounds, money market is different from capital market? Explain.

Ans:- Money Market vs. Capital Market:

1. Maturity of Instruments: Money market deals with short-term financial instruments with maturities of less than one year, while capital market deals with long-term securities with maturities exceeding one year.

2. Purpose: The primary purpose of the money market is to facilitate short-term borrowing and lending of funds, meeting liquidity needs. In contrast, the capital market enables long-term investment and capital formation.

3. Participants: Money market participants are typically banks, financial institutions, and government entities, while the capital market involves a broader range of participants, including corporations and individual investors.

4. Risk Profile: Money market instruments are considered less risky compared to capital market securities, as they have shorter maturities and lower price volatility.

5. Regulatory Authority: The Reserve Bank of India (RBI) regulates the money market, while the Securities and Exchange Board of India (SEBI) oversees the capital market.

(c)        Define mutual fund and state its advantages.

Ans:- Mutual Fund: A mutual fund is a financial intermediary that pools money from multiple investors and invests it in a diversified portfolio of stocks, bonds, or other securities. Each investor in the fund owns shares that represent their proportionate ownership of the underlying assets.

Advantages of Mutual Funds:

1. Diversification: Mutual funds offer diversification by investing in a variety of securities, reducing the risk associated with individual investments.

2. Professional Management: Experienced fund managers make investment decisions, aiming to generate returns for investors.

3. Liquidity: Mutual fund shares can be easily bought or sold, providing liquidity to investors.

4. Affordability: Mutual funds allow small investors to access diversified portfolios that might be otherwise unaffordable.

5. Transparency: Mutual funds provide regular updates on holdings, performance, and costs, enhancing transparency for investors.

6. Tax Efficiency: Many mutual funds offer tax benefits, such as tax-saving schemes (ELSS) and tax-free bonds.

7. Convenience: Mutual funds offer options for systematic investment plans (SIPs) and systematic withdrawal plans (SWPs) for convenient investing and withdrawals.

8. Risk Reduction: Through diversification and professional management, mutual funds aim to reduce investment risks.

(d)       State the basic features of financial services.

Ans:-  State the basic features of financial services:

Financial services encompass a wide range of activities and offerings that help individuals and organizations manage their financial resources. The basic features of financial services include:

1. Intermediation: Financial institutions, such as banks and investment firms, act as intermediaries between those who have excess funds (savers and investors) and those who need capital (borrowers and businesses). This intermediation role facilitates the efficient allocation of funds in the economy.

2. Risk Management: Financial services provide various tools and products for risk management, including insurance, derivatives, and hedging strategies. These services help individuals and businesses protect themselves against unforeseen financial losses.

3. Investment and Savings: Financial services offer a platform for individuals to invest and save their money. This can involve services like savings accounts, mutual funds, and brokerage accounts, allowing people to grow their wealth over time.

4. Payment and Settlement: Facilitating payment transactions and settlement processes is a crucial function of financial services. Payment services, including credit/debit cards, electronic funds transfer, and mobile wallets, make everyday transactions convenient.

5. Capital Formation: Financial services play a pivotal role in raising capital for businesses. Through methods like initial public offerings (IPOs) and debt issuance, companies can access the capital markets to fund their expansion and development.

6. Information and Advice: Financial institutions and professionals provide financial advice, market research, and analysis to help clients make informed decisions about their investments, savings, and financial planning.

7. Regulatory Framework: Financial services are subject to regulation to protect consumers, maintain market stability, and prevent fraud. Regulatory bodies, like the Securities and Exchange Commission (SEC) in the United States, oversee financial markets and institutions.

(e)       Explain the regulatory role of SEBI in Indian securities market.

Ans:- Explain the regulatory role of SEBI in the Indian securities market:

The Securities and Exchange Board of India (SEBI) is the primary regulatory authority for the securities market in India. Its regulatory role includes the following key aspects:

1. Investor Protection: SEBI's foremost responsibility is to safeguard the interests of investors in the Indian securities market. It does so by enforcing rules and regulations that promote transparency, fairness, and integrity in the market. SEBI ensures that investors receive accurate information about securities and that they are not subject to fraudulent or unfair practices.

2. Market Regulation: SEBI regulates stock exchanges, clearinghouses, and depositories to ensure smooth and efficient trading in the securities market. It formulates and enforces rules and guidelines for market operations, including listing requirements, trading mechanisms, and disclosure norms.

3. Issuer Compliance: SEBI monitors and regulates companies and issuers to ensure they adhere to disclosure norms and corporate governance standards. It reviews the documents related to initial public offerings (IPOs) and other securities offerings to protect the interests of investors.

4. Intermediary Oversight: SEBI oversees intermediaries such as brokers, mutual funds, and investment advisors. It establishes rules for their conduct, qualifications, and registration, promoting fair and ethical practices within the industry.

5. Market Surveillance: SEBI conducts market surveillance to detect and prevent market manipulation and insider trading. It has the authority to investigate and penalize those involved in such activities.

6. Regulatory Framework: SEBI continuously updates and refines the regulatory framework to keep pace with changing market dynamics. It introduces new regulations and amends existing ones to adapt to emerging trends and challenges.

7. Investor Education: SEBI promotes investor education and awareness to empower investors with the knowledge needed to make informed decisions.

SEBI's regulatory role is critical in maintaining the integrity and stability of the Indian securities market and in fostering investor confidence.

(f)         “Stock exchange is considered as the economic barometer of a country.” Justify the statement.

Ans:- "Stock exchange is considered as the economic barometer of a country." Justify the statement:

The statement that a stock exchange is considered the economic barometer of a country holds merit for several reasons:

1. Reflects Economic Health: Stock exchanges, such as the New York Stock Exchange (NYSE) in the United States or the Bombay Stock Exchange (BSE) in India, are key indicators of a nation's economic health. The performance of stock indices, like the S&P 500 or the Sensex, can provide insights into the overall economic conditions.

2. Market Sentiment: Stock prices are influenced by investor sentiment, which is, in turn, influenced by economic conditions. Bull markets often coincide with periods of economic growth, while bear markets can be associated with economic downturns. The stock market's movements reflect investor perceptions of the economy's prospects.

3. Business Performance: Companies listed on a stock exchange are typically large, established firms. Their financial performance and profitability are closely tied to the broader economic environment. Positive corporate earnings reports can indicate a robust economy, while declining profits may signal economic challenges.

4. Capital Allocation: A thriving stock market attracts investments from individuals and institutions. It serves as a source of capital for businesses, enabling them to grow and expand. This, in turn, contributes to economic development and job creation.

5. Foreign Investment: The performance of a country's stock market can influence foreign investment decisions. A strong and stable stock market can attract foreign capital, benefiting the economy.

6. Policy and Regulation: Government policies and regulatory changes can have a significant impact on the stock market. Investors often look to the stock market's response to government decisions as an indicator of economic stability.

7. Liquidity and Financing:  Stock markets provide a source of liquidity for investors and companies. A liquid stock market allows investors to quickly buy or sell assets, contributing to efficient capital allocation and economic stability.

While a stock exchange is not the sole indicator of a country's economic health and should be considered alongside other economic metrics, it remains a crucial barometer due to its responsiveness to economic shifts, investment implications, and its role in reflecting investor sentiment and business performance.

4. Answer the following questions:           10x4=40

(a)  Discuss the important functions of financial system.                   10

Ans:-  The Important Functions of Financial System:

The financial system of a country plays a crucial role in the overall economic development and stability. It encompasses a wide range of institutions, markets, and intermediaries that facilitate the flow of funds and financial resources within an economy. Here are the important functions of a financial system:

1. Resource Allocation: The financial system helps in the efficient allocation of financial resources to various sectors of the economy. It channels savings from households and businesses to productive investments, such as funding new businesses or infrastructure projects.

2. Intermediation: Financial institutions, like banks, act as intermediaries between savers and borrowers. They accept deposits from savers and lend these funds to borrowers, facilitating the flow of money and credit in the economy.

3. Risk Management: The financial system provides tools and instruments for managing and mitigating financial risks. This includes insurance products, derivatives, and various hedging mechanisms, which help individuals and businesses protect themselves from unexpected events.

4. Payment System: Financial systems include payment systems that allow for the smooth and secure transfer of money and facilitate everyday transactions. This includes electronic funds transfers, checks, credit cards, and digital wallets.

5. Price Discovery: Financial markets determine the prices of financial assets, including stocks, bonds, and commodities. These prices provide valuable information about the health and prospects of companies and industries, aiding investors and businesses in making informed decisions.

6. Liquidity Provision: Financial institutions and markets provide liquidity to participants. This liquidity allows investors to buy and sell assets quickly, ensuring the smooth functioning of the financial system.

7. Capital Formation: The financial system encourages savings and investment, which in turn fosters capital formation. Capital formation is crucial for long-term economic growth as it leads to the creation of productive assets and infrastructure.

8. Economic Stability: A well-developed financial system can contribute to economic stability by absorbing shocks and spreading risks. It provides tools for managing financial crises and reducing the systemic impact of such crises.

9. Monetary Policy Transmission: Central banks use the financial system to implement monetary policy. Through mechanisms like interest rates and open market operations, central banks influence the money supply and control inflation.

10. **Financial Inclusion**: The financial system aims to ensure that a broad segment of the population has access to financial services. Financial inclusion is critical for reducing poverty and promoting economic development.


“All well-development financial system is the basis for the development of the economy of a country.” – Critically examine the statement.  10

Ans:- Critically examine the statement:

The statement that a well-developed financial system is the basis for the development of an economy is generally true. Here's a critical examination of the statement:


1. Resource Mobilization: A robust financial system mobilizes savings and channels them into productive investments. This capital allocation is essential for economic growth, as it funds business expansion, infrastructure development, and innovation.

2. Risk Management: Financial systems offer tools and instruments for managing financial risks. This encourages investment and entrepreneurship by providing a safety net against unforeseen events.

3. Economic Stability: A well-developed financial system contributes to economic stability by absorbing shocks and facilitating crisis management. This stability is a prerequisite for long-term economic development.

4. Monetary Policy Transmission: Central banks use the financial system to implement monetary policy, which is essential for controlling inflation and ensuring macroeconomic stability.

5. Innovation and Efficiency: Developed financial systems often encourage financial innovation, leading to the creation of new products and services that can drive economic growth and efficiency.


1. Inequality: In some cases, a financial system can exacerbate income inequality. Access to financial services and opportunities is not evenly distributed, and this can lead to a concentration of wealth in the hands of a few.

2. Risk of Crises: While financial systems can mitigate risks, they can also be a source of instability. The 2008 financial crisis is a stark example of how a poorly regulated financial system can lead to economic downturns.

3. Financialization: Excessive financialization, where the financial sector becomes disproportionately large compared to the real economy, can lead to speculation and bubbles, rather than productive investment.

4. Limited Access: In developing economies, a well-developed financial system may not be accessible to a large portion of the population, limiting the benefits of economic development to a select few.

In conclusion, while a well-developed financial system can certainly be a catalyst for economic development, it is not a silver bullet. Its effectiveness depends on how it is structured, regulated, and the degree to which it promotes inclusion and sustainable growth. Careful attention to these factors is crucial for realizing the potential benefits of a strong financial system while mitigating its drawbacks.

(b) Give the classification of financial market. Also explain about various submarkets of money market.    4+6=10

Ans:-  Classification of Financial Markets:

Financial markets can be classified into two broad categories: Money Market and Capital Market.

Money Market:

The money market deals with short-term financial instruments and transactions. It provides a platform for the borrowing and lending of funds for short durations, typically one year or less. Money market instruments are highly liquid and considered low-risk. Submarkets within the money market include:

a. Treasury Bills (T-Bills): These are short-term government debt securities with maturities ranging from a few days to one year. They are considered one of the safest investments.

b. Commercial Paper: Commercial paper is a short-term, unsecured debt instrument issued by corporations to raise funds for their working capital needs.

c. Certificate of Deposit (CD): CDs are time deposits offered by banks with fixed maturities and often offer higher interest rates compared to regular savings accounts.

d. Repurchase Agreements (Repo): Repos involve the sale and repurchase of securities, often U.S. Treasury securities, with an agreement to repurchase at a specific price and date. They are commonly used in the money market to manage short-term liquidity.

e. Banker's Acceptance: These are short-term promissory notes issued by a company and guaranteed by a bank. They are often used in international trade transactions.

f. Money Market Mutual Funds: These funds invest in money market instruments and provide investors with a convenient way to access money market investments.


What is primary market? Explain the functions of primary market.             2+8=10

Ans:- Primary Market:

The primary market is the part of the capital market where new securities are issued to the public for the first time. It is the initial point of contact between the company and potential investors. The primary market serves several important functions:

Functions of the Primary Market:

a. Capital Raising: Companies use the primary market to raise funds for various purposes, such as expansion, research and development, debt repayment, and working capital. They do this by issuing new shares or debt securities.

b. Pricing of Securities: The primary market determines the initial price at which new securities are offered to investors. This price is usually set through processes like an initial public offering (IPO) or a rights issue.

c. Investor Access: The primary market provides individual and institutional investors with the opportunity to invest in new securities and become shareholders or bondholders of the issuing company.

d. Transparency: Companies issuing new securities must disclose detailed information about their financial health, operations, and prospects in a prospectus. This transparency helps investors make informed decisions.

e. Economic Growth: The primary market supports economic growth by facilitating capital formation and investment in new businesses, which, in turn, leads to job creation and economic development.

f. Regulatory Compliance: Companies issuing securities in the primary market must adhere to regulatory requirements, ensuring that the process is fair and transparent for all participants.

(c)  Define bank. Discuss the structures of Indian banking system.               2+8=10

Ans:- Bank: A bank is a financial institution that plays a pivotal role in the economy by offering various financial services and facilitating the flow of money and credit within an economy. Banks act as intermediaries between those who have surplus funds (depositors) and those who require funds (borrowers), thus promoting savings, investment, and economic growth. Banks provide a wide range of services, including accepting deposits, granting loans, facilitating electronic fund transfers, offering investment services, and serving as custodians for valuable assets. The key functions of a bank include:

1. Accepting Deposits: Banks collect funds from individuals, businesses, and institutions in the form of deposits. These deposits can be in the form of savings accounts, current accounts, fixed deposits, or recurring deposits.

2. Lending Money: Banks provide loans to individuals and businesses for various purposes, such as buying homes, starting or expanding businesses, and funding education. They charge interest on these loans, which is a primary source of revenue.

3. Payment and Settlement: Banks offer payment services that enable customers to transfer money within the country or internationally. This includes services like wire transfers, electronic funds transfers, and check clearing.

4. Safekeeping of Funds: Banks act as safekeepers of deposits, ensuring the security and accessibility of funds. They provide services like safe deposit boxes for storing valuable assets.

5. Investment Services: Banks provide investment opportunities through products like mutual funds, fixed deposits, and stock trading services.

6. Currency Exchange: Banks facilitate the exchange of one currency for another, essential for international trade and travel.

Indian Banking System:

The Indian banking system is a complex structure comprising various types of banks, both public and private, operating within the country. The key components of the Indian banking system include:

1. Scheduled Commercial Banks: These are banks that are listed in the Second Schedule of the Reserve Bank of India (RBI) Act, 1934. Scheduled commercial banks can be further categorized into public sector banks, private sector banks, and foreign banks.

2. Cooperative Banks: These are banks organized and operated by cooperative societies. Cooperative banks are further divided into urban cooperative banks and rural cooperative banks.

3. Regional Rural Banks (RRBs): RRBs are financial institutions created to promote rural and agricultural development. They are sponsored by scheduled commercial banks.

4. Development Banks: These banks are established with a specific focus on financing developmental projects. Examples include the National Bank for Agriculture and Rural Development (NABARD) and the Small Industries Development Bank of India (SIDBI).

5. Non-Banking Financial Companies (NBFCs): While not traditional banks, NBFCs provide financial services similar to banks, including lending and investment services.


Elaborately discuss the regulatory and developmental roles played by RBI.             10

Ans:- Regulatory and Developmental Roles of RBI (Reserve Bank of India):

The Reserve Bank of India (RBI) plays a crucial role in regulating and developing the Indian banking system. It functions as the central bank of India, and its roles can be divided into two main categories:

Regulatory Roles:

1. Monetary Policy: The RBI formulates and implements monetary policy to control inflation, stabilize prices, and promote economic growth. It uses tools like interest rates, open market operations, and reserve ratios to achieve these objectives.

2. Bank Supervision and Regulation: RBI is responsible for supervising and regulating banks and other financial institutions in India to ensure their stability and soundness. It sets capital adequacy norms, conducts inspections, and enforces prudential regulations.

3. Currency Issuance: RBI is the sole authority responsible for issuing and managing the Indian rupee. It ensures the security and availability of currency notes and coins.

4. Foreign Exchange Management: RBI manages the country's foreign exchange reserves and formulates policies related to foreign exchange transactions. It aims to maintain stability in the foreign exchange market.

Developmental Roles:

1. Financial Inclusion: RBI promotes financial inclusion by encouraging banks to reach underserved and unbanked areas. It sets targets for opening branches and offering services in rural and semi-urban regions.

2. Payment Systems: RBI facilitates the development of efficient payment and settlement systems, including the National Electronic Funds Transfer (NEFT) and the Real-Time Gross Settlement (RTGS) systems.

3. Banking Technology and Innovation: RBI encourages the adoption of modern banking technology and promotes innovation in the banking sector, such as mobile banking, digital payments, and fintech partnerships.

4. Credit Control: RBI plays a role in controlling credit availability in the economy by setting guidelines for priority sector lending and regulating lending rates through instruments like the Marginal Cost of Funds Based Lending Rate (MCLR).

(d) Give the meaning of leasing with example. State the differences between operating lease and financial lease. 3+7=10

Ans:- Leasing: Leasing is a financial arrangement where one party, known as the lessor, allows another party, known as the lessee, to use an asset (such as a vehicle, equipment, or property) for a specified period in exchange for periodic payments. Leasing is a common alternative to purchasing assets outright and is widely used in various industries. There are two primary types of leases: operating leases and financial leases.

Operating Lease:

1. Operating leases are short-term and often cancellable leases, typically lasting less than the economic life of the leased asset.

2. These leases are more like rental agreements, and the lessor retains ownership of the asset.

3. The lessee does not usually record the leased asset on their balance sheet, and lease payments are treated as operating expenses.

4. Operating leases are often used for assets that have a limited useful life and are frequently updated, like office space or equipment.

Financial Lease (Capital Lease):

1. Financial leases are long-term leases that typically cover the majority of the asset's useful life.

2. In a financial lease, the lessee is considered the owner of the asset for accounting purposes, and it is recorded on the lessee's balance sheet as an asset and liability.

3. The lessee often has an option to purchase the asset at the end of the lease term at a specified price.

4. Lease payments for financial leases are divided into both interest and principal components.

Differences between Operating Lease and Financial Lease:

1. Ownership: In an operating lease, the lessor retains ownership of the asset, while in a financial lease, the lessee is typically treated as the owner for accounting purposes.

2. Lease Term: Operating leases are usually short-term, while financial leases are long-term, covering the majority of the asset's useful life.

3. Balance Sheet Treatment: In financial leases, the leased asset and corresponding liability are recorded on the lessee's balance sheet. In operating leases, the asset remains on the lessor's balance sheet.

4. Tax Benefits: Financial leases often offer more favorable tax benefits to the lessee compared to operating leases.

IRDA (Insurance Regulatory and Development Authority) Objectives and Functions:

Objectives of IRDA:

1. Protection of Policyholders: IRDA's primary objective is to protect the interests of policyholders by ensuring fair treatment and financial stability of insurance companies.

2. Promotion of Competition: IRDA aims to promote competition in the insurance sector to provide consumers with a variety of insurance products at competitive prices.

3. Regulation and Supervision: It regulates and supervises the insurance industry to maintain the stability of the financial system and protect the interests of policyholders.

4. Development of the Insurance Market: IRDA works to promote the development of the insurance market, encouraging innovation and expansion of insurance services.

Functions of IRDA:

1. Licensing and Regulation: IRDA grants licenses to insurance companies and regulates their operations, including their solvency and financial stability.

2. Policyholder Protection: It ensures that policyholders' interests are safeguarded by setting guidelines for the fair treatment of policyholders and claims settlement.

3. Product Approval: IRDA approves insurance products, ensuring they meet the required standards and are in the best interest of policyholders.

4. Market Conduct Regulation: It monitors and regulates the market conduct of insurance companies to prevent unfair practices.

5. Promotion of Microinsurance and Rural Insurance: IRDA promotes the expansion of insurance coverage to underserved and rural areas.

6. Dispute Resolution: It provides a platform for the resolution of disputes between policyholders and insurance companies.

7. Research and Development: IRDA conducts research and development activities to promote the growth and development of the insurance industry in India.

These objectives and functions of IRDA are aimed at creating a fair, stable, and competitive insurance market that benefits both policyholders and the insurance industry.


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