Regulatory and Ethical Framework
What the exam tests here
The statutory skeleton around BFSI plus conduct rules: which regulator, which Act, which reporting obligation, and what ethical behaviour looks like at a branch or desk.
Core rules and concepts
- RBI: RBI Act, 1934; Banking Regulation Act, 1949; Payment and Settlement Systems Act, 2007 for payment operators.
- SEBI (SEBI Act, 1992) for securities; IRDAI (Insurance Act, 1938 and IRDA Act, 1999) for insurance; PFRDA (PFRDA Act, 2013) for pensions.
- FSDC is chaired by the Union Finance Minister; its sub-committee is chaired by the RBI Governor.
- PMLA, 2002: reporting entities must file a Cash Transaction Report for cash transactions of ₹10 lakh or more (or a series), and a Suspicious Transaction Report where there is suspicion - the STR has no monetary threshold and is confidential.
- FATF sets global AML/CFT standards; FIU-IND receives reports.
- Ethics in practice: confidentiality of customer data, conflict-of-interest disclosure, no insider trading (SEBI PIT Regulations, 2015), no bribery under the Prevention of Corruption Act, 1988, and protected whistle-blowing.
Worked example
A current-account customer deposits ₹6 lakh in cash in the morning and ₹6 lakh in the afternoon. The total is ₹12 lakh. Reasoning: aggregate the day's cash receipts - ₹12 lakh crosses the ₹10 lakh CTR threshold, so a CTR must be filed with FIU-IND. If the source of funds looked suspicious, an STR would be filed as well, independent of the amount.
Traps that cost marks
- Saying FSDC is chaired by the RBI Governor.
- Applying a threshold to STRs.
- Naming SEBI as the regulator for insurers.
- Revealing to the customer that an STR has been filed - this is prohibited (tipping off).