Considering the volumes in this market, it was imperative that there had to be regulations governing this market. The RBI is the main regulator of this market and SEBI playing a second fiddle. Actually, the RBI has diverse roles to play in the debt market. It is the regulator, it is the issuer of securities in the market (it issues G - secs on behalf of Govt.), it has to manage the GoI's borrowing program, it has to check the volatility in the market through its open market operations and it determines the interest rate policy.

The RBI determines the guidelines as to how the commercial banks can raise money from the general public. It controls the credit extended by the banks through its policies on CRR, SLR, priority sector lending, asset liability management (ALM), its refinance rate and its open market operations (OMO). Its policies on CRR and SLR determine the extent of bank investments in G - secs, the amount of liquidity available in the system and have a profound effect on the interest rates prevalent in the economy. Its guidelines on deployment of surplus funds by banks determine the amount of money going to different sectors of the economy. Its guidelines on ALM determine the level of bank investment in various debt securities. Since the time, Indian economy has moved to market determined interest rates, the cutoff rate for G - secs auction, bank rate, repo rates, CRR and SLR set the benchmark for the interest rates in the economy. These set a floor rate for the interest rates in the economy. They form the basis for the entire yield curve. Also it monitors interest rates in the economy through its OMO.

The SEBI gets involved in the debt market when an entity raises money from the individual investors through public issue. As the volume of public debt issues raising money from individual investors is very small, SEBI plays a second fiddle to the RBI. It determines the guidelines for raising money through public issues like disclosures to be made, to disclose risks involved in the issue, terms and conditions of the issue etc. SEBI is also the main regulator for Mutual Funds (only Money Market Mutual Funds come under the purview of the RBI) and it also regulates the FII investment in the debt market.

Apart from these two main regulators, there are different regulators for specific investors. For example, the Central Provident Funds commissioner regulates the Provident Funds. The respective statutes of the LIC and GIC, under which they were established, regulate them.