Presentation on the Roles of Rbi and the steps taken by Dr. Raghuram Rajan to control Inflation.I think it will be helpful for you guys.

1. ROLE OF RBI AND
RAGHURAM RAJAN
PRESENTED BY -
ANUPRAS PANDA (14202223)
PINAKI RANJAN BHAKAT
(14202238)
ANTAREEP MAHAPATRA (14202231)
A ANIL DORA (14202241)
KUMAR NISHIKANT (14202240)
RATIKA MEHROTRA (14202216)

2. CONTENTS
 RBI
HISTORY
 ROLE OF RBI
MONETARY POLICY
ISSUER OF CURRENCY
FOREX
MARKET OPERATION
 DR. RAGHURAM RAJAN STEPS
 VISION AND AGENDA OF RBI

3. RBI IN A NUTSHELL
HEADQUARTERS - SHAHID BHAGAT SINGH MARG
MUMBAI , MAHARASTRA
ESTABLISHED - APRIL 1, 1935 ( 79 YEARS AGO )
GOVERNOR - DR.RAGHURAM RAJAN
CURRENCY - INDIAN RUPEE
RESERVES - US$311.86 BILLION
BANK RATE - 9.00%
CRR - 4.00%
WEBSITE - HTTP://WWW.RBI.ORG.IN/

4. HISTORY
 FOUNDED ON 1 APRIL 1935
 “ THE PROBLEM OF THE RUPEE – ITS ORIGIN
AND ITS SOLUTION . “
 HILTON – YOUNG COMMISION
 RBI SEAL
 CENTRAL OFFICE IN 1937

5. ROLE OF RBI
 MONETARY POLICY
 ISSUER OF CURRENCY
 FOREIGN EXCHANGE
 MARKET OPERATION

6. MONETARY POLICY & ITS OBJECTIVE
THE POLICY STATEMENT, TRADITIONALLY
ANNOUNCED TWICE A YEAR, THROUGH
WHICH THE RESERVE BANK OF INDIA SEEKS
TO ENSURE PRICE STABILITY FOR THE
ECONOMY.

7. INSTRUMENTS OF MONETARY POLICY
• 1. BANK RATE
• 2. CASH RESERVE RATIO
• 3. STATUTORY LIQUIDITY RATIO
• 4. REPO RATE
• 5. REVERSE REPO RATE

8. CRR VS SLR
HIGH CRR AND SLR
SUPPOSE TOTAL DEPOSIT DEPOSITED IN (BY YOU AND ME) STATE BANK OF INDIA =RS.100
Total Deposit Rs.100
CRR: 15%SBI has to park this much
amount of total deposit in RBI, without
getting any interest.
-15
SLR: 38%SBI has to park this much
amount of total deposit, in
Government securities / treasury
bonds. SBI earns around 7.5% interest
rate on this investment.
-38
Money left with SBI 100-15-38=Rs.47
LOW CRR AND SLR
Total Deposit Rs.100
CRR: 4.75%SBI has to park this much
amount of total deposit in RBI, without
getting any interest.
-4.75
SLR: 23%SBI has to park this much
amount of total deposit, in
Government securities / treasury
bonds. SBI earns around 7.5% interest
rate on this investment.
-23
Money left with SBI 100-4.75-23=Rs.72.25

9. ISSUER OF CURRENCY
 DEFINITION OF ISSUER CURRENCY:
THE BANK ISSUES AND EXCHANGES OR DESTROYES CURRENCY NOTES AND COINS
THAT ARE NOT FIT FOR CIRCULATION.
 OBJECTIVES:
A. PUBLIC ADEQUATE SUPS OF RBI ARE TO ISSUE BANKNOTES
B. MANAGEMENT OF CURRENCY
C. CREDIT SYSTEM OF THE COUNTRY TO UTILIZE IT IN IT’S BEST ADVANTAGE

10. CURRENCY MANAGEMENT AND CONSTRAINTS
• CURRENCY MANAGEMENT HAS A GREAT DEGREE OF
SIGNIFICANCE FOR CENTRAL BANKS
• BECAUSE OF THE SHEER SIZE OF OUR POPULATION
AND THE QUANTUM OF BANKNOTES INDIA HAS
EMERGED AS ONE OF THE BIGGEST CONSUMERS OF
THE INGREDIENTS THAT GO INTO PRODUCTION OF
BANKNOTES IN THE WORLD.
• THERE HAS BEEN A STEADY INCREASE IN THE
DEMAND FOR BANKNOTES AND COINS OVER THE
YEARS, DESPITE THE INCREASED USE OF
TECHNOLOGY-DRIVEN NON-CASH MODES OF
PAYMENTS/E-CURRENCY/VIRTUAL CURRENCY-BIT
COINS, ETC…
Year
2012/
13
India USA UK EURO
ZONE
AUST
RALIA
CANA
DA
No of
Pieces
(In
Billion
)
76.47 34.5 2.99 15.8n 1.15 2.00
Value
in
home
curren
cy
terms
1246
8
billio
n
1198
billion
58billi
on
933.7
billion
53.6
billion
63.7
billion
COMPARATIVE PICTURE OF THE NOTES

11. CURRENCY MANAGEMENT IN INDIA-MAJOR CHALLENGES
THE SHEER SIZE OF POPULATION AND THE QUANTUM OF BANKNOTES REQUIRED. AS ON
DECEMBER 31, 2013, THERE IS A NETWORK OF 110,520 COMMERCIAL BANK BRANCHES AND
137,080 ATMS. THE NOTES IN CIRCULATION AS ON THE SAME DATE WAS APPROXIMATELY 76.47
BILLION PIECES VALUED AT ` 12, 468 BILLON WHILE THE COINS IN CIRCULATION WERE
AROUND 89.91 BILLION PIECES VALUED AT ` 168 BILLION.
ENSURING ADEQUATE SUPPLY OF ALL DENOMINATIONS
DISTRIBUTION AND SECURITY IN TRANSIT /STORAGE

12. DENOMINATIONS
NOTE
DENOMINATION
 THE INDIAN CURRENCY IS
CALLED INDIAN RUPEE AND
IT’S SUB-DENOMINATION IS
CALLED PAISA.
 PROVISIONS OF RBI ACT
1934, NOTES >10000/- CAN’T
BE ISSUED.
 COINS UP TO 50 PAISA ARE
CALLED SMALL COINS AND
COINS OF RUPEES ONE AND
ABOVE ARE CALLED RUPEE
COINS
 PROVISIONS OF COINAGE
ACT 1906, COINS CAN BE
ISSUED UP TO THE
DENOMINATION OF RS.1000.
COIN
DENOMINATION

13. FOREX EXCHANGE RESERVES
IN INDIA, FOREIGN EXCHANGE RESERVES ARE
DEFINED AS EXTERNAL ASSETS WHICH ARE
READILY AVAILABLE TO & CONTROLLED BY RBI
FOR MEETING BOP FINANCING NEEDS.
• THE TERM FOREIGN EXCHANGE IMPLIES TWO THINGS
• A) FOREIGN CURRENCY AND
• B) EXCHANGE RATE

14. FOREX RESERVES CONTD….
AT PRESENT, RESERVES INCLUDE
FOREIGN CURRENCY ASSETS OF THE
RBI, GOLD & RESERVE TRANCHE
POSITION IN THE IMF WHICH
CONFORMS TO INTERNATIONAL BEST
PRACTICES AS SUGGESTED IN THE IMF
MANUAL.
SINCE 1993, THE RBI HAS INTERVENED
IN THE FOREX MARKET TO KEEP AN
ORDERLY MOVEMENT IN THE VALUE OF
THE RUPEE. THIS APPROACH KEPT THE
ECONOMY ON TRACK, BUT NOW THE
VOLATILITY IN RUPEE MOVEMENT
THREATENS ITS DERAILMENT.

15. EVOLUTION OF RESERVE MANAGEMENT POLICY
IN INDIA
 RBI ACT,1934 PRESCRIBES AND FACILITATES RBI TO ACT AS THE CUSTODIAN OF
FOREIGN RESERVES AND MANAGE THEM WITH DEFINED OBJECTIVES.
 BOP CRISES 1991-
INCREASED BORROWINGS FROM FOREIGN SOURCES IN THE LATE 1980’S WHICH
HELPED FUEL ECONOMIC GROWTH .AUG 1990 IRAQ INVADED KUWAIT AND THE
PRICE OF OIL SOON DOUBLE.
 THE ‘RESERVES’ REFER TO BOTH FOREIGN RESERVES IN THE FORM OF GOLD
ASSETS, FOREIGN SECURITIES AND DOMESTIC RESERVES IN THE FORM OF BANK
RESERVES.

16. ADVANTAGES OF FOREX MARKET
 IT’S ALREADY THE WORLD’S LARGEST MARKET AND IT’S STILL GROWING QUICKLY.
 IT MAKES EXTENSIVE USE OF INFORMATION TECHNOLOGY MAKING IT AVAILABLE
TO EVERYONE.
 TRADERS CAN PROFIT FROM BOTH STRONG AND WEAK ECONOMICS
 TRADERS CAN PLACE VERY SHORT TERM ORDERS WHICH ARE PROHIBITED IN SOME
OTHER MARKETS.
 THE MARKET IS NOT REGULATED.
 BROKERAGE COMMISSIONS ARE VERY LOW OR NON-EXISTENT.
 THE MARKET IS OPEN 24 HOURS A DAY DURING WEEKDAYS.

17. MARKET OPERATION OF RBI
 OPEN MARKET OPERATION
 LIQUIDITY ADJUSTMENT FACILITY ACTION
 MARKET STABILIZATION SCHEME
 DOMESTIC FOREIGN EXCHANGE MARKET OPERATION
 MONEY MARKET

18. OPEN MARKET OPERATION & DOMESTIC FOREIGN
EXCHANGE
OMO DOMESTIC FOREIGN EXCHANGE
 CONDUCTED WITHIN THE RBI FRAMEWORK OF EXCHANGE
RATE OF MANAGEMENT POLICY
 ALLOW UNDERLINE DEMAND AND SUPPLY CONDITIONS.
 DETERMINE THE EXCHANGE RATE MOVEMENT OVER A PERIOD
 GUIDED BY THE NEED TO REDUCE EXCESS VOLATILITY
 PREVENT THE EMERGENCE OF DESTABILISING SPECULATIVE
ACTIVITY.
 HELP MAINTAIN ADEQUATE LEVEL OF RESERVE AND DEVELOP
AN ORDERLY FOREIGN EXCHANGE MARKET

19. LIQUIDITY ADJUSTMENT FACILITY ACTION
 ALLOWS BANKS TO BORROW MONEY THROUGH REPURCHASE AGREEMENTS.
 IT IS USED TO AID BANKS IN ADJUSTING THE DAY TO DAY MISMATCHES IN LIQUIDITY.
 LAF CONSISTS OF REPO AND REVERSE REPO OPERATIONS.
MARKET STABILIZATION SCHEME
 ON THE RECOMMENDATIONS OF RBI ON FEBRUARY 23, 2004 MSS WAS INTRODUCED.
 THE SCHEME IS EFFECTIVE FROM APRIL 2004
OBJECTIVES :
THE GOVERNMENT WOULD ISSUE TREASURY BILLS AND/OR DATED SECURITIES UNDER MSS FOR ABSORBING
LIQUIDITY FROM THE SYSTEM.

20. MONEY MARKET
 INVOLVE BORROWING, LENDING, BUYING AND SELLING WITH ORIGINAL MATURITIES OF
ONE YEAR OR LESS.
 TRADING IN THE MONEY MARKETS IS DONE OVER THE COUNTER AND IS WHOLESALE.
INSTRUMENTS:
TREASURY BILLS, COMMERCIAL PAPER, BANKERS' ACCEPTANCES, DEPOSITS, CERTIFICATES OF
DEPOSIT, BILLS OF EXCHANGE, REPURCHASE AGREEMENTS, FEDERAL FUNDS, AND SHORT-LIVED
MORTGAGE, AND ASSET-BACKED SECURITIES.
FUNCTIONS OF THE MONEY MARKET
 FINANCING TRADE
 FINANCING INDUSTRY
 PROFITABLE INVESTMENT
 SELF-SUFFICIENCY OF COMMERCIAL BANK
 HELP TO CENTRAL BANK

21. THE FIVE PILLARS OF RAGHURAMRAJAN

22. REASONS WHY MARKETS ARE CHEERING DR. RAGHURAM
RAJAN
THE INDIAN RUPEE JUMPED OVER 2 PER CENT AND THE BSE SENSEX CLIMBED AROUND 550
POINTS, A DAY AFTER RAGHURAM RAJAN TOOK OVER AS THE GOVERNOR OF CENTRAL BANK.
HERE'S WHY MARKETS ARE REACTING POSITIVELY TO DR. RAJAN'S PLANS:
1. HOPE AT LAST
2. CAPITAL INFLOWS
3. BETTER COMMUNICATIONS
4. RUPEE INTERNATIONALIZATION
5. INCLUSIVE DEVELOPMENT
6. FINANCIAL INFRASTRUCTURE
7. HOUSEHOLDS

23. RBI VISION & AGENDA FOR 2014-15
THE RESERVE BANK INTENDS TO FURTHER IMPROVE THE FINANCIAL SECTOR THROUGH A SERIES
OF INITIATIVES THAT REST ON FIVE PILLARS.
 ITS WORK AGENDA INCLUDES WORKING WITH THE GOVERNMENT TO STRENGTHEN THE
MONETARY POLICY FRAMEWORK
 SEVERAL COMPLEMENTARY STEPS, LIKE REFINING PRIORITY SECTOR GUIDELINES AND KYC
(KNOW YOUR CUSTOMER) NORMS ARE ALSO UNDER CONSIDERATION
 BESIDES, ONGOING EFFORTS WILL REINFORCE THE REGULATORY AND SUPERVISORY REGIMES,
WITH A VIEW TO REDUCING DISTRESS IN FINANCIAL AND NON-FINANCIAL FIRMS
 THE RBI WILL INTRODUCE 1 BILLION PIECES OF RS 10 NOTES IN POLYMER/PLASTIC ON A FIELD
TRIAL BASIS.

24. CONCLUSION
• RESERVE BANK WAS ESTABLISHED IN 1935 WITH 100 MEMBER.
• NOW RBI HAS BEEN FULLY NATIONALIZED IN 1949.
• RBI UNDER ITS 23RD GOVERNOR DR. RAGHURAM RAJAN TAKING STEPS TO CURB THE ISSUES
LIKE INFLATION, CURRENT ACCOUNT DEFICIENT, GROWTH, MAINTAINING THE REVALUE OF
RUPEE.
• MORE IMPORTANT ON CORRUPTION RBI IS ALSO TAKING STEPS SUCH AS RETUNING OF ALL
NOTE UPTO 2005.