1. Chapter 2: Central Banking
Meaning
A central bank is a public institution that manages
the currency of a country or group of countries and
controls the money supply- literally, the amount of
money in circulation.
Nature
The Central Bank does not aim at profits but aims
at national welfare.
The Central Bank does not compete with the
member banks.
The Central Bank is generally free from political
influence.
2. Functions of Central Bank
Regulator of Currency
Banker and Advisor to the Government
Custodian of Commercial Banks
Custodian and Manager of Foreign Exchange
Reserves
Lender of the Last Resort
Controller of Credit
Transfer and Settlements
3. CREDIT CONTROL METHODS
Bank Rate or Discount Rate Policy
Open Market Operations
Variable Reserve Ratio
Selective Credit Controls
4. RBI AND ITS MONETARY POLICY
Monetary Policy of RBI
There are several direct and indirect monetary policy
instruments that help in implementing the monetary
policy in India.
Repo Rate
Reverse Repo Rate
Marginal Standing Facility (MSF)
Bank Rate Cash Reserve Ratio (CRR)
Statutory Liquidity Ratio (SLR )
Open Market Operations(OMO)
5. Role of RBI
Issuer of Currency
Monetary Authority
Manager of Foreign Exchange
Regulator and Supervisor of the Financial System
Regulator and Supervisor of Payment and
Settlement Systems
Related Functions
Developmental Role
6. BANKING SECTOR REFORMS
Reforms in the banking sector were introduced on the
basis of the recommendations of different
committees:
The first Narasimhan Committee (1991)
The Verma Committee (1996)
The Khan Committee (1997)
The Second Narasimhan Committee (1998).