Reserve Bank of India
Central Bank

It is an apex institution of the monetary and banking structure of a
 country. A central bank has the author...
RBI was set up in 1935 under the RBI act of
1934.
It was nationalized in 1949.

Quantitative Methods

•Bank rate policy
•O...
Quantitative Method
 Bank rate policy

 It is also known as discount rate. Bank
 rate extend credit to commercial bank. It...
Open Market Operations
• It refers broadly to the purchase and
  sale by central bank of variety of
  assets such as forei...
Variable reserve ratio

• CRR ( Cash reserve ratio) All
  commercial bank required to keep a
  certain portion of their de...
Qualitative control

These are selective credit
control designed specially to
curb excess flow of credit in
selected area ...
Margin requirement

• If aperson A wants a loan of Rs
  10,000 to stock rice& margin
  requirement is 10% then A will get
...
Regulation of consumer
credit
• During inflation condition the
  RBI may ask the commercial
  bank not to grant loans and
...
S.L.R.
: Commercial Bank are required to maintain
with themselves a certain proportion of their total deposit
in near mone...
Credit Rationing

• The central bank can fix
  maximum limit or ceiling on
  loans and advances.
Direct Actions

• Refuse rediscounting of bills of
  commercial banks
• To refuse loans
• To impose monetary penalties
• A...
Commercial banks are the oldest, biggest and fastest growing financial
intermediaries They are important depositories of p...
Origin of commercial bank can be traced back in vedic
period( use of hundi)

Middle of 19th century          Indigenous ba...
Growth and Structure of commercial bank
    Importance of Indian commercial Banks in National Economy



    Year         ...
Indian Banking system

                                   RBI


                                                        No...
Apart from usual function, foreign bank are now playing a special
  role in shaping the attitude ,perceptions and policies...
Liabilities of Banks
              Deposits

Demand deposit         Current deposit   Call deposit   Term deposit



Facto...
Banking Assets



•   Cash in hand and balance with RBI
•   Asset with banking system
•   Investment in government and oth...
Banking Innovations
Retail Banking
Bank as authorized dealer
Customer service
Lead Bank scheme
Service area approach
Micro...
Rbi
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Rbi

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Rbi

  1. 1. Reserve Bank of India
  2. 2. Central Bank It is an apex institution of the monetary and banking structure of a country. A central bank has the authority to regulate and control the banking business and monetary system of a country. Its main function are •Bank of issue •Financial advisor to the state( banker also) •Banker to bank •Custodian of foreign exchange reserves •Lender of the last resort •Bank of central clearance and transfer •Controller of credit
  3. 3. RBI was set up in 1935 under the RBI act of 1934. It was nationalized in 1949. Quantitative Methods •Bank rate policy •Open market operation •Variable reserve ratio Qualitative Method • Margin requirement •Credit Rationing •Regulation of consumer credit •Direct action
  4. 4. Quantitative Method Bank rate policy It is also known as discount rate. Bank rate extend credit to commercial bank. It will be more proper to say rediscount the–Bills of exchange. As bank rate increases credit creation by banks reduces and as it reduces the credit creation by bank increases.
  5. 5. Open Market Operations • It refers broadly to the purchase and sale by central bank of variety of assets such as foreign exchange, gold, government securities and even companies shares • Securities are brought results in increase in money supply and when securities are sold the money supply decreases.
  6. 6. Variable reserve ratio • CRR ( Cash reserve ratio) All commercial bank required to keep a certain portion of their demand and time liabilities. • As percentage of CRR increases credit creation by banks reduces and percentage of CRR reduces the credit creation by bank increases.
  7. 7. Qualitative control These are selective credit control designed specially to curb excess flow of credit in selected area without affecting other type of credit.
  8. 8. Margin requirement • If aperson A wants a loan of Rs 10,000 to stock rice& margin requirement is 10% then A will get only Rs 9000/. If MR is 25%,A will get Rs7500/. Thus high margin not only restricts the credit creating power of banks but also restricts unnecessary hoarding of essential commodities.
  9. 9. Regulation of consumer credit • During inflation condition the RBI may ask the commercial bank not to grant loans and advances to the consumers. During depression limited credit policy is adopted.
  10. 10. S.L.R. : Commercial Bank are required to maintain with themselves a certain proportion of their total deposit in near money form. SLR may be increased or decreased As when required.
  11. 11. Credit Rationing • The central bank can fix maximum limit or ceiling on loans and advances.
  12. 12. Direct Actions • Refuse rediscounting of bills of commercial banks • To refuse loans • To impose monetary penalties • Alter the condition of rediscounting • To disallow banks to conduct banking business
  13. 13. Commercial banks are the oldest, biggest and fastest growing financial intermediaries They are important depositories of public saving and most important disburser of finance. Management of Reserve Creation of Credit
  14. 14. Origin of commercial bank can be traced back in vedic period( use of hundi) Middle of 19th century Indigenous banking First bank Bank of Hindustan (1770) Later we had Presidency Bank in Calcutta Bombay & Madras 1919 Imperial Bank of India
  15. 15. Growth and Structure of commercial bank Importance of Indian commercial Banks in National Economy Year Deposit/N.I. Deposit / Share in Saving financial asset 1951-56 10 16.6 1960-61 13 14.2 1975-76 24 41.8 1980-81 35.9 45.8 73.8 1990-91 48.1 31.8 65.5 1994-95 52 40.2 64.8 1995-96 44.82 28.2 64.7 2001-02 61.5 37.83 72.2
  16. 16. Indian Banking system RBI Non Scheduled Bank Schedule Banks State Coop. Commercial Central Coop. bank Bank Bank and Primary Credit Banks Societies Indian Foreign Commercial Bank PSU Pvt. Sector Bank Banks SBI & its Other nationalized Regional rural subsidaries bank bank
  17. 17. Apart from usual function, foreign bank are now playing a special role in shaping the attitude ,perceptions and policies of foreign government, corporate, and other clients towards India (c)Structuring and syndicating project finance for crucial sector (d)Advising and introducing overseas companies in joint venture and collaboration with Indian Companies ©Helping to bring the FII and Indian companies (d) Managing and syndicating the euro issue of debt and equity (e) Introducing new technology in data management and information system The Indian Banks include 27 PSU banks ,196 RRB,30 private sector bank and 44 Foreign banks in 2001-02
  18. 18. Liabilities of Banks Deposits Demand deposit Current deposit Call deposit Term deposit Factors affecting composition of Bank deposit (c)Increase in national income (d)Expansion of banking facilities (e)Increase in banking habits (f) Increase in the relative rate of return on deposit (g)Increase in deficit financing (h)Increase in bank credit (i) Inflow of deposit from NRI’s (j) Growth in substitutes
  19. 19. Banking Assets • Cash in hand and balance with RBI • Asset with banking system • Investment in government and other approved securities • Bank credit among these assets, and is influence by the RBI policy,quantitatively, bank credit and investment in government securities.
  20. 20. Banking Innovations Retail Banking Bank as authorized dealer Customer service Lead Bank scheme Service area approach Micro finance Consortium approach Credit cards Local Area Banks

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