project

1. Central BankingCentral Banking
ByBy
ITM E-MBA XIII-BITM E-MBA XIII-B
Manish Bhat (Roll No-77)Manish Bhat (Roll No-77)
Pawan Jadhav (Roll No-85)Pawan Jadhav (Roll No-85)
Sandeep Shirsekar (Roll No-93)Sandeep Shirsekar (Roll No-93)

2. Points coveredPoints covered
 Central bank- Meaning,Central bank- Meaning,
DefinitionsDefinitions
 Origin, History & StructureOrigin, History & Structure
 FunctionsFunctions
 Monetary policies & objectivesMonetary policies & objectives
 Qualitative & QuantitativeQualitative & Quantitative
PoliciesPolicies
 ConclusionConclusion

3. Central BankCentral Bank
““A central bank is a lender of last resort”A central bank is a lender of last resort”
-- Prof.Hawtry-- Prof.Hawtry
““It is a bank of banker”It is a bank of banker”
-- Samuelson-- Samuelson
““Bank which has monopoly over noteBank which has monopoly over note
issue”issue”
-- Vera Smith-- Vera Smith
““Central bank is the government’s bank”Central bank is the government’s bank”
-- Sayers-- Sayers

4. Central bankingCentral banking
““An institution charged with theAn institution charged with the
responsibility of managing theresponsibility of managing the
expansion and contraction of theexpansion and contraction of the
volume of money in the interest ofvolume of money in the interest of
general public welfare”general public welfare”
Prof.KentProf.Kent
““One which constitute the apex ofOne which constitute the apex of
the monetary and banking structurethe monetary and banking structure
of its country”of its country”
Prof.M.H.De KockProf.M.H.De Kock

5. RBI and its originRBI and its origin
Commenced Operations on 1Commenced Operations on 1stst
April 1935 as per The ReserveApril 1935 as per The Reserve
Bank of India Act, 1934 (II of 1934)Bank of India Act, 1934 (II of 1934)
and Nationalise on 1and Nationalise on 1stst
Jan 1949.Jan 1949.
 To regulate the issue of banknotesTo regulate the issue of banknotes
 To maintain reserves with a view toTo maintain reserves with a view to
securing monetary stability andsecuring monetary stability and
 To operate the credit and currencyTo operate the credit and currency
system of the country to itssystem of the country to its
advantage.advantage.

6. Structure of Banking in IndiaStructure of Banking in India
Reserve Bank
Commercial Bank Co-operative Bank
-Public Sector Bank -State Co-op bank
-Private Sector bank -Central Co-op Bank
-Regional Rural Bank -Primary Co-op Soc

7. Functional ChartFunctional Chart

8. Organisational StructureOrganisational Structure

9. Functions of RBIFunctions of RBI
 Bank of Note issueBank of Note issue
 The Government’s BankThe Government’s Bank
 Banker’s BankBanker’s Bank
 Custodian Foreign ExchangeCustodian Foreign Exchange
Reserves for countryReserves for country
 Lender of last resort and bank ofLender of last resort and bank of
rediscounting.rediscounting.
 Controller of creditController of credit

10. Monetary PolicyMonetary Policy
““Monetary policy is essentially aMonetary policy is essentially a
programme of actionprogramme of action
undertaken by central bank,undertaken by central bank,toto
control and regulate the supplycontrol and regulate the supply
of moneyof money with the public andwith the public and
flow of credit with a view offlow of credit with a view of
achieving predeterminedachieving predetermined
macroeconomic goals.”macroeconomic goals.”
-Macroeconomics-Theory & policy-D.N.Dwivedi-Tata Magraw Hill comp,-Macroeconomics-Theory & policy-D.N.Dwivedi-Tata Magraw Hill comp,

11. Instruments of MonetaryInstruments of Monetary
Policy (Economic variables)Policy (Economic variables)
 Weapons of Monetary controls
 Nuts & Bolts of Monetary policy
-- Samuelson & Nordhaus
 Quantitative credit control (General
credit control) – Control of quantity or
volume of money
 Qualitative credit control ( Selective
credit control) – Quality
/Purpose/Direction of credit control

12. Objectives of Credit ControlObjectives of Credit Control
 To stabilise internal price levelTo stabilise internal price level
 To stabilise the rate of foreignTo stabilise the rate of foreign
exchangeexchange
 To protect the outflow of goldTo protect the outflow of gold
 To control business cyclesTo control business cycles
 To meet business needsTo meet business needs
 To have growth & stabilityTo have growth & stability

13. Credit Control MeasuresCredit Control Measures
Quantitative Qualitative
-Bank Rate -Marginal Requirement
-Open Mkt. Operations -Rationing of Credit
-Variation in C R R -Cost. Credit Regulation
-S L R -Issue of Directives
-P L R -Moral Suasion
-Publicity
-Direct Action

14. TermsTerms
 CRR Cash Reserve Ratio is the percentage
of bank deposits (reserves and surplus)
which are statutorily parked with the RBI as
reserve.
 SLR Statutory Liquidity Ratio it is the
proportion of total deposits which banks are
required to maintained in liquid form of cash
reserve, gold and government bond in
addition to CRR to prevent commercial
banks from liquidating assets when CRR is
raised.

15. TermsTerms
 Prime Lending Rate (PLR) is that rate of
interest at which a bank lends to its best
customers.
 Repo Rate is the rate at which the RBI
buys government securities from the market
to infuse liquidity in the system
 Reverse Repo rate is the rate at which the
RBI absorbs excess bank funds by selling
government securities in the market.

16. As on date prevailing RatesAs on date prevailing Rates
of Quantitative Measuresof Quantitative Measures
 CRR- 8.50%CRR- 8.50%
 SLR – 25%SLR – 25%
 PLR – 12.75 -13.25%PLR – 12.75 -13.25%
Source- RBI websiteSource- RBI website

17. Cash Reserve Ratio and Interest RatesCash Reserve Ratio and Interest Rates
(per cent per annum)
Item / Week Ended 2007 2008
Jul. 13 Jul. 11
C R R (per cent)
S L R (per cent)
6.50
25.00
8.50
25.00
P L R (per cent) 12.75-13.25 12.75-13.25
(1) CRR & SLR relates to Scheduled Commercial
Banks (excluding Regional Rural Banks).
(2) Prime Lending Rate relates to five major Banks.
(3) Data cover 90-95 per cent of total transactions
reported by participants. Source- RBI website

18. Prime Lending Rates as on 9Prime Lending Rates as on 9thth
July 2008 for different loansJuly 2008 for different loans
Personal Loan 15.00% / 17.50%
Home Loan 11.00% / 11.50%
12.00% / 12.50%
Short Term Edu. Loan 13.00% /
Doctor Loan 14.00% /
Two Wheelers Loan 11.50% /
Car Loan 12.50% / 13.00%
13.50%
General Credit Card 16.00% / 17.00%
Source- RBI website

19. Credit Control MeasuresCredit Control Measures
Quantitative Qualitative
-Bank Rate -Marginal Requirement
-Open Mkt. Operations -Rationing of Credit
-Variation in C R R -Cost. Credit Regulation
-S L R -Issue of Directives
-P L R -Moral Suasion
-Publicity
-Direct Action

20. Difference BetweenDifference Between
Qualitative & Quantitative.Qualitative & Quantitative.
 QuantitativeQuantitative
 Total Volume orTotal Volume or
Quantity of MoneyQuantity of Money
 It controls creditIt controls credit
indirectlyindirectly
 Lenders are controlledLenders are controlled
not the borrowersnot the borrowers
 It is known as generalIt is known as general
credit controlcredit control
 Instruments used areInstruments used are
bank rate, open mkt.bank rate, open mkt.
oprt., CRR etcoprt., CRR etc
 QualitativeQualitative
 Quality or use orQuality or use or
purpose of creditpurpose of credit
 It controls creditIt controls credit
directlydirectly
 Lenders andLenders and
borrowers both areborrowers both are
influencedinfluenced
 It is known asIt is known as
selective credit controlselective credit control
 Instruments areInstruments are
variations in marg req,variations in marg req,
 Consumer credit regl,Consumer credit regl,
direct action etcdirect action etc

21. Difference between CentralDifference between Central
and Commercial Bankand Commercial Bank
 Central BankCentral Bank
 It is apex institution ofIt is apex institution of
monetary systemsmonetary systems
 It is owned byIt is owned by
governmentgovernment
 It is non profit org.It is non profit org.
 It is banker and agent toIt is banker and agent to
governmentgovernment
 It controls credit createdIt controls credit created
by commercial banksby commercial banks
 It has monopoly to noteIt has monopoly to note
issueissue
 It has no competitionIt has no competition
 There is only one centralThere is only one central
bank in economybank in economy
 Commercial BankCommercial Bank
 It is operating as perIt is operating as per
guideline of central bankguideline of central bank
 It owned by privateIt owned by private
sector or governmentsector or government
 It is a profit seeking org.It is a profit seeking org.
 It is banker and agent toIt is banker and agent to
publicpublic
 It creates creditIt creates credit
 It has no power to issueIt has no power to issue
creditcredit
 There is a competitionThere is a competition
among themselves.among themselves.
 Commercial banks areCommercial banks are
many in numbermany in number

22. Current FocusCurrent Focus
 Supervision of financial institutionsSupervision of financial institutions
 Consolidated accountingConsolidated accounting
 Legal issues in bank fraudsLegal issues in bank frauds
 Divergence in assessments of non-Divergence in assessments of non-
performing assets andperforming assets and
 Supervisory rating model for banks.Supervisory rating model for banks.
Source- RBI websiteSource- RBI website

23. ConclusionConclusion
 Central bank plays importantCentral bank plays important
role in achieving economicrole in achieving economic
growth of a developing country.growth of a developing country.
 It promotes economic growthIt promotes economic growth
with stability.with stability.
 It helps in attaining fullIt helps in attaining full
employment of resources, inemployment of resources, in
overcoming balance of paymentovercoming balance of payment
disequilibrium & in stabilizingdisequilibrium & in stabilizing
exchange rates.exchange rates.

24. BibliographyBibliography
 Website : Reserve bank ofWebsite : Reserve bank of
IndiaIndia
 Macro-economics Theory-Macro-economics Theory-
M.L.JhinganM.L.Jhingan,,1111thth
edition, Vrinda Publication pg 317-344edition, Vrinda Publication pg 317-344
 Macroeconomics- Theory &Macroeconomics- Theory &
Policy –Policy –D. N. DwivediD. N. Dwivedi,, Tata McGraw-HillTata McGraw-Hill
comp. pg 527-542comp. pg 527-542
 Economics –Economics – Naik & SwaminathanNaik & Swaminathan