1. Reserve Bank of India

2. The RBI was established by
passing "transfer of public
ownership Act" in Sep-1948 .
The bank was passed into the
hands of the Government of
India with effect from 1st
January 1949.

3. Prior to 1993, the supervision and
regulation of commercial banks was
handled by the Department of Banking
Operations & Development (DBOD). In
December 1993 the Department of
Supervision was carved out of the
DBOD with the objective of segregating
the supervisory role from the regulatory
functions of RBI.

4. FUNCTIONS OF RBI
The functions are classified
into three heads,viz.
A) Traditional functions
B) Promotional functions
and
C) Supervisory functions.

5. A) Traditional functions
1.Monopoly of currency notes issue
2.Banker to the Government(both the central and state)
3.Agent and advisor to the Government
4.Banker to the bankers
5.Acts as the clearing house of the country
6.Lender of the last resort
7.Custodian of the foreign exchange reserves
8.Maintaining the external value of domestic currency
9.Controller of forex and credit
10.Ensures the internal value of the currency
11.Publishes the Economic statistical data
12.Fight against economic crisis and ensures stability of India
n economy.

6. B) Promotional functions
1.Promotion of banking habit and expansion of
banking systems.
2.Provides refinance for export promotion
3.Expansion of the facilities for the provision of the
agricultural credit through NABARD
4.Extension of the facilities for the small scale
industries
5.Helping the Co-operative sectors.
6.Prescribe the minimum statutory requirement.
7.Innovating the new banking business
transactions.

7. C) Supervisory functions
1.Granting license to Banks.
2.Inspects and makes enquiry or determine position
in respect of matters under various sections of RBI
and Banking regulations
3.Implements Deposit insurance scheme
4.Periodical review of the work of the commercial
banks
5.Giving directives to commercial banks
6.Control the non-banking finance corporation
7.Ensuring the health of financial system through
on-site and off-site verification.
These are all the functions which are protective to
the Indian Economy, that is why RBI is considered
as the head of all banks.
regards

8. Some important aspects of RBI
Supervisory Process
The major instrument of supervision of the financial sector
is inspection. The inspection process focuses mainly on
aspects crucial to the bank’s financial soundness with a
recent shift in focus towards risk management. Areas
relating to internal control, credit management, overseas
branch operations, profitability, compliance with prudential
regulations, developmental aspects, proper valuation of
asset/ liability portfolio investment portfolio, and the bank’s
role in social lending are covered in the course of the
inspection. The Department undertakes statutory
inspections of banks on the basis of an annual programme,
which is co-terminus with the financial year for public sector
banks.

9. After the inspection report is released to the bank, followed by a
‘supervisory letter’ based on the inspection findings to the bank, the
concerns of the inspections are discussed with the CEO of the bank
and a Monitorable Action Plan is given to the bank for rectification of
those deficiencies. The Department submits a memorandum covering
supervisory concerns brought out by the inspection to the Board for
Financial Supervision (BFS). Specific corrective directions of the BFS
are conveyed to the banks concerned for immediate compliance. The
Memoranda submitted by the departments for supervisory scrutiny and
consideration of BFS generally cover matters relating to supervisory
strategy and operational supervision of individual banks, financial
institutions and non-banking financial companies as also industry-wide
issues and sectoral performance reviews.

10. Closer supervision on the asset quality and fixing responsibility on the
board and accountability on top management of banks has had a
perceptible impact on the Non Performing Assets (NPAs) of public
sector banks. The banks have shown a declining trend in terms of
percentage of NPAs to total advances during the last four years. The
percentage of gross NPAs to gross advances of public sector banks
declined from a high level of 19.45 at the end of March 1995 to 13.86
as on 31 March 2000. The net NPAs formed 8.07% of the net
advances as on 31st
March 2000.
The Capital to Risk-weighted Assets Ratio (CRAR) for banks initially
fixed at 8% was increased to 9% from March 2000. The position of
banks not achieving the prescribed CRAR level since 1995 has come
down from 42 banks (14 public sector) as on 31 March 1995 to 4 banks
(1 public sector) as on 31 March 2000 due to constant monitoring and
directions for improvement in this area at quarterly intervals.

11. Board for Financial Supervision: Constitution
The Committee on Financial System set up by the Government of India had
suggested that the supervisory functions of RBI should be separated from the
more traditional central banking functions and that a separate agency, which
could pay undivided attention to supervision, should be set up under the aegis
of RBI. A complete severance of supervision from central banking was not
considered necessary or desirable in the Indian context. So, based on this
recommendation, the first Board for Financial Supervision (BFS) was
constituted on November 16, 1994 by the Governor as a committee of the
Central Board of Directors of the Reserve Bank of India (RBI). It functions
under the RBI (BFS) Regulations, 1994 exclusively framed for the purpose in
consultation with the Government of India. The Board is chaired by the
Governor and is constituted by co-opting four non-official Directors from the
Central Board as Members for a term of two years. The Deputy Governors of
the Bank are ex-officio Members. One of the Deputy Governors is nominated
as Vice-Chairman.

12. Supervision serves as the Secretariat for the BFS.
Shri S P Talwar, Deputy Governor holding charge of the Bank's
regulation and supervision function has been the Vice-Chairman
of the BFS since its inception. Dr. Y. Venugopal Reddy and Shri
Jagdish Capoor, Deputy Governors, are other ex-officio Members
as on date. Shri Y H Malegam, Shri E A Reddy, Dr. S S Johl, and
Dr. (Ms) Amrita Patel, who were members on the Central Board of
Directors of the Reserve Bank, were the non-official members of
the first Board.
The Board has since been reconstituted for a term of two years in
consultation with the Central Board in its meeting held on 21
December 2000, with Dr. Ashok S. Ganguly and Shri K. Madhava
Rao nominated in the place of Dr. S. S. Johl and Shri E. A. Reddy,
who ceased to be members of the reconstituted

13. Central Board. Shri Y H Malegam and Dr. (Ms) Amrita
Patel have been nominated to continue as Members of the
reconstituted BFS. Executive Directors in-charge of
Department of Banking Operations & Development,
Department of Banking Supervision and Department of Non-
Banking Supervision participate in the BFS meetings by
invitation. In-charges of these departments are also to be in
attendance for the meetings.
The Chairman, Vice-Chairman and Members of the Board
jointly and severally exercise the powers of the Board. The
Board is at present required to meet ordinarily at least once
a month. Three Members, of whom one shall be Chairman
or the Vice-Chairman, form the quorum for the meeting.

14. Corporate Governance and Management
Guidance
The requirements of the corporate governance framework differ across
institutions because of the different ownership structures of the commercial
banks.
• Public Sector banks are largely owned by the Government. The majority
holding in State Bank of India is held by RBI and State Bank of India holds
majority shareholding in its seven associate banks. (These holdings are
gradually being divested).
• The old private sector banks have traditionally been owned and controlled
by communities, groups or regional interests.
• The new private sector banks are owned and managed by financial
institutions or major corporate though the shareholding pattern is
increasingly diversified with fresh issues of capital as part of start up
covenants.
• The foreign banks are in essence branches of overseas entities though a
Local Advisory Board provides general guidance.
• Even amongst financial institutions, there are both state owned and private
sector entities.

15. Transparency and Disclosure
RBI has always been committed to enhancing the
element of transparency and adequate disclosures in the
financial statements of banks. The formats of balance
sheet and profit & loss account have been prescribed in
the Banking Regulation Act, 1949, and banks have to
strictly comply with this. The accounts and balance
sheets are required to be duly audited by statutory
auditors (including branch auditors) appointed with the
approval of RBI. While international accounting
standards are broadly followed, specific valuation
standards have been prescribed in respect of
investments and foreign exchange positions.

16. Internal controls and housekeeping in banks
(i) Internal Control Systems
Reconciliation of inter-branch accounts
Reconciliation of inter-bank accounts
Reconciliation of accounts, and
Status of balancing of books of accounts
Reconciliation of clearing differences
(ii) Reconciliation of inter-branch accounts
(iii) Balancing of books
Presented by:
Ms. Megha Mathur

17. e-banking
E-Banking
E-banking and electronically providing financial services are
branches of electronic
commerce. A significant development has been achieved in
offering a variety of new and
innovative E-banking services to customers to-day which were
not thought of before.
Corporate Internet Banking (CIB)
It facilitates banking from your desk. At the click of a mouse,
we can access your
accounts at any branch of the bank and also keep track of your
accounts at its numerous
branches.

18. PHASES OF INTERNET
BANKING

19. How e-banking can ease your life:
Bill payment service
Each bank has tie-ups with various utility companies,
service providers and insurance companies, across the
country. You can facilitate payment of electricity and
telephone bills, mobile phone, credit card and
insurance premium bills.
To pay your bills, all you need to do is complete a
simple one-time registration for each biller. You can
also set up standing instructions online to pay your
recurring bills, automatically. One-time standing
instruction will ensure that you don't miss out on your
bill payments due to lack of time. Most interestingly,
the bank does not charge customers for online bill
payment.

20. Fund transfer
You can transfer any amount from one account to
another of the same or any another bank. Customers
can send money anywhere in India. Once you login
to your account, you need to mention the payees's
account number, his bank and the branch. The
transfer will take place in a day or so, whereas in a
traditional method, it takes about three working
days. ICICI Bank says that online bill payment
service and fund transfer facility have been their
most popular online services.

21. Credit card customers
Credit card users have a lot in store.
With Internet banking, customers can
not only pay their credit card bills online
but also get a loan on their cards. Not
just this, they can also apply for an
additional card, request a credit line
increase and God forbid if you lose
your credit card, you can report lost
card online.

22. Railway pass
This is something that would interest all
the aam janta. Indian Railways has tied
up with ICICI bank and you can now
make your railway pass for local trains
online. The pass will be delivered to
you at your doorstep. But the facility is
limited to Mumbai, Thane, Nashik,
Surat and Pune. The bank would just
charge Rs 10 + 12.24 per cent of
service tax.

23. Investing through Internet banking
Opening a fixed deposit account cannot get
easier than this. You can now open an FD
online through funds transfer. Online banking
can also be a great friend for lazy investors.
Now investors with interlinked demat account
and bank account can easily trade in the stock
market and the amount will be automatically
debited from their respective bank accounts
and the shares will be credited in their demat
account.

24. Recharging your prepaid phone
Now you no longer need to rush to the vendor
to recharge your prepaid phone, every time
your talk time runs out. Just top-up your
prepaid mobile cards by logging in to Internet
banking. By just selecting your operator's
name, entering your mobile number and the
amount for recharge, your phone is again back
in action within few minutes.

25. Shopping at your fingertips
Leading banks have tie ups with
various shopping websites. With a
range of all kind of products, you
can shop online and the payment is
also made conveniently through
your account. You can also buy
railway and air tickets through
Internet banking.

26. ATM Card
Sometimes called cash cards, they
allow the cardholder to withdraw
cash from an ATM machine after
entering a PIN that is specific to the
card. Some cards may only be
used in an ATM but most are
combination debit, ATM and
cheque guarantee cards.

27. DEBIT CARDS
Debit card is a multifaceted, powerpacked globally
accepted plastic debit card which enables one to
access ones account from anywhere. The ATM
debit card may have either the Visa or the
Mastercard logo embossed on it.
The ATM debit card is linked to an account from
where the fees or charges are deducted as the
transaction demands. The ATM debit card has
the name of the debit card holder embossed on
the debit card.

28. CREDIT CARD
• It is a card entitling its holder to buy goods and
services based on the holder's promise to pay
for these goods and services. The issuer of the
card grants a line of credit to the consumer (or
the user) from which the user can borrow money
for payment to a merchant or as a cash advance
to the user

29. Difference between Debit card &
Credit card.
• debit card = decrease in credit balance of bank
a/c of a account holder.
• credit card = increase in debit balance of bank
a/c of a account holder. these cards are used in
the same way, but in the case of debit card we
would have amount in the account and in the
case of credit card no need to maintain amount
in the account but we have to pay after bill
payment to the banker.

30. To use a debit card a person must have sufficient amount in
his/her account and shopping is limited to the amount avail in the
account, it cannot be exceeded. From debit card the amount is
transacted/debited at the very moment as and when it is utilized.
To use credit card one need not have to have money/amount in
his/her account. They are the special type of customers because
banks issued credit cards to them based on some attributions or
features. When the credit card is being swapped by the
shopkeeper, the amount does not get transacted at the very
moment infact it is being transacted approximately after 5 or 7
days

31. Electronic funds transfer or EFT
Refers to the computer-based systems used to perform
financial transactions electronically.
The term is used for a number of different concepts:
Cardholder-initiated transactions, where a cardholder
makes use of a payment card.
Direct deposit payroll payments for a business to its
employees.
Direct debit payments from customer to business, where
the transaction is initiated by the business with customer
permission.
Electronic bill payment in online banking, which may be
delivered by EFT or paper check.
Transactions involving of electronic money, possibly in a
private currency .
Wire transfer via an international banking network

32. Email Money Transfer (EMT)
It is a funds transfer service
between personal accounts at
participating Canadian
financial institutions. The provider
of this service is CertaPay, a
division of Acxsys Corporation. If
your bank is in Canada you will be
able to send the world's first,
interbank - based Interac Email
Money Transfers.