2. Preamble
The Preamble of the Reserve Bank of India
describes the basic functions of the Reserve
Bank as:
“...to regulate the issue of Bank Notes and
keeping of reserves with a view to securing
monetary stability in India and generally to
operate the currency and credit system of
the country to its advantage.”
3. Background
Established under RBI Account of 1934
Started functioning from April 1, 1935
It was nationalized in January , 1, 1949
Share capital Rs.5.00 Cr of Rs.100.00
each
Government held nominal shares of
Rs.2.22 lac
At the time of Nationalization Govt. paid
Rs.118.58ps per share of Rs.10.00
4. objectives
The Objective of any Central Bank is-
to stabilize the monitory unit
It has monopoly of note issuing
It is not a profit center
It will not compete with the commercial
banks
It is a Bank of Issue
It is a Banker to the government
Custodians of Nations Credit
Controller of Credit
6. Central Board
The Reserve Bank's affairs are governed by a central board
of directors. The board is appointed by the Government of
India in keeping with the Reserve Bank of India Act.
Appointed/nominated for a period of four years
Constitution:
Official Directors
•Full-time : Governor and not more than four Deputy
Governors
Non-Official Directors
•Nominated by Government: ten Directors from
various fields and one government Official
•Others: four Directors - one each from four local
boards
Functions : General superintendence and direction of the
Bank's affairs
8. Local Boards
One each for the four regions of the country in
Mumbai, Calcutta, Chennai and New Delhi
Membership:
consist of five members each
appointed by the Central Government
for a term of four years
Functions : To advise the Central Board on local matters
and to represent territorial and economic interests of
local cooperative and indigenous banks; to perform such
other functions as delegated by Central Board from time
to time.
9. Powers and
responsibilities
of RBI in respect of regulation
of banks
The Reserve Bank of India has been entrusted
with the responsibility under the Banking
Regulation Act, 1949 to regulate and supervise
banks' activities in India and their branches
abroad. While the regulatory provisions of this
Act prescribe the policy framework to be
followed by banks, the supervisory framework
provides the mechanism to ensure banks'
compliance with the policy prescription.
10. Banking Supervision
Organisation of the Supervision Function
Supervision of overseas branches of
Indian banks
Uniform guidelines on Write-off/
compromise settlements
Checklist for Inspecting Officers
Study of large value bank frauds
Nostro Accounts- Reconciliation
Non- SLR Investments
Transparency and Disclosure
Internal controls and housekeeping in
banks
11. Note Issuing
The assets of the Issue Department
against which bank notes are issued
are….
Gold coins and Bullions
Foreign Securities
Rupee Coins
Government of India Rupee Securities
The Bills of Exchange and Promissory
notes payable in India, which are eligible
for purchase by the bank under Sec22 of
RBI act
Minimum Reserve System since 1957
Rs.200 Crore of which Rs.115 crore in gold
12. RBI Monetary Policy
Monitory Policy refers to the policy of the
central bank to control money supply, credit
and inflation in economy
Monetary policy is a part of overall
economic policy
To accelerate economic development to
raise national income and standard of living
to control inflationary pressures in the
economy
13. RBI’s CREDIT CONTROl
Measures
RBI has various tools to use to
maintain monetary stability--
Quantitative Controls – to
regulate the volume of total credit
Qualitative(Selective Credit)
Controls – to regulate the flow of
credit to various uses and
purposes
14. Controls
Quantitative-
Bank Rate - 6% (with effectfrom30th
April, 2003 )
Open Market Operations – Buying and
Selling of Securities
CRR-25.0%
SLR-7.5%
REPO – 9% (at present)
Rev REPO - 6% (at present)
Qualitative-
Selective Credit Control
15. WHAT’s THAT
Bank Rate CRR
This is the rate at which RBI Also called the cash reserve
lends money to other banks ratio, refers to a portion of
(or financial institutions) deposits (as cash) which
banks have to keep/maintain
SLR with the RBI.
Besides the CRR, banks are required to invest a
portion of their deposits in government securities as
a part of their statutory liquidity ratio (SLR)
requirements.
Repo (Repurchase) Rate Reverse Repo Rate
Repo rate is the rate at which banks This is the exact
borrow funds from the RBI to meet opposite of repo rate.
the gap between the demand they
are facing for money (loans) and how
much they have on hand to lend.
