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Reserve Bank of India & Indian Economy
-B.V.Raghunandan
PG Department of Commerce,
SDM College, Ujire
August 14, 2014
RBI and
Government
• Government vests
RBI with the power
of monetary
control
• Finances
Government
through T-Bills and
Dated Bonds
• Independence from
Government
Control
• Frame Policies in
sync with
Government Policy
• Control of Inflation
and Interest Rates
• Regulation of
Money Market
RBI and Banking
• Stability through liquidity
• Branch Expansion in Rural Areas
• Prevention of Speculation and Risk Accumulation
• Priority Sector Lending
• A Separate Agriculture Department
• Differentiated Banking: Grameena Banks, LAB, Post
Offices, Small Banks and Payments Banks
• Leader of all banks
Development & Absorption of Technology
• Establishment of Institute for Development and
Research in Banking Technology in 1996
• Infinet, National Financial Switch
• ECS, MICR Cheques, NEFT, RTGS, CTS etc
• Establishment of Clearing Corporation of India
• National Payment Corporation of India
• Authority to regulate the payments under The Payment
and Settlement Systems Act, 2007
• Mobile Banking and Net Banking
Forex Management
• Managing forex inflow and outflow
• Before 1992, managing the shortage
• After 1992, managing the unpredictable
• Introduction of Market Stabilisation Scheme
• Monitoring FII and FDI Inflow
Money Market
• Failure in development of Bill Market
• Banking Dominance and RBI-Commercial Bank
Domination
• Stability in the money market
• Regulating supply and demand through change in
key rates by way of credit policy
• Unorganised sector’s entry and dominance
Black Money
• Unaccounted for income tax
purpose
• Sources: Under billing or no
billing, Corruption, Gambling,
Arms Smuggling, Smuggling other
Products, Black Marketing, Drug
Trafficking, Real Estate
Transactions, Illegal Commission
on Government and Defence
Procurement, Unregistered
business, be-nami business
• Kept in dollars, cash, in be-nami
bank accounts, bank lockers,
deposit in foreign banks, assets in
benami accounts
Spending Black
Money
• Buying luxury items
• Foreign Travel and Spending in Foreign Countries
• Making Political Donations
• Giving Bribes and Illegal Commissions
• Buying Property through undervaluation
• Day-to-day Spending
Washing the Black Money
• Showing imaginary agricultural
income
• Showing imaginary receipts in
business like in shopping malls,
movie theatres
• Showing benami receipts
• Converting into FII or FDI inflow
• Route the money to a country
where there is no income tax
and show it as consulting fees
RBI and Black Money
• RBI has limited powers to
unearth black money
• Introduction of KYC norms
• Withdrawal of Old Currency
Notes (Notes issued prior to
2005)
• Making banks to report high
value transactions
• RBI directing banks to give
information and documents
to Special Investigation Team
THAN YOU

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Rbi & indian economy b.v.raghunandan

  • 1. Reserve Bank of India & Indian Economy -B.V.Raghunandan PG Department of Commerce, SDM College, Ujire August 14, 2014
  • 2. RBI and Government • Government vests RBI with the power of monetary control • Finances Government through T-Bills and Dated Bonds • Independence from Government Control • Frame Policies in sync with Government Policy • Control of Inflation and Interest Rates • Regulation of Money Market
  • 3. RBI and Banking • Stability through liquidity • Branch Expansion in Rural Areas • Prevention of Speculation and Risk Accumulation • Priority Sector Lending • A Separate Agriculture Department • Differentiated Banking: Grameena Banks, LAB, Post Offices, Small Banks and Payments Banks • Leader of all banks
  • 4. Development & Absorption of Technology • Establishment of Institute for Development and Research in Banking Technology in 1996 • Infinet, National Financial Switch • ECS, MICR Cheques, NEFT, RTGS, CTS etc • Establishment of Clearing Corporation of India • National Payment Corporation of India • Authority to regulate the payments under The Payment and Settlement Systems Act, 2007 • Mobile Banking and Net Banking
  • 5. Forex Management • Managing forex inflow and outflow • Before 1992, managing the shortage • After 1992, managing the unpredictable • Introduction of Market Stabilisation Scheme • Monitoring FII and FDI Inflow
  • 6. Money Market • Failure in development of Bill Market • Banking Dominance and RBI-Commercial Bank Domination • Stability in the money market • Regulating supply and demand through change in key rates by way of credit policy • Unorganised sector’s entry and dominance
  • 7. Black Money • Unaccounted for income tax purpose • Sources: Under billing or no billing, Corruption, Gambling, Arms Smuggling, Smuggling other Products, Black Marketing, Drug Trafficking, Real Estate Transactions, Illegal Commission on Government and Defence Procurement, Unregistered business, be-nami business • Kept in dollars, cash, in be-nami bank accounts, bank lockers, deposit in foreign banks, assets in benami accounts
  • 8. Spending Black Money • Buying luxury items • Foreign Travel and Spending in Foreign Countries • Making Political Donations • Giving Bribes and Illegal Commissions • Buying Property through undervaluation • Day-to-day Spending
  • 9. Washing the Black Money • Showing imaginary agricultural income • Showing imaginary receipts in business like in shopping malls, movie theatres • Showing benami receipts • Converting into FII or FDI inflow • Route the money to a country where there is no income tax and show it as consulting fees
  • 10. RBI and Black Money • RBI has limited powers to unearth black money • Introduction of KYC norms • Withdrawal of Old Currency Notes (Notes issued prior to 2005) • Making banks to report high value transactions • RBI directing banks to give information and documents to Special Investigation Team