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RBI- Reserve
Bank of India
INTRODUCTION
• Reserve Bank of India Central bank of India
• Established 1 April 1935
• Governor Shaktikanta Das
• Headquarter Mumbai, Maharashtra
• Major Function Supervision of commercial banks & issuance of currency
• The preamble of the Reserve Bank of India describes its main functions 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.
FUNCTIONS OF RBI
• It controls and supervises the functioning of financial institutions, commercial banks
and non-banking financial companies by establishing certain set rules & regulations to
be followed
• It is authorized to facilitate the issuance and flow of currency in the country by
analyzing economic structure and prevailing scenario to decide on the number of
paper notes to be printed & circulated in the system
• While RBI prints the paper currency, coins are minted by the govt. of India and RBI
acts as an agent for handling and distributing coins
• RBI also keeps on upgrading the security features in currency to avoid any kind of
counterfeiting of currency
FUNCTIONS OF RBI
• It serves as a banker to the government by carrying out country’s financial transactions
efficiently by maintaining accounts of payments and receipts
• It works as a banker’s bank in a way that commercial banks hold their account in Rbi,
deposits money and borrows money as and when required on the prevailing interest
rate
• It regulated foreign exchange transactions by facilitating foreign trade and maintaining
foreign exchange market in India to create forex reserve
• Until 2016 monetary policy was solely under control of Rbi, but as in 2016 Monetary
policy committee had been formed to decide and fix the interest rate in India
POLICY RATES
• Repo Rate – It is the rate charged by Rbi while lending money to
commercial banks for a shorter time period of less than 90 days. If Rbi
wants to make borrowing money expensive for commercial bank it
increases the repo rate and in similar way it decreases repo rate to make
borrowings cheaper for commercial bank. Current Repo Rate is 6.50%
• Increased repo rate makes borrowing costly for commercial banks as a
result of which these commercial banks also increases the interest rate
making borrowings by public costlier. This leads to less demand for loans
reducing the money supply in economy to curb inflation
POLICY RATES
• Reverse Repo Rate – Reverse repo rate is the interest rate charged by
commercial banks on Rbi for borrowing money. This borrowing is usually for a
shorter period of time. Current Reverse Repo Rate is 6.25%
• It is sometimes done intentionally by Rbi to reduce the liquidity in commercial
banks
• Bank Rate – It is the interest rate charged by Rbi on long-term borrowings
by commercial banks. Current Bank Rate is 6.75%
RESERVE RATIOS
• Cash Reserve Ratio – It is mandated to keep certain percentage of
deposit as a cash reserve in Rbi, this obligatory deposit by commercial
banks in Rbi is known as Cash Reserve Ratio. Current CRR is 4%
• Statutory Liquidity Ratio – It is proportion of net demand and time
liabilities mandated to be maintained as liquid reserve usually in the
form of cash and gold reserve by commercial banks in Rbi. Current
SLR is 19.5%
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Rbi - Reserve Bank of India

  • 2. INTRODUCTION • Reserve Bank of India Central bank of India • Established 1 April 1935 • Governor Shaktikanta Das • Headquarter Mumbai, Maharashtra • Major Function Supervision of commercial banks & issuance of currency • The preamble of the Reserve Bank of India describes its main functions 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. FUNCTIONS OF RBI • It controls and supervises the functioning of financial institutions, commercial banks and non-banking financial companies by establishing certain set rules & regulations to be followed • It is authorized to facilitate the issuance and flow of currency in the country by analyzing economic structure and prevailing scenario to decide on the number of paper notes to be printed & circulated in the system • While RBI prints the paper currency, coins are minted by the govt. of India and RBI acts as an agent for handling and distributing coins • RBI also keeps on upgrading the security features in currency to avoid any kind of counterfeiting of currency
  • 4. FUNCTIONS OF RBI • It serves as a banker to the government by carrying out country’s financial transactions efficiently by maintaining accounts of payments and receipts • It works as a banker’s bank in a way that commercial banks hold their account in Rbi, deposits money and borrows money as and when required on the prevailing interest rate • It regulated foreign exchange transactions by facilitating foreign trade and maintaining foreign exchange market in India to create forex reserve • Until 2016 monetary policy was solely under control of Rbi, but as in 2016 Monetary policy committee had been formed to decide and fix the interest rate in India
  • 5. POLICY RATES • Repo Rate – It is the rate charged by Rbi while lending money to commercial banks for a shorter time period of less than 90 days. If Rbi wants to make borrowing money expensive for commercial bank it increases the repo rate and in similar way it decreases repo rate to make borrowings cheaper for commercial bank. Current Repo Rate is 6.50% • Increased repo rate makes borrowing costly for commercial banks as a result of which these commercial banks also increases the interest rate making borrowings by public costlier. This leads to less demand for loans reducing the money supply in economy to curb inflation
  • 6. POLICY RATES • Reverse Repo Rate – Reverse repo rate is the interest rate charged by commercial banks on Rbi for borrowing money. This borrowing is usually for a shorter period of time. Current Reverse Repo Rate is 6.25% • It is sometimes done intentionally by Rbi to reduce the liquidity in commercial banks • Bank Rate – It is the interest rate charged by Rbi on long-term borrowings by commercial banks. Current Bank Rate is 6.75%
  • 7. RESERVE RATIOS • Cash Reserve Ratio – It is mandated to keep certain percentage of deposit as a cash reserve in Rbi, this obligatory deposit by commercial banks in Rbi is known as Cash Reserve Ratio. Current CRR is 4% • Statutory Liquidity Ratio – It is proportion of net demand and time liabilities mandated to be maintained as liquid reserve usually in the form of cash and gold reserve by commercial banks in Rbi. Current SLR is 19.5%
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