Role of RBI

1. GROUP MEMBERS
SR. NO. NAME WRO NO
1 KUNAL MOTWANI
(Group Leader)
WRO0532073
(Contact No: 969709664)
2 DHRUV SHAH WRO0556670
3 HARSHAD BAFNA WRO0558966
4 SONAL MALONDKAR WRO0560694
5 DEEPALI CHOKSEY WRO0475916
CENTRE NAME : VASAI BRANCH OF WIRC OF ICAI
BATCH NAME : AFTERNOON JULY 2016
BATCH COMMENCEMENT DATE : 11TH JULY 2016
GROUP NO : 6
ITT PRESENTATION

3. REASON FOR SELECTING THE TOPIC
 India is one of the fastest growing economy in the world, with a
population over 1.2 Billion housed under the seventh largest
nation, India has become the hub for global investment.
 How does such an economy function?
There are various factors that influence & control Indian
economy, one such being The RBI, one of the oldest institution
behind the success of our economy.
 Growth in Exports, FOREX, Capital Markets & other Sectors of
the economy are all happening because of a strong backbone
of Indian economy – The RBI.
 In this presentation, We will learn about RBI : it’s Function & it’s
role in Indian Banking System.

4. TOPICS TO BE COVERED IN THE PRESENTATION :
 INTRODUCTION
 HISTORY OF RBI
 ORGANIZATIONAL STRUCTURE OF RBI
 STRUCTURE OF BANKING IN INDIA
 ROLE OF RBI IN INDIAN BANKING SYSTEM
 CONCLUSION

5. INTRODUCTION
 The Reserve Bank of India (RBI) is India's Central
banking institution, which controls the monetary policy of
the Indian rupee.
 It is the apex bank in the Indian Banking System.
 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."
 The Reserve Bank of India has
four zonal offices at :
1. Chennai
2. Delhi
3. Kolkata
4. Mumbai.
 It has 19 regional offices &
10 sub-offices.

6. HISTORY OF RBI
 It commenced its operations on 1st April 1935 during the British Rule in
accordance with the provisions of the Reserve Bank of India Act, 1934 by
the recommendation of Hilton-Young Commission.
 The original share capital was Rupees Five Crores divided into shares of
100 each fully paid, which were initially owned entirely by private
shareholders.
 Following India's independence, the RBI was nationalised on 1st
January 1949.
 Reserve Bank continued to act as the Central Bank for Burma (Myanmar)
till Japanese Occupation of Burma (1942–45) and later up to April,1947.
After the partition of India, the Reserve Bank served as the central bank
of Pakistan up to June 1948 when the State Bank of Pakistan
commenced operations.

7. ORGANIZATIONAL STRUCTURE OF RBI
 The Central Board of Directors is the
main committee of the RBI.
The Government of India appoints the
directors for a 4-year term.
 The Board consists of a Governor, and
not more than 4 Deputy Governors,
4 Directors to represent the regional
boards, 2 from the Ministry of Finance
and 10 other directors from various
fields.
 The bank is headed by the Governor and
the post is currently held by
economist Raghuram Rajan.
There are 4 Deputy Governors, Dr Urjit
Patel, R Gandhi, S S Mundra and N S
Vishwanathan.

9. Central Bank
(RBI)
Scheduled Banks
Commercial Banks
Public
Sector
Banks
Other
Nationalised
Banks
SBI &
Associate
Banks
Private
Sector
Banks
Foreign
Banks
Regional
Rural
Banks
Co-operative Banks
Urban
Co-operative
Banks
State
Co-operative
Banks
Unscheduled Banks
STRUCTURE OF BANKING IN INDIA

11. MONETARY AUTHORITY
 RBI controls the supply of money
in the economy by its control over
interest rates in order to maintain
price stability and achieve high
economic growth using Monetary
Policy.
 Main Aim of Monetary Policy is to:
1. Stabilise exchange rate
2. Maintain Healthy Balance of
Payment
3. Attain Financial stability
4. Control inflation
5. Strengthen Banking System CONTD....

12. MONETARY AUTHORITY (CONTD...)
Quantitative Measures of Credit Control
under Monetary Policy :
 Bank Rate : Rate at which RBI discounts bills
of commercial banks.
 Cash Reserve Ratio (CRR) : Portion of
Deposit which commercial banks have to
keep with RBI in the form of Cash Reserves.
 Statutory Liquidity Rate (SLR): Portion of
Total Deposit which commercial banks have
to keep with RBI in the form of Liquid Assets
viz – Gold, Cash or Approved Government
securities.
 Repo Rate : Rate at which Commercial Banks
borrow money from RBI.
 Reverse Repo Rate : Rate at which RBI
borrows money from Commercial Banks.

13. ISSUER OF CURRENCY
 The bank issues and exchanges currency
notes and coins and destroys the same
when they are not fit for circulation.
 The objectives are to issue bank notes
and giving public adequate supply of the
same, to maintain the currency and credit
system of the country to utilize it in its
best advantage, and to maintain the
reserves.
 It is the sole authority in India to issue
Currency.
 Every Note issued by RBI has it’s name
imprinted on the top along with signature
of governor below promissory clause.

15. ISSUER OF BANKING LICENSE
 Every Bank has to obtain a Banking License from RBI
to conduct banking business in India (As per Sec 22
of Banking regulation Act)
 Since April 2014, the RBI has granted 23 new banking
licences.
 Entities / groups in the private sector, entities in public
sector and Non-Banking Financial Companies
(NBFCs) shall be eligible to set up a bank through a
wholly-owned Non-Operative Financial Holding
Company (NOFHC). They will also need to have a
sound & successful track record of 10 years.
 Various Banks have been given the license like:
Universal
Banks
Payments
Bank
Small Finance
Banks
IDFC Vodafone M-
pesa
Equitas Holdings
Bandhan Bank Fino PayTech Utkarsh Micro
Finance

16. BANKER’S BANK
 RBI is bank of all banks in
India. As a banker of banks,
RBI: Enables smooth and swift
clearing and settlements of
inter-bank transactions
 Provides efficient means of
funds transfer for all banks
Enables banks to maintain their
accounts with RBI for statutory
reserve requirements and
maintenance of transaction
balances.
 Regulates opening of New
ATMS & Branches of
Commercial Banks
 Why RBI is called as
banker's bank ?
1. Provides loan to
banks/bankers.
2. Accept Deposits of Banks.
3. Rediscount the bills of
Banks.

17. LENDER OF LAST RESORT
 The banks can borrow from
the RBI by keeping eligible
securities as collateral or
any other arrangement and
at the time of need or
crisis, they approach RBI
for financial help. Thus RBI
works as Lender of the Last
Resort (LORL) for banks.

18. BANKER & DEBT MANAGER OF GOVERNMENT
 Keeps deposits of Governments (Centre & state) as deposit free of
interest.
 Receives & Makes Payment on behalf of Government.
 Carrying out the Government’s exchange remittances & other
Banking Operations.
 Helping Both State & Central Government to float new loans and
manage public debt.
 Acts as an Advisor to Government on all monetary & Banking
functions

19. CONTROLLER OF CREDIT
 Credit Control is a major weapon used
by RBI to control demand & Supply of
Money in Economy.
 Some of the Credit Control techniques
are :
1. Open Market Operations (OMO) : An
open market operation is
an instrument of monetary
policy which involves buying or
selling of government securities from
or to the public and banks.
2. Credit Ceiling : In this operation RBI
issues prior information or direction
that loans to the commercial banks
will be given up to a certain limit. In
this case commercial bank will be
tight in advancing loans to the public.

20. ACTS AS CLEARING HOUSE
 Clearing Houses facilitate the exchange of instruments and
processing of payment instructions at a central point among the
participating banks.
 RBI acts as a Clearing House for settlement of Banking
transactions.
 It is a member bank of the Asian Clearing Union.
 RBI manages 14 clearing houses of the country situated in
different major cities. The SBI & Associate Banks look after
clearing house function as an agent of RBI.

21. MANAGER OF FOREIGN EXCHANGE
 RBI is required to maintain external value of Rupee. For this purpose
it acts as a custodian of FOREX.
 On a given day, the foreign exchange rate reflects the demand for and
supply of foreign exchange arising from trade and capital transactions.
The RBI’s Financial Markets Department (FMD) participates in the
foreign exchange market by undertaking sales / purchases of foreign
currency to ease volatility in periods of excess demand for/supply of
foreign currency.
 Administer and enforces the provision of Foreign Exchange
Management Act (FEMA), 1999.

22. SUMMARY
 The Reserve Bank of India (RBI) is India's Central
bank & apex bank in Indian banking system.
 Commenced business on 1st April 1935 in accordance
with the provisions of the Reserve Bank of India Act,
1934.
 It Plays an important role in strengthening, developing
and diversifying the country’s economic & financial
structure.

23. ROLE OF RBI IN INDIAN BANKING SYSTEM :
1. MONETARY AUTHORITY.
2. ISSUER OF CURRENCY.
3. ISSUER OF BANKING LICENSE.
4. BANKER’S BANK.
5. LENDER OF LAST RESORT.
6. BANKER & DEBT MANAGER OF GOVERNMENT.
7. CONTROLLER OF CREDIT.
8. ACTS AS CLEARING HOUSE.
9. MANAGER OF FOREX
SUMMARY (CONTD...)

24. BIBLOGRAPHY
Chapter on Money & Banking
(CA-CPT : Macroeconomics)
RBI Official Website (www.rbi.org.in)
Economic Times
Wikipedia
Slideshare.net
Google Search Engine