 Upload

 Login
 Signup




Submit Search

 Home

 Explore

 Presentation Courses

 PowerPoint Courses

 by LinkedIn Learning
25 of 51
 RBI Project
22,527 views

 Share

 Like

 Download

 ...

Akash Tanwar
, Teacher at teaching
Follow

Published on Sep 8, 2014

This project contains all the functions and working of Reserve Bank of India.

...
Published in: Economy & Finance
 0 Comments
 24 Likes
 Statistics
 Notes

Post

 Be the first to comment

RBI Project
1. 1. 1 The Reserve Bank: Tradition and Change The origin of the Reserve Bank can be traced to
1926, when the Royal Commission on Indian Currency and Finance—also known as the Hilton-
Young Commission— recommended the creation of a central bank to separate the control of
currency and credit from the government and to augment banking facilities throughout the
country. The Reserve Bank of India was established on April 1, 1935 in accordance with the
provisions of the Reserve Bank of India Act 1934. Since then, the Reserve Bank‘s role and
functions have undergone numerous changes—as the nature of the Indian economy has changed.
The Central Office of the Reserve Bank was initially established in Calcutta but was permanently
moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are
formulated. Though originally privately owned, since nationalisation in 1949, the Reserve Bank is
fully owned by the Government of India. Today‘s RBI bears some resemblance to the original
 institution, although our mission has expanded along with our deepened, broadened and
increasingly globalised economy.
2. 2. 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. 3. 3 The RBI Logo The selection of the Bank‘s common seal to be used as the emblem of the
Bank on currency notes, cheques and publications, was an issue that had to be taken up at an early
stage of the Bank‘s formation. The Goverment‘s general ideas on the seal were as follows: 1. The
seal should emphasize the Governmental status of the Bank, but not too closely; 2. It should have
something Indian in the design; 3. It should be simple, artistic and heraldically correct; and 4. The
design should be such that it could be used without substantial alteration for letter heading, etc.
For this purpose, various seals, medals and coins were examined. The East India Company Double
Mohur, with the sketch of the Lion and Palm Tree, was found most suitable; however, it was
decided to replace the lion by the tiger, the latter being regarded as the more characteristic animal
of India! To meet the immediate requirements in connection with the stamping of the Bank‘s share
certificates, the work was entrusted to a Madras firm. The Board, at its meeting on
4. 4. 4 February 23, 1935, approved the design of the seal but desired improvement of the animal‘s
appearance. Unfortunately it was not possible to make any major changes at that stage. But the
Deputy Governor, Sir James Taylor, did not rest content with this. He took keen interest in getting
fresh sketches prepared by the Government of India Mint and the Security Printing Press, Nasik.
As a basis for good design, he arranged for a photograph to be taken of the statue of the tiger on
the entrance gate at Belvedere, Calcutta. Something or the other went wrong with the sketches so
that Sir James, writing in September I938, was led to remark: ......‘s tree is all right but his tiger
looks too like some species of dog, and I am afraid that a design of a dog and a tree would arouse
derision among the irreverent. .....‘s tiger is distinctly good but the tree has spoiled it. The stem is
too long and the branches too spidery, but I should have thought that by putting a firm line under
the feet of his tiger and making his tree stronger and lower we could get quite a good result from
his design. Later, with further efforts, it was possible to have better proofs prepared by the
Security Printing Press, Nasik. However, it was eventually decided not to make any change in the
existing seal of the Bank, and the new sketches came to be used as an emblem for the Bank‘s
currency notes, letter-heads, cheques and publications issued by the Bank. Source: „History of the
Reserve Bank of India‟
5. 5. For proper management of public debts. For proper arrangement of industrial finance.  For
proper arrangement of agriculture finance.  For the development of organized money market in
the country.  For balanced and systematic development of banking in the country.  To stabilizes
internal and external value of rupee.  To manage the monetary and credit system of the country.
5 Objectives and Reasons for the Establishment of R.B.I. The main objectives for establishment
of RBI as the central Bank of India were as follows:-
6. 6. Local Boards: In Chennai, Kolkata, Mumbai and New Delhi, representing the country‘s four
regions. Local board members, appointed by the Central Government for four-year terms,
represent regional and economic interests and the interests of co-operative and indigenous
banks. Sub-committees of the Central Board: Includes those on Inspection and Audit; Staff; and
Building. Focus of each subcommittee is on specific areas of operations.  Board for Payment and
Settlement Systems: Regulates and supervises the payment and settlement systems.  Board for
Financial Supervision: Regulates and supervises commercial banks, Non-Banking Finance
Companies (NBFCs), development finance institutions, urban co-operative banks and primary
dealers.  Committee of Central Board: Oversees the current business of the central bank and
typically meets every week, on Wednesdays. The agenda focusses on current business, including
approval of the weekly statement of accounts related to the Issue and Banking Departments. 
Central Board: Includes the Governor, Deputy Governors and the nominated Directors and a
government nominee-Director 6 Structure, Organization and Governance: How We Function
The Reserve Bank is wholly owned by the Government of India. The Central Board of Directors
oversees the Reserve Bank‘s business. About the Central Board The Central Board has primary
authority for the oversight of the Reserve Bank. It delegates specific functions to its committees
and sub-committees.
7. 7. 1 meeting—at a minimum—each quarter 6 meetings—at a minimum—each year  1
representative of the Central Government  10 directors nominated by the Central Government
with expertise in various segments of the economy  4 directors—nominated by the Central
Government to represent each local board  4 Deputy Governors, at a maximum Non-Official
Directors  1 Governor 7 Central Board of Directors by the Numbers Official Directors
8. 8. 8 SECRETARY'S DEPARTMENT Names and addresses of the Directors of the Central Board
of the Reserve Bank of India 1. Dr. D Subbarao Governor Reserve Bank of India Central Office
Mumbai 400 001. 2. Smt. Shyamala Gopinath Deputy Governor Reserve Bank of India Central
Office Mumbai 400 001. 3. Dr.K.C.Chakrabarty Deputy Governor Reserve Bank of India Central
Office Mumbai 400 001. 4. Dr. Subir Gokarn Deputy Governor Reserve Bank of India Central
Office Mumbai 400 001. 5. Shri Anand Sinha Deputy Governor Reserve Bank of India Central
Office Mumbai 400 001 6. Shri Y.H. Malegam Chartered Accountant C/o S. B. Billimoria &
Company Meher Chambers (2nd floor) R. Kamani Road, Ballard Estate Mumbai 400 001 * 7.
Prof. Suresh D. Tendulkar Economist, AD-86-C, Shalimar Bagh, New Delhi – 110 088 * 8. Prof.
U. R. Rao Chairman, Physical Research Laboratory Department of Space, Government of India
Antariksh Bhavan, New BEL Road Bangalore – 560 094 * 9. Shri Lakshmi Chand IAS (Retd.), C-
12, Sector 14 NOIDA, Gautham Budh Nagar Uttar Pradesh * 10. Shri H. P. Ranina Advocate,
Supreme Court of India, 506, Raheja Centre, 214 Backbay Reclamation, Free Press Journal Road,
Mumbai - 400 023 @
9. 9. 9 11. Shri Azim Premji Chairman, WIPRO Limited Doddakannelli, Sarjapur Road, Bangalore –
560033 @ 12. Shri Kumar Mangalam Birla Chairman, Aditya Birla Group of Companies Aditya
Birla Centre, S. K. Ahire Marg, Worli Mumbai – 400 030 @ 13. Smt. Shashi Rajagopalan Plot
No. 10, Saket Phase 2 Kapra, ECIL Post Hyderabad – 500 062 @ 14. Shri Suresh Neotia B-32,
Greater Kailash Part - I New Delhi – 110 048 @ 15. Dr. A. Vaidyanathan B-1, Sonali Apartment,
Old No. 11 Beach Road, Kalakshetra Colony Chennai – 600 090 @ 16. Prof. Man Mohan Sharma
2/3 Jaswant Baug (Runwal Park), Behind Akbarallys, Chembur Naka Mumbai – 400 071 @ 17.
Shri Sanjay Labroo Managing Director & CEO Asahi India Glass Ltd. Global Business Park
Tower - B, 5th Floor' Mehrauli - Gurgaon Road Gurgaon - 122002 (Haryana) @ 18. Shri Ashok
Chawla Finance Secretary Government of India Ministry of Finance New Delhi 110001 # *
Directors nominated under Sect 8 (1) (b) of the RBI Act, 1934. @ Directors nominated under Sect
8 (1) (c) of the RBI Act, 1934. # Director nominated under Sect 8 (1) (d) of the RBI Act, 1934
10. 10. 10 Names and Addresses of the Members of The Local Boards of The Reserve Bank of India
WESTERN AREA EASTERN AREA 1. Shri Y.H. Malegam Chartered Accountant c/o
S.B.Billimoria & Company Meher Chambers (2nd floor) R. Kamani Road, Ballard Estate Mumbai
400 001 1. Shri Suresh D. Tendulkar Economist, AD-86-C, Shalimar Bagh, New Delhi – 110 088
2. Shri K. Venkatesan 113, F-Block Anna Nagar East Chennai 600 040 2. Shri A. K. Saikia, Retd.
IAS H-8, Sector - 27 Noida - 201 301 3. Shri Dattaraj V. Salgaocar Managing Director V. M.
Salgaocar & Bro. Ltd. Hira Bihar, Airport Road, Chicalim Vasco Da Gama, Goa - 403 711 3. Shri
Sovan Kanungo, Retd. IAS 17/404, East End Apartments Mayur Vihar I ( Extension ) New Delhi
-110096 4. Shri Jayantilal B. Patel Chairman Sahakari Khand Udyog Mandal Ltd. At & Post,
Gandevi Sugar Factory Taluka Gandevi, District Navsari, Via Billimora Gujarat PIN-396 360 As
on Dated November 3, 2010, Mumbai
11. 11. 11 NORTHERN AREA SOUTHERN AREA 1. Prof. U. R. Rao Chairman, Physical Research
Laboratory, Department of Space, Antariksh Bhawan, New BEL Road Bangalore – 560094 1. Shri
Lakshmi Chand Retd. IAS, C-12, Sector – 14, Noida, U. P. 201301 2. Dr. Ram Nath Ex-Professor
& Vice Chancellor CSA University of Agri. & Tech. Plot No. 710, 'A' Block, Avas Vikas Colony,
Hanspur, Naubasta, Kanpur - 208 001 2. Shri C. P. Nair Retd. Chief Secretaray to Government of
Kerala Narayaneeyam, Jawahar Nagar Thiruvananthapuram - 695 041 3. Dr. Pritam Singh
Director, Management Development Institute Mehrauli Road, Sukhrali Gurgaon - 122 001 3. Dr.
M. Govinda Rao Director National Institute of Public Finance and Policy 18/2, Satsang Vihar
Marg Special Institutional Area (Near JNU) New Delhi 110 067 4. Shri Kamal Kishore Gupta
Chartered Accountant Kamal & Co. 1372, Kashmere Gate Delhi 110006 4. Smt. Devaki Jain,
Tharangavana, D-5, 12th Cross, RMV Extension, Bangalore 560080 5. Shri Mihir Kumar Moitra
H-205, Wembley Estate Rosewood City Sector-49-50 Gurgaon-122001 As on Dated November 3,
2010, Mumbai
12. 12. Customer Service Department Department of Payment and Settlement System  Department
of Currency Management  Department of Government Bank Accounts  Department of Statistics
 and Information Management 4. Services  Department of Economic Analysis and Policy  Rural
Planning and Credit Department 3. Research  Foreign Exchange Department  Department of
Banking Supervision  Urban Banks Department  Department of Non-Banking Supervision 
Department of External Investments and Operations 2. Regulation and Supervision  Internal Debt
Management Department  Financial Markets Department  Monetary Policy Department 12
Management and Structure The Governor is the Reserve Bank‘s chief executive. The Governor
supervises and directs the affairs and business of the Reserve Bank. The management team also
includes Deputy Governors and Executive Directors. Departments 1. Markets
13. 13. Research institutes: RBI-funded institutions to advance training and research on banking
issues, economic growth and banking technology, such as, National Institute of Bank Management
(NIBM) at Pune, Indira Gandhi Institute of Development Research (IGIDR) at Mumbai, and
Institute for Development and Research in Banking Technology (IDRBT) at Hyderabad.
Training centers: The Reserve Bank Staff College at Chennai addresses the training needs of RBI
officers; the College of Agricultural Banking at Pune trains staff of co-operative and commercial
banks, including regional rural banks. The Zonal Training Centers, located at regional offices,
train non-executive staff.  26 Regional Offices and Branches: These are the Reserve Bank‘s
operational arms and customer interfaces, headed by Regional Directors. Smaller branches / sub-
offices are headed by a General Manager / Deputy General Manager.  26 Departments: These
focus on policy issues in the Reserve Bank‘s functional areas and internal operations. 
Department of Banking Operations and Development The RBI is composed of:  Department of
Expenditure and Budgetary Control  Department of Information Technology  Department of
Communication  Human Resources Development Department  Department of Administration
and Personnel Management  Legal Department  Inspection Department  Rajbhasha Department
 Secretary‘s Department  Premises Department 13 5. Support
14. 14. Subsidiaries: Fully-owned subsidiaries include National Housing Bank (NHB), Deposit
Insurance and Credit Guarantee Corporation (DICGC), Bhartiya Reserve Bank Note Mudran
Private Limited (BRBNMPL). The Reserve Bank also has a majority stake in the National Bank
for Agriculture and Rural Development (NABARD).14
15. 15. Developmental Role Regulator and Supervisor of the Payment and Settlement Systems 
Manager of Foreign Exchange  Regulator of the Banking System  Banker to Banks  Banker
and Debt Manager to Government  Issuer of Currency  Monetary Authority 15 Main
Activities of the RBI: What We Do The Reserve Bank is the umbrella network for numerous
activities, all related to the nation‘s financial sector, encompassing an extending beyond the
functions of a typical central bank. This section provides an overview of our primary activities:
16. 16. Financial stability The relative emphasis among the objectives varies from time to time,
depending on evolving macroeconomic developments. Our Approach Our operating framework is
based on a multiple indicator approach. This means that we monitor and analyse the movement of
a number of indicators including interest rates, inflation rate, money supply, credit, exchange rate,
trade, capital flows and fiscal position, along with trends in output as we develop our policy
perspectives. Ensuring adequate flow of credit to the productive sectors of the economy to
support economic growth  Maintaining price stability  Monetary Authority Monetary policy
refers to the use of instruments under the control of the central bank to regulate the availability,
cost and use of money and credit. The goal: achieving specific economic objectives, such as low
and stable inflation and promoting growth. The main objectives of monetary policy in India are:
16 “The basic functions of the Reserve Bank of India are to regulate the issue of Bank notes and
the 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.” - From the Preamble of the
Reserve Bank of India Act, 1934
17. 17. Market Stabilization Scheme (MSS): This instrument for monetary management was
introduced in 2004. Liquidity of a more enduring nature arising from large capital flows is
absorbed through sale of short-dated government securities and Open Market Operations (OMO):
Outright sales/purchases of government securities, in addition to LAF, as a tool to determine the
level of liquidity over the medium term.  Liquidity Adjustment Facility (LAF): Consists of daily
infusion or absorption of liquidity on a repurchase basis, through repo (liquidity injection) and
reverse repo (liquidity absorption) auction operations, using government securities as collateral. 
Refinance facilities: Sector-specific refinance facilities (e.g., against lending to export sector)
 provided to banks. Indirect Instruments  Statutory Liquidity Ratio (SLR): The share of net
demand and time liabilities that banks must maintain in safe and liquid assets, such as,
government securities, cash and gold.  Cash Reserve Ratio (CRR): The share of net demand and
time liabilities that banks must maintain as cash balance with the Reserve Bank. 17 Our Tools
The Reserve Bank‘s Monetary Policy Department (MPD) formulates monetary policy. The
Financial Markets Department (FMD) handles day-to-day liquidity management operations. There
are several direct and indirect instruments that are used in the formulation and implementation of
monetary policy. Direct Instruments
18. 18. Bank rate: It is the rate at which the Reserve Bank is ready to buy or rediscount bills of
exchange or other commercial papers. It also signals the medium-term stance of monetary policy.
Repo/reverse repo rate: These rates under the Liquidity Adjustment Facility (LAF) determine the
corridor for short-term money market interest rates. In turn, this is expected to trigger movement
in other segments of the financial market and the real economy. 18 treasury bills. The mobilized
cash is held in a separate government account with the Reserve Bank.
19. 19. The Reserve Bank has the authority to issue notes up to value of Rupees Ten Thousand. Our
Tools Four printing presses actively print notes: Dewas in Madhya Pradesh, Nasik in Maharashtra,
Mysore in Karnataka, and Salboni in West Bengal. The presses in Madhya Pradesh and
Maharashtra are owned by the Security Printing and Minting Corporation of India (SPMCIL), a
wholly owned company of the Government of India. The presses in Karnataka and West Bengal
are set up by BRBNMPL, a wholly owned subsidiary of the Reserve Bank. Coins are minted by
the Government of India. RBI is the agent of the Government for distribution, issue and handling
of coins. Four mints are in operati Currency chests at more than 4,000 bank branches— typically
commercial banks—contain adequate quantity of notes and coins so that currency is accessible to
the public in all parts of the country.  The Department of Currency Management in Mumbai, in
cooperation with the Issue Departments in the Reserve Bank‘s regional offices, oversees the
production and manages the distribution of currency.  Issuer of Currency The Reserve Bank is
the nation‘s sole note issuing authority. Along with the Government of India, we are responsible
for the design and production and overall management of the nation‘s currency, with the goal of
ensuring an adequate supply of clean and genuine notes. The Reserve Bank also makes sure there
is an adequate supply of coins, produced by the government. In consultation with the government,
we routinely address security issues and target ways to enhance security features to reduce the risk
of counterfeiting or forgery. Approach 19 on: Mumbai, Noida in Uttar Pradesh, Kolkata, and
Hyderabad.
20. 20. Installation of note sorting machines Public awareness campaigns to educate citizens to help
prevent circulation of forged or counterfeit notes  Continual upgrades of bank note security
features 20 RBI’s Anti-counterfeiting Measures
21. 21. Developing the market for government securities to enable the government to raise debt at a
reasonable cost, provide benchmarks for raising resources by other entities and facilitate
transmission of monetary policy actions. Our Tools At the end of each day, our electronic system
automatically consolidates all of the government‘s transactions to determine the net final position.
If the balance in the government‘s account shows a negative position, we extend a short-term,
interest-bearing advance, called a Ways and Means Advance—WMA—the limit or amount for
which is set at the beginning of each financial year in April. Managing the governments‘
domestic debt with the objective of raising the required amount of public debt in a cost-effective
and timely manner.  Undertaking banking transactions for the central and state governments to
facilitate receipts and payments and maintaining their accounts.  Banker and Debt Manager to
Government Managing the government‘s banking transactions is a key RBI role. Like individuals,
businesses and banks, governments need a banker to carry out their financial transactions in an
efficient and effective manner, including the raising of resources from the public. As a banker to
the central government, the Reserve Bank maintains its accounts, receives money into and makes
payments out of these accounts and facilitates the transfer of government funds. We also act as the
banker to those state governments that have entered into an agreement with us. The role as banker
and debt manager to government includes several distinct functions: 21
22. 22. Central Accounts Section at Nagpur: consolidates the government‘s banking transactions. The
Internal Debt Management Department based in Mumbai raises the government‘s domestic debt
and regulates and develops the government securities market. Public debt offices: provide
 depository services for government securities for institutions and service government loans. 
Public accounts departments: manage the day-to-day aspects of our Government‘s banking
operations. The Reserve Bank also appoints commercial banks as its agents and uses their
branches for greater access to the government‘s customers. 22 The RBI’s Government Finance
Operating Structure The Reserve Bank‘s Department of Government and Bank Accounts oversees
governments‘ banking related activities. This department encompasses:
23. 23. Remittance facilities: Banks and government departments can use these facilities to transfer
funds. Deposit Account Department: This department‘s computerized central monitoring system
helps banks manage their funds position in real time to maintain the optimum balance between
surplus and deficit centres.  Non-interest earning current accounts: Banks hold accounts with the
Reserve Bank based on certain terms and conditions, such as maintenance of minimum balances.
They can hold accounts at each of our regional offices. Banks draw on these accounts to settle
their obligations arising from inter-bank settlement systems. Banks can electronically transfer
payments to other banks from this account, using the Real Time Gross Settlement System
(RTGS).  Acting as lender of the last resort. Our Tools The Reserve Bank provides similar
products and services for the nation‘s banks to what banks offer their own customers. Here‘s a
look at how we help:  Enabling banks to maintain their accounts with us for purpose of statutory
reserve requirements and maintain transaction balances.  Providing an efficient means of funds
transfer for banks.  Enabling smooth, swift and seamless clearing and settlement of inter-bank
obligations.  Banker to Banks Like individual consumers, businesses and organisations of all
kinds, banks need their own mechanism to transfer funds and settle inter-bank transactions—such
as borrowing from and lending to other banks—and customer transactions. As the banker to
banks, the Reserve Bank fulfills this role. In effect, all banks operating in the country have
accounts with the Reserve Bank, just as individuals and businesses have accounts with their banks.
As the banker to banks, we focus on: 23
24. 24. Loans and advances: The Reserve Bank provides short-term loans and advances to banks /
financial institutions, when necessary, to facilitate lending for specified purposes. Lender of the
last resort: The Reserve Bank provides liquidity to banks unable to raise short term liquid
resources from the inter-bank market. Like other central banks, the Reserve Bank considers this a
critical function because it protects the interests of depositors, which in turn, has a stabilizing
impact on the financial system and on the economy as a whole. 24
25. 25. Regulator of the Banking System Banks are fundamental to the nation‘s financial system. The
central bank has a critical role to play in ensuring the safety and soundness of the banking
system—and in maintaining financial stability and public confidence in this system. As the
regulator and supervisor of the banking system, the Reserve Bank protects the interests of
depositors, ensures a framework for orderly development and conduct of banking operations
conducive to customer interests and maintains overall financial stability through preventive and
corrective measures. The Reserve Bank regulates and supervises the nation‘s financial system.
Different departments of the Reserve Bank oversee the various entities that25 Thematic
inspections, scrutiny and periodic meetings Off-site surveillance, making use of required
reporting by the regulated entities  On-site inspections  Non-Banking Financial Companies
(NBFC): Regulated and supervised by the Department of Non-Banking Supervision Our Tools
The Reserve Bank makes use of several supervisory tools:  Regional Rural Banks (RRB), District
Central Cooperative Banks and State Co-operative Bank: Regulated by the Rural Planning and
Credit Department and supervised by NABARD  Urban co-operative banks: Regulated and
supervised by the Urban Banks Department  Commercial banks and all-India development
financial institutions: Regulated by the Department of Banking Operations and Development,
supervised by the Department of Banking Supervision comprise India‘s financial infrastructure.
We oversee:
26. 26. Initiating new regulation Setting appropriate regulatory norms related to income recognition,
asset classification, provisioning, investment valuation, exposure limits and the like  Regulating
interest rates in specific areas  Prescribing lending to certain priority sectors of the economy 
Setting prudential regulations to ensure solvency and liquidity of the banks  Monitoring
governance  Prescribing capital requirements  Licensing 26 The Board for Financial
Supervision oversees the Reserve Bank‘s regulatory and supervisory responsibilities. The RBI’s
 Regulatory Role As the nation‘s financial regulator, the Reserve Bank handles a range of
activities, including:
27. 27. Managing the foreign currency assets and gold reserves of the country Our Tools The Reserve
Bank is responsible for administration of the Foreign Exchange Management Act,1999 and
regulates the market by issuing licences to banks and other select institutions to act as Authorised
Dealers in foreign exchange. The Foreign Exchange Department (FED) is responsible for the
regulation and development of the market. 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. The Department of External Investments and Operations (DEIO) invests the
country‘s foreign exchange reserves built up by purchase of foreign currency from the market. In
investing its foreign assets, the Reserve Bank is guided by three principles: safety, liquidity and
return. Ensuring smooth conduct and orderly conditions in the domestic foreign exchange market
 Regulating transactions related to the external sector and facilitating the development of the
foreign exchange market  Manager of Foreign Exchange With the transition to a market-based
system for determining the external value of the Indian rupee, the foreign exchange market in
India gained importance in the early reform period. In recent years, with increasing integration of
the Indian economy with the global economy arising from greater trade and capital flows, the
foreign exchange market has evolved as a key segment of the Indian financial market. The
Reserve Bank plays a key role in the regulation and development of the foreign exchange market
and assumes three broad roles relating to foreign exchange: 27
28. 28. Department of Payment and Settlement Systems: The Reserve Bank‘s payment and settlement
systems regulatory arm. Large value systems: Facilitating settlement of inter-bank transactions
from financial markets. These include: - Real Time Gross Settlement System (RTGS): for funds
transfers - Securities Settlement System: for the government securities market - Foreign Exchange
Clearing: for transactions involving foreign currency  Retail payment systems: Facilitating
cheque clearing, electronic funds transfer, through National Electronic Funds Transfer (NEFT),
settlement of card payments and bulk payments, such as electronic clearing services. Operated
through local clearing houses throughout the country.  Regulator and Supervisor of Payment and
Settlement Systems Payment and settlement systems play an important role in improving overall
economic efficiency. They consist of all the diverse arrangements that we use to systematically
transfer money—currency, paper instruments such as cheques, and various electronic channels.
Our Approach The Payment and Settlement Systems Act of 2007 (PSS Act) gives the Reserve
Bank oversight authority, including regulation and supervision, for the payment and settlement
systems in the country. In this role, we focus on the development and functioning of safe, secure
and efficient payment and settlement mechanisms. Our Tools The Reserve Bank has a two-tiered
structure. The first tier provides the basic framework for our payment systems. The second tier
focuses on supervision of this framework. As part of the basic framework, the Reserve Bank‘s
network of secure systems handles various types of payment and settlement activities. Most
operate on the security platform of the Indian Financial NETwork (INFINET), using digital
signatures for further security of transactions. Here is an overview of the various systems used:
28
29. 29. Securities and Trading Cor National Housing Bank (1989), an apex financial institution for
promoting and regulating housing finance  Discount and Finance House of India (1988), a money
market intermediary and a primary dealer in government securities  National Bank of Agriculture
and Rural Development (1982), for promoting rural and agricultural credit  Industrial
Development Bank of India (1964), a development finance institution for industry  Unit Trust of
India (1964), the first mutual fund of the country  Deposit Insurance and Credit Guarantee
Corporation (1962), to provide protection to bank depositors and guarantee cover to credit
facilities extended to certain categories of small borrowers  Developmental Role This role is,
perhaps, the most unheralded aspect of our activities, yet it remains among the most critical. This
includes ensuring that credit is available to the productive sectors of the economy, establishing
institutions designed to build the country‘s financial infrastructure, expanding access to affordable
financial services and promoting financial education and literacy. Over the years, the Reserve
 Bank has added new institutions as the economy has evolved. Some of the institutions established
by the RBI include: 29 poration of India (1994), a primary dealer
30. 30. Financial inclusion: Expanding access to finance and promoting financial literacy are a part of
our outreach efforts. Strengthening and supporting small local banks: This includes regional rural
banks and cooperative banks  Sector specific refinance: The Reserve Bank makes available
refinance to banks against their credit to the export sector. In exceptional circumstances, it can
provide refinance against lending to other sectors..  Lead Bank Scheme: A commercial bank is
designated as a lead bank in each district in the country and this bank is responsible for ensuring
banking development in the district through coordinated efforts between banks and government
officials. The Reserve Bank has assigned a Lead District Manager for each district who acts as a
catalytic force for promoting financial inclusion and smooth working between government and
banks.  Directed credit for lending to priority sector and weaker sections: The goal here is to
facilitate/ enhance credit flow to employment intensive sectors such as agriculture, micro and
small enterprises (MSE), as well as for affordable housing and education loans. 30 Our Tools
The Reserve Bank continues its developmental role, while specifically focussing on financial
inclusion. Key tools in this on-going effort include:
31. 31. Developmental / Promotional Functions of RBI Along with the routine traditional functions,
central banks especially in the developing country like India have to perform numerous functions.
These functions are country specific functions and can change according to the requirements of
that country. The RBI has been performing as a promoter of the financial system since its
inception. Some of the major development functions of the RBI are maintained below. 1.
Development of the Financial System : The financial system comprises the financial institutions,
financial markets and financial instruments. The sound and efficient financial system is a
precondition of the rapid economic development of the nation. The RBI has encouraged
establishment of main banking and non-banking institutions to cater to the credit requirements of
diverse sectors of the economy. 2. Development of Agriculture: In an agrarian economy like ours,
the RBI has to provide special attention for the credit need of agriculture and allied activities. It
has successfully rendered service in this direction by increasing the flow of credit to this sector. It
has earlier the Agriculture Refinance and Development Corporation (ARDC) to look after the
credit, National Bank for Agriculture and Rural Development (NABARD) and Regional Rural
Banks (RRBs). 3. Provision of Industrial Finance: Rapid industrial growth is the key to faster
economic development. In this regard, the adequate and timely availability of credit to small,
medium and large industry is very significant. In this regard the RBI has always been instrumental
in setting up special financial institutions such as ICICI Ltd. IDBI, SIDBI and EXIM BANK etc.
4. Provisions of Training: The RBI has always tried to provide essential training to the staff of the
banking industry. The RBI has set up the bankers' training colleges at several places. National
Institute of Bank Management i.e. NIBM, Bankers Staff College i.e. BSC and College of
Agriculture Banking i.e. CAB are few to mention.31 Other Functions of RBI
32. 32. 32 5. Collection of Data: Being the apex monetary authority of the country, the RBI collects
process and disseminates statistical data on several topics. It includes interest rate, inflation,
savings and investments etc. This data proves to be quite useful for researchers and policy makers.
6. Publication of the Reports: The Reserve Bank has its separate publication division. This
division collects and publishes data on several sectors of the economy. The reports and bulletins
are regularly published by the RBI. It includes RBI weekly reports, RBI Annual Report, Report on
Trend and Progress of Commercial Banks India., etc. This information is made available to the
public also at cheaper rates. 7. Promotion of Banking Habits: As an apex organization, the RBI
always tries to promote the banking habits in the country. It institutionalizes savings and takes
measures for an expansion of the banking network. It has set up many institutions such as the
Deposit Insurance Corporation-1962, UTI-1964, IDBI-1964, NABARD-1982, NHB-1988, etc.
These organizations develop and promote banking habits among the people. During economic
reforms it has taken many initiatives for encouraging and promoting banking in India. 8.
Promotion of Export through Refinance: The RBI always tries to encourage the facilities for
providing finance for foreign trade especially exports from India. The Export-Import Bank of
India (EXIM Bank India) and the Export Credit Guarantee Corporation of India (ECGC) are
supported by refinancing their lending for export purpose.
33. 33. Supervisory Functions of RBI The reserve bank also performs many supervisory functions. It
has authority to regulate and administer the entire banking and financial system. Some of its
 supervisory functions are given below. 1. Granting license to banks: The RBI grants license to
banks for carrying its business. License is also given for opening extension counters, new
branches, even to close down existing branches. 2. Bank Inspection: The RBI grants license to
banks working as per the directives and in a prudent manner without undue risk. In addition to this
it can ask for periodical information from banks on various components of assets and liabilities. 3.
Control over NBFIs: The Non-Bank Financial Institutions are not influenced by the working of a
monitory policy. However RBI has a right to issue directives to the NBFIs from time to time
regarding their functioning. Through periodic inspection, it can control the NBFIs. 4.
Implementation of the Deposit Insurance Scheme: The RBI has set up the Deposit Insurance
Guarantee Corporation in order to protect the deposits of small depositors. All bank deposits
below Rs. One lakh are insured with this corporation. The RBI work to implement the Deposit
Insurance Scheme in case of a bank failure. Reserve Bank of India's Credit Policy The Reserve
Bank of India has a credit policy which aims at pursuing higher growth with price stability. Higher
economic growth means to produce more quantity of goods and services in different sectors of an
economy; Price stability however does not mean no change in the general p33 rice level but to
control the inflation. The credit policy aims at increasing finance for the agriculture and industrial
activities. When credit policy is implemented, the role of other commercial banks is very
important. Commercial banks flow of credit to different sectors of the economy depends on the
actual cost of credit and arability of funds in the economy.
34. 34. 34 MONETARY POLICY OF THE RBI With the introduction of the Five year plans, the need
for appropriate adjustment in monetary and fiscal policies to suit the pace and pattern of planned
development became imperative. The monetary policy since 1952 emphasized the twin aims of the
economic policy of the government: a) spread up economic development in the country to raise
national income and standard of living, and b) To control and reduce inflationary pressure in the
economy. This policy of RBI since the First plan period was termed broadly as one of controlled
expansion, i.e; a policy of ―adequate financing of economic growth and at the same time the time
ensuring reasonable price stability‖. Expansion of currency and credit was essential to meet the
increased demand for investment funds in an economy like India which had embarked on rapid
economic development. Accordingly, RBI helped the economy to expand via expansion of money
and credit and attempted to check in rise in prices by the use of selective controls. RBI’s Anti-
inflationary Monetary Policy since 1972.. Since 1972, the Indian economy has been working with
considerable inflationary potential------ rapid increase in money with the public and with the
banking system. There was also expansion of bank credit to finance trade and industry. RBI was
forced to abandon ‗controlled expansion‘ and adopt the policy of credit restraint or tight monetary
policy. RBI has generally followed this kind of monetary policy with varying degrees of success
till today.
35. 35. 35 AN EVALUATION OF THE MONETARY POLICY The objective of monetary policy
was at one time characterized by RBI itself as ‗controlled expansion.‘ On the one hand, RBI was
thinking steps such as the bill market scheme to expand bank credit to industry and trade and thus
help in economic development. On the either hand, RBI was using both quantitative (general
credit restraint) and selective credit controls so that the deployment of loans and advances by the
commercial banks for speculative purposes was under control. There was necessary to keep the
rising prices under check. Thus, the monetary policy had twin aims- expansion of the economy
and control of inflationary pressure. Monetary policy RBI has certain inherent constraints and
obviously limited in its usefulness. Finally, the weapons and the powers available to RBI are such
that they cover only organized banking sector viz. commercial banks and cooperative banks. To
the extent inflationary pressure is the result of bank finance, Reserve Banks general and selective
controls will have positive effect. But if inflationary pressure is really brought about by deficit
financing and shortage of goods, RBI‘s control may not have effect at all. This is what is probably
happening in Indian in recent years. Besides, it should always be kept in mind that RBI has no
power over non-banking financial institutions as well as indigenous bankers who play such major
role in financing trade and industry.
36. 36. 36 OBJECTIVES OF MONETARY POLICY:- 1. Price stability: The chakravarty committee
argued that, in the context of planned economic development, monetary authorities should aim at
―price stability‖ in the broadest sense. Price stability here does not mean constant price level but
it is consistent with an annual rise of 4% in the wholesale price index. To achieve this objective,
the government should aim at raising output levels, while RBI should control the expansion in
 reserve money and the money supply. 2. Monetary targeting: Emphasizing the inter-relation
between money, output and prices, the chakravarty committee has recommended the formation of
a monetary policy based on monetary targeting. According to the committee, target for growth in
money supply in a broad sense during a given year should be in terms of a range. a) based on
anticipated growth in output, and b) in the light of the price situation. The target range should be
announced in advance, the target for money supply should be reviewed in the course of the year to
accommodate revisions, if any, in the anticipated growth in output and any change in the price
situation 3. Change in the definition of budgetary deficit: Till now the budgetary deficit of the
central government essentially took from increase in treasury bills outstanding. Not all the treasury
bills were held by RBI but part of treasury bills were absorbed by the public. Since the present
concept of budget deficit did not distinguish between the amounts held by RBI, it overstated the
extent of monetary impact of fiscal operation. Accordingly, the chakravarty committee suggested
a change in the definition of budgetary deficit, so that there could be clear distinction between
revenue deficit, fiscal deficit and overall budgetary deficit.
37. 37. 37 4. Interest rate policy: At present the interest rate structure is completely administered by
the monetary authorities under the general direction of the government. According to the
chakravarty committee, the present system of administered interest rates has become unduly
complex and needs to be modified the committee has mentioned some of the important aspects of
interest rate policy which need to be taken into account, while modifying the administered interest
rate structure as for example increasing the pool of financial savings, providing a reasonable
return on saving of small savers, reinforcing anti-inflationary policies the need to provide credit at
concessional rate of interest to the priority sector and the profitability of banks , etc. Thus, the
chakravarty committee envisaged a strong supportive role for interest rate policy in monetary
regulating based on monetary targeting. 5. Restructuring of the money market in India: The
committee envisage (predicted) an important role in treasury bill market, the call money market,
the commercial bills market and the inter-corporate funds market in the allocation of short term
resources, with minimum of cost and minimum of delay, further, according to the committee, a
well-organized money market provided an efficient mechanism for the transmission of the
monetary regulation to the rest of economy. Accordingly, the committee has recommended that
RBI should take measures to develop an efficient
38. 38. 38 RBI Repo rate or key short term lending rate When reference is made to the Indian interest
rate this often refers to the repo rate, also called the key short term lending rate. If banks are short
of funds they can borrow rupees from the Reserve Bank of India (RBI) at the repo rate, the interest
rate with a 1 day maturity. If the central bank of India wants to put more money into circulation,
then the RBI will lower the repo rate. The reverse repo rate is the interest rate that banks receive if
they deposit money with the central bank. This reverse repo rate is always lower than the repo
rate. Increases or decreases in the repo and reverse repo rate have an effect on the interest rate on
banking products such as loans, mortgages and savings. RBI latest interest rate changes Change
date Percentage January 25 2011 6.500 % November 02 2010 6.250 % September 16 2010 6.000
% July 27 2010 5.750 % July 02 2010 5.500 % April 20 2010 5.250 % march 19 2010 5.000 %
April 21 2009 4.750 % march 05 2009 5.000 % January 05 2009 5.500 %
39. 39. 39 Interest Rates based on 10 year Government Bond Yield
40. 40. 40 Most recent CPI India (inflation figure) 9.303 % When we talk about the rate of inflation in
India, this often refers to the rate of inflation based on the consumer price index, or CPI for short.
The Indian CPI shows the change in prices of a standard package of goods and services which
Indian households purchase for consumption. In order to measure inflation, an assessment is made
of how much the CPI has risen in percentage terms over a give period compared to the CPI in a
preceding period. If prices have fallen this is called deflation (negative inflation). CPI IN recent
years Period Inflation January 2011 9.303 % January 2010 16.216 % January 2009 10.448 %
January 2008 5.512 % January 2007 6.723 % January 2006 4.372 % January 2005 4.365 %
January 2004 4.348 % January 2003 3.426 % January 2002 4.944 %
41. 41. 41 Inflation Rate in India Money Multiplier in India
42. 42. 42 Top 10 Gold Holders Inflation & Policy Rate For 2010
43. 43. 43 RBI’s Inflation Benchmark Primary Article Inflation: Revision
44. 44. 44 THE RESERVE BANK'S ACCOUNTS FOR 2009-10 The balance sheet of the Reserve
Bank changed significantly during the course of the year, reflecting the impact of monetary and
liquidity management operations undertaken by the Bank to manage the recovery in growth while
 containing inflation. Monetary policy measures affected through increases in the Cash Reserve
Ratio (CRR) contributed to the expansion in the Bank's liabilities in the form of banks' deposits
while notes in circulation continued to dominate the liability side. Foreign currency assets of the
Bank continued to dominate on the asset side. As return on foreign assets tracked the near zero
policy rates maintained by the central banks of the advanced economies, income on such assets
declined significantly. In monetary operations, sustained period of large net absorption of liquidity
through reverse repo also involved higher net interest outgo. Reflecting these, the Bank's gross
income fell from `60,732 crore in 2008-09 to `32,884 crore in 2009-10. Gross expenditure of the
Bank rose modestly from `8,218 crore to `8,403 crore. After meeting the needs of necessary
transfer to the Contingency Reserve (CR) and the Asset Development Reserve (ADR), `18,759
crore was allocated for transferring to the Government. 1. The size of the Reserve Bank‘s balance
sheet increased significantly in 2009-10 (July-June) in response to its policy actions and market
operations. On the liability side, there was a high growth in notes in circulation, banks‘ deposits
with the Reserve Bank due to the policy driven increases in CRR as well as deposit growth in the
banking system and the Central Government‘s deposits with the Reserve Bank. The outstanding
balances maintained by the Central Government under the Market Stabilization Scheme (MSS),
however, declined. 2. On the asset side, there was significant increase in Bank‘s portfolio of
domestic assets in the form of government securities parked by the banks with the Reserve Bank
for availing funds under repo. Foreign currency assets declined largely due to valuation effect and
use of a part of such assets for purchase of gold from the IMF.
45. 45. 45 3. The Reserve Bank has continued to present its accounts covering the period July- June
for the last 70 years. The financial statements of the Bank are prepared in accordance with the
Reserve Bank of India Act, 1934 and the notifications issued there under and in the form
prescribed by the Reserve Bank of India General Regulations, 1949. The Bank presents two
balance sheets. The first one relating to the sole function of currency management is presented as
the Balance Sheet of the Issue Department. The second one reflecting the impact of all other
functions of the Bank is known as the Balance Sheet of the Banking Department. The key
financial results of the Reserve Bank‘s operations during the year 2009-10 (July- June) are
presented here. RBI’s Assets & Source of Income
46. 46. Supply accurate and timely data for academic research as well as the general public
Communicating with the Public Our emphasis on communication involves a range of activities, all
aimed at sharing knowledge about the financial arena. The Reserve Bank‘s web site
(www.rbi.org.in) provides a full range of information about our activities, our publications, our
history and our organization. The web site is updated regularly, with the most recent publications,
speeches, press releases and circulars. Of note, relevant press releases and circulars are posted in
13 local languages. Provide reliable, data-driven information for policy and decision-making 
Educate the public 46 Research, Data and Knowledge-Sharing: How We Communicate The
Reserve Bank has a rich tradition of generating sound economic research, data collection and
knowledge-sharing. Our economic research focuses on study and analysis of domestic and
international issues affecting the Indian economy. This is mainly done by the Department of
Economic Analysis and Policy and the Department of Statistics and Information Management.
This important work is designed to:
47. 47. Banking Ombudsman: The Reserve Bank‘s quasi-judicial authority for resolving disputes
between commercial banks, primary cooperative banks and regional rural banks and their
customers. There is one Banking Ombudsman in virtually every state.
(www.bankingombudsman.rbi.org.in) Banking Codes and Standards Board of India: The Reserve
Bank established this board to encourage transparency in lending and fair pricing. This will give
customers more confidence in the system and encourage more usage of formal banking.
(www.bcsbi.org.in)  Customer Service Department (CSD): Questions? Problems? Concerns?
Communicate with this department (helpcsd@rbi.org.in) which was set up in 2006, based at the
central office in Mumbai, to respond to system-level customer issues. 47 Customer Service: How
Can We Help You? Our customer outreach policy is aimed at informing the public, so that they
know what to expect, what choices they have and what rights and obligations they have in relation
to banking services. Our customer service initiatives are designed to protect customers‘ rights,
enhance the quality of customer service and strengthen the grievance redressal mechanism in the
banking sector as a whole—and at the Reserve Bank itself. Our efforts include:
48. 48. Spearhead the Reforms You initiate and monitor reforms and changes in India's financial
environment and manage an economy in transition. Your job offers the challenge of driving a
nation on the move. Team up with the Best You get to be a member of a team that shapes the
financial policies. You work with the government and top level financial minds. You work with
international organizations to contribute to thinking on global best practices  Wider Canvas You
get an opportunity to work on a wider canvas of operations, you are involved in formulation of
policies having nationwide implications. You get a multi- disciplinary job content and an
opportunity to contribute to nation building 48 Build Your Future with RBI RBI provides one of
the most intense training inputs and facilities at its own training establishments and outside.
Incentives for self-development include scholarships to acquire higher qualifications, facility to
pursue your own research, deputation to other institutions, participation in national and
international level conferences and seminars and sabbatical. Benefits of working with RBI
Working with RBI gives you a whole new perspective on various banking, economic and cultural
dimensions. But that isn't where it ends: you also get to work with experienced, qualified people
who've driven the country's economy for decades.
49. 49. Do Research that Matters You do research that induces policy changes. You have information
and data at your fingertips. Touch the lives of millions Your everyday job can make a difference
to a farmer, a small entrepreneur, an exporter, an industry, a financial entity, or even a common
man.  Go Global You get an opportunity to interact with some of the brightest minds across
sectors of economy and across the globe. You even negotiate treaties with multi lateral bodies or
guide other emerging economies. In domestic seminars and conferences you represent your
institution and internationally you represent your country. 49
50. 50. 50 Conclusion RBI is the apex banking institution in India. RBI is an autonomous body
promoted by the government of India and is headquartered at Mumbai. The RBI plays a key role
in the management of the treasury foreign exchange movements and is also the primary regulator
for banking and non-banking financial institutions. The RBI operates a number of government
mints that produce currency and coins. The RBI has been one of the most successful central banks
around the world in preventing the effects of the subprime crisis to the Indian economy,
particularly its banks. This adds a lot of credibility to every decision that is taken by them. Further,
as a large proportion of the Indian population is impacted by inflation, it was necessary for the
RBI to think about the majority and try to curb inflation by tightening its monetary stance. All the
functions of RBI, monitory, non monitory, supervisory or promotional are equally significant in
context of the Indian economy. Under the Banking Regulation Act, RBI has been given a wide
range of powers. Under the supervision & inspection of RBI, the working of banks has greatly
improved. RBI has been responsible for strong financial support to industrial & agricultural
development in the country.
51. 51. http://www.authorstream.com www.allfreeessays.com  www.company-
profile.reportlinker.com  www.banknetindia.com  http://www.blurtit.com/ 
http://www.drnarendrajadhav.info/drnjadhav_web_files/Published%20papers/EPW%20BALANC
E%20SHEET.pdf  http://www.scribd.com  http://www.rbi.org.in 51 BIBLOGRAPHY
Recommended


PowerPoint Tips Weekly

Online Course - LinkedIn Learning

Creative Insights: Renaldo Lawrence on Elearning

 Online Course - LinkedIn Learning

Social Media in the Classroom

Online Course - LinkedIn Learning

Objectives of central banks

pankaj1612

Central Banking (RBI)

Ashish Nangla

globalisation and the indian economy

marudhurimaha


 PPT on Demonetization
Achin Gupta

GST Power Point Presentation

praveendel

AI and Machine Learning Demystified by Carol Smith at Midwest UX 2017

Carol Smith

The AI Rush
Jean-Baptiste Dumont

 English
 Español
 Português
 Français
 Deutsch
 About

 Dev & API

 Blog

 Terms
  Privacy

 Copyright

 Support






LinkedIn Corporation © 2018