Reserve Bank of India

INTRODUCTION

Regulatory framework of the country. Degrees of Imperfections cannot be denied Financial system deals in other peoples money Trust ,confidence and faith in it is crucially important for its smooth functioning

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Centre of the Indian Financial and Monetary System Apex Institution Guiding, Monitoring and Controlling. Started functioning from 1st April 1935 , on the terms of Reserve Bank of India Act,1934 Was a Private Shareholders Institution till Jan 1949 after which it became a state-owned institution under the RBI Act.

Functions of RBI

To maintain Monetary Stability To maintain Financial Stability To maintain stable payment system To promote the development of financial infrastructure of markets and systems credit allocation To regulate the overall volume of money

Roles of RBI

Note Issuing Authority Governments Banker Bankers Bank Supervising Authority Exchange control authority

Note issuing authority

Since its inception, RBI has the sole right or authority or monopoly of issuing currency notes other than one rupee notes and coins, and coins of smaller denominations. Although one rupee notes and coins, and coins of smaller denominations are issued by Government of India, they are put into circulation by RBI All affairs of the bank relating to note issue are conducted by its Issue Department

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Banker to The Government

Maintaining Accounts Receiving the Revenue of the governments Making Payments of the governments Providing Remittance Facilities Issuing Treasury Bills Providing Ways & Means Finance Advisor to the Government Representing the Government

Bankers Bank

The bank controls the volume of reserves of commercial banks and thereby determines the deposits/credit creating ability of the banks. The banks hold a part of their reserves with the RBI In times of need, the banks borrow funds from RBI It is, therefore, called the bank of last resort or the lender of the last resort.

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Clearing House & Remittance Facilities Real Time Gross Settlement: Introduced in 2004, it is the beginning of a clearing system at the national level On the whole, the RBI is the ultimate source of money and credit in India

Supervising Authority

Supervise and control commercial and cooperative banks. To issue the licenses for the establishments of new banks To issue licenses for setting up of bank branches To prescribe minimum requirements regarding paid-up capital and reserves, maintenance of cash and other liquid assets.

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To inspect the working of banks in India as well as abroad in respect of their Organizational set- up To conduct the investigations , from time to time , regarding irregularities, frauds, complaints, etc To control methods of operations of banks To control appointment, re-appointment, termination of appointment of the chairman and CEOs of Private sector banks

Exchange Control Authority

It manages the exchange rate between the rupee and other currencies To negotiate with the monetary authorities and financial institutions like IMF, World Bank and Asian Development Bank. The RBI is the custodian of the countrys foreign exchange reserves, and it is vested with the responsibility of managing the investment and utilization of the reserves in the most advantageous manner.

Techniques used by RBI

OMO - Open market operations. An open market operation (also known as OMO) is an activity by a central bank to buy or sell government bonds on the open market. Bank Rate - The rate at which RBI rediscounts the bills. Cash Reserve Ratio The CRR refers to the cash which banks have to maintain with the RBI as a percentage of their demand liabilities. Statutory Liquidity Ratio The SLR is the ratio of cash in hand exclusive of cash balances maintained by banks for CRR.

Recent policy rates

Bank Rate: 9% Repo Rate: 8% Reverse Repo Rate:7.00% CRR: 4.5% SLR: 23% Base Rate: 7.5%-8% Saving Bank Rate: 3.5% Deposit Rate: 6%-7.5%