contents

Introduction Preamble of the Reserve Bank of

India Role of RBI

Policy rates
RBI; Actions in Times of Crisis

Introduction
Central bank is the apex bank in a country. It

is called by different names in different country . Central bank countries

India England America Reserve Bank of India Bank of England Federal Reserve System

France

Bank of France

Preamble of the Reserve Bank of India

"...

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."

Reserve Bank of India(RBI)

It was established in the year 1935 under the

reserve bank of India act, 1934.

The Central Office of the Reserve Bank was

initially established in Calcutta but was permanently moved to Mumbai in 1937.

Indias monetary authority

Supervisor of financial system

Managed by Central Board of Directors.

Role of RBI on Indian economy

The Reserve Bank is the umbrella network for numerous

activities, all related to the nations financial sector, encompassing and extending beyond the functions of a typical central bank. This section provides an overview of our primary activities: Provision of finance Promotional activities Issuer of Currency Banker and Debt Manager to Government Banker to Banks Regulator of the Banking System Manager of Foreign Exchange Regulator and Supervisor of the Payment and Settlement Systems

Provision of finance
Reserve bank of India provides necessary

finance needed by agriculturists through commercial banks, co-operatives and regional rural banks. Two funds were established after amending the RBI act 1) National agricultural credit(long term operations)fund; It advances long-term loans to state governments.
2) National agricultural credit(stabilization) fund;

 It conducts a number of studies & surveys pertaining

to the rural credit aspects in the country.

The RBI felt that co-operatives are the major force in

the sphere of agricultural credit & accordingly the following policies were made. Reorganization of the state & central co-operative banks Rehabilitation of central co-operative banks. Strengthening of PACS Training programmes

Regulatory functions of RBI

Credit control:

It refers to the regulation by monetary

authority[RBI] of the volume & direction of credit of the banking system.

In times of inflation -contraction of credit. During deflation-expansion of credit.

For price & exchange stability.

OBJECTIVES OF CREDIT CONTROL

To stabilise the internal price level.

To stabilise the rate of foreign exchange.

To protect the outflow of gold. To control business cycles. To meet business needs. To have growth with stability.

INSTRUMENTS OF CREDIT CONTROL

Direct Instruments
Cash Reserve Ratio (CRR).
Statutory Liquidity Ratio (SLR). Refinance facilities.

 Indirect Instruments

Liquidity Adjustment Facility (LAF). Open Market Operations (OMO). Market Stabilisation Scheme (MSS).

Repo/reverse repo rate.

Bank rate.

Policy rates
Bank rate 6%

Repo rate Reverse repo rate

Cash reserve ratio Statutory liquidity ratio Prime lending rate Savings bank rate

5.25% 3.75%
6% 25% 11-12% 3.5%
As on 22-6-

 The Reserve Bank is the nations sole note issuing

authority. It has its issue department which issues notes & coins to commercial banks.
Coins are manufactured in the Govt. mint but they are

put into circulation through the central bank.

Central banks is required to keep a certain amount of

gold & foreign securities against the issue of notes.

RBI is required to keep Rs.115 crores in gold & Rs.85

Conti..
central bank ensures uniformity in the notes

issued which helps in facilitating exchange & trade within the country. It brings stability in the monetary system & creates confidence among the public. RBIs Anti-counterfeiting Measures Continual upgrades of bank note security features Public awareness campaigns to educate citizens to help prevent circulation of forged or counterfeit notes Installation of note sorting machines

note Printing Press

Denominations of coins and notes in circulation:

RBIs Clean Note Policy

Education campaign on preferred way to

handle notes: no stapling, writing, excessive folding and the like.

Timely removal of soiled notes: use of

currency verification and processing systems and sorting machines.

Exchange facility for torn, mutilated or

defective notes: at currency chests of

Banker and Debt Manager to Government

The role as banker and debt manager to

government includes several distinct functions: Undertaking banking transactions for the central and state governments to facilitate receipts and payments and maintaining their accounts. Managing the governments domestic debt with the objective of raising the required amount of public debt in a cost-effective and timely manner. 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.

 Public accounts departments.

Public debt offices.

Central Accounts Section.

Banker to Banks
Banks need their own mechanism to transfer

funds and settle inter-bank 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

products and services

Non-interest earning current accounts. Deposit Account Department. Remittance facilities.

Lender of the last resort.

Loans and advances.

Regulator of the Banking System

The Reserve Bank regulates and supervises

the nations financial system: Commercial banks and all-India development financial institutions.
Urban co-operative banks.
Regional Rural Banks (RRB), District Central

Cooperative Banks and State Co-operative Bank.

Non-Banking Financial Companies (NBFC).

Manager of Foreign Exchange

Regulating transactions related to the

external sector and facilitating the development of the foreign exchange market.
Ensuring smooth conduct and orderly

conditions in the domestic foreign exchange market.

Managing the foreign currency assets and

gold reserves of the country.

Payment and Settlement Systems

Retail payment systems. Large value systems.

Department of Payment and Settlement

Systems.
Department of Information Technology.

Developmental Role
Directed credit for lending to priority sector

and weaker sections.

Lead Bank Scheme. Sector specific refinance.

Strengthening and supporting small local

banks.
Financial inclusion.

 The Reserve Banks web site

(www.rbi.org.in) provides a full range of information about RBI activities, publications, history and organisation.
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

RBI; Actions in Times of Crisis

Carefully considered and calibrated reduction

of interest rates until situation has stabilised. Loosened restrictions on access to foreign currency. Creation of a rupee-dollar swap facility to manage short-term funding requirements. Establishment of a refinancing window and special-purpose vehicle for non-banking financial companies. Expansion of funding sources for umbrella financial institutions to keep credit flowing to

CONCLUSION
Thus the central bank plays an important role

in the economic growth of a developing economy through various measures discussed above.
It should promote economic growth with

stability.
Helps in attaining full employment of

resources.

Reference s
Agricultural finance & management- S. Subba

Reddy
P. Raghu Ram
Macro-economic theory- M. L. Jhingan www.rbi.org.in

Newswire 18 - THIRD QUARTER REVIEW RBI MONETARY POLICY: 08-09. Business Line January 28th

Thank you

Annual Policy Statement for the Year 2010-1120th April 2010

Part A. Monetary Policy

IV. Monetary Measures 42. On the basis of the current assessment and in line with the policy stance as outlined in Section III, the Reserve Bank announces the following policy measures: Bank Rate 43. The Bank Rate has been retained at 6.0 per cent. Repo Rate 44. It has been decided to: increase the repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 5.0 per cent to 5.25 per cent with immediate effect.

Conti
Reverse Repo Rate 45. It has been decided to:

increase the reverse repo rate under the LAF by 25 basis points from 3.5 per cent to 3.75 per cent with immediate effect. Cash Reserve Ratio 46. It has been decided to: increase the cash reserve ratio (CRR) of scheduled banks by 25 basis points from 5.75 per cent to 6.0 per cent of their net demand and time liabilities (NDTL) effective the fortnight beginning April 24, 2010. 47. As a result of the increase in the CRR, about Rs. 12,500 crore of excess liquidity will be absorbed from the system. 48. The Reserve Bank will continue to monitor macroeconomic conditions, particularly the price situation, closely and take further action as warranted.

Expected Outcomes
49. The expected outcomes of the actions are: (i) Inflation will be contained and inflationary expectations will be anchored.

(ii) The recovery process will be sustained.

(iii) Government borrowing requirements and the private credit demand will be met. (iv) Policy instruments will be further aligned in a manner consistent with the evolving state of the economy.

THIRD QUARTER REVIEW RBI MONETARY POLICY: 08-09

Discussed by: Aseem Sidhu

MONETARY MEASURES
Repo Rate, Reverse Repo Rate, CRR kept

unchanged.
Repo rate: 5.5% Reverse Repo : 4% CRR: 5%

Bank Rate kept unchanged at 6%.

FY09 GDP target revised down to 7% with

downward bias. CONTEXT: Previous FY09 GDP target was 7.58.0%. FY09 Mar-end inflation target below 3%. CONTEXT: Previous FY09 Mar-end inflation