GOOD MORNING

RESERVE BANK OF INDIA Presented by Umer Mushtaq

Introduction
It is the Central Bank of India Established in 1934 under the RESERVE BANK OF INDIA ACT 1934. Its head quarters is in Mumbai (Maharashtra). Its present governor is Duvvuri Subbarao. It has 26 offices in which four are regional offices located in metropolitan cities.

Breif History
It was set up on the recommendations of the Hilton Young Commission .It was started as share-holders bank with a paid up capital of INR 5 crores. Initially it was located in Kolkata. It moved to Mumbai in 1937. Initially it was privately owned. The govt. had a nominal value of shares of INR 2,20,000. later on in 1949, the bank was nationalised and is fully owned by the Govt. of India.

Preamble
The Preamble of the Reserve Bank of India describes the basic objectives 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."

Organization of The RBI

The Reserve Bank's affairs are governed by a central board of directors and four local boards of directors. The central board performs the functions of general superintendence and direction of the banks affairs. Central board: Appointed/nominated by the GOI for a time period of four years. It includes the following; Official directors Non-official directors Committee of Central board Board for Financial Supervision(BFS)

Organization of The RBI

Board for Payment and Settlement system(BPSS) Sub - Committees of the Central Board Local board: There are four local boards, one each for the four regions of the country situated in Mumbai, New Delhi, Chennai and Kolkata. The membership of each local board consists of five members appointed by the central govt. for a period of four years. The functions of the local board include: to advise central board on local matters to perform such other functions as may be delegated by the central board from time to time.

Departments
The RBI has 26 departments focusing on policy issues in RBIs functional areas etc. lets briefly know the functions of each department. 1.Customer Service Department: In order to enhance the quality of customer service and strengthen the grievance redressal mechanism, the RBI constituted a new department namely CSD. 2. Department of Currency Management: This department performs the core statutory function of note and coin issue and currency management. 3. Urban Banks Department: This department carries out the function of regulation and supervision of UCBs. 4. Rajbhasha Department: Translating annual reports, news letters, bulletins etc. Imparting training to officers/employees in Hindi language, Use of Hindi on computers, and English-Hindi translation.

Departments
5. Rural Planning and Credit Department: RPCD is primarily concerned with formulating policies relating to rural credit and monitors timely and adequate flow of credit to the rural population for agricultural activities etc. 6. Foreign Exchange Department: It is concerned with facilitating external trade and developing foreign exchange markets of India. 7. Human Resources Development Department: Recruitment Performance and Potential Appraisal Placement etc. 8. Financial Markets Department: This department wad established with the objective of integrating the banking sector to the financial markets and help the bank to conduct monetary operations viz. OMOs,LAF etc.

Departments
9. Financial Stability Unit: Development of a time series of a core set of financial indicators. Conduct of systemic stress tests to assess resilience. Preparation of financial stability reports. 10. Inspection Department (Internal): 11. Department of Banking Supervision: This department is entrusted with the authority of regulating and supervising the Indian Banking System including FIs. 12. Department of Non-Banking Supervision (DNBS): Mainly concerned with supervising the NBFCs.

Departments
13. Department of Banking Operations and Development: The Department is entrusted with the responsibility of regulation of commercial banks under the provisions contained in Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934 and other related statutes and development of banking policies. 14. Department of Information Technology: Computerizing the operation in RBI Monitoring the progress of IT in banks. 15. Legal Department: 16. Monetary Policy Department: 17. Internal Debt Management Department: Managing public debt of the GOI/state govts. Management of PDs system and development of govt. securities market.

Departments
18. Department of External Investments and Operations: Invest of foreign exchange reserves of the RBI. 19. Department of Economic & Policy Research: Concerned with studying the issues both domestic and international affecting the Indian economy. 20. Department of Statistics and Information Management: Collection, processing and dissemination of data on banking, corporate and external sectors. 21. Department of Payment and Settlement Systems: 22. Secretary's Department: Secretarial work involving meetings of central board and its committees etc. Secretarial work relating to deputy governors committee meetings. 23. External Relations and Customer Service. Annual, quarterly, monthly and weekly reports etc.

Departments
23. Department of Communication: 24. Department of Expenditure and Budgetary Control: 25. Department of Administration and Personnel Management: 26. Department of Banking Operation and Development: 27. Department of Govt and Bank accounts.

Subsidiaries
The Reserve Bank of India has fully-owned four subsidiaries which include National Housing Bank(NHB). Deposit Insurance and Credit Guarantee Corporation of India(DICGC). Bharatiya Reserve Bank Note Mudran Private Limited(BRBNMPL). National Bank for Agriculture and Rural Development (NABARD). The Reserve Bank of India has recently divested its stake in State Bank of India to the Government of India. RBI has also set up some trainning institutions.

Legal Framework
There are various acts which govern the functioning of RBI, specific functions, banking operations and individual institutions owned by RBI. 1. Umbrella Acts: The reserve Bank of India Act, 1934, governs the RBI functions The Banking regulation Act, 1949, governs the financial sector. 2. Acts Governing Specific Functions. like The Securities Contract(Regulation) Act, 1956, regulates govt securities market, FEMA Act, 1999 etc. 3. Acts Governing Banking Operations. like Negotiable Instruments Act, 1881 etc. 4. Acts Governing Individual Institutions. like State Bank of India Act, 1954, The Industrial Development Bank of India Act, the National Housing Bank Act etc.

Functions of RBI
Functions of RBI include Monetary Authority Regulator & Supervisor of Financial System, and Manager of Foreign Exchange Issuer of Currency Developmental Role.

Formulates Monetary Policy.

Monetary policy-making is the central function of the Reserve Bank. The broad objectives of monetary policy in India are (a) maintaining price stability and (b) ensuring adequate flow of credit to productive sectors to assist growth by influencing the cost and availability of money and credit. It uses qualitative and quantitative measures to implement the monetary policy. Quantitative Measures : Quantitative Measures BANK RATE also called discount rate.It also includes repo rate. OPEN MARKET OPERATIONS buying and selling of government securities. VARIABLE RESERVE RATIO it includes CRR and SLR.

Qualitative measures : Qualitative measures Margin Requirements Moral Suasion Rationing of Credit

Regulates & Supervises the Financial

System:
Objective: To Maintain Public confidence in the system, protect depositors interest & provide cost effective banking services to the public. What RBI does.. Prescribes broad parameters of banking operations within which the country's banking and financial system functions. The Reserve Bank of India performs this function under the guidance of the Board for Financial Supervision (BFS).

 Banker to the Government:

The RBI as the central bank manages the public debt of the central and the state govts and also acts as the banker to them under the provisions of the RBI Act 1934. RBI Act provides that the central govt shall entrust the RBI with all its money, remittance, exchange, and banking transactions in India and the management of public debt and shall also deposit all its cash balances with the RBI free of interest. It also includes: provides a range of banking services acceptance of money on govt A/Cs, payment/withdrawal of funds etc., provides safe custody facilities; manages special funds like the consolidated sinking fund, the calamity relief fund, issues and manages bonds etc. provides ways and means advances to both the central and the state govts. introduced the primary dealer system in 1996 for the development of govt securities market etc.

 Manager of Exchange Control:

The function of the RBI is to develop and regulate the Forex market. The banks role is to facilitate external trade and payment and promote orderly development and maintenance of foreign market in India. The RBI regulate forex transactions under the provisions of FEMA Act, 1999. The RBI periodically enters into the forex transactions to prevent undue fluctuations in the exchange rate and to ensure orderly market conditions. In pursuit of developing the forex market RBI allowed Authorized Dealers(ADs) to borrow abroad and also allowed FIIs to invest up to 49% of the paid-up capital of Indian companies with the approval of the shareholders by a special resolution.

 Note Issuing Agency:

The RBI has been entrusted with the role of issuing the notes and managing the currency by the preamble of the RBI Act, 1934. RBI issues notes in the denomination of INR 2, 5, 10, 50, 100, 500, and INR 1000. The GOI issues one rupee coins and one rupee notes but they are put into circulation only through the RBI. Currency management involves efforts to achieve self-sufficiency in the production of currency notes and coins with a judicious denomination mix etc. These functions i.e. note issue and currency management are discharged in 18 regional Issue Offices/sub-offices and a wide network of currency chests maintained by banks and govt treasuries spread across the country. Bank notes are printed at four notes presses, of which the currency Notes Press, Nasik, and Bank Note Press, Dewas, are owned by the central govt and the presses at Mysore and Salboni are owned by the Bharatiya Reserve Bank Note Mudran Limited, a wholly-owned subsidiary of the RBI.

 Banker to the Banks:

The Banks medium-term objective is to bring down the CRR to three per cent of the banks Net Demand and Time Liabilities(NDTL). The scheduled banks maintain balances in their current account with the RBI mainly for maintaining the CRR and as working funds for clearing adjustments.

The RBI also provides a variety of financial facilities and accommodations to scheduled banks. It takes care of temporary liquidity gaps in the banking system through refinancing schemes(i.e. refinancing of bills). It also acts as a lender of last resort to the banks to foster financial stability.

 Developmental role:
The RBI performs various developmental and promotional activities to support national objectives. The RBI has helped to set up a number of development financial institutions such as the Industrial Development Bank of India(IDBI), the National Bank for Agriculture and Rural Development (NABARD), the Industrial Reconstruction Bank of India(IRBI), the National Housing Bank(NHB) and various other institutes. It also has helped in the development of UTI, Discount and Finance House of India(DFHI) and the Securities Trading Corporation of India(STCI) to promote and develop financial markets. Another important developmental role that RBI carries out is that it has made priority sector lending mandatory for both public and private sector banks. RBI in its pursuit of developmental functions so far as banking sector is concerned established a committee under the chairmanship of Mr. Narasimham to suggest the future direction of banking sector. It suggested various reforms in two phases one in 1991 and another in 1998. The recommendations include deregulation of interest rate structure, deregulation of the entry norms for private sector banks and foreign banks, bringing NBFCs under the ambit of regulatory framework, capital adequacyetc.

Conclusion
The RBI has done commendable job as a monetary authority and regulator of the financial system. It has adopted the best international practices in the dissemination of information and rational of policies(i.e., the extent of information disclosed helps market to make its own projections of interest rates). The bank intervened in markets where necessary and allowed the market participation to build skills and gain maturity to accept the new system. It has adopted a consultative and participative approach to introduce changes. The RBI has managed foreign exchange resources effectively. The current level of foreign exchange reserves is enough and adequate to meet the liabilities.

Thank you