APresentation

onRole of Reserve Bank Of

Indiain

Indian EconomyPresented By: Sachin Nandha

Preamble : "...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."

Retrospect

Central Bank is an apex financial institution of a country. The Reserve Bank of India started working since, 1st April, 1935 in accordance with the provision of the Reserve Bank of India Act, 1934.Initially, the RBI was established as shareholder’s bank.

Nationalization of RBI

Since January 1, 1949, the the reserve bank of India is functioning as a state owned and state controlled(nationalized) bank. RBI was nationalized in tune with the changing national and international political and economical scenario.

Organization & management of RBI :

Central Board of Directors

Governor

Deputy Governors

Directors

Local Boards

Role of Reserve Bank of India

Issue of notesBanker, Agent and advisor to the Government Banker’s Bank Custodian of Foreign Exchange ReservesRegulation of Banking System Credit Control Other Functions

Issue of notes

The Reserve Bank of India enjoys monopoly in the issue of currency notes as central Bank of the country.In the year of 2006-07 reserve bank has allotted Rs. 2020 crore to security press for printing of notes and the number of units printed in this year stands at 1248.4 crore.

Against it in the year of 2007-08 (June-July) it has allocated Rs. 2026 crore and the number of units printed is 1393.

Money supply

22.421.3

22.4

19.4

22.5

20

Banker, Agent and advisor to the Government

736

Banker’s Bank

As an apex bank the RBI acts as banker of the banks and lender of the last resort. In case of need of funds, commercial banks can borrow funds from Reserve Bank on the basis of eligible securities or get financial accommodation in times of need or stringency by rediscounting their bills of exchange.

Custodian of Foreign Exchange Reserves

Maintaining external value of rupee.Adopting appropriate monetary polices for the economic stability in the country and thereby exchange stability in the long-term.

1 2

3

Movement of rupee vis-à-vis US dollar

4

Credit Control

The reserve Bank is the most appropriate body to control the creation of credit.For smooth functioning of the economy RBI control credit through,I. Quantitative or General Methods.II. Qualitative or selective methods.

I. Quantitative or General Methods

1) Cash Reserve Ratio (CRR)2) Statutory Liquidity Ratio (SLR)3)  Bank Rate 4)  Open Market Operation (OMO)5) Repo and Reverse repo rate

Cash Reserve Ratio (CRR)

CRR, or cash reserve ratio, refers to a portion of deposits (as cash) which banks have to keep/maintain with the RBI

Statutory Liquidity ratio

• Banks are required to invest a portion of their deposits in government securities as a part of their statutory liquidity ratio (SLR) requirements.

Bank rate• Bank rate is the minimum rate at which the

central bank provides loans to the commercial banks.

Open Market Operation

• An important instrument of credit control, the Reserve Bank of India purchases and sells securities in open market operations.

Repo rate & Reverse repo rate

A repurchase agreement or ready forward deal is a secured short-term (usually 15 days) loan by one bank to another against government securities.

II. Qualitative or selective methods

1) Selective credit control2) Rationing of Credit3) Moral Persuasion4) Direct action

Regulation of Banking System

Regulate the banking system.It has power of

Licensingmanagement branch expansion power of inspection of bank power to issue directions

Other Functions

i. Agriculture Credit ii. Industrial Finance iii. Publication of Data iv. Banking Education and Training v. Remitting Facility vi. Conversion of currency vii. To accept Deposits viii.Transactions with international institutions

ix. Transactions in precious metals x. Expansion of Banking facilitiesxi. Supply of Development Finance

Thank you