8/10/2019 ravirbi-140622085728-phpapp02

1/37

8/10/2019 ravirbi-140622085728-phpapp02

2/37

INTRODUCTION TO RBI

Established in April 1935under the RESERVEBANK OF INDIAN ACT 1934.

Head Quarters MUMBAI

The Reserve Bank of India is thecentral banking institution of Indiaand controls the monetary policy of

the rupee as well as currencyreserves.

Present Governor P Raghuram rajan .

8/10/2019 ravirbi-140622085728-phpapp02

3/37

History Of RBI

It was set up on the recommendations of Hilton YoungCommission

It was started as share-holders bank with a paid up capital of 5crores

Initially it was located in KolkataIt moved to Mumbai in 1937Initially it was privately ownedSince 1949 , the RBI is fully owned by the Government of India.Its First governor was Sir Osborne A.SmithThe First Indian Governor was Sir Chintaman D.Deshmukh

8/10/2019 ravirbi-140622085728-phpapp02

4/37

8/10/2019 ravirbi-140622085728-phpapp02

5/37

REGIONAL OFFICE AND SUBSIDARIES Has 27 regional offices. Has five training establishments College of Agricultural Banking and Reserve Bank of India

Staff College Pune. National Institute for Bank Management- Pune. Indira Gandhi Institute for Development and Research -

Mumbai. Institute for Development and Research in Banking

Technology (IDRBT)- Hyderabad.SUBSIDIARIES

Deposit Insurance and Credit Guarantee Corporation ofIndia(DICGC).

Bharatiya Reserve Bank Note Mudran Private LimitedBRBNMPL .

8/10/2019 ravirbi-140622085728-phpapp02

6/37

Regional offices of RBI

8/10/2019 ravirbi-140622085728-phpapp02

7/37

FUNCTIONS OF RBI

Financial supervision. Monetary management. Issue of currency. Banker to government. Banker to bank. Formulate monetary policy. Financial regulation and management. Manager of foreign exchange. Development role.

8/10/2019 ravirbi-140622085728-phpapp02

8/37

The Reserve Bank of India performs this function under

the guidance of the Board for Financial Supervision(BFS). The Board was constituted in November 1994 asa committee of the Central Board of Directors of the

Reserve Bank of India. Objective

Primary objective of BFS is to undertake consolidatedsupervision of the financial sector comprisingcommercial banks, financial institutions and non-bankingfinance companies.

Financial Supervision

8/10/2019 ravirbi-140622085728-phpapp02

9/37

Constitution

The Board is constituted by co-opting four Directors from theCentral Board as members for a term of two years and ischaired by the Governor. The Deputy Governors of theReserve Bank are ex-officio members. One DeputyGovernor, usually, the Deputy Governor in charge of banking

regulation and supervision, is nominated as the Vice-Chairman of the Board.

BFS meetings

The Board is required to meet normally once every month. Itconsiders inspection reports and other supervisory issues

placed before it by the supervisory departments.

8/10/2019 ravirbi-140622085728-phpapp02

10/37

Monetary authority

Main monetary authority of the country.

It formulates, implements and monitors themonetary policy as well as it has to ensure anadequate flow of credit to productive sectors.

The RBI controls the monetary supply,monitors economic indicators like the grossdomestic product and has to decide the designof the rupee banknotes as well as coins .

8/10/2019 ravirbi-140622085728-phpapp02

11/37

Issuer of currency Design, printing anddistribution.

The bank issues andexchanges or destroyscurrency and coins not fit for

circulation.

The objectives are giving the public adequate supply ofcurrency of good quality andto provide loans tocommercial banks to maintainor improve the GDP.

8/10/2019 ravirbi-140622085728-phpapp02

12/37

Minimum Reserve System

Principle of Currency Note Issue.

RBI can issue currency notes as much as thecountry requires, provided it has to make asecurity deposit of Rs. 200 crores, out of whichRs. 115 crores must be in gold and Rs. 85crores must be FOREX Reserves.

This principle of currency notes issue is knownas the 'Minimum Reserve System'.

8/10/2019 ravirbi-140622085728-phpapp02

13/37

BANKER TO THE GOVERNMENT

Banker to the Government: performsmerchant banking function for the centraland the state governments; also acts astheir banker.

BANKER TO THE BANK

8/10/2019 ravirbi-140622085728-phpapp02

14/37

FINANCIAL REGULATION AND MANAGEMENT

As the regulator and thesupervisor of the bankingsystem, the Reserve Bank has acritical role to play in ensuring

the systems safety andsoundness on an ongoing basis.

The objective of this function is to protect the interest ofdepositors through an effective prudential regulatoryframework for orderly development and conduct of bankingoperations, and to maintain overall financial stabilitythrough various policy measures.

8/10/2019 ravirbi-140622085728-phpapp02

15/37

Manager of Foreign Exchange

To facilitate external trade and payment.

It acts as a custodian and Manages theForeign Exchange Management

Act,(FEMA) 1999.

RBI buys and sells foreign currency to maintain the exchangerate of Indian Rupee v/s foreign currencies like the US Dollar,Euro, Pound and Japanese yen.

OBJECTIVE: TO FACILITATE EXTERNAL TRADEAND PAYMENT AND PROMOTE ORDERLYDEVELOPMENT AND MAINTENANCE OF FOREIGN

EXCHANGE MARKET IN INDIA.

8/10/2019 ravirbi-140622085728-phpapp02

16/37

The central bank has to perform a wide rangeof promotional

functions to supportnational objectives andindustries.

DEVELOPMENTAL ROLE

SACP.KCC.NATURAL CALAMITIES.LEAD BANK SCHEME.EXPORT CREDIT.

8/10/2019 ravirbi-140622085728-phpapp02

17/37

Special Agricultural CreditPlan

View to augmenting the flow of credit toagriculture.

Under the SACP, banks are required to fix self-set targets showing an increase of about 30per cent over previous years disbursementson yearly basis (April March).

The public sector banks- 1994. Private Sector banks -2005-06.

8/10/2019 ravirbi-140622085728-phpapp02

18/37

Kisan Credit Cards

1998-99.

To enable the farmers to purchase agricultural inputsand draw cash for their production needs.

On revision of the KCC Scheme by NABARD in 2004, thescheme now covers term credit as well as workingcapital for agriculture and allied activities and areasonable component for consumption needs.

Under the scheme, the limits are fixed on the basis ofoperational land holding, cropping pattern.

8/10/2019 ravirbi-140622085728-phpapp02

19/37

Natural Calamities

Relief Measures In order to provide relief to bankborrowers in times of natural calamities, theReserve Bank has issued standing guidelines tobanks.

Rescheduling / conversion of short-term loansinto term loans;

Fresh loans; Relaxed security and Non-compounding of interest in respect of loans

converted / rescheduled; and moratorium of atleast one year.

8/10/2019 ravirbi-140622085728-phpapp02

20/37

Lead Bank Scheme

Lead Bank Scheme - 1969. Here designated banks were made key instruments

for local development and were entrusted with theresponsibility of identifying growth centres, assessing

deposit potential and credit gaps and evolving acoordinated approach for credit deployment in eachdistrict, in concert with other banks and otheragencies.

The Reserve Bank has assigned a Lead DistrictManager for each district who acts as a catalyticforce for promoting financial inclusion and smoothworking between government and banks.

8/10/2019 ravirbi-140622085728-phpapp02

21/37

Export Credit

Recognising the important role of exports inmaintaining the viability of external sector andin generating employment, the Reserve Bank

had sought to ensure adequate availability ofconcessional bank credit to exporters.

It took the lead role in setting up the ExportImport Bank of India (EXIM Bank) in January1982.

8/10/2019 ravirbi-140622085728-phpapp02

22/37

ROLE OF RBI IN INFLATION CONTROL

Inflation arises when the demand increases and there is ashortage of supply There are two policies in the hands of theRBI.

Monetary Policy: It includes the interest rates. When the bankincreases the interest rates than there is reduction in the borrowers and people try to save more as the rate of interesthas increased.

Fiscal Policy: It is related to direct taxes and governmentspending. When direct taxes increased and governmentspending increased than the disposable Income of the peoplereduces and hence the demand reduces.

8/10/2019 ravirbi-140622085728-phpapp02

23/37

Quantitative Measures

Quantitative Measures BANK RATE also called DiscountR ate .It also includes Repo Rate .Open Market Operations buying and selling of government

securities.Variable Reserve Ratio it includes C.R.R and S.L.R

Qualitative Measures1. Moral suasion2. Direct Action3. Prescription of margin.4. Consumer credit regulation.

8/10/2019 ravirbi-140622085728-phpapp02

24/37

BANK RATE

Its the interest rate that is charged by a countrys centralbank on loans and advances to control money supply in theeconomy and the banking sector.

The present bank rate is 8.75%

REPO RATE

Whenever the banks have any shortage of funds they can borrow it from the central bank. Repo rate is the rate at whichour banks borrow currency from the central bank.

A reduction in the repo rate will help banks to get Money at acheaper rate .

The present repo rate is 7.75 %

8/10/2019 ravirbi-140622085728-phpapp02

25/37

REVERSE REPO R TE

Its the rate at which the banks park surplus fundswith reserve bank.

While the Repo rate is the rate at which the banksborrow from the central bank.

It is mostly done , when there is surplus liquidity in

the market by the central bank.

The present reverse repo rate is 6.75 %

8/10/2019 ravirbi-140622085728-phpapp02

26/37

CASH RESERVE RATIO

Cash Reserve Ratio (CRR) is the amount ofCash(liquid cash like gold)that the banks have to keepwith RBI.

The present CRR rate is 4 %.

8/10/2019 ravirbi-140622085728-phpapp02

27/37

STATUTARY LIQUIDITY RATIO

It is the amount a commercial bank needs to maintainin the form of cash, or gold or govt. approved securities(Bonds) before providing credit to its customers.

SLR rate is determined and maintained by the RBI(Reserve Bank of India) in order to control theexpansion of bank credit.

The present SLR rate is 23%.

8/10/2019 ravirbi-140622085728-phpapp02

28/37

BASE RATE

The Base Rate is the minimum interest rate ofa Bank below which it cannot lend, except incases allowed by RBI.

9.80 10.25 %

8/10/2019 ravirbi-140622085728-phpapp02

29/37

REGULATION OF BANKING SYSTEM

The prime duty of the reserve Bank is to regulate the bankingsystem of our country in such a way that the people of the countrycan trust in the banking Up to perform its duty.The Reserve Bank has following powers in this regard:

Licensing:According to the section 22 of the Banking Regulation Act, every

bank has to obtain license from the Reserve Bank. The ReserveBank issues such license only to those banks which fulfillcondition of the bank.

8/10/2019 ravirbi-140622085728-phpapp02

30/37

Management:

Section 10 of the Banking Regulation Act embowered theReserve Bank to change manager or director of any bank if itconsiders it necessary or desirable.

Branch Expansion:

Section 23 requires every bank to take prior permission fromReserve Bank to open new places of business in India.

Power of inspection of Bank:

Under Section 35, the Reserve Bank may inspect any bank andits books and accounts either at its own initiative or at theinstance of the Central Government.

8/10/2019 ravirbi-140622085728-phpapp02

31/37

PUBLICATIONS OF RBI

AnnualAnnual Report Report on Trend and Progress of Banking in India

Report on Currency and FinanceHandbook of Statistics on the Indian EconomyState Finances: A Study of BudgetsA Profile of Banks

Statistical Tables Relating to Banks in India Basic Statistical Returns of Scheduled Commercial Banksin India

8/10/2019 ravirbi-140622085728-phpapp02

32/37

Half Yearly

Financial Stability Report

Quarterly Macroeconomic and Monetary Development Occasional Papers Quarterly Statistics on Deposits and Credit of

Scheduled Commercial Banks

Monthly RBI BulletinMonetary and Credit Information Review

Weekly Weekly Statistical Supplement

Occasional RBI Working Paper Series (Web version)

8/10/2019 ravirbi-140622085728-phpapp02

33/37

Second Quarter Review of MonetaryPolicy Statement 2013-14

Growth Modest improvement in growth is expected in

the second half (H2) of 2013-14 following arebound in agriculture and an improvement inexports

With deceleration in private consumption andfall in investment, overall demand conditionsremain weak.

8/10/2019 ravirbi-140622085728-phpapp02

34/37

Second Quarter Review of MonetaryPolicy Statement 2013-14

Inflation WPI inflation is ruling above the Reserve Banks

comfort level and may remain range-boundaround the current level during H2 of 2013-14.Moreover, the persistence of high CPI inflationremains a concern.

The good monsoon should have a salutary effecton food inflation, but second-round effects fromalready high food and fuel inflation could impartupside pressures on prices of other commoditiesand services.

8/10/2019 ravirbi-140622085728-phpapp02

35/37

Second Quarter Review of MonetaryPolicy Statement 2013-14

Reduced the marginal standing facility (MSF)rate by 25 basis points from 9.0 per cent to8.75 per cent

Increased the policy repo rate under theliquidity adjustment facility (LAF) by 25 basis

points from 7.5 per cent to 7.75 per cent

8/10/2019 ravirbi-140622085728-phpapp02

36/37

Second Quarter Review of MonetaryPolicy Statement 2013-14

Credit to agriculture increased by 13.2 per cent inSeptember 2013 as compared with the increase of 19.6 percent in September 2012.

Credit to industry increased by 17.6 per cent in September2013 as compared with the increase of 17.0 per centSeptember 2012.

Credit to the services sector increased by 22.1 per cent inSeptember 2013 as compared with the increase of 14.4 per

cent in September 2012. Credit to Non Banking Financial Companies (NBFCs)increased by 26.6 per cent in September 2013 as comparedwith the increase of 28.4 per cent in September 2012.

8/10/2019 ravirbi-140622085728-phpapp02

37/37