RESERVE BANK OF INDIAPRESENTED BYSIMRAN KAURMBA 2ND YEARIGICM

CONTENTS

• Introduction to RBI• Role of RBI• Functions of RBI• Monetary policy• Fiscal policy

RESERVE BANK OF INDIA

• India’s central banking institution• Established on 1 April 1935 under RBI Act,1934• Nationalized in 1949 under RBI Act,1948• Headquarters- Mumbai• 19 regional offices

ROLE OF RBI

• Strengthening economic and financial structure• Economic stability• Advisor to Government• Channelize credit• Keep inflationary trends under control

FUNCTIONS OF RBI

• Issue of Bank notes• Banker to the Government• Banker’s Bank• Custodian of foreign exchange resources• Controller of credit

FUNCTIONS OF RBI(CONTD.)

• Lender of last resort• Central clearance, settlement and transfer of money• Promotional functions• Collection and publication of data

MONETARY POLICY

• Definition“Use of instruments under the control of the central bank to regulate the availability, cost and use of money and credit”• Objectives1. Price stability2. Adequate flow of credit

MONETARY POLICY(CONTD.)

3. Rapid economic growth4. Full employment5. Equal income distribution• Instruments1. Bank rate2. Statutory Liquidity Ratio(SLR)

MONETARY POLICY(CONTD.)

3. Repo Rate4. Reverse Repo Rate5. Cash Reserve Ratio(CRR)6. Open market operations7. Margin requirement8. Moral persuasion

MONETARY POLICY(CONTD.)

• Limitations1. Poor banking habit2. Underdeveloped money market3. Existence of black money4. Lack of coordination with fiscal policy5. Limitations of monetary instruments

FISCAL POLICY

• Definition“Any decision to change the level, composition or timing of Government or to change rate and structure of tax”• Objectives1. Price level2. Consumption level

FISCAL POLICY(CONTD.)

3. Employment level4. Income distribution5. Degree of growth6. Increase in capital formation• Instruments1. Public expenditure

FISCAL POLICY(CONTD.)

2. Taxation policy3. Public debt4. Deficit financing• Limitations1. Lack of accurate forecasting2. Poor tax administration

FISCAL POLICY(CONTD.)

3. Inequality of income4. Failure in public sector5. Increasing interest burden

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