Reserve Bank of India

PRESENTED BY: RAHUL SRIVASTAV FATIMA SIDDIQUE ASGAR QURESHI AMIT HIMANI

SUBMITTED TO: PROF. UMAR PATEL

FEATURING..

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Introduction History Need for RBI Board of directors Functions of RBI Manager of Foreign Exchange Susidiaries Narsimham Committee Conclusion

INTRODUCTION RBI is the apex financial institution in India.

It operates under the control of Ministry of Finance.

It was established in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission.

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CONTD… Its present governor is Dr. Duvvuri Subbarao.

It has 22 regional offices, most of them in State capitals.

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HISTORY The RBI was established in 1935, under Reserve

Bank of India Act, 1934.

It was a private Shareholders association till January, 1949.

It was nationalise with effect from 1st January 1949

In 1949, the Banking Regulation Act gave extensive regulatory powers to the RBI over the commercial banks.

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CONTD… Initially it was located in Kolkata,later

It moved to Mumbai in 1937.

Since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.

Its First governor was Sir Osborne A. Smith

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NEED FOR RBI RBI plays an important role in the

economic development of the nation.

It(RBI) regulates money supply in the country.

It monitors the working of Commercial banks.

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CONTD.. It frames monetary policy of the country.

Banks and Government are the account holders of RBI.

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ORGANISATION AND MANAGE MENT The Reserve Bank is managed by the

Central Board of Directors, Four local board of directors and the Committee of the Central Board of Directors.

The final control of the Bank vests in the Central Board which comprises the Governor, Four Deputy Governors and fifteen Directors

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CONTD.. The bank has Twenty Departments and

three Training establisment at the Central Office of the Bank.

The department of banking supervision has been set up with its central office at Mumbai and 16 regional offices at various centres in the country.

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BOARD OF DIRECTORSThe Reserve Bank's affairs are governed by a

central board of directors. Azim Premji Kumar Mangalam Birla. Suresh Tendulkar, Economist and Member, Prime Minister's

Economic Advisory Council (to represent Eastern Area Local Board)

U. R. Rao, former Chairman, ISRO and Chairman Research Council, Physical Research Laboratory, Department of Space (to represent Northern Area Local Board)

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CONTD… Lakshmi Chand, IAS (Retd.) (to represent

Southern Area Local Board) Shashi Rekha Rajagopalan, Consultant, Co-

operatives Suresh Kumar Neotia, Chairman, Ambuja Cement A. Vaidyanathan, Madras Institute of Development

Studies Man Mohan Sharma, FRS, Former Director,

Mumbai University Institute of Chemical Technology

D. Jayavarthanavelu, Chairman and Managing Director, Laxmi Machine Works Ltd.

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FUNCTIONS OF RBI

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Bank of IssueBanker of GovernmentBankers’ Bank and Lender of the Last ResortController of CreditCustodian of Foreign ReservesSupervisory FunctionsPromotional Functions

NETWORK OF CURRENCY CHESTS RBI is located only in 18 places for currency

operations Distribution of notes and coins throughout the

country is done through designated bank branches, called chests

Chest is a receptacle in a commercial bank to store notes and coins on behalf of the Reserve Bank

Deposit into chest leads to credit of the commercial bank’s account and withdrawal, debit

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FORMULATE MONETARY POLICY

Objective: Maintain price stability and ensuring adequate flow of credit in

the economy.

What R.B.I does: It formulates, implements and monitors the monetary policy.

Intruments: Quantitative & Qualitative.

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QUANTITATIVE MEASURES Objective: Control the volume of credit and inflation,

indirectly.

Repo Rate, Reverse Repo Rate, CRR kept unchanged. Repo rate: 4.75% (w.e.f. 21/04/2009) Reverse Repo : 3.25% (w.e.f. (21/04/2009) CRR: 5.00%( w.e.f. 17/01/2009) SLR: 25%(w.e.f. 07/11/2009)

Bank Rate kept unchanged at 6.00% (w.e.f. 29/04/2003)

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QUALITATIVE MEASURES Objective: They control the supply of money in selective

sectors of the economy.

The RBI issues directives to banks relating to the purpose for which advances may or may not be made.

The margins to be maintained in respect of secured advances.

The maximum amount of advance to any borrower.

The maximum amt. of guarantee that can be given on behalf of any firm

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REGULATES AND SUPERVISE THE FINANCIAL SYSTEM Objective: To Maintain Public confidence

in the system, protect depositor’s interest & provide cost effective banking services to the public.

What R.B.I does: Prescribes broad parameters of banking operations within which the country's banking and financial system functions.

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CONTD… The Reserve Bank of India performs this

function under the guidance of the Board for Financial Supervision (BFS).

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MANAGER OF FOREIGN EXCHANGE Objective: To facilitate external trade and payment

and promote orderly development and maintenance of foreign exchange market in India.

What R.B.I does: It acts as a custodian and Manages the Foreign Exchange Management Act, 1999.

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

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ISSUE OF CURRENCY Objective: To ensure adequate quantity of

supplies of currency notes and coins of good quality.

What R.B.I does: Issues new currency and destroys currency and coins not fit for circulation.

It has to keep in forms of gold and foreign securities as per statutory rules against notes & coins issued.

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DEVELOPMENT ROLE Objective : To develop the quality of

banking system in india.

What R.B.I does: Performs a wide range of promotional functions to support national objectives.

To establish financial institutions of national importance, for e.g: NABARD,IDBI etc.

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SUBSIDIARIES Fully owned: 1) National Housing Bank(NHB), 2) Deposit Insurance and Credit Guarantee

Corporation of India(DICGC), 3) Bharatiya Reserve Bank Note Mudran Private

Limited(BRBNMPL)

Major stakes: 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.

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GOLD TRADING The Reserve Bank of India also regulates the

trade of gold.

Currently 17 Indian banks are involved in the trade of gold in India.

RBI has invited applications from more banks for direct import of gold to curb illegal trade in gold and increase competition in the market.

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NARSIMHAM COMMITTEE

Narasimham committee in 1991 suggested following recommendation(Reforms)

1) CRR and SLR: CRR was brought down from 15% to

5%.SLR was reduced from 38.5% to 25%.

2) Interest Rates: The interest rate on savings deposits has been reduced to 3.5%.

3) Corporate Governance : promoting customer relations and office culture

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CONTD… 4) Financial Markets: RBI has been making special

efforts to develop the money market, the government seccurities market and the foreign exchange market.

5) Opening of More Pvt. sector banks 6) Motivation foreign banks to expand their network

by opening new branches.

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CONTD… 7) Asset Reconstruction for bringing down NPA in

future

8) Deregulation of RBI and Finance ministry of India. Making RBI as a regulator of all Banks and let Banks takes participation in equity market with govt. stake of 51%.

9) Basel Committee norms I&II

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BASEL COMMITTEE NORMS I&II Basel Committee I was started in 1988.

Basel I introduced CAR without going into detail about individual banks.

Basel Committee II norms is resting on 3 pillars

Minimum Capital Requirements(CAR) Supervisory Review Process(Ratings) Market Discipline(Risk Involved)

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CONCLUSION RBI has developed greater competition among

banks for improving their efficiency and the quality of services.

Monetory policy helps in correcting ills of economy such as inflation and deflation.

Under the RBI's supervision and inspection, the

working of banks has greatly improved. Commercial banks have developed into financially and operationally sound and viable units.

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