Reserve Bank of India

RESERVE BANK OF INDIA

PRESENTED BY:-

SHWETA SINGH

SECTION B

INTRODUCTION

The Reserve Bank of India (RBI) is India’s central banking institution.

It was established on 1 April 1935 during the British Raj in accordance with the provisions of Reserve Bank of India Act, 1934 after the recommendation from Hilton- Young commission.

The Reserve bank of India was nationalised in 1949 under the Reserve Bank (Transfer of Public Ownership) Act, 1948.

ORGANISATIONAL STRUCTURE OF RBI

REASONS FOR ESTABLISHMENT OF RBI

To manage the monetary and credit system of the country.

For balanced and systematic development of banking in the country.

For the development of organized money market in the country.

For proper arrangement of agriculture finance.

Contd...

For proper management of public debt.

To establish monetary relations with other countries of the world and international financial institutions.

For centralization cash reserves of commercial banks.

To maintain balance between demand and supply of currency.

FUNCTIONS OF RBI

MONETARY FUNCTION

Issuer Of Currency Design, printing and distribution. The bank issues and exchanges or destroys

currency and coins not fit for circulation. The goal of ensuring an adequate supply of clean

and genuine notes.

Control Of Credit It is a major weapon of RBI used to control demand

and supply of money in the economy.

Contd...

Banker To Government Performs merchant banking function for the central

and the state governments. Also acts as their bankers.

Banker To Bank Transfer funds and settle inter-bank transactions. All banks operating in the country have accounts

with the Reserve bank.

Contd...

Manager Of Foreign Exchange It acts as a custodian and manages the Foreign

Exchange Management Act, (FEMA) 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 and Japanese Yen.

NON MONETARY FUNCTION

Collection And Publication Of Data The RBI has a separate Department of Statistics for

collecting, compiling and disseminating statistical information.

Regulatory And Supervisory The RBI Act and the Banking Act have both conferred

extensive powers of regulations & supervisions to the RBI over commercial & cooperatives banks to protect interests of investors.

Contd...

Development And Promotion The RBI has been aiding development & promoting

saving & banking habits. Development of the institutional agriculture and

other rural activities has been an area of focus from its inception.

ROLE OF RBI IN INFLATION CONTROL

Inflation arises when the demand increases and there is a shortage of supply.

There are two policies in the hands of the RBI.1. Monetary Policy2. Fiscal Policy

CONTROL MEASURES

Bank Rate It is the interest rate that is charged by a bank loans

and advances to control money supply in the economy.

Repo Rate It is the rate at which RBI lends money commercial

banks in the event of any shortfall of funds.

Contd...

Reverse Repo Rate It is the rate at which the Reserve Bank of India

borrows money commercial banks within the country.

CRR (Cash Reserve Ratio) Cash Reserve Ratio (CRR) is a specified minimum

fraction of the total deposits of customers which commercial banks have to hold as reserves with the RBI.

Contd...

SLR (Statutory Liquidity Ratio) It is the amount a commercial bank needs to

maintain in the form of cash or gold or government approved securities (Bonds) before providing credit to its customers.

It is maintained by the RBI in order to control the expansion of bank credit.

Policy Rates In Indian Banking (2015)

RATES (%)Bank Rate 8.75

Cash Reserve Ratio 4.00Statutory Liquidity Ratio 21.50

Repo Rate 7.75Reverse Repo Rate 6.75

CONCLUSION RBI is an autonomous body promoted by the

government of India and is headquartered in Mumbai.

RBI plays important role in achieving economic growth of a country.

It helps in attaining full employment balance of payment disequilibrium and in stabilizing exchange rate.

RBI operates a number of government mints that produce currency and coins.