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GOOD MORNING

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RESERVE BANK OF INDIA

Presented by

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Introduction

It is the Central Bank of India Established in1934 under the RESERVE BANK OF INDIAACT 1934. Its head quarters is in Mumbai(Maharashtra). Its present governor isDuvvuri Subbarao. It has 26 offices in whichfour are regional offices located in

metropolitan cities.

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Breif History

It was set up on the recommendations of theHilton Young Commission .It was started asshare-holders bank with a paid up capital ofINR 5 crores. Initially it was located inKolkata. It moved to Mumbai in 1937. Initiallyit was privately owned. The govt. had a

nominal value of shares of INR 2,20,000. lateron in 1949, the bank was nationalised and isfully owned by the Govt. of India.

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Preamble

The Preamble of the Reserve Bank of Indiadescribes the basic objectives of the ReserveBank as "...to regulate the issue of BankNotes and keeping of reserves with a view tosecuring monetary stability in India andgenerally to operate the currency and credit

system of the country to its advantage."

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Organization of The RBI

The Reserve Bank's affairs are governed by a centralboard of directors and four local boards of directors.The central board performs the functions of general

superintendence and direction of the banks affairs.Central board: Appointed/nominated by the GOI fora time period of four years. It includes the following;

Official directors

Non-official directors Committee of Central board

Board for Financial Supervision(BFS)

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Departments

The RBI has 26 departments focusing on policy issues in RBIs functional areas etc.lets briefly know the functions of each department.

1.Customer Service Department:

In order to enhance the quality of customer service and strengthen the grievanceredressal mechanism, the RBI constituted a new department namely CSD.

2. Department of Currency Management:This department performs the core statutory function of note and coin issue andcurrency management.

3. Urban Banks Department:

This department carries out the function of regulation and supervision of UCBs.

4. Rajbhasha Department:

Translating annual reports, news letters, bulletins etc.Imparting training to officers/employees in Hindi language, Use of Hindi oncomputers, and English-Hindi translation.

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Departments

5. Rural Planning and Credit Department:

RPCD is primarily concerned with formulating policies relating to rural creditand monitors timely and adequate flow of credit to the rural population foragricultural activities etc.

6. Foreign Exchange Department:

It is concerned with facilitating external trade and developing foreign exchangemarkets of India.

7. Human Resources Development Department:

Recruitment

Performance and Potential Appraisal

Placement etc.

8. Financial Markets Department:

This department wad established with the objective of integrating the bankingsector to the financial markets and help the bank to conduct monetaryoperations viz. OMOs,LAF etc.

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Departments

9. Financial Stability Unit:

Development of a time series of a core set of financialindicators.Conduct of systemic stress tests to assess resilience.

Preparation of financial stability reports.10. Inspection Department (Internal):

11. Department of Banking Supervision:

This department is entrusted with the authority of

regulating and supervising the Indian Banking Systemincluding FIs.12. Department of Non-Banking Supervision (DNBS):

Mainly concerned with supervising the NBFCs.

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Departments

13. Department of Banking Operations and Development:

The Department is entrusted with the responsibility of regulationof commercial banks under the provisions contained in BankingRegulation Act, 1949 and the Reserve Bank of India Act, 1934and other related statutes and development of banking policies.

14. Department of Information Technology:

Computerizing the operation in RBIMonitoring the progress of IT in banks.

15. Legal Department:

16. Monetary Policy Department:17. Internal Debt Management Department:

Managing public debt of the GOI/state govts.Management of PDs system and development of govt. securities

market.

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Departments

18. Department of External Investments and Operations:

Invest of foreign exchange reserves of the RBI.

19. Department of Economic & Policy Research:

Concerned with studying the issues both domestic and international

affecting the Indian economy.20. Department of Statistics and Information Management:

Collection, processing and dissemination of data on banking, corporateand external sectors.

21. Department of Payment and Settlement Systems:

22. Secretary's Department:

Secretarial work involving meetings of central board and its committeesetc.

Secretarial work relating to deputy governors committee meetings.

23. External Relations and Customer Service.

Annual, quarterly, monthly and weekly reports etc.

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Departments

23. Department of Communication:

24. Department of Expenditure and

Budgetary Control:25. Department of Administration and

Personnel Management:

26. Department of Banking Operation andDevelopment:

27. Department of Govt and Bank accounts.

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Subsidiaries

The Reserve Bank of India has fully-owned four subsidiarieswhich include

National Housing Bank(NHB).

Deposit Insurance and Credit Guarantee Corporation of

India(DICGC). Bharatiya Reserve Bank Note Mudran Private

Limited(BRBNMPL).

National Bank for Agriculture and Rural Development(NABARD).

The Reserve Bank of India has recently divested its stake inState Bank of India to the Government of India. RBI has alsoset up some trainning institutions.

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Legal Framework

There are various acts which govern the functioning of RBI, specificfunctions, banking operations and individual institutions owned by RBI.

1. Umbrella Acts:

The reserve Bank of India Act, 1934, governs the RBI functions

The Banking regulation Act, 1949, governs the financial sector.2. Acts Governing Specific Functions.

like The Securities Contract(Regulation) Act, 1956, regulates govtsecurities market, FEMA Act, 1999 etc.

3. Acts Governing Banking Operations.

like Negotiable Instruments Act, 1881 etc.

4. Acts Governing Individual Institutions.

like State Bank of India Act, 1954, The Industrial Development Bank ofIndia Act, the National Housing Bank Act etc.

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Functions of RBI

Functions of RBI include Monetary Authority Regulator & Supervisor of FinancialSystem, and Manager of Foreign Exchange Issuer of Currency DevelopmentalRole.

Formulates Monetary Policy.Monetary policy-making is the central function of the Reserve Bank. The broad

objectives of monetary policy in India are (a) maintaining price stability and (b)ensuring adequate flow of credit to productive sectors to assist growth byinfluencing the cost and availability of money and credit. It uses qualitative andquantitative measures to implement the monetary policy.

Quantitative Measures :

Quantitative Measures BANK RATE also called discount rate.It also includes reporate. OPEN MARKET OPERATIONS buying and selling of government securities.VARIABLE RESERVE RATIO it includes CRR and SLR.

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Qualitative measures :

Qualitative measures Margin Requirements Moral SuasionRationing of Credit

Regulates & Supervises the Financial

System:Objective: To Maintain Public confidence in the system,protect depositors interest & provide cost effectivebanking services to the public. What RBI does.. Prescribes

broad parameters of banking operations within which thecountry's banking and financial system functions. TheReserve Bank of India performs this function under theguidance of the Board for Financial Supervision (BFS).

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Banker to the Government:The RBI as the central bank manages the public debt of the central and the state

govts and also acts as the banker to them under the provisions of the RBI Act1934. RBI Act provides that the central govt shall entrust the RBI with all itsmoney, remittance, exchange, and banking transactions in India and the

management of public debt and shall also deposit all its cash balances with theRBI free of interest.

It also includes:

provides a range of banking services acceptance of money on govt A/Cs,payment/withdrawal of funds etc.,

provides safe custody facilities; manages special funds like the consolidatedsinking fund, the calamity relief fund, issues and manages bonds etc.

provides ways and means advances to both the central and the state govts.

introduced the primary dealer system in 1996 for the development of govtsecurities market etc.

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Manager of Exchange Control:The function of the RBI is to develop and regulate the Forexmarket. The banks role is to facilitate external trade andpayment and promote orderly development and

maintenance of foreign market in India. The RBI regulateforex transactions under the provisions of FEMA Act, 1999.

The RBI periodically enters into the forex transactions toprevent undue fluctuations in the exchange rate and toensure orderly market conditions.

In pursuit of developing the forex market RBI allowedAuthorized Dealers(ADs) to borrow abroad and alsoallowed FIIs to invest up to 49% of the paid-up capital ofIndian companies with the approval of the shareholders bya special resolution.

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Note Issuing Agency:The RBI has been entrusted with the role of issuing the notes and

managing the currency by the preamble of the RBI Act, 1934. RBI issuesnotes in the denomination of INR 2, 5, 10, 50, 100, 500, and INR 1000. The

GOI issues one rupee coins and one rupee notes but they are put intocirculation only through the RBI. Currency management involves efforts toachieve self-sufficiency in the production of currency notes and coins with a

judicious denomination mix etc.

These functions i.e. note issue and currency management are dischargedin 18 regional Issue Offices/sub-offices and a wide network of currencychests maintained by banks and govt treasuries spread across the country.

Bank notes are printed at four notes presses, of which the currency NotesPress, Nasik, and Bank Note Press, Dewas, are owned by the central govtand the presses at Mysore and Salboni are owned by the Bharatiya ReserveBank Note Mudran Limited, a wholly-owned subsidiary of the RBI.

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Banker to the Banks:

The Banks medium-term objective is to bring down the CRR to

three per cent of the banks Net Demand and Time

Liabilities(NDTL). The scheduled banks maintain balances in theircurrent account with the RBI mainly for maintaining the CRR andas working funds for clearing adjustments.

The RBI also provides a variety of financial facilities andaccommodations to scheduled banks. It takes care of temporary

liquidity gaps in the banking system through refinancingschemes(i.e. refinancing of bills). It also acts as a lender of lastresort to the banks to foster financial stability.

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Developmental role:The RBI performs various developmental and promotional activities to support

national objectives.

The RBI has helped to set up a number of development financial institutions such as

the Industrial Development Bank of India(IDBI), the National Bank for Agriculture andRural Development (NABARD), the Industrial Reconstruction Bank of India(IRBI), the

National Housing Bank(NHB) and various other institutes. It also has helped in the

development of UTI, Discount and Finance House of India(DFHI) and the Securities

Trading Corporation of India(STCI) to promote and develop financial markets.

Another important developmental role that RBI carries out is that it has made

priority sector lending mandatory for both public and private sector banks.RBI in its pursuit of developmental functions so far as banking sector is concerned

established a committee under the chairmanship of Mr. Narasimham to suggest the

future direction of banking sector. It suggested various reforms in two phases one in

1991 and another in 1998. The recommendations include deregulation of interest rate

structure, deregulation of the entry norms for private sector banks and foreign banks,

bringing NBFCs under the ambit of regulatory framework, capital adequacyetc.

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Thank you