09th Aug, 2011 Financial Markets & Institutions

Flow of PresentationFlow of Presentation

History of RBI Celebrating 75 years of RBI Management & Structure Functions of RBI What they do? Monetary Model Direct & Indirect Instruments of RBI RBI Publication RBI : At time of Crisis Conclusion

History of RBIHistory of RBI

History of RBIHistory of RBI

History of History of RBIRBI

Management StructureManagement Structure

Markets

Monetary Policy DepartmentFinancial Markets Department

Research

Regulation and Supervision

Services

Markets

Support

Internal Debt Management DepartmentDepartment of External Investments and Operations

Department of Economic Analysis and Policy

Department of Statistics and Information ManagementDepartment of Banking

Operations and DevelopmentDepartment of Non-Banking SupervisionUrban Banks Department

Foreign Exchange DepartmentRural Planning and Credit DepartmentDepartment of

Government Bank AccountsDepartment of Currency Management

Department of Payment and Settlement SystemCustomer Service DepartmentPremises

DepartmentSecretary’s Department

Rajbhasha DepartmentInspection DepartmentLegal Department

Department of Administration and Personnel ManagementHuman Resources Development Department

Department of CommunicationDepartment of Information TechnologyDepartment of Expenditure and Budgetary Control

Management StructureManagement Structure

To maintain monetary stability To maintain financial stability

and ensure sound financial institution.

To maintain stable payments system.

To promote the development of financial infrastructure of markets and systems.

To enable it to operate efficiently.

To ensure that credit allocation by the financial system

Functions of RBIFunctions of RBI

What they do?What they do?

The Reserve Bank is the umbrella network for numerous activities,

all related to the nation’s financial sector, encompassing and

extending beyond the functions of a typical central bank. Monetary Authority

Issuer of Currency Banker and Debt Manager to

Government Banker to Banks Regulator of the Banking

System Manager of Foreign Exchange Regulator and Supervisor of

the Payment and Settlement Systems Developmental Role

This list provides an overview of their primary activities:

Monetary PolicyMonetary Policy

The Monetary Policy is the Process by which the monetary authority of a country controls the supply of money by targeting a rate of interest for the purpose of promoting economic growth & stability.Monetary Policy ModelMonetary Policy Model

Monetary Policy Model – Inflation LevelMonetary Policy Model – Inflation Level

Monetary Policy Model - CurrencyMonetary Policy Model - Currency

Monetary Policy Model – Monetary Policy Model – Price LevelPrice Level

Monetary Policy ModelMonetary Policy Model

Monetary Model – Money SupplyMonetary Model – Money Supply

Monetary Model – Income LevelMonetary Model – Income Level

Monetary Model – Interest RatesMonetary Model – Interest Rates

Objective of Monetary PolicyObjective of Monetary Policy

The main objectives of monetary policy in India are: Maintaining price stability

Ensuring adequate flow of credit to the productive sectors of the economy to support economic growth

Financial stability

Note : The relative emphasis among the objectives varies from time to time, depending on evolving macroeconomic developments.

Instrument of Monetary PolicyInstrument of Monetary PolicyThe Reserve Bank’s Monetary Policy Department (MPD) formulates monetary policy. There are several direct and indirect instruments that are used in the formulation and implementation of monetary policy. Direct Instruments Cash Reserve Ratio (CRR) Statutory Liquidity Ratio(SLR) Refinance Facilities

Indirect Instruments Liquidity Adjustment Facility (LAF) Open Market Operations (OMO) Market Stabilisation Scheme (MSS) Repo/reverse repo rate Bank rate

Instrument of Monetary PolicyInstrument of Monetary Policy

Repo rate

CRR

SLR

Bank Rate

Reverse Repo Rate

OMO

LAF

Reverse Repo Rate

The Reserve Bank is the nation’s sole note issuing authority. Along with the Government of India, RBI is responsible for the design and production and overall management of the nation’s currency, with the goal of ensuring an adequate supply of clean and genuine notes.

In consultation with the government, they routinely address security issues and target ways to enhance security features to reduce the risk of counterfeiting or forgery.

RBI does 2 main things:-1. Currency Management2. Currency Distribution

Issuer of CurrencyIssuer of Currency

Bankers to BankBankers to Bank

All banks operating in the country have accounts with the Reserve Bank, just as individuals and businesses have accounts with their banks.

Like individual consumers, businesses and organizations of all kinds, banks need their own mechanism to transfer funds and settle inter-bank transactions—such as borrowing from and lending to other banks—and customer transactions. As the banker to banks, the Reserve Bank fulfillsthis role.

‘Banker to Banks’ function of the

Reserve Bank, which is delivered through the “Deposit Accounts Department” (DAD)

Its also provides short term loans to selected banks.

Regulator of Banking SystemRegulator of Banking System

The Reserve Bank has a critical role to play in ensuring the system’s safety and soundness.

India’s financial system includes commercial banks, regional rural banks, local area banks, cooperative banks, financial institutions and non-banking financial companies.

There are various departments in the Reserve Bank that perform these regulatory and supervisory functions like:-

1.Department of Banking Operations and Development (DBOD) 2.Department of Non-Banking Supervision (DNBS)3.Urban Banks Department (UBD) 4.Rural Planning and Credit Department (RPCD)

RBI take care of various aspect like licences, capital adequacy, risk management etc

The Reserve Bank ,has the responsibility of managing country’s foreign exchange reserves.

The basic parameters of the Reserve Bank’s policies for foreign exchange reserves management are safety, liquidity and returns.

The Reserve Bank mainly focuses on:-1. Maintaining market’s confidence in

monetary and exchange rate policies.2. stabilise foreign exchange markets.3. Limiting external vulnerability by

maintaining foreign currency liquidity etc.

RBI also look after :1. Foreign Investment2. Indian Investment Abroad3. External Commercial Borrowings

Manager of Foreign ExchangeManager of Foreign Exchange

Development RoleDevelopment Role

The Reserve Bank’s developmental role includes:-

credit to productive sectors of the economy.

creating institutions to build financial infrastructure.

Expanding access to affordable financial services

RBI has taken various initiatives for this purpose:-

Kisan Credit CardsNatural Calamities – Relief

MeasuresMicro, Small and Medium

Enterprises Development.

RBI PublicationsRBI Publications

AnnualQuarterlyMonthlyWeekly

A Central Resource: The RBI’s Data Warehouse Enterprise-wide data warehouse User-friendly, public access via RBI web site, www.dbie.rbi.org.in Pre-formatted reports Simple and advanced queries Definitions of basic concepts

RBI : Action at the time of CrisisRBI : Action at the time of Crisis

The Reserve Bank’s willingness to use conventional and unconventional measures help buffer the nation from severe crisis. Here are some examples of our responses during the 2008-9 Global financial crisis:

Carefully considered and calibrated reduction of interest rates until situation has stabilized. Loosened restrictions on access to foreign currency.Creation of a rupee-dollar swap facility to manage short-term funding requirements.Establishment of a refinancing window and special-purpose vehicle for non-banking financial companies.Expansion of funding sources for umbrella financial institutions to keep credit flowing to small.

How They can Help You?How They can Help You?

Customer Service Department (CSD)

Banking Codes and Standards Board of India

Banking Ombudsman

Building on the firm foundation of India’s rich tradition, the Reserve Bank is also changing with the times.

The Reserve Bank’s mandate—yesterday, today and tomorrow—is to set a monetary and financial course that will sustain the nation’s economic growth and health during global downturns, periods of volatility and global upturns alike.

The Reserve Bank responses during extraordinary times are aimed at maintaining stability while ensuring sufficient rupee and foreign exchange liquidity to ensure that credit will continue to flow to businesses and consumers alike.

We also continue to address the challenge of ensuring that the national financial and monetary policy-making contribute to positive, sustainable impact for all citizens of India, across the income spectrum.

ConclusionConclusion