Reserve Bank of IndiaIndia’s Central Bank

Presentation By

Ajay Singh ( MFM – Ist Semester)

Establishment

Established on April 1, 1935 with share capital of Five

Crores on recommendation of Hilton Young

Commission.

RBI was Nationalised in Year 1949.

Central Office was initially established in Calcutta and

moved to Mumbai in 1937

Structure

RBI Have 20 Directors :

• The Governor

• Four Deputy Governor

• One Govt. Official from Ministry of Finance.

• Ten Nominate Director, nominated by Govt.

• Four Directors to represent Headquarters at Mumbai,

Kolkata, Chennai & New Delhi.

Appointed/ Nominated for period of Four Years.

RBI Offi ces

Head office in Mumbai.

24 Regional offices, most

of them in State Capital.

Preamble

“… to regulate the issue of Bank Notes and keeping of

reserves with a view to securing monetary stability in India

and generally to operate the currency and credit system

of the country to its advantage."

Main Functi ons (Act, 1934)

Bank of Issue (Under Sec 22)

• RBI has sole right to issue One Rupees Notes and

small coins in country as agent of Government.

• RBI has separate Issue Department to issue currency

notes.

• RBI maintain Minimum Reserve in form of Gold and

Foreign Exchange Reserve of which almost 55%

should be in Gold.

Main Functi ons (Act, 1934)

Banker to Government

• RBI is banker, agent and advisor of Central Government

and all State Government in India.

• RBI helps the Government to float new loans and to

manage public debt.

• RBI makes loans and advances to the States and local

authorities.

Main Functi ons (Act, 1934)

Banker’s Bank & Lender of Last Resort

• RBI maintains banking accounts of all schedule

banks.

• Every schedule bank have to keep cash reserve a fix

percentage of their aggregate deposit liabilities .

• Banks always expect for help from RBI in time of

banking crisis.

Main Functi ons (Act, 1934)

Controller of Credit

• RBI holds the cash reserves of all schedule banks.

• It holds credit operations of banks through quantities

• RBI has power to ask bank or whole banking system

not to lend particular group or person.

• Every bank have to get license from RBI for banking

operation. RBI can also cancel this license.

• Every bank gives weekly return showing assets and

liabilities in details .

Main Functi ons (Act, 1934)

Custodian of Foreign Reserves

• RBI responsible to maintain official rate of exchange

as according terms of I.M.F.

• RBI reserves the international currency.

• RBI observes relationship of Indian Currency with

other International currency.

Main Functi ons (Act, 1934)

Promotional Functions

• RBI ask banks and financing agencies to promote rural

and semi-urban areas by financing (funding ).

• RBI setup directly or indirectly some institutions like :• Deposit Insurance Corporation ( 1962 )• Industrial Development Bank ( 1964 )• Unit Trust of India ( 1964 )

• Industrial Reconstruction Corp. of India ( 1972 )

• Agricultural Refinance Corporation ( 1963 )

• RBI promotes villagers for saving and route this money

as short term credit to agriculture.

List of Executi ves

Governor

• Dr. D Subbarao

Deputy Governors

• Dr. Rakesh Mohan, Smt. S. Gopinath, Smt. Usha Thorat

Executive Directors

• Sh. V.K. Sharma, Sh. C. Krishnan, Sh. Anand Sinha,

Sh. V.S. Das, Sh. G. Gopalkrishna, Sh. H.R. Khan,

Sh. D.K. Mohanty

Address of RBI

Reserve Bank of India,

Central Office,

Shaheed Bhagat Singh Road,

Mumbai – 400 001

Ph.No. 22660868, Web : www.rbi.org.in

04/08/2023

NABARD MODEL

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NABARD: An introductionNABARD was set up in 1982 as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts. It also has the mandate to support all other allied economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is entrusted with-Providing refinance to lending institutions in rural areasBringing about or promoting institutional development Evaluating, monitoring and inspecting the client banks

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Cont…Besides this pivotal role, NABARD also:

Acts as a coordinator in the operations of rural credit institutions

Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development

Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development

Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development

Acts as regulator for cooperative banks and RRBs

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NABARD's Micro Finance - Vision and Mission

Vision:

Empowerment of rural poor by improving their access to the formal credit system through various MF innovations in a cost effective and sustainable manner

Mission:

To extend financial services to one third of India's unreached and underserved rural poor numbering nearly 100 million through one million SHGs with focus on women during a ten year period through various microfinance interventions

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Innovative Projects

Setting up of grain banksProject on processers cardsProject on e-gramaJoint Liability GroupsSetting up of computer munshisMicro enterprise promotion by SHGs

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• Providing liquidity support to banks for financing production and investment activities in rural areas

• Providing technical support for building sustainable rural banking system

• Undertaking development activities for enhancing the outreach & credit absorption capacity

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Functions Of NABARD

SCHEME OF PROVIDING TECHNOLOGY SUPPORT TO NGOs

Grant Assistance up to Rs.50,000Purchase of PCNGO should have completed 3 yearsShould have promoted minimum 500 SHGsShould not have been black-listed

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NABARD manpower building approaches

BankersDifferent training and exposure programmes for CEOs, Directors on

Boards, middle management, branch managers, field staff

NGOsDifferent training and exposure programmes for CEOs and field staff,

Refresher programmes

Government officialsDifferent training and exposure programmes for senior bureaucrats,

middle level operational functionaries, and field staff

Trainers Different programmes to equip trainers from Banks, Government, and

NGOs

04/08/2023

Initiatives to Support MFIs

MFDF redesignated as Micro Finance Development & Equity Fund (MFDEF) with enhanced corpus of Rs.200 Crore for promoting the sector through grant for capacity building support.

NABARD provides refinance to Banks at concessional rates of interest in order to encourage Bank –MFI linkage

A scheme for rating is launched by NABARD to enable qualifying and deserving MFIs to obtain loans from banks

04/08/2023

Promotional efforts by NABARD

NABARD Refinance Support to BanksNABARD provides refinance support to banks to the extent of 100% of the bank loans disbursed to SHGs. The total refinance disbursed to banks against their loans to SHGs during the year 2007-08 was Rs.1615.50 crore as against Rs.1292.86 crore during the year 2006-07 with a growth rate of 30%.

04/08/2023

Cont…

Promotional Support - SHG Bank Linkage

Training and Capacity buildingMicro Enterprise Development Programme (MEDP) for skill DevelopmentGrant Support to Partner Agencies for Promotion and Nurturing of SHGsPilot Project on SHG Post Office Linkage Programme04/08/2023

04/08/2023

INDIGENOUS BANKS

Indigenous bankers

• Individual bankers like Shroffs, Seths, Sahukars, Mahajans, etc. combine trading and other business with money lending.

• Vary in size from petty lenders to substantial shroffs• Act as money changers and finance internal trade

through hundis (internal bills of exchange)• Indigenous banking is usually family owned business

employing own working capital• At one point it was estimated that IBs met about 90% of

the financial requirements of rural India

Indigenous banks• Vedas and the Manusmriti: • Kautalya’s Arthashastra:

Suggested Maximum and Minimum Interest rate

• Kautalya, Yajnyavalkya and Manu recommended 15 per cent interest per annum on capital.

• British rule almost wiped out these tribes by bringing European Banks from urban

• They moved to villages. They survive even today.

How did Sahukar lend?• Borrower is known• Very little documentation• Sahukar usually a bad guy• Exorbitant rates of interests• Compounded Shorter Intervals• Records Tampered• Mostly Mortgaged lending on

Land, Properties, Jewels etc• Most cases poor borrowers

surrendered their properties.

RBI and indigenous bankers (1)

• Methods employed by the indigenous bankers are traditional with vernacular system of accounting.

• RBI suggested that bankers give up their trading and commission business and switch over to the western system of accounting.

• It also suggested that these bankers should develop the deposit side of their business

• Ambiguous character of the hundi should stop• Some of them should play the role of discount houses

(buy and sell bills of exchange)

RBI and indigenous bankers (2)

• IB should have their accounts audited by certified chartered accountants

• Submit their accounts to RBI periodically• As against these obligations the RBI promised to provide

them with privileges offered to commercial banks including– Being entitled to borrow from and rediscount bills with RBI

• The IBs declined to accept the restrictions as well as compensation from the RBI

• Therefore, the IBs remain out of RBI’s purview

Thank You