RBI Role In foreign

Exchange Market

Kirti Vardam - 407

Roselena Jathana - 408
Kirti Gorivale - 409
Vaibhav Basutkar - 410
 Introduction
• The Reserve Bank of India (RBI) is India central bank , also known as the
bankers bank. The Reserve bank of India was established in the year 1935
according to the Reserve Bank of India act,1934.
• The central bank manages to reach different goals of the Foreign Exchange
Management Act, 1999. Their objective is to facilitate external trade and
payment and promote orderly development and maintenance of foreign
exchange market in India.
• RBI has an important role to play in regulating and managing Foreign Exchange
of the country. It manages forex and gold reserves of the nation.
• On a given day, the foreign exchange rate reflects the demand for and supply of
foreign exchange arising from trade and capital transactions. The RBI's Financial
Markets Department (FMD) participates in the foreign exchange market by
undertaking sales/purchases of foreign currency to ease volatility in periods of
excess demand for/supply of foreign currency.
 Function of RBI in FEM
• Support and maintain confidence in the policies for monetary and
exchange rate management.
• Limit external vulnerability by maintaining foreign currency liquidity to
absorb shocks.
• Provide a level of confidence to markets that a country can meet its
external obligations.
• Maintain a reserves for national disasters or emergencies.
• Demonstrate the backing of domestic currency by external assets.
 RBI as Regulators of FEM
• RBI is responsible for administration of the Foreign Exchange
Management Act, 1999 and regulates the market by issuing licenses to
bank and other select institutions to act as Authorized Dealers in
Foreign Exchange. The (fed) responsible for the regulation and
development of the market
• Regulating transactions related to the external sector and facilitating
the development of the foreign exchange market.
• Ensuring smooth conduct and orderly conditions in the domestic
foreign exchange market.
• Managing the foreign currency assets and gold reserves of the country .
 Conclusion
RBI plays an vital role in foreign exchange market because
the Indian currency is issued by RBI and since the RBI gives the
information of the Indian currency which is printed in India so that the
foreign market can out the value of the dollar or any other foreign
currency equivalent to Indian rupee.
RBI uses its foreign exchange reserves to buy and sell
currencies in the market. For exampl, if rupee is going down fast, it will
buy rupees and sell dollars. Additional demand will stop rupee’s fall.
THANK YOU.