Reserve Bank of India

Introduction
 Concept of Central
• Banking
Central Bank occupies a special place of significance in the monetary
system of a country.
• The Central Bank is the Apex Authority which regulates & monitors
the banking sector & other financial institutions.
• The organization & development of the banking sector is the main
responsibility of the Central Bank.
• It formulates & implements the Monetary Policy & ensures price
stability through various measures.
• The Central Bank hence plays a pivotal role in the banking & financial
system of a country.
• It is to be noted that the role of a Central Bank is different from that of
other banks & financial institutions
Significance of Central
The significance of Central Banks enhanced during the 1980s.
Bank
The following are the factors which contributed to the growth of
Central Banks both in developed & developing economies.

Rapid growth of the financial sector.

Integration of the economies due to Globalisation

Free flow of capital between nations due to Liberalisation

Substantial increase in the volume of International Trade

Changes in the exchange rate mechanisms adopted by countries

Significant growth of the services sector leading to more

transactions
 Evolution of Reserve Bank of
•India
The Reserve Bank of India was established in 1934 through the
RBI Act 1934 – Statutory Autonomous Institution

• It started its operations from 1st April 1935.

• It was Nationalised in 1949.

• It formulates & implements the Monetary Policy.

• It not only monitors & regulates the financial sector, but also
introduces reforms for the competitiveness of the Financial
sector.

• Today RBI performs a variety of functions viz – Regulatory,

Developmental & Promotional functions
•Changing face
The Central Bank is theof Central
Apex institution of the Banking &
Monetary sector.
Banking
• In today’s dynamic world, the role of Central Bank has evolved
over the years.

• The important functions associated with Central Banks are as

follows:
• Issue of Currency Notes - Monopoly

• Banker to the Government - accepts receipts & makes payments on behalf

of the government.

• Banker to the Bank – Reserves, Credit creation etc

• Custodian of Foreign Exchange Reserves – maintaining liquidity position,

stability

• Controller of Credit – control on inflation, stablise money market

 Organisational & Operational
Framework
- RBI Act 1934; Started functioning from 1935, Nationalised 1949
- Initially Head Quartered at Calcutta, 1937 moved to Bombay

• Central Board of Directors

• The Central Board of Directors consists of 20 members
• One Governor & Four Deputy Governors – appointed by Central Government
• Tenure of office – 5 years & eligible for reappointment
• 4 Directors with 4 years tenure appointed by the CG who retire by rotation
• 10 Directors – same provisions
• 1 Nominee director – CG , usually Secretary of Min of Fin
• Chairman of the Central Board is the Governor of the RBI
• 4 Deputy governors assigned areas of operation
• Apart from the CB, there are 4 Regional Local Boards with HQs at 4 Metros
– New Delhi, Kolkata, Mumbai & Chennai
• There are 5 members in each board appointed by the CG with advisory
roles.
• Till now RBI had 24 Governors.

• First Governor Sir Osborne Arkell Smith, an Australian.

• C.D. Deshmukh was the first Indian Governor

• Present Governor, Shaktikanta Das is the 25 th Governor suceeding Dr.Urijit

patel.
• Current Deputy Governors are
• A.T. Rabi Shankar

• J. Sw\aminathan

• Dr. M.D,Patra

• M.K.Jain
•Departments of
33 departments, 19 regional offices & 9 sub offices

•RBI
Issue department

• Banking operations & Development bank

• Exchange Central department
• Banking department
• Research & Statistics department
• Legal department
• Industrial Finance department
• Department of Administration
• Others – Accounts, Secretarial, inspection
•Role ofCurrency
Issuer of RBI – Legal Denominations, Demonetisation Nov 8th
2016
• Banker to the Government
• Banker to the Banks
• Custodian of Foreign Exchange reserves
• Central clearing house
• Controller of credit
• Promotional functions – IDBI, NABARD, EXIM Bank, SFCs, SIDBI, UTI,
NHB, IFCI, SSI
• Establishment of Development institutions
• Balanced Regional Development
• Banking habits
• Research
• Balance of Payment
Supervisory
Functions
• Granting licenses to Banks

• Inspection & Enquiry

• Banking Regulation Act 1949

• Periodical examination, Reporting

• Remedial measures on lapses, deficiencies

• Investigation as and when needed

• Control of Non Banking Financial Corporations

•Regulatory Role of RBI
Bank Rate – the rate at which the RBI rediscounts the BoE & other
securities of commercial banks. It is the lending rate of CB. Currently
it is 5.15%.
• Open Market Operations – It refers to buying & selling of government
securities by the RBI. It is followed as a credit control technique.
• Variable reserve requirements – CRR (4.5%) & SLR (18.%)
• Repo & Reverse Repo Rates – Repurchase rate is the rate at which RBI
lends short term loans to Commercial Banks ( 1 to 14 days)(6.5%).
Reverse Repo rate refers to the rate at which Commercial Banks park
their surplus funds with RBI for a short period of time(3.35%).
• Liquidity Adjustment Facility-LAF – Repo to inject & Reverse Repo to
absorb
• Market stabilisation scheme – stabilise Forex market
• MCLR – Marginal Cost of Funding based Lending Rate – 6.75%
Minimum Lending Rate
•Infrastructures Regulated
Real Time Gross Settlement (RTGS) – implemented in March 2004 above 2L
•by RBIElectronic Fund Transfers (NEFT) – November 2005
National
• Immediate Payment Service (IMPS) – 22nd November 2010
• Electronic Clearance Service (ECS) – 9th August 2003
• Note Printing & Coin Minting
• Deposit Insurance and Credit Guarantee Corporation of India (DICGC),
• Security Printing & Minting Corporation of India Limited ( SPMCIL) – Dewas (MP), Nashik
(MH) , owned by GoI
• Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) – Mysore (Kar) & Salboni
(WB) RBI
• Coins – Minted by GoI through RBI – Mumbai (MH), Noida (UP), Kolkatta (WB), Hyderabad
• Reserve Bank Information Technology Private Limited (ReBIT),
• Indian Financial Technology and Allied Services (IFTAS), and
• Reserve Bank Innovation Hub (RBIH)