rbi functions and roles

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Information about rbi functions and roles
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Published on June 9, 2009

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Slide 1: Goodmorning RESERVE BANK OF INDIA : RESERVE BANK OF INDIA Powered By- : Jyoti Prasad Manoj Singh Jyoti Shankar Introduction : Introduction It is the Central Bank of India Established in 1 April 1935 under the RESERVE BANK OF INDIA ACT Its head quarters Is in Mumbai (Maharashtra). Its present governor is Duvvuri Subbarao. It has 22 regional offices, most of them in State capitals Website: http://www.rbi.org.in Breif History (1 of 2) : Breif History (1 of 2) It was set up on the recommendations of the Hilton Young Commission It was started as share-holders bank with a paid up capital of 5 crores. Initially it was located in Kolkata. It moved to Mumbai in 1937. Initially it was privately owned. Breif History (2 of 2) : Breif History (2 of 2) Since nationalization in 1949, the Reserve Bank is fully owned by the Government of India. Its First governor was Sir Osborne A. SmithApril 1, 1935 to June 30, 1937 The first Indian Governor was “Sir Chintaman D.Deshmukh” (August 11, 1943 to June 30, 1949) On June 27, 2006, the Union Government of India reconstituted the Central Board of Directors of the Reserve Bank of India (RBI) with 13 members, including Azim Premji and Kumar Mangalam Birla Governors (1 of 2) : Governors (1 of 2) Sir Osborne A. SmithApril 1, 1935 to June 30, 1937 Sir Chintaman D.Deshmukh August 11, 1943 to June 30, 1949 INDIAN Governors (2 of 2) : Governors (2 of 2) Dr.Y.V.Reddy  September 6, 2003 to September 5, 2008 Dr. D. Subbarao  September 5, 2008 onwards Preamble : Preamble The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as :- "...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." Organization of RBI : Organization of RBI Central Board Local Board Central Board (1 of 2) : Central Board (1 of 2) The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of India as per the Reserve Bank of India Act. Appointed/nominated for a period of four years Constitution: Official Directors Full-time : Governor and not more than four Deputy Governors Central Board (2 of 2) : Central Board (2 of 2) Non-Official Directors Nominated by Government: ten Directors from various fields and one government Official Others: four Directors - one each from four local boards Functions : General superintendence and direction of the Bank's affairs RBI Headquarters' Delhi entrance with the Yakshini Sculpture depicting ‘Prosperity through Agriculture’ : RBI Headquarters' Delhi entrance with the Yakshini Sculpture depicting ‘Prosperity through Agriculture’ Local Board (1 of 2) : Local Board (1 of 2) One each for the four regions of the country in Mumbai, Calcutta, Chennai and New Delhi Membership: Consist of five members each Appointed by the Central Government For a term of four years Local Board (2 of 2) : Local Board (2 of 2) Functions : To advise the Central Board on local matters and to represent territorial and economic interests of local cooperative and indigenous banks. To perform such other functions as delegated by Central Board from time to time. Functions of RBI : Functions of RBI Monetary Authority Regulator & Supervisor of Financial System Manager of Foreign Exchange Issuer of Currency Developmental Role Formulate Monetary policy : Formulate Monetary policy Objective:Maintain price stability and ensuring adequate flow of credit in the economy. What R.B.I does. It formulates, implements and monitors the monetary policy. Intruments: qualitative & quantitative. Quantitative Measures : Quantitative Measures BANK RATE also called discount rate.it also includes repo rate. OPEN MARKET OPERATIONS buying and selling of government securities. VARIABLE RESERVE RATIO it includes C.R.R and S.L.R Qualitative measures : Qualitative measures Margin Requirements Moral Suasion Rationing of Credit Regulate & Supervise the Financial System : Regulate & Supervise the Financial System Objective: To Maintain Public confidence in the system, protect depositor’s interest & provide cost effective banking services to the public. What R.B.I does….. Prescribes broad parameters of banking operations within which the country's banking and financial system functions. The Reserve Bank of India performs this function under the guidance of the Board for Financial Supervision (BFS). Lender of last resort Manager of Foreign Exchange : Manager of Foreign Exchange Objective:To facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India. What R.B.I does….. It acts as a custodian and Manages the Foreign Exchange Management Act, 1999. RBI buys and sells foreign currency to maintain the exchange rate of  Indian Rupee v/s  foreign currencies like the US Dollar, Euro, Pound sterling and Japanese yen. Dollar Deposits - LIBOR Issue of Currency : Issue of Currency Objective:To ensure adequate quantity of supplies of currency notes and coins of good quality. What R.B.I does….. Issues new currency and destroys currency and coins not fit for circulation. It has to keep in forms of gold and foreign securities as per statutory rules against notes & coins issued. Developmental Role : Developmental Role Objective : To develop the quality of banking system in india. What R.B.I does…… Performs a wide range of promotional functions to support national objectives. To establish financial institutions of national importance, for e.g: NABARD,IDBI etc. Subsidiaries : Subsidiaries Fully owned: National Housing Bank(NHB), Deposit Insurance and Credit Guarantee Corporation of India(DICGC), Bharatiya Reserve Bank Note Mudran Private Limited(BRBNMPL) Major stakes: National Bank for Agriculture and Rural Development (NABARD) The Reserve Bank of India has recently divested its stake in State Bank of India to the Government of India. R.B.I had also set up some trainning institutions. Related Functions (1of 2) : Related Functions (1of 2) Banker to the Government: Performs all banking function for the central and the state governments and also acts as their banker. Banker to banks: maintains banking accounts of all scheduled banks. RBI also regulates the opening /installation of  ATM Fresh currency notes for  ATMs are supplied by RBI RBI regulates the opening of branches by banks. It ensures that all the N.B.F.S follow the Know Your Customer guidelines. Related Functions (2 of 2) : Related Functions (2 of 2) The Reserve Bank of India also regulates the trade of gold. Currently 17 Indian banks are involved in the trade of gold in India. RBI has invited applications from more banks for direct import of gold to curb illegal trade in gold and increase competition in the market. Collection and publication of data. It issues guidelines and directives for the commercial banks Role of RBI in Economic Development : Role of RBI in Economic Development Development of banking system Development of financial institutions Development of backward areas Economic stability Economic growth Proper interest rate structure Miscellaneous Narasimham Committee (1991) (1 of 2) : Narasimham Committee (1991) (1 of 2) High Level Committee-’Mr M.Narasimham’(Chairman) Submitted Report in Nov. 1991 Basic Approach: Greater market orientation would strengthen the financial system & thus improve its efficiency. The solvency, health & efficiency of the institutions should be central to effective financial reforms. Narasimham Committee (1991) (2 of 2) : Narasimham Committee (1991) (2 of 2) On Directed Investments-(SLR & CRR) On Directed Credit Programmes On the Structure of Interest Rates On Structural Reorganization of the Banking Structure Banking Sector Reforms (1992-2005) (1 of 2) : Banking Sector Reforms (1992-2005) (1 of 2) Statutory Liquidity Ratio (SLR) Cash Reserve Ratio (CRR) Interest Rate slabs Prudential Norms Capital Adequacy Norms Freedom of operation Supervision of Commercial Banks Recovery of Debts Slide 31: Thank you

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