Submitted by: Bachkaniwala Priyanka

Bavda Nikita

Lalwani Sonam

Submitted to : Mr. Paresh Dave

S. R. Luthra Institute of Management

INTRODUCTION It is the Central Bank of India Established on 1 April 1934

under the RESERVE BANK OF INDIA ACT,1934.

It started functioning from April 1,1935.

Its headquarters are in Mumbai (Maharashtra) since 1937.

Its present governor is Duvvuri Subbarao.

It has 22 regional offices, most of them are in State capitals

It has 26 offices in which four are regional offices located in metropolitan cities.

Brief History 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. The govt. had a

nominal value of shares of INR 2,20,000. Later on in 1949, the bank was nationalised and is fully owned by the Govt. of India.

Since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.

Its First governor was Sir Osborne A. Smith April 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 Sir Osborne A. Smith April 1, 1935 to June 30, 1937

Sir Chintaman D.Deshmukh August 11, 1943 to June 30, 1949 INDIAN

Governors  

Dr. Y.V.Reddy  September 6, 2003 to September 5, 2008

Dr. D. Subbarao  September 5, 2008 onwards

PreambleThe Preamble of the Reserve Bank of India describes the

basic objectives 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."

The preamble prescribes the objectives as:

to secure monetary stability within the country

To operate the currency and credit system to the

advantage of the country.

Organization of RBICentral Board Local Board

Central Board (1 of 2)

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

The functions of the central board are general

superintendence and direction of the bank’s

affairs.

Official directors

Non official directors

Local Board There are four Local Board

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

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.

Roles of RBI

Monetary AuthorityRegulator & Supervisor of Financial SystemBanker to the governmentManager of Foreign Exchange Issuer of CurrencyDevelopmental RoleBanker to the banks

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.

Instruments: qualitative & quantitative.

Quantitative Measures

BANK RATE also called discount rate 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

Repo Rate Whenever the banks have any shortage of funds they can

borrow it from the central bank. Repo rate is the rate at which our banks borrow currency from the central bank.

A reduction in the repo rate will help banks to get Money at a cheaper rate.

When the repo rate increases borrowing from the central bank becomes more expensive.

In order to increse the liquidity in the market, the central bank does it.

The present repo rate is 8%

Bank Rate It’s the interest rate that is charged by a country’s central bank

on loans and advances to control money supply in the economy and the banking sector.

This is typically done on a quarterly basis to control inflation and stabilize the country’s exchange rates.

A fluctuation in bank rates Triggers a Ripple-Effect as it impacts every sector of a country’s economy.

A change in bank rates affects customers as it influences Prime Interest Rates for personal loans.

The present bank rate is 9%

Reverse Repo Rate It’s the rate at which the banks park surplus

funds with reserve bank.

While the Repo rate is the rate at which the banks borrow from the central bank.

It is mostly done , when there is surplus liquidity in the market by the central bank.

The present reverse repo rate is 7%

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

Banker to the Government

• Keeping the cash balances of the Government as deposits free of interest.

• Receiving and making payments on behalf of the Govt.

• Carrying out the Govts’ exchange remittances and other banking operations.

• Helping both Central and State Govts float new loans and mange public debt.

• Making ways and means advances to the state and local authorities.

• Acting as advisor to the Govt. on all monetary and banking matters.

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.

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.

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.

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.

Functions

1. Issue of currency

Functions (contd.)

2. Banker to Govt.: Agent of all Central & State

Govt. Obligations to transact Govt.

business Acts as advisor in Govt. & Public

matters Issue of debt instruments like

bonds, T-bills

Functions (contd.)3. Banker’s bank & Lender of the last resort: According to the Banking Companies Act 1949,

every scheduled bank was required to maintain the Reserve Bank a cash reserve at the rates prescribed by RBI from time to time

Controls the liquidity in the banking system Lends to the bank as a refinancing function in case

of exigencies

4. Controller of credit: Volume of credit through open market

transactions/reducing bank rate Permission of opening a new branch Weekly return of details Power to inspect the accounts of any commercial

banks

Functions (contd.)Powers of RBI:1) Holds the cash reserves

for all scheduled banks2) Controls the credit

operations of bank through quantitative & qualitative controls

3) Controls the banking system

4) To provide rediscount and refinance facilities to scheduled banks

Functions (contd.)

5. Custodian of foreign exchange reserves:

Maintains official rate of exchange by intervening market operations which can be active or passive

Monitoring the movement of exchange rates with the help of Real Effective Exchange Rate(REER)

Replacement of FERA with FEMA

Functions (contd.)6. Regulatory & Supervisory

functions To prevent risk, avoid

financial crises, protect depositors’ interest & reduce asymmetry of information between depositors and financial institutions

Concept of risk mgt. systemAsset liability management

Subsidiaries of RBIFully owned: National Housing Bank(NHB),

Deposit Insurance and Credit Guarantee Corporation of India(DICGC), Bharatiya Reserve Bank Note Mudran Private Limited(BRBNMPL).

Majority stake: 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.

Current News about RBIRBI has penalized 6 more banks for

KYC violation. These banks are Allahabad Bank, Bank of Maharashtra, Corporation Bank, Dena Bank, IDBI Bank and Indian Bank.

Repo rate:7.25%Reverse repo rate: 6.25%CRR:4%SLR:23%GDP Growth forecast:5.5%