Reserve bank of

India

Contents

Introduction Definition History Organization of RBI Management and its Function Credit Control Monetary policy of RBI

Introduction

Reserve Bank of India is the central bank of India .The reserve bank of India was established on 1st April 1935,under the reserve bank of India act,1934.

This bank was constituted as a private shareholders bank with a fully paid up share capital of Rs.5crores,divided into 5,00,000 fully paid up shares of Rs.100 each.

Bank was nationalized with effect from January ,1949 under the reserve bank Act,1948.

The entire share capital of the bank was acquired by the central government after giving adequate compensation to the share holders .

Thus ,from 1st January 1949,reserve bank of India became a state owned institution.

Definition and Objective

Central Bank is an institution charged with the responsibility of managing the expansion and contraction of the volume of money in the interest of general public welfare.

To regulate the issue of currency in India To maintain and manage the foreign exchange

reserves of the country To establish monetary stability in the country. To develop financial structure of the country on the

basis of the national economic social objectives and policies.

History of RBI

1935–1950 The bank was founded in 1935 to respond to economic troubles after

the First World War. The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as to regulate the issue of bank notes, to keep reserves with a view to securing monetary stability in India and generally to operate the currency and credit system in the best interests of the country. The Central Office of the Reserve Bank was initially established in Kolkata, Bengal, but was permanently moved to Mumbai in 1937.

1960–1969 As a result of bank crashes, the reserve bank was requested to

establish and monitor a deposit insurance system. It should restore the trust in the national bank system and was initialized on 7 December 1961.

1969–1985 Between 1969 and 1980, the Indian government nationalized 6

more commercial banks; following 14 major commercial banks being nationalized in 1969 . The branch was forced to establish two new offices in the country for every newly established office in a town. The oil crises in 1973 resulted in increasing inflation, and the RBI restricted monetary policy to reduce the effects.

1985–1991 A lot of committees analyzed the Indian economy between

1985 and 1991. Their results had an effect on the RBI.

1991–2000 The national economy came down in July 1991 and the Indian rupee was

devalued. The currency lost 18% relative to the US, and the Narsimahmam Committee advised restructuring the financial sector by a temporal reduced reserve ratio as well as the statutory liquidity ratio. published in 1993 to establish a private banking sector. This turning point should reinforce the market and was often called liberal. The central bank deregulated bank interests and some sectors of the financial market like the trust and property markets. 

Since 2000 The Foreign Exchange Management Act from 1999 came into force in

June 2000. It should improve the foreign exchange market, international investments in India and transactions. The RBI promoted the development of the financial market in the last years, allowed online banking in 2001 and established a new payment system in 2004–2005

Management of RBI

One governor and 4 deputy governors appointed by the government of India for a period of 5 years.

4 directors nominated from the local boards located at,mumbai,kolkata,chennai and new Delhi.

10 other directors nominated by government of India whose term is 4 years.

An official of the government of India to attend the meetings of the central board.

Organization of RBI

Issue department Banking Department Banking Development Department Department of banking operation Non-Banking Companies Department Agricultural credit department Industrial finance department Exchange control department Legal affairs department Department of research and statistics Planning and reorganization department Economic department Inspection department Services department Control and supervision department Financial market department

Functions of reserve bank of India

Central banking function: Issue of currency Banker to the government Banker to the banks Custodian of foreign exchange reserve of the country Regulation and control of credit Training in banking Collection and publication of static's

General banking function: Acceptance of deposits grant of loans to deal in bills to deal in securities To deal in foreign exchange To borrow money To deal with the banks of other countries To provide save custody To deal in costly metals

Current bank rates

Bank Rate 9.50% Repo Rate 8.50% Reverse Repo Rate 7.50% Cash Reserve Ratio (CRR) 4.75% Statutory Liquidity Ratio (SLR) 24.0% Base Rate 10.00%–10.75% Reserve Bank Rate 4% Deposit Rate 8.50%–9.25%

Monetary policy of RBI

Right from 1949,the RBI monetary policy has been guided by 3 objectives:

Stability Growth Social justiceMain focus of reserve bank’s monetary policy has been

on controlled expansion of money supply. Since the beginning of the first 5 yr plan the principal

objective of the monetary policy as adopted by the RBI have been economic development and price stability

Methods of Credit Control By RBI

Open market operations Bank rate Variable reserve ratios Statuary liquidity ratio (SLR) Liquidity adjustment facility Credit monitoring arrangement

Achievements of RBI

It has very successfully regulated credit to meet the requirements of trade, industry and agricultural

It has developed and promoted sound banking practices in the country

The RBI has successfully promote the institutions nationalization of saving by-

Promoting banking habits Extending banking facilities all over the country Establishing specialized financial agencies

• As a guardian of the banking system the reserve bank has been providing insurance and credit guarantee facilities to the banks through DICGC