(88816581) RBI role

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A PROJECT

REPORT OF

INDIAN FINANCIALSYSTEM ON

ROLE OF RBI IN INDIAN

ECONOMY

IN PARTIAL FULFILLMENT OF THE

REQUIREMENT IN SEMISTER IIIMASTER OF BUSINESS

ADMINISTRATION

SUBMITTED BY:

Hitesh Soni (0854)

Suresh Chaudhary (0805)

SUBMITTED TO:

MS. Khushbu Shah

S.P.B.PATEL ENGG.COLLEGE,LINCH(MEHSANA)

S.P.B.PATEL ENGG. COLLEGE(MBA PROGRAMME),MEHSANA 1

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Preamble

The Preamble of the Resere Ba!" of #!$%a $es&r%bes the bas%& f'!&t%o!s of the ResereBa!" as

...to re*'late the %ss'e of Ba!" Notes a!$ "ee+%!* of reseres %th a %e to se&'r%!*

mo!etar- stab%l%t- %! #!$%a a!$ *e!erall- to o+erate the &'rre!&- a!$ &re$%t s-stem of the

&o'!tr- to %ts a$a!ta*e.

OVERVIEW OF RBI

The Reserve Bank of India %s the &e!tral ba!" of #!$%a,a!$ as establ%she$ o! A+r%l 1,

1/0 %! a&&or$a!&e %th the +ro%s%o!s of the Resere Ba!" of #!$%a A&t, 1/. The

Ce!tral Off%&e of the Resere Ba!" as %!%t%all- establ%she$ %! 2ol"ata b'tas+erma!e!tl- moe$ to M'mba% %! 1/3. Tho'*h or%*%!all- +r%atel- o!e$, the RB# has

bee! f'll- o!e$ b- the Goer!me!t of #!$%a s%!&e!at%o!al%4at%o! %! 1.

5''r% S'bbarao ho s'&&ee$e$ 6a*a 7e!'*o+al Re$$- o! Se+tember 8, 899: %sthe

&'rre!t Goer!or ofRB#.

The Resere Ba!" of #!$%a as set '+ o! the re&omme!$at%o!s of the Hilton YoungCommission. The &omm%ss%o! s'bm%tte$ %ts re+ort %! the -ear 18;, tho'*h the ba!" as

!ot set '+ for !%!e -ears.

The Preamble of the Resere Ba!" of #!$%a $es&r%bes the bas%& f'!&t%o!s of the ResereBa!" as to re*'late the %ss'e of Ba!" Notes a!$ "ee+%!* of reseres %th a %e to

se&'r%!* mo!etar- stab%l%t- %! #!$%a a!$ *e!erall- to o+erate the &'rre!&- a!$ &re$%t

s-stem of the &o'!tr- to %ts a$a!ta*e.

#t has 88 re*%o!al off%&es, most of them %! state &a+%tals.

RB# as starte$ %th a +a%$ '+ share &a+%tal of 0 &rore.o! establ%she$ %t too" oer the

f'!&t%o! of ma!a*eme!t of &'rre!&- from *oer!me!t of #!$%a a!$ +oer of &re$%t

&o!trol from %m+er%al ba!" of %!$%a.

http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Duvvuri_Subbaraohttp://en.wikipedia.org/wiki/Governorhttp://en.wikipedia.org/wiki/Governorhttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Duvvuri_Subbaraohttp://en.wikipedia.org/wiki/Governorhttp://en.wikipedia.org/wiki/Governorhttp://en.wikipedia.org/wiki/India

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Nationaliation of RBI!

?

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OR"#NI$#%ION & '#N#"E'EN% BO(Y

.

S.P.B.PATEL ENGG. COLLEGE(MBA PROGRAMME),MEHSANA

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RO)E OF RE*ERVE B#N+ OF IN(I#

Bank of Issue!$er Se&t%o! 88 of the Resere Ba!" of #!$%a A&t, the Ba!" has the sole r%*ht to %ss'e ba!" !otes of all$e!om%!at%o!s. The $%str%b't%o! of o!e r'+ee !otes a!$ &o%!s a!$ small &o%!s all oer the &o'!tr- %s'!$erta"e! b- the Resere Ba!" as a*e!t of the Goer!me!t. The Resere Ba!" has a se+arate #ss'e5e+artme!t h%&h %s e!tr'ste$ %th the %ss'e of &'rre!&- !otes. The assets a!$ l%ab%l%t%es of the #ss'e5e+artme!t are "e+t se+arate from those of the Ba!"%!* 5e+artme!t. Or%*%!all-, the assets of the #ss'e5e+artme!t ere to &o!s%st of !ot less tha! to@f%fths of *ol$ &o%!, *ol$ b'll%o! or sterl%!* se&'r%t%es+ro%$e$ the amo'!t of *ol$ as !ot less tha! Rs. 9 &rores %! al'e. The rema%!%!* three@f%fths of theassets m%*ht be hel$ %! r'+ee &o%!s,Goer!me!t of #!$%a r'+ee se&'r%t%es, el%*%ble b%lls of e&ha!*e a!$ +rom%ssor- !otes +a-able %! #!$%a.

5'e to the e%*e!&%es of the Se&o!$

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The s&he$'le$ ba!"s &a! borro from the Resere Ba!" of #!$%a o! the bas%s of el%*%ble se&'r%t%es or *etfinancial a&&ommo$at%o! %! t%mes of !ee$ or str%!*e!&- b- re$%s&o'!t%!* b%lls of e&ha!*e. S%!&e

&ommer&%al ba!"s &a! ala-s e+e&t the Resere Ba!" of #!$%a to &ome to the%r hel+ %! t%mes of ba!"%!*&r%s%s the Resere Ba!" be&omes !ot o!l- the ba!"ers ba!" b't also the le!$er of the last resort.

Controller of Credit

The Resere Ba!" of #!$%a %s the &o!troller of &re$%t %.e. %t has the +oer to %!fl'e!&e the ol'me of &re$%t

&reate$ b- ba!"s %! #!$%a. #t &a! $o so thro'*h &ha!*%!* the Ba!" rate or thro'*h o+e! mar"et o+erat%o!s.

A&&or$%!* to the Ba!"%!* Re*'lat%o! A&t of 1, the Resere Ba!" of #!$%a &a! as" a!- +art%&'lar ba!"or the hole ba!"%!* s-stem !ot to le!$ to +art%&'lar *ro'+s or +erso!s o! the bas%s of &erta%! t-+es of

se&'r%t%es. S%!&e 10;, sele&t%e &o!trols of &re$%t are %!&reas%!*l- be%!* 'se$ b- the Resere Ba!".

The Resere Ba!" of #!$%a %s arme$ %th ma!- more +oers to &o!trol the #!$%a! mo!e- mar"et. Eer-ba!" has to *et a l%&e!&e from the Resere Ba!" of #!$%a to $o ba!"%!* b's%!ess %th%! #!$%a, the l%&e!&e

&a! be &a!&elle$ b- the Resere Ba!" of &erta%! st%+'late$ &o!$%t%o!s are !ot f'lf%lle$. Eer- ba!" %ll

hae to *et the +erm%ss%o! of the Resere Ba!" before %t &a! o+e! a !e bra!&h. Ea&h s&he$'le$ ba!"m'st se!$ a ee"l- ret'r! to the Resere Ba!" sho%!*, %! $eta%l, %ts assets a!$ l%ab%l%t%es. Th%s +oer of

the Ba!" to &all for %!format%o! %s also

%!te!$e$ to *%e %t effe&t%e &o!trol of the &re$%t s-stem. The Resere Ba!" has also the +oer to %!s+e&tthe a&&o'!ts of a!- &ommer&%al ba!".

As s'+ereme ba!"%!* a'thor%t- %! the &o'!tr-, the Resere Ba!" of #!$%a, therefore, has the

follo%!* +oers(a) #t hol$s the &ash reseres of all the s&he$'le$ ba!"s.

(b) #t &o!trols the &re$%t o+erat%o!s of ba!"s thro'*h ?'a!t%tat%e a!$ ?'al%tat%e &o!trols.

(&) #t &o!trols the ba!"%!* s-stem thro'*h the s-stem of l%&e!s%!*, %!s+e&t%o! a!$ &all%!* for

%!format%o!.

($) #t a&ts as the le!$er of the last resort b- +ro%$%!* re$%s&o'!t fa&%l%t%es to s&he$'le$ ba!"s.

Custodian of Foreign Reserves

The Resere Ba!" of #!$%a has the res+o!s%b%l%t- to ma%!ta%! the off%&%al rate of e&ha!*e. A&&or$%!* to

the Resere Ba!" of #!$%a A&t of 1/, the Ba!" as re?'%re$ to b'- a!$ sell at f%e$ rates a!- amo'!tof sterl%!* %! lots of !ot less tha! Rs. 19,999. The rate of e&ha!*e f%e$ as Re. 1 sh. ;$. S%!&e 1/0

the Ba!" as able to ma%!ta%! theexchange rate f%e$ at lsh.;$. tho'*h there ere +er%o$s of etreme+ress're %! fao'r of or a*a%!st

S.P.B.PATEL ENGG. COLLEGE(MBA PROGRAMME),MEHSANA ;
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the r'+ee. After #!$%a be&ame a member of the #!ter!at%o!al Mo!etar- >'!$ %! 1;, the Resere Ba!" hasthe res+o!s%b%l%t- of ma%!ta%!%!* f%e$ e&ha!*e rates %th all other member &o'!tr%es of the #.M.>.

Bes%$es ma%!ta%!%!* the rate of e&ha!*e of the r'+ee, the Resere Ba!" has to a&t as the &'sto$%a! of#!$%as resere of %!ter!at%o!al &'rre!&%es. The ast sterl%!* bala!&es ere a&?'%re$ a!$ ma!a*e$ b- the

Ba!". >'rther, the RB# has the res+o!s%b%l%t- of a$m%!%ster%!* the e&ha!*e &o!trols of the &o'!tr-.

*u.ervisor/ fun0tions

#! a$$%t%o! to %ts tra$%t%o!al &e!tral ba!"%!* f'!&t%o!s, the Resere ba!" has &erta%! !o!@ mo!etar-

f'!&t%o!s of the !at're of s'+er%s%o! of ba!"s a!$ +romot%o! of so'!$ ba!"%!* %! #!$%a. The Resere

Ba!" A&t, 1/, a!$ the Ba!"%!* Re*'lat%o! A&t, 1 hae *%e! the RB# %$e +oers of s'+er%s%o!a!$ &o!trol oer &ommer&%al a!$ &o@o+erat%e ba!"s, relat%!* to l%&e!s%!* a!$ establ%shme!ts, bra!&h

e+a!s%o!, l%?'%$%t- of the%r assets, ma!a*eme!t a!$ metho$s of or"%!*, amal*amat%o!, re&o!str'&t%o!,

a!$ l%?'%$at%o!. The RB# %s a'thor%se$ to &arr- o't +er%o$%&al %!s+e&t%o!s of the ba!"s a!$ to &all forret'r!s a!$ !e&essar- %!format%o! from them. The !at%o!al%sat%o! of 1 maFor #!$%a! s&he$'le$ ba!"s %!='l- 1; has %m+ose$ !e res+o!s%b%l%t%es o! the RB# for $%re&t%!* the *roth of ba!"%!* a!$ &re$%t

+ol%&%es toar$s more ra+%$ $eelo+me!t of the e&o!om- a!$ real%sat%o! of &erta%! $es%re$ so&%al

obFe&t%es. The s'+er%sor- f'!&t%o!s of the RB# hae hel+e$ a *reat $eal %! %m+ro%!* the sta!$ar$ ofba!"%!* %! #!$%a to $eelo+ o! so'!$ l%!es a!$ to %m+roe the metho$s of the%r o+erat%o!.

Promotional fun0tions

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Classifi0ation of RBIs fun0tions

The mo!etar- f'!&t%o!s also "!o! as the &e!tral ba!"%!* f'!&t%o!s of the RB# are relate$ to &o!trol a!$

re*'lat%o! of mo!e- a!$ &re$%t, %.e., %ss'e of &'rre!&-, &o!trol of ba!" &re$%t, &o!trol of fore%*! e&ha!*e

o+erat%o!s, ba!"er to the Goer!me!t a!$ to the mo!e- mar"et. Mo!etar- f'!&t%o!s of the RB# ares%*!%f%&a!t as the- &o!trol a!$ re*'late the ol'me of mo!e- a!$ &re$%t %! the &o'!tr-.

E?'all- %m+orta!t, hoeer, are the !o!@mo!etar- f'!&t%o!s of the RB# %! the &o!tet of #!$%as e&o!om%&ba&"ar$!ess. The s'+er%sor- f'!&t%o! of the RB# ma- be re*ar$e$ as a !o!@ mo!etar- f'!&t%o! (tho'*h

ma!- &o!s%$er th%s a mo!etar- f'!&t%o!). The +romot%o! of so'!$ ba!"%!* %! #!$%a %s a! %m+orta!t *oal of

the RB#, the RB# has bee! *%e! %$e a!$ $rast%& +oers, '!$er the Ba!"%!* Re*'lat%o! A&t of 1 @

these +oers relate to l%&e!&%!* of ba!"s, bra!&h e+a!s%o!, l%?'%$%t- of the%r assets, ma!a*eme!t a!$metho$s of or"%!*, %!s+e&t%o!, amal*amat%o!, re&o!str'&t%o! a!$ l%?'%$at%o!. !$er the RB#s

s'+er%s%o! a!$ %!s+e&t%o!, the or"%!* of ba!"s has *reatl- %m+roe$. Commer&%al ba!"s hae

$eelo+e$ %!to f%!a!&%all- a!$ o+erat%o!all- so'!$ a!$ %able '!%ts. The RB#s +oers of s'+er%s%o! hae!o bee! ete!$e$ to !o!@ba!"%!* f%!a!&%al %!terme$%ar%es. S%!&e %!$e+e!$e!&e, +art%&'larl- after %ts

!at%o!al%sat%o!

1, the RB# has folloe$ the +romot%o!al f'!&t%o!s %*oro'sl- a!$ has bee! res+o!s%ble for stro!*f%!a!&%al s'++ort to %!$'str%al a!$ a*r%&'lt'ral $eelo+me!t %! the &o'!tr-.

S.P.B.PATEL ENGG. COLLEGE(MBA PROGRAMME),MEHSANA :

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RE"1)#%ION OF B#N+IN" *Y*%E'

? Ob2e0tiveThe obFe&t%es of ba!" re*'lat%o!, a!$ the em+has%s, ar%es betee! F'r%s$%&t%o!. The most&ommo! obFe&t%es are

1. Pr'$e!t%al @@ to re$'&e the leel of r%s" ba!" &re$%tors are e+ose$ to (%.e. to +rote&t$e+os%tors)

8. S-stem%& r%s" re$'&t%o!@@ to re$'&e the r%s" of $%sr'+t%o! res'lt%!* from a$erse tra$%!*&o!$%t%o!s for ba!"s &a's%!* m'lt%+le or maFor ba!" fa%l'res

/. Ao%$ m%s'se of ba!"s @@ to re$'&e the r%s" of ba!"s be%!* 'se$ for &r%m%!al

+'r+oses, e.*. la'!$er%!* the +ro&ee$s of &r%me

. To +rote&t ba!"%!* &o!f%$e!t%al%t-0. Cre$%t allo&at%o! @@ to $%re&t &re$%t to faore$ se&tors

"eneral .rin0i.les of bank regulation

Ba!"%!* re*'lat%o!s &a! ar- %$el- a&ross !at%o!s a!$ F'r%s$%&t%o!s. Th%s se&t%o! of the art%&le

$es&r%bes *e!eral +r%!&%+les of ba!" re*'lat%o! thro'*ho't the orl$.

Minimum requirements

Re?'%reme!ts are %m+ose$ o! ba!"s %! or$er to +romote the obFe&t%es of the re*'lator. The most%m+orta!t m%!%m'm re?'%reme!t %! ba!"%!* re*'lat%o! %s ma%!ta%!%!* m%!%m'm &a+%tal rat%os.

Supervisory review

Ba!"s are re?'%re$ to be %ss'e$ %th a ba!" l%&e!se b- the re*'lator %! or$er to &arr- o!

b's%!ess as a ba!", a!$ the re*'lator s'+er%ses l%&e!&e$ ba!"s for &om+l%a!&e %th there?'%reme!ts a!$ res+o!$s to brea&hes of the re?'%reme!ts thro'*h obta%!%!* '!$erta"%!*s,

*%%!* $%re&t%o!s, %m+os%!* +e!alt%es or reo"%!* the ba!"s l%&e!&e.

S.P.B.PATEL ENGG. COLLEGE(MBA PROGRAMME),MEHSANA
http://en.wikipedia.org/wiki/Systemic_riskhttp://en.wikipedia.org/wiki/Systemic_riskhttp://en.wikipedia.org/wiki/Systemic_risk

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Market discipline

The re*'lator re?'%res ba!"s to +'bl%&l- $%s&lose f%!a!&%al a!$ other %!format%o!, a!$ $e+os%tors

a!$ other &re$%tors are able to 'se th%s %!format%o! to assess the leel of r%s" a!$ to ma"e%!estme!t $e&%s%o!s. As a res'lt of th%s, the ba!" %s s'bFe&t to mar"et $%s&%+l%!e a!$ there*'lator &a! also 'se mar"et +r%&%!* %!format%o! as a! %!$%&ator of the ba!"s f%!a!&%al health.

Instruments and re3uirements of bank regulation

Capital requirement

The &a+%tal re?'%reme!t sets a frameor" o! ho ba!"s m'st ha!$le the%r &a+%tal %! relat%o!

to the%r assets. #!ter!at%o!all-, the Ba!" for #!ter!at%o!al Settleme!ts Basel Comm%ttee o!Ba!"%!* S'+er%s%o! %!fl'e!&es ea&h &o'!tr-s &a+%tal re?'%reme!ts. #!

1::, the Comm%ttee $e&%$e$ to %!tro$'&e a &a+%tal meas'reme!t s-stem &ommo!l-referre$ to as the Basel Ca+%tal A&&or$s. The latest &a+%tal a$e?'a&- frameor" %s

&ommo!l- "!o! as Basel ##. Th%s '+$ate$ frameor" %s %!te!$e$ to be more r%s" se!s%t%e

tha! the or%*%!al o!e, b't %s also a lot more &om+le.

Reserve requirement

The resere re?'%reme!t sets the m%!%m'm reseres ea&h ba!" m'sthol$ to $ema!$ $e+os%tsa!$ ba!"!otes. Th%s t-+e of re*'lat%o! has lost the role %t o!&e ha$, as the em+has%s has

moe$ toar$ &a+%tal a$e?'a&-, a!$ %! ma!- &o'!tr%es there %s !o m%!%m'm resere rat%o.The +'r+ose of m%!%m'm resere rat%os %s l%?'%$%t- rather tha!safet-. A! eam+le of a&o'!tr- %th a &o!tem+orar- m%!%m'm resere rat%o %s Ho!* 2o!*, here ba!"s are re?'%re$to ma%!ta%! 80D of the%r l%ab%l%t%es that are $'e o! $ema!$ or %th%! 1 mo!th as ?'al%f-%!*l%?'ef%able assets.

Reserere?'%reme!ts hae also bee! 'se$ %! the +ast to &o!trol the sto&" of ba!"!otes a!$orba!" $e+os%ts. Re?'%re$ reseres hae at t%mes bee! *ol$ &o%!, &e!tral ba!" ba!"!otes or

$e+os%ts, a!$ fore%*! &'rre!&-.

Corporate governance

Cor+orate *oer!a!&e re?'%reme!ts are %!te!$e$ to e!&o'ra*e the ba!" to be ellma!a*e$, a!$ %s a! %!$%re&t a- of a&h%e%!* other obFe&t%es. Re?'%reme!ts ma-

%!&l'$e

http://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Bank_reserveshttp://en.wikipedia.org/wiki/Banknoteshttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Bank_reserveshttp://en.wikipedia.org/wiki/Banknotes

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1. To be a bo$- &or+orate (%.e. !ot a! %!$%%$'al, a +art!ersh%+, tr'st or other

'!%!&or+orate$ e!t%t-)8. To be %!&or+orate$ lo&all-, a!$or to be %!&or+orate$ '!$er as a +art%&'lar t-+e of bo$-

&or+orate, rather tha! be%!* %!&or+orate$ %! a fore%*! F'r%s$%&t%o!./. To hae a m%!%m'm !'mber of $%re&tors

. To hae a! or*a!%4at%o!al str'&t're that %!&l'$es ar%o's off%&es a!$ off%&ers, e.*.&or+orate se&retar-, treas'rerC>O, a'$%tor, Asset L%ab%l%t- Ma!a*eme!t Comm%ttee,

Pr%a&- Off%&er et&. Also the off%&ers for those off%&es ma- !ee$ to be a++roe$ +erso!s,

or from a! a++roe$ &lass of +erso!s.0. To hae a &o!st%t't%o! or art%&les of asso&%at%o! that %s a++roe$, or &o!ta%!s or $oes !ot

&o!ta%! +art%&'lar &la'ses, e.*. &la'ses that e!able $%re&tors to a&t other tha! %! the best

%!terests of the &om+a!- (e.*. %! the %!terests of a +are!t &om+a!-) ma- !ot be alloe$.

Financial reporting and disclosure requirements

1. Pre+are a!!'al f%!a!&%al stateme!ts a&&or$%!* to a f%!a!&%al re+ort%!* sta!$ar$, hae

them a'$%te$, a!$ to re*%ster or +'bl%sh them

8. Pre+are more fre?'e!t f%!a!&%al $%s&los'res, e.*. I'arterl- 5%s&los're Stateme!ts

/. Hae $%re&tors of the ba!" attest to the a&&'ra&- of s'&h f%!a!&%al $%s&los'res. Pre+are a!$ hae re*%stere$ +ros+e&t'ses $eta%l%!*the terms of se&'r%t%es %t %ss'es (e.*.

$e+os%ts), a!$ the relea!t fa&ts that %ll e!able %!estors to better assess the leel a!$

t-+e of f%!a!&%al r%s"s %! %!est%!* %! those se&'r%t%es.

Credit rating requirement

Ba!"s ma- be re?'%re$ to obta%! a!$ ma%!ta%! a &'rre!t &re$%t rat%!* from a! a++roe$ &re$%trat%!* a*e!&-, a!$ to $%s&lose %t to %!estors a!$ +ros+e&t%e %!estors. Also, ba!"s ma- be

re?'%re$ to ma%!ta%! a m%!%m'm &re$%t rat%!*.

Large exposures restrictions

Ba!"s ma- be restr%&te$ from ha%!* %m+r'$e!tl- lar*e e+os'res to %!$%%$'al&o'!ter+art%es or*ro'+s of &o!!e&te$ &o'!ter+art%es. Th%s ma- be e+resse$ as a +ro+ort%o! of the ba!"s assets or

e?'%t-, a!$ $%ffere!t l%m%ts ma- a++l- $e+e!$%!* o! the se&'r%t- hel$ a!$or the &re$%t rat%!* of

the &o'!ter+art-.

Related party exposure restrictions

Ba!"s ma- be restr%&te$ from %!&'rr%!* e+os'res to relate$ +art%es s'&h as the ba!"s +are!t

&om+a!- or $%re&tors. T-+%&all- the restr%&t%o!s ma- %!&l'$e

? E+os'res to relate$ +art%es m'st be %! the !ormal &o'rse of b's%!ess a!$ o! !ormal

terms a!$ &o!$%t%o!s

http://en.wikipedia.org/wiki/Prospectus_(finance)http://en.wikipedia.org/wiki/Counterpartyhttp://en.wikipedia.org/wiki/Prospectus_(finance)http://en.wikipedia.org/wiki/Counterparty

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? E+os'res to relate$ +art%es m'st be %! the best %!terests of the ba!"

? E+os'res to relate$ +art%es m'st be !ot more tha! l%m%te$ amo'!ts or +ro+ort%o!s of the

ba!"s assets or e?'%t-.

CRE(I% CON%RO)

O!e of the more +leasa!t as+e&ts of the latest ?'arterl- Mo!etar- Pol%&- Re%e %s the attem+t

b- the Resere Ba!" of #!$%a to be as +re$%&table as +oss%ble, or at least less $%sr'+t%e tha! %thas bee! before. The !ot%o! that some eleme!ts of a t%*hter mo!e- +ol%&- o'l$ be a!!o'!&e$

as +rett- m'&h to be e+e&te$.

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OB4EC%IVE OF CRE(I% CON%RO)

The &e!tral ba!" ma"es efforts to &o!trol the e+a!s%o! or &o!tra&t%o! of &re$%t %! or$er to "ee+

%t at the re?'%re$ leel %th a %e to a&h%e%!* the follo%!* e!$s.

1. To sae Gol$ Reseres The &e!tral ba!" a$o+ts ar%o's meas'res of &re$%t &o!trol to safe

*'ar$ the *ol$ reseres a*a%!st %!ter!al a!$ eter!al $ra%!s.

8. To a&h%ee stab%l%t- %! the Pr%&e leel >re?'e!tl- &ha!*es %! +r%&es a$ersel- affe&t the

e&o!om-. #!flat%o!ar- a!$ $eflat%o!ar- tre!$s !ee$ to be +ree!te$. Th%s &a! be a&h%ee$ b-

a$o+t%!* a F'$%&%o's of &re$%t &o!trol.

/. To a&h%ee stab%l%t- %! the >ore%*! E&ha!*e Rate A!other obFe&t%e of &re$%t &o!trol %s to

a&h%ee the stab%l%t- of fore%*! e&ha!*e rate. #f the fore%*! e&ha!*e rate %s stab%l%4e$, %t

%!$%&ates the stable e&o!om%& &o!$%t%o!s of the &o'!tr-.

. To meet B's%!ess Nee$s A&&or$%!* to B'r*ess, o!e of the %m+orta!t obFe&t%es of &re$%t

&o!trol %s the KA$F'stme!t of the ol'me of &re$%t to the ol'me of B's%!ess &re$%t %s !ee$e$to meet the re?'%reme!ts of tra$e a! %!$'str-. So b- &o!troll%!* &re$%t &e!tral ba!" &a! meet

the re?'%reme!ts of b's%!ess.

S.P.B.PATEL ENGG. COLLEGE(MBA PROGRAMME),MEHSANA 1/

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'E%HO( OF CRE(I% CON%RO)

There are to metho$ of &re$%t &o!trol@

? 5uantitative met-od

67 Bank Rate Poli0/

87 O.en 'arket O.erations

97 C-ange in Reserve Ratios

:7 Credit Rationing

? 5ualitative met-od

67 (ire0t #0tion

87 'oral .ersuasion97 )egislation

:7 Publi0it/

5uantitative met-od

67 Bank Rate Poli0/! Ba!" rate %s the rate of %!terest h%&h %s &har*e$ b- the &e!tral

ba!" o! re$%s&o'!t%!* the f%rst &lass b%lls of e&ha!*e a!$ a$a!&%!* loa!s a*a%!sta++roe$ se&'r%t%es. Th%s fa&%l%t- %s +ro%$e$ to other ba!"s. #t %s also "!o! as 5%s&o'!t

Rate Pol%&-.

87 O.en 'arket O.erations! The term KO+e! Mar"et O+erat%o!s %! the %$er se!se

mea!s +'r&hase or sale b- a &e!tral ba!" of a!- "%!$ of +a+er %! h%&h %t $eals, l%"e*oer!me!t se&'r%t%es or a!- other +'bl%& se&'r%t%es or tra$e b%lls et&. %! +ra&t%&e,


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hoeer the term %s a++l%e$ to +'r&hase or sale of *oer!me!t se&'r%t%es, short@term as

ell as lo!*@term, at the %!%t%at%e of the &e!tral ba!", as a $el%berate &re$%t +ol%&-.

97 C-ange in Reserve Ratios! Eer- &ommer&%al ba!" %s re?'%re$ to $e+os%t %th the&e!tral ba!" a &erta%! +art of %ts total $e+os%ts. '!$s from the RB# at Re+o rate.


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5ualitative met-od

67 (ire0t #0tion! The &e!tral ba!" ma- ta"e $%re&t a&t%o! a*a%!st &ommer&%al

ba!"s that %olate the r'les, or$ers or a$%&e of the &e!tral ba!". Th%s+'!%shme!t %s er- seere of a &ommer&%al ba!".

87 'oral .ersuasion! #t %s a!other metho$ b- h%&h &e!tral ba!" ma- *et&re$%t s'++l- e+a!$e$ or &o!tra&te$. B- moral +ress're %t ma- +roh%b%t or

$%ss'a$e &ommer&%al ba!"s to $eal %! s+e&'lat%e b's%!ess.

97 )egislation! The &e!tral ba!" ma- also a$o+t !e&essar- le*%slat%o! for

e+a!$%!* or &o!tra&t%!* &re$%t mo!e- %! the mar"et.

:7 Publi0it/! The &e!tral ba!" ma- resort to mass%e a$ert%s%!* &am+a%*! %!the !es +a+ers, ma*a4%!es a!$ Fo'r!als $e+%&t%!* the +oor e&o!om%&

&o!$%t%o!s of the &o'!tr- s'**est%!* &ommer&%al ba!"s a!$ other f%!a!&%al

%!st%t't%o!s to &o!trol &re$%t e%ther b- e+a!s%o! or b- &o!tra&t%o!.

S.P.B.PATEL ENGG. COLLEGE(MBA PROGRAMME),MEHSANA 1;

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Bibliogra.-/!?

BOO+*

? '7Y7 +-an @Indian finan0ial s/stem

? *ud-ir s-a-?Indian e0onom/

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