It is the Central Bank Of INDIA

Head Quarter-Mumbai, Maharashtra (Present)

GOVERNOR – DR. RAGHURAM GOVIND RAJAN

It has “22 Regional Offices”, most of them are in State Capital.

Website: http://www.rbi.org.in

INTRODUCTION

Reserve Bank Of India, Regional Office, DelhiEntrance with the Yakshini Sculpture depicting “

Prosperity through Agriculture”

A statue of Yaksha is stands as guard at RBIYaksha is a servant of Kuberji (God of Wealth)

Established in 1st April 1935 under the RESERVE BANK OF INDIA ACT, 1934.

It was setup on the recommendations of the Royal Commission on Indian Currency and Finance also known as “Hilton Young Commission”

Initially started as entirely owned by Privately Share-Holders with a paid up capital of 5 Crores.

The originally share capital was divided into shares of 100 each fully paid.

BRIEF HISTORY

Continued...

When RBI established its Head Quarter at Calcutta (now Kolkata).

After in 1937 it was moved at Bombay (now Mumbai). Since Nationalization in 1949, it was fully owned by

Government of India. Its very first Governor was “Sir Osborne A. Smith” (1st

April 1935 to 30th June 1937). The Very First INDIAN Governor was“Sir Chintan D. Deshmukh” (11th August 1943 to 30th June

1949) On 27th June 2006, the Government of India reconstituted

the Central Board of Directors of the RBI with 13 members including Azim Premji and Kumar Manglam Birla.

GOVERNORSSir Osborne A. Smith1st April 1935 to 30th June 1937

Sir James Taylor1st July 1937 to 17th February 1943

Sir Chintan D. Deshmukh11th August 1943 to 30th June 1949

Continued...

GOVERNORS

Sir Benegal Rama Rau1st July 1949 to 14th January 1957

K G Ambegaokar14th January 1957 to 28th February 1957

Haravu Venkatanrasimha Iyengar1st March 1957 to 28th February 1962

Continued...

GOVERNORSParesh Chandra Bhattacharya1st March 1962 to 30th June 1967

Lakshmi Kant Jha1st July 1967 to 3rd May 1970

Bhaskar Namdeo Adarkar4th May 1970 to 15th June 1970

Continued...

GOVERNORS

Sarukkai Jagnnathan16th June 1970 to 19th May 1975

N C Sen Gupta19th May 1975 to 19th August 1975

K R Puri20th August 1975 to 2nd May 1977

Continued...

GOVERNORSMaidavolu Narasimham2nd May 1977 to 30th November 1977

Dr. Indraprasad Gordhanbhai Patel1st December 1977 to 15th September 1982

Dr. Manmohan Singh16th September 1982 to 14th January 1985

Continued...

GOVERNORSAmitabh Ghosh15th January 1985 to 2nd February 1985

Rajam N Malhotra4th February 1985 to 22nd December1990

S Venkitaramanan22nd December1990 to 22nd December1990

Continued...

GOVERNORS

Dr. Chakravarthi Rangarajan22nd December 1992 to 21st November 1997

Dr. Bimal Jalan22nd November 1997 to 6th September 2003

Dr. Yaga Venugopal Reddy6th September 2003 to 5th September 2008

Continued...

GOVERNORSDr. Duvvuri Subbarao5th September 2008 to 4th September 2013

Dr. Raghuram Govind Rajan4th September 2013 to Present Date

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."

PREAMBLE

ORGANIZATION OF RBI•Central Board•Local Board

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. Constitute:

Official DirectorsFull-Time: Governor and Four Deputy Governors

CENTRAL BOARD

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CENTRAL BOARD 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

CENTRAL BOARD OF DIRECTORS

One each for the four regions of the country in Mumbai, Chennai, Kolkata and New Delhi.

Membership: Consist of five members each Appointed by the Government For a term of Four Years

Functions: To advise the Central Board on local matters and to represent territorial and economic interest of local cooperative and indigenous banks. To perform such other functions as delegated by central board

from time to time.

LOCAL BOARD

Regulate and Supervise the Financial System Formulate Monetary Policy Policy Rates and Reverse Ratio Issue of Currency Development Role Role of RBI in Inflation Role of RBI in Economic Development Banker to Government Banker to Bank Manager of Foreign Exchange Clearing House Functions Regulations of Banking Systems

FUNCTIONS OF RBI

Objective: To Maintain Public confidence in the system, protect depositor’s interest and provide cost effective banking services

to the public. What RBI does?

Prescribes broad parameters of banking operations with in 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).

REGULATE AND SUPERVISE THE FINANCIAL SYSTEM

Objective: Maintain price stability and ensuring adequate flow of credit in the

economy. What RBI does?

It formulates, implements and monitors the monetary policy. Instruments: Quantitative and Qualitative

FORMULATE MONETARY POLICY

QUANTITAVE MEASURESIt includes BANK RATE and also called discount rate.It also includes REPO RATE.Open Market Operations buying and selling of government securitiesVariable Reverse Ratio it includes CRR and SLR

QUALITATIVE MEASURE1. Direct Action2. Moral Persuasion3. Legislation4. Publicity

Direct Action: The RBI may take direct action against commercial banks that violate the rules, orders or advice of the RBI. This punishment is very severe of a commercial bank.

Moral persuasion: It is another method by which RBI may get credit supply expanded or contracted. By moral pressure it may prohibit or dissuade commercial banks to deal in speculative business.

QUALITATIVE MEASURES

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Legislation:The RBI may also adopt necessary legislation for expanding or contracting credit money in the market.

Publicity: The RBI may resort to massive advertising campaign in the news papers, magazines and journals depicting the poor economic conditions of the country suggesting commercial banks and other financial institutions to control credit either by expansion or by contraction.

QUALITATIVE MEASURES

BANK RATE REPO RATE REVERSE REPO RATE CASH REVERSE RATIO STATUTORY LIQUIDITY RATIO

POLICY RATES AND REVERSE RATIO (QUNTITATIVE MEASURES)

It’s the interest rate that is charged by a country’s RBI 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 8.25%

BANK RATE

Whenever the banks have any shortage of funds they can borrow it from the RBI. Repo rate is the rate at which our banks borrow currency from the RBI.

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

When the repo rate increases borrowing from the RBI becomes more expensive.

In order to increase the liquidity in the market, the RBI does it.

The present Repo Rate is 7.25%

REPO RATE

It’s the rate at which the banks park surplus funds with RBI.

While the Repo rate is the rate at which the banks borrow from the RBI

It is mostly done, when there is surplus liquidity in the market by the RBI

The present Reverse Repo Rate is 6.25%

REVERSE REPO RATE

Cash Reserve Ratio (CRR) is the amount of Cash(liquid cash like gold)that the banks have to keep with RBI.

This Ratio is basically to secure solvency of the bank and to drain out the excessive money from the banks.

The present CRR Rate is 4%.

CASH REVERSE RATIO

It is the amount a commercial bank needs to maintain in the form of cash, or gold or govt. approved securities (Bonds) before providing credit to its customers.

SLR rate is determined and maintained by the RBI in order to control the expansion of bank credit.

The present SLR Rate is 21.50%.

STATUTORY LIQUIDITY RATIO

To ensure adequate quantity of supplies of currency notes and coins of good quality.

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.

ISSUE OF CURRENCY

To develop the quality of banking system in India. Performs a wide range of promotional functions to

support national objectives. To establish financial institutions of national

importance, for e.g: NABARD,IDBI etc.

DEVELOPMENT ROLE

Inflation arises when the demand increases and there is a shortage of supply There are two policies in the hands of the RBI.

Monetary Policy: It includes the interest rates. When the bank increases the interest rates than there is reduction in the borrowers and people try to save more as the rate of interest has increased.

Fiscal Policy:It is related to direct taxes and government spending. When direct taxes increased and government spending increased than the disposable Income of the people reduces and hence the demand reduces.

ROLE OF RBI IN INFLATION

Development of Banking System Development of Financial Institutions Development of Backward Areas Economic Stability Economic Growth Proper Interest Rate Structure

ROLE OF RBI IN ECONOMIC DEVELOPEMENT

Performs all banking function for the central and the state governments and also acts as their banker excepting that of Jammu and Kashmir. It makes loans and advances to the States and local authorities. It acts as adviser to the Government on all monetary and banking matters.

BANKER TO GOVERNMENT

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. The Reserve Bank Of India also regulates the trade of

gold. Currently 17 Indian banks are involved in the trade of gold in India.

BANKERS TO BANK

Continued...

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 fro the commercial

banks.

Objective: To facilitate external trade and payment and promote orderly development and the maintenance of foreign exchange market in India.

What RBI does? It acts as a custodian and manages the Foreign Exchange

Management Act, (FEMA)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

MANAGER OF FOREIGN EXCHANGE

The RBI operates clearing houses to settle banking transactions. The RBI manages 14 major clearing houses of the country situated in different major cities. The State Bank of India and its associates look after clearing houses function in other parts of the country as an agent of RBI.

CLEARING HOUSE FUNCTIONS

The prime duty of the reserve Bank is to regulate the banking system of our country in such a way that the people of the country can trust in the banking Up to perform its duty.

The Reserve Bank has following powers in this regard: Licensing:

According to the section 22 of the Banking Regulation Act, every bank has to obtain license from the Reserve Bank. The Reserve Bank issues such license only to those banks which fulfill condition of the bank.

REGULATION OF BANKING SYSTEM

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Management:Section 10 of the Banking Regulation Act embowered the Reserve Bank to change manager or director of any bank if it considers it necessary or desirable.

Branch Expansion:Section 23 requires every bank to take prior permission from Reserve Bank to open new places of business in India.

Power of Inspection of Bank: Under Section 35, the Reserve Bank may inspect any

bank and its books and accounts either at its own initiative or at the instance of the Central Government.

National Housing Bank (NHB), Deposit Insurance and Credit Guarantee Corporation of India(DICGC), Bhartiya Reserve Bank Note Mudran Private Limited(BRBNMPL)

Major Stakes:National Bank for Agriculture and Rural Development

(NABARD)The Reserve Bank of India has divested its stake in state bank

of India to the Government of India.RBI has also set up some training Institutions.

SUBSIDIARIES

High Level Committee – “Mr. M. Narasimham” (Chairman) submitted Report in November 1991

Basic Approach:Greater market orientation would strengthen the financial

system and thus improve its efficiency.The solvency, health and efficiency of the institutions should

be central to effective financial reforms.On Directed Investments – (SLR and CRR).On Directed Credit Programmes.On the structure of Interest Rates.On Structural Reorganizations of the Banking Structure.

NARASIMHAM COMMITTEE (1991)

ThankYou!