RBI Project
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About This Presentation
This project contains all the functions and working of Reserve Bank of India. It contains the history and structure of RBI.
Slide Content
1
The Reserve Bank: Tradition and Change
The origin of the Reserve Bank can be traced to 1926, when the Royal Commission on
Indian Currency and Finance—also known as the Hilton-Young Commission—
recommended the creation of a central bank to separate the control of currency and credit
from the government and to augment banking facilities throughout the country. The
Reserve Bank of India was established on April 1, 1935 in accordance with the provisions
of the Reserve Bank of India Act 1934. Since then, the Reserve Bank‘s role and functions
have undergone numerous changes—as the nature of the Indian economy has changed.
The Central Office of the Reserve Bank was initially established in Calcutta but was
permanently moved to Mumbai in 1937. The Central Office is where the Governor sits
and where policies are formulated. Though originally privately owned, since
nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.
Today‘s RBI bears some resemblance to the original institution, although our mission has
expanded along with our deepened, broadened and increasingly globalised economy.
The Reserve Bank: Tradition and Change
The origin of the Reserve Bank can be traced to 1926, when the Royal Commission on
Indian Currency and Finance—also known as the Hilton-Young Commission—
recommended the creation of a central bank to separate the control of currency and credit
from the government and to augment banking facilities throughout the country. The
Reserve Bank of India was established on April 1, 1935 in accordance with the provisions
of the Reserve Bank of India Act 1934. Since then, the Reserve Bank‘s role and functions
have undergone numerous changes—as the nature of the Indian economy has changed.
The Central Office of the Reserve Bank was initially established in Calcutta but was
permanently moved to Mumbai in 1937. The Central Office is where the Governor sits
and where policies are formulated. Though originally privately owned, since
nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.
Today‘s RBI bears some resemblance to the original institution, although our mission has
expanded along with our deepened, broadened and increasingly globalised economy.
2
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."
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."
3
The RBI Logo
The selection of the Bank‘s common seal to be used as the emblem of the Bank on
currency notes, cheques and publications, was an issue that had to be taken up at an early
stage of the Bank‘s formation.
The Goverment‘s general ideas on the seal were as follows:
1. The seal should emphasize the Governmental status of the Bank, but not too closely;
2. It should have something Indian in the design;
3. It should be simple, artistic and heraldically correct; and
4. The design should be such that it could be used without substantial alteration for letter
heading, etc.
For this purpose, various seals, medals and coins were examined. The East India
Company Double Mohur, with the sketch of the Lion and Palm Tree, was found most
suitable; however, it was decided to replace the lion by the tiger, the latter being regarded
as the more characteristic animal of India!
To meet the immediate requirements in connection with the stamping of the Bank‘s share
certificates, the work was entrusted to a Madras firm. The Board, at its meeting on
The RBI Logo
The selection of the Bank‘s common seal to be used as the emblem of the Bank on
currency notes, cheques and publications, was an issue that had to be taken up at an early
stage of the Bank‘s formation.
The Goverment‘s general ideas on the seal were as follows:
1. The seal should emphasize the Governmental status of the Bank, but not too closely;
2. It should have something Indian in the design;
3. It should be simple, artistic and heraldically correct; and
4. The design should be such that it could be used without substantial alteration for letter
heading, etc.
For this purpose, various seals, medals and coins were examined. The East India
Company Double Mohur, with the sketch of the Lion and Palm Tree, was found most
suitable; however, it was decided to replace the lion by the tiger, the latter being regarded
as the more characteristic animal of India!
To meet the immediate requirements in connection with the stamping of the Bank‘s share
certificates, the work was entrusted to a Madras firm. The Board, at its meeting on
4
February 23, 1935, approved the design of the seal but desired improvement of the
animal‘s appearance. Unfortunately it was not possible to make any major changes at that
stage. But the Deputy Governor, Sir James Taylor, did not rest content with this. He took
keen interest in getting fresh sketches prepared by the Government of India Mint and the
Security Printing Press, Nasik. As a basis for good design, he arranged for a photograph
to be taken of the statue of the tiger on the entrance gate at Belvedere, Calcutta.
Something or the other went wrong with the sketches so that Sir James, writing in
September I938, was led to remark:
......‘s tree is all right but his tiger looks too like some species of dog, and I am afraid that
a design of a dog and a tree would arouse derision among the irreverent. .....‘s tiger is
distinctly good but the tree has spoiled it. The stem is too long and the branches too
spidery, but I should have thought that by putting a firm line under the feet of his tiger
and making his tree stronger and lower we could get quite a good result from his design.
Later, with further efforts, it was possible to have better proofs prepared by the Security
Printing Press, Nasik. However, it was eventually decided not to make any change in the
existing seal of the Bank, and the new sketches came to be used as an emblem for the
Bank‘s currency notes, letter-heads, cheques and publications issued by the Bank.
Source: „History of the Reserve Bank of India‟
February 23, 1935, approved the design of the seal but desired improvement of the
animal‘s appearance. Unfortunately it was not possible to make any major changes at that
stage. But the Deputy Governor, Sir James Taylor, did not rest content with this. He took
keen interest in getting fresh sketches prepared by the Government of India Mint and the
Security Printing Press, Nasik. As a basis for good design, he arranged for a photograph
to be taken of the statue of the tiger on the entrance gate at Belvedere, Calcutta.
Something or the other went wrong with the sketches so that Sir James, writing in
September I938, was led to remark:
......‘s tree is all right but his tiger looks too like some species of dog, and I am afraid that
a design of a dog and a tree would arouse derision among the irreverent. .....‘s tiger is
distinctly good but the tree has spoiled it. The stem is too long and the branches too
spidery, but I should have thought that by putting a firm line under the feet of his tiger
and making his tree stronger and lower we could get quite a good result from his design.
Later, with further efforts, it was possible to have better proofs prepared by the Security
Printing Press, Nasik. However, it was eventually decided not to make any change in the
existing seal of the Bank, and the new sketches came to be used as an emblem for the
Bank‘s currency notes, letter-heads, cheques and publications issued by the Bank.
Source: „History of the Reserve Bank of India‟
5
Objectives and Reasons for the
Establishment of R.B.I.
The main objectives for establishment of RBI as the central Bank of India were as
follows:-
To manage the monetary and credit system of the country.
To stabilizes internal and external value of rupee.
For balanced and systematic development of banking in the country.
For the development of organized money market in the country.
For proper arrangement of agriculture finance.
For proper arrangement of industrial finance.
For proper management of public debts.
Objectives and Reasons for the
Establishment of R.B.I.
The main objectives for establishment of RBI as the central Bank of India were as
follows:-
To manage the monetary and credit system of the country.
To stabilizes internal and external value of rupee.
For balanced and systematic development of banking in the country.
For the development of organized money market in the country.
For proper arrangement of agriculture finance.
For proper arrangement of industrial finance.
For proper management of public debts.
6
Structure, Organization and Governance:
How We Function
The Reserve Bank is wholly owned by the Government of India. The Central Board of
Directors oversees the Reserve Bank‘s business.
About the Central Board
The Central Board has primary authority for the oversight of the Reserve Bank. It
delegates specific functions to its committees and sub-committees.
Central Board: Includes the Governor, Deputy Governors and the nominated
Directors and a government nominee-Director
Committee of Central Board: Oversees the current business of the central bank
and typically meets every week, on Wednesdays. The agenda focusses on current
business, including approval of the weekly statement of accounts related to the
Issue and Banking Departments.
Board for Financial Supervision: Regulates and supervises commercial banks,
Non-Banking Finance Companies (NBFCs), development finance institutions,
urban co-operative banks and primary dealers.
Board for Payment and Settlement Systems: Regulates and supervises the
payment and settlement systems.
Sub-committees of the Central Board: Includes those on Inspection and Audit;
Staff; and Building. Focus of each subcommittee is on specific areas of operations.
Local Boards: In Chennai, Kolkata, Mumbai and New Delhi, representing the
country‘s four regions. Local board members, appointed by the Central
Government for four-year terms, represent regional and economic interests and the
interests of co-operative and indigenous banks.
Structure, Organization and Governance:
How We Function
The Reserve Bank is wholly owned by the Government of India. The Central Board of
Directors oversees the Reserve Bank‘s business.
About the Central Board
The Central Board has primary authority for the oversight of the Reserve Bank. It
delegates specific functions to its committees and sub-committees.
Central Board: Includes the Governor, Deputy Governors and the nominated
Directors and a government nominee-Director
Committee of Central Board: Oversees the current business of the central bank
and typically meets every week, on Wednesdays. The agenda focusses on current
business, including approval of the weekly statement of accounts related to the
Issue and Banking Departments.
Board for Financial Supervision: Regulates and supervises commercial banks,
Non-Banking Finance Companies (NBFCs), development finance institutions,
urban co-operative banks and primary dealers.
Board for Payment and Settlement Systems: Regulates and supervises the
payment and settlement systems.
Sub-committees of the Central Board: Includes those on Inspection and Audit;
Staff; and Building. Focus of each subcommittee is on specific areas of operations.
Local Boards: In Chennai, Kolkata, Mumbai and New Delhi, representing the
country‘s four regions. Local board members, appointed by the Central
Government for four-year terms, represent regional and economic interests and the
interests of co-operative and indigenous banks.
7
Central Board of Directors by the Numbers
Official Directors
1 Governor
4 Deputy Governors, at a maximum
Non-Official Directors
4 directors—nominated by the Central Government to represent each local board
10 directors nominated by the Central Government with expertise in various
segments of the economy
1 representative of the Central Government
6 meetings—at a minimum—each year
1 meeting—at a minimum—each quarter
Central Board of Directors by the Numbers
Official Directors
1 Governor
4 Deputy Governors, at a maximum
Non-Official Directors
4 directors—nominated by the Central Government to represent each local board
10 directors nominated by the Central Government with expertise in various
segments of the economy
1 representative of the Central Government
6 meetings—at a minimum—each year
1 meeting—at a minimum—each quarter
8
SECRETARY'S DEPARTMENT
Names and addresses of the Directors of the Central Board of the Reserve Bank of India
1. Dr. D Subbarao
Governor
Reserve Bank of India
Central Office
Mumbai 400 001.
2. Smt. Shyamala Gopinath
Deputy Governor
Reserve Bank of India
Central Office
Mumbai 400 001.
3. Dr.K.C.Chakrabarty
Deputy Governor
Reserve Bank of India
Central Office
Mumbai 400 001.
4. Dr. Subir Gokarn
Deputy Governor
Reserve Bank of India
Central Office
Mumbai 400 001.
5. Shri Anand Sinha
Deputy Governor
Reserve Bank of India
Central Office
Mumbai 400 001
6. Shri Y.H. Malegam
Chartered Accountant
C/o S. B. Billimoria & Company
Meher Chambers (2nd floor)
R. Kamani Road, Ballard Estate
Mumbai 400 001 *
7. Prof. Suresh D. Tendulkar
Economist,
AD-86-C,
Shalimar Bagh,
New Delhi – 110 088 *
8. Prof. U. R. Rao
Chairman, Physical Research Laboratory
Department of Space,
Government of India
Antariksh Bhavan, New BEL Road
Bangalore – 560 094 *
9. Shri Lakshmi Chand
IAS (Retd.),
C-12, Sector 14
NOIDA, Gautham Budh Nagar
Uttar Pradesh *
10. Shri H. P. Ranina
Advocate, Supreme Court of India,
506, Raheja Centre,
214 Backbay Reclamation,
Free Press Journal Road,
Mumbai - 400 023 @
SECRETARY'S DEPARTMENT
Names and addresses of the Directors of the Central Board of the Reserve Bank of India
1. Dr. D Subbarao
Governor
Reserve Bank of India
Central Office
Mumbai 400 001.
2. Smt. Shyamala Gopinath
Deputy Governor
Reserve Bank of India
Central Office
Mumbai 400 001.
3. Dr.K.C.Chakrabarty
Deputy Governor
Reserve Bank of India
Central Office
Mumbai 400 001.
4. Dr. Subir Gokarn
Deputy Governor
Reserve Bank of India
Central Office
Mumbai 400 001.
5. Shri Anand Sinha
Deputy Governor
Reserve Bank of India
Central Office
Mumbai 400 001
6. Shri Y.H. Malegam
Chartered Accountant
C/o S. B. Billimoria & Company
Meher Chambers (2nd floor)
R. Kamani Road, Ballard Estate
Mumbai 400 001 *
7. Prof. Suresh D. Tendulkar
Economist,
AD-86-C,
Shalimar Bagh,
New Delhi – 110 088 *
8. Prof. U. R. Rao
Chairman, Physical Research Laboratory
Department of Space,
Government of India
Antariksh Bhavan, New BEL Road
Bangalore – 560 094 *
9. Shri Lakshmi Chand
IAS (Retd.),
C-12, Sector 14
NOIDA, Gautham Budh Nagar
Uttar Pradesh *
10. Shri H. P. Ranina
Advocate, Supreme Court of India,
506, Raheja Centre,
214 Backbay Reclamation,
Free Press Journal Road,
Mumbai - 400 023 @
9
11. Shri Azim Premji
Chairman,
WIPRO Limited
Doddakannelli,
Sarjapur Road,
Bangalore – 560033 @
12. Shri Kumar Mangalam Birla
Chairman,
Aditya Birla Group of Companies
Aditya Birla Centre,
S. K. Ahire Marg, Worli
Mumbai – 400 030 @
13. Smt. Shashi Rajagopalan
Plot No. 10, Saket Phase 2
Kapra, ECIL Post
Hyderabad – 500 062 @
14. Shri Suresh Neotia
B-32, Greater Kailash Part - I
New Delhi – 110 048 @
15. Dr. A. Vaidyanathan
B-1, Sonali Apartment, Old No. 11
Beach Road, Kalakshetra Colony
Chennai – 600 090 @
16. Prof. Man Mohan Sharma
2/3 Jaswant Baug (Runwal Park),
Behind Akbarallys, Chembur Naka
Mumbai – 400 071 @
17. Shri Sanjay Labroo
Managing Director & CEO
Asahi India Glass Ltd.
Global Business Park
Tower - B, 5th Floor'
Mehrauli - Gurgaon Road
Gurgaon - 122002 (Haryana) @
18. Shri Ashok Chawla
Finance Secretary
Government of India
Ministry of Finance
New Delhi 110001 #
* Directors nominated under Sect 8 (1) (b) of the RBI Act, 1934.
@ Directors nominated under Sect 8 (1) (c) of the RBI Act, 1934.
# Director nominated under Sect 8 (1) (d) of the RBI Act, 1934
11. Shri Azim Premji
Chairman,
WIPRO Limited
Doddakannelli,
Sarjapur Road,
Bangalore – 560033 @
12. Shri Kumar Mangalam Birla
Chairman,
Aditya Birla Group of Companies
Aditya Birla Centre,
S. K. Ahire Marg, Worli
Mumbai – 400 030 @
13. Smt. Shashi Rajagopalan
Plot No. 10, Saket Phase 2
Kapra, ECIL Post
Hyderabad – 500 062 @
14. Shri Suresh Neotia
B-32, Greater Kailash Part - I
New Delhi – 110 048 @
15. Dr. A. Vaidyanathan
B-1, Sonali Apartment, Old No. 11
Beach Road, Kalakshetra Colony
Chennai – 600 090 @
16. Prof. Man Mohan Sharma
2/3 Jaswant Baug (Runwal Park),
Behind Akbarallys, Chembur Naka
Mumbai – 400 071 @
17. Shri Sanjay Labroo
Managing Director & CEO
Asahi India Glass Ltd.
Global Business Park
Tower - B, 5th Floor'
Mehrauli - Gurgaon Road
Gurgaon - 122002 (Haryana) @
18. Shri Ashok Chawla
Finance Secretary
Government of India
Ministry of Finance
New Delhi 110001 #
* Directors nominated under Sect 8 (1) (b) of the RBI Act, 1934.
@ Directors nominated under Sect 8 (1) (c) of the RBI Act, 1934.
# Director nominated under Sect 8 (1) (d) of the RBI Act, 1934
10
Names and Addresses of the Members of The Local Boards of The Reserve Bank of India
WESTERN AREA EASTERN AREA
1. Shri Y.H. Malegam
Chartered Accountant
c/o S.B.Billimoria & Company
Meher Chambers (2nd floor)
R. Kamani Road, Ballard Estate
Mumbai 400 001
1. Shri Suresh D. Tendulkar
Economist,
AD-86-C,
Shalimar Bagh,
New Delhi – 110 088
2. Shri K. Venkatesan
113, F-Block
Anna Nagar East
Chennai 600 040
2. Shri A. K. Saikia, Retd. IAS
H-8, Sector - 27
Noida - 201 301
3. Shri Dattaraj V. Salgaocar
Managing Director
V. M. Salgaocar & Bro. Ltd.
Hira Bihar, Airport Road, Chicalim
Vasco Da Gama, Goa - 403 711
3. Shri Sovan Kanungo, Retd. IAS
17/404, East End Apartments
Mayur Vihar I ( Extension )
New Delhi -110096
4. Shri Jayantilal B. Patel
Chairman
Sahakari Khand Udyog Mandal Ltd.
At & Post, Gandevi Sugar Factory
Taluka Gandevi, District Navsari, Via
Billimora
Gujarat
PIN-396 360
As on Dated November 3, 2010, Mumbai
Names and Addresses of the Members of The Local Boards of The Reserve Bank of India
WESTERN AREA EASTERN AREA
1. Shri Y.H. Malegam
Chartered Accountant
c/o S.B.Billimoria & Company
Meher Chambers (2nd floor)
R. Kamani Road, Ballard Estate
Mumbai 400 001
1. Shri Suresh D. Tendulkar
Economist,
AD-86-C,
Shalimar Bagh,
New Delhi – 110 088
2. Shri K. Venkatesan
113, F-Block
Anna Nagar East
Chennai 600 040
2. Shri A. K. Saikia, Retd. IAS
H-8, Sector - 27
Noida - 201 301
3. Shri Dattaraj V. Salgaocar
Managing Director
V. M. Salgaocar & Bro. Ltd.
Hira Bihar, Airport Road, Chicalim
Vasco Da Gama, Goa - 403 711
3. Shri Sovan Kanungo, Retd. IAS
17/404, East End Apartments
Mayur Vihar I ( Extension )
New Delhi -110096
4. Shri Jayantilal B. Patel
Chairman
Sahakari Khand Udyog Mandal Ltd.
At & Post, Gandevi Sugar Factory
Taluka Gandevi, District Navsari, Via
Billimora
Gujarat
PIN-396 360
As on Dated November 3, 2010, Mumbai
11
NORTHERN AREA
SOUTHERN AREA
1. Prof. U. R. Rao
Chairman,
Physical Research Laboratory,
Department of Space,
Antariksh Bhawan, New BEL Road
Bangalore – 560094
1. Shri Lakshmi Chand
Retd. IAS, C-12,
Sector – 14, Noida,
U. P. 201301
2. Dr. Ram Nath
Ex-Professor & Vice Chancellor
CSA University of Agri. & Tech.
Plot No. 710, 'A' Block, Avas Vikas
Colony, Hanspur,
Naubasta, Kanpur - 208 001
2. Shri C. P. Nair
Retd. Chief Secretaray to Government of
Kerala
Narayaneeyam, Jawahar Nagar
Thiruvananthapuram - 695 041
3. Dr. Pritam Singh
Director, Management Development
Institute
Mehrauli Road, Sukhrali
Gurgaon - 122 001
3. Dr. M. Govinda Rao
Director
National Institute of Public Finance and
Policy
18/2, Satsang Vihar Marg
Special Institutional Area (Near JNU)
New Delhi 110 067
4. Shri Kamal Kishore Gupta
Chartered Accountant
Kamal & Co.
1372, Kashmere Gate
Delhi 110006
4. Smt. Devaki Jain,
Tharangavana, D-5, 12th Cross,
RMV Extension,
Bangalore 560080
5. Shri Mihir Kumar Moitra
H-205, Wembley Estate
Rosewood City
Sector-49-50
Gurgaon-122001
As on Dated November 3, 2010, Mumbai
NORTHERN AREA
SOUTHERN AREA
1. Prof. U. R. Rao
Chairman,
Physical Research Laboratory,
Department of Space,
Antariksh Bhawan, New BEL Road
Bangalore – 560094
1. Shri Lakshmi Chand
Retd. IAS, C-12,
Sector – 14, Noida,
U. P. 201301
2. Dr. Ram Nath
Ex-Professor & Vice Chancellor
CSA University of Agri. & Tech.
Plot No. 710, 'A' Block, Avas Vikas
Colony, Hanspur,
Naubasta, Kanpur - 208 001
2. Shri C. P. Nair
Retd. Chief Secretaray to Government of
Kerala
Narayaneeyam, Jawahar Nagar
Thiruvananthapuram - 695 041
3. Dr. Pritam Singh
Director, Management Development
Institute
Mehrauli Road, Sukhrali
Gurgaon - 122 001
3. Dr. M. Govinda Rao
Director
National Institute of Public Finance and
Policy
18/2, Satsang Vihar Marg
Special Institutional Area (Near JNU)
New Delhi 110 067
4. Shri Kamal Kishore Gupta
Chartered Accountant
Kamal & Co.
1372, Kashmere Gate
Delhi 110006
4. Smt. Devaki Jain,
Tharangavana, D-5, 12th Cross,
RMV Extension,
Bangalore 560080
5. Shri Mihir Kumar Moitra
H-205, Wembley Estate
Rosewood City
Sector-49-50
Gurgaon-122001
As on Dated November 3, 2010, Mumbai
12
Management and Structure
The Governor is the Reserve Bank‘s chief executive. The Governor supervises and directs
the affairs and business of the Reserve Bank. The management team also includes Deputy
Governors and Executive Directors.
Departments
1. Markets
Monetary Policy Department
Financial Markets Department
Internal Debt Management Department
Department of External Investments and Operations
2. Regulation and Supervision
Department of Non-Banking Supervision
Urban Banks Department
Department of Banking Supervision
Foreign Exchange Department
Rural Planning and Credit Department
3. Research
Department of Economic Analysis and Policy
Department of Statistics and Information Management
4. Services
Department of Government Bank Accounts
Department of Currency Management
Department of Payment and Settlement System
Customer Service Department
Management and Structure
The Governor is the Reserve Bank‘s chief executive. The Governor supervises and directs
the affairs and business of the Reserve Bank. The management team also includes Deputy
Governors and Executive Directors.
Departments
1. Markets
Monetary Policy Department
Financial Markets Department
Internal Debt Management Department
Department of External Investments and Operations
2. Regulation and Supervision
Department of Non-Banking Supervision
Urban Banks Department
Department of Banking Supervision
Foreign Exchange Department
Rural Planning and Credit Department
3. Research
Department of Economic Analysis and Policy
Department of Statistics and Information Management
4. Services
Department of Government Bank Accounts
Department of Currency Management
Department of Payment and Settlement System
Customer Service Department
13
5. Support
Premises Department
Secretary‘s Department
Rajbhasha Department
Inspection Department
Legal Department
Department of Administration and Personnel Management
Human Resources Development Department
Department of Communication
Department of Information Technology
Department of Expenditure and Budgetary Control
Department of Banking Operations and Development
The RBI is composed of:
26 Departments: These focus on policy issues in the Reserve Bank‘s functional
areas and internal operations.
26 Regional Offices and Branches: These are the Reserve Bank‘s operational
arms and customer interfaces, headed by Regional Directors. Smaller branches /
sub-offices are headed by a General Manager / Deputy General Manager.
Training centers: The Reserve Bank Staff College at Chennai addresses the
training needs of RBI officers; the College of Agricultural Banking at Pune trains
staff of co-operative and commercial banks, including regional rural banks. The
Zonal Training Centers, located at regional offices, train non-executive staff.
Research institutes: RBI-funded institutions to advance training and research on
banking issues, economic growth and banking technology, such as, National
Institute of Bank Management (NIBM) at Pune, Indira Gandhi Institute of
Development Research (IGIDR) at Mumbai, and Institute for Development and
Research in Banking Technology (IDRBT) at Hyderabad.
5. Support
Premises Department
Secretary‘s Department
Rajbhasha Department
Inspection Department
Legal Department
Department of Administration and Personnel Management
Human Resources Development Department
Department of Communication
Department of Information Technology
Department of Expenditure and Budgetary Control
Department of Banking Operations and Development
The RBI is composed of:
26 Departments: These focus on policy issues in the Reserve Bank‘s functional
areas and internal operations.
26 Regional Offices and Branches: These are the Reserve Bank‘s operational
arms and customer interfaces, headed by Regional Directors. Smaller branches /
sub-offices are headed by a General Manager / Deputy General Manager.
Training centers: The Reserve Bank Staff College at Chennai addresses the
training needs of RBI officers; the College of Agricultural Banking at Pune trains
staff of co-operative and commercial banks, including regional rural banks. The
Zonal Training Centers, located at regional offices, train non-executive staff.
Research institutes: RBI-funded institutions to advance training and research on
banking issues, economic growth and banking technology, such as, National
Institute of Bank Management (NIBM) at Pune, Indira Gandhi Institute of
Development Research (IGIDR) at Mumbai, and Institute for Development and
Research in Banking Technology (IDRBT) at Hyderabad.
14
Subsidiaries: Fully-owned subsidiaries include National Housing Bank (NHB),
Deposit Insurance and Credit Guarantee Corporation (DICGC), Bhartiya Reserve
Bank Note Mudran Private Limited (BRBNMPL). The Reserve Bank also has a
majority stake in the National Bank for Agriculture and Rural Development
(NABARD).
Subsidiaries: Fully-owned subsidiaries include National Housing Bank (NHB),
Deposit Insurance and Credit Guarantee Corporation (DICGC), Bhartiya Reserve
Bank Note Mudran Private Limited (BRBNMPL). The Reserve Bank also has a
majority stake in the National Bank for Agriculture and Rural Development
(NABARD).
15
Main Activities of the RBI: What We Do
The Reserve Bank is the umbrella network for numerous activities, all related to the
nation‘s financial sector, encompassing an extending beyond the functions of a typical
central bank. This section provides an overview of our primary activities:
Monetary Authority
Issuer of Currency
Banker and Debt Manager to Government
Banker to Banks
Regulator of the Banking System
Manager of Foreign Exchange
Regulator and Supervisor of the Payment and Settlement Systems
Developmental Role
Main Activities of the RBI: What We Do
The Reserve Bank is the umbrella network for numerous activities, all related to the
nation‘s financial sector, encompassing an extending beyond the functions of a typical
central bank. This section provides an overview of our primary activities:
Monetary Authority
Issuer of Currency
Banker and Debt Manager to Government
Banker to Banks
Regulator of the Banking System
Manager of Foreign Exchange
Regulator and Supervisor of the Payment and Settlement Systems
Developmental Role
16
“The basic functions of the Reserve Bank of
India are to regulate the issue of Bank notes
and the 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.”
- From the Preamble of
the Reserve Bank of India Act, 1934
Monetary Authority
Monetary policy refers to the use of instruments under the control of the central bank to
regulate the availability, cost and use of money and credit.
The goal: achieving specific economic objectives, such as low and stable inflation and
promoting growth.
The main objectives of monetary policy in India are:
Maintaining price stability
Ensuring adequate flow of credit to the productive sectors of the economy to
support economic growth
Financial stability
The relative emphasis among the objectives varies from time to time, depending on
evolving macroeconomic developments.
Our Approach
Our operating framework is based on a multiple indicator approach. This means that we
monitor and analyse the movement of a number of indicators including interest rates,
inflation rate, money supply, credit, exchange rate, trade, capital flows and fiscal position,
along with trends in output as we develop our policy perspectives.
“The basic functions of the Reserve Bank of
India are to regulate the issue of Bank notes
and the 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.”
- From the Preamble of
the Reserve Bank of India Act, 1934
Monetary Authority
Monetary policy refers to the use of instruments under the control of the central bank to
regulate the availability, cost and use of money and credit.
The goal: achieving specific economic objectives, such as low and stable inflation and
promoting growth.
The main objectives of monetary policy in India are:
Maintaining price stability
Ensuring adequate flow of credit to the productive sectors of the economy to
support economic growth
Financial stability
The relative emphasis among the objectives varies from time to time, depending on
evolving macroeconomic developments.
Our Approach
Our operating framework is based on a multiple indicator approach. This means that we
monitor and analyse the movement of a number of indicators including interest rates,
inflation rate, money supply, credit, exchange rate, trade, capital flows and fiscal position,
along with trends in output as we develop our policy perspectives.
17
Our Tools
The Reserve Bank‘s Monetary Policy Department (MPD) formulates monetary policy.
The Financial Markets Department (FMD) handles day-to-day liquidity management
operations. There are several direct and indirect instruments that are used in the
formulation and implementation of monetary policy.
Direct Instruments
Cash Reserve Ratio (CRR): The share of net demand and time liabilities that
banks must maintain as cash balance with the Reserve Bank.
Statutory Liquidity Ratio (SLR): The share of net demand and time liabilities
that banks must maintain in safe and liquid assets, such as, government securities,
cash and gold.
Refinance facilities: Sector-specific refinance facilities (e.g., against lending to
export sector) provided to banks.
Indirect Instruments
Liquidity Adjustment Facility (LAF): Consists of daily infusion or absorption of
liquidity on a repurchase basis, through repo (liquidity injection) and reverse repo
(liquidity absorption) auction operations, using government securities as collateral.
Open Market Operations (OMO): Outright sales/purchases of government
securities, in addition to LAF, as a tool to determine the level of liquidity over the
medium term.
Market Stabilization Scheme (MSS): This instrument for monetary management
was introduced in 2004. Liquidity of a more enduring nature arising from large
capital flows is absorbed through sale of short-dated government securities and
Our Tools
The Reserve Bank‘s Monetary Policy Department (MPD) formulates monetary policy.
The Financial Markets Department (FMD) handles day-to-day liquidity management
operations. There are several direct and indirect instruments that are used in the
formulation and implementation of monetary policy.
Direct Instruments
Cash Reserve Ratio (CRR): The share of net demand and time liabilities that
banks must maintain as cash balance with the Reserve Bank.
Statutory Liquidity Ratio (SLR): The share of net demand and time liabilities
that banks must maintain in safe and liquid assets, such as, government securities,
cash and gold.
Refinance facilities: Sector-specific refinance facilities (e.g., against lending to
export sector) provided to banks.
Indirect Instruments
Liquidity Adjustment Facility (LAF): Consists of daily infusion or absorption of
liquidity on a repurchase basis, through repo (liquidity injection) and reverse repo
(liquidity absorption) auction operations, using government securities as collateral.
Open Market Operations (OMO): Outright sales/purchases of government
securities, in addition to LAF, as a tool to determine the level of liquidity over the
medium term.
Market Stabilization Scheme (MSS): This instrument for monetary management
was introduced in 2004. Liquidity of a more enduring nature arising from large
capital flows is absorbed through sale of short-dated government securities and
18
treasury bills. The mobilized cash is held in a separate government account with
the Reserve Bank.
Repo/reverse repo rate: These rates under the Liquidity Adjustment Facility
(LAF) determine the corridor for short-term money market interest rates. In turn,
this is expected to trigger movement in other segments of the financial market and
the real economy.
Bank rate: It is the rate at which the Reserve Bank is ready to buy or rediscount
bills of exchange or other commercial papers. It also signals the medium-term
stance of monetary policy.
treasury bills. The mobilized cash is held in a separate government account with
the Reserve Bank.
Repo/reverse repo rate: These rates under the Liquidity Adjustment Facility
(LAF) determine the corridor for short-term money market interest rates. In turn,
this is expected to trigger movement in other segments of the financial market and
the real economy.
Bank rate: It is the rate at which the Reserve Bank is ready to buy or rediscount
bills of exchange or other commercial papers. It also signals the medium-term
stance of monetary policy.
19
Issuer of Currency
The Reserve Bank is the nation‘s sole note issuing authority. Along with the Government
of India, we are responsible for the design and production and overall management of the
nation‘s currency, with the goal of ensuring an adequate supply of clean and genuine
notes. The Reserve Bank also makes sure there is an adequate supply of coins, produced
by the government. In consultation with the government, we routinely address security
issues and target ways to enhance security features to reduce the risk of counterfeiting or
forgery.
Approach
The Department of Currency Management in Mumbai, in cooperation with the
Issue Departments in the Reserve Bank‘s regional offices, oversees the production
and manages the distribution of currency.
Currency chests at more than 4,000 bank branches— typically commercial
banks—contain adequate quantity of notes and coins so that currency is accessible
to the public in all parts of the country.
The Reserve Bank has the authority to issue notes up to value of Rupees Ten
Thousand.
Our Tools
Four printing presses actively print notes: Dewas in Madhya Pradesh, Nasik in
Maharashtra, Mysore in Karnataka, and Salboni in West Bengal. The presses in Madhya
Pradesh and Maharashtra are owned by the Security Printing and Minting Corporation of
India (SPMCIL), a wholly owned company of the Government of India. The presses in
Karnataka and West Bengal are set up by BRBNMPL, a wholly owned subsidiary of the
Reserve Bank. Coins are minted by the Government of India. RBI is the agent of the
Government for distribution, issue and handling of coins. Four mints are in operation:
Mumbai, Noida in Uttar Pradesh, Kolkata, and Hyderabad.
Issuer of Currency
The Reserve Bank is the nation‘s sole note issuing authority. Along with the Government
of India, we are responsible for the design and production and overall management of the
nation‘s currency, with the goal of ensuring an adequate supply of clean and genuine
notes. The Reserve Bank also makes sure there is an adequate supply of coins, produced
by the government. In consultation with the government, we routinely address security
issues and target ways to enhance security features to reduce the risk of counterfeiting or
forgery.
Approach
The Department of Currency Management in Mumbai, in cooperation with the
Issue Departments in the Reserve Bank‘s regional offices, oversees the production
and manages the distribution of currency.
Currency chests at more than 4,000 bank branches— typically commercial
banks—contain adequate quantity of notes and coins so that currency is accessible
to the public in all parts of the country.
The Reserve Bank has the authority to issue notes up to value of Rupees Ten
Thousand.
Our Tools
Four printing presses actively print notes: Dewas in Madhya Pradesh, Nasik in
Maharashtra, Mysore in Karnataka, and Salboni in West Bengal. The presses in Madhya
Pradesh and Maharashtra are owned by the Security Printing and Minting Corporation of
India (SPMCIL), a wholly owned company of the Government of India. The presses in
Karnataka and West Bengal are set up by BRBNMPL, a wholly owned subsidiary of the
Reserve Bank. Coins are minted by the Government of India. RBI is the agent of the
Government for distribution, issue and handling of coins. Four mints are in operation:
Mumbai, Noida in Uttar Pradesh, Kolkata, and Hyderabad.
20
RBI’s Anti-counterfeiting Measures
Continual upgrades of bank note security features
Public awareness campaigns to educate citizens to help prevent circulation of
forged or counterfeit notes
Installation of note sorting machines
RBI’s Anti-counterfeiting Measures
Continual upgrades of bank note security features
Public awareness campaigns to educate citizens to help prevent circulation of
forged or counterfeit notes
Installation of note sorting machines
21
Banker and Debt Manager to Government
Managing the government‘s banking transactions is a key RBI role. Like individuals,
businesses and banks, governments need a banker to carry out their financial transactions
in an efficient and effective manner, including the raising of resources from the public. As
a banker to the central government, the Reserve Bank maintains its accounts, receives
money into and makes payments out of these accounts and facilitates the transfer of
government funds. We also act as the banker to those state governments that have entered
into an agreement with us.
The role as banker and debt manager to government includes several distinct functions:
Undertaking banking transactions for the central and state governments to
facilitate receipts and payments and maintaining their accounts.
Managing the governments‘ domestic debt with the objective of raising the
required amount of public debt in a cost-effective and timely manner.
Developing the market for government securities to enable the government to raise
debt at a reasonable cost, provide benchmarks for raising resources by other
entities and facilitate transmission of monetary policy actions.
Our Tools
At the end of each day, our electronic system automatically consolidates all of the
government‘s transactions to determine the net final position. If the balance in the
government‘s account shows a negative position, we extend a short-term, interest-bearing
advance, called a Ways and Means Advance—WMA—the limit or amount for which is
set at the beginning of each financial year in April.
Banker and Debt Manager to Government
Managing the government‘s banking transactions is a key RBI role. Like individuals,
businesses and banks, governments need a banker to carry out their financial transactions
in an efficient and effective manner, including the raising of resources from the public. As
a banker to the central government, the Reserve Bank maintains its accounts, receives
money into and makes payments out of these accounts and facilitates the transfer of
government funds. We also act as the banker to those state governments that have entered
into an agreement with us.
The role as banker and debt manager to government includes several distinct functions:
Undertaking banking transactions for the central and state governments to
facilitate receipts and payments and maintaining their accounts.
Managing the governments‘ domestic debt with the objective of raising the
required amount of public debt in a cost-effective and timely manner.
Developing the market for government securities to enable the government to raise
debt at a reasonable cost, provide benchmarks for raising resources by other
entities and facilitate transmission of monetary policy actions.
Our Tools
At the end of each day, our electronic system automatically consolidates all of the
government‘s transactions to determine the net final position. If the balance in the
government‘s account shows a negative position, we extend a short-term, interest-bearing
advance, called a Ways and Means Advance—WMA—the limit or amount for which is
set at the beginning of each financial year in April.
22
The RBI’s Government Finance Operating Structure
The Reserve Bank‘s Department of Government and Bank Accounts oversees
governments‘ banking related activities. This department encompasses:
Public accounts departments: manage the day-to-day aspects of our
Government‘s banking operations. The Reserve Bank also appoints commercial
banks as its agents and uses their branches for greater access to the government‘s
customers.
Public debt offices: provide depository services for government securities for
institutions and service government loans.
Central Accounts Section at Nagpur: consolidates the government‘s banking
transactions.
The Internal Debt Management Department based in Mumbai raises the government‘s
domestic debt and regulates and develops the government securities market.
The RBI’s Government Finance Operating Structure
The Reserve Bank‘s Department of Government and Bank Accounts oversees
governments‘ banking related activities. This department encompasses:
Public accounts departments: manage the day-to-day aspects of our
Government‘s banking operations. The Reserve Bank also appoints commercial
banks as its agents and uses their branches for greater access to the government‘s
customers.
Public debt offices: provide depository services for government securities for
institutions and service government loans.
Central Accounts Section at Nagpur: consolidates the government‘s banking
transactions.
The Internal Debt Management Department based in Mumbai raises the government‘s
domestic debt and regulates and develops the government securities market.
23
Banker to Banks
Like individual consumers, businesses and organisations of all kinds, banks need their
own mechanism to transfer funds and settle inter-bank transactions—such as borrowing
from and lending to other banks—and customer transactions. As the banker to banks, the
Reserve Bank fulfills this role. In effect, all banks operating in the country have accounts
with the Reserve Bank, just as individuals and businesses have accounts with their banks.
As the banker to banks, we focus on:
Enabling smooth, swift and seamless clearing and settlement of inter-bank
obligations.
Providing an efficient means of funds transfer for banks.
Enabling banks to maintain their accounts with us for purpose of statutory reserve
requirements and maintain transaction balances.
Acting as lender of the last resort.
Our Tools
The Reserve Bank provides similar products and services for the nation‘s banks to what
banks offer their own customers. Here‘s a look at how we help:
Non-interest earning current accounts: Banks hold accounts with the Reserve
Bank based on certain terms and conditions, such as maintenance of minimum
balances. They can hold accounts at each of our regional offices. Banks draw on
these accounts to settle their obligations arising from inter-bank settlement
systems. Banks can electronically transfer payments to other banks from this
account, using the Real Time Gross Settlement System (RTGS).
Deposit Account Department: This department‘s computerized central
monitoring system helps banks manage their funds position in real time to
maintain the optimum balance between surplus and deficit centres.
Remittance facilities: Banks and government departments can use these facilities
to transfer funds.
Banker to Banks
Like individual consumers, businesses and organisations of all kinds, banks need their
own mechanism to transfer funds and settle inter-bank transactions—such as borrowing
from and lending to other banks—and customer transactions. As the banker to banks, the
Reserve Bank fulfills this role. In effect, all banks operating in the country have accounts
with the Reserve Bank, just as individuals and businesses have accounts with their banks.
As the banker to banks, we focus on:
Enabling smooth, swift and seamless clearing and settlement of inter-bank
obligations.
Providing an efficient means of funds transfer for banks.
Enabling banks to maintain their accounts with us for purpose of statutory reserve
requirements and maintain transaction balances.
Acting as lender of the last resort.
Our Tools
The Reserve Bank provides similar products and services for the nation‘s banks to what
banks offer their own customers. Here‘s a look at how we help:
Non-interest earning current accounts: Banks hold accounts with the Reserve
Bank based on certain terms and conditions, such as maintenance of minimum
balances. They can hold accounts at each of our regional offices. Banks draw on
these accounts to settle their obligations arising from inter-bank settlement
systems. Banks can electronically transfer payments to other banks from this
account, using the Real Time Gross Settlement System (RTGS).
Deposit Account Department: This department‘s computerized central
monitoring system helps banks manage their funds position in real time to
maintain the optimum balance between surplus and deficit centres.
Remittance facilities: Banks and government departments can use these facilities
to transfer funds.
24
Lender of the last resort: The Reserve Bank provides liquidity to banks unable to
raise short term liquid resources from the inter-bank market. Like other central
banks, the Reserve Bank considers this a critical function because it protects the
interests of depositors, which in turn, has a stabilizing impact on the financial
system and on the economy as a whole.
Loans and advances: The Reserve Bank provides short-term loans and advances
to banks / financial institutions, when necessary, to facilitate lending for specified
purposes.
Lender of the last resort: The Reserve Bank provides liquidity to banks unable to
raise short term liquid resources from the inter-bank market. Like other central
banks, the Reserve Bank considers this a critical function because it protects the
interests of depositors, which in turn, has a stabilizing impact on the financial
system and on the economy as a whole.
Loans and advances: The Reserve Bank provides short-term loans and advances
to banks / financial institutions, when necessary, to facilitate lending for specified
purposes.
25
Regulator of the Banking System
Banks are fundamental to the nation‘s financial system. The central bank has a critical
role to play in ensuring the safety and soundness of the banking system—and in
maintaining financial stability and public confidence in this system. As the regulator and
supervisor of the banking system, the Reserve Bank protects the interests of depositors,
ensures a framework for orderly development and conduct of banking operations
conducive to customer interests and maintains overall financial stability through
preventive and corrective measures.
The Reserve Bank regulates and supervises the nation‘s financial system. Different
departments of the Reserve Bank oversee the various entities that comprise India‘s
financial infrastructure. We oversee:
Commercial banks and all-India development financial institutions: Regulated
by the Department of Banking Operations and Development, supervised by the
Department of Banking Supervision
Urban co-operative banks: Regulated and supervised by the Urban Banks
Department
Regional Rural Banks (RRB), District Central Cooperative Banks and State
Co-operative Bank: Regulated by the Rural Planning and Credit Department and
supervised by NABARD
Non-Banking Financial Companies (NBFC): Regulated and supervised by the
Department of Non-Banking Supervision
Our Tools
The Reserve Bank makes use of several supervisory tools:
On-site inspections
Off-site surveillance, making use of required reporting by the regulated entities
Thematic inspections, scrutiny and periodic meetings
Regulator of the Banking System
Banks are fundamental to the nation‘s financial system. The central bank has a critical
role to play in ensuring the safety and soundness of the banking system—and in
maintaining financial stability and public confidence in this system. As the regulator and
supervisor of the banking system, the Reserve Bank protects the interests of depositors,
ensures a framework for orderly development and conduct of banking operations
conducive to customer interests and maintains overall financial stability through
preventive and corrective measures.
The Reserve Bank regulates and supervises the nation‘s financial system. Different
departments of the Reserve Bank oversee the various entities that comprise India‘s
financial infrastructure. We oversee:
Commercial banks and all-India development financial institutions: Regulated
by the Department of Banking Operations and Development, supervised by the
Department of Banking Supervision
Urban co-operative banks: Regulated and supervised by the Urban Banks
Department
Regional Rural Banks (RRB), District Central Cooperative Banks and State
Co-operative Bank: Regulated by the Rural Planning and Credit Department and
supervised by NABARD
Non-Banking Financial Companies (NBFC): Regulated and supervised by the
Department of Non-Banking Supervision
Our Tools
The Reserve Bank makes use of several supervisory tools:
On-site inspections
Off-site surveillance, making use of required reporting by the regulated entities
Thematic inspections, scrutiny and periodic meetings
26
The Board for Financial Supervision oversees the Reserve Bank‘s regulatory and
supervisory responsibilities.
The RBI’s Regulatory Role
As the nation‘s financial regulator, the Reserve Bank handles a range of activities,
including:
Licensing
Prescribing capital requirements
Monitoring governance
Setting prudential regulations to ensure solvency and liquidity of the banks
Prescribing lending to certain priority sectors of the economy
Regulating interest rates in specific areas
Setting appropriate regulatory norms related to income recognition, asset
classification, provisioning, investment valuation, exposure limits and the like
Initiating new regulation
The Board for Financial Supervision oversees the Reserve Bank‘s regulatory and
supervisory responsibilities.
The RBI’s Regulatory Role
As the nation‘s financial regulator, the Reserve Bank handles a range of activities,
including:
Licensing
Prescribing capital requirements
Monitoring governance
Setting prudential regulations to ensure solvency and liquidity of the banks
Prescribing lending to certain priority sectors of the economy
Regulating interest rates in specific areas
Setting appropriate regulatory norms related to income recognition, asset
classification, provisioning, investment valuation, exposure limits and the like
Initiating new regulation
27
Manager of Foreign Exch ange
With the transition to a market-based system for determining the external value of the
Indian rupee, the foreign exchange market in India gained importance in the early reform
period. In recent years, with increasing integration of the Indian economy with the global
economy arising from greater trade and capital flows, the foreign exchange market has
evolved as a key segment of the Indian financial market.
The Reserve Bank plays a key role in the regulation and development of the foreign
exchange market and assumes three broad roles relating to foreign exchange:
Regulating transactions related to the external sector and facilitating the
development of the foreign exchange market
Ensuring smooth conduct and orderly conditions in the domestic foreign exchange
market
Managing the foreign currency assets and gold reserves of the country
Our Tools
The Reserve Bank is responsible for administration of the Foreign Exchange
Management Act,1999 and regulates the market by issuing licences to banks and other
select institutions to act as Authorised Dealers in foreign exchange. The Foreign
Exchange Department (FED) is responsible for the regulation and development of the
market.
On a given day, the foreign exchange rate reflects the demand for and supply of foreign
exchange arising from trade and capital transactions. The RBI‘s Financial Markets
Department (FMD) participates in the foreign exchange market by undertaking sales /
purchases of foreign currency to ease volatility in periods of excess demand for/supply of
foreign currency.
The Department of External Investments and Operations (DEIO) invests the country‘s
foreign exchange reserves built up by purchase of foreign currency from the market. In
investing its foreign assets, the Reserve Bank is guided by three principles: safety,
liquidity and return.
Manager of Foreign Exch ange
With the transition to a market-based system for determining the external value of the
Indian rupee, the foreign exchange market in India gained importance in the early reform
period. In recent years, with increasing integration of the Indian economy with the global
economy arising from greater trade and capital flows, the foreign exchange market has
evolved as a key segment of the Indian financial market.
The Reserve Bank plays a key role in the regulation and development of the foreign
exchange market and assumes three broad roles relating to foreign exchange:
Regulating transactions related to the external sector and facilitating the
development of the foreign exchange market
Ensuring smooth conduct and orderly conditions in the domestic foreign exchange
market
Managing the foreign currency assets and gold reserves of the country
Our Tools
The Reserve Bank is responsible for administration of the Foreign Exchange
Management Act,1999 and regulates the market by issuing licences to banks and other
select institutions to act as Authorised Dealers in foreign exchange. The Foreign
Exchange Department (FED) is responsible for the regulation and development of the
market.
On a given day, the foreign exchange rate reflects the demand for and supply of foreign
exchange arising from trade and capital transactions. The RBI‘s Financial Markets
Department (FMD) participates in the foreign exchange market by undertaking sales /
purchases of foreign currency to ease volatility in periods of excess demand for/supply of
foreign currency.
The Department of External Investments and Operations (DEIO) invests the country‘s
foreign exchange reserves built up by purchase of foreign currency from the market. In
investing its foreign assets, the Reserve Bank is guided by three principles: safety,
liquidity and return.
28
Regulator and Supervisor of Payment and
Settlement Systems
Payment and settlement systems play an important role in improving overall economic
efficiency. They consist of all the diverse arrangements that we use to systematically
transfer money—currency, paper instruments such as cheques, and various electronic
channels.
Our Approach
The Payment and Settlement Systems Act of 2007 (PSS Act) gives the Reserve Bank
oversight authority, including regulation and supervision, for the payment and settlement
systems in the country. In this role, we focus on the development and functioning of safe,
secure and efficient payment and settlement mechanisms.
Our Tools
The Reserve Bank has a two-tiered structure. The first tier provides the basic framework
for our payment systems. The second tier focuses on supervision of this framework. As
part of the basic framework, the Reserve Bank‘s network of secure systems handles
various types of payment and settlement activities. Most operate on the security platform
of the Indian Financial NETwork (INFINET), using digital signatures for further security
of transactions. Here is an overview of the various systems used:
Retail payment systems: Facilitating cheque clearing, electronic funds transfer,
through National Electronic Funds Transfer (NEFT), settlement of card payments
and bulk payments, such as electronic clearing services. Operated through local
clearing houses throughout the country.
Large value systems: Facilitating settlement of inter-bank transactions from
financial markets. These include:
- Real Time Gross Settlement System (RTGS): for funds transfers
- Securities Settlement System: for the government securities market
- Foreign Exchange Clearing: for transactions involving foreign currency
Department of Payment and Settlement Systems: The Reserve Bank‘s payment
and settlement systems regulatory arm.
Regulator and Supervisor of Payment and
Settlement Systems
Payment and settlement systems play an important role in improving overall economic
efficiency. They consist of all the diverse arrangements that we use to systematically
transfer money—currency, paper instruments such as cheques, and various electronic
channels.
Our Approach
The Payment and Settlement Systems Act of 2007 (PSS Act) gives the Reserve Bank
oversight authority, including regulation and supervision, for the payment and settlement
systems in the country. In this role, we focus on the development and functioning of safe,
secure and efficient payment and settlement mechanisms.
Our Tools
The Reserve Bank has a two-tiered structure. The first tier provides the basic framework
for our payment systems. The second tier focuses on supervision of this framework. As
part of the basic framework, the Reserve Bank‘s network of secure systems handles
various types of payment and settlement activities. Most operate on the security platform
of the Indian Financial NETwork (INFINET), using digital signatures for further security
of transactions. Here is an overview of the various systems used:
Retail payment systems: Facilitating cheque clearing, electronic funds transfer,
through National Electronic Funds Transfer (NEFT), settlement of card payments
and bulk payments, such as electronic clearing services. Operated through local
clearing houses throughout the country.
Large value systems: Facilitating settlement of inter-bank transactions from
financial markets. These include:
- Real Time Gross Settlement System (RTGS): for funds transfers
- Securities Settlement System: for the government securities market
- Foreign Exchange Clearing: for transactions involving foreign currency
Department of Payment and Settlement Systems: The Reserve Bank‘s payment
and settlement systems regulatory arm.
29
Developmental Role
This role is, perhaps, the most unheralded aspect of our activities, yet it remains among
the most critical. This includes ensuring that credit is available to the productive sectors
of the economy, establishing institutions designed to build the country‘s financial
infrastructure, expanding access to affordable financial services and promoting financial
education and literacy.
Over the years, the Reserve Bank has added new institutions as the economy has evolved.
Some of the institutions established by the RBI include:
Deposit Insurance and Credit Guarantee Corporation (1962), to provide protection
to bank depositors and guarantee cover to credit facilities extended to certain
categories of small borrowers
Unit Trust of India (1964), the first mutual fund of the country
Industrial Development Bank of India (1964), a development finance institution
for industry
National Bank of Agriculture and Rural Development (1982), for promoting rural
and agricultural credit
Discount and Finance House of India (1988), a money market intermediary and a
primary dealer in government securities
National Housing Bank (1989), an apex financial institution for promoting and
regulating housing finance
Securities and Trading Corporation of India (1994), a primary dealer
Developmental Role
This role is, perhaps, the most unheralded aspect of our activities, yet it remains among
the most critical. This includes ensuring that credit is available to the productive sectors
of the economy, establishing institutions designed to build the country‘s financial
infrastructure, expanding access to affordable financial services and promoting financial
education and literacy.
Over the years, the Reserve Bank has added new institutions as the economy has evolved.
Some of the institutions established by the RBI include:
Deposit Insurance and Credit Guarantee Corporation (1962), to provide protection
to bank depositors and guarantee cover to credit facilities extended to certain
categories of small borrowers
Unit Trust of India (1964), the first mutual fund of the country
Industrial Development Bank of India (1964), a development finance institution
for industry
National Bank of Agriculture and Rural Development (1982), for promoting rural
and agricultural credit
Discount and Finance House of India (1988), a money market intermediary and a
primary dealer in government securities
National Housing Bank (1989), an apex financial institution for promoting and
regulating housing finance
Securities and Trading Corporation of India (1994), a primary dealer
30
Our Tools
The Reserve Bank continues its developmental role, while specifically focussing on
financial inclusion. Key tools in this on-going effort include:
Directed credit for lending to priority sector and weaker sections: The goal
here is to facilitate/ enhance credit flow to employment intensive sectors such as
agriculture, micro and small enterprises (MSE), as well as for affordable housing
and education loans.
Lead Bank Scheme: A commercial bank is designated as a lead bank in each
district in the country and this bank is responsible for ensuring banking
development in the district through coordinated efforts between banks and
government officials. The Reserve Bank has assigned a Lead District Manager for
each district who acts as a catalytic force for promoting financial inclusion and
smooth working between government and banks.
Sector specific refinance: The Reserve Bank makes available refinance to banks
against their credit to the export sector. In exceptional circumstances, it can
provide refinance against lending to other sectors..
Strengthening and supporting small local banks: This includes regional rural
banks and cooperative banks
Financial inclusion: Expanding access to finance and promoting financial literacy
are a part of our outreach efforts.
Our Tools
The Reserve Bank continues its developmental role, while specifically focussing on
financial inclusion. Key tools in this on-going effort include:
Directed credit for lending to priority sector and weaker sections: The goal
here is to facilitate/ enhance credit flow to employment intensive sectors such as
agriculture, micro and small enterprises (MSE), as well as for affordable housing
and education loans.
Lead Bank Scheme: A commercial bank is designated as a lead bank in each
district in the country and this bank is responsible for ensuring banking
development in the district through coordinated efforts between banks and
government officials. The Reserve Bank has assigned a Lead District Manager for
each district who acts as a catalytic force for promoting financial inclusion and
smooth working between government and banks.
Sector specific refinance: The Reserve Bank makes available refinance to banks
against their credit to the export sector. In exceptional circumstances, it can
provide refinance against lending to other sectors..
Strengthening and supporting small local banks: This includes regional rural
banks and cooperative banks
Financial inclusion: Expanding access to finance and promoting financial literacy
are a part of our outreach efforts.
31
Other Functions of RBI
Developmental / Promotional Functions of RBI
Along with the routine traditional functions, central banks especially in the developing
country like India have to perform numerous functions. These functions are country
specific functions and can change according to the requirements of that country. The RBI
has been performing as a promoter of the financial system since its inception. Some of the
major development functions of the RBI are maintained below.
1. Development of the Financial System : The financial system comprises the financial
institutions, financial markets and financial instruments. The sound and efficient
financial system is a precondition of the rapid economic development of the nation.
The RBI has encouraged establishment of main banking and non-banking institutions to
cater to the credit requirements of diverse sectors of the economy.
2. Development of Agriculture: In an agrarian economy like ours, the RBI has to
provide special attention for the credit need of agriculture and allied activities. It has
successfully rendered service in this direction by increasing the flow of credit to this
sector. It has earlier the Agriculture Refinance and Development Corporation (ARDC)
to look after the credit, National Bank for Agriculture and Rural Development
(NABARD) and Regional Rural Banks (RRBs).
3. Provision of Industrial Finance: Rapid industrial growth is the key to faster economic
development. In this regard, the adequate and timely availability of credit to small,
medium and large industry is very significant. In this regard the RBI has always been
instrumental in setting up special financial institutions such as ICICI Ltd. IDBI, SIDBI
and EXIM BANK etc.
4. Provisions of Training: The RBI has always tried to provide essential training to the
staff of the banking industry. The RBI has set up the bankers' training colleges at
several places. National Institute of Bank Management i.e. NIBM, Bankers Staff
College i.e. BSC and College of Agriculture Banking i.e. CAB are few to mention.
Other Functions of RBI
Developmental / Promotional Functions of RBI
Along with the routine traditional functions, central banks especially in the developing
country like India have to perform numerous functions. These functions are country
specific functions and can change according to the requirements of that country. The RBI
has been performing as a promoter of the financial system since its inception. Some of the
major development functions of the RBI are maintained below.
1. Development of the Financial System : The financial system comprises the financial
institutions, financial markets and financial instruments. The sound and efficient
financial system is a precondition of the rapid economic development of the nation.
The RBI has encouraged establishment of main banking and non-banking institutions to
cater to the credit requirements of diverse sectors of the economy.
2. Development of Agriculture: In an agrarian economy like ours, the RBI has to
provide special attention for the credit need of agriculture and allied activities. It has
successfully rendered service in this direction by increasing the flow of credit to this
sector. It has earlier the Agriculture Refinance and Development Corporation (ARDC)
to look after the credit, National Bank for Agriculture and Rural Development
(NABARD) and Regional Rural Banks (RRBs).
3. Provision of Industrial Finance: Rapid industrial growth is the key to faster economic
development. In this regard, the adequate and timely availability of credit to small,
medium and large industry is very significant. In this regard the RBI has always been
instrumental in setting up special financial institutions such as ICICI Ltd. IDBI, SIDBI
and EXIM BANK etc.
4. Provisions of Training: The RBI has always tried to provide essential training to the
staff of the banking industry. The RBI has set up the bankers' training colleges at
several places. National Institute of Bank Management i.e. NIBM, Bankers Staff
College i.e. BSC and College of Agriculture Banking i.e. CAB are few to mention.
32
5. Collection of Data: Being the apex monetary authority of the country, the RBI collects
process and disseminates statistical data on several topics. It includes interest rate,
inflation, savings and investments etc. This data proves to be quite useful for
researchers and policy makers.
6. Publication of the Reports: The Reserve Bank has its separate publication division.
This division collects and publishes data on several sectors of the economy. The reports
and bulletins are regularly published by the RBI. It includes RBI weekly reports, RBI
Annual Report, Report on Trend and Progress of Commercial Banks India., etc. This
information is made available to the public also at cheaper rates.
7. Promotion of Banking Habits: As an apex organization, the RBI always tries to
promote the banking habits in the country. It institutionalizes savings and takes
measures for an expansion of the banking network. It has set up many institutions such
as the Deposit Insurance Corporation-1962, UTI-1964, IDBI-1964, NABARD-1982,
NHB-1988, etc. These organizations develop and promote banking habits among the
people. During economic reforms it has taken many initiatives for encouraging and
promoting banking in India.
8. Promotion of Export through Refinance: The RBI always tries to encourage the
facilities for providing finance for foreign trade especially exports from India. The
Export-Import Bank of India (EXIM Bank India) and the Export Credit Guarantee
Corporation of India (ECGC) are supported by refinancing their lending for export
purpose.
5. Collection of Data: Being the apex monetary authority of the country, the RBI collects
process and disseminates statistical data on several topics. It includes interest rate,
inflation, savings and investments etc. This data proves to be quite useful for
researchers and policy makers.
6. Publication of the Reports: The Reserve Bank has its separate publication division.
This division collects and publishes data on several sectors of the economy. The reports
and bulletins are regularly published by the RBI. It includes RBI weekly reports, RBI
Annual Report, Report on Trend and Progress of Commercial Banks India., etc. This
information is made available to the public also at cheaper rates.
7. Promotion of Banking Habits: As an apex organization, the RBI always tries to
promote the banking habits in the country. It institutionalizes savings and takes
measures for an expansion of the banking network. It has set up many institutions such
as the Deposit Insurance Corporation-1962, UTI-1964, IDBI-1964, NABARD-1982,
NHB-1988, etc. These organizations develop and promote banking habits among the
people. During economic reforms it has taken many initiatives for encouraging and
promoting banking in India.
8. Promotion of Export through Refinance: The RBI always tries to encourage the
facilities for providing finance for foreign trade especially exports from India. The
Export-Import Bank of India (EXIM Bank India) and the Export Credit Guarantee
Corporation of India (ECGC) are supported by refinancing their lending for export
purpose.
33
Supervisory Functions of RBI
The reserve bank also performs many supervisory functions. It has authority to regulate
and administer the entire banking and financial system. Some of its supervisory functions
are given below.
1. Granting license to banks: The RBI grants license to banks for carrying its business.
License is also given for opening extension counters, new branches, even to close down
existing branches.
2. Bank Inspection: The RBI grants license to banks working as per the directives and in
a prudent manner without undue risk. In addition to this it can ask for periodical
information from banks on various components of assets and liabilities.
3. Control over NBFIs: The Non-Bank Financial Institutions are not influenced by the
working of a monitory policy. However RBI has a right to issue directives to the NBFIs
from time to time regarding their functioning. Through periodic inspection, it can
control the NBFIs.
4. Implementation of the Deposit Insurance Scheme: The RBI has set up the Deposit
Insurance Guarantee Corporation in order to protect the deposits of small depositors.
All bank deposits below Rs. One lakh are insured with this corporation. The RBI work
to implement the Deposit Insurance Scheme in case of a bank failure.
Reserve Bank of India's Credit Policy
The Reserve Bank of India has a credit policy which aims at pursuing higher growth with
price stability. Higher economic growth means to produce more quantity of goods and
services in different sectors of an economy; Price stability however does not mean no
change in the general price level but to control the inflation. The credit policy aims at
increasing finance for the agriculture and industrial activities. When credit policy is
implemented, the role of other commercial banks is very important. Commercial banks
flow of credit to different sectors of the economy depends on the actual cost of credit and
arability of funds in the economy.
Supervisory Functions of RBI
The reserve bank also performs many supervisory functions. It has authority to regulate
and administer the entire banking and financial system. Some of its supervisory functions
are given below.
1. Granting license to banks: The RBI grants license to banks for carrying its business.
License is also given for opening extension counters, new branches, even to close down
existing branches.
2. Bank Inspection: The RBI grants license to banks working as per the directives and in
a prudent manner without undue risk. In addition to this it can ask for periodical
information from banks on various components of assets and liabilities.
3. Control over NBFIs: The Non-Bank Financial Institutions are not influenced by the
working of a monitory policy. However RBI has a right to issue directives to the NBFIs
from time to time regarding their functioning. Through periodic inspection, it can
control the NBFIs.
4. Implementation of the Deposit Insurance Scheme: The RBI has set up the Deposit
Insurance Guarantee Corporation in order to protect the deposits of small depositors.
All bank deposits below Rs. One lakh are insured with this corporation. The RBI work
to implement the Deposit Insurance Scheme in case of a bank failure.
Reserve Bank of India's Credit Policy
The Reserve Bank of India has a credit policy which aims at pursuing higher growth with
price stability. Higher economic growth means to produce more quantity of goods and
services in different sectors of an economy; Price stability however does not mean no
change in the general price level but to control the inflation. The credit policy aims at
increasing finance for the agriculture and industrial activities. When credit policy is
implemented, the role of other commercial banks is very important. Commercial banks
flow of credit to different sectors of the economy depends on the actual cost of credit and
arability of funds in the economy.
34
MONETARY POLICY OF THE RBI
With the introduction of the Five year plans, the need for appropriate adjustment in
monetary and fiscal policies to suit the pace and pattern of planned development became
imperative. The monetary policy since 1952 emphasized the twin aims of the economic
policy of the government:
a) spread up economic development in the country to raise national income and
standard of living, and
b) To control and reduce inflationary pressure in the economy.
This policy of RBI since the First plan period was termed broadly as one of controlled
expansion, i.e; a policy of ―adequate financing of economic growth and at the same time
the time ensuring reasonable price stability‖. Expansion of currency and credit was
essential to meet the increased demand for investment funds in an economy like India
which had embarked on rapid economic development. Accordingly, RBI helped the
economy to expand via expansion of money and credit and attempted to check in rise in
prices by the use of selective controls.
RBI’s Anti-inflationary Monetary Policy since 1972..
Since 1972, the Indian economy has been working with considerable inflationary
potential------ rapid increase in money with the public and with the banking system. There
was also expansion of bank credit to finance trade and industry. RBI was forced to
abandon ‗controlled expansion‘ and adopt the policy of credit restraint or tight monetary
policy. RBI has generally followed this kind of monetary policy with varying degrees of
success till today.
MONETARY POLICY OF THE RBI
With the introduction of the Five year plans, the need for appropriate adjustment in
monetary and fiscal policies to suit the pace and pattern of planned development became
imperative. The monetary policy since 1952 emphasized the twin aims of the economic
policy of the government:
a) spread up economic development in the country to raise national income and
standard of living, and
b) To control and reduce inflationary pressure in the economy.
This policy of RBI since the First plan period was termed broadly as one of controlled
expansion, i.e; a policy of ―adequate financing of economic growth and at the same time
the time ensuring reasonable price stability‖. Expansion of currency and credit was
essential to meet the increased demand for investment funds in an economy like India
which had embarked on rapid economic development. Accordingly, RBI helped the
economy to expand via expansion of money and credit and attempted to check in rise in
prices by the use of selective controls.
RBI’s Anti-inflationary Monetary Policy since 1972..
Since 1972, the Indian economy has been working with considerable inflationary
potential------ rapid increase in money with the public and with the banking system. There
was also expansion of bank credit to finance trade and industry. RBI was forced to
abandon ‗controlled expansion‘ and adopt the policy of credit restraint or tight monetary
policy. RBI has generally followed this kind of monetary policy with varying degrees of
success till today.
35
AN EVALUATION OF THE MONETARY POLICY
The objective of monetary policy was at one time characterized by RBI itself as
‗controlled expansion.‘ On the one hand, RBI was thinking steps such as the bill market
scheme to expand bank credit to industry and trade and thus help in economic
development. On the either hand, RBI was using both quantitative (general credit
restraint) and selective credit controls so that the deployment of loans and advances by
the commercial banks for speculative purposes was under control. There was necessary to
keep the rising prices under check.
Thus, the monetary policy had twin aims- expansion of the economy and control of
inflationary pressure. Monetary policy RBI has certain inherent constraints and obviously
limited in its usefulness.
Finally, the weapons and the powers available to RBI are such that they cover only
organized banking sector viz. commercial banks and cooperative banks. To the extent
inflationary pressure is the result of bank finance, Reserve Banks general and selective
controls will have positive effect. But if inflationary pressure is really brought about by
deficit financing and shortage of goods, RBI‘s control may not have effect at all. This is
what is probably happening in Indian in recent years. Besides, it should always be kept in
mind that RBI has no power over non-banking financial institutions as well as indigenous
bankers who play such major role in financing trade and industry.
AN EVALUATION OF THE MONETARY POLICY
The objective of monetary policy was at one time characterized by RBI itself as
‗controlled expansion.‘ On the one hand, RBI was thinking steps such as the bill market
scheme to expand bank credit to industry and trade and thus help in economic
development. On the either hand, RBI was using both quantitative (general credit
restraint) and selective credit controls so that the deployment of loans and advances by
the commercial banks for speculative purposes was under control. There was necessary to
keep the rising prices under check.
Thus, the monetary policy had twin aims- expansion of the economy and control of
inflationary pressure. Monetary policy RBI has certain inherent constraints and obviously
limited in its usefulness.
Finally, the weapons and the powers available to RBI are such that they cover only
organized banking sector viz. commercial banks and cooperative banks. To the extent
inflationary pressure is the result of bank finance, Reserve Banks general and selective
controls will have positive effect. But if inflationary pressure is really brought about by
deficit financing and shortage of goods, RBI‘s control may not have effect at all. This is
what is probably happening in Indian in recent years. Besides, it should always be kept in
mind that RBI has no power over non-banking financial institutions as well as indigenous
bankers who play such major role in financing trade and industry.
36
OBJECTIVES OF MONETARY POLICY: -
1. Price stability: The chakravarty committee argued that, in the context of planned
economic development, monetary authorities should aim at ―price stability‖ in the
broadest sense. Price stability here does not mean constant price level but it is
consistent with an annual rise of 4% in the wholesale price index. To achieve this
objective, the government should aim at raising output levels, while RBI should
control the expansion in reserve money and the money supply.
2. Monetary targeting: Emphasizing the inter-relation between money, output and
prices, the chakravarty committee has recommended the formation of a monetary
policy based on monetary targeting. According to the committee, target for growth
in money supply in a broad sense during a given year should be in terms of a
range.
a) based on anticipated growth in output, and
b) in the light of the price situation.
The target range should be announced in advance, the target for money supply
should be reviewed in the course of the year to accommodate revisions, if any, in
the anticipated growth in output and any change in the price situation
3. Change in the definition of budgetary deficit: Till now the budgetary deficit of
the central government essentially took from increase in treasury bills outstanding.
Not all the treasury bills were held by RBI but part of treasury bills were absorbed
by the public. Since the present concept of budget deficit did not distinguish
between the amounts held by RBI, it overstated the extent of monetary impact of
fiscal operation. Accordingly, the chakravarty committee suggested a change in
the definition of budgetary deficit, so that there could be clear distinction between
revenue deficit, fiscal deficit and overall budgetary deficit.
OBJECTIVES OF MONETARY POLICY: -
1. Price stability: The chakravarty committee argued that, in the context of planned
economic development, monetary authorities should aim at ―price stability‖ in the
broadest sense. Price stability here does not mean constant price level but it is
consistent with an annual rise of 4% in the wholesale price index. To achieve this
objective, the government should aim at raising output levels, while RBI should
control the expansion in reserve money and the money supply.
2. Monetary targeting: Emphasizing the inter-relation between money, output and
prices, the chakravarty committee has recommended the formation of a monetary
policy based on monetary targeting. According to the committee, target for growth
in money supply in a broad sense during a given year should be in terms of a
range.
a) based on anticipated growth in output, and
b) in the light of the price situation.
The target range should be announced in advance, the target for money supply
should be reviewed in the course of the year to accommodate revisions, if any, in
the anticipated growth in output and any change in the price situation
3. Change in the definition of budgetary deficit: Till now the budgetary deficit of
the central government essentially took from increase in treasury bills outstanding.
Not all the treasury bills were held by RBI but part of treasury bills were absorbed
by the public. Since the present concept of budget deficit did not distinguish
between the amounts held by RBI, it overstated the extent of monetary impact of
fiscal operation. Accordingly, the chakravarty committee suggested a change in
the definition of budgetary deficit, so that there could be clear distinction between
revenue deficit, fiscal deficit and overall budgetary deficit.
37
4. Interest rate policy: At present the interest rate structure is completely
administered by the monetary authorities under the general direction of the
government. According to the chakravarty committee, the present system of
administered interest rates has become unduly complex and needs to be modified
the committee has mentioned some of the important aspects of interest rate policy
which need to be taken into account, while modifying the administered interest
rate structure as for example increasing the pool of financial savings, providing a
reasonable return on saving of small savers, reinforcing anti-inflationary policies
the need to provide credit at concessional rate of interest to the priority sector and
the profitability of banks , etc. Thus, the chakravarty committee envisaged a strong
supportive role for interest rate policy in monetary regulating based on monetary
targeting.
5. Restructuring of the money market in India: The committee envisage
(predicted) an important role in treasury bill market, the call money market, the
commercial bills market and the inter-corporate funds market in the allocation of
short term resources, with minimum of cost and minimum of delay, further,
according to the committee, a well-organized money market provided an efficient
mechanism for the transmission of the monetary regulation to the rest of economy.
Accordingly, the committee has recommended that RBI should take measures to
develop an efficient
4. Interest rate policy: At present the interest rate structure is completely
administered by the monetary authorities under the general direction of the
government. According to the chakravarty committee, the present system of
administered interest rates has become unduly complex and needs to be modified
the committee has mentioned some of the important aspects of interest rate policy
which need to be taken into account, while modifying the administered interest
rate structure as for example increasing the pool of financial savings, providing a
reasonable return on saving of small savers, reinforcing anti-inflationary policies
the need to provide credit at concessional rate of interest to the priority sector and
the profitability of banks , etc. Thus, the chakravarty committee envisaged a strong
supportive role for interest rate policy in monetary regulating based on monetary
targeting.
5. Restructuring of the money market in India: The committee envisage
(predicted) an important role in treasury bill market, the call money market, the
commercial bills market and the inter-corporate funds market in the allocation of
short term resources, with minimum of cost and minimum of delay, further,
according to the committee, a well-organized money market provided an efficient
mechanism for the transmission of the monetary regulation to the rest of economy.
Accordingly, the committee has recommended that RBI should take measures to
develop an efficient
38
RBI Repo rate or key short term lending rate
When reference is made to the Indian interest rate this often refers to the repo rate, also
called the key short term lending rate. If banks are short of funds they can borrow rupees
from the Reserve Bank of India (RBI) at the repo rate, the interest rate with a 1 day
maturity. If the central bank of India wants to put more money into circulation, then the
RBI will lower the repo rate. The reverse repo rate is the interest rate that banks receive if
they deposit money with the central bank. This reverse repo rate is always lower than the
repo rate. Increases or decreases in the repo and reverse repo rate have an effect on the
interest rate on banking products such as loans, mortgages and savings.
RBI latest interest rate changes
Change date Percentage
January 25 2011 6.500 %
November 02 2010 6.250 %
September 16 2010 6.000 %
July 27 2010 5.750 %
July 02 2010 5.500 %
April 20 2010 5.250 %
march 19 2010 5.000 %
April 21 2009 4.750 %
march 05 2009 5.000 %
January 05 2009 5.500 %
RBI Repo rate or key short term lending rate
When reference is made to the Indian interest rate this often refers to the repo rate, also
called the key short term lending rate. If banks are short of funds they can borrow rupees
from the Reserve Bank of India (RBI) at the repo rate, the interest rate with a 1 day
maturity. If the central bank of India wants to put more money into circulation, then the
RBI will lower the repo rate. The reverse repo rate is the interest rate that banks receive if
they deposit money with the central bank. This reverse repo rate is always lower than the
repo rate. Increases or decreases in the repo and reverse repo rate have an effect on the
interest rate on banking products such as loans, mortgages and savings.
RBI latest interest rate changes
Change date Percentage
January 25 2011 6.500 %
November 02 2010 6.250 %
September 16 2010 6.000 %
July 27 2010 5.750 %
July 02 2010 5.500 %
April 20 2010 5.250 %
march 19 2010 5.000 %
April 21 2009 4.750 %
march 05 2009 5.000 %
January 05 2009 5.500 %
39
Interest Rates based on 10 year Government Bond Yield
Interest Rates based on 10 year Government Bond Yield
40
Most recent CPI India (inflation figure) 9.303 %
When we talk about the rate of inflation in India, this often refers to the rate of inflation
based on the consumer price index, or CPI for short. The Indian CPI shows the change in
prices of a standard package of goods and services which Indian households purchase for
consumption. In order to measure inflation, an assessment is made of how much the CPI
has risen in percentage terms over a give period compared to the CPI in a preceding
period. If prices have fallen this is called deflation (negative inflation).
CPI IN recent years
Period Inflation
January 2011 9.303 %
January 2010 16.216 %
January 2009 10.448 %
January 2008 5.512 %
January 2007 6.723 %
January 2006 4.372 %
January 2005 4.365 %
January 2004 4.348 %
January 2003 3.426 %
January 2002 4.944 %
Most recent CPI India (inflation figure) 9.303 %
When we talk about the rate of inflation in India, this often refers to the rate of inflation
based on the consumer price index, or CPI for short. The Indian CPI shows the change in
prices of a standard package of goods and services which Indian households purchase for
consumption. In order to measure inflation, an assessment is made of how much the CPI
has risen in percentage terms over a give period compared to the CPI in a preceding
period. If prices have fallen this is called deflation (negative inflation).
CPI IN recent years
Period Inflation
January 2011 9.303 %
January 2010 16.216 %
January 2009 10.448 %
January 2008 5.512 %
January 2007 6.723 %
January 2006 4.372 %
January 2005 4.365 %
January 2004 4.348 %
January 2003 3.426 %
January 2002 4.944 %
41
Inflation Rate in India
Money Multiplier in India
Inflation Rate in India
Money Multiplier in India
42
Top 10 Gold Holders
Inflation & Policy Rate For 2010
Top 10 Gold Holders
Inflation & Policy Rate For 2010
43
RBI’s Inflation Benchmark
Primary Article Inflation: Revision
RBI’s Inflation Benchmark
Primary Article Inflation: Revision
44
THE RESERVE BANK'S ACCOUNTS FOR 2009 -10
The balance sheet of the Reserve Bank changed significantly during the course of the
year, reflecting the impact of monetary and liquidity management operations undertaken
by the Bank to manage the recovery in growth while containing inflation. Monetary
policy measures affected through increases in the Cash Reserve Ratio (CRR) contributed
to the expansion in the Bank's liabilities in the form of banks' deposits while notes in
circulation continued to dominate the liability side. Foreign currency assets of the Bank
continued to dominate on the asset side. As return on foreign assets tracked the near zero
policy rates maintained by the central banks of the advanced economies, income on such
assets declined significantly. In monetary operations, sustained period of large net
absorption of liquidity through reverse repo also involved higher net interest outgo.
Reflecting these, the Bank's gross income fell from `60,732 crore in 2008-09 to `32,884
crore in 2009-10. Gross expenditure of the Bank rose modestly from `8,218 crore to
`8,403 crore. After meeting the needs of necessary transfer to the Contingency Reserve
(CR) and the Asset Development Reserve (ADR), `18,759 crore was allocated for
transferring to the Government.
1. The size of the Reserve Bank‘s balance sheet increased significantly in 2009-10
(July-June) in response to its policy actions and market operations. On the liability
side, there was a high growth in notes in circulation, banks‘ deposits with the
Reserve Bank due to the policy driven increases in CRR as well as deposit growth
in the banking system and the Central Government‘s deposits with the Reserve
Bank. The outstanding balances maintained by the Central Government under the
Market Stabilization Scheme (MSS), however, declined.
2. On the asset side, there was significant increase in Bank‘s portfolio of domestic
assets in the form of government securities parked by the banks with the Reserve
Bank for availing funds under repo. Foreign currency assets declined largely due
to valuation effect and use of a part of such assets for purchase of gold from the
IMF.
THE RESERVE BANK'S ACCOUNTS FOR 2009 -10
The balance sheet of the Reserve Bank changed significantly during the course of the
year, reflecting the impact of monetary and liquidity management operations undertaken
by the Bank to manage the recovery in growth while containing inflation. Monetary
policy measures affected through increases in the Cash Reserve Ratio (CRR) contributed
to the expansion in the Bank's liabilities in the form of banks' deposits while notes in
circulation continued to dominate the liability side. Foreign currency assets of the Bank
continued to dominate on the asset side. As return on foreign assets tracked the near zero
policy rates maintained by the central banks of the advanced economies, income on such
assets declined significantly. In monetary operations, sustained period of large net
absorption of liquidity through reverse repo also involved higher net interest outgo.
Reflecting these, the Bank's gross income fell from `60,732 crore in 2008-09 to `32,884
crore in 2009-10. Gross expenditure of the Bank rose modestly from `8,218 crore to
`8,403 crore. After meeting the needs of necessary transfer to the Contingency Reserve
(CR) and the Asset Development Reserve (ADR), `18,759 crore was allocated for
transferring to the Government.
1. The size of the Reserve Bank‘s balance sheet increased significantly in 2009-10
(July-June) in response to its policy actions and market operations. On the liability
side, there was a high growth in notes in circulation, banks‘ deposits with the
Reserve Bank due to the policy driven increases in CRR as well as deposit growth
in the banking system and the Central Government‘s deposits with the Reserve
Bank. The outstanding balances maintained by the Central Government under the
Market Stabilization Scheme (MSS), however, declined.
2. On the asset side, there was significant increase in Bank‘s portfolio of domestic
assets in the form of government securities parked by the banks with the Reserve
Bank for availing funds under repo. Foreign currency assets declined largely due
to valuation effect and use of a part of such assets for purchase of gold from the
IMF.
45
3. The Reserve Bank has continued to present its accounts covering the period July-
June for the last 70 years. The financial statements of the Bank are prepared in
accordance with the Reserve Bank of India Act, 1934 and the notifications issued
there under and in the form prescribed by the Reserve Bank of India General
Regulations, 1949. The Bank presents two balance sheets. The first one relating to
the sole function of currency management is presented as the Balance Sheet of the
Issue Department. The second one reflecting the impact of all other functions of
the Bank is known as the Balance Sheet of the Banking Department. The key
financial results of the Reserve Bank‘s operations during the year 2009-10 (July-
June) are presented here.
RBI’s Assets & Source of Income
3. The Reserve Bank has continued to present its accounts covering the period July-
June for the last 70 years. The financial statements of the Bank are prepared in
accordance with the Reserve Bank of India Act, 1934 and the notifications issued
there under and in the form prescribed by the Reserve Bank of India General
Regulations, 1949. The Bank presents two balance sheets. The first one relating to
the sole function of currency management is presented as the Balance Sheet of the
Issue Department. The second one reflecting the impact of all other functions of
the Bank is known as the Balance Sheet of the Banking Department. The key
financial results of the Reserve Bank‘s operations during the year 2009-10 (July-
June) are presented here.
RBI’s Assets & Source of Income
46
Research, Data and Knowledge -Sharing: How We
Communicate
The Reserve Bank has a rich tradition of generating sound economic research, data
collection and knowledge-sharing.
Our economic research focuses on study and analysis of domestic and international issues
affecting the Indian economy. This is mainly done by the Department of Economic
Analysis and Policy and the Department of Statistics and Information Management.
This important work is designed to:
Educate the public
Provide reliable, data-driven information for policy and decision-making
Supply accurate and timely data for academic research as well as the general
public
Communicating with the Public
Our emphasis on communication involves a range of activities, all aimed at sharing
knowledge about the financial arena.
The Reserve Bank‘s web site (www.rbi.org.in) provides a full range of information about
our activities, our publications, our history and our organization. The web site is updated
regularly, with the most recent publications, speeches, press releases and circulars. Of
note, relevant press releases and circulars are posted in 13 local languages.
Research, Data and Knowledge -Sharing: How We
Communicate
The Reserve Bank has a rich tradition of generating sound economic research, data
collection and knowledge-sharing.
Our economic research focuses on study and analysis of domestic and international issues
affecting the Indian economy. This is mainly done by the Department of Economic
Analysis and Policy and the Department of Statistics and Information Management.
This important work is designed to:
Educate the public
Provide reliable, data-driven information for policy and decision-making
Supply accurate and timely data for academic research as well as the general
public
Communicating with the Public
Our emphasis on communication involves a range of activities, all aimed at sharing
knowledge about the financial arena.
The Reserve Bank‘s web site (www.rbi.org.in) provides a full range of information about
our activities, our publications, our history and our organization. The web site is updated
regularly, with the most recent publications, speeches, press releases and circulars. Of
note, relevant press releases and circulars are posted in 13 local languages.
47
Customer Service: How Can We Help You?
Our customer outreach policy is aimed at informing the public, so that they know what to
expect, what choices they have and what rights and obligations they have in relation to
banking services. Our customer service initiatives are designed to protect customers‘
rights, enhance the quality of customer service and strengthen the grievance redressal
mechanism in the banking sector as a whole—and at the Reserve Bank itself. Our efforts
include:
Customer Service Department (CSD): Questions? Problems? Concerns?
Communicate with this department ([email protected]) which was set up in
2006, based at the central office in Mumbai, to respond to system-level customer
issues.
Banking Codes and Standards Board of India: The Reserve Bank established
this board to encourage transparency in lending and fair pricing. This will give
customers more confidence in the system and encourage more usage of formal
banking. (www.bcsbi.org.in)
Banking Ombudsman: The Reserve Bank‘s quasi-judicial authority for resolving
disputes between commercial banks, primary cooperative banks and regional rural
banks and their customers. There is one Banking Ombudsman in virtually every
state. (www.bankingombudsman.rbi.org.in)
Customer Service: How Can We Help You?
Our customer outreach policy is aimed at informing the public, so that they know what to
expect, what choices they have and what rights and obligations they have in relation to
banking services. Our customer service initiatives are designed to protect customers‘
rights, enhance the quality of customer service and strengthen the grievance redressal
mechanism in the banking sector as a whole—and at the Reserve Bank itself. Our efforts
include:
Customer Service Department (CSD): Questions? Problems? Concerns?
Communicate with this department ([email protected]) which was set up in
2006, based at the central office in Mumbai, to respond to system-level customer
issues.
Banking Codes and Standards Board of India: The Reserve Bank established
this board to encourage transparency in lending and fair pricing. This will give
customers more confidence in the system and encourage more usage of formal
banking. (www.bcsbi.org.in)
Banking Ombudsman: The Reserve Bank‘s quasi-judicial authority for resolving
disputes between commercial banks, primary cooperative banks and regional rural
banks and their customers. There is one Banking Ombudsman in virtually every
state. (www.bankingombudsman.rbi.org.in)
48
Build Your Future with RBI
RBI provides one of the most intense training inputs and facilities at its own training
establishments and outside. Incentives for self-development include scholarships to
acquire higher qualifications, facility to pursue your own research, deputation to other
institutions, participation in national and international level conferences and seminars and
sabbatical.
Benefits of working with RBI
Working with RBI gives you a whole new perspective on various banking, economic and
cultural dimensions. But that isn't where it ends: you also get to work with experienced,
qualified people who've driven the country's economy for decades.
Wider Canvas
You get an opportunity to work on a wider canvas of operations, you are involved
in formulation of policies having nationwide implications. You get a multi-
disciplinary job content and an opportunity to contribute to nation building
Team up with the Best
You get to be a member of a team that shapes the financial policies. You work
with the government and top level financial minds. You work with international
organizations to contribute to thinking on global best practices
Spearhead the Reforms
You initiate and monitor reforms and changes in India's financial environment and
manage an economy in transition. Your job offers the challenge of driving a nation
on the move.
Build Your Future with RBI
RBI provides one of the most intense training inputs and facilities at its own training
establishments and outside. Incentives for self-development include scholarships to
acquire higher qualifications, facility to pursue your own research, deputation to other
institutions, participation in national and international level conferences and seminars and
sabbatical.
Benefits of working with RBI
Working with RBI gives you a whole new perspective on various banking, economic and
cultural dimensions. But that isn't where it ends: you also get to work with experienced,
qualified people who've driven the country's economy for decades.
Wider Canvas
You get an opportunity to work on a wider canvas of operations, you are involved
in formulation of policies having nationwide implications. You get a multi-
disciplinary job content and an opportunity to contribute to nation building
Team up with the Best
You get to be a member of a team that shapes the financial policies. You work
with the government and top level financial minds. You work with international
organizations to contribute to thinking on global best practices
Spearhead the Reforms
You initiate and monitor reforms and changes in India's financial environment and
manage an economy in transition. Your job offers the challenge of driving a nation
on the move.
49
Go Global
You get an opportunity to interact with some of the brightest minds across sectors
of economy and across the globe. You even negotiate treaties with multi lateral
bodies or guide other emerging economies. In domestic seminars and conferences
you represent your institution and internationally you represent your country.
Touch the lives of millions
Your everyday job can make a difference to a farmer, a small entrepreneur, an
exporter, an industry, a financial entity, or even a common man.
Do Research that Matters
You do research that induces policy changes. You have information and data at
your fingertips.
Go Global
You get an opportunity to interact with some of the brightest minds across sectors
of economy and across the globe. You even negotiate treaties with multi lateral
bodies or guide other emerging economies. In domestic seminars and conferences
you represent your institution and internationally you represent your country.
Touch the lives of millions
Your everyday job can make a difference to a farmer, a small entrepreneur, an
exporter, an industry, a financial entity, or even a common man.
Do Research that Matters
You do research that induces policy changes. You have information and data at
your fingertips.
50
Conclusion
RBI is the apex banking institution in India. RBI is an autonomous body promoted by the
government of India and is headquartered at Mumbai. The RBI plays a key role in the
management of the treasury foreign exchange movements and is also the primary
regulator for banking and non-banking financial institutions. The RBI operates a number
of government mints that produce currency and coins.
The RBI has been one of the most successful central banks around the world in
preventing the effects of the subprime crisis to the Indian economy, particularly its banks.
This adds a lot of credibility to every decision that is taken by them. Further, as a large
proportion of the Indian population is impacted by inflation, it was necessary for the RBI
to think about the majority and try to curb inflation by tightening its monetary stance.
All the functions of RBI, monitory, non monitory, supervisory or promotional are equally
significant in context of the Indian economy. Under the Banking Regulation Act, RBI has
been given a wide range of powers. Under the supervision & inspection of RBI, the
working of banks has greatly improved. RBI has been responsible for strong financial
support to industrial & agricultural development in the country.
Conclusion
RBI is the apex banking institution in India. RBI is an autonomous body promoted by the
government of India and is headquartered at Mumbai. The RBI plays a key role in the
management of the treasury foreign exchange movements and is also the primary
regulator for banking and non-banking financial institutions. The RBI operates a number
of government mints that produce currency and coins.
The RBI has been one of the most successful central banks around the world in
preventing the effects of the subprime crisis to the Indian economy, particularly its banks.
This adds a lot of credibility to every decision that is taken by them. Further, as a large
proportion of the Indian population is impacted by inflation, it was necessary for the RBI
to think about the majority and try to curb inflation by tightening its monetary stance.
All the functions of RBI, monitory, non monitory, supervisory or promotional are equally
significant in context of the Indian economy. Under the Banking Regulation Act, RBI has
been given a wide range of powers. Under the supervision & inspection of RBI, the
working of banks has greatly improved. RBI has been responsible for strong financial
support to industrial & agricultural development in the country.
51
BIBLOGRAPHY
http://www.rbi.org.in
http://www.scribd.com
http://www.drnarendrajadhav.info/drnjadhav_web_files/Published%20pa
pers/EPW%20BALANCE%20SHEET.pdf
http://www.blurtit.com/
www.banknetindia.com
www.company-profile.reportlinker.com
www.allfreeessays.com
http://www.authorstream.com
BIBLOGRAPHY
http://www.rbi.org.in
http://www.scribd.com
http://www.drnarendrajadhav.info/drnjadhav_web_files/Published%20pa
pers/EPW%20BALANCE%20SHEET.pdf
http://www.blurtit.com/
www.banknetindia.com
www.company-profile.reportlinker.com
www.allfreeessays.com
http://www.authorstream.com
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