3. Introduction
The Reserve Bank of India describe the basic functions of the Reserve Bank as
“…to regulate the issue of Bank Notes and keeping of reserve with
a view to securing monetary stability in India and generally to operate
the currency and credit system of the country to its advantage”
“It is a bank of banker”
“Bank which has monopoly over note issue”
4. • It was set up on the recommendations of the HILTON YOUNG COMMISSION
•It was started as Share - Holders Bank with a paid up capital of 5 Crs.
•It was established on 1st of April 1935
•Initially it was located in Kolkata
•It moved to Mumbai in the year 1937
•Initially it was privately owned
•It was the 1 st bank to be Nationalised in 1949
•It has 22 regional offices, most of them in state capitals
•Since nationalisation in 1949, the Reserve Bank is fully owned by the
Government of India
•Its First governor was Sir Osborne A. Smith (1st April 1935 to 30th June 1937 )
•The First Indian Governor was “Sir Chintaman D. Deshmukh ”(11th August
1943 to 30th June 1949 )
•On 27th June 2006 , the Union Government of India reconstituted the Central
Board of Directors of the Reserve Bank of India(RBI) with 13 Members,
including Azim Premji and Kumar Mangalam Birla
BRIEF HISTORY
5. Monetary Authority
! Formulates, implements and monitors the monetary policy
! Objective : maintaining price stability and ensuring adequate flow of
credit to productive sectors
Regulator and supervisor of the financial system:
! Prescribes broad parameters of banking operations within which the
country's banking and financial system functions
! Objective : maintain public confidence in the system, protect depositors
interest and provide cost- effective banking services to the public
Manager of Foreign Exchange
! Manages the Foreign Exchange Management Act, 1999 .
! Objective : to facilitate external trade and payment and promote orderly
development and maintenance of foreign exchange market in India
THE KEY ROLES OF THE RBI
ARE…
6. Issuer of Currency
! Issues and exchanges or destroys currency and coins not fit for
circulation
! Objective: to give the public adequate quantity of supplies of
currency notes and coins and in good quality
Developmental Role
! Performs a wide range of promotional functions to support
national objectives
Related Functions
! Banker to the Government: performs merchant banking
function for the central and the state governments; also acts as
their banker
! Banker to banks: maintains banking accounts of all scheduled
banks
7. OBJECTIVE AND REASONS FOR ESTABLISHMENT OF RBI
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 stabilise internal and external value of rupee
• For balanced and systematic development of banking in the country
• For the development of organised money market in the country
• For proper arrangement of agriculture finance
• For proper arrangement of industrial finance
• For proper management of public debt
• To establish monetary relations with other countries of the world and international financial
Institutions
• For centralisation of cash reserves of commercial banks
• To maintain balance between demand and supply of currency
• Regulator and supervisor of the financial system
• Manager of Exchange control
• Issuer of currency
• Banker to the Government
• Bank to banks: maintains banking accounts of the scheduled banks
• Reserve Ratio (CRR)
• Statutory Liquidity Ratio(SLR)
• Repo and Reverse Repo Ratio
• Bank Rate
8. Related Functions
! RBI also regulates the opening / installation of ATM
! RBI regulates the opening of branches by banks
! It ensures that all the N.B.F.C follow the KYC Guidelines
! Fresh currency notes for ATM are supplied by RBI
! Banker to the Government: Performs all banking function for the
central and state governments and also act as their banker
! The reserve bank of India also regulates the trade of gold. Currently
17 banks are involved in the trade of gold in India RBI has invited
applications from more banks for direct import of gold to curb
illegal trade in gold and increase competition in the market
! It issues guidelines and directions for the commercial banks
10. Financial institution is an institution or organisation that provides financial
services for its clients, members and society. Probably the most important
financial service provided by financial institutions is acting as financial
intermediaries. Most financial institutions are regulated by the government
Financial institution
11. • Financial institutions include banks, credit unions, asset management firms,
building societies, and stock brokerages, among others. These institutions are
responsible for distributing financial resources in a planned way to the potential
users.
• These function performed in following ways……
A. Accepting Deposits
B. Providing Agricultural Loans
C. Providing Commercial Loans
D. Providing Real Estate Loans
E. Providing Mortgage Loans
F. Issuing Share Certificates
FUNCTION OF FINANCIAL INSTITUTION
12. We can divide financial institution in two major parts as following….
1. Banking financial company(BFCs)
2. Non banking financial company(NBFCs)
Banking institution can use banking instruments like cheque, draft, pay-order
but non banking institution can not use these instruments.
TYPE OF FINANCIAL INSTITUTION
13. BANKING INSTITUTION
• Banking institution are those institution who is provide banking and other financial
services to their customers and society such as …..
•Accept deposits
• Provide loans
• Cash management services
• Portfolio management services
We can divide Indian banking system in following ways
• Commercial bank
A) Public sector bank
1) State bank. 2) Nationalised bank
B) Private sector bank
1) Indian private bank 2) Foreign private bank
C) Co-operative bank
1) Urban cooperative banks 2) State cooperative banks
3) Central cooperative banks
D) Regional rural banks
14. NBFIs at present consist of a heterogeneous group of institutions that cater to a
wide range of financial requirements. These type company are involved in
promoting new company ,expansion and meeting the financial requirement of
the company for economic development
Non banking financial company(NBFCs)
15. • NABARD (National bank for agriculture and rural development) –
It is working in India to promote agriculture and rural development.
• Industrial development bank of India(IDBI)-
It is apex institution in the field of long term industrial finance it was set
in 1964 as wholly subsidiary of RBI
• Industrial finance corporation of India(IFCI)-
It was established in 1948, it provide assistance in long term loan,
underwriting of equity and guarantee of loans in foreign exchange.
• Export Import Bank of India (EXIM Bank)-
It facilitates export and import trading in India.
• Small Industries Development Bank of India (SIDBI)-
It provide financial assistance in small scale industry
• Life insurance corporation of India(LIC)-
It provide all type insurance.
• Security and exchange board of India(SEBI)-
It regulate all the activity in the Indian capital market
