2. Introduction
Preamble
History
Main Role and
Functions
Departments
Banking Structure
Governors
Types of Banks
RBI Rates
Monetary Policy
Banking Reforms
Financial Inclusion
Training
Establishments
Subsidiaries
RBI Links
2
3. Established under the “RBI Act” on 1st April,
1935, RBI( a.k.a. Mint Street) is
Headquartered at Mumbai, Maharashtra.
It has 22 Regional Offices all over India in
many State Capitals.
Urijit Patel succeeded Raghuram Rajan as the
24th Governor of RBI on 4th September, 2016.
3
4. The Preamble of Reserve Bank Of IndiaAct
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.”
4
5. The Reserve bank of India was set up on the
basis of the recommendations of the Hilton
Young Commission.
It was started as Share-Holder Bank on April
1, 1935 with a paid up capital of 5 crs
Initially it was located in Kolkata.
It moved to Mumbai in 1937.
5
6. The Bank was constituted to:
Regulate the issue of bank note
Maintain reserves with a view to securing money
stability
To operate the credit and currency system of the
country to its advantage
Later on in 1949 the bank was nationalized and
is fully owned by the Government of India
Its first Governor was Sir Osborne A. Smith (1st
April 1935 to 30th June 1937)
6
7. Monetary Authority: Formulates, implements and
monitors the monetary policy for maintaining price
stability, keeping inflation in check and ensuring adequate
flow of credit to productive sectors.
Regulator and supervisor of the financial system: lays
out parameters of banking operations within which the
country’s banking and financial system functions for - (i)
maintaining public confidence in the system, (ii)
protecting depositors’ interest and providing cost-
effective banking services to the general public.
Manager of Foreign Exchange: RBI manages forex under
the FEMA- Foreign Exchange Management Act, 1999. It
facilitate external trade & payment and also promote
development of foreign exchange market in India.
7
8. Issuer of Currency: RBI issues and exchanges currency as
well as destroys currency & coins not fit for circulation to
ensure that the public has adequate quantity of supplies of
currency notes and in good quality.
Developmental Role : RBI performs a wide range of
promotional functions to support national objectives. Under
this it setup institutions like NABARD, IDBI, SIDBI, NHB, etc.
Banker to the Government: Performs merchant banking
function for the central and the state governments, also acts
as their banker.
Banker to banks: An important role and function of RBI is
to maintain the banking accounts of all scheduled banks and
acts as banker of last resort. It also act as a agent of
Government of India in the IMF.
8
9. To carry out its functions/operations smoothly and
efficiently, the Reserve Bank of India has the following
departments:
1. Banking Department
The Banking Department is responsible for rendering the
bank’s services as a banker to the Government and to the
banks. It consists of four sub-divisions:
Public Accounts Department, Public Debt Department,
Deposit Accounts Department and Securities
Department.
9
10. 2 Issue Department:
The Issue Department is concerned with the proper and
efficient management of the note issue. For the conduct
of monetary transactions, the country has been divided
into 14 circles of issue, each having an Office of Issue.
3 Department of Currency Management
This department is concerned with the forecasting of the
long-term requirements of the currency, indenting and
allocation of currency notes to various branches of the
Issue Department taking into account the demand
pattern, storage facilities, etc. It is headed by the Chief
Officer.
10
11. 4. Department of Expenditure and Budgetary Control
This department is concerned with the preparation of the
bank’s budget and monitoring of the expenditure of the
different units. It is headed by the Financial Controller.
5. Department of Government and Bank Accounts
This department is concerned with the maintenance and
supervision of the bank’s accounts in the Issue and the
Banking Departments and the compilation of weekly
statements of affairs and the Annual Profits & Loss
Account and Balance Sheet. It is headed by the Chief
Accountant.
11
12. 6. Exchange Control Department
The Exchange Control department is responsible for
controlling foreign exchange transactions and
maintaining exchange rate stability.
7. Department of Banking Operations and Development
This Department was entrusted with the responsibility of
the supervision, control and development of the
commercial bank system in the country.Till July 1982, it
was also concerned with the Lead Bank Scheme and
bank credit to the priority sectors.
12
18. Regional Rural Banks
Regional Rural Banks or RRBs, simply put, serve the rural areas
and agricultural sectors with basic banking and adequate
financial services.The RRBs are owned by the central
government (50%), the state government (15%) and the sponsor
bank (35%). Several commercial banks have sponsored RRBs.
Prominent examples include the Maharashtra Gramin Bank
(sponsored by the Bank of Maharashtra) and the Himachal
Gramin Bank (sponsored by Punjab National Bank). RRBs were
set up to eliminate other unorganized financial institutions like
money lenders and supplement the efforts of co-operative
banks.
18
19. Non-scheduled Banks
Non-scheduled banks by definition are those which are not listed in
the 2nd schedule of the RBI act, 1934. Banks with a reserve capital
of less than 5 lakh rupees qualify as non-scheduled banks. Unlike
scheduled banks, they are not entitled to borrow from the RBI for
normal banking purposes, except, in emergency or “abnormal
circumstances.” Jammu & Kashmir Bank is an example of a non-
scheduled commercial bank.
Co-operative Banks
Co-operative banks operate in both urban and non-urban areas. In
the urban centres, they mainly finance entrepreneurs, small
businesses, industries, self-employment and cater to home buying
and educational loans. In the rural areas they primarily cater to
agricultural-based activities, which include farming, livestock,
dairies and hatcheries etc. Unlike commercial banks, who are
driven by profit, co-operative banks work on a “no profit, no loss”
basis.
19
20. Commercial Banks
According to the RBI, “Commercial Banks refer to both scheduled
and non-scheduled commercial banks which are regulated under
Banking RegulationAct, 1949.”Commercial banks operate on a
‘for-profit’ basis.They primarily engage in the acceptance of
deposit and extend loans to the general public, businesses and the
government.
Scheduled Banks
Any bank which is listed in the 2nd schedule of the Reserve Bank of
India Act, 1934 is considered a scheduled bank.The list includes the
State Bank of India and its subsidiaries, all nationalised banks
(Bank of Baroda, Bank of India etc), regional rural banks (RRBs),
foreign banks (HSBC Holdings Plc, Citibank NA) and some co-
operative banks. Scheduled banks are eligible for loans from the
Reserve Bank of India at bank rate, and are given membership to
clearing houses.
20
25. Reserve Ratios
CRR: 4%
SLR: 19.5%
Government Securities
Market
6.79% GS 2027:7.1351%
91 dayT-bills: 6.1495%*
182 dayT-bills: 6.3092%*
364 dayT-bills: 6.3551%*
* cut-off at the last auction
25
26. Monetary policy is the process by which RBI
controls the supply of money in the economy
by its control over interest rates in order to
maintain price stability and achieve high
economic growth.
It includes:
Qualitative Measures &
Quantitative Measures
26
27. Bank Rate Policy
Open Market Operations
Cash Reserve Ratio
Statutory Liquidity Ratio
Repo Rate
Reverse Repo Rate
27
28. The bank rate is the official interest rate at
which RBI rediscounts the approved bills held
by commercial banks. For controlling the
credit, inflation and money supply , RBI will
increase the bank rate.
28
29. It refer to direct sales and purchase of
securities and bills in the open market by
Reserve bank of India.The aim is to control
volume of credit.
29
30. Cash Reserve Ratio refers to that portion of
total deposits in commercial Bank which it
has to keep with RBI as cash reserves.
30
31. It refers to that portion of deposits with the
banks which it has to keep with itself as liquid
assets(Gold, approved govt. securities etc.) If
RBI wishes to control credit and discourage
credit it would increase CRR & SLR.
31
32. Repo Rate: It is the interest rate at which the
commercial bank can borrow from the central
ban to meet there short term needs(7 days)
Reverse Repo Rate: It is the interest rate at
ehich commercial bank can deposit their
funds with the central bank
32
34. Margin requirements refers to difference
between the securities offered and amount
borrowed by the banks.
Rationing of credit :Fixing the credit quotas
for different business activities.The RBI
controls the Credit granted / allocated by
commercial banks. e.g. liquor factory
34
35. This step is taken by the RBI against banks
that don’t fulfill conditions and requirements.
RBI may refuse to rediscount their papers or
may give excess credits or charge a penal rate
of interest over and above the Bank rate, for
credit demanded beyond a limit.
35
36. Psychological means and informal means of
selective credit control or we can say that the
centre bank pressurize the commercial bank
to follow the direction of central bank on the
flow of credit.
36
37. As per the new rules, under Section 35AA -
the central bank is entitled to issue
directions to any banking company or
banking companies to initiate insolvency
resolution process in respect of a default
under the provisions of the Insolvency and
Bankruptcy Code.
37
38. Here are the three key measures proposed in
the ordinance:
1)The government may authorise the Reserve
Bank of India (RBI) to issue directions to banks to
initiate insolvency proceedings against defaulters
under the bankruptcy code.
2) RBI on its own accord can issue directions to
banks for resolution of stressed assets.
3) RBI may form committees with members it can
choose to appoint to advise banks on resolution of
stressed assets.
38
39. In the Indian context, the term ‘financial
inclusion’ was used for the first time in April
2005 in the Annual Policy Statement
presented byY.Venugopal Reddy, the then
Governor of RBI.
RBI’s vision for 2020 is to open nearly 600
million new customers' accounts and service
them through a variety of channels by
leveraging on IT
39
40. Opening of no-frills accounts: Basic banking
no-frills account is with nil or very low
minimum balance as well as charges that
make such accounts accessible to vast
sections of the population. Banks have been
advised to provide small overdrafts in such
accounts.
Know-Your-Customer (KYC) norms: RBI has
extended the deadline for linkingAadhaar to
bank accounts till 31st March, 2018
40
41. Engaging business correspondents (BCs): The
BC model allows banks to provide doorstep
delivery of services, especially cash in-cash out
transactions, etc. for providing financial and
banking services.
Opening of branches in unbanked rural
centres: banks have been mandated in the April
monetary policy statement to allocate at least
25% of the total number of branches to be
opened during a year to unbanked rural centres.
41
42. RBI has 5Training establishments:
Three autonomous institutes-
National Institute of Bank Management (NIBM)
Indira Gandhi Institute for Development
Research(IGIDR)
Institute for Development and Research in Banking
Technology (IDRBT)
Two direct run colleges-
College of Agricultural Banking
Reserve Bank of India Staff College
42
43. Deposit Insurance and Credit Guarantee
Corporation of India(DICGC)
Bharatiya Reserve Bank Note Mudran Private
Limited (BRBNMPL)
National Housing Bank (NHB)
43
