RBI

1. A
PROJECT REPORT
ON
RBI: - Reserve Bank of India
SUBMITTED BY
Dhanraj Laxman kadam
s.Y B.B. A (SEM-III)
(Academic year 2020-2021)
UNDER THE GUIDENCE OF
Prof. Fazilat Jagot
SUBMITTED TO
“SAVITRIBAI PHULE UNIVERSITY OF PUNE”
FOR
The Partial Fulfilment of Bachelor of Business Administration

2. PRAGNYA
GROUP OF INSTITUTES
Pragnya Educational Trust’s
PRAGNYA COLLEGE OF MANAGEMENT & COMPUTER STUDIES
HANDEWADI ROAD, PUNE – 412308
CERTIFICATE
This is certified that Mr. / Dhanraj Laxman Kadam student of
“PRAGNYA COLLEGE OF MGMT & CS”, Pune has completed his
/her field work report on the topic of “RBI: - Reserve Bank of India”
and has submitted the project report in partial fulfilment of BBA to
the college for the academic year 2020-2021
He has worked under the guidance and direction. The said report is
based on bonafied information.
Prof. Asha Yadwarkar Prof. Fazilat Jagot
Principal Project guide

3. 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 systemof the
country to its advantage."

4. ACKNOWLEDGEMENT
It is a pleasure to thanks all the people who directly or indirectly in many ways to have
assisted me in my project related studies and contributed in making this project. Firstly, I
would like to thank my project guidance of Prof. Fazilat Jagot for her support, cooperation
and fruitful discussion during my research on the topic “RBI- Reserve Bank of India I would
like to express my gratitude to Savitribai Phule University of Pune and my college for
guiding and supporting me during my project.
THANKING YOU
Dhanraj Laxman Kadam.

5. DECLARATION
I, the undersigned, hereby declare that the Project Report entitled “RBI- Reserve Bank of India
“written and submitted by me to the University of Pune.Pune in partial fulfilment of the
requirements for the award of degree of Bachelor of Business Administration under the
guidance of Prof. Fazilat Jagot Is my original work and the conclusions drawn therein are based
on the material collected by myself.
Place: Pune
Research Student: -Dhanraj Laxman Kadam
Date:

6. EXECUTIVE SUMMARY
The broad objectives of the Reserve Bank of India as spelt out in the preamble to
the RBI Act, 1934 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”.
RBI was established on 1st April 1935. Although the bank was initially owned
privately, it has been taken up the Government of India ever since, it was nationalized 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.
Now IAS Shaktikanta Das is Governor of reserve bank of India.
The research and their analysis, collected through a survey done on many of peoples.
The data collected have been well organized and presented. Hope the research findings and
conclusion will be of use.
This project has been a great learning experience for me. At the same time, it gave
me enough scope to implement my analytical ability

7. INDEX
chapterNo Particular’s Page No
I Description
II Introduction of Reserve Bank of India
III The Reserve Bank: Tradition and Change
IV
The RBI Logo
V
Reserve Bank of India (RBI)
VI
Research Methodology
VII
History
VIII Structure
IX Function
X Bankers' bank
XI 2016 Demonetisation
XII
Bank rate
XIII Supervisory Functions of RBI
XIV Main Activities of the RBI: What We Do
XV
Objectives of monetary policy
XVI Customer Service: How Can We Help You
XVII Conclusion
XVIII
Bibliography

8. I. Description
The Reserve Bank of India (RBI) is India's central bank and regulatory body under the
jurisdiction of Ministry of Finance, Government of India.
It is responsible for the issue and supply of the Indian rupee
and the regulation of the Indian banking system. It also manages the country's main
payment systems and works to promote its economic development. Until the Monetary
Policy Committee was established in 2016, it also had full control monetary policy in India. It
commenced its operations on 1 April 1935 in accordance with the Reserve Bank of India Act,
1934. The original share capital was divided into shares of 100 each fully paid. Following
India's independence on 15 August 1947, the RBI was nationalised on 1 January 1949.
The overall direction of the RBI lies with the 21-member
central board of directors, composed of: the governor; four deputy governors; two finance
ministry representatives (usually the Economic Affairs Secretary and the Financial Services
Secretary); ten government-nominated directors; and four directors who represent local
boards for Mumbai, Kolkata, Chennai, and Delhi. Each of these local boards consists of five
members who represent regional interests and the interests of co-operative and indigenous
banks. It is a member bank of the Asian Clearing Union. The bank is also active in promoting
financial inclusion policy and is a leading member of the Alliance for Financial Inclusion (AFI).
The bank is often referred to by the name 'Mint Street'.

9. II. Introduction of Reserve Bank of India
Reserve Bank of India is also known as India's Central Bank. It was established on 1st April
1935. Although the bank was initially owned privately, it has been taken up the Government
of India ever since, it was nationalized. The bank has been vested with immense
responsibility of reviewing and reconstructing the economic stability of the country by
formulating economic policies and ensuring a proper exchange of currency. In this regard,
the Reserve Bank of India is also known as the banker of banks
.
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.
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 systemof the
country to its advantage. “The Preamble of the RBI speaks about the basic functions of the
bank. It deals with the issuing the bank notes and keeping reserves in order to secure
monetary stability in the country. It also aims at operating and boosting up the currency and
credit infrastructure of India.

10. III. The Reserve Bank: Tradition and Change
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.
IV. The RBI Logo

11. 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 Government’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.

12. V. Reserve Bank of India (RBI)
Seal of the RBI
Headquarters: Mumbai, Maharashtra, India
Established: 1 April 1935
Ownership: Ministry of Finance, Government of India
Governor: Shaktikanta Das, IAS
Central bank of: India
Currency: Indian rupee (₹)
Reserves: ₹4,355,951 crore (US$610 billion)
Bank rate: 4.00%
Interest on reserves: 3.35% (market determined)
Website: rbi.org.in (http://r bi.org.in
The Reserve Bank of India (RBI) is India's central bank and
regulatory body under the jurisdiction of Ministry of Finance, Government of India. It is

13. responsible for the issue and supply of the Indian rupee and the regulation of the Indian
banking system. It also manages the country's main payment systems and works to promote
its economic development.
Until the Monetary Policy Committee was established in 2016, it also
had full control monetary policy in India. It commenced its operations on 1 April 1935 in
accordance with the Reserve Bank of India Act, 1934. The original share capital was divided
into shares of 100 each fully paid. Following India's independence on 15 August 1947, the
RBI was nationalised on 1 January 1949.
The overall direction of the RBI lies with the 21-member central board
of directors, composed of: the governor; four deputy governors; two finance ministry
representatives (usually the Economic Affairs Secretary and the Financial Services
Secretary); ten government nominated directors; and four directors who represent local
boards for Mumbai, Kolkata, Chennai, and Delhi. Each of these local boards consists of five
members who represent regional interests and the interests of co-operative and indigenous
banks.
It is a member bank of the Asian Clearing Union. The bank is also
active in promoting financial inclusion policy and is a leading member of the Alliance for
Financial Inclusion (AFI). The bank is often referred to by the name 'Mint Street.

14. VI. Research Methodology: -
Research Methodology decides the territory of proposed study and gives
information to the readers about adopted process of analysis for the respective study. This
includes aims for which the study is undertaken. This also clarify time, scope, data sources
etc. of proposed study. Another significant aspect is tools and techniques which are used for
the study. In brief this chapter helps to the researcher to decide his path of research work.
In the light of the above, the research study has been undertaken to study the
selected banks to know, what policies, structural and procedural changes taken place in
these selected banks and how these changes made impact on these banks. The other
individual benefit of undertaking this research to the researcher is to grab an opportunity to
meet and discuss with Academic Professional, Govt. Officials, regulatory Bodies of
Government, Practical Bankers, Business and Industry, Executives, State Government
Officials, Researchers and Policy Makers on various issues related to the banking sector
reforms and their impacts in India.
The research will help the academic research scholars, policy makers, students and
Government Officials to gain an insight into the future challenges before Indian Banking
System. To conduct the research on the subject titled “Critical Analysis of Financial Reforms
in Banking Sector in Post Liberalization Period- (With respect to public and private sector
banks)” the following thought-provoking objectives were framed.
OBJECTIVES OF THE STUDY:
To Study the financial performance of the selected public sector and private banks.28
To study and analyse of various financial reforms in banking sector during post liberalization
period with respect to public and private sector banks.
To Study the legal and structural and financial status of banking sector prior to financial
reforms period.
To study the changes in banking sector during post financial reform period.
To assess the impact of financial reform on banking sector
To identify the problems and prospects for banking sectors emerged due to financial
reforms.
HYPOTHESIS OF THE STUDY: -
The study is carried out with the following hypotheses:

15. The reforms in banking sector transformed the regulated environment into a market-
oriented one and induced competitiveness in banking industry.
The reform measures brought a paradigm shift in the banking industry and enhanced the
overall performance of the banks.
Information technology in banking business has a visible impact on the quality of customer
service.
The performance of public sector banks is not as good as' private sector banks in spite of
their age, size and image.
The introduction of prudential norms improved the financial health and credibility of banks.
DATA COLLECTION: -
The research is mainly based on the secondary database but it is supported by the primary
data. Secondary data have been collected through structured questionnaire, annual reports,
authentic records and publications of RBI and website of individual banks and RBI website.
Primary data are collected through interviews from the officers of selected public sector
banks as well as private sector banks. The interviews were undertaken from selected banks
namely Bank of Baroda, SBI, Dena Bank and Oriental bank of commerce operating in Gujarat
and Mumbai. The data also collected through interviews of the officers of above-mentioned
banks and also from the RBI
VII. History:

16. The Reserve Bank of India was established following the Reserve Bank of India Act of
1934.Though privately owned initially, it was nationalised in 1949 and since then fully
owned by the Ministry of Finance, Government of India (GoI). In 1926, the Hilton Young
Commission recommended the setting up of the Reserve Bank of India. At the time of
establishment, the authorized capital of the Reserve Bank of India was Rs. 5 crores. The
government's share in this was only Rs 20-22 lakhs.
A 2010 stamp dedicated to the75th anniversary ofthe ReserveBank of India
1935–1949: -

17. The Reserve Bank of India was founded on 1 April 1935 to respond to economic troubles
after the First World War. The bank was set up based on the recommendations of the 1926
Royal Commission on Indian Currency and Finance, also known as the Hilton Young
Commission. Eventually, the Central Legislative Assembly passed these guidelines as the RBI
Act 1934. The original choice for the seal of RBI was the East India Company Double Mohur,
with the sketch of the Lion and Palm Tree. However, it was decided to replace the lion with
the tiger, the national animal of India. The Preamble of the RBI describes its basic functions
to regulate the issue of banknotes, keep reserves to secure monetary stability in India, and
generally to operate the currency and credit systemin the best interests of the country. The
Central Office of the RBI was established in Calcutta (now Kolkata) but was moved to
Bombay (now Mumbai) in 1937. The RBI also acted as Burma's (now Myanmar) central bank
until April 1947 (except during the years of Japanese occupation (1942– 45)), even though
Burma seceded from the Indian Union in 1937. After the Partition of India in August 1947,
the bank served as the central bank for Pakistan until June 1948 when the State Bank of
Pakistan commenced operations. Though set up as a shareholders' bank, the RBI has been
fully owned by the Government of India since its nationalisation in 1949.RBI has a monopoly
of note issue.

18. ReserveBank of India-10Rupees (1938), the first year of banknoteissue.

19. Since 2000: -
The Foreign Exchange Management Act, 1999 came into force in June 2000. It should
improve the item in 2004–2005 (National Electronic Fund Transfer). The Security Printing &
Minting Corporation of India Ltd., a merger of nine institutions, was founded in 2006 and
produces banknotes and coins.
The national economy's growth rate came down to 5.8% in the last quarter of 2008–2009
and the central bank promotes the economic development.
In 2016, the Government of India amended the RBI Act to establish the
Monetary Policy Committee (MPC) to set. This limited the role of the RBI in setting interest
rates, as the MPC membership is evenly divided between members of the RBI (including the
RBI governor) and independent members appointed by the government. However, in the
event of a tie, the vote of the RBI governor is decisive.
In April 2018, the RBI announced that "entities regulated by RBI shall not deal
with or provide services to any individual or business entities dealing with or settling virtual
currencies," including Bitcoin. While the RBI later clarified that it "has not prohibited"
virtual currencies, a three-judge panel of the Supreme Court of India issued a ruling on 4
March 2020 that the RBI had failed to show "at least some semblance of any damage
suffered by its regulated entities" through the handling of virtual currencies to justify its
decision. The court challenge was filed by the Internet and Mobile Association of India,
whose members include some cryptocurrency exchanges whose businesses suffered
following the RBI's 2018 order.

20. VIII. Structure: -
The central board of directors is the main committee of the central bank. The Government
of India appoints the directors for a four-year term. The board consists of a governor, and
not more than four deputy governors; four directors to represent the regional boards; two –
usually the Economic Affairs Secretary and the Financial Services Secretary – from the
Ministry of Finance and ten other directors from various fields. The Reserve Bank – under
Raghuram Rajan's governorship – wanted to create a post of a chief operating officer (COO),
in the rank of deputy governor and wanted to re-allocate work between the five of them
(four deputy governor and COO).
The bank is headed by the governor, currently Shaktikanta Das. There
are currently four deputy governors Mahesh Kumar Jain, M. Rajeshwar Rao, Michael Patra
and T. Rabi Shankar. Since 2000 Structure Two of the four deputy governors are traditionally
from RBI ranks and are selected from the bank's executive directors. One is nominated from
among the chairpersons of public sector banks and the other is an economist. An Indian
Administrative Service officer can also be appointed as deputy governor of RBI and later as
the governor of RBI as with the case of Y. Venugopal Reddy and Duvvuri Subbarao. Other
persons forming part of the central board of directors of the RBI are Nachiket Mor, Y. C.
Deveshwar, Prof Damodar Acharya, Ajay Tyagi and Anjuly Duggal.

22. Executive Directors (ED) consist of M. Rajeshwar Rao, Lily Vadera, Rabi N. Mishra, Smt.
Nanda S. Dave, Anil K. Sharma, S. C. Murmu, T. Rabi Sankar, Janak Raj, P Vijayakumar,
Indrani Banerjee, O.P. Mall and Sudha Balakrishnan (Chief Financial Officer).
Sudha Balakrishnan, a former vice-president at National Securities Depository Limited,
assumed charge as the first chief financial officer (CFO) of the Reserve Bank on 15 May
2018; she was given the rank of an executive director.
Branches and support bodies: -
The RBI has four regional representations: North in New Delhi, South
in Chennai, East in Kolkata and West in Mumbai. The representations are formed by five
members, appointed for four years by the central government and with the advice of the
central board of directors serve as a forum for regional banks and to deal with delegated
tasks from the Central Board.
It has two training colleges for its officers, viz. Reserve Bank Staff
College, Chennai and College of Agricultural Banking, Pune. There are three autonomous
institutions run by RBI namely National Institute of Bank Management (NIBM), Indira
Gandhi Institute of Development Research (IGIDR), Institute for Development and
Research in Banking Technology (IDRBT). There are also four zonal training centres at
Mumbai, Chennai, Kolkata, and New Delhi.
The RegionalReserve Bank building as seen from theChennai Suburban Railway lines

23. The Board of Financial Supervision (BFS), formed in November 1994, serves as a CCBD
committee to control the financial institutions. It has four members, appointed for two
years, and takes measures to strength the role of statutory auditors in the financial sector,
external monitoring, and internal controlling systems. The Tarapore committee was set up
by the Reserve Bank of India under the chairmanship of former RBI deputy governor S. S.
Tarapore to "lay the road map" to capital account convertibility. The five-member
committee recommended a three-year time frame for complete convertibility by 1999–
2000.
RBI Headquarters inMumbai
On 8 December 2017, Surekha Marandi, Executive Director (ED) of Reserve Bank of India,
said RBI will open an office in the north-eastern state of Arunachal Pradesh.

24. IX. Functions: -
The central bank of any country executes many functions such as overseeing monetary
policy, issuing currency, managing foreign exchange, working as a bank for government and
as a banker of scheduled commercial banks. It also works for overall economic growth of the
country. The preamble of the Reserve Bank of India describes its main functions 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.
ReserveBank of India regionaloffice,
Delhi entrancewith theYakshini sculpturedepicting "Prosperity through agriculture

25. Financial supervision: -
The regional office of RBI (right) in front of GPO (left) at Dalhousie Square, Kolkata.
The primary objective of RBI is to undertake consolidated supervision of the financial sector
comprising commercial banks, financial institutions, and non-banking finance companies.
The board is constituted by co-opting four directors from the Central
Board as members for a term of two years and is chaired by the governor. The deputy
governors of the reserve bank are ex-officio members. One deputy governor, usually the
deputy governor in charge of banking regulation and supervision, is nominated as the vice-
chairman of the board. The board is required to meet normally once every month. It
considers inspection reports and other supervisory issues placed before it by the supervisory
departments.
BFS through the Audit Sub-Committee also aims at upgrading the quality of
the statutory audit and internal audit functions in banks and financial institutions. The audit
subcommittee includes deputy governor as the chairman and two directors of the Central
Board as members. The BFS oversees the functioning of the Department of Banking
Supervision (DBS), the Department of Non-Banking Supervision (DNBS) and the Financial
Institutions Division (FID) and gives directions on the regulatory and supervisory issues.

26. Regulator and supervisor of the financial system: -
The institution is also the regulator and supervisor of the financial
system and prescribes broad parameters of banking operations within which the country's
banking and financial systemfunctions. Its objectives are to maintain public confidence in
the system, protect depositors' interest and provide cost-effective banking services to the
public. The Banking Ombudsman Scheme has been formulated by the Reserve Bank of India
(RBI) for effective addressing of complaints by bank customers. The RBI controls the
monetary supply, monitors economic indicators like the gross domestic product and has to
decide the design of the rupee banknotes as well as coins.
Regulator and supervisor of the payment and settlement systems: -
Payment and settlement systems play an important role in
improving overall economic efficiency. The Payment and Settlement Systems Act of 2007
(PSS Act) [60] gives the Reserve Bank oversight authority, including regulation and
supervision, for the payment and settlement systems in the country. In this role, the RBI
focuses on the development and functioning of safe, secure and efficient payment and
settlement mechanisms. Two payment systems National Electronic Fund Transfer (NEFT)
and Real-Time Gross Settlement (RTGS) allow individuals, companies and firms to transfer
funds from one bank to another. These facilities can only be used for transferring money
within the country.
NEFT operates on a Deferred net settlement (DNS) basis and
settles transactions in batches. The settlement takes place for all transactions received until
a particular cut-off time. It operates in hourly batches – there are twelve settlements from 8
am to 7 pm on weekdays and six between 8 am and 1 pm on Saturdays. Any transaction
initiated after the designated time would have to wait until the next settlement time. In
RTGS, transactions are processed continuously, all through the business hours. RBI's
settlement time is 9 am to 4:30 pm on weekdays and 9 am to 2 pm on Saturdays.

27. Banker and debt manager to government: -
Just as individuals need a bank to carry out their financial
transactions effectively and efficiently, governments also need a bank to carry out their
financial transactions. The RBI serves this purpose for the Government of India (GoI). As a
banker to the Government of India, the RBI maintains its accounts, receive payments into
and make payments out of these accounts. The RBI also helps the GoI to raise money from
the public via issuing bonds and government-approved securities. In Sep 2019, a decision at
RBI directors meet was taken to change the RBI financial accounting year to March–April to
align itself with the central government calendar instead of the current June–July year.
RBI issue taxable bonds for investments. From 1 July 2020, RBI is
offering Floating Rate Savings Bonds, 2020 (Taxable) – FRSB 2020 (T). The interest on the
bonds is payable semi-annually on 1 Jan and 1 July every year. The coupon on 1 January
2021 shall be paid at 7.15%. The Interest rate for next half-year will be reset every six
months, the first reset being on 1 January 2021. There is no option to pay interest on
cumulative basis.
Managing foreign exchange: -
The central bank manages to reach different goals of the Foreign
Exchange Management Act, 1999. Their objective is to facilitate external trade and
payment and promote orderly development and maintenance of foreign exchange market
in India.
With the 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 and the RBI has an important
role to play in regulating and managing this segment. The RBI manages forex and gold
reserves of the nation.
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.

28. Issue of currency: -
Other than the Government of India, the Reserve Bank of India is the sole body authorised
to issue banknotes in India.
The bank also destroys banknotes when they are not fit for circulation.
All the money issued by the central bank is its monetary liability, i.e., the central bank is
obliged to back the currency with assets of equal value, to enhance public confidence in
paper currency. The objectives are to issue
banknotes and give the public adequate supply of the same, to maintain the currency and
credit system of the country to utilise it in its best advantage, and to maintain the reserves
The RBI maintains the economic structure of the country so that it
can achieve the objective of price stability as well as economic development because both
objectives are diverse in themselves.

29. For the printing of notes, RBI uses four facilities:
The Security Printing and Minting Corporation of India Limited (SPMCIL), a wholly owned
company of the Government of India, has printing presses at Nashik, Maharashtra and
Dewas, Madhya Pradesh.
he Bhartiya Reserve Bank Note Mudran Private Limited (BRBNMPL), owned by the RBI,
has printing facilities in Mysore, Karnataka and Salboni, West Bengal.
For the minting of coins, SPMCIL has four mints at Mumbai, Noida,
Kolkata and Hyderabad for coin production.
Whilst coins are minted by, and ₹ 1 notes are issued by the
Government of India (GoI), the RBI works as an agent of GoI for the distribution and
handling of coins. RBI also works to prevent counterfeiting of currency by regularly
upgrading security features of currency.
The RBI is authorised to issue notes with face values of up to ₹ 10,000
and coins up to ₹ 1,000 rupees.
New ₹ 500 and ₹ 2,000 notes were been issued on 8 November 2016.
The old series of ₹ 1,000 and ₹ 500 notes were banned in 8 November 2016, and are no
longer in use.
Earlier ₹ 1,000 notes have been discarded by the RBI.

30. X. Bankers' bank: -
Reserve Bank of India also works as a central bank where
commercial banks are account holders and can deposit money. RBI maintains banking
accounts of all scheduled banks. [70] Commercial banks create credit. It is the duty of the
RBI to control the credit through the CRR, repo rate, and open market operations. As the
bankers' bank, the RBI facilitates the clearing of cheques between the commercial banks
and helps the inter-bank transfer of funds. It can grant financial accommodation to schedule
banks. It acts as the lender of the last resort by providing emergency advances to the banks.
Nagpur branch holds most of India's gold deposits.
Regulator of the Banking System: -
RBI has the responsibility of regulating the nation's financial
system. As a regulator and supervisor of the Indian banking systemit ensures financial
stability & public confidence in the banking system. RBI uses methods like On-site
inspections, off-site surveillance, scrutiny & periodic meetings to supervise new bank
licences, setting capital requirements and regulating interest rates in specific areas. RBI is
currently focused on implementing norms.

31. Detection of fake currency: -
To curb the counterfeit money problem in India, RBI has launched a
website to raise awareness among masses about fake banknotes in the market.
www.paisaboltahai.rbi.org.in provides information about identifying fake currency
On 22 January 2014; RBI gave a press release stating that after 31
March 2014, it will completely withdraw from circulation of all banknotes issued prior to
2005. From 1 April 2014, the public will be required to approach banks for exchanging these
notes. Banks will provide exchange facility for these notes until further communication. The
reserve bank has also clarified that the notes issued before 2005 will continue to be legal
tender. This would mean that banks are required to exchange the notes for their customers
as well as for non-customers. From 1 July 2014, however, to exchange more than 15 pieces
of '500 and '1000 notes, non-customers will have to furnish proof of identity and residence
as well as show Aadhar to the bank branch in which he/she wants to exchange the notes.
This move from the reserve bank is expected to unearth black money
held in cash. As the new currency notes have added increased security features, they would
help in curbing the menace of fake currency
Developmental role: -
The central bank has to perform a wide range of promotional functions to
support national objectives and industries. The RBI faces a lot of inter-sectoral and local
inflation-related problems. Some of these problems are results of the dominant part of the
public sector.
Key tools in this effort include Priority Sector Lending such as agriculture,
micro and small enterprises (MSE), housing and education. RBI work towards strengthening
and supporting small local banks and encourage banks to open branches in rural areas to
include large section of society in banking net

32. Related functions: -
The RBI is also a banker to the government and performs merchant
banking function for the central and the state governments. It also acts as their banker. The
National Housing Bank (NHB) was established in 1988 to promote private real estate
acquisition. The institution maintains banking accounts of all scheduled banks, too. RBI on 7
August 2012 said that Indian banking system is resilient enough to face the stress caused by
the drought-like situation because of poor monsoon this year
Custodian to foreign exchange
The Reserve Bank has custody of the country's reserves of
international currency, and this enables the Reserve Bank to deal with crisis connected with
adverse balance of payments position.
CSD for G-Sec (Government Securities)
Public Debt Office (PDO) acts as CSD (Central Securities Depository) for G-Sec.
MIFOR (Mumbai Interbank Forward Outright Rate)
With LIBOR cessation in 2021, RBI is set to replace MIFOR with a
new benchmark. MIFOR has LIBOR as one of the components and used in interest rate swap
(IRS) markets.

33. XI. 2016 Demonetisation: -
On 8 November 2016, the Government of India announced the demonetisation of all ₹ 500
and ₹ 1,000 banknotes of the Mahatma Gandhi Series on the recommendation of the
Reserve Bank of India (RBI). The government claimed that the action would curtail the
shadow economy and crack down on the use of illicit and counterfeit cash to fund illegal
activity and terrorism.
The Reserve Bank of India laid down a detailed procedure for the exchange of the
demonetised banknotes with new ₹ 500 and ₹ 2,000 banknotes of the Mahatma Gandhi
New Series and ₹ 100 banknotes of the preceding Mahatma Gandhi Series. The key points
were:
People gathered at ATM of
Axis Bank in Mehsana,
Gujarat to withdraw cash
following deposit of
demonetised currency notes
in bank on 15 November
2016
Long queuein front of SBI
ATM at Paravoornearthe
city of Kollam in Kerala, 19
November 2016.

34. Citizens had until 30 December 2016 to tender their old banknotes at any office of the RBI or any bank
branch and credit the value into their respective bank accounts.
Cash withdrawals from bank accounts were restricted to ₹10,000 (US$140) per day and
₹20,000 (US$280) per week per account from 10 to 13 November 2016. This limit was
increased to ₹24,000 (US$340) per week from 14 November.
For immediate cash needs, the old banknotes could be exchanged for the new ₹500 and
₹2,000 banknotes as well as ₹100 banknotes over the counter of bank branches by filling up
a requisition form along with a valid ID proof. It was announced that this facility would be
available until 30 December 2016.
Initially, the limit was fixed at ₹4,000 (US$56) per person from 8 to 13 November 2016. This
limit was increased to ₹4,500 (US$63) per person from 14 to 17 November 2016
The limit was reduced to ₹2,000 (US$28) per person from 18 November 2016
All exchange of banknotes was abruptly stopped from 25 November 2016
Initially, all ATMs were dispensing banknotes of only ₹ 50 and ₹100 denominations and cash
withdrawals from ATMs were restricted to ₹2,000 (US$28) per day. [83] From 14 November
onwards, ATMs were recalibrated to dispense new ₹500 and ₹2,000 notes and to allow a
maximum withdrawal of ₹2,500 (US$35) per day, while other ATMs dispensing banknotes of
only ₹50 and ₹100 denominations will allow a maximum withdrawal of ₹2,000 (US$28) per
day
However, exceptions were given to petrol, CNG and gas stations,
government hospitals, railway and airline booking counters, state-government recognised
dairies and ration stores, and crematoriums to accept the old ₹500 and ₹1,000 banknotes
until 11 November 2016, which was later extended to 14 November 2016 and once again to
24 November 2016.International airports were also instructed to facilitate an exchange of
notes amounting to a total value of ₹5,000 (US$70) for foreign tourists and outbound
passengers.
Under the revised guidelines issued on 17 November 2016,
families were allowed to withdraw ₹250,000 (US$3,500) for wedding expenses from one
account provided it was KYC compliant. The rules were also changed for farmers who are
permitted to withdraw ₹25,000 (US$350) per week from their accounts against crop loan.

35. Cash crunch and demerits: -
The scarcity of cash due to demonetisation led to chaos, and
most people holding old banknotes faced difficulties exchanging them due to endless lines
outside banks and ATMs across India, which became a daily routine for millions of people
waiting to deposit or exchange the ₹500 and ₹1,000 banknotes since 9 November.
ATMs were running out of cash after a few hours of being functional, and around half the
ATMs in the country were non-functional. [89] Sporadic violence was reported in New Delhi,
but there were no reports of any grievous injury, [92] people attacked bank premises and
ATMs, and a ration shop was looted in Madhya Pradesh after the shop owner refused to
accept ₹500 banknotes.
Policy rates and reserve ratios
Repo rate
Repo (repurchase) rate also known as the benchmark
interest rate is the rate at which the RBI lends money to the commercial banks for a short-
term (a maximum of 90 days). When the repo rate increases, borrowing from RBI becomes
more expensive. If RBI wants to make it more expensive for the banks to borrow money, it
increases the repo rate similarly, if it wants to make it cheaper for banks to borrow money it
reduces the repo rate. If the repo rate is increased, banks can't carry out their business at a
profit whereas the very opposite happens when the repo rate is cut down. Generally, repo
rates are cut down whenever the country needs to progress in banking and economy.
If banks want to borrow money (for short term, usually
overnight) from RBI then banks have to charge this interest rate. Banks have to pledge
government securities as collateral. This kind of deal happens through a repurchases
agreement. If a bank wants to borrow, it has to provide government securities at least
worth ₹ 1 billion (could be more because of margin requirement which is 5%–10% of loan
amount) and agree to repurchase them at ₹1.07 billion (US$15 million) at the end of
borrowing period. So, the bank has paid ₹65 million (US$910,000) as interest. This is the
reason it is called repo rate.

36. The government securities which are provided by banks as
collateral cannot come from SLR quota (otherwise the SLR will go below 19.5% of NDTL and
attract penalties)
To curb inflation, the RBI increases repo rate which
will make borrowing costs for banks. Banks will pass this increased cost to their customers
which make borrowing costly in the whole economy. Fewer people will apply for loans and
aggregate demand will be reduced. This will result in inflation coming down. The RBI does
the opposite to fight deflation. When the RBI reduces the repo rate, banks are not legally
required to reduce their own base rate.
The present repo rate is 4%
Reverse repo rate (RRR): -
As the name suggest, reverse repo rate is just the opposite of repo rate.
Reverse repo rate is the short-term borrowing rate in which commercial bank Park their
surplus in RBI the reserve bank uses this tool when it feels there is too much money floating
in the banking system. An increase in the reverse repo rate means that the banks will get a
higher rate of interest from RBI. As a result, banks prefer to lend their money to RBI which is
always safe instead of lending it to others (people, companies, etc.) which is always risky.
Repo rate signifies the rate at which liquidity is injected into the
banking system by RBI, whereas reverse repo rate signifies the rate at which the central
bank absorbs liquidity from the banks. Currently, reverse repo rate is 3.35%

37. Statutory liquidity ratio (SLR): -
Apart from the CRR, banks are required to maintain liquid
assets in the form of gold, cash and approved securities. Higher liquidity ratio forces
commercial banks to maintain a larger proportion of their resources in liquid form and thus
reduces their capacity to grant loans and advances, thus it is an anti-inflationary impact. A
higher liquidity ratio diverts the bank funds from loans and advances to investment in
government and approved securities.
In well-developed economies, central banks use open market
operations—buying and selling of eligible securities by the central bank in the money
market—to influence the volume of cash reserves with commercial banks and thus
influence the volume of loans and advances they can make to the commercial and industrial
sectors. In the open money market, government securities are traded at market-related
rates of interest. The RBI is resorting increasing to open market operations in recent years.
Generally, the RBI uses
1. Minimum margins for lending against specific securities.
2. A ceiling on the amounts of credit for certain purposes.
3. The discriminatory rate of interest charged on certain types of advances.
Direct credit controls in India are of three types:
1. Part of the interest rate structure, i.e., on small savings and provident funds, are
administratively set.
2. Banks are mandatory required to keep 18% of their NDTL (net demand and time
liabilities) in the form of liquid assets.
3. Banks are required to lend to the priority sectors to the extent of 40% of their advances.
The share of net demand and time liabilities that banks must maintain in safe and liquid
assets, such as government securities, cash, and gold. Here it would be pertinent to mention
the gold swap of July 2014 the present SLR is 18.00%.

38. XII. Bank rate: -
Bank rate is defined in Section 49 of the RBI Act of
1934 as the 'standard rate at which RBI is prepared to buy or rediscount bills of exchange or
other commercial papers eligible for purchase'. When banks want to borrow long term
funds from the RBI, it is the interest rate which the RBI charges to them. It is currently set to
4.25. The bank rate is not used to control money supply, but penal rates continue to be
linked to the bank rate. If a bank fails to meet SLR or CRR requirements then the RBI will
impose a penalty of 300 basis points above bank rate.
Current exchange rate: -
RBI Reference Rate
 INR / 1 USD: 64.0958
 INR / 1 Euro: 75.5241
 INR / 100 Jap. YEN: 57.1300
 INR / 1 Pound Sterling: 86.1319
RBI Rates: -
Policy Rates
 Repo Rate: 6.00%  Reverse Repo Rate: 5.75%
 Marginal Standing Facility Rate: 6.25%  Bank Rate: 6.25%
Lending / Deposit Rates
 Base Rate: 8.85% - 9.45%  MCLR (Overnight): 7.65% - 8.05%
 Savings Deposit Rate: 3.50% - 4.00%  Term Deposit Rate > 1 Year: 6.00% - 6.75%
Reserve Ratios
 CRR: 4%  SLR: 19.5%
Government Securities Market
 6.79% GS 2027:7.1351%  91-day T-bills: 6.1495%*
 182-day T-bills: 6.3092%*  364-day T-bills: 6.3551%*

39. Liquidity adjustment facility (LAF): -
Liquidity adjustment facility was introduced in 2000. LAF is a
facility provided by the Reserve Bank of India to scheduled commercial banks to avail of
liquidity in case of need or to park excess funds with the RBI on an overnight basis against
the collateral of government securities.
RBI accepts applications for a minimum amount of ₹5 crore (US$700,000) and in multiples
of ₹ 50 million thereafter
Cash reserve ratio (CRR): -
CRR refers to the ratio of bank's cash reserve balances with
RBI with reference to the bank's net demand and time liabilities to ensure the liquidity and
solvency of the scheduled banks. The share of net demand and time liabilities that banks
must maintain as cash with the RBI. The RBI has set CRR at 3%. A 1% change in CRR affects
the economy by 1,37,000 crores. An increase draws this amount from the economy, while a
decrease injects this amount into the economy. So, if a bank has ₹2 billion (US$28 million) of
NDTL then it has to keep ₹80 million (US$1.1 million) in cash with RBI. RBI pays no interest
on CRR.
Let's assume the economy is showing inflationary trends and
the RBI wants to control this situation by adjusting SLR and CRR. If the RBI increases SLR to
50% and CRR to 20% then bank will be left only with ₹600 million (US$8.4 million) for
operations. Now it will be very difficult for the bank to maintain profitability with such a
small amount of capital. The bank will be left with no choice but to raise its interest rate
which will make borrowing by its customers more costly. This will in turn reduce the overall
demand and hence prices will eventually come down.

40. Open market operation (OMO): -
Open market operation is the activity of buying and selling of
government securities in open market to control the supply of money in banking system.
When there is excess supply of money, central bank sells government securities thereby
sucking out excess liquidity. Similarly, when liquidity is tight, RBI will buy government
securities and thereby inject money supply into the economy.
On 23 March 2020, Reserve Bank of India infuse Rs 1 trillion
(short scale) through term repo auction, a massive OMOs (open market operations)
purchase of government securities. The Reserve Bank is monitoring the financial market
conditions and liquidity situation in the economy as COVID-19 pandemic in India fears of a
recession
Marginal standing facility (MSF): -
This scheme was introduced in May 2011 and all the scheduled
commercial bank can participate in this scheme. Banks can borrow up to 2.5% [115] per cent
of their respective net demand and time liabilities. The RBI receives application under this
facility for a minimum amount of Rs. 10 million and in multiples of Rs. 10 million thereafter.
The important difference from repo rate is that bank can pledge
government securities from its SLR quota (up to one per cent). So even if SLR goes below
20.5%[116] by pledging SLR quota securities under MSF, the bank will not have to pay any
penalty. The marginal standing facility rate currently stands at 4.25%

41. Qualitative tools: -
Margin requirements: -
Loan-to-value (LTV) is the ratio of loan amount to the actual value of asset purchased
The RBI regulates this ratio so as to control the amount a bank can lend
to its customers. For example, an individual wants to buy a car using borrowed money and
the car's value is ₹10 lakh (US$14,000). If the LTV is set to 70%, he can borrow a maximum
of ₹700,000 (US$9,800).
The RBI can decrease or increase to curb inflation or deflation respectively
Selective credit control: -
Under this measure, the RBI can specifically instruct banks
not to give loans to traders of certain commodities e.g., sugar, edible oil, etc. This prevents
the speculation/hoarding of commodities using money borrowed from banks.
Moral suasion: -
Under this measure, the RBI try to persuade banks through meetings,
conferences, media statements to do specific things under certain economic trends. For
example, when the RBI reduces repo rate, it asks banks to reduce their base rate as well.
Another example of this measure is to ask banks to reduce their non-performing assets.

42. Limitations of monetary policy: -
In developing countries like India, monetary policy fails to show immediate or no results
because the following factors:
People do not employ alternative investment options. A large section of society still
depends on saving accounts, fixed deposits, Public Provident Fund for investment.
Commercial banks have large deposits. RBI is not the main or even prominent money
supplier for these banks. So whatever monetary action central bank takes has little or late
impact on the economy.
Many people in rural areas are out of the banking net and whatever the RBI does, has no
impact on their financial activities.
Monsoon uncertainty adversely affects food production and thereby cause food inflation.
Monetary policy has no impact on food inflation.

43. RTGS and NEFT transactions' charges removal: -
RBI decided to remove charges on RTGS (Real Time Gross Settlement
System) and NEFT (National Electronic Funds Transfer
Regulation of variable pay of bank management: -
In November, RBI introduced a set of draft guidelines to
regulate the variable pay of CEOs and top management at private banks. The new rules are
in line with the Sound Compensation Practices issued by the Financial Stability Board in April
2009. The rules will apply to CEOs, wholetime directors, and material risk takers at private
banks, small finance banks and domestic executives of foreign banks. As per the new rules
at least 50% of the pay should be based on individual, unit, business and firm wide
performance evaluation which will be capped at 300% of the fixed pay. In case of variable
pay above 200% then at least 50% of this amount should be via non-cash instruments. Share
linked instruments are included as part of variable pay. Guaranteed bonus should not be
part of the compensation package except in case of joining bonus. The RBI also has put
clauses in place to clawback/malus in case of deteriorating performance. The bank shall
identify a representative set of conditions when the recovery clause for clawback /malus
can be invoked

44. Publications: -
A report titled "Trend and Progress of Banking in India" is published
annually, as required by the Banking Regulation Act, 1949. The report sums up trends and
developments throughout the financial sector. [120] Starting in April 2014, the Reserve Bank
of India publishes bi-monthly policy updates.
Committees set up by RBI: -
KV Kamath Committee
In August 2020, RBI set up a five membered Committee
under the chairmanship of KV Kamath, the former CEO of the ICICI bank in order to make
recommendations on the norm for resolution of COVID-19 related stressed loans. In order
to restructure the loans up to 15,000 crores the expert Committee was tasked with coming
up with a sector specific plan for successful resolution of the stressed loans. The parameters
were to include aspects related to leverage, liquidity and debt serviceability.

45. 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 systemsince its inception. Some
of the major development functions of the RBI are maintained below.
1. Development of the Financial System: The financial systemcomprises 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.
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.

46. 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.

47. XIII. 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 is 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.

48. 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:
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.

49. 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
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

50.  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
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

51. 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 centre’s: 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.
 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).

52. XIV. 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

53. XV. 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 aimat 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.
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

54. 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
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.

55. 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.
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.

56. 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

57. XVI. 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 (helpcsd@rbi.org.in) 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)
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.

58. 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.

59. XVII. 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.

60. XVIII. Bibliography
1. 'The Gazetteer of India Volume II - History and Culture', Edited by Dr.P.N. Chopra,
Ministry of Education and Social Welfare, 1973.
2. 'Indigenous Banking in Ancient and Medieval India', Brijkishore Bhargave, 1935.
3. 'Commercial Banks in India: Profitability, Growth and Development', Kishore C.Raut &
Santosh K.Das, 1996.
4. 'The Evolution of the State Bank of India', A.K.Bagchi, 1987.
5. 'A Study of the Indian Money Market', Bimal C.Ghose, 1943.
6. Report of the 'Working Group to consider feasibility of introducing MICR/OCR Technology
for Cheque Processing', Reserve Bank of India, 1982.
7. Report of the 'Committee on Mechanisation in the Banking Industry', Reserve Bank of
India, 1984.
8. Report of the 'Committees on Communication Network for Banks and SWIFT
implementation', Reserve Bank of India, 1987.
9. Report of the 'Committee on Computerisation in Banks', Reserve Bank of India, 1988.
10. Report of the 'Committee on Technology Issues relating to Payments System, Cheque
Clearing and Securities Settlement in the Banking Industry', Reserve Bank of India, 1994
. 11. Report of the 'Committee for proposing Legislation on Electronic Funds Transfer and
other Electronic Payments', Reserve Bank of India, 1995.
12. 'Uniform Regulations and Rules for Bankers' Clearing Houses', Reserve Bank of India,
1986.
13. 'Payment Systems in the Group of Ten Countries', Bank for International Settlements,
1993.
14. Reports on Currency and Finance, 1970 - 1997, Reserve Bank of India.
15. Banking Statistics Quarterly Review, 1997, Reserve Bank of India.