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Reserve Bank of India
Reserve Bank of India

History :-

♦ RBI was established on April 1, 1935 under RBI Act, 1934 is central bank of the country. It was nationalized in Jan 01, 1949. RBI's central office was initially established in Calcutta but is permanently moved to Mumbai in 1937.

♦ It was established on the recomendation of Hilton Young Commission.

♦ Osborne Smith was the first governor of RBI.

♦ CD Deshmukh was the first Indian governer of RBI.

Administratio :-

♦ The are 24 member board in central board of directors in RBI.

One Governer :-

♦ Shaktikanta Das (25)

♦ These are 4 Deputy Governors RBI.

  1. BP Kanungo
  2. N. S. Viswanathan
  3. Mahesh Kumar Jain

♦ Two Govt. offical from ministry of finance appointed by Central Govt.

♦ Ten directors appointed by central Govt to give representation of different.

Head office of RBI : -

♦ Mumbai

Zonal office :-

  1. Mumbai
  2. Kolkata
  3. Chennai
  4. New Delhi

♦ Four director appointed by central Govt. to give representation of their respective Zone.

Note :-

There are 19 reasonical offices and 10 Sub reasonical offices of Rbi in India.

Functions of RBI
  1. To issue currency note (except Rs 1 note)
  2. Banker's Bank
  3. Govt's Bank
  4. Custodion of forex (foreign exchange)reserve
  5. Lender of the last resort
  6. Credit Control

To issue currency note :-

♦ RBI is the sole authority in India to issue currency notes under signatures of Governor. The Reserve Bank India is called "Bank Notes. The One Rupees notes and coins are issued by the Central Govt. and signed by Finance Secretary.

♦ Method for issuing currency notes - MRS (Minimum Reserve Method (1957).

♦ Min. Reserve = 200cr. Out of which,

♦ 115 cr = Should be in gold

♦ 85 cr = Foreign Currencies, (including SDR)

♦ Proportional Reserve System (PRS)

♦ Reserve = 400cr. Out of which,

♦ 230 cr = Should be in gold

♦ 170 cr = Foreign Currencies

♦ Coins(Govt)

Four mints :-

  1. Mumbai
  2. Kolkata
  3. Hydrabad
  4. Noida

♦ Maximum denomination value of currency note :- 10000

♦ Maximum denomination value of coin :- 1000

Banker's Bank

♦ The RBI has extensive power to control and supervise commercial banking system under the RBI Act, 19934 and the Banking Regulation Act, 1949.

  • The Banks are required to maintain a minimum of Cash Reserve Ratio (CRR) with RBI.
  • The RBI provides financial assistance to scheduled banks and state cooperative banks.
  • Enables banks to maintain their accounts with RBI  for statutory reserve requirements and maintenance of transaction balances.

 

Govt,'s Bank

♦ RBI lends money to central Govt./ State Govt. for short term (minimum 1 years), it is called ways and mean advances.

 

Custodian of Forex (foreign exchange) reserve :-

♦ RBI keeps all foregin exchange reserves in its custody. (china = 3200bd) It is also authorised to do currency exchange CB's are doing currency exchange activity on be half. (India = 350 bd)

Lenders of the last resort:

 ♦ When commercial banks unable to find money from other sources for long term then RBI lends to them (CB's) for long term at bank rate then RBI is called lender of the last resort.

♦ Credit Creation

  1. Customer deposit
  2. Shares
Credit Control

Two types of Credit Control

A. Quantitative

B. Qualitative

Tools of quantitative credit control-

(i) Repo rate

(ii) Reverse Repo rate

(iii) Cash Reserve Ratio

(iv) Statutory Liquidity Ratio

(v) Open Market Operation

(vi) Marginal Standing Facility

(vii) Bank Rate

(i) Repo rate - The rate at which commercial banks borrow money from Reserve Bank of India is called Repo rate. It is for short term  (2 to 14 days).

(ii) Reverse Repo rate - Commercial Bank park (deposit) their extra (Surplus) money to RBI and RBI gives some rate of interest on that parked money and this rate is known as Reserve Repo Rate.(2 to 14 days)

Cash Reserve Ratio :-

                                   

(iii) Cash Reserve Ratio - Every commercial bank has to maintain certain percentage of its total deposit in from of cash only with Reserve Bank of India is called Cash Reserve Ratio.

(iv) Statutory Liquidity Ratio - Every CB, has to maintain certain percentage of its total deposit in form of cash, gold and govt. securities ( Treasury Bill) with itself is called Statutory Liquidity Ratio.

(v) Open Market Operation - It means the buying and selling of the govt. securities in the open market (banks) in order to expand or contract the amount of money in the banking system. Purchases means to inject money into banking system, while sells of the securities do the opposite.

(vi) Marginal Standing Facility - Every commercial Bank can borrow money from RBI upto two percentage of its total deposits (NDTL) for over night or one day is called MSF. The rate charged on MSF is called Marginal Standing Facility.2

        



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