rbi history-i 103

8/6/2019 Rbi History-i 103

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Introduction

� The Objective of any Central Bank is tostabilize the monitory unit

± It has monopoly of note issuing

± It is not a profit center

± It will not compete with the comercial banks

� It is a Bank of Issue

� It is a Banker to the government� Custodians of Nations Credit

� Controller of Credit



History

� Established under RBI Account of 1934� Started functioning from April 1, 1935

� It was nationalized wef January , 1, 1949

� Share capital Rs.5.00 Cr of Rs.100.00each

� Government held nominal shares of Rs.2.22 lac

� At the time of Nationalisation Govt. paidRs.118.58ps per share of Rs.10.00



Events

� 1926Royal Commission on Indian Currency(Hilton Young Commission) recommends theestablishment of a central bank to be called the'Reserve Bank of India'.

� 1931Indian Central Banking Enquiry Committeerevives the issue of the establishment of theReserve Bank of India as the Central Bank for India.

� 5 March 1934Reserve Bank of India Act, 1934,(II of 1934) constitutes the statutory basis onwhich the Bank is established



Events� 1 Apr 1935 Reserve Bank of India commences

operations.

� Sir Osborne Smith the first Governor of the Bank.

� The Bank was constituted as a shareholders' bank.

� 5 Jul 1935 Scheduled banks required to maintain the

Cash Reserve Ratio, i.e., hold cash balances with theRBI equivalent to 5% of their Demand Liabilities and 2%of their Time Liabilities.

� Oct 1935 London Office of the Reserve Bank set up.This was closed on September 30, 1963.

� 1 Nov 1936Resignation of the first Governor, Sir Osborne Smith, wef July 1, 1937.

� 15 Jan 1937Indian Companies (Amendment) Act, 1936devotes a separate chapter exclusively to Banks.



RBI SH ARE CERTIFICATE



History

� The Bank began its operations by taking over ± From the Government the functions so far being performed by theController of Currency and

± From the Imperial Bank of India, the management of Governmentaccounts and public debt.

± The existing currency offices at Calcutta, Bombay, Madras, Rangoon,Karachi, Lahore and Cawnpore (Kanpur) became branches of the Issue

Department. ± Offices of the Banking Department were established in Calcutta,Bombay, Madras, Delhi and Rangoon.

� Burma (Myanmar) seceded from the Indian Union in 1937 but theReserve Bank continued to act as the Central Bank for Burma tillJapanese Occupation of Burma and

� later upto April, 1947. After the partition of India, the Reserve Bank

served as the central bank of Pakistan upto June 1948 when theState Bank of Pakistan commenced operations.

� The Bank, which was originally set up as a shareholder's bank, wasnationalised in 1949.



Management

� Central Board of Directors

� 20 members

� 1 Governor

� 4 Deputy Governors

� 1 Government Official from FM

� 10 Directors nominated by GOI

� 4 Directors nominated each one from the LocalBoard

� The Directors hold the office for 4 years



The Main functions of Reserve Bank of India

� Maintain financial stability and enable the growth of sound Financial Institutions.

� Maintain monetary stability for the business andeconomic life towards growth and proper functioning of amixed economic system in the country.

� Maintain a stable payments and currency system andfacilitate safe and efficient execution of financialtransactions.

� Promote a stable financial structure of markets andsystems and help it to operate with optimum efficiency

� Regulate the money and credit supply in the economy tohelp maintain price stability to a reasonable extent.

� Ensure credit allocation in line with national economicpriorities



List of Directors

� Dr. Y.V.Reddy ± Governor

� Dr. Rakesh Mohan ± Deputy Governor

� Shri. V.Leeladhar ± Deputy Governor � Smt.Shyamala Gopinath ± Deputy Governor

� Smt. Usha Thorat ± Deputy Governor

� Functions : General superintendence anddirection of the Bank's affairs



The Main functions of Reserve Bank of India

� Note Issuing Authority

� Banker to the Government

� Bankers Banker � Collection and Furnishing Credit Information

� Administration of Currency Chests



Note Issuing

� The assets of the Issue Department againstwhich bank notes are issued are«.

� Gold coins and Bullions

� Foreign Securities

� Rupee Coins� Government of India Rupee Securities

� The Bills of Exchange and Promissory Notespayable in India , which are eligible for purchaseby the bank

� Under Sec22 of RBI act

� Minimum Reserve System since 1957

� Rs.200 Crore of which Rs.115 crore in gold



Bankers to the Government

� Bankers to the Government ± State in every country is the largest receiver of revenue

± Largest Borrower

± Govt. expenditure has got the disturbing influence on theeconomy

� Keeps Financial Accounts ± Tax accounts

± Expenditure Accounts

± Public Debt Accounts

� Acts as Financial Agent ± Floating of Debt on Behalf of Govt

± Temporary Advances

� Provides Foreign Exchange

� Executes Monitory Policy



Bankers Bank

� A Custodian of Cash Reserves ± Minimum Reserve of 3%

± Centralised Reserve

± Liquidity

± Mobility

± Elasticity and Liquidity of Banking system ± Settlement of inter-bank Indebtedness

� A Bank of Clearance

� A Bank of Rediscount

� Lender of last resort

� Custodian of Forex Reserves

� Controller of Credit



Banking Supervision

� Organisation of the Supervision Function� Department of Banking Supervision (DBS) to Board of

Financial Supervision

� Department of Non-Banking Supervision (DNBS)

� On / off site inspections of Banks / FI / NBFC

� Supervision of overseas branches of Indian banks

� Uniform guidelines on Write-off/ compromise settlements

� Checklist for Inspecting Officers

� Study of large value bank frauds

� Nostro Accounts- Reconciliation

� Non- SLR Investments

� Transparency and Disclosure

� Internal controls and housekeeping in banks



RBI Monetary Policy

� Monitory Policy refers to the policy of the

central bank to control money supply , credit

and inflation in economy

� Monetary policy is a part of overall economicpolicy

� to accelerate economic development to raise

national income and standard of living� to control inflationary pressures in the

economy



RBI¶s Credit Control Measures

� RBI has various tools to use to maintain

monetary stability

� Quantitative Controls ± to regulate thevolume of total credit

� Qualitative (Selective Credit) Controls ± to

regulate the flow of credit to various uses

and purposes



Controls

� Quantitative� Bank Rate - 6% (at present)

� Open Market Operations ± Buying and Selling of Securities

� CRR� SLR

� REPO ± 7.75% (at present)

� Rev REPO - 6% (at present)

� Qualitative

� Selective Credit Control



CRR & SLR

PERIOD CRR PERIOD SLR

1960 3% Before 1972 25%

1973 June 5% 1972 30%

1973 Sep 7% 1973 32%

1989 July 15% 1988 Sep 38%

1993 May 14% 1990 Sep 38.%



Economic Development

� RBI ± Commercial Banks

� RBI ± Monetary Stability

� RBI ± Agriculture Credit� RBI ± Industrial Finance

� RBI ± Foreign Trading



Changing Scenario

� Financial Markets are more integrated

� Currencies are more volatile

� It can only try to control the physical money� The competitive pressure on banks

� Alternative delivery channels ± effect on

banks� Globalisation ± More market oriented

monitory policy



Autonomy of Central Bank

� Personnel Autonomy

� Financial Autonomy� Policy Autonomy



New Developments

� Market Stabilization Scheme (LAF)- 2004

� Benchmark PLR ± 2003� Availability of Credit ± Agrl ,SME

rbi history-i 103

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