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Reserve Bank of India Reserve Bank of India Act,1934Act,1934

Section:- 58 Last amended in 1997 to give proper

coverage to NBFC also. RBI established on 1st April 1935. RBI was nationalized w.e.f.1st January 1949. Previously Imperial Bank of India from SBI was conducting Central Bank’s functions – It was shareholder’s bank – taken over by Central Govt. – Paid up capital is Rs. 5 Cr. RBI’s Central Office is in Mumbai.

Management of RBI :-

By a Central Board of Directors with 4 local boards at Mumbai, Delhi, Kolkata & Chennai.One Governor ( Presently Dr. Subba Rao) provisions for - 4 - Dy. Governors and - 15 - other directors.

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Functions of RBI: - 3 Headings

(i) Supervisory & Regulatory(a)Monopoly of Note Issue (b) Control of Credit through monetary policy ( c) Exchange Control (d) Statutory Regulations (e) Bank of Central Clearance settlement & transfer.(ii) Promotional & Developmental(a)Banker to Govt. (b) Banker to Bankers ( c) Agriculture, Industrial & Export finance (d) Strengthening co-op structure (e) Collection of data & publication (f) Promotion & development of Trading Institutions.(iii) Refinance Operations & Lenders of the last resort.

MAJOR DUTIES OF CENTRAL MAJOR DUTIES OF CENTRAL BANK IN INDIABANK IN INDIA(1)Government’s Debt Manager(2)Monetary Policy Authority(3)Policy Maker(4)Prudential Regulator Of Banks &

Non Banking Financial Companies.

(5)Regulator Of Payment Mechanism In india

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Functions of RBI

(a)Issuance of Currency : Sec. 22 Sole agency to issue bank notes under signature of Governor Rs.2 to Rs. 10000 – Except one rupeenote signed by finance secretary or coins issued byCentral Govt.

Issue Dept.:- Responsible for issue fresh notes.Security – aggregate value of gold & foreign currency resources – not less than Rs.200 Cr. Of which gold not less than 115 Cr. (Sec.33) currency distributed with help of currency chests.

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(b) Banker To The Govt.(Sec.20 for Central Govt. /Sec.21(A) for State Govt.

(1)Transacts govt. business & manages public debt. (2)Advises Govt. on all monetary matters.(3)Provides Ways & Means advancesSec 17(5) – Temporary advances (O/D)extended by RBI to Central & State Govts. to bridge the interval between expenses & receipts – to provide support – purely temporary – 1% below Repo Rate (7.25 % minus 1%) – Central Govt. for 10 days –State Govt. for 14 days.

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( c) Banker’s Bank:-

Keep deposits of Commercial Banks & acts as lender of last resort – Sec.17(2) & 17(3) – banks to approach RBI for rediscounting, refinance etc. – Provides export refinance & liquidity Adjustment Facility – Repo Rate means Injecting Funds – Reverse Repo means absorbing Funds.

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(d) Controller of Banks Banks to obtain license from RBI – second schedule of RBI Act – Scheduled Banks – issues directions, carries inspection (onsite & off site) and exercises management control.

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(e) Controller of Credit (Sec.21 & 35A) Fix interest rate (incl. – Bank Rate) exercise selective credit control to control inflation & money supply for growth of economy & price stability – change in CRR, stipulation of margin on securities etc. are used – carries sales & purchase of securities known as open market operations – Quantitative & Qualitative Method.

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(f) Statutory Reserves

Banks also maintain certain percentage of their assets in liquid cash from under SLR / CRR requirementsSec.42(1):- All scheduled commercial bank (in second sch. of RBI) are required to keep certain minimum cash reserves with RBI (3% to 20%). Present CRR 4.00%.RRB also to maintain CRR as Sch.Com.Banks – of their net demand & time liabilities.

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(g) Collection of Information

Collects credit information (UnderSec.45(C) .Borrower enjoying credit limits upto Rs.10 Lacs on secured basis & Rs.5 Lacs on unsecured basis & share this information with other banks (Sec.45-D) – Obtains information on suit filed a/c’s & BSR returns Basic Statistical Returns.

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(h)Maintenance of External Value of Indian Currency – as well as internal value.

Foreign Exchange reserves are held by RBI – wide powers to regulate foreign exchange transactions under FEMA – Foreign Exchange Management Act.

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Board For Financial Supervision

Sec.58 of RBI Act w.e.f. 16th November1994. RBI Governor is ex-officer.Functions: Empanelment and selection of StatutoryAuditors for banks & exercise integratedSupervision over com. banks, F.I’s & NBFC’s & other Para banking financial institutions.Both on-site (through inspection) & off-site (through DSB returns) w.e.f.1st April 1996 submitted on quarterly basis.

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Sec.28: RBI can frame rules for refunding value of mutilated, soiled orimperfect notes.

Sec.29: Bank notes shall be exempted from stamp duty under Ind. Stamp Act.

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Sec.31: Prohibits any person or institution to issue notes payable to bearer on demand – currency notes.

Sec.45: Regulation of NBFC.

Sec.48: Exemption to RBI from paying Income Tax or Super Tax.

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Sec.49:- Announcement / Publish Bank Rate – Rate at which RBI is prepared to buy or rediscount bills of exchange or other Commercial papers eligible for purchase under the Act – Present Bank Rate is 10.25%

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What is Scheduled Bank ?

Sec.2(e) of RBI Act 1934 – whose name mentioned in 2nd schedule.(1)Paid up capital + Reserves not less than 5Lacs.(2)Affairs not conducted which jeopardize interest of depositors.(3)May be state Co-op Bank ,Co. defined under Companies Act 1956, institution notified by Central Govt. or any law in force in any place outside India. Any Bank not included in 2nd schedule of RBI is called Non - Scheduled Bank.

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A BIG THANK YOU TO ALL

B.J. VED