UNIVERSITY OF MUMBAI PROJECT ON
“75 YEARS OF RESERVE BANK OF INDIA” INDIA”
SUBMITTED BY
ANSARI AKBAR ALI MOHD. SHAMOON R0LL NO -03
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF BACHELOR OF MANAGEMENT STUDIES
UNDER THE GUIDANCE OF
PROF. VIKAS UBALE
PADMASHRI ANNASAHEB JADHAV BHARATIYA SAMAJ UNNATI MANDAL’S
B.N.N.COLLEGE, BHIWANDI. DIST. THANE – THANE – 421 421 305
PADMASHRI ANNASAHEB JADHAV BHARTIYA SAMAJ UNNATI MANDAL‘S
B.N.N. COLLEGE, BHIWANDI DIST. THANE-421302
CERTIFICATE This is Certify that, Ansari Akbar Ali (Roll No. 03) of Bachelor in Management Studies (Academic Year 2012-2013) 2012-2013) has successfully completed the project on, ―75 Years of Reserve Bank of India‖ in Partial Fulfillment of the requirement for the award of the Degree of the B.M.S.(Bachelor in Management Studies) of University of Mumbai.
I/C Principal
Prof. U.D. Kadam
______________
Course Co-Coordinator Co-Coordinator
Prof. Parbha Pardesi
______________
Project Guide
Prof. Vikas Ubale
______________ ______________
External Examiner
______________
______________
DECLARATION
I, Mr. Ansari Akbar Ali (Roll No. 03) of Bachelor in Management Studies, Studying in B. N. N. College, Bhiwandi, hereby declare that information contained in the project titled ―Reserve Bank of India‖ is true and correct to the best of my knowledge and belief.
(Ansari Akbar Ali) Name of the Students
ACKNOWLEDGEMENT
I am indebted to my project guide Prof. Vikas Ubale, for helping me out in the successful completion of my project Report on, ―75 Year of Reserve Bank of India‖ I am thankful to my other teacher for providing me information as and when required. I am extremely thankful to my family members for their constant support Last, but not the least, comes my friends who discussed with me the various issues in my project. Finally, I want to thank one all that helped me directly or indirectly for the project work.
( Ansari Akbar Ali) Name of the Student
Reserve
Bank Of India
RBI CentralOfficeBuilding,
Mumbai
RESER VE BANK OF INDIA www.rbi.org.in
INDEX SR.NO
1
TOPIC
Overview
PAGE NO.
5
2
Research Methodology
13
3
Review of Literature
23
4
Organisation and Structure
25
5
Main Activities
35
6
Research, Data and Knowledge Sharing
67
7
Addressing Current and Future Challenges
71
8
Customer Service: How Can We Help You
73
9
List of Abbreviations
74
10
The RBI Logo
88
11
Conclusion
90
12
Bibliography & References
91
13
Appendix
92
Overview Who We Are
The Reserve Bank Of India is the nation central bank--
Since 1935, when we began operation we have stood at the centre of India‘s financial system, with a fundamental commitment to maintaining the nation s monetary and financial ‘
stability.
From ensuring stability of inter est and exchange rates to providing liquidity and an adequate supply of currency and credit for the real sector; from ensuring bank penetration and safety of depositor ‘s funds to promoting and developing financial institutions and markets, the Reserve Bank plays a crucial role in the economy. Our decisions touch the daily life of all
Indians and help chart the country‘s current and futur e economic and financial cour se.
Over the years, our specific r oles and functions have evolved. However ,there have been certain
constants ,such as the integrity and professionalism with which the Reserve Bank discharges its man date.
RBI at a Glance �ManagedbyCentralBoardof Dir ector ector s ManagedbyCentralBoardof Dir �India‘smonetaryauthority smonetaryauthority �Supervisor of of financialsystem financialsystem �Issuer of curr ency of curr ency �Manager of foreignexchange r eserves of foreignexchange eserves �Bankeranddebtmanager togovernment togovernment �Supervisor of of paymentsystem �Banker to to banks �Developmentalfunctions Developmentalfunctions �Research,dataandknowledgesharing
Celebrating Our Platinum Jubilee 1935-2010
― As Reserve Bank of India commence Operations today I take the opportunity To--- express my confidencethat this great undertaking willcontribute largely to the economicwell being of India and…its people.
‖ - Excerpt from telegram sent by the to Osborne Smith, first governor of the Reserve Bank, 1935
Osborne Smith
The Reserve Bank : Tradition and Change The origin of the Reserve Bank can be traced to 1926, when the Royal Commission on Indian Currency and Finance — also also known as the Hilton-Young Commission — recommended recommended the creation of a central bankto separate the control of currency and credit from the government and to augment banking facilities throughout the country.The Reserve Bank of India Act of 1934 established the Reserve Bank as the banker to the central government and set in motional series of actions culminating in the start of operations in 1935. Since then, the Reserve Bank‘s role and functions have undergone numerous changes— as as the nature of the Indian economy has changed.
Today‘s RBI bears some resemblance to the original institution, although our mission has expanded along with our deepened, broadened and increasingly globalised economy.
Celebrating 75 years: 1935 :Operation begin on April 1
1949: Nationalisation of the Reserve Bank of India; Banking Regulation Act enacted.
1950:India Embarks on planed economic development. The Reserve Bank of India becomes active agent and participants.
1966:Cooperative Bank came under RBI Regulation.
1969: Nationalisation of 14 major commercial Bank (Six more bank nationalize in 1980)
1973:RBI strengthen exchange control by amendingForeign Exchange Regulation Act.
1974:Introduction of priority sector lending targets
1975:Regional Rural Bank Setup
1985:Financial market reforms begins with Sukhamoy Chakravaty and Vaghul Committee Report.
1991:India faces Balance of Payment crisis, pledges gold to shore up reserve. Rupee devalued.
1993:Exchange rate become market determined
1994:Board of Financial Supervision Setup.
Highlights
1997:Ad hoc treasury bill phased out ending automatic monetization.
1997:Regulation of Non-Banking Finance Companies Strengthened.
1998:Multiple indicator Approach for monetary policy adopted.
2000:Foreign Exchange Management Act replace FERA.
2002:Clearing Corporation of India Limited (CCIL) commences clearing and settlement in government securities.
2003:Fiscal Responsibility and Budget Management Act enacted.
2004:Transition to a full-fledged daily liquidity adjustment facility (LAF) completed. Market Stabilisation Scheme (MSS) introduced to sterilize capital flows.
2004:Real Time Gross Settlement System commences.
2005:Focus on financial inclusion and increasing the outreach of the banking sector .
2006:RBI empowered to regulate money, forex, G-sec and gold related securities market.
2007:RBI empowered to regulate Payment System.
2008/9:Pro-active efforts to minimize impacts of global financial crisis.
2002
2000
2005
2007
2006
2008/9
Review of Literature RBI must amend FEMA rules on FDI in retail: Supreme Court
New Delhi, Oct 15: The Foreign Exchange Management Act regulations should have been amended by the Reserve Bank of India before the Centre cleared 51 per cent FDI in multi-brand retail, the Supreme Court said today. The apex court made this observation while hearing a Public Interest Litigation that was filed by Advocate ML Sharma. He argued that retail trading is barred under the existing FEMA regulations. Attorney General GE Vahanvati admitted that the government had erred since the RBI had not effected any change in the regulations after 2008. The Supreme Court bench of Justice RM Lodha and Justice AR Dave then said that "it is an irregularity that is curable and as soon as amendment is brought, it would be cured." Stating that this irregularity is not enough to warrant a stay on the policy, the court emphasised emphasised that RBI must amend the rules without without delay. "This is a must before the policy is i s given a legal shape," the judges said. They demanded to know when the RBI will take the necessary steps. Vahanvati assured that he will ask the RBI governor to immediately amend the FEMA regulations. The court, however, rejected the petitioner's other contention that prior approval from the President or Parliament was needed for the Centre's notification on FDI in retail. "This assumption that the policy has to be in the name of the President is flawed and unfounded. The Constitution does not provide that the policy should be in the name of the President," President," the judges said.
Pointing out that Parliament does not look into int o policies, the court said that a policy can be deemed as incorrect only if the relevant notification is ultra vires of the law. The court has given the government time till the next hearing on Nov 5 to amend the FEMA regulations. It is to be noted that the Trinamool Congress walked out of the ruling coalition just days after the UPA allowed 51 per cent FDI in retail. The exit of the Mamata Banerjee-led party meant that the government was reduced to a minority.
India can recover faster than China: RBI deputy governor
Beijing, Sep 30: India can recover from global economic slowdown faster than China as the economy is driven by domestic consumption, but the country needs to "get its act together" for this to happen, Reserve Bank Deputy Governor Anand Sinha said here today. Speaking to PTI, Sinha also said "confidence issues like the general pessimism and not-so-good-feel factor also affected the economy". "Both economies (India and China) are affected by the global economic slowdown but India being a domestic consumption driven economy could recover faster," he said. "But for that we have to get our act together. Being dependent on domestic economy, we would be less affected by export sector performance. So, that could be our strength. But we have to get our act together and whatever weaknesses we have to get around them," he said responding to a question. When asked what should be done by India to arrest the slide in growth, he said, "We have to get hold of inflation. If we get hold of it, growth will have better prospect. Once growth takes off things would be better."
Retail inflation in India is in double digits at 10.03 per cent. RBI had been repeatedly saying that focus of its monetary policy is on controlling inflation. "We must realise that even if we put our domestic situation on sound footing, what happens in the rest of the world, we cannot be totally immune to that. So you will not have the same growth rate as we would have had if the world economy is in good shape." Sinha also blamed "not so good feel factor", besides the global economic slowdown, for the current domestic situation. "One reason is global economic slowdown. That has affected us is the trade channel. We are not export dependent but exports suffered due to global economic crisis. Apart from trade issues, confidence issues like the general pessimism and not so good feel factor also affected the economy," he said apparently referring to criticism about policy paralysis. "Sentiments are very important when it comes to taking business decision," he said.
Bank ATMs stop sucking in cash after RBI direction
New Delhi, Sept 23: Next time you go to an ATM to withdraw cash, don't worry about the banknotes getting sucked back by the machine if not collected immediately, as RBI has asked all banks to immobilise the 'cash retraction facility'. At the same time, customers will have to be extra careful in collecting the cash dispensed by the ATM, as they cannot later claim the money from the bank, which was the case when this 'cash retraction facility' was in place at the ATMs.
Most of the banks, including HDFC Bank, Axis Bank and Canara Bank, have already removed the cash retraction facility from all their ATMs, while the withdrawal process for this facility is underway for few remaining ATMs. As per RBI directions, the banks are communicating to their customers about the withdrawal of this facility, under which the cash goes back into the ATM machine if not collected within a stipulated time, which is generally 10-15 seconds, but varies from bank to bank. The facility was initially implemented to avoid the cases of someone else getting the money, if the actual cardholder forgets to collect the withdrawn cash before leaving the ATM. However, RBI in the past one year has come across banks reporting several instances of frauds pertaining to mis-use of cash retraction facility at the ATMs. The typical modus operandi has been to hold on to a few pieces of notes in ATM machines that have cash retraction system, while allowing one or two pieces of notes to be retracted and then claiming non-receipt of cash. Since retracted transactions are credited back to the customer's account, the balance in the fraudster's account remains unaffected even after collecting bulk of the delivered cash. The ATMs do not have the capability to count the pieces of retracted notes, thus leaving a loophole for committing such frauds.
2G scam: RBI Governor Subbarao to appear before JPC
New Delhi, Sept 7: RBI Governor D Subbarao, who was the Finance Secretary when 2G licences were allocated, will appear before the Joint Parliamentary Committee examining the issue as a witness on Sept 18. He was the Finance Secretary between Apr 2007 and Sept 2008. The controversial 2G radiowave licences were allocated in Jan 2008. Sources said the meeting of the committee
slated for Sept 14, in which former Cabinet Secretary KM Chandrasekhar was to appear, has been rescheduled. A fresh date will be decided to call Chandrasekhar, who was the top bureaucrat between Jun 2007 and Jun 2011. The JPC meeting on Sept 18 is taking place after a gap of nearly a month. BJP members had stormed out of the proceedings on Aug 22 insisting on calling Prime Minister Manmohan Singh and Finance Minister P Chidambaram as witnesses before the panel. Sources said besides the former Cabinet Secretary, the other "essential witnesses" the committee seeks to examine before drafting the report are the Telecom and Finance Secretaries, former Law Secretary, the present incumbent and the Attorney General. It is not yet clear whether the six BJP members on the panel will attend the next meeting. Amid growing bitterness between ruling and opposition sides in the 30member JPC, five out of the six BJP members present at the meeting had walked out, claiming that Congress members had used foul language when they pressed for calling Singh and Chidambaram. Congress had refuted the allegation.
RBI may hike NPA provision ratio if needed: K C Chakrabarty
MUMBAI: RBI Deputy Governor K C Chakrabarty has come down heavily on banks showing higher profits without providing adequately for bad loans, and said if need be, the central bank may hike provision coverage ratio (PCR) levels. "Why banks need to show profits as high as 25 per cent? They can show 5 per cent growth in their profits. If they are not doing (providing more), I will increase it (PCR)," he told PTI in an interview.
Expert’s views on RBI monetary policy review Mumbai, (IANS) The Reserve Bank of India (RBI) kept key policy rates unchanged in the first quarter review of monetary policy announced Tuesday. Following are the comments from experts on the monetary policy statement. – Anis Chakravarty, senior director, Deloitte in India ―This is a bold step from RBI and it certainly needs to be appreciated. With headline inflation persistently remaining above comfort level of 7 percent, this policy stance of retaining repo rate looks justified despite obvious impact of tight monetary policy for past two years on the growth slowdown. Although SLR is expected to maintain liquidity levels, it may not show any significant impact as the liquidity conditions have been already eased out since the April policy, which included injection of liquidity by way of open market operations.‖ – Harsh Pati Singhania, president, International Chamber of Commerce India and managing director, JK Paper Ltd. ―It is disappointing that RBI has chosen not to cut policy rates. Reduction in the SLR does not make any difference in the present scenario as credit growth has not picked up due to higher rates of interest. In fact, by following this path RBI is not taking any constructive steps to either control inflation or stimulate economic growth. It has squarely put the onus of reviving growth with the government. May be it is time we started looking at the paradigm of living with a slightly higher inflation accompanied with higher growth.‖ – R.V. Kanoria, president, Federation of Indian Chambers of Commerce and Industry (FICCI)
―The central bank and the government need to coordinate and find a solution to balance the monetary policy, improve the fiscal situation and to get growth back in the economy. The situation in the economy calls for urgent and decisive action and the two primary agencies – RBI and government – responsible for policy making should pre pare an effective roadmap together.‖ – Chandrajit Banerjee, director general, Confederation of Indian Industry (CII) ―A cut in policy rates, at this juncture, would have done much to infuse liquidity in the system which is facing tight liquidity conditions, spur investments among corporates and rev up growth momentum in the economy. RBI had sufficient head room to cut interest rates as falling global commodity prices, stable core and manufacturing inflation would ease the pressure on prices. In fact, despite having raised interest rates in the past, inflation has persisted while adversely impacting industrial growth and business sentiment. The need of the hour is administrative actions on the part of the government to ease supply bottlenecks which will help ease inflationary pressure.‖ – Siddharth Shankar, Director, KASSA group ―Monetary policy will not stimulate growth nor would government policy, now it is for the industry to act and make itself more efficient. From the policy front I feel government will have to keep the social and agricultural aspect in mind, much over the industry. Growth in India is likely to remain low with high inflation something and this is a very uncomfortable situation of stagflation. While the GDP forecast is 6.5 percent to my mind it would be below 6 percent mark for current financial year.‖ – A Sakthivel, chairman, Apparel Export Promotion Council (AEPC)
―The Reserve Bank of India has kept interest rate unchanged, thereby keeping the cost of funds very high. The industry was expecting downward trend in the interest rate so that cost of manufacturing can be reduced.‖ – Murthy Nagarajan, head, fixed income, Tata Asset Management Limited ―RBI focus is clearly on managing inflation expectations getting retrenched in the economy even against a scenario of falling GDP growth rates. By cutting SLR, it is releasing more money for banks who have SLR at the margin, to lend to the corporate sector. RBI has stated it is ready to do what is required, if government cuts its subsidy burden and reduce supply side bottleneck pressure on the economy.‖ – Lalit Kumar Jain, chairman, Kumar Urban Development and president, CREDAI ―There is once again disappointment from RBI. There was no change in the rates in previous policy announcement and the real estate sector was expecting a rate cut this time. Both, the developer community and the home buyers are unhappy with results of the policy and this will affect the already disheartened real estate sector. We don‘t see any positive policies from government which will boost the real estate sector and economy as well. We keep our fingers crossed and hope the next credit policy will bring some cheer to the industry.‖
Research Methodology Research in common parlance refers to a search for knowledge. One can also define research as a scientific & systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. The Advanced Learner‘s Dictionary of Current English lays down the meaning of research as ―a careful investigation or inquiry especially through search for new facts in any branch of knowledge.‖ Redman & Mory defined research as a ―systemized effort to gain new knowledge.‖ OBJECTIVES OF RESEARCH:
The purpose of research is to discover answers to questions through the application of scientific procedures. The main aim of research is to find out the truth which is hidden & which has not been discovered as yet. Though each research study has its own specific purpose.
TYPES OF RESEARCH:
The basic types of research are as follows: 1. Descriptive V/s Analytical. 2. Applied V/s Fundamental. 3. Quantitative V/s Qualitative. 4. Conceptual V/s Empirical. 5. Some other types of research.
Types of Data Primary Data:
Data that has been collected from first-hand-experience is known as primary data. Primary data has not been published yet and is more reliable, authentic and objective. Primary data has not been changed or altered by human beings, therefore its validity is greater than secondary data. Importance of Primary Data:
Importance of Primary data cannot be neglected. A research can be conducted without secondary data but a research based on only secondary data is least reliable and may have biases because secondary data has already been manipulated by human beings. In statistical surveys it is necessary to get information from primary sources and work on primary data: for example, the statistical records of female population in a country cannot be based on newspaper, magazine and other printed sources. One such sources are old and secondly they contain limited information as well as they can be misleading and biased. Validity: Validity is one of the major concerns in a research. Validity is the qualit y
of a research that makes it trustworthy and scientific. Validity is the use of scientific methods in research to make it logical and acceptable. Using primary data in research can improves the validity of research. First hand information obtained from a sample that is representative of the target population will yield data that will be valid for the entire target population. Authenticity: Authenticity is the genuineness of the research. Authenticity can be
at stake if the researcher invests personal biases or uses misleading information int
he research. Primary research tools and data can become more authentic if the methods chosen to analyze and interpret data are valid and reasonably suitable for the data type. . Primary sources are more authentic because the facts have not been overdone. Primary source can be less authentic if the source hides information or alters facts due to some personal reasons. Their are methods that can be employed to ensure factual yielding of data from the source. Reliability: Reliability is the certainty that the research is enough true to be trusted
on. For example, if a research study concludes that junk food consumption does not increase the risk of cancer and heart diseases. This conclusion should have to be drawn from a sample whose size, sampling technique and variability is not questionable. Reliability improves with using primary data. In the similar research mentioned above if the researcher uses experimental method and questionnaires the results will be highly reliable. On the other hand, if he relies on the data available in books and on internet he will collect information that does not represent the real facts. Sources of Primary Data:
Sources for primary data are limited and at times it becomes difficult to obtain data from primary source because of either scarcity of population or lack of cooperation. Regardless of any difficulty one can face in collecting primary data; it is the most authentic and reliable data source. Following are some of the sources of primary data. Experiments: Experiments require an artificial or natural setting in which to
perform logical study to collect data. Experiments are more suitable for medicine, psychological studies, nutrition and for other scientific studies. In experiments the
experimenter has to keep control over the influence of any extraneous variable on the results. Survey: Survey is most commonly used method in social sciences, management,
marketing and psychology to some extent. Surveys can be conducted in different methods. Questionnaire: is the most commonly used method in survey. Questionnaires are a list of questions either open-ended or close -ended for which the respondent give answers. Questionnaire can be conducted via telephone, mail, live in a public area, or in an institute, through electronic mail or through fax and other methods. Interview: Interview is a face-to-face conversation with the respondent. In interview the main problem arises when the respondent deliberately hides information otherwise it is an in depth source of information. The interviewer can not only record the statements the interviewee speaks but he can observe the body language, expressions and other reactions to the questions too. This enables the interviewer to draw conclusions easily. Observations: Observation can be done while letting the observing person know that he is being observed or without letting him know. Observations can also be made in natural settings as well as in artificially created environment. Secondary Data:
Data collected from a source that has already been published in any form is called as secondary data. The review of literature in nay research is based on secondary data. MNostly from books, journals and periodicals.
Importance of Secondary Data:
Secondary data can be less valid but its importance is still there. Sometimes it is difficult to obtain primary data; in these cases getting information from secondary sources is easier and possible. Sometimes primary data does not exist in such situation one has to confine the research on secondary data. Sometimes primary data is present but the respondents are not willing to reveal it in such case too secondary data can suffice: for example, if the research is on the psychology of transsexuals first it is difficult to find out transsexuals and second they may not be willing to give information you want for your research, so you can collect data from books or other published sources. Sources of Secondary Data:
Secondary data is often readily available. After the expense of electronic media and internet the availability of secondary data has become much easier. Published Printed Sources: There are variety of published printed sources. Their
credibility depends on many factors. For example, on the writer, publishing company and time and date when published. New sources are preferred and old sources should be avoided as new technology and researches bring new facts into light. Books: Books are available today on any topic that you want to research. The use of books start before even you have selected the topic. After selection of topics books provide insight on how much work has already been done on the same topic and you can prepare your literature review. Books are secondary source but most authentic one in secondary sources.
Journals/periodicals: Journals and periodicals are becoming more important as far as data collection is concerned. The reason is that journals provide upto-date information which at times books cannot and secondly, journals can give information on the very specific topic on which you are researching rather talking about more general topics. Magazines/Newspapers: Magazines are also effective but not very reliable. Newspaper on the other hand are more reliable and in some cases the information can only be obtained from newspapers as in the case of some political studies. Published Electronic Sources: As internet is becoming more advance, fast and
reachable to the masses; it has been seen that much information that is not available in printed form is available on internet. In the past the credibility of internet was questionable but today it is not. The reason is that in the past journals and books were seldom published on internet but today almost every journal and book is available online. Some are free and for others you have to pay the price. e-journals: e-journals are more commonly available than printed journals. Latest journals are difficult to retrieve without subscription but if your university has an e-library you can view any journal, print it and those that are not available you can make an order for them. General websites; Generally websites do not contain very reliable information so their content should be checked for the reliability before quoting from them. Weblogs: Weblogs are also becoming common. They are actually diaries written by different people. These diaries are as reliable to use as personal written diaries.
Unpublished Personal Records: Some unpublished data may also be useful in
some cases. Diaries: Diaries are personal records and are rarely available but if you are conducting a descriptive research then they might be very useful. The Anne Franks diary is the most famous example of this. That diary contained the most accurate records of Nazi wars. Letters: Letters like diaries are also a rich source but should be checked for their reliability before using them. Governement Records: Government records are very important for marketing,
management, humanities and social science research. Census Data/population statistics: Health records Educational institutes records Public Sector Records:
NGOs's survey data Other private companies records
SIGNIFICANCE OF RESEARCH:
The role of research in several fields of applied economics, whether related to business or to the economy as a whole, has greatly increased in modern times. The increasingly complex nature of business & government has focused attention
on the use of research in solving operational problems. Research, as an aid to economic policy, has gained added importance, both for government & business.
RESEARCH & SCIENTIFIC METHOD:
The scientific method is, thus, based on certain basic postulates which can be stated as: 1. It relies on empirical evidence. 2. It utilizes relevant concepts. 3. It is committed only to objective considerations. 4. It pre supposes ethical neutrality. 5. It results in to probabilistic predictions. 6. Its methodology is made known to all concerned for critical scrutiny & for use in testing the conclusions through replications. 7. It aims at formulating more general axioms or what can be termed as scientific theories.
RESEARCH PROCESS:
Research process consists of series of actions or steps necessary to effectively carry out research & the desired sequencing of its steps: However, the following order concerning various steps provides a useful procedural guideline regarding the research process: 1. Formulating the research problem. 2. Extensive literature survey 3. Developing the hypothesis. 4. Preparing the research design 5. Determining the sample design. a. Deliberate sampling.
b. Simple random sampling. c. Systematic sampling. d. Stratified sampling. e. Quota sampling. f. Cluster sampling & area sampling. g. Multi-stage sampling. h. Sequential sampling.
6. Collecting the data. a. By observation. b. Through personal interviews. c. Through telephone interview. d. By mailing of Questionnaire. e. Through schedules. 7. Execution of the project. 8. Analysis of the data. 9. Hypothesis testing. 10.Generalizations & interpretations. 11.Preparation of the report or presentation of the results. a. Introduction. b. Summary of findings. c. Main report. d. Conclusion.
In this case since RBI is a bank so Basic Research is taken into consideration for the purpose of preparing this project. Details about basic research are given below.
BASIC RESEARCH
Pure research advances fundamental knowledge about the human world. It focuses on refuting or supporting theories that explain how this world operates, what makes things happen, why social relations are a certain way, and why society changes. Pure research is the source of most new scientific ideas and ways of thinking about the world. It can be exploratory, descriptive, or explanatory; however, explanatory research is the most common. Pure research generates new ideas, principles and theories, which may not be immediately utilized; though are the foundations of modern progress and development in different fields. Today's computers could not exist without the pure research in mathematics conducted over a century ago, for which there was no known practical application at that time. Pure research rarely helps practitioners directly with their everyday concerns. Nevertheless, it stimulates new ways of thinking about deviance that have the potential to revolutionize and dramatically improve how practitioners deal with a problem. A new idea or fundamental knowledge is not generated only by pure research, but pure research can build new knowledge. In any case, pure research is essential for nourishing the expansion of knowledge. Researchers at the center of the scientific community conduct most of what is pure research.
Structure, Organisation and Governance: How We Function The Reserve Bank is wholly owned by the Government of India. The Central Board of Directors oversees the Reserve Bank‘s business.
About the Central Board
The Central Board has primary authority for the oversight of the Reserve Bank. It delegatesspecific functions to its committees and sub-committees.
Central Board: Includes the Governor,Deputy Governors and the nominatedDirectors and agovernment nominee-Director
Committee of Central Board: Overseesthe current business of the centralbank and typically meets every week, onWednesdays. The agenda focusses oncurrent business, including approval of the weekly statement of accounts related to the Issue and Banking Departments.
Board for Financial Supervision: Regulates and supervises commercial banks, Non-Banking Finance Companies (NBFCs), development finance institutions, urban co-operative banks and primary dealers.
Board for Payment and Settlement Systems: Regulates and supervises thepayment and settlement systems
Sub-committees of the Central Board: Includes those on Inspection and Audit; Staff; and Building. Focus of each subcommittee is on specific areas of operations.
Local Boards: In Chennai, Kolkata, Mumbai and New Delhi, representing the country‘s four regions. Local board members, appointed by the Central Government for four-year terms, represent regional and economic interests and the interests of co-operative and indigenous banks.
Central Board of Directors by the Numbers
Official Directors
1 Governor 4 Deputy Governors, at a maximum
Non-Official Directors
4 directors — nominated by the Central Government to represent each local board
10 directors nominated by the Central Government with expertise in various segments of the economy
1 representative of the Central Government 6 meetings — at a minimum — each year 1 meeting — at a minimum — each quarter
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.
Governor Dr. D. Subbarao
Deputy Governor Smt. ShyamalaGopinath
Deputy Governor Dr. K. C. Chakrabarty
Deputy Governor Smt. UshaThorat
Deputy Governor Dr. SubirGokarn
Executive Directors 1) Shri V K Sharma
3) ShriAnandSinha
2) Shri C Krishnan
4) Shri V S Das
4) Shri Gopalkrishna 6) Shri H R Khan7) Shri D K Mohanty
Departments 1) Market
Monetary Policy Department
Financial Market Departm ent
MARK ET Dept of Extnl Invstment and Operation
2) Service Department of Payment and Settlement System
Dept of Currency Mangt
Dept of Govt Bank Account
Customer Service Department
Internati onal Debt Mangt Departm ent
3) Regulation And Supervision
•Dept of Banking Opertation & Development •Dept of Banking Supervision
•Dept of NonBanking Supervision •Urban Banks Department
•Rural Planning and Credit Department •Foreign Exchange Department
4) Research
Research
Department of Economic Analysis and Policy
Department of Statistics and Information Management
5) Support Departmen t of Administrat ion and Personnel Manageme nt
Inspecti on Depart ment
Human Resources Developme nt Department
Secretary’ s Departme nt
Legal Depart ment
Departme nt of Communic ation
Premises Departmen t
Rajbhasha Departme nt
Department of Expenditure and Budgetary Control 2) Department of Information Technology
The Reserve Bank of India is Made up of26 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 centers: 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 Centres, 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 Researchin Banking Technology (IDRBT) at Hyderabad.
Subsidiaries: Fully-owned subsidiaries include National Housing Bank (NHB), Deposit Insurance and Credit Guarantee Corporation (DICGC), Bharatiya 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).
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 andextending beyond the functions of a typical central bank. Thissection 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
Monetary Authority Monetary policy refers to the use of instruments under the control of the central bank to regulate the availability, cost and use of money and credit.The goal: achieving specific economic objectives, such as low and stableinflation and promoting growth.
The main objectives of monetary policy in India are:
Maintaining
price
stability
Ensuring
adequate
flow
of
credit
to
the
productivesectors of the economy to support economic growth Financial stability The relative emphasis among the objectives varies from time to time, depending on evolving macroeconomic developments.
The basic functions of the Reserve Bank of India are to regulate the issue of Bank notes and the keeping of reserves with a view to securing
― - From the Preamble of
monetary stability in India and generally to operate the currency and credit system of the country to its advantage.
the Reserve Bank of India Act, 1934‖
Our Approach
Our operating framework is based on a multiple indicator approach. This means that we monitor and analyse the movement of a number of indicators including interest rates, inflation rate, money supply, credit, exchange rate, trade, capital flows and fiscal position, along with trends in output as we develop our policy perspectives.
Our Tools
The Reserve Bank‘s Monetary Policy Department (MPD) formulates monetary policy. The Financial Markets Department (FMD) handles day-to-day liquidity management operations. There are several direct and indirect instruments that are used in the formulation and implementation of monetary policy.
Direct Instruments Cash Reserve Ratio (CRR): The share of net demand and time liabilities that banks must maintain as cash balance with the Reserve Bank.
Statutory Liquidity Ratio (SLR): The share of net demand and time liabilities that banks must maintain in safe and liquid assets, such as, government securities, cash and gold.
Refinance facilities: Sector-specific refinance facilities (e.g., against lending to export sector) provided to banks.
Indirect Instruments Liquidity Adjustment Facility (LAF): Consists of daily infusion or absorption of liquidity on a repurchase basis, through repo (liquidity injection)and reverse repo (liquidity absorption) auction operations, using government securities as collateral.
Open Market Operations (OMO): Outright sales/purchases of government securities, in addition to LAF, as a tool to determine the level of liquidity over the medium term.
Market Stabilisation Scheme (MSS): This instrument for monetary management was introduced in 2004. Liquidity of a more enduring nature arising from large capital flows is absorbed through sale of short-dated government securities and treasury bills. The mobilised cash is held in a separate government account with the Reserve Bank.
Repo/reverse repo rate: These rates under the Liquidity Adjustment Facility (LAF) determine the corridor for short-term money market interest rates. In turn, this is expected to trigger movement in other segments of the financial market and the real economy.
Bank rate: It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange orother commercial papers. It also signals themedium-term stance of monetary policy.
What is the Cash Reserve Ratio? The Reserve Bank requires banksto maintain a certain amount ofcash in reserve as a percentageof their deposits to ensure thatbanks have sufficient cash tocover customer withdrawals. Weadjust this ratio on occasion,as an instrument of
monetarypolicy,
depending
on
prevailingconditions.
Our
centralised
andcomputerised system allows forefficient and accurate monitoring of the balances maintained bybanks with the Reserve Bank.
RBI Governor responds to questions following the release of the annual policy statement.
“ Improving transparency in our decisions and actions is a constant endeavour at RBI.
” Open and Transparent Monetary Policy-Making
The Reserve Bank explains the relative importanceof its objectives in a given context in a transparentmanner, emphasises a consultative approach inpolicy formulation as well as autonomy in policyoperations and harmony with other
elementsof macroeconomic policies. The monetary policyformulation is aided by advice and input from:
Technical Advisory Committee on Monetary Policy Pre-policy consultations with bankers, economists, market participants, chambers of commerce and industry and otherstakeholders
Regular discussions with credit heads of banks Feedback from banks andfinancial institutions Internal analysis
The Reserve Bank‘s Annual Policy Statements,Announced in April, are followed by three quarterlyreviews, in July, October and January. A detailedbackground report — Review of Macroeconomicand Monetary Developments — is released theday before the policy review. Faced with multipletasks and a complex mandate, the Reserve Bankemphasizes clear and structured communicationfor effective functioning. Improving transparency inour decisions and actions is a constant endeavour at the Reserve Bank.
Looking Ahead
The Reserve Bank looks at both short term and longerterm issues related to liquidity management. In thelonger term, we monitor the developments in globalfinancial markets, capital flows, the government‘s fiscalposition and inflationary pressures, with an eye towardencouraging strong and sustainable economic growth.
Issuer of Currency The Reserve Bank is the nation‘s sole note issuing authority. Along with the Government of India, we are responsible for the design and production and overall management of the nation‘s currency, with the goal of ensuring an adequate supply of clean and genuine notes. The Reserve Bank also makes sure there is an adequate supply of coins, produced by the government.In consultation with the government, we routinely addresssecurity issues and target ways to enhance security features to reduce the risk of counterfeiting or forgery.
Our Approach
The Department of Currency Management inMumbai, in cooperation with the Issue Departmentsin the Reserve Bank‘s regional offices, oversees the production and manages the distribution of currency.
Currency chests at more than 4,000 bank branches — typically commercial banks — contain adequatequantity of notes and coins so that currency is accessible to the public in all parts of the country.
The Reserve Bank has the authority to issue notes upto value of Rupees Ten Thousand.
Our note Printing Press at Mysore: The Reserve Bank is the government’s agent for issue and distribution of coins
RBI’s Clean Note Policy
Education campaign on preferred way to handle notes: no stapling, writing, excessive folding andthe like
Timely removal of soiled notes: use of currencyverification and processing systems and sortingmachines
Exchange facility for torn, mutilated or defectivenotes: at currency chests of commercial banksand in Reserve Bank issue offices
Our Tools
Four printing presses actively print notes: Dewas inMadhya Pradesh, Nasik in Maharashtra, Mysore inKarnataka, and Salboni in West Bengal.The presses in Madhya Pradesh and Maharashtra areowned by the Security Printing and Minting Corporationof India (SPMCIL), a wholly owned company of theGovernment of India. The presses in Karnataka andWest Bengal are set up by BRBNMPL, a wholly owned subsidiary of the Reserve Bank. Coins are minted by the
Government of India. RBI isthe agent of the Government for distribution, issue andhandling of coins. Four mints are in operation: Mumbai,Noida in Uttar Pradesh, Kolkata, and Hyderabad.
RBI’s Anti-counterfeiting Measures
Continual upgrades of bank note security features Public awareness campaigns to educate citizensto help prevent circulation of forged or counterfeit notes
Installation of note sorting machinesOur note Printing Press at Mysore: The Reserve Bank is the government’s agent for issueand distribution of coins
Looking Ahead
Focus continues on ensuring availability of clean notesand on strengthening the security features of banknotes. Given the volumes involved and costs incurredin the printing, transport, storage and removal of unfit/soiled notes, the Reserve Bank is evaluating ways toextend the life of bank notes — particularly in the lowerdenominations. For example, we are considering issues ofRs.10 banknotes in polymer.
Denominations of coins and notes in circulation:
Coins in circulation: 25 paise, 50 paise, 1, 2, 5 and 10 Rupee
Notes in circulation: Rs. 5, 10, 20, 50,100, 500 and 1000
Bank notes are legal tender at any place in India for payment without limit.
As per Indian Coinage Act-
Rupee coin (1 and above) can be used to pay /settle for any sum Paise 50 can be used to pay /settle any sum not exceeding Ten Rupees In case of smaller coins below 50 paise, any sum not exceeding One Rupee
Banker and Debt Manager to Government Managing the government‘s banking transactions is a key RBI role. Like individuals, businesses and banks, governments need a banker to carry out their financialtransactions in an efficient and effective manner, including the raising of resourcesfrom the public. As a banker to the central government, the Reserve Bankmaintains its accounts, receives money into and makes payments out of these Accounts and facilitates the transfer of government funds. We also act as thebanker to those state governments that have entered into an agreement with us.
Our Approach
The role as banker and debt manager to governmentincludes several distinct functions:
Undertaking banking transactions for the central andstate governments to facilitate receipts andpayments and maintaining their accounts.
Managing the governments‘ domestic debt with theobjective of raising therequired amount of publicdebt in a cost-effective and timely manner.
Developing the market for government securitiesto enable the government toraise debt at areasonable cost, provide benchmarks for raisingresources by other entities and facilitate transmissionof monetary policy actions.
Our Tools
At the end of each day, our electronic systemautomatically consolidates all of the government‘s transactions to determine the net final position. If thebalance in the government‘s account shows a negativeposition, we extend a short-term, interest-
bearingadvance, called a Ways and Means Advance — WMA — thelimit or amount for which is set at the beginning of eachfinancial year in April.
The RBI’s Government Finance Operating Structure
The Reserve Bank‘s Department of Government and Bank Accounts oversees governments‘ banking related activities. This department encompasses:
Public
accounts
departments:
manage
the
day-to-day
aspects
of
ourGovernment‘s banking operations. The Reserve Bank also appointscommercial banks as its agents and uses their branches for greater access tothe government‘s customers.
Public debt offices: provide depository services for government securities for institutions and service government loans.
Central Accounts Section at Nagpur: consolidates the government‘sbanking transactions.The Internal Debt Management Department based in Mumbai raises thegovernment‘s
domestic
debt
and
regulates
and
develops
the
governmentsecurities market.
Looking Ahead
Going forward, we will continue to enhance efficient anduser-friendly conduct of banking transactions for centraland state governments while ensuring costeffectivecash and debt management by deepening and wideningof the market for government securities.The RBI plays a critical role managing the issuance of public debt.Part of this role includes informing potential investors aboutupcoming debt auctions through notices such as these.
RBI as the Government’s Debt Manager
In this role, we set policies,in consultation with thegovernment and determinethe operational
aspects
ofraising
money
to
help
thegovernment
finance
itsrequirements:
Determine the size,tenure and nature(fixed or floating rate)of the loan Define the issuing process including holding of auctions Inform the public and potential investors about upcoming government loan auctions The Reserve Bank also undertakes market development efforts, including enhanced secondary market trading and settlement mechanisms, authorisation of primary dealers and improved transparency of issuing process to increase investor confidence, with the objective of broadening and deepening the government securities market
The RBI plays a critical role managing the issuance of public debt. Part of this role includes informing potential investors about upcoming debt auctions through notices such as these.
Banker to Banks Like individual consumers, businesses and organisations of all kinds, banks need their own mechanism to transfer funds and settle inter-bank transactions — such as borrowing from and lending to other banks — and customer transactions. As the banker to banks, the Reserve Bank fulfills this role. In effect, all banks operating in the country have accounts with the Reserve Bank, just as individuals and businesses have accounts with their banks.
Our Approach
As the banker to banks, we focus on:
Enabling smooth, swift and seamless clearing andsettlement of inter-bank obligations.
Providing an efficient means of funds transferfor banks. Enabling banks to maintain their accounts withus for purpose of statutory reserve requirementsand maintain transaction balances. Acting as lender of the last resort.
RBI provides liquidity support to banks. Cash being transported from Musore Press.
Our Tools
The Reserve Bank provides similar products and servicesfor the nation‘s banks to what banks offer their owncustomers. Here‘s a look at how we help:
Non-interest earning current accounts: Bankshold accounts with the Reserve Bank based oncertain terms and conditions, such as maintenance ofminimum balances. They can hold accounts at eachof our regional offices. Banks draw on these accountsto settle their obligations arising from inter-banksettlement systems. Banks can electronically transferpayments to other banks from this account, usingthe Real Time Gross Settlement System (RTGS).
Deposit Account Department: This department‘scomputerised central monitoring system helpsbanks manage their funds position in real timeto maintain the optimum balance betweensurplus and deficit centres.
Remittance facilities: Banks and governmentdepartments can use these facilities totransfer funds.
Lender of the last resort: The Reserve Bankprovides liquidity to banks unable to raise shorttermliquid resources from the inter-bank market.Like other central banks, the Reserve Bank considersthis a critical function because it protects theinterests of depositors, which in turn, hasa stabilising impact on the financial systemand on the economy as a whole.
Loans and advances: The Reserve Bank providesshort-term loans and advances to banks / financialinstitutions, when necessary, to facilitate lendingfor specified purposes.
Looking Ahead
Challenges going forward include implementing corebanking solutions for our customers and enhancing thesafety and efficiency of the payments and settlement services in the country.
Regulator of the Banking System Banks are fundamental to the nation‘s financial system. Thecentral bank has a critical role to play in ensuring the safetyand soundness of the banking system — and in maintainingfinancial stability and public confidence in this system. As the regulator and supervisor of the banking system, the ReserveBank protects the interests of depositors, ensures a frameworkfor orderly development and conduct of banking operationsconducive to customer interests and maintains overall financialstability through preventive and corrective measures.
Our Approach
The Reserve Bank regulates and supervises the nation‘sfinancial system. Different departments of the ReserveBank oversee the various entities that comprise India‘s financial infrastructure. We oversee:
Commercial
banks
and
all-India
developmentfinancial
institutions:
Regulated by theDepartment of Banking Operations and Development,supervised by the Department of Banking Supervision
Urban co-operative banks: Regulated andsupervised by the Urban Banks Department
Regional Rural Banks (RRB), District CentralCooperative Banks and State Co-operative Bank:
Regulated by the Rural Planning and CreditDepartment and supervised by NABARD
Non-Banking Financial Companies (NBFC): Regulated and supervised by the Department ofNon-Banking Supervision
Our Tools
The Reserve Bank makes use of several supervisory tools:
On-site inspections Off-site surveillance, making use of requiredreporting by the regulated entities Thematic inspections, scrutiny and periodic meetingsThe Board for Financial Supervision
oversees
the
ReserveBank‘s
regulatory
and
supervisory
responsibilities.
( Consumer confidence and trust are fundamental to the proper functioning of the banking system. RBI’s supervision and regulation helps ensure that banks are stable and that the system functions smoothly .)
Manager of Foreign Exchange With the transition to a market-based system for determining the external value of the Indian rupee, the foreign exchange market in India gained importance in the early reform period. In recent years, with 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.
Our Approach
The Reserve Bank plays a key role in the regulationand development of the foreign exchange market andassumes three broad roles relating to foreign exchange:
Regulating transactions related to the external sectorand facilitating the development of the foreignexchange market
Ensuring smooth conduct and orderly conditions inthe domestic foreign exchange market
Managing the foreign currency assets and goldreserves of the country
Our Tools
The Reserve Bank is responsible for administration of the Foreign Exchange Management Act,1999 and regulatesthe market by issuing licences to banks and other selectinstitutions to act as Authorised Dealers in foreignexchange. The Foreign Exchange Department (FED) isresponsible for the regulation and development of themarket.
On a given day, the foreign exchange rate reflects thedemand for and supply of foreign exchange arisingfrom trade and capital transactions. The RBI‘s FinancialMarkets Department (FMD) participates in the foreignexchange market by undertaking sales / purchases offoreign currency to ease volatility in periods of excessdemand for/supply of foreign currency.The Department of External Investments andOperations (DEIO) invests the country‘s foreignexchange reserves built up by purchase of foreigncurrency from the market. In investing its foreignassets, the Reserve Bank is guided by three principles:safety, liquidity and return.
The Department of External Investments &Operations manages a multi-currency multi-instrument portfolio of foreign currency assets. A well-equipped dealing room executes transactions .
Looking Ahead
The challenge now is to liberalise and develop the foreignexchange market, with an eye toward ushering in greatermarket efficiency while ensuring financial stability in anincreasingly global financial market environment. Withcurrent account convertibility achieved in 1994, the keyfocus is now on capital account management.
“ In investing its foreign assets, the Reserve Bankis guided by three principles: safety, liquidity and return.
”
Regulator and Supervisorof Payment and Settlement Systems Payment and settlement systems play an important role in improvingoverall economic efficiency. They consist of all the diverse arrangementsthat we use to systematically transfer money — currency, paper instrumentssuch as cheques, and various electronic channels.
Our Approach
The Payment and Settlement Systems Act of 2007(PSS Act) gives the Reserve Bank oversight authority,including regulation and supervision, for the payment and settlement systems in the country. In this role,we focus on the development and functioning ofsafe, secure and efficient payment and settlement mechanisms.
Our Tools
The Reserve Bank has a two-tiered structure. The firsttier provides the basic framework for our paymentsystems. The second tier focusses on supervision of
thisframework. As part of the basic framework, the ReserveBank‘s network of secure systems handles various typesof payment and settlement activities. Most operate on the security platform of the IndianFInancialNETwork(INFINET), using digital signatures for further security oftransactions. Here is an overview of the various systemsused:
Retail payment systems: Facilitating cheque clearing, electronic funds transfer, through NationalElectronic Funds Transfer (NEFT), settlement ofcard payments and bulk payments, such as electronicclearing services. Operated through local clearing houses throughout the country.
Large value systems: Facilitating settlement offender-bank transactions from financial markets. These include:
- Real Time Gross Settlement System (RTGS):for funds transfers - Securities Settlement System: for thegovernment securities market - Foreign Exchange Clearing: for transactionsinvolving foreign currency
Department of Payment and Settlement Systems:
The Reserve Bank‘s payment and settlement systemsregulatory arm.
Department of Information Technology: Tech support for the payment systems and for theReserve Bank‘s internal IT systems.
Looking Ahead
Going forward, we are proactively identifying andaddressing issues that help mitigate the risks for largevalue systems. Efforts on the retail payment system sidewill focus on operational efficiencies, cost effectiveness,innovation and risk management.
Efficient funds clearing was first initiated in the ‘80s through Magnetic Ink Character Recognition (MICR) technology.
Developmental Role This role is, perhaps, the most unheralded aspect of our activities,yet it remains among the most critical. This includes ensuring that creditis available to the productive sectors of the economy, establishinginstitutions designed to build the country‘s financial infrastructure,expanding access to affordable financial services andpromoting financial education and literacy.
Our Approach
Over the years, the Reserve Bank has added newinstitutions as the economy has evolved. Some of theinstitutions established by the RBI include:
Deposit Insurance and Credit Guarantee Corporation (1962), to provide protection to bank depositorsand guarantee cover to credit facilities extendedto certain categories of small borrowers
Unit Trust of India (1964), the first mutual fundof the country Industrial Development Bank of India (1964),a development finance institution for industry
National Bank of Agriculture and Rural Development(1982), for promoting rural and agricultural credit
Discount and Finance House of India (1988), a moneymarket intermediary and a primary dealer ingovernment securities
National Housing Bank (1989), an apexfinancial institution for promoting and regulatinghousing finance
Securities and Trading Corporation of India (1994), a primary dealer
Our Tools
The Reserve Bank continues its developmental role, while specifically focussing on financial inclusion. Key tools inthis on-going effort include:
Directed credit for lending to priority sector andweaker sections: The goal here is to facilitate/enhance credit flow to employment intensive sectors such as agriculture, micro and small enterprises(MSE), as well as for affordable housing and education loans.
Lead Bank Scheme: A commercial bank isdesignated as a lead bank in each district in thecountry and this bank is responsible for ensuringbanking development in the district throughcoordinated efforts between banks and governmentofficials. The Reserve Bank has assigned a LeadDistrict Manager for each district who acts as acatalytic force for promoting financial inclusion andsmooth working between government and banks.
Sector specific refinance: The Reserve Bankmakes available refinance to banks against theircredit to the export sector. In exceptionalcircumstances, it can provide refinance againstlending to other sectors
Strengthening and supporting smalllocal banks: This includes regional rural banks and cooperative banks
Financial inclusion: Expanding access to financeand promoting financial literacy are a part of ouroutreach efforts.
Looking Ahead
The development role of the Reserve Bank will continueto evolve, along with the Indian economy. Through theoutreach efforts and emphasis on customer service, theReserve Bank will continue to make efforts to fill thegaps to promote inclusive economic growth and stability.
RBI aims to ensure that credit is available to the productive sectors of the economy .
Financial Inclusion and Literacy: Expanding Access; Encouraging Education Expanding access to and knowledge about financeis a fundamental aspect of the Reserve Bank‘soperations. These efforts are critical to ensuringthat the benefits of a growing and healthy economyreach all segments of the population. Our work hereincludes:
Encouraging provision of affordable financialservices like zero-balance, no-frills bank accounts,access to payments and remittance facilities,savings, loans and insurance services
Expanding banking outreach through use oftechnology, such as banking by cell phone, smartcards and the like
Encouraging bank branch expansion in parts ofthe country with few banking facilities
Facilitating use of specified persons to act asagents to perform banking functions in hard-to reach parts of the country Our work to promote financial literacy focuses on educating people about responsible financial management. Efforts here include:
Information and knowledge-sharing: User-friendly website includes easy-to understand tips and guidance in multiplelanguages; brochures, advertisements andother marketing materials educatethe public about banking services.
Credit counseling: The Reserve Bank encouragescommercial banks to set up financial literacy and Credit counseling centers, to help people developbetter financial planning skills.
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 analysisof domestic and international issues affecting the Indianeconomy. This is mainly done by the Department of EconomicAnalysis and Policy and the Department of Statistics andInformation Management.
This important work is designed to:
Educate the public Provide reliable, data-driveninformation for policy anddecision-making Supply accurate and timely data foracademic research as well as thegeneral 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 posts relevant informationfor citizens in 13 local languages.The Reserve Bank‘s web site (www.rbi.org.in) provides a full range of information about ouractivities, our publications, our history and our organisation. The web site is updated regularly,with the most recent publications, speeches, press releases and circulars. Of note, relevantpress releases and circulars are posted in 13 local languages.
― The Reserve Bank’s web site posts relevant information for citizens in 13 local languages.
‖
RBI Publications Publications produced on a regularbasis include: Annual
Annual Report Report on Currency and Finance Report on Trend and Progress of Banking in India Handbook of Statistics on the Indian Economy State Finances: A Study of Budgets Statistical Tables Relating to Banks in India Basic Statistical Returns of Scheduled Commercial Banks in India
Quarterly
Macroeconomics and Monetary Development Occasional Papers Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks
Monthly
RBI Bulletin Monetary and Credit Information Review
Weekly
Weekly Statistical Supplement
A Central Resource: the RBI’s Data Warehouse
Enterprise-wide data warehouse
User-friendly, public accessvia RBI web site, www.dbie.rbi.org.in
Pre-formatted reports Simple and advanced queries Definitions of basic concepts
Looking Ahead
Future plans include publishing a regular report onfinancial stability.
Addressing Current andFuture Challenges Building on the firm foundation of our rich tradition,the Reserve Bank is also changing with the times.
The Reserve Bank‘s mandate — yesterday, today and tomorrow — is to set a monetary andfinancial course that will sustain the nation‘s economic growth and health during globaldownturns, periods of volatility and global upturns alike.Our actions prior to and during the recent period of global financial upheaval exemplify these commitments. We have demonstrated a willingness to take pro-active measures topreserve gains and to ensure that progress is sustainable. The Reserve Bank responsesduring extraordinary times are aimed at maintaining stability while ensuring sufficient rupeeand foreign exchange liquidity to ensure that credit will continue to flow to businesses andconsumers alike.We also continue to address the challenge of ensuring that the national financial andmonetary policy-making contribute to positive, sustainable impact for all citizens of India,across the income spectrum.
RBI: Actions in Times of Crisis
The Reserve Bank‘s willingness to use conventional and unconventional measures help buffer the nation from severe crisis. Here are some examples of our responses during the 2008-9 global financial crisis:
Carefully considered and calibrated reduction of interest rates until situation has stabilised Loosened restrictions on access to foreign currency Creation of a rupee-dollar swap facility to manage short-term funding requirements Establishment of a refinancing window and special-purpose vehicle for non banking financial companies Expansion of funding sources for umbrella financial institutions to keep credit flowing to small businesses, housing and export businesses
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
(
[email protected]) 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.
List of Abbreviations
C
ADRs
American Depository Receipts
AFS
Available for Sale
ANBC
Adjusted Net Bank Cr edit
ARC
Agricultural Refinance Corporation
ARDC
Agricultural Refinance and Development Corporation
ATM
Automated Teller Machine
BC
Business Correspondent
BCSBI
Banking Codes and Standards Board of India
BF
Business Facilitator
BFS
Board for Financial Supervision
BIS
Bank for International Settlements
BO
Banking Ombudsman
BoP
Balance of Payments
BPSS
Board for Regulation and Supervision of Payment and Settlement Systems
BRBNMPL
Bharatiya Reserve Bank Note Mudran Private Limited
BSR
Basic Statistical Returns
CAC
Current Account Convertibility
CAS
Central Accounts Section
CBS
Core Banking Solution
CCIL
Clearing Corporation of India Limited
CCP
Central Counter Party
D
E
F
DAD
Deposit Accounts Department
DBOD
Department of Banking Operations and Development
DCC
District Consultative Committee
DCCB
District Central Cooperative Bank
DEAP
Department of Economic Analysis and Policy
DICGC
Deposit Insurance and Credit Guarantee Corporation
DNBS
Department of Non-Banking Supervision
DPSS
Department of Payment and Settlement Systems
EBT
Electronic Benefit Tr ansfer
ECBs
External Commercial Borrowings
ECS
Electronic Clearing Service
EEFC
Exchange Earner s Foreign Currency
EFT
Electronic Funds Tr ansfer
EximBank
Export Import Bank of India
FCAC
Fuller Capital Account Convertibility
FCAs
Foreign Currency Assets
FCCB
Foreign Currency Convertible
FEMA
Foreign Exchange Management Act
FERA
Foreign Exchange Regulation Act
FIIs
Foreign Institutional Investor s
FRAs
Forward Rate Agreements
GDRs
Global Depository Receipts
GoI
Government of India
GRF
Guarantee Redemption Fund
‘
The RBI Logo The selection of the Bank‘s common seal to be used as the emblem ofthe 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 emphasis 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 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 look s 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. Source: ‘History of the Reserve Bank of India’
Conclusion From the above all mentioned fact in this project one can easily say that The Reserve Bank of India is the central bank of the country. Central banks are a relatively recent innovation and most central banks, as we know them today, were established around the early twentieth century. The Reserve Bank of India was set up on the basis of the recommendations of the Hilton 1934) provides the statutory basis of the functioning of the Bank, which commenced operations on April 1, 1935 Young Commission
Following given below are some importantI. Objectives of the Reserve Bank of India
The Reserve Bank of India Act, 1934 sets out the objectives of the Reserve Bank: '...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.' The formulation, framework and institutional architecture of monetary policy in India have evolved around these objectives – maintaining price stability, ensuring adequate flow of credit to sustain the growth momentum, and securing financial stability.
The responsibility for ensuring financial stability has entailed the vesting of
extensive powers in and operational objectives for the Reserve Bank for regulation and supervision of the financial system and its constituents, the money, debt and foreign exchange segments of the financial markets in India and the payment and settlement system. The endeavour of the Reserve Bank has been to develop a robust, efficient and diversified financial system so as to anchor financial stability and to facilitate effective transmission of monetary policy. In addition, the Reserve Bank pursues operational objectives in the context of its core function of issuance of bank notes and currency management as well as its agency functions such as banker to Government (Centre and States) and management of public debt; banker to the banking system including regulation of bank reserves and the lender of the last resort. The specific features of the Indian economy, including its socio-economic characteristics, make it necessary for the Reserve Bank to operate with multiple objectives. Regulation, supervision and development of the financial system remain within the legitimate ambit of monetary policy broadly interpreted in India. The role of communication policy, therefore, lies in articulating the hierarchy of objectives in a given context in a transparent manner, emphasising a consultative approach as well as autonomy in policy operations and harmony with other elements of macroeconomic policies.
II. The Goals of Communication Policy
The long-term goals of the Reserve Bank‘s communication policy are intimately interlinked to its objectives. Faced with multiple tasks and a complex mandate, clear and structured communication is critical for effective functioning as well as enlarging the spheres of traditional policy instruments. The goal of communication
policy thus would be to anchor inflation expectation by promoting credibility and understanding of monetary policy; and enabling private stakeholders to map the changing economic circumstances into anticipation of the broad policy direction with reasonable accuracy. In order to be realistic, the communication policy also highlights impediments to achieving stated objectives in a conditional sense. The principal goals of the Reserve Bank‘s communication strategy are: Transparency for strengthening accountability and credibility Clarity on the Reserve Bank‘s role and responsibilities with regard to its multiple objectives; managing inherent complementarities/ contradictions and transition Managing expectations and promoting two-way flow of information/ perceptions Dissemination of information, statistics and research at various frequencies
Bibliography & References
Books 1) Indian Economy
Tr Jain, Mukesh Trehan
2) Indian Economy: Performance And Policies
Uma Kapila
3) Principles Of Management
P C Tripathi , P N Reddy
4) Money Banking & Finance: Magical Book Series
N.K. Sinha
5) RBI Officers Grade B Examination
Dr.Lal & jain
6) Resource Book To RBI For The Examinations Of Grade B
Bookhive
7) RBI and Financial Reforms
Parchure K M
8) General Banking And Economic Awareness
Kiran Prakashan
Websites www.rbi.org.in www.mbaclubindia.com www.caclubindia.com taxguru.in http://www.allbankingsolutions.com http://www.bestguru.com http://www.accountingtools.com http://www.ibpsquestionpapers.in http://www.livecareer.com http://www.bestguru.com http://www.indiabix.com http://bankclerkpo.com
Appendix Here some frequently asked question in questionnaires are as given below. A) Some Basic question about currencies and coins:-
1) What is the Indian currency called? 2) What are the present denominations of banknotes in India? 3) Can banknotes and coins be issued only in these denominations? 4) Demonetization of higher denomination banknotes. 5) What are the present available denominations of coins in India? 6) What is legal tender? 7) What is the meaning of "I promise to pay" clause. 8) Why is One Rupee liability of the Government of India?
B) Some basic questions with regards to currency management are:-
1)
What is the role of the Reserve Bank of India in currency management?
2)
What is the role of Government of India?
3)
Who decides on the volume and value of banknotes to be printed and on what basis?
4)
Who decides on the quantity of coins to be minted?
5)
How does the Reserve Bank estimate the demand for banknotes?
6)
How does the Reserve Bank reach the currency to people?
7)
What is a currency chest?
8)
What is a small coin depot?
9)
What happens when the banknotes and coins return from circulation?
10)
From where can the general public obtain banknotes and coins?
C) Current Issues
1)
Is there a way to reduce dependence on cash?
2) Steps taken to increase the supply of banknotes and coins. 3)
Why are Re.1, Rs.2, Rs.5 banknotes not being printed?
D) Soiled and Mutilated Banknotes
1)
What are soiled, mutilated and imperfect banknotes?
2)
Can soiled and mutilated banknotes be exchanged for value?
3)
Where are soiled/mutilated banknotes accepted for exchange?
4)
How much value would one get in exchange of soiled banknotes?
5)
How much value would one get in exchange of mutilated banknotes?
6)
How much value would one get in exchange of imperfect banknotes?
7)
What types of banknotes are not eligible for payment under the Note Refund Rules?
8)
What if a banknote is found to be non-payable?
E) Bank notes since Independence
1)
Are there any special features in the banknotes of Mahatma Gandhi series(MG)- 1996?
2)
Why was the change brought about?
3)
What is a "star series" banknote?
F) Counterfeits / Forgeries
1)
How does one differentiate between a genuine banknote and forged / counterfeit bank notes.
2)
What are the legal provisions relating to printing and circulation of forged bank notes?
G) Clean Note Policy
Your Guide to Money Matters
Money as a means of payment consists of coins, paper money and withdrawable bank deposits. Today, credit cards and electronic cash form an important component of the payment system. For a common person though, money simply means currency and coins. This is so because in India, the payment system, especially for retail transactions still revolves mainly around currency and coins. Here is an attempt to answer some of the Frequently Asked Questions on Indian Currency.
A) Some Basics Coins
The first documented coinage seems to have started with 'Punch Marked' coins issued between the 7th-6th Century BC and 1st Century AD. The coinage can be classified into the following periods: a. Ancient b. Medival c. Mughal d. Late pre-colonial e. British India f. Republic India g. Others. India won its independence on August 15, 1947. During the period of transition India retained the monetary system and the currency and coinage of the earlier period. India brought out its distinctive coins on 15th August, 1950. Coins in India are presently being issued in denominations of 25 paise, 50 paise, one rupee, two rupees and five rupees. Coins upto 50 paise are called 'small coins' and coins of Rupee one and above are called 'Rupee Coins'. Coins can be issued up to the denomination of Rs.1000 as per the Coinage Act, 1906. Currency
Financial Instruments and 'Hundies' in India have a venerable history. Paper Money, in the modern sense, traces its origins to the late eighteenth century with the issues of private banks as well as those of semi-government banks. The Paper
Currency Act of 1861 conferred upon Government of India the monopoly of Note Issue bringing to end banknote issues of Private and Presidency Banks. Government of India continued to issue currency notes till the Reserve Bank of India (RBI) was established on 1st April, 1935. Reserve Bank issued banknotes in January 1938 when the first Five Rupee banknote was issued bearing the portrait of George VI. This was followed by Rs. 10 in February, Rs. 100 in March and Rs. 1,000 and Rs. 10,000 in June 1938. The George VI series continued till 1947 and thereafter as a frozen series till 1950 when post independence banknotes were issued, with the Ashoka Pillar watermark. Banknotes in the Mahatma Gandhi Series were introduced in 1996 and were issued in a phased manner in the denominations of Rs.5, Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000. Banknotes in MG series 2005, in the denomination of Rs.10, Rs.20, Rs.50, Rs.100 Rs.500, and Rs.1000 with additional / new security features are presently being issued. What is the Indian currency called?
The Indian currency is called the Indian Rupee (INR) and the coins are called paise. One Rupee consists of 100 paise. What are the present denominations of banknotes in India?
At present, banknotes in India are issued in the denomination of Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000. These notes are called banknotes as they are issued by the Reserve Bank of India (Reserve Bank). The printing of notes in the denominations of Re.1, Rs. 2 and Rs.5 has been discontinued as these
denominations have been coinised. However, such banknotes issued earlier can still be found in circulation and these banknotes continue to be legal tender. Can banknotes and coins be issued only in these denominations?
Not necessarily. The Reserve Bank can also issue banknotes in the denominations of five thousand rupees and ten thousand rupees, or any other denomination that the Central Government may specify. There cannot, though, be banknotes in denominations higher than ten thousand rupees in terms of the current provisions of the Reserve Bank of India of Act, 1934. Coins can be issued up to the denomination of Rs.1000. Demonetization of higher denomination banknotes.
Rs. 1000 and Rs.10000 banknotes, which were then in circulation were demonetized in January 1946, primarily to curb unaccounted money. The higher denomination banknotes in Rs.1000, Rs.5000 and Rs.10000 were reintroduced in the year 1954, and these banknotes (Rs.1000, Rs.5000 and Rs.10000) were again demonetized in January 1978. What are the present available denominations of coins in circulation in India?
Presently 25 paise, 50 paise, one rupee, two rupees and five rupee coins are being issued. Coins up to 50 paise are called 'small coins' and coins of Rupee one and above are called 'Rupee Coins'. Though the coins in the denomination of 1 paise, 2 paise, 3 paise, 5 paise, 10 paise and 20 paise may still be in circulation, due to lack of demand these coins are not being issued. What is legal tender?
The coins issued under the authority of Section 6 of The Coinage Act, 1906, shall be legal tender in payment or on account i.e. provided that a coin has not been defaced and has not lost weight so as to be less than such weight as may be prescribed in its case: (a) coin of any denomination not lower than one rupee shall be legal tender for any sum, (b) half rupee coin shall be legal tender for any sum not exceeding ten rupees, (c) any other coin shall be legal tender for any sum not exceeding one rupee [Section 13 of The Coinage Act, 1906]. Similarly, the One Rupee notes issued under the Currency Ordinance, 1940 are also legal tender and included in the expression Rupee coin for all the purposes of the Reserve Bank of India Act, 1934. Every banknote issued by Reserve Bank of India (Rs.2, Rs.5, Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000) shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government, subject to provisions of sub-section (2) Section 26 of RBI Act, 1934. What is the meaning of "I promise to pay" clause?
As per Section 26 of Reserve Bank of India Act, 1934, the Bank is liable to pay the value of banknote. This is payable on demand by RBI, being the issuer. The Bank's obligation to pay the value of banknote does not arise out of a contract but out of statutory provisions. The promissory clause printed on the banknotes i.e., "I promise to pay the bearer an amount of X" is a statement which means that the banknote is a legal tender for
X amount. The obligation on the part of the Bank is to exchange a banknote for coins of an equivalent amount. Why is One Rupee liability of the Government of India?
The Government of India derives authority to issue Rupee coins from the Coinage Act. As such the rupee coins issued by Government constitute the liabilities of the Government. B) Currency Management. What is the role of the Reserve Bank of India in currency management?
The Reserve Bank derives its role in currency management from the Reserve Bank of India Act, 1934.The Reserve Bank manages currency in India. The Government, on the advice of the Reserve Bank, decides on various denominations of banknotes to be issued. The Reserve Bank also co-ordinates with the Government in the designing of banknotes, including the security features. The Reserve Bank estimates the quantity of banknotes that are likely to be needed denomination-wise and accordingly, places indent with the various printing presses. Banknotes received from banks and currency chests are examined and those fit for circulation are reissued and the others (soiled and mutilated) are destroyed so as to maintain the quality of banknotes in circulation. What is the role of Government of India?
In terms of Section 25 of RBI Act, 1934 the design of banknotes is required to be approved by the Central Government on the recommendations of the Central Board of the Reserve Bank of India. The responsibility for coinage vests with the Government of India on the basis of the Coinage Act, 1906 as amended from time
to time. The Government of India also attends to the designing and minting of coins in various denominations. Who decides on the volume and value of banknotes to be printed and on what basis?
The Reserve Bank decides the volume and value of banknotes to be printed each year. The quantum of banknotes that needs to be printed, broadly depends on the requirement for meeting the demand for banknotes due to inflation, GDP growth, replacement of soiled banknotes and reserve stock requirements. Who decides on the quantity of coins to be minted?
The Government of India decides the quantity of coins to be minted on the basis of indents received from the Reserve Bank. How does the Reserve Bank estimate the demand for banknotes?
The Reserve Bank estimates the demand for banknotes on the basis of the growth rate of the economy, the replacement demand and reserve stock requirements by using statistical models/techniques. How does the Reserve Bank reach the currency to people?
The Reserve Bank presently manages the currency operations through its 18 Issue offices located at Ahmedabad, Bangalore, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Mumbai, Nagpur, New Delhi, Patna, Thiruvananthapuram, one sub-office at Lucknow, a currency chest at Kochi and a wide net work of currency chests. These offices receive fresh banknotes from the banknote printing presses. The Issue
Offices of RBI send fresh banknote remittances to the designated branches of commercial banks. The Reserve Bank offices located at Hyderabad, Kolkata, Mumbai and New Delhi (Mint linked Offices) initially receive the coins from the mints. These offices then send them to the other offices of the Reserve Bank. The banknotes and rupee coins are stocked at the currency chests and small coins at the small coin depots. The bank branches receive the banknotes and coins from the Currency Chests and Small Coin Depots for further distribution among the public. What is a currency chest?
To facilitate the distribution of banknotes and rupee coins, the Reserve Bank has authorised select branches of scheduled banks to establish Currency Chests. These are actually storehouses where banknotes and rupee coins are stocked on behalf of the Reserve Bank. As on June 30, 2006, there were 4428 Currency Chests and 4102 Small Coin Depots. The currency chest branches are expected to distribute banknotes and rupee coins to other bank branches in their area of operation. What is a small coin depot?
Some bank branches are also authorised to establish Small Coin Depots to stock small coins. The Small Coin Depots also distribute small coins to other bank branches in their area of operation. What happens when the banknotes and coins return from circulation?
Banknotes and coins returned from circulation are deposited at the Issue offices of the Reserve Bank. The Reserve Bank subjects these to processing, authenticates banknotes for their genuineness, segregates them into notes fit for reissue and those
which are not, for cancellation. The banknotes which are fit for reissue are sent back in circulation and those which are unfit for reissue are destroyed by way of shredding after completion of examination process. Similarly, coins received back from circulation are either reissued or are sent to the Mints for melting. From where can the general public obtain banknotes and coins?
Banknotes and coins can be obtained in exchange at any of the offices of the Reserve Bank and at all the designated branches of banks. C) Current Issues Is there a way to reduce dependence on cash?
Cash continues to be the predominant payment means of transactions in India. A compositional shift is underway in the form of a gradual replacement of lower denomination banknotes by higher denomination banknotes, particularly Rs.100 and Rs.500. Instruments such as cheques, credit and debit cards, electronic funds transfer are at present supplementing the use of banknotes and as the use of these gains popularity, the growth rate of the demand for currency is expected to slow down. Steps taken to increase the supply of banknotes and coins.
Several steps have been taken to augment the supply of banknotes and coins. Some of these are: The existing banknote printing presses and the mints owned by the Government have been modernised.
Bharatiya Reserve Bank Note Mudran (P) Ltd., was set up as a fully owned subsidiary of the Reserve Bank of India on February 03, 1995. Under its aegis two banknote printing presses with the state-of-the-art technology, one each at Mysore (Karnataka) and Salboni (West Bengal), commenced production from June 01, 1996 and December 11, 1996, respectively. To bridge the demand-supply gap, the Government had, as a one-time measure, imported banknotes, in the year 1997-98. Government of India had also imported rupee coins during 2000-2003 to supplement the supply of coins from the four mints. The overall position of both banknote and coin supply is comfortable now. The Regional Offices of RBI launched aggressive campaigns for providing exchange facility to the members of public. Why are Re.1, Rs.2, Rs.5 banknotes not being printed?
Volume-wise, the share of such small denomination banknotes in the total banknotes in circulation was very high but in terms of value they constituted a very small percentage. The average life of these banknotes was found to be less than a year. The cost of printing and servicing these banknotes was, thus, not commensurate with their life, and printing of these banknotes was, therefore, discontinued. These denominations were coinised. However, Rs.5 was reintroduced in 2001 to supplement the gap between the demand and supply of coins in this denomination. The printing of Rs.5 banknotes has been discontinued from the year 2005. D) Soiled and Mutilated Banknotes What are soiled, mutilated and imperfect banknotes?
(i) "soiled note:" means a note which, has become dirty due to usage and also includes a two piece note pasted together wherein both the pieces presented belong to the same note, and form the entire note. (ii) Mutilated banknote is a banknote, of which a portion is missing or which is composed
of
more
than
two
pieces.
(iii) Imperfect banknote means any banknote, which is wholly or partially, obliterated, shrunk, washed, altered or indecipherable but does not include a mutilated banknote. Where
are
soiled/mutilated
banknotes
accepted
for
exchange?
All banks are authorized to accept soiled banknotes for full value. They are expected to extend the facility of exchange of soiled notes even to non-customers. All currency chest branches of commercial banks are authorised to adjudicate mutilated banknotes and pay value for these, in terms of the Reserve Bank of India (Note Refund) Rules, 2009 How much value would one get in exchange of mutilated banknotes?
A mutilated banknote can be exchanged for full value if, (i) For denominations of Re. 1, Rs. 2, Rs. 5, Rs. 10 and Rs. 20, the area of the single largest undivided piece of the note presented is more than 50 percent of the area of respective denomination, rounded off to the next complete square centimeter.
(ii) For denominations of Rs. 50, Rs.100, Rs. 500 and Rs. 1000, the area of the single largest undivided piece of the note presented is more than 65 percent of the area of respective denomination, rounded off to the next complete square centimeter. Banknotes in denominations of Re. 1, Rs. 2, Rs. 5, Rs. 10 and Rs. 20, cannot be exchanged for half value. A mutilated banknote in denominations of Rs.50, Rs.100, Rs.500 or Rs.1000, can be exchanged for half value if, The undivided area of the single largest piece of the note presented is equal to or more than 40 percent and less than or equal to 65 percent of the area of respective denomination, rounded off to the next complete square centimeter. How much value would one get in exchange of imperfect banknotes?
The value of an imperfect note may be paid for full value / half value under rules as
specified
for
mutilated
notes
if,
(i) the matter, which is printed on the note has not become totally illegible, and (ii) it can be satisfied that it is a genuine note. What types of banknotes are not eligible for payment under the Note Refund Rules?
The following banknotes are not payable under the Reserve Bank of India (Note Refund) Rules 2009. A banknote for which:
the area of single largest undivided piece of note presented is less than or equal to 50% of area of the note for denominations of Re. 1, Rs. 2, Rs. 5, Rs. 10 and Rs. 20. the area of the single largest undivided piece of the note is less than 40 percent for denominations of Rs.50, Rs. 100, Rs. 500 and Rs. 1000. A banknote which: cannot be identified with certainty as a genuine note for which the Bank is liable under the Act, has been made imperfect or mutilated, thereby causing the note to appear to be of a higher denomination, or has been deliberately cut, torn, defaced, altered or dealt with in any other manner, not necessarily by the claimants, enabling the use of the same for making of a false claim under these rules or otherwise to defraud the Bank or the public, carries any extrinsic words or visible representations intended to convey or capable of conveying any message of a political or religious character or furthering the interest of any person or entity, has been imported into India by the claimant from any place outside India in contravention of the provision of any law. What if a banknote is found to be non-payable?
Non-payable banknotes are retained by the receiving banks and sent to the Reserve Bank where they are destroyed.
E) Banknotes since Independence. i.
Ashoka Pillar Banknotes:
The first banknote issued by independent India was the one rupee note issued in 1949. While retaining the same designs the new banknotes were issued with the symbol of Lion Capital of Ashoka Pillar at Sarnath in the watermark window in place of the portrait of King George. The name of the issuer, the denomination and the guarantee clause were printed in Hindi on the new banknotes from the year 1951. The banknotes in the denomination of Rs.1000, Rs.5000 and Rs.10000 were issued in the year 1954. Banknotes in Ashoka Pillar watermark Series, in Rs.10 denomination were issued between 1967 and 1992, Rs.20 denomination in 1972 and 1975, Rs.50 in 1975 and 1981, and Rs.100 between 1967-1979. These banknotes are still found in circulation. The banknotes issued during the above period, contained the symbols representing science and technology, progress, orientation to Indian Art forms.
In the year 1980, the legend
"SatyamevaJayate", i.e., truth alone shall prevail was incorporated under the national emblem for the first time. To contain the volume of banknotes in circulation, Rs.500, banknote was introduced in October 1987 with the portrait of Mahatma Gandhi and the Ashoka Pillar watermark. Mahatma Gandhi watermark as well as Mahatma Gandhi's portrait.
i.
Are there any special features in the Mahtma Gandhi (MG) Series 1996
The banknotes in MG Series – 1996 are available in the denomination of Rs.5, (introduced in November 2001) Rs.10 (13-06-1996), Rs.20 (24-08-2001), Rs.50
(14-03-1997), Rs.100 (04-06-1996), Rs.500 (20-10.1997) and Rs.1000 (November 2000). All the banknotes of this series bear the portrait of Mahatma Gandhi on the obverse (front) side, in place of symbol of Lion Capital of Ashoka Pillar, which has also been retained and shifted on the same side. This means that these banknotes contain banknotes of Mahatma Gandhi series- 1996? The Mahatma Gandhi series-1996 banknotes contained several special features visà-vis the banknotes issued earlier. These are i.
Security thread: Rs.10, Rs.20 and Rs.50 notes contain fully embedded
security thread. Rs.100, Rs.500 and Rs.1000 banknotes contain windowed security thread. This thread is partially exposed and partially embedded. When held against light, this thread can be seen as one continuous line. Other than on Rs.1000 banknotes, this thread contains the words 'Bharat' in the Devanagari script and 'RBI' appearing alternately. The security thread of the Rs.1000 banknote contains the inscription 'Bharat' in the Devanagari script, '1000' and 'RBI'. ii.
Latent Image: The vertical band next to the (right side) Mahatma
Gandhi‘s portrait, contains a latent image, showing the denominational value 20, 50, 100, 500 or 1000 as the case may be. The value can be seen only when the banknote is held horizontally and light allowed to fall on it at 45° ; otherwise this feature appears only as a vertical band. iii.
Micro letterings: This feature appears between the vertical band and
Mahatma Gandhi portrait. It contains the word ‗RBI‘ in Rs.10. Notes of Rs.20 and above also contain the denominational value of the banknotes. This feature can be seen better under a magnifying glass. iv.
Identification mark: A special intaglio feature (raised printing) has been
introduced on the left of the watermark window, on the obverse (front) on all
banknotes except Rs.10/- banknote. This feature is in different shapes for various denominations (Rs.20-Vertical Rectangle, Rs.50-Square, Rs.100Triangle, Rs.500-Circle, Rs.1000-Diamond) and helps the visually impaired to identify the denomination
v.
Intaglio Printing: The portrait of Mahatma Gandhi, Reserve Bank seal,
Guarantee and promise clause, Ashoka Pillar Emblem and RBI Governor's signature are printed in intaglio i.e. in raised prints in Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000 banknotes. vi.
Fluorescence: The number panels of the banknotes are printed in
fluorescent ink. The banknotes also have optical fibres. Both can be seen when the banknotes are exposed to ultra-violet lamp. vii.
Optically Variable Ink: The numeral 500 & 1000 on the Rs.500 [revised
colour scheme of mild yellow, mauve and brown] and Rs.1000 banknotes are printed in Optically Variable Ink viz., a colour-shifting ink. The colour of these numerals appears green when the banknotes are held flat but would change to blue when the banknotes are held at an angle. viii.
Watermark:
The banknotes contain the Mahatma Gandhi watermark with
a light and shade effect and multi-directional lines in the watermark window.
iii) MG series – 2005 banknotes
MG series 2005 banknotes are issued in the denomination of Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000 contain some additional / new security features. The Rs.50 and Rs.100 banknotes were issued in August 2005, followed by Rs.500 and Rs.1000 denominations in October 2005 and Rs.10 and Rs.20 in April 2006 and August 2006, respectively. The additional / new security features in MG Series 2005 banknotes.
ix.
Security Thread: The machine-readable security thread in Rs.10, Rs.20
and Rs.50denomination banknotes is windowed on front side and fully embedded on reverse side. The thread fluoresces in yellow on both sides under ultraviolet light. The thread appears as a continuous line from behind when held up against light. x.
Rs.100, Rs.500 and Rs.1000 denomination banknotes have machinereadable windowed security thread with colour shift
from green to blue
when viewed from different angles. It fluoresces in yellow on the reverse and the text will fluoresce on the obverse under ultraviolet light. xi.
Intaglio Printing: The portrait of Mahatma Gandhi, Reserve Bank seal,
Guarantee and promise clause, Ashoka Pillar emblem, Governor's signature and the identification mark for the visually impaired persons are printed in improved intaglio. xii.
See through register: Half the numeral of each denomination (10, 20, 50,
100, 500 and 1000) is printed on the obverse (front) and half on the reverse. The accurate back to back registration makes the numeral appear as one when viewed against light.
xiii.
Water Mark and electrotype watermark: The portrait of Mahatma
Gandhi, the multi-directional lines and an electrotype mark showing the denominational numeral 10, 20, 50, 100, 500 and 1000 appear in this section respectively in each denomination banknote and these can be viewed better when the banknote is held against light. xiv.
Optically Variable Ink (OVI): The font size of the numeral 500 and 1000
in Rs.500 and Rs.1000 denomination banknotes is reduced, as compared to MG series banknotes issued in these denominations earlier in the year 2000. The colour of the numeral appears green when the banknote is held flat but would change to blue when the banknote is held at an angle. xv. xvi.
Dual coloured optical fibres, seen under UV lamp. Year of Printing: Year of printing appears on the reverse of the banknote
All these banknotes issued by the Bank are legal tender. The details are also available in the updated version of the Master Circular on Detection and Impounding of Counterfeit Banknotes- (2007). (Annex IV) Why was the change brought about?
Central banks, the world over change the design of their banknotes and introduce new security features primarily to make counterfeiting difficult and to stay ahead of counterfeiters. India also follows the same policy. What is a "star series" banknote?
Fresh banknotes issued by Reserve Bank of India till August 2006 were serially numbered. Each banknote bears a distinctive serial number along with a prefix.
The prefix consists of numeral and letter/s. The banknotes are issued in packets containing 100 pieces. The Bank has adopted the "STAR series" numbering system for replacement of defectively printed banknotes, at the printing presses. To begin with, this will be for banknotes of Rs.10, Rs.20 and Rs.50 denomination. The Star series banknotes are exactly like the existing Mahatma Gandhi Series banknotes, but have an additional character viz., a *(star) in the number panel in the space between the prefix and the number. The packets containing these banknotes will not, therefore, have sequential serial numbers, but contain 100 banknotes, as usual. To facilitate easy identification, the bands on such packets clearly indicate the presence of these banknotes in the packet.
F) Counterfeits / Forgeries How does one differentiate between a genuine banknote and forged / counterfeit banknote?
The banknote on which the above explained features i.e., the features of genuine banknotes are not available / absent can be suspected to be a counterfeit banknotes and examined minutely.
What are the legal provisions relating to printing and circulation of forged banknotes?
Counterfeiting banknotes / using as genuine, forged or counterfeit banknotes / possession of forged or counterfeit banknote / making or possessing instruments or materials for forging or counterfeiting banknotes making or using documents resembling banknotes are offences under Sections 489A to 489E of the Indian Penal Code and are punishable in the Courts of Law by fine or imprisonment ranging from seven years to life imprisonment or both, depending on the offence. G) Clean Note Policy:
Reserve Bank of India has been continuously making efforts to make good quality banknotes available to the members of public. To help RBI and banking system, the members of public are requested to ensure the following: o
Not to staple the banknotes
o
Not to write / put rubber stamp or any other mark on the banknotes
Store the banknotes safely to prevent any damage
----------------------------------------RESERVE BANK OF INDIA---------------------------------------www.rbi.org.in Reserve Bank of India, Central Office Building, ShahidBhagat Singh Marg, Mumbai - 400 001. Tel: 022 - 2260 1000 Fax: 022 - 2266 0358 E-mail:
[email protected]
