THE FUNCTIONS OF RESERVE BANK OF INDIA Prepared By Renny M P
§ Traditional
Promotional &
Functions
Devolopmental Functions
Other
Prohibitory
Functions
Functions
V § Issue of Currency
Training Facilities
Banker to Government
Collection & Publication of Data & Reports
Bankerǯs Bank
Exchange Management & Control
Control of Credit
¢ Acts as the currency authority. ¢ Monopoly of issuing all denominations except one rupee note & coins ¢ They are printed and issued by DzIssue Departmentdz. ¢ Rs.1,2,5 and small coins (issued by Ministry of Finance) are also distributed by this dept. ¢ Currency is distributed to banks & public through 15 offices and 2 branches in touch with SBI 7 Associates some public sector banks State Govt. treasuries & sub-treasuries.
0 ¢ Acts as banker to the Central & State Govt.s
It renders following services: Maintains and operates the cash balances of the Central & State govt.s in the current account deposit. Receives and makes payments on behalf of the Central & State govt.s Carries out exchange, remittance and other banking operations on behalf of them. Buys and sells govt. securities in the market. Manages the public debt by issuing govt. loans and paying interest and principal.
Sells treasury bills through tender on behalf of the govt. Advices the govt.s on all banking and financial matters (financing 5 Year plans and resource mobilisation, balance of payment, etc. Acts as the agent of the Central & State govt.s in their dealings with IMF, World Bank, IFC, Exim Bank, etc.
ð ¢ Acts as banker to scheduled commercial banks
in India. Keeps a part of the cash reserves of these banks and provides them with remittance facilities. 2) It supervises, regulates and controls the working of banks in India(issuing licence for opening & branch expansion, inspection of books & accounts, etc. 3) Acts as clearing house for banks. 4) Provides refinance facilities to commercial banks for export credit. 1)
D
Exchange Management & Control
Manage Foreign Exchange Reserves Control external value of rupee
O
¢ Under Foreign Exchange Regulation Act, 1973, it
controls receipts & payments of foreign currencies. [
[
Foreign currencies coming to India are sold and exchangedǥ Foreign currencies are provided to importers & persons travelling abroad.
¢ Changes the exchange rate of the rupee in
relation to other currencies( such as dollar, mark, yen. Sterling, etc.) ¢ Introduced full convertibility of rupee to entire
current account transactions.
G ¢ Controls money supply and credit to ensure price
stability & meet varying economic conditions of the country. ¢ Estimates credit needs and supplies to different sectors.
variations in interest rates open market operations changes in CRR, SLR
! "# Department of Economic Analysis & policy
Division of Reports, Reviews & Publications Collects data on economic matters and publishes them in various publications.
Important Publications: i. Reserve Bank of India Bulletin ( monthly) ii. Annual report on currency & finance iii. Report on Trend & Progress on Banking in India. iv. Other occassional papers. v. Conducts surveys and publishes reports on them.
º § ¢ Setting up training colleges & centres to provide
training to banking personnel. 1.Bankerǯs Training College at Mumbai : Training to Senior officers
2.Reserve Bank Staff College at Madras : for bank officers on area of investment, fund mangt., customer service, etc.
3.College of gricultural Banking at une : Training programmes in field of agricultural finance, rural banking, etc.
4.Zonal Training Centres in Mumbai, Culcutta, Chennai, New Delhi : for 3rd and 4th class staffs
5.Indira Gandhi Institute of Devolopment Research : conducts research on projects and arranges workshop, conferences 7 seminars.
6.Training in Computer Technology : for efficient and quick use of technologies.
§ Traditional
Promotional &
Functions
Devolopmental Functions
Other
Prohibitory
Functions
Functions
! # § Promotional & Devolopmental Functions
Creating Machinery needed for financing dept.
Ensuring that the finance flows in socially desired directions
1. Agricultural Finance . ¢ Provides advice and financial help for dept. of agriculture and allied rural activities. ¢ Agricultural Credit Dept. ¢ NABARD ( since 1982 )
2. Industrial Finance. ¢ Advice and help bank in providing financial help to industry ¢ setting up SFC, IFCI, IDBI, ICICI,etc. ¢ Industrial Credit Dept.
3. Export Credit ¢ RBI provides concessional credit, refinance facilities and guarantee to commercial bank for exporters. ¢ Set up Exim Bank to finance export trade.
4. Credit to Priority sector & Weaker sections ¢ Differential rate of interest scheme Ȃ provides concessional finance to them @ 4% interest rate .
5. Bill Market Scheme ¢ Provide rediscounting facilities to commercial banks from the Bank and other financial institutions.
6.Devolopment & Regulation of Banking system ¢ Devpt. & promotion of country. ¢ Establishing IDBI, IFCI, ICICI, SIDBI,etc. ¢ Judicious policy of regulation & control of banks.
§ Traditional
Promotional &
Functions
Devolopmental Functions
Other
Prohibitory
Functions
Functions
$ § a. Issues demand drafts, and makes, issues and circulates bank postbills.
b. Borrows money from a scheduled bank in India/central banks in other countries.
c. Make agency agreement with central banks in other countries, act as agent and invest funds in their shares.
d. Purchases and sells gold and bullion
§ Traditional
Promotional &
Functions
Devolopmental Functions
Other
Prohibitory
Functions
Functions
§
¢ Not for competing with other banks ¢ For keeping its assets in liquid form to meet any
eventuality. Cannot buy its own or other banking companyǯs shares Cannot participate in business/ trade/industry
Cannot give interest for its deposits Cannot give loans against immovable property
Cannot purchase immovable property except for its offices
REFERENCE BOOKS : ¢ M L JHNGAN, DzMonetary Economicsdz, 5th Edition ¢ DzEconomics for Managersdz Ȃ Prescribed Text book of M.G.University ¢ DzEconomic Timesdz ¢ RBI Report on Currency and Finance,1991-92 & 1992-93.
