Академический Документы
Профессиональный Документы
Культура Документы
Land
Public Pvt. State Pub Pvt.
Sector Sector Coop.
Dev Gov Sector Sector
Banks
Nationalised Non-Scheduled
Banks Banks Chits, Nidhis,
LIC, GIC, UTI, Corporate
RRBs EXIM Bank, IDBI, bodies, Hire
IFCI, IRBI, Purch Cos.,
NABARD, SFC, Investment Cos,
SIDBI, STCI, etc. Merchant
Banks,
1
9/13/2007
CENTRAL BANK
• It is the APEX monetary institute in the money market
which acts as the monetary authority of the country
and serves as the Government‟s bank as well as the
bankers‟ bank.
• In brief, we may say that the central bank is an
organ of the Government which, by reason of its
operations influences the working of the FIs of the
country.
2
9/13/2007
3
9/13/2007
4
9/13/2007
THE
RESERVE BANK OF INDIA
5
9/13/2007
Historical Perspective
• The origin of RBI in 1935 was the culmination of a long series of efforts.
• The earliest effort to set up a central bank dates back to 1773 when Warren
Hastings, the Governor of Bengal recommended the establishment of a
“General Bank in Bengal and Bihar.”
• The next attempt was made in 1807-08 when Robert Richards, a member of
the Bombay Government submitted a scheme for a General Bank… but the
Governor General was not impressed.
6
9/13/2007
•The First Major step was taken in 1921 when the three Presidency Banks
were amalgamated to for the Imperial Bank of India. It was primarily a
commercial bank but also performed certain central banking
functions.(But note issue and Foreign exchange were the direct
responsibility of the Central Govt.)
•In 1926 the Hilton Young Commission recommended that the dichotomy
of the functions and divisions of responsibility should be ended. It
suggested the establishment of a central bank to be called as RBI.
•Accordingly the gold standard and the RBI Bill was introduced in the
legislative assembly in Jan 1927 but was dropped on account of sharp
differences.
•The Indian Constitutional Reforms in 1933 made it obligatory that the
transfer of responsibility from the British Govt. in India to Indian hands
was dependent on the establishment of the RBI. These events led to the
introduction of a fresh bill in Sept. 1933 Bank of Bengal 1806-1921
7
9/13/2007
• The Governor General gave his accent on 6th March 1934 and
RBI was constituted in accordance with the provisions of the Act
containing 58 sections and was inaugurated on 1st of April 1935.
• The RBI was constituted as a shareholder‟s bank with a fully paid
up capital of Rs. 5 Crores divided into shares of Rs. 100 each. Of
these 5 lakh shares, 2200 shares were subscribed by the directors
of the bank and the remaining by the Pvt. Shareholders.
• In view of the need for close integration between bank‟s policy
and those of the government, the question of state ownership
surfaced time and again. But it was only after independence that
the decision to Nationalise the bank was taken. In terms of RBI
(Transfer to Public Ownership) Act, 1948, its entire paid up
capital was transferred to Central Govt. on 1st of January 1949
when it became a state owned institution.
8
9/13/2007
9
9/13/2007
10
9/13/2007
11
9/13/2007
12
9/13/2007
Functions of RBI
• Traditional Function
– Issue of Currency (200crg+Fex-115g)
– Banker to Government (
– Banker‟s Bank
– Exchange Management and control
– Control of Credit
– Collection and Publication of Data and Report
– Training Facilities
• Promotional & Developmental Functions
– Agricultural Finance
– Industrial Finance
– Export Credit
– Credit to priority sector
– Bill market scheme
– Development and regulation of banking system
• Other Functions
– Purchase and Selling of Gold
– Banking function with other Central Banks Worldwide
– Can borrow money from a scheduled bank in India or outside
– Issues DDs made payable at its own offices and agencies, and makes issues and circulates banks post
bills
13
9/13/2007
1. Issue of Currency
Monopoly in notes issue
1 Re notes and coins not issued by RBI
Issued on the basis of minimum currency reserve system. By RB
Amendment Act 1956, a provision was made for a minimum
reserve in foreign exchange. And in gold in absolute terms.
400 Cr in Foreign Reserves and a min of 115 cr in Gold. A
total of 515 cr.
Operates through Currency Chests at 15 offices & 2 Branches
all over India supported by SBI where there is no
representation.
14
9/13/2007
15
9/13/2007
3. Bankers‟ Bank
Under the Banking Reg. Act 1949 every bank is required to keep
between 3% to 15% of the total of its time and demand liabilities
with the RBI as CRR which is interest free. (Ap.07-6.5%)
Every bank is also required to maintain with the RBI between 25%
to 40% of its net time and demand liabilities as SLR. (25%)
RBI also regulates, supervises and controls the working of the banks :
Issuing of license for opening and branch exp. Calling for returns
and statements and books of accounts. Issue of directions concerning
terms and conditions for loans and advances.
RBI acts as clearing house for banks
RBI provides refinance facilities to commercial banks for export
credit, against 364 days T bills.
16
9/13/2007
17
9/13/2007
18
9/13/2007
19
9/13/2007
20
9/13/2007
5. Credit Control
The RBI controls the money supply and credit to
ensure price stability and meet the varying economic
conditions of the country. For this purpose it uses the
various credit control measures such as variations in
interest rates, open market operations, changes in
CRR and SLR, selective credit controls etc.
21
9/13/2007
22
9/13/2007
7. Training Facilities
• The RBI has set up a no. of training colleges and
centers to provide training to the banking personnel
at different levels:
– Banker‟s Training College (BTC) Mumbai
– Reserve Bank Staff College (RSBC) Madras
– College of Agricultural Banking (CAB) Pune
– Zonal Training Centres (ZTC) M,K,C,D
– Indira Gandhi Institute of Development Research
– Training in Computer Technology
23
9/13/2007
24
9/13/2007
Agricultural Finance
RBI extended Assistance to the cooperative credit
institutions for agricultural dev and allied rural
activities right from its inception in the year 1935
For this it set up an agricultural credit department
to provide long and medium term financing to these
sectors. The department was taken by NABARD in
the year 1982
25
9/13/2007
INDUSTRIAL FINANCE
An industrial credit department was set up in the
year 1957 to advice and help the bank in
providing financial assistance to industries and in
setting up financial institutions like IDBI, IFCI, ICICI
etc.
It also established the National Industrial Credit (Lt-
op)Fund in 1964 to provide financial assistance to
large scale industries.
26
9/13/2007
EXPORT CREDIT
The RBI provides concessional credit , refinance
facilities and guarantee to commercial banks for
export.
It also has setup the EXIM bank to finance export
trade.
27
9/13/2007
28
9/13/2007
29
9/13/2007
Detailed Discussion:
To Stabilise Internal Price Levels:
Frequent Change in Price Adversely effects the economy
Inflation and Deflation trends needs to be prevented
And all these could be done by adopting a suitable Credit Control Policy.
To Stabilize the rate of Foreign Exchange
Change in internal price level effects the level of exports and imports in the
country
If Prices Exports and Imports therefore value of Domestic currency
in the foreign market and its exchange rate ( And vice-versa)
To Protect the outflow of Gold
Expansion of bank credit leads to Rise in Prices thereby decreasing Export
and Increasing Import. As a result an Unfavourable Balance of Payment
Situation.
Bank Cr Prices will & thus Exports will & Imports will
30
9/13/2007
31
9/13/2007
Quantitative Qualitative
32
9/13/2007
Quantitative Methods
1. Bank Rate Policy
33
9/13/2007
34
9/13/2007
35
9/13/2007
36
9/13/2007
37
9/13/2007
Limitations:
Lack of well organised securities market.
CRR is not stable
Penal Bank Rate
Banks Act Differently
Pessimistic or optimistic Attitude
Velocity of Credit money is not constant.
38
9/13/2007
39
9/13/2007
Limitations:
Excess Reserve
Clumsy method: Lacks definiteness and is inexact and uncertain.
(Amount of Reserve and Place)
Discriminatory: Effects different bank differently.
Inflexible: is applicable all over the country universally whereas
different regions have different requirements
40
9/13/2007
41
9/13/2007
1. Regulation of Margin
42
9/13/2007
43
9/13/2007
44
9/13/2007
45
9/13/2007
46
9/13/2007
4. Direct Action
47
9/13/2007
5. Moral Suasion
48
9/13/2007
6. Publicity
49
9/13/2007
CONCLUSION
Selective credit controls are not used to the total
exclusion of general credit controls. In fact they are
an adjunct to general quantitative control. They are
meant to supplement the later and are regarded only
as the „second line instrument.‟
The vital point is not the question of general vs.
selective credit control or the assessment of the
general pros and cons between the two methods but
of their integration. Indeed the co-ordination of
selective and general controls appears to be more
effective then the use of any one of them singly or in
isolation.
50