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Study Material1 Principles and Practice of Banking
Study Material1 Principles and Practice of Banking
Study Material1 Principles and Practice of Banking
PRACTICE OF BANKING
2. Objectives
Preamble of RBI: Preamble of RBI Act-1934 lay down
3. Composition of Indian
Banking System
Indian Banking System
Reserve Bank of India
Public
Sector
Banks-27
Nationalized
Banks
-19
Private
sector
Banks-37
Foreign
Banks in
India-40
State Bank of
India its
Subsidiaries-8
Regional
Rural Banks196
Old Private
Banks-22
S. Urban
Coop.
Banks-52
S. State
Coop.
Banks-16
New Private
Banks-8
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4. Governing Body
Central Board: Consist of 20 Directors including Governor
as Chairman, Deputy Governors not more than four, 14
Directors out of which four one each from Local
Board and one Government Official nominated by
Central Government. Entrusted with responsibility of
policy making, general supervision and direction of
affairs and business of Reserve Bank.
Local Board: Four Local Boards for Four Regions:
Western with Head quarters in Mumbai, Eastern with
Kolkata, Northern with New Delhi and Southern with
Chennai. Consist of Five Directors appointed by Central
Govt. for four years. They represent territorial and
economic interests of local cooperatives and
indigenous banks. Advise Central Board on matters of
local importance.
Governor: Chairman of Board as well as the Chief
Executive authority. Assisted by Deputy Governors.
Appointed for Five Years.
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5. Organizational
Structure
Deposit
6. Organizational
Structure (contd.)
Exchange Control Department:
Controlling foreign exchange
transactions and maintaining exchange rate stability.
Rural Planning and Credit Department: District Credit Plans, Lead Bank
Scheme, Financial Assistance for NABARD, Special Studies for
promoting IRDP, Framing policies for rural credit/development and
Microfinance.
Department of Economic Analysis and Policy: Economic Research,
Reviews financial and banking conditions, Report on Currency and
Finance, RBI Bulletins, Policy studies on emerging aspects of
banking and economy and Annual Reports.
Other Departments: Dept. of
Statistical Analysis and Computer
Services,
Dept. of Administration and Personnel, Legal Dept.
Management Services Dept., Dept. of Non-Banking Companies,
Banking Supervision, Credit Planning Cell, Dept. of External
Investment and Operations, Deposit Insurance and Credit Guarantee
Corporation, Industrial and Export Credit Dept., Secretarys Dept.,
RBI Service Board and Human Resource Development Dept.
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(Training Institutions).
7. Functions of RBI
Operational Framework Performs all functions of Central
Bank. Besides developmental and promotional functions consistent
with planning priorities.
Sole right to issue currency notes of Rs.2 and above. One Rupee
Note and coins by MF but circulated under RBI supervision.
All notes issued by RBI legal tender/ guaranteed by Central Govt.
Rules Governing Note Issue: Proportionate Reserve System of 40%
Gold Reserve. Since 1957, followed Minimum Reserve System
Rs.200 crore of Gold and foreign exchange of which Rs.115 crore
Gold. Adopted .
Design, form, denomination and material of notes subject to
approval by Govt.
Currency Chests: For provision of remittance facilities to banks and
public, facilitating treasuries and bank to function by minimum
cash balance and facilitating exchange of New for old/soiled notes.
8. Banker to Governments
Banker to Central and State Governments:
9. Bankers Bank
Banker to Scheduled Commercial Banks:
13. Supervisory
Framework of RBI.
RBI adopted Basel Committee - 25 core principles for
effective banking supervision.
Department of Supervision separated from DBOD in
1993. Two Departments: DBS and DNBS set up under
the Board of Financial Supervision (BFS) with Governor
as chairman in 1994.
Supervisory process include : On-site Inspection and
Off-site Monitoring and surveillance system
On-site Inspection: Annual Financial Inspections (AFI)
undertaken directly by RBI or external auditors, focuses
on statutory mandated areas, solvency, liquidity and
financial and operational health of the bank.
RBI identifies areas of concerns and draws up action
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plan to monitor.
14. Off-site
Monitoring/Surveillance
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