UNIVERSITY OF MUMBAI

PROJECT ON

“75 YEARS OF RESERVE BANK OF 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 – 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) 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

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

RESERVEBANK OF INDIA
www.rbi.org.in
RBICentralOfficeBuilding, Mumbai
RESERVE BANK OF INDIA
www.rbi.org.in
INDEX
SR.NO
1

TOPIC
Overview Research Methodology Review of Literature Organisation and Structure Main
Activities Research, Data and Knowledge Sharing Addressing Current and Future
Challenges Customer Service: How Can We Help You

PAGE NO. 5 13 23 25 35 67 71 73 74 88 90 91 92

2 3 4 5 6 7 8 9 10 11 12 13

List of Abbreviations
The RBI Logo Conclusion Bibliography & References Appendix
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 interest 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 future economic and financial course.

Over the years, our specific roles 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
�ManagedbyCentralBoardofDirectors �India‘smonetaryauthority
�Supervisoroffinancialsystem �Issuerofcurrency �Managerofforeignexchangereserves
�Bankeranddebtmanagertogovernment �Supervisorofpaymentsystem �Bankertobanks
�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 known as the Hilton-Young Commission—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 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 that RBI must
amend the rules without delay. "This is a must before the policy is 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," the judges said.
Pointing out that Parliament does not look into 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 prepare 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 quality 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 � Governor 1 � Deputy Governors, at a maximum 4
Non-Official Directors � directors—nominated by the Central Government to represent
4 each local board � directors nominated by the Central Government with expertise
10 in various segments of the economy � representative of the Central Government 1
� meetings—at a minimum—each year 6 � meeting—at a minimum—each quarter 1
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 2) Shri C Krishnan

3) ShriAnandSinha

4) Shri V S Das

4) Shri Gopalkrishna 6) Shri H R Khan7) Shri D K Mohanty

Departments
1) Market
Monetary Policy Department Internati onal Debt Mangt Departm ent

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

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 of� Departments: 26 These focus on policy
issues in the Reserve Bank’s functional areas and internal operations. � Regional
Offices and Branches: 26 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 monetary stability in
India and generally to operate the currency and credit system of the country to its
advantage. ― - From the Preamble of 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 �
case of smaller coins below 50 paise, any sum not exceeding One Rupee In
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 nonbanking
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

(helpcsd@rbi.org.in) 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
ADRs AFS ANBC ARC ARDC ATM BC BCSBI BF BFS BIS BO BoP BPSS BRBNMPL BSR American
Depository Receipts Available for Sale Adjusted Net Bank Credit Agricultural
Refinance Corporation Agricultural Refinance and Development Corporation Automated
Teller Machine Business Correspondent Banking Codes and Standards Board of India
Business Facilitator Board for Financial Supervision Bank for International
Settlements Banking Ombudsman Balance of Payments Board for Regulation and
Supervision of Payment and Settlement Systems Bharatiya Reserve Bank Note Mudran
Private Limited Basic Statistical Returns Current Account Convertibility Central
Accounts Section Core Banking Solution Clearing Corporation of India Limited
Central Counter Party

CAC CAS CBS CCIL CCP

D

DAD DBOD DCC DCCB DEAP DICGC DNBS DPSS

Deposit Accounts Department Department of Banking Operations and Development

District Consultative Committee District Central Cooperative Bank Department of
Economic Analysis and Policy Deposit Insurance and Credit Guarantee Corporation
Department of Non-Banking Supervision Department of Payment and Settlement Systems
Electronic Benefit Transfer External Commercial Borrowings Electronic Clearing
Service Exchange Earner‘s Foreign Currency Electronic Funds Transfer Export Import
Bank of India Fuller Capital Account Convertibility Foreign Currency Assets Foreign
Currency Convertible Foreign Exchange Management Act Foreign Exchange Regulation
Act Foreign Institutional Investors Forward Rate Agreements Global Depository
Receipts Government of India Guarantee Redemption Fund

EBT ECBs ECS EEFC

EFT EximBank FCAC FCAs FCCB FEMA FERA FIIs FRAs GDRs GoI GRF
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 looks 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,
letterheads, 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) 2) 3)

What is the role of the Reserve Bank of India in currency management? What is the
role of Government of India? Who decides on the volume and value of banknotes to be
printed and on what basis?

4) 5) 6) 7) 8) 9)

Who decides on the quantity of coins to be minted? How does the Reserve Bank
estimate the demand for banknotes? How does the Reserve Bank reach the currency to
people? What is a currency chest? What is a small coin depot? 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) 2) 3) 4) 5) 6) 7)

What are soiled, mutilated and imperfect banknotes? Can soiled and mutilated
banknotes be exchanged for value? Where are soiled/mutilated banknotes accepted for
exchange? How much value would one get in exchange of soiled banknotes? How much
value would one get in exchange of mutilated banknotes? How much value would one
get in exchange of imperfect banknotes? 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) 3)

Why was the change brought about? 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 o

Not to staple the banknotes 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: helpdoc@rbi.org.in
Thanking You