Q1. What is RBI?

A1. Reserve Bank of India (RBI) is India’s central bank. It controls

the monetary policy concerning the national currency, the Indian
rupee. The basic functions of the RBI are the issuance of
currency, to sustain monetary stability in India, to operate the
currency, and maintain the country’s credit system. RBI is an
institution of national importance and the pillar of the surging
Indian economy. It is a member of the International Monetary
Fund (IMF). 

Q2. What are the Main functions of RBI?

A2. Reserve Bank of India works as:
Monetary Authority

 Implementation of monetary policies.

 Monitoring the monetary policies
 Ensuring price stability in the country considering the economic
growth of the country
Also, read about the Monetary Policy Committee (MPC) and know more
about this six-member committee.
Regulator and Administrator of the Financial System

 The RBI determines the comprehensive parameters of banking

operations.
 These methods are responsible for the functioning of the country’s
banking and financial system. Methods such as:

o License issuing
o Liquidity of assets
o Bank mergers
o Branch expansion, etc.
Managing Foreign Exchange

 RBI manages the FOREX Reserves of India.

 It is responsible for maintaining the value of the Rupee outside the
country. 
 It aids foreign trade payment. 
Issuer of currency

 The Reserve Bank of India is responsible for providing the public with
a sufficient supply of currency notes and coins. 
 The quality of currency notes and coins is also taken care of by the
RBI.
 RBI oversees issuing and exchanging of currency and coins. 
 Also, the destruction of currency and coins that are not fit for
circulation.

Q3. Establishment of RBI, Act of establishment and year of

nationalization of RBI?

A3.

The concept of Reserve Bank of India was based on the

strategies formulated by Dr. Ambedkar in his book named
“The Problem of the Rupee – Its origin and its solution”. This
central banking institution was established based on the
suggestions of the “Royal Commission on Indian Currency &
Finance” in 1926. This commission was also known
as Hilton Young Commission. In 1934, The British enacted
the Reserve Bank of India Act. In 1949, the Reserve Bank of
India was nationalized and became a member bank of the
Asian Clearing Union. In the year 2016, the original RBI Act
 of 1934 was amended and that provided the statutory basis
for the implementation of the flexible inflation-targeting
framework. 

Q4. Governor of RBI?

A4.
 The governor of the RBI is responsible for controlling
the interest rates on deposits and advances of the
country. However, this control is limited to the extent
of prescribing interest rates on savings account and a
minimum lending rate.
 The governor of the RBI is responsible for regulating
and administering the financial system of the nation.
He is responsible for setting parameters within which
the whole financial system will function. Not a rupee
can be moved without the permission of the governor
of RBI.
 The foreign exchange management Act, 1999 which is
to facilitate external trade and payment and to
promote orderly development and maintenance of
foreign exchange market in India is managed by the
governor of RBI.
 The RBI governor is further responsible to monitor the
issue and destruction of currency and coins which are
not fit for circulation in public. He is also responsible
to monitor the adequate quantity of currency notes
and coins are supplied and in good quality.
 He also has a major role to play when it comes to
helping and promoting functions to support national
objectives.
Current RBI Governor - Shri Shaktikanta Das

Q5. Repo rate?

A5. Repo rate refers to the rate at which commercial banks

borrow money by selling their securities to the Central bank of our
country i.e., Reserve Bank of India (RBI) to maintain liquidity, in
case of shortage of funds or due to some statutory measures. It is
one of the main tools of RBI to keep inflation under control.

Q6. Reverse Repo rate?

Reverse Repo Rate is a mechanism to absorb the liquidity in the

market, thus restricting the borrowing power of investors.

Reverse Repo Rate is when the RBI borrows money from banks
when there is excess liquidity in the market. The banks benefit out
of it by receiving interest for their holdings with the central bank.

During high levels of inflation in the economy, the RBI increases

the reverse repo. It encourages the banks to park more funds with
the RBI to earn higher returns on excess funds. Banks are left
with lesser funds to extend loans and borrowings to consumers.

Q7. Cash Reserve Ratio?

A7. Under cash reserve ratio (CRR), the commercial banks must
hold a certain minimum amount of deposit as reserves with the
central bank. The percentage of cash required to be kept in
reserves as against the bank's total deposits, is called the Cash
Reserve Ratio. The cash reserve is either stored in the bank’s
vault or is sent to the RBI. Banks can’t lend the CRR money to
corporates or individual borrowers, banks can’t use that money for
investment purposes. And Banks don’t earn any interest on that
money.
Q8. SLR?
A8. SLR, or statutory liquidity ratio, determines the amount of
money a bank needs to invest in certain specified securities,
which are predominantly securities issued by the central
government and state governments. RBI fixes this limit.
Unlike CRR, money invested under the SLR window earn some
interests for banks. But they can’t access this fund for lending
purposes.

Q9. NPA?
A9. It refers to those loans and advances that are in default or in arrears
i.e., principal and interest payments are late or missed. As per the RBI,
an asset becomes non-performing when it stops to generate income for
the bank.
Types of NPAs

 Term Loans
 Overdraft and cask credit facility left out of order for more than 90
days.
 Agricultural advances whose interest and principal
instalment payment remains overdue.
  Expected payment is overdue for more than 90 days for any other
type of account.

Q10. Bank Rate?

A10. The minimum rate of interest, which a central bank charges
(in India's case - Reserve Bank of India), while lending loans to
domestic banks is called "Bank Rate". When a bank suffers fund
deficiency, it can borrow money from RBI to continue services.
 
When Bank Rate is increased by the central bank, a commercial
bank’s borrowing costs hikes, which reduce the supply of money
in the market.
Q11. Difference between RTGS and NEFT
A11. Differences between NEFT and RTGS
NEFT (National Electronic Funds Transfer)
Through National Electronics Funds Transfer,
transactions of any amount can be sent to the
recipient’s account without any maximum
limit to the funds that can be sent in a day
The National Electronic Funds Transfer
method does not have a minimum transfer
limit ceiling.
The funds transferred through NEFT are
processed in 12 batches between 8:00 AM to
6:30 PM on weekdays and between 8:00 AM
and 1:00 PM on Saturdays. It is not available
on Sundays and bank holidays.
The settlement of funds happens on a half-
hourly basis
The NEFT mode is used when the transactions
are of smaller values.
The National Electronic Funds Transfer
system was introduced in November 2005 to
replace the Special Electronic Fund Transfer
(SEFT) system that was in use at the time.
When NEFT transactions fail or are not
processed on time, destination banks are
required to return the fund to the originating
branch within two hours of completion of the
batch in which the transaction was processed
RTGS (Real-Time Gross Settlement)
Large amounts of funds can be used to transfer instantly
with Real-Time Gross Settlement. The transaction speed is
faster than any other form of online payment.
The minimum amount needed to be transferred must be of
Rs. 2 Lakhs and above for RTGS
The Reserve Bank of India (RBI) has allocated the following
timeslots for Real-Time Gross Settlements:
 9:00 AM – 4:30 PM on weekdays
 9:00 AM – 1:30 PM on Saturdays
The settlement of funds is instantaneous and happens in real-
time
RTGS is used in high-value transactions.
The Real-Time Gross Settlement system was first
implemented in India in March 2004 as a major technology-
based electronic funds transfer system across the country.
In an event when transactions fail, the money is credited into
the sender’s account once the money is received back by the
remitting bank. The funds are returned to the originating
bank within one hour or before the end of the RTGS
business day or whichever comes first
Q12.Commencement of RBI and Affiliation of RBI?

A12. The Reserve Bank of India was set up based on the

recommendations of the Hilton Young Commission. The
Reserve Bank of India Act, 1934 (II of 1934) provides the
statutory basis of the functioning of the Bank, which
commenced operations on April 1, 1935. RBI is affiliated
to Ministry. RBI is affiliated to Ministry of Finance.