Assignment

By: Prudhvi Pokuru

PGDM ABM (2021-23)
1. What is RBI?
Reserve Bank Of India is India’s central bank and regulatory body which comes under Ministry
of Finance, GOI. It was established on April 1, 1935, under RBI act 1934. Initially the central
office was located at Kolkata. It was shifted to Mumbai in 1937. RBI was nationalised with
effect from 1stJanuary 1949based on Reserve Bank of India (Transfer to public ownership) Act
1948.

2. What are the main functions of RBI?

Monetary Authority:
 Formulates implements and monitors the monetary policy.
 Objective: maintaining price stability while keeping in mind the objective of growth.

Regulator and supervisor of the financial system:

 Prescribes broad parameters of banking operations within which the country's banking
and financial system functions.
 Objective: maintain public confidence in the system, protect depositors' interest and
provide cost-effective banking services to the public.

Manager of Foreign Exchange

 Manages the Foreign Exchange Management Act, 1999.
 Objective: to facilitate external trade and payment and promote orderly development and
maintenance of foreign exchange market in India.

Issuer of currency: 

 Issues and exchanges or destroys currency and coins not fit for circulation.
 Objective: to give the public adequate quantities of supplies of currency notes and coins
and in good quality.

Developmental role: 

 Performs a wide range of promotional functions to support national objectives.

3. Establishment of RBI, Act of establishment and year of nationalization of RBI
  The Reserve Bank of India was established on April 1, 1935 in accordance with the
provisions of the Reserve Bank of India Act, 1934
 Though originally privately owned, since nationalisation in 1949, the Reserve Bank is
fully owned by the Government of India.

4. Governor of RBI
Governor of RBI is Shri Shaktikanta Das. He is a retired 1980 batch Indian Administrative
Service officer of Tamil Nadu cadre. Currently he is serving as 25th governor of RBI. He was
earlier a member of the Fifteenth Finance Commission.

5. Repo Rate:
 Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case
of India) lends money to commercial banks in the event of any shortfall of funds. Repo
rate is used by monetary authorities to control inflation.
 As of April 2021, RBI’s repo rate stands at 4%, repo rate was reduced by 40 basis points
from 4.4% to 4%.

6. Reverse Repo Rate:

 Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of
India in case of India) borrows money from commercial banks within the country. It is a
monetary policy instrument which can be used to control the money supply in the
country.
 As of April 2021, RBI’s Reverse repo rate stands at 3.35%.

7. Cash Reserve Ratio:

 The Reserve Bank of India or RBI mandates that banks store a proportion of their
deposits in the form of cash so that the same can be given to the bank’s customers if the
need arises. The percentage of cash required to be kept in reserves, vis-a-vis a 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 do not get any interest on the money that is with
the RBI under the CRR requirements.

8. SLR:

 Statutory Liquidity Ratio or SLR is a minimum percentage of deposits that a

commercial bank has to maintain in the form of liquid cash, gold or other securities. It is
basically the reserve requirement that banks are expected to keep before offering credit to
customers
 RBI in 2020 has fixed a SLR ratio of 18%.
9. NPA:
 An asset, including a leased asset, becomes non-performing when it ceases to generate
income for the bank. A 'non-performing asset' (NPA) was defined as a credit facility in
respect of which the interest and/ or installment of principal has remained 'past due' for a
specified period of time.
 Indian public sector banks collectively owned approximately 6.17 trillion Indian rupees
in non-performing assets in fiscal year 2021. This value was much higher, at around 7.5
trillion rupees in the 2019 fiscal year, indicating a slow but slight relief for India's
economy in terms of non-paying assets at public banks.

10. Bank Rate:

 Bank rate is the rate charged by the central bank for lending funds to commercial banks.
 Base rate is the minimum rate set by the Reserve Bank of India below which banks are
not allowed to lend to its customers.

11. Difference between RTGS and NEFT

Parameters NEFT RTGS

Expansion National Electronics Funds Real Time Gross Settlement

Transfer
Minimum transfer value Re 1 Rs 2 lakhs

Maximum transfer value No limit No limit

Payment options Online and offline Online and offline

Settlement type Takes time because of batch Real time transaction

wise transaction