Tata Institute of Social Sciences

School of Vocational Education

A PROJECT REPORT
ON

RBI AND ITS CONTROL OVER BANKS

SUBMITTED TO

TIKSNA LIVELIHOOD

By

Ms Shreya Rampujan Giri

Enrollment No. HC0446/0243/S22
Batch No. HC0446/C111/B01/S23

IN PARTIAL FULFILMENT OF

B. VOC IN MEDICAL LABORATORY TECHNOLOGY (HCI|I)

MONTH, YEAR
RECEIVED BY EXAMINED BY
NAME: NAME:

SIGN: SIGN:

Marks Obtained
RESERVE BANK OF INDIA AN INTRODUCTION

● RBI is the central bank of the country.

● It is the apex institution of the country's monetary and financial

system

● It was established on the recommendations of the Hilton

young commission as a body corporate under the RBI act

1934

● It plays a leading role in organizing, running, supervising,

regulation and developing the monetary and financial system

● The design and conduct of monetary and credit policy are its

special responsibility.

● It was in 1948, through the Reserve bank(Transfer of public

ownership) Act, 1948 the entire share capital was acquired by

central govt

● Its head office is located in Mumbai.

 ORGANISATION AND MANAGEMENT OF RBI

● Central board- The general superintendence and direction of

the bank's affairs is in the hands of central board of directors.

It comprises of a governor, four deputy governors and 15

directors.

● Local board- there is a local board with headquarters In

Mumbai, kolkata, Delhi and Chennai for each of the regional

areas of the country i.e. east, west, north and south.

 METHODS OF CREDIT CONTROL

Techniques used by RBI

Quantitative or general methods Qualitative methods

Bank rate open market operations Change in CRR and SLR

Margin requirements, Regulation of consumer credit rationing of credit

direct action moral suasion
 MONETARY POLICY

● Monetary policy refers to that policy through which the central

bank of the country controls:-

● The supply of money

● Availability of money and

● Cost of money i.e. rate of interest, in order to achieve a set of

objectives oriented towards the growth and stability of the

country
 Objectives of monetary policy

i) controlled expansion of money supply

● It is needed to restrain the inflationary forces of the economy.

It is essential for growth with stability which can be achieved

through monetary policy of the RBI.

ii) sectoral allocation of funds

 Functions of the RBI

A. Monetary functions (Central banking functions)

1. Bank of issue: RBI has the sole right to issue bank notes of all
denominations. Coins - finance ministry of India, currency
notes-RBI

2. Government banker: RBI acts as government banker, agent and

advisor. The bank has the obligation to transact government
business.

3. Banker's bank and lender of the last resort: the provisions of RBI
Act 1934, tells that every scheduled bank has to maintain cash
balances with the RBI equal to 5% of its demand deposit and 2% of
its time deposit

4. Controller of Credit: has the power to influence the volume of

credit created by the banks in India

5. Custodian of foreign exchange reserves: RBI has the

responsibility to maintain the official rate of exchange.

B. Non- monetary functions:

1. Supervisory functions: has wide powers of supervision and

control over all scheduled banks relating to licensing and
establishment, branch expansion, liquidity of their assets etc.

2. Promotional functions: RBI promotes banking habits, extend

banking facility to rural and semi urban areas and establish and
promote new specialised agencies
 Role of RBI in inflation control

• Inflation arises when the demand increases and there is a

shortage of supply There are two policies in the hands of the RBI.

• Monetary Policy: It includes the interest rates. When the bank

increases the interest rates then there is reduction in the borrowers
and people try to save more as the rate of interest has increased.

• Fiscal Policy: It is related to direct taxes and government

spending. When direct taxes increase and government spending
increases then the disposable Income of the people reduces and
hence the demand reduces.
 SLR (Statutory Liquidity Ratio)

● It is the amount a commercial bank needs to maintain in the

form of cash, or gold or govt. approved securities (Bonds)
before providing credit to its customers.

● SLR rate is determined and maintained by the RBI (Reserve

Bank of India) in order to control the expansion of bank credit.

CRR (Cash Reserve Ratio)

● Cash Reserve Ratio (CRR) is the amount of Cash(liquid cash

like gold) that the banks have to keep with RBI.

● This Ratio is basically to secure solvency of the bank and to

drain out the excessive money from the banks.