PRESENTED BY: RAHUL SRIVASTAV

FATIMA SIDDIQUE
ASGAR QURESHI
AMIT HIMANI

SUBMITTED TO: PROF. UMAR PATEL

FEATURING..
 Introduction
 History
 Need for RBI
 Board of directors
 Functions of RBI
 Manager of Foreign Exchange
 Susidiaries
 Narsimham Committee
 Conclusion

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INTRODUCTION
 RBI is the apex financial institution in India.

 It operates under the control of Ministry of

Finance.

 It was established in April 1935 with a

share capital of Rs. 5 crores on the basis
of the recommendations of the Hilton
Young Commission.

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CONTD…
 Its present governor is Dr. Duvvuri Subbarao.

 It has 22 regional offices, most of them in

State capitals.

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HISTORY
 The RBI was established in 1935, under Reserve
Bank of India Act, 1934.

 It was a private Shareholders association till

January, 1949.

 It was nationalise with effect from 1st January 1949

 In 1949, the Banking Regulation Act gave

extensive regulatory powers to the RBI over the
commercial banks.

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CONTD…
 Initially it was located in Kolkata,later
It moved to Mumbai in 1937.

 Since nationalization in 1949, the

Reserve Bank is fully owned by the
Government of India.

 Its First governor was Sir Osborne

A. Smith

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NEED FOR RBI
 RBI plays an important role in the
economic development of the nation.

 It(RBI) regulates money supply in the

country.

 It monitors the working of Commercial

banks.

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CONTD..
 It frames monetary policy of the country.

 Banks and Government are the account

holders of RBI.

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ORGANISATION AND MANAGE MENT

 The Reserve Bank is managed by the

Central Board of Directors, Four local
board of directors and the Committee of
the Central Board of Directors.

 The final control of the Bank vests in the

Central Board which comprises the
Governor, Four Deputy Governors and
fifteen Directors

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CONTD..
 The bank has Twenty Departments and
three Training establisment at the
Central Office of the Bank.

 The department of banking supervision

has been set up with its central office at
Mumbai and 16 regional offices at
various centres in the country.

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BOARD OF DIRECTORS
The Reserve Bank's affairs are governed by a
central board of directors.
 Azim Premji
 Kumar Mangalam Birla.
 Suresh Tendulkar, Economist and Member, Prime Minister's
Economic Advisory Council (to represent Eastern Area
Local Board)
 U. R. Rao, former Chairman, ISRO and Chairman Research
Council, Physical Research Laboratory, Department of
Space (to represent Northern Area Local Board)

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CONTD…
 Lakshmi Chand, IAS (Retd.) (to represent
Southern Area Local Board)
 Shashi Rekha Rajagopalan, Consultant, Co-
operatives
 Suresh Kumar Neotia, Chairman, Ambuja Cement
 A. Vaidyanathan, Madras Institute of Development
Studies
 Man Mohan Sharma, FRS, Former Director,
Mumbai University Institute of Chemical
Technology
 D. Jayavarthanavelu, Chairman and Managing
Director, Laxmi Machine Works Ltd.
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FUNCTIONS OF RBI

Bank of Issue
Banker of Government
Bankers’ Bank and Lender of the Last Resort
Controller of Credit
Custodian of Foreign Reserves
Supervisory Functions
Promotional Functions

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NETWORK OF CURRENCY CHESTS
 RBI is located only in 18 places for currency
operations
 Distribution of notes and coins throughout the
country is done through designated bank
branches, called chests
 Chest is a receptacle in a commercial bank to
store notes and coins on behalf of the Reserve
Bank
 Deposit into chest leads to credit of the
commercial bank’s account and withdrawal,
debit

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FORMULATE MONETARY POLICY
 Objective: Maintain price stability and
ensuring adequate flow of credit in
the economy.

 What R.B.I does: It formulates, implements

and monitors the monetary policy.

 Intruments: Quantitative & Qualitative.

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QUANTITATIVE
MEASURES
 Objective: Control the volume of credit and inflation,
indirectly.

 Repo Rate, Reverse Repo Rate, CRR kept unchanged.

 Repo rate: 4.75% (w.e.f. 21/04/2009)
 Reverse Repo : 3.25% (w.e.f. (21/04/2009)
 CRR: 5.00%( w.e.f. 17/01/2009)
 SLR: 25%(w.e.f. 07/11/2009)

 Bank Rate kept unchanged at 6.00% (w.e.f. 29/04/2003)

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QUALITATIVE
MEASURES
 Objective: They control the supply of money in selective sectors
of the economy.

 The RBI issues directives to banks relating to the purpose for

which advances may or may not be made.

 The margins to be maintained in respect of secured advances.

 The maximum amount of advance to any borrower.

 The maximum amt. of guarantee that can be given on behalf of

any firm

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REGULATES AND SUPERVISE THE
FINANCIAL SYSTEM
 Objective: To Maintain Public confidence
in the system, protect depositor’s
interest & provide cost effective banking
services to the public.

 What R.B.I does: Prescribes broad

parameters of banking operations within
which the country's banking and
financial system functions.

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CONTD…
 The Reserve Bank of India performs this
function under the guidance of the
Board for Financial Supervision (BFS).

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MANAGER OF FOREIGN EXCHANGE
 Objective: To facilitate external trade and payment
and promote orderly development and maintenance
of foreign exchange market in India.

 What R.B.I does: It acts as a custodian and

Manages the Foreign Exchange Management Act,
1999.
 RBI buys and sells foreign currency to maintain the
exchange rate of  Indian Rupee v/s  foreign
currencies like the US Dollar, Euro, Pound sterling
and Japanese yen.
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ISSUE OF CURRENCY
 Objective: To ensure adequate quantity of
supplies of currency notes and coins of
good quality.

 What R.B.I does: Issues new currency and

destroys currency and coins not fit for
circulation.
 It has to keep in forms of gold and foreign
securities as per statutory rules against
notes & coins issued.

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DEVELOPMENT ROLE
 Objective : To develop the quality of
banking system in india.

 What R.B.I does: Performs a wide range of

promotional functions to support national
objectives.
 To establish financial institutions of national
importance, for e.g: NABARD,IDBI etc.

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SUBSIDIARIES
 Fully owned:
1) National Housing Bank(NHB),
2) Deposit Insurance and Credit Guarantee
Corporation of India(DICGC),
3) Bharatiya Reserve Bank Note Mudran Private
Limited(BRBNMPL)

 Major stakes: National Bank for Agriculture and Rural

Development (NABARD)
 The Reserve Bank of India has recently divested its stake
in State Bank of India to the Government of India.
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GOLD TRADING
 The Reserve Bank of India also regulates the
trade of gold.

 Currently 17 Indian banks are involved in the

trade of gold in India.

 RBI has invited applications from more banks

for direct import of gold to curb illegal trade in
gold and increase competition in the market.

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NARSIMHAM
COMMITTEE
 Narasimham committee in 1991 suggested
following recommendation(Reforms)

1) CRR and SLR: CRR was brought down from 15% to

5%.SLR was reduced from 38.5% to 25%.

2) Interest Rates: The interest rate on savings deposits has

been reduced to 3.5%.

3) Corporate Governance : promoting customer relations

and office culture

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CONTD…
4) Financial Markets: RBI has been making special
efforts to develop the money market, the government
seccurities market and the foreign exchange market.

5) Opening of More Pvt. sector banks

6) Motivation foreign banks to expand their network

by opening new branches.

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CONTD…
7) Asset Reconstruction for bringing down NPA in
future

8) Deregulation of RBI and Finance ministry of

India. Making RBI as a regulator of all Banks and
let Banks takes participation in equity market with
govt. stake of 51%.

9) Basel Committee norms I&II

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BASEL COMMITTEE NORMS I&II

 Basel Committee I was started in 1988.

Basel I introduced CAR without going
into detail about individual banks.

 Basel Committee II norms is resting on 3

pillars
 Minimum Capital Requirements(CAR)
 Supervisory Review Process(Ratings)
 Market Discipline(Risk Involved)

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CONCLUSION
 RBI has developed greater competition among
banks for improving their efficiency and the quality
of services.

 Monetory policy helps in correcting ills of

economy such as inflation and deflation.

 Under the RBI's supervision and inspection, the

working of banks has greatly improved.
Commercial banks have developed into financially
and operationally sound and viable units.

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