Reserve Bank of India

Act,1934
Section:- 58
Last amended in 1997 to give proper coverage
to NBFC also. RBI established on 1st April
1935. RBI was nationalized w.e.f.1st January
1949. Previously Imperial Bank of India from
SBI was conducting Central Bank’s functions
– It was shareholder’s bank – taken over by
Central Govt. – Paid up capital is Rs. 5 Cr.
RBI’s Central Office is in Mumbai.

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Management of RBI :-

By a Central Board of Directors with

4 local boards at Mumbai, Delhi,
Kolkata & Chennai.
One Governor ( Presently Dr. Subba
Rao) provisions for - 4 - Dy.
Governors and - 15 - other directors.

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Functions of RBI: - 3 Headings
(i) Supervisory & Regulatory
(a)Monopoly of Note Issue (b) Control of Credit
through monetary policy ( c) Exchange Control
(d) Statutory Regulations (e) Bank of Central
Clearance settlement & transfer.
(ii) Promotional & Developmental
(a)Banker to Govt. (b) Banker to Bankers
( c) Agriculture, Industrial & Export finance
(d) Strengthening co-op structure (e) Collection of
data & publication (f) Promotion & development of
Trading Institutions.
(iii) Refinance Operations & Lenders of the last resort.

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MAJOR DUTIES OF CENTRAL
BANK IN INDIA
(1) Government’s Debt Manager
(2) Monetary Policy Authority
(3) Policy Maker
(4) Prudential Regulator Of Banks & Non
Banking Financial Companies.
(5) Regulator Of Payment Mechanism In
india

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Functions of RBI

(a)Issuance of Currency : Sec. 22

Sole agency to issue bank notes under signature of

Governor Rs.2 to Rs. 10000 – Except one rupee
note signed by finance secretary or coins issued by
Central Govt.

Issue Dept.:- Responsible for issue fresh notes.

Security – aggregate value of gold & foreign currency
resources – not less than Rs.200 Cr. Of which gold
not less than 115 Cr. (Sec.33) currency distributed
with help of currency chests.
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(b) Banker To The Govt.
(Sec.20 for Central Govt. /Sec.21(A) for State
Govt.

(1)Transacts govt. business & manages public debt.

(2)Advises Govt. on all monetary matters.
(3)Provides Ways & Means advances
Sec 17(5) – Temporary advances (O/D)extended
by RBI to Central & State Govts. to bridge the
interval between expenses & receipts – to provide
support – purely temporary – 1% below Repo Rate
(7.25 % minus 1%) – Central Govt. for 10 days –State
Govt. for 14 days.

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( c) Banker’s Bank:-

Keep deposits of Commercial Banks &

acts as lender of last resort – Sec.17(2) &
17(3) – banks to approach RBI for
rediscounting, refinance etc. – Provides
export refinance & liquidity Adjustment
Facility – Repo Rate means Injecting
Funds – Reverse Repo means absorbing
Funds.

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(d) Controller of Banks

Banks to obtain license from RBI

– second schedule of RBI Act –
Scheduled Banks – issues
directions, carries inspection
(onsite & off site) and exercises
management control.
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(e) Controller of Credit (Sec.21 & 35A)

Fix interest rate (incl. – Bank Rate)

exercise selective credit control to control
inflation & money supply for growth of
economy & price stability – change in
CRR, stipulation of margin on securities
etc. are used – carries sales & purchase of
securities known as open market
operations – Quantitative & Qualitative
Method.
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(f) Statutory Reserves

Banks also maintain certain percentage of their

assets in liquid cash from under
SLR / CRR requirements
Sec.42(1):- All scheduled commercial bank (in
second sch. of RBI) are required to keep certain
minimum cash reserves with RBI (3% to 20%).
Present CRR 4.00%.RRB also to maintain CRR
as Sch.Com.Banks – of their net demand & time
liabilities.

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(g) Collection of Information

Collects credit information (Under

Sec.45(C) .Borrower enjoying credit
limits upto Rs.10 Lacs on secured basis &
Rs.5 Lacs on unsecured basis & share this
information with other banks (Sec.45-D) –
Obtains information on suit filed a/c’s &
BSR returns Basic Statistical Returns.

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(h)Maintenance of External
Value of Indian Currency
– as well as internal value.

Foreign Exchange reserves are held by

RBI – wide powers to regulate foreign
exchange transactions under FEMA –
Foreign Exchange Management Act.

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Board For Financial Supervision

Sec.58 of RBI Act w.e.f. 16th November1994.

RBI Governor is ex-officer.
Functions:
Empanelment and selection of Statutory
Auditors for banks & exercise integrated
Supervision over com. banks, F.I’s & NBFC’s
& other Para banking financial institutions.
Both on-site (through inspection) & off-site
(through DSB returns) w.e.f.1st April 1996
submitted on quarterly basis.
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Sec.28: RBI can frame rules for
refunding value of mutilated, soiled or
imperfect notes.

Sec.29: Bank notes shall be

exempted from stamp duty under
Ind. Stamp Act.

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Sec.31: Prohibits any person or
institution to issue notes payable to
bearer on demand – currency notes.

Sec.45: Regulation of NBFC.

Sec.48: Exemption to RBI from

paying Income Tax or Super Tax.

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Sec.49:- Announcement /
Publish Bank Rate – Rate at
which RBI is prepared to buy
or rediscount bills of exchange
or other Commercial papers
eligible for purchase under the
Act – Present Bank Rate is
10.25%
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What is Scheduled Bank ?
Sec.2(e) of RBI Act 1934 – whose name
mentioned in 2nd schedule.
(1)Paid up capital + Reserves not less than 5Lacs.
(2)Affairs not conducted which jeopardize interest of
depositors.
(3)May be state Co-op Bank ,Co. defined under
Companies Act 1956, institution notified by Central
Govt. or any law in force in any place outside India.
Any Bank not included in 2nd schedule of RBI is
called Non - Scheduled Bank.

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A BIG THANK YOU TO
ALL

B.J. VED

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