By Zenit Group I

RBI : An Introduction
India s Central Bank Established in April 1935 , on the recommendations of Hilton Young Commission . Nationalized in the year 1949 . 20 members on central board , including governor and 4 deputy governors . Subsidiaries NHB , DICGC , NABARD , BRBNMPL. Has4 regional offices , 15 branches and 5 sub - offices .

RBIs Preamble

To regulate the issue of Bank Notes and keeping the reserve with a view to secure monetary stability in India and generally to operate the currency and credit system of the country to its advantage.

Functions
Supreme monetary authority in the country. Banker to the government. Issuer of currency. Controller of foreign exchange (Foreign Management Act, 1999). Lender of the last resort. Controller of credit. Promotional functions. Clearing house function.

Non monetary functions

Financial advisor to the state and banks. Regulator and supervisor of the financial system. Licensing, establishment, amalgamation, reconstruction and liquidation of commercial and cooperative banks. Periodic inspection of the banks. Promote and establish new specialized financial institutions.

Polici es

Monetary policy To maintain price stability, proper credit flow, for the overall economic growth. Fiscal policy - To stabilize economic growth, avoid the boom and bust economic cycle.

Money supply (M3) Bank rate (6.0%) CRR (5.5%) SLR Repo Rate (8.5%) Reverse Repo Rate (7.5%) Capital Adequacy Ratio (CAR) SLR 24% Open Market Operations

Monetary policy

Fiscal Policy
Reduction of Govt. Expenditure Increase in Taxation Imposition of new Taxes Wage Control Rationing Public Debt Increase in savings Maintaining Surplus Budget

RBI: Recent trends

RBI infused Rs.60000 crores since November 2011. Wholesale Price Index fell to 7.4% in December 2011. CRR reduced by 0.5% on January 24,2012.

Limitations
Cannot stimulate economic demand and combat inflation simultaneously. Monetary policies restricted and impacted by other government activities, primarily fiscal policy. Inflexible labor market, inadequate infrastructure and fiscal policy, being open to questions, limits the effectiveness of the monetary policy. Tight monetary policy has been a point of criticism. Monetary policy cant work in isolation.

RBIs Policies Effects on India as a whole

GDP has gone down from 7.6 to 7.0%. Industrial Growth has been affected ( bottom line of most of the companies have gone down).

Thank you!