Importance of rbi
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IMPORTANCE OF RBI
By Ravindra
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RBI Central Office Building, Mumbai
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ESTABLISHMENT
• The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
• The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937.
• Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India
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PREAMBLE
The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as:"...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage."
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Headquarters Maharashtra
Established 1 April 1935
Governor Duvvuri Subbarao
Central bank of India
Currency Indian Rupee
ISO 4217 Code INR
Reserves US$287.37 billion (2009)
Base borrowing rate 5.2%
Base deposit rate 9.5%
Website rbi.org.in
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Main fuctions of RBI
Issuer of Currency
Banker and Debt Manager to Government
Banker to Banks
Regulator of the Banking System
Manager of Foreign Exchange
Regulator and Supervisor of the Payment and Settlement Systems
Developmental Role
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MONETARY AUTHORITY
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Monetary Authority
Monetary policy refers to the use of
instruments under the control of the
central bank to regulate the availability,
cost and use of money and credit.
The goal: achieving specific economic
objectives, such as low and stable inflation
and promoting growth
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The main objectives of monetary policy in India
Maintaining price stability
Ensuring adequate flow of credit to the
productive sectors of the economy to support
economic growth
Financial stability
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ISSUER OF CURRENCY
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Issuer of Currency
The Reserve Bank is the nation’s sole note issuing authority.
Along with the Government of India, RBI is responsible for the
design and production and overall management of the nation’s
currency, with the goal of ensuring an adequate supply of clean
and genuine notes.
The Reserve Bank also makes sure there is an adequate supply
of coins, produced by the government.
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BANKER AND DEBT MANAGER TO GOVERNMENT
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Banker and Debt Manager to Government
The role as banker and debt manager to governmen Includes several distinct functions:
Undertaking banking transactions for the central and state
governments to facilitate receipts and Payments and
maintaining their accounts.
Managing the governments’ domestic debt with the objective
of raising the required amount of public debt in a cost-
effective and timely manner.
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BANKER TO BANKER
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Banker to Banks
As the banker to banks, we focus on:
Enabling smooth, swift and seamless clearing and settlement of inter-
bank obligations. Providing an efficient means of funds transfer for banks.
Enabling banks to maintain their accounts with us for purpose of
statutory reserve requirements and maintain transaction balances. Acting as lender of the last resort.
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REGULATOR TO THE BANKING SYSTEM
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Regulator of the Banking System
The Reserve Bank regulates and supervises the nation’s financial
system. Different departments of the Reserve Bank oversee the
various entities that comprise India’s financial infrastructure.
Commercial banks and all-India development financial
institutions.
Urban co-operative banks.
Regional Rural Banks (RRB), District Central Cooperative Banks
and State Co-operative Bank
Non-Banking Financial Companies (NBFC)
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NON-BANKING FINICIAL COMPANIES
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Non-Banking Financial Companies (NBFC):
The Reserve Bank plays a key role in the regulation and
development of the foreign exchange market and assumes
three broad roles relating to foreign exchange.
Regulating transactions related to the external sector and
facilitating the development of the foreign exchange market.
Ensuring smooth conduct and orderly conditions in the
domestic foreign exchange market
Managing the foreign currency assets and gold
reserves of the country
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REGULATOR AND SUPERVISER OF PAYMENT AND SETTELEMENT SYSTEM
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Regulator and Supervisor of Payment and Settlement Systems
The Payment and Settlement Systems Act of 2007
(PSS Act) gives the Reserve Bank oversight
authority, including regulation and supervision, for
the payment and settlement systems in the country.
In this role, we focus on the development and
functioning of safe, secure and efficient payment and
settlement mechanisms.
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DEVELOPMENT ROLE
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Developmental Role
This role is, perhaps, the most unheralded aspect of RBI’s
activities, yet it remains among the most critical.
This includes:
Ensuring that credit is available to the productive sectors of
the economy,
Establishing institutions designed to build the country’s
financial infrastructure.
Expanding access to affordable financial services and
promoting financial education and literacy.
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Research, Data and Knowledge-Sharing
The Reserve Bank has a rich tradition of generating sound
economic research, data collection and knowledge-sharing.
It’s economic research focuses :
on study and analysis of domestic and international issues
affecting the Indian economy.
This is mainly done by the Department of Economic
Analysis and Policy and Department of Statistics and
Information Management.
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Cont……
This important work is designed to:
Educate the public
Provide reliable, data-driven
information for policy and
decision-making
Supply accurate and timely data for
academic research as well as the
general public
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Communicating with the Public:
RBI emphasis on communication involves a range of activities, all aimed at sharing knowledge about the financial arena. The Reserve Bank’s web site (www.rbi.org.in)
provides a full range of information about RBI’s activities, RBI's publications, it’s history and organisation.
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RBI: Actions in Times of Crisis
The Reserve Bank’s willingness to use conventional and unconventional measures help buffer the nation from severe crisis. Here are some examples of our responses during the 2008-9 global financial crisis:
Carefully considered and calibrated reduction of interest rates until situation has stabilised
Loosened restrictions on access to foreign currency
Creation of a rupee-dollar swap facility to manage short-term funding requirements
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Cont…..
Establishment of a refinancing window and special-purpose vehicle for non-banking financial companies
Expansion of funding sources for umbrella financial institutions to keep credit flowing to small businesses, housing and export businesses.