What is RBI ?
- RBI (Reserve Bank of India) is India’s Central Banking Institution.
When did RBI came into existence ?
- RBI came into existence on 1st April 1935 as a private share holder.
- On 1st January 1949.
- 19 regional offices.
- It prints currency in 15 languages.
- It came into existence on recommendation of Hilton Young (Royal) commission as per RBI act 1934.
Does RBI pay interest on government deposits ?
- No. RBI does not pay interest on government deposits
- Monetary Authority
- Regulator and supervisor of the financial system
- Manager of Foreign Exchange
- Issuer of currency
- Developmental role(Functions to support national objectives)
- Banker to Banks
- Banker to the Government
RBI is said to be Banker to the Banks. Which functions it performs as Bankers' Bank ?
- Keeps a part of cash reserves of the banks
- Short term lending
- Centralized clearing facility
- Currency notes are issued by RBI under “Minimum Reserve system 1957” with backing of 200 Cr Reserve(Gold : Rs. 115Cr + Foreign Securities Rs.85 Crore)
- Bank Rate, Repo Rate, Reverse Repo Rate, Cash Reserve Ratio, Statutory Liquidity Ratio
- Bank Rate, also known as discount rate at which RBI (central bank) lends to commercial banks and other financial institutions. It is usually for longer period.
- In simple words, it is basically borrowing money from someone and then paying interest. This rate is decided by central bank depending upon the demand and supply of money in an economy.
- It is the rate at which banks takes money from RBI for a short period of time by selling their financial assets to RBI with an agreement to repurchase it in future.
- The rate at which RBI borrows from the commercial bank. RBI uses Reverse repo rate when it feels there is too much money floating in the banking system.
- Both Repo and Reserve repo rate are used as policy instruments for day to day liquidity management under the liquidity adjustment facility.
- Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. RBI increases the CRR rate to drain out the excessive cash from the banks.
- SLR (Statutory Liquidity Ratio) 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. SLR is determined as the percentage of total demand and percentage of time liabilities. SLR is used to control inflation and propel growth.
- It involves buying and selling of government securities by RBI to influence the volume of cash reserves with commercial banks.
- Central Board of Directors
- One Governor (Dr. Raghuram Rajan)
- Four Deputy Governors(4 is the maximum)
- H R Khan,
- Dr Urjit Patel,
- R Gandhi and
- SS Mundra.
- Four Non official Directors(which is nominated by Central Government. -Each non-official director represent the local boards in Delhi, Chennai, Kolkata and Mumbai)
- Ten Non official directors(Nominated by RBI)
- One representative of Central Government
- Committee of Central Boards
- Board of Financial Supervision
- Board of Payment and Settlement systems
- Subcommittees of central board
- Local Boards
- Bank Rate : 8.25%
- Repo Rate : 7.25%
- Reverse Repo Rate : 6.25%
- Cash Reserve Ratio (CRR) : 4%
- Statutory Liquidity Ratio (SLR): 21.50%
- Marginal Standing Facility(MSF): 8.25%