Main functions

Financial Supervision

The primary objective of BFS is to undertake consolidated supervision of the financial sector
comprising commercial banks, financial institutions and non-banking finance companies.

The Board is constituted by co-opting four Directors from the Central Board as members for a
term of two years and is chaired by the Governor. The Deputy Governors of the Reserve Bank
are ex-officio members. One Deputy Governor, usually, the Deputy Governor in charge of
banking regulation and supervision, is nominated as the Vice-Chairman of the Board. The Board
is required to meet normally once every month. It considers inspection reports and other
supervisory issues placed before it by the supervisory departments.

BFS through the Audit Sub-Committee also aims at upgrading the quality of the statutory audit
and internal audit functions in banks and financial institutions. The audit sub-committee includes
Deputy Governor as the chairman and two Directors of the Central Board as members. The
BFS oversees the functioning of Department of Banking Supervision (DBS), Department of Non-
Banking Supervision (DNBS) and Financial Institutions Division (FID) and gives directions on
the regulatory and supervisory issues.

Regulator and supervisor of the financial system

The institution is also the regulator and supervisor of the financial system and prescribes broad
parameters of banking operations within which the country's banking and financial system
functions. Its objectives are to maintain public confidence in the system, protect depositors'
interest and provide cost-effective banking services to the public. The Banking Ombudsman
Scheme has been formulated by the Reserve Bank of India (RBI) for effective addressing of
complaints by bank customers. The RBI controls the monetary supply, monitors economic
indicators like the gross domestic product and has to decide the design of the rupee banknotes
as well as coins.

Managing of exchange control

The central bank manages to reach different goals of the Foreign Exchange Management Act,
1999. Objective: to facilitate external trade and payment and promote orderly development and
maintenance of foreign exchange market in India

Issue of currency[edit]
The bank issues and exchanges currency notes and coins and destroys the same when they
are not fit for circulation. The objectives are to issue bank notes and give public adequate
supply of the same, to maintain the currency and credit system of the country to utilize it in its
best advantage, and to maintain the reserves. RBI maintains the economic structure of the
country so that it can achieve the objective of price stability as well as economic development
because both objectives are diverse in themselves. For printing of notes, the Security Printing
and Minting Corporation of India Limited (SPMCIL), a wholly owned company of the
Government of India, has set up printing presses at Nashik, Maharashtra and Dewas, Madhya
Pradesh. The Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), also has set
up printing presses in Mysore in Karnataka and Salboni in West Bengal. In all, there are four
printing presses.[45] And for the minting of coins, SPMCIL has four mints at Mumbai, Noida (UP),
Kolkata and Hyderabad for coin production.[46] Commercial banks create credit. It is the duty of
the RBI to control the credit through the CRR, bank rate and open market operations. As
banker's bank, the RBI facilitates the clearing of cheques between the commercial banks and
helps the inter-bank transfer of funds. It can grant financial accommodation to schedule banks.
It acts as the lender of the last resort by providing emergency advances to the banks. It
supervises the functioning of the commercial banks and takes action against it if the need
arises. The RBI also advices the banks on various matters for example Corporate Social
Responsibility
Detection of fake currency
In order to curb the fake currency menace, RBI has launched a website to raise awareness
among masses about fake notes in the market. www.paisaboltahai.rbi.org.in provides
information about identifying fake currency.

On 22 January 2014; RBI gave a press release stating that after 31 March 2014, it will
completely withdraw from circulation all banknotes issued prior to 2005. From 1 April 2014, the
public will be required to approach banks for exchanging these notes. Banks will provide
exchange facility for these notes until further communication. The Reserve Bank has also
clarified that the notes issued before 2005 will continue to be legal tender. This would mean that
banks are required to exchange the notes for their customers From 1 July 2014, however, to
exchange more than 15 pieces of `500 and `1000 notes, non-customers will have to furnish
proof of identity and residence as well as show aadhar to the bank branch in which she/he
wants to exchange the notes.as well as for non-customers. From 1 July 2014, however, to
exchange more than 15 pieces of `500 and `1000 notes, non-customers will have to furnish
proof of identity and residence as well as show aadhar to the bank branch in which she/he
wants to exchange the notes.

This move from the Reserve Bank is expected to unearth black money held in cash. As the new
currency notes have added security features, they would help in curbing the menace of fake
currency.

Developmental role

The central bank has to perform a wide range of promotional functions to support national
objectives and industries. The RBI faces a lot of inter-sectoral and local inflation-related
problems. Some of these problems are results of the dominant part of the public sector.

Related functions

The RBI is also a banker to the government and performs merchant banking function for the
central and the state governments. It also acts as their banker. The National Housing
Bank (NHB) was established in 1988 to promote private real estate acquisition. The institution
maintains banking accounts of all scheduled banks, too. RBI on 7 August 2012 said that Indian
banking system is resilient enough to face the stress caused by the drought like situation
because of poor monsoon this year
Policy rates and reserve ratios

Repo rate[edit]

Repo (Repurchase) rate also known as the benchmark interest rate is the rate at which the RBI
lends money to the banks for a short-term. When the repo rate increases, borrowing from RBI
becomes more expensive. If RBI wants to make it more expensive for the banks to borrow
money, it increases the repo rate similarly, if it wants to make it cheaper for banks to borrow
money it reduces the repo rate.If the repo rate is increased, banks can't carry out their business
at a profit whereas the very opposite happens when the repo rate is cut down. Generally, repo
rates are cut down whenever the country needs to progress in banking and economy. Currently,
the new RBI Governor Sri Urjit Patel has cut the previous R

Policy Rates, Reserve Ratios, Lending and Deposit Rates as of 2 August 2017

Bank Rate 6.25%

Repo Rate 6.0%

Reverse Repo Rate 5.75%

 Cash Reserve Ratio (CRR) 4%

Statutory Liquidity Ratio (SLR) 20%

Base Rate 9.25%9.65%

Savings Deposit Rate 4%

Term Deposit Rate

6.50%7.00%
for > 1 year

Reverse Repo Rate (RRR)[edit]

Reverse Repo rate is the short term borrowing rate at which RBI borrows money from banks.
The Reserve bank uses this tool when it feels there is too much money floating in the banking
system. An increase in the reverse repo rate means that the banks will get a higher rate of
interest from RBI. As a result, banks prefer to lend their money to RBI which is always safe
instead of lending it others (people, companies etc.) which is always risky.

Repo Rate signifies the rate at which liquidity is injected into the banking system by RBI,
whereas Reverse Repo rate signifies the rate at which the central bank absorbs liquidity from
the banks. Reverse Repo Rate is linked to Repo Rate with a difference of 0.5% between them.

Statutory liquidity ratio (SLR)[edit]

Apart from the CRR, banks are required to maintain liquid assets in the form of gold, cash and
approved securities. Higher liquidity ratio forces commercial banks to maintain a larger
proportion of their resources in liquid form and thus reduces their capacity to grant loans and
advances, thus it is an anti-inflationary impact. A higher liquidity ratio diverts thebank funds from
loans and advances to investment in government and approved securities. In well-developed
economies, central banks use open market operationsbuying and selling of eligible securities
by the central bank in the money marketto influence the volume of cash reserves with
commercial banks and thus influence the volume of loans and advances they can make to the
commercial and industrial sectors. In the open money market, government securities are traded
at market-related rates of interest. The RBI is resorting more to open market operations in the
more recent years. Generally, RBI uses

1. Minimum margins for lending against specific securities.

 2. Ceiling on the amounts of credit for certain purposes.
3. The discriminatory rate of interest charged on certain types of advances.

Direct credit controls in India are of three types:

1. Part of the interest rate structure, i.e., on small savings and provident funds, are
administratively set.
2. Banks are mandatory required to keep 21.50% of their deposits in the form of
government securities.
3. Banks are requi
4. red to lend to the priority sectors to the extent of 40% of their adva
The Reserve Bank of India (RBI) is India's central banking institution, which controls
the monetary policy of the Indian rupee. It commenced its operations on 1 April 1935 during the
British Rule in accordance with the provisions of the Reserve Bank of India Act, 1934.[6] The
original share capital was divided into shares of 100 each fully paid, which were initially owned
entirely by private shareholders.[7] Following India's independence on 15 August 1947, the RBI
was nationalised on 1 January 1949.[8]

The RBI plays an important part in the Development Strategy of the Government of India. It is a
member bank of the Asian Clearing Union. The general superintendence and direction of the
RBI is entrusted with the 21-member Central Board of Directors: the Governor, 4 Deputy
Governors, 2 Finance Ministry representatives, 10 government-nominated directors to represent
important elements of India's economy, and 4 directors to represent local boards headquartered
at Mumbai, Kolkata, Chennai and New Delhi. Each of these local boards consists of 5 members
who represent regional interests, the interests of co-operative and indigenous banks.

A Central Bank is an independent apex monetary authority which regulates banks and provides
important financial services like storing of foreign exchange reserves, control of inflation,
monetary policy report. A Central Bank is known by different names in different countries. The
functions of a Central Bank vary from country to country and are autonomous or quasi-
autonomous body and perform or through another agency vital monetary functions in the
country. A central bank is a vital financial apex institution of an economy and the key objects of
central banks may differ from country to country still they perform activitie s and functions with
the goal of maintaining economic stability and growth of an economy.[9]

The bank is also active in promoting financial inclusion policy and is a leading member of
the Alliance for Financial Inclusion(AFI).

Joint India-IMF Training Programme

ITP Centre
Pune

Welcome to the Joint India-IMF Training Programme

About Us

Launched on May 1, 2006, the Joint India-IMF Training Programme (ITP) is a cooperative venture of the International
Monetary Fund (IMF) and the Reserve Bank of India (RBI).The Joint India-IMF Training Programme was formally
inaugurated on January 24, 2007 by Mr. John Lipsky, First Deputy Managing Director of IMF and Dr. Rakesh
Mohan, Deputy Governor of RBI The ITP is located in Pune, India
The purpose of the ITP is to provide policy-oriented training in economics and related operational fields to selected
Indian officials, as well as to officials of certain other countries in South Asia and East Africa to be designated jointly
by the RBI and the IMF.
The ITP courses will cover, among other subjects, macroeconomic management and policies, financial Programming,
monetary policy, bank supervision, financial sector issues, public finance, exchange rate policy and foreign exchange
operations and statistics. The Programme will also include seminars on topical issues for high-level officials.
The ITP Centre is located at the National Institute of Bank Management (NIBM) campus at Kondhwe Khurd, Pune,
India.
The ITP benefits from a substantial financial contribution from the Government of Australia.

5.