CENTRAL BANK

Department of Management studies

SAKEC

Economic Environment of Business

Semester II Prof. Sanchita Chandra

2008-2009
 GROUP 5
 NIKHIL K. 25
 JITESH L. 26
 ARCHANA L. 27
 KASHYAP M. 28
 SAGAR M. 29
 ISHA M. 30
INTRODUCTION
A universal monetary institute in modern
times

Constitutes the apex of the money

structure of an economy.

 Acts as the leader of the money market .

Supervises, controls and regulates the

activities of commercial banks.
 CENTRAL BANKS

India Reserve Bank of India.

U.S.A. Federal Reserve bank.

U.K. Bank of England.

Pakistan Bank of Pakistan.

DEFINITION

“Institute charged with the

responsibility of managing the
expansion and contraction of
the volume of money in the
interest of the general public
welfare.”
IMPORTANCE !!!!
To control credit.

To issue Paper currency.

To iron out economic crisis.

To implement Monetary and financial

Policies.
ESTABLISHMENT OF RBI
Established in April 1935 with a share
capital of Rs. 5 crores.

Nationalized in the year 1949.

Initially established in Calcutta but

permanently moved to Mumbai in 1937.
FUNCTIONS OF CENTRAL
BANK
MONETARY NON-MONETARY
Issue of Currency Bank’s Supervision
Notes Development
Bankers to Functions
Government Data Collection
Banker’s Bank Research
Credit Controller Clearness
Custodian of Forex
Reserves
CREDIT CONTROL MEASURES
GENERAL CREDIT SELECTIVE CREDIT
CONTROLS CONTROLS

Bank Rate Ceiling on Credit

Open market Margin
operations Requirements
Cash Reserve Ratio Directives
Statutory Liquidity Moral Suasion
Ratio
CURRENT SCENARIO
CRR 5%

SLR 24%

Repo Rate 5.5%

Reverse Repo Rate 4%

Inflation 3.92%
RECESSION?

A decline in a country's gross

domestic product (GDP) growth
for two or more consecutive
quarters of a year. A recession
is also preceded by several
quarters of slowing down.
CAUSES & EFFECTS
Causes
Slow down of normal Economic Cycle.
Consumers lose confidence in growth.

Effects
Decreased demand for goods and services.
Stock Market tumbles.
RBI IN RECESSION
CRR cut to 5%
Repo rate cut to 5.5%
Reverse Repo rate cut to 4%
Short-term lending and borrowing rates
cut
Slashed tax rates
Injection of Money
Opening up new borrowing channels for
banks
Government hikes its spending
RBI HELPING CORPORATE
SECTOR
Restructuring of NPA’S

Diamond industry

Aviation Sector

NBFC’s , Mutual Funds and Banks

Real estate.
FEDERAL RESERVE BANK
Central banking system of the United
States.
Created in 1913 by the enactment of the
Federal Reserve Act.
Mr.Ben Bernanke, current chairman of the
Federal Reserve.
A quasi-public (government entity with
private components) banking system.
Changes in Fed Funds rate & Discount rate
 CURRENT SCENARIO
Discount Fed funds
Date
rate rate
Jan – July, 2007 6.25% 5.25%

Dec 11, 2007 4.75% 4.25%

April 30, 2008 2.25% 2.00%

October 29, 1.25% 1.00%

2008

January 16, 0.25% 0.25%

2009
FEDERAL BANK IN
RECESSION
Cuts Fed funds rates to 0.25%
Cuts Discount rates to 0.25%
$250-billion bailout package in Tax Cuts
High spending in Energy & Power
 A.I.G. sought a $85 billion lifeline
Takeover of Fannie Mae and Freddie Mac
$75-billion package unveiled by Obama
TALF, a program of $200 billion to support
Asset-backed Securities
TARP, a program of $700 billion to insure
troubled assets

 CONCLUSION
o Central Bank is not a Profit
Hunting Institution.Profit is its
secondary objective.Its Primary
function is to stimulate economic
growth of the Country.

o It reveals complete Transperancy,

& Prudence in Nations Economy.

o So it clearly Justifies the Need &

Importance of The Central Bank.
THANK YOU