BANKING LAW ASSIGNMENT

ANUSHK ALOK
500077358
R760219127

RESERVE BANK OF INDIA : THE

BACKBONE OF INDIAN ECONOMY
India is an emerging market with a population of more than 1 billion. To serve the varied needs of this
large market, Reserve Bank issues notes in various denominations viz. Rs. 5, Rs. 10, Rs. 20, Rs. 50 and so
on in addition to coins of denominations namely- 10 paise, 25 paise, 50 paise, one rupee and two rupees
for small transactions.

The Reserve Bank also manages the exchange rate that corresponds to the value of Indian Rupees which
are pegged to US dollar at a rate or 4 per cent as announced by RBI from time to time under Article 19(4)
of the Banking Regulation Act 1949 (Act No XXXII).

The Reserve Bank is responsible for the design, issue, circulation and the varying its value of paper
money in India.

There are 22 Scheduled Commercial Banks in India viz. State Bank of India (SBI), its associate banks viz.
SBI Capital Markets, SBI Card Services Limited, SBI Life Insurance Co. Ltd., State Bank of Bikaner & Jaipur,
State Bank of Mysore, State Bank of Patiala, State Bank of Travancore etc., nationalized Banks viz.
Punjab National & Sind National Banks Ltd., Canara bank etc., Private Sector banks viz. ICICI bank Ltd.,
HDFC bank Ltd., YES bank ltd. etc. and foreign banks viz. Bank of America, N.A., Standard Chartered Bank
etc.
There are two types of notes, one is called the rupee notes and the other is called the coin. This type of
subdivision has been done since 1835 till today’s date for logical reasons. There is a difference of Rs.1
between the face value of a coin and the face value of a note. A coin is equivalent to Rs. 1 in face value.

The rupee notes are always printed with different design and colour every year, with different theme on
the front side and with different security features both in terms of printing and thread etc., on the back
side, which makes it counterfeit proof.

The Reserve Bank is responsible for the circulation and supply of coinage in India which includes notes of
specified denominations in various metals viz., copper, silver, nickel, brass etc., in different shapes viz.,
round, square, hexagonal etc.

The central bank of any country is in charge of the country's monetary policy. The Reserve Bank of India
(RBI) is similar to the Federal Reserve Bank of the United States (Reserve bank of India).

The RBI has direct authority over all monetary policies. The most prevalent monetary policy is OPEN
MARKET OPERATIONS, in which the RBI or other central bank buys or sells government bonds to manage
money supply.

When the money supply in the economy needs to be reduced, central banks sell government bonds on
the open market; when the money supply in the economy needs to be increased, central banks buy
government bonds by creating currency notes.

The money supply in the economy is regulated in this way by the RBI or any other central bank. The
notion of LM is used in economics to examine the money supply.

Finally, we looked at how the RBI is operating in order to keep the foreign exchange rate stable, and
how it is doing so through this strategy. When a central bank creates money, the value of the home
currency depreciates in relation to the foreign currency.

Not only does the central bank create currency to grow the money supply, but it also issues currency to
fund the government's deficit or to finance the fiscal deficit. Because the central bank is the country's
largest financial institution, each transaction that takes place there is recorded.

The central banks are continually keeping an eye on it. The central bank is in charge of all payments
made in foreign currency. Foreign reserves are held by the central bank. Furthermore, the central bank
has the gold reserve in its custody to assist the economy in extreme circumstances, as we saw in 1991.

In a nutshell, the central bank is the backbone of any economy.

RBI as a publication

Annual publications of the RBI

Annual Report - The Reserve Bank of India's annual report is a statutory report that is published every
year. The Indian economy is valued and progressed in this research. An overview of the economy, the
Reserve Bank's operations during that year, and the RBI's projected vision and agenda for the next year,
as well as the Reserve Bank's annual accounts

Report on Banking in India: Trends and Progress - This publication provides a review of the financial
sector's policies and developments during the previous year.

Statistical Tables Concerning Indian Banks – This yearly publication includes comprehensive chronology
data on India's Scheduled Commercial Banks (SCBs). The report also includes balance sheet and
performance indicator information for each SCB in India. The journal additionally offers segregated data
sources on various key parameters pertaining to bank-by-bank, bank-by-bank group, and state-by-state
data.

Basic Statistical Returns — This is another data-driven yearly journal that displays complicated
information on the number of offices, workers, deposits, and credit of Scheduled Commercial Banks in
minute levels of detail, such as region-, state-, and district-level data. This information is also sent on to
the general public and each bank's credit standards.

Three yearly lectures have been established by the Reserve Bank of India. Two of the lectures will be
given by former Reserve Bank Governors, and one will be given by a well-known economist.

Report on Currency and Finance - This report is written and delivered by Reserve Bank of India
employees, and it focuses on a certain subject and provides a full economic analysis of the issues
surrounding it.

Handbook of Indian Economic Statistics – The Reserve Bank's attempt to improve data dissemination is
highlighted in this paper. It is a useful repository of important statistical data.

Policies of the Reserve Bank of India

Repo rate

The repo rate, also known as the repurchase rate, is the interest rate at which the RBI loans money to
all other banks for a brief period of time. Borrowing from the RBI becomes more expensive as the repo
rate rises, and consumers or the general public bear the brunt of high interest rates.
Reverse repo rate (RRR)

The short-term borrowing rate at which RBI borrows money from other banks is known as the reverse
repo rate. When there is extra money in the financial system, the Reserve Bank of India utilises this
strategy to control inflation.

Policies of the Reserve Bank of India

Repo Rate

The repo rate, also known as the repurchase rate, is the interest rate at which the RBI loans money to all
other banks for a brief period of time. Borrowing from the RBI becomes more expensive as the repo rate
rises, and consumers or the general public bear the brunt of high interest rates.

Rate of Reverse Repo (RRR)

The short-term borrowing rate at which RBI borrows money from other banks is known as the reverse
repo rate. When there is extra money in the financial system, the Reserve Bank of India utilises this
strategy to control inflation.

Cash Reserve Ratio (CRR)

The Cash Reserve Ratio is the percentage of a bank's total deposit that must be kept with the Reserve
Bank of India in the form of liquid cash.

(SLR)Statutory liquidity ratio

Aside from the cash reserve ratio, banks must have liquid assets such as gold and authorized securities
on hand. A rising SLR makes it impossible for banks to provide more loans.

Initiatives in Payment Systems

To address public needs, the Reserve Bank of India has made several measures toward establishing and
modernizing safe and long-term payment systems in India.

Paper-based instruments, electronic instruments, and additional instruments, such as pre-paid systems
(e-wallets), mobile internet banking, ATM-based transactions, Point-of-Sale terminals, and online
transactions, are currently available in India.

Brief History
The Reserve Bank of India is the country's central bank. Central banks are a relatively new invention,
with the majority of modern central banks being formed in the early twentieth century.

The Reserve Bank of India was established in response to the Hilton Young Commission's
recommendations. The Reserve Bank of India Act, 1934 (II of 1934) establishes the legal framework for
the Bank's operations, which began on April 1, 1935.

The Bank was established to: The Bank was established to:

* Regulate the issuance of banknotes;

* Maintain reserves in order to ensure monetary stability; and

* Operate the country's credit and currency system to its benefit.

The Bank began its operations by assuming from the government the tasks previously undertaken by the
Controller of Currency and the Imperial Bank of India, including the handling of government accounts
and public debt. The Issue Department took over the existing currency offices in Calcutta, Bombay,
Madras, Rangoon, Karachi, Lahore, and Cawnpore (Kanpur). In Calcutta, Bombay, Madras, Delhi, and
Rangoon, the Banking Department opened offices.

Burma (Myanmar) broke away from the Indian Union in 1937, but the Reserve Bank continued to
operate as the country's central bank until the Japanese occupied Burma in 1942, and then until April
1947. The Reserve Bank of Pakistan operated as Pakistan's central bank after India's partition until June
1948, when the State Bank of Pakistan took over. In 1949, the Bank, which was founded as a
shareholder's bank, was nationalised.

The Reserve Bank of India had an intriguing trait in that it was considered as performing a distinctive
function in the context of development, particularly agriculture, from the beginning. When India began
its plan efforts, the Reserve Bank's development role became clear, particularly in the 1960s, when the
Reserve Bank pioneered the notion and practise of leveraging money to catalyse development in
numerous ways. The Bank also aided in the establishment of institutions such as the Deposit Insurance
and Credit Guarantee Corporation of India, the Unit Trust of India, the Industrial Development Bank of
India, the National Bank of Agriculture and Rural Development, and the Discount and Finance House of
India etc. to build the financial infrastructure of the country.

With liberalisation, the Bank's attention has switched back to fundamental central banking duties
including monetary policy, bank supervision and regulation, and payment system oversight, as well as
establishing financial markets.
The RBI's Organizational Structure
The RBI was established in 1935 to address the economic problems that arose in British-ruled India
following World War I. Its organisational structure has changed significantly since then. The RBI now has
a central board of directors that oversees its operations.

There are 21 members on the board of directors:

Governor – selected by the government for a four-year term Deputy Governors – up to four Executive
Directors recommended by the government from various areas and regions, as well as two directors
nominated by the government from the Ministry of Finance
Legal Framework
The Reserve Bank of India comes under the purview of the following Acts:

 Reserve Bank of India Act, 1934

 Public Debt Act, 1944
 Government Securities Regulations, 2007
 Banking Regulation Act, 1949
 Foreign Exchange Management Act, 1999
 Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002
 Credit Information Companies(Regulation) Act, 2005
 Payment and Settlement Systems Act, 2007

ROLES OF RBI
Monetary Authority

The Reserve Bank of India is continually working to keep inflation in line, as well as to provide appropriate liquidity
for the productive sector and financial stability.

Financial System Supervisory Authority

Specifies rules for the proper operation of banks and financial institutions, including non-banking finance firms.

Encourages the use of optimum risk management and corporate governance practises to protect depositors'
interests and boost public trust in the country's financial sector.

Encourages banks to employ technology to provide consumers with more cost-effective service.

Currency's Issuer

Ensures a sufficient supply of high-quality coins and currency notes - Removes notes and coins that are unsuitable
for circulation.

Provides advice to the government on how to develop currency notes with the most up-to-date security
measures.

Foreign Exchange Manager

Formulates policies to enable external commerce and payments, as well as foreign and Indian investments in each
other's countries, and encourages the orderly growth of foreign exchange markets.

Banker to the government

Accounts for the federal and state governments. Serves as a merchant banker for the federal and state
governments.

- Aids central and state governments in better financial management by encouraging the growth and orderly
operation of the government securities market.

Payment Methods

Work toward the country's establishment of a modern, resilient, efficient, secure, and integrated payment and
settlement system.

Banker's bank

On a daily basis, ensures appropriate liquidity in the financial system and individual banks - serves as lender of last
resort.

Role in Development

Ensures orderly expansion and development of financial markets and institutions, creates organisations to address
specialised financial requirements, and extends the organised financial sector to all sections of the economy.

Under Research

Analyzes the challenges and problems impacting the Indian economy - Renders advice for policy formulation and
moulding monetary, banking, and financial policies - Prepares the Bank's publications - Warehouses data to assist
decision-making

BIBLOGRAPHY

https://rbi.org.in/