BANKING AWARENESS-RESERVE BANK OF INDIA
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| ABOUT RESERVE BANK OF INDIA (RBI) – *Name of Central Bank of India: Reserve Bank of India (RBI) *No of Central Bank in India: One (1) *Reserve Bank of India Act passed in 1934. *Reserve Bank of India (RBI) established on 1 April 1935. *Reserve Bank of India (RBI) established on the recommendation of Hilton-Young Commission. *Hilton-Young Commission submitted its report in the year 1926. *Initially RBI was constructed as a Private Share holders’ bank with fully paid-up capital of Rs 5 Crores. *RBI was nationalize in the year of 1st January,1949. *RBI is a statutory body. *RBI is the sole authority in India to issue Bank notes in India. *RBI can issue currency notes as much as the country requires, provided it has to make a security deposit of Rs 200 crores, out of which Rs. 115 crores must be in gold and Rs. 85 crores must be FOREX Reserves. *Emblem of RBI: Panther and Palm Tree. *Initially the headquarter of RBI was in Calcutta (Now Kolkata) but in 1937 it was permanently moved to Mumbai ,Maharastra. *The Reserve Bank of India has 19 regional offices, most of them in state capitals and 9 Sub-offices The Executive head of RBI is known as Governor. *The governor is associated by Four Deputy Governors. *The bank has also two training colleges for its officers, viz. Reserve Bank Staff College at Chennai and College of Agricultural Banking at Pune. *RBI is a member bank of the Asian Clearing Union. *Chintaman Dwarkanath Deshmukh (C D Deshmukh) was the governor of RBI at the Time of nationalization of RBI in 1949.C D Deshmukh, then Governor of RBI, represented India at the Bretton Woods negotiations in 1944. *1st women Deputy Governor of RBI -K.J.Udeshi . *RBI is not a Commercial Bank. *RBI prints currency in 15 Languages. *RBI is a member of IMF (International Monetary Fund). CENTRAL BOARD OF RESERVE BANK OF INDIA: The Reserve Bank’s affairs are governed by a Central Board of Directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India (RBI) Act, 1934. Structure of Central Board of Directors: Appointed/nominated for a period of FOUR years Constitution: Official Directors: Full -time : One Governor and not more than four Deputy Governors. Non-Official Directors: Nominated by Government: Ten Directors from various fields and one government official (General ly from Ministry of Finance) Others: Four Directors - one each from four local boards. One each for the four regions of the country in Mumbai , Calcutta, Chennai and New Delhi . The Function of Central Board of RBI:
*The main function of Central Board of RBI is General superintendence and direction of the Bank’s affairs. The local boards advises the Central Board on local matters and to represent territorial and economic interests of local cooperative and indigenous banks; to perform such other functions as delegated by Central Board from time to time.
Present Governor of RBI and Deputy Governor of RBI:
The executive head of Reserve Bank of India is known as the Governor, the governor is assist by four deputy Governor.
Governor:Newly Appointed Governor of Reserve Bank of India (RBI) is Raghuram Rajan who replaced
Duvvuri Subbarao on September 4, 2013.Raghuram Rajan (New Appointment, Replaced D. Subbarao) Appointed on: On 4 September 2013
List of Deputy Governor:1. Name: Dr.K.C.Chakrabarty 2. Name: Uri ji t Patel (New Appointment, Replaced Subir Gokarn.) 3. Name: Shri Anand Sinha 4. Name: Shri H.R.Khan Female Deputy Governors of Reserve Bank of India:
K J Udeshi: (10.06.2003 to 12.10.2005) K J Udeshi becomes the first woman RBI deputy governor. K J Udeshi has been appointed the deputy governor of the Reserve Bank of India (RBI). She is the first Woman deputy governor of the RBI. The appointment is till 12 October 2005 when she completes 62 years of age.
Shyamala Gopinath: (21.09.2004 to 08.09.2009, 09.09.2009 to 20.06.2011) Shyamala Gopinath is the former deputy governor of the Reserve Bank of India (RBI). Gopinath served as deputy governor of Reserve Bank of India from September 21, 2004 to June 20, 2011. She was the second lady deputy governor of RBI.
Smt Usha Thorat: (10.11.2005 to 09.11.2010) Usha Thorat served as Deputy Governor of the Reserve Bank of India (RBI) from November 10, 2005 to November 8, 2010. Prior to this she was the executive Di rector of the RBI.
RBI Monetary Policy,RBI Functions and RBI Rates: Reserve Bank of India (RBI) is the central banking institution of India. RBI control the monetary pol icy Rupee as a sole control ler. RBI also controls the liquidity (flow of money) in Indian Market by Changing i ts Pol icy rates and Reserve ratios. RBI have three rates: Bank Rate, CRR,SLR. Different RBI Rates: (As of October 7,2013) *Bank Rate (9%) *Cash Reserve Ratio (4%) *Statutory Liquidity Ratio (23%) * Base Rate *Marginal Standing Facility ( MSF) – 9%
What are Repo rate and Reverse Repo rate? Repo(Repurchase) rate is the rate at which the RBI lends shot-term money to the banks.When the reporate increases borrowing from RBI becomes more expensive.
Therefore, we can say that in case, RBI wants to make it more expensive for the banks to borrow money, it
increases the reporate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces the reporate. Reverse Repo rate is the rate at which banks park their short-term excess liquidity with the RBI. The RBI uses this tool when it feels there is too much money floating in the banking system. An increase in the reverse reporate means that the RBI will borrow money from the banks at a higher rate of interest. As a result, banks would prefer to keep their money with the RBI. As of September 20, 2013:
*Current Repo Rate: 7.50%
*Current Reverse Repo Rate: 6.50%
BANK RATE: What is Bank rate? Bank Rate is the rate at which central bank of the country, in India it is the Reserve Bank of India (RBI), allows financial liquidity to commercial /scheduled banks within the territory of India. RBI uses Bank Rate as a tool for short-term measures. Any upward revision in Bank Rate is an indication that banks should also increase the deposit rates as well as the Prime Lending Rate. Any revision in the Bank rate indicates more or less interest on your deposits and also an increase or decrease in your EMI. What is Bank Rate (Non Bankers Point of View) ? This is the rate at which RBI lends money to other banks or financial institutions. If the bank rate goes up, long-term interest rates also tend to move up, and If the bank rate goes down, long-term interest rates also tend to move down. Thus, it can said that in case bank rate is hiked, in all likelihood banks will hikes their own lending rates to ensure and they continue to make a profit. *Present Bank Rate of RBI: 9.50% [As of September 20, 2013] CASH RESERVE RATIO: Every commercial /Scheduled bank in India has to keep certain minimum amount of cash reserves with Reserve Bank of India (RBI). Reserve Bank of India uses CRR as a tool to increase or decrease the reserve requirement depending on whether RBI wants to increase or decrease in the money supply. RBI can vary Cash Reserve Ratio (CRR) rate between 3% and 15%. An increase in CRR will make it mandatory for the banks to hold a large proportion of their deposits in the form of deposits with the RBI. This will reduce the amount of Bank deposits and they will lend less as they have less amount as their reserve. This will in turn decrease the money supply. If RBI wants to increase Money supply it may reduce the rate of CRR and It will allow the banks to keep large amount of their deposit with themselves and they will lend more money. It will increase the money supply. For example: When someone deposits Rs.100 in a bank, it increase the deposit of banks by Rs100, and if the cash reserve ratio is 9%, the banks will have to hold additional Rs 9 with RBI and Bank will be able to use only Rs 91 for investments and lending / credit purpose. Therefore, higher the ratio (i .e. CRR), the lower is the amount that banks will be able to use for lending and investment. RBI uses CRR to control liquidity in the banking system. The Reserve Bank of India (Amendment) Bi l l , 2006 has been enacted and has come into force with its gazette notification. Consequent upon amendment to sub-Section 42(1), the Reserve Bank, having regard to the needs of securing the monetary stability in the country, can prescribe Cash Reserve Ratio (CRR) for scheduled banks without any floor rate or ceiling rate. [Before the enactment of this amendment, in terms of Section 42(1) of the RBI Act, the Reserve Bank could prescribe CRR for scheduled banks between 3 per cent and 20 per cent of total of their demand and time liabilities]. *Present Cash Reserve Ratio (CRR) is 4% STATUTORY What is SLR? Apart from the Cash Reserve Ratio, scheduled banks in India are required to maintain, at the close of business every day, a minimum proportion of their Net Demand and Time Liabilities,liquid assets in the form of gold, cash and approved securities. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). Reserve Bank of India is empowered to increase Statutory Liquidity Ratio (SLR) up to 40%. An increase in SLR also reduces their (Bank’s) capacity to grant loans and advances, thus it is an anti -inflationary impact.
What is SLR (Non Bankers Point of View)?
SLR stands for Statutory Liquidity Ratio. This term is used by bankers and indicates the minimum percentage of deposits that the bank has to maintain in form of gold, cash or other approved securities. Thus, it is ratio of cash and some other approved to liabilities (deposits) It regulates the credit growth in India. *Current SLR Rates: The present SLR is 23%. (reduced from earlier 24%). BASE RATE: What is Base Rate? Base Rate is the minimum rate below which Bank’s are not permitted to lend barring certain exceptions. It is the minimum rate of interest that a bank is allowed to charge from its customers. Reserve Bank of India (RBI) rule stipulates that no bank can offer loans at a rate lower than the Base Rate to any of its customers. Base Rate replaced Bank Prime Lending Rate (BPLR) on July 1, 2010. *Present Base Rate: 9.70% – 10.50% MARGINAL STANDING FACILITY or MSF – Rate: Marginal Standing Facility (MSF) is the rate at which scheduled banks could borrow funds overnight from the Reserve Bank of India (RBI) against approved government securities.Banks can borrow funds through MSF during acute cash shortage (considerable shortfall of liquidity). This measure has been introduced by RBI to regulate short-term asset liability mismatches more effectively.The Marginal Standing Facility (MSF) is pegged 100bps or 1 % above the Repo Rate.To provide greater liquidity cushion the Reserve Bank of India (RBI) introduced Marginal Standing Facility or MSF. RBI announced the introduction of MSF on May 3, 2011 and i t was effected from May 9, 2011.Reserve Bank of India, in it’s annual policy statement, has declared “The stance of monetary pol icy is, among other things, to manage liquidity to ensure that it remains broadly in balance, with neither a large surplus diluting monetary transmission nor a large deficit choking off fund flows.”Marginal Standing Facility Rate: Under this scheme, Banks will be able to borrow upto 2% (wef 17/04/2012) of their respective Net Demand and Time Liabilities (NDTL). |
