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RESERVE BANK OF INDIA

- Reserve Bank of India (RBI) is the central bank of the country and apex institute of India which
monitors and regulates the monitory policy of India
- The RBI was established in the year of 1935 1
st
April by British government under the provisions
of RBI Act, 1934
- Reserve Bank of India was nationalized on 1
st
Jan, 1949
- RBI s governing body consists of 21 member-central board of directors
- It Controls the monitory policy of the Indian rupee
- The RBI has 4 zonal, 19 regional and 9 sub offices in the country

MAIN FUNCTIONS OF RBI
1. Issue of Notes It has monopoly of note issue in the country & It adopted Minimum Reserve
System for the note issue
2. Banker to the Government RBI acts as an advisor, agent, banker to the Government & It
provides loan to the Government by bonds
3. Banker of Banks Banks holds accounts in RBI and deposits money. RBI lends money to the
banks at certain interest rate and it borrows from bank too.
4. Controller of Credit It undertakes the responsibility of controlling credits created by the
commercial banks
5. Custodian of Foreign Exchange Managing the foreign exchange to facilitate external trade
and payment
6. Monetary Authority It formulates, implements and monitors the monetary policy and it
ensure the adequate flow of credit to all sectors in the country


IMPORTANT RBI TERMINOLOGY

1. Bank Rate A bank rate is the interest rate at which RBI lends money to the commercial
banks
2. Repo Rate An interest rate at which banks borrows money from Reserve bank of India
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3. Reverse Repo Rate - An interest rate at which RBI borrows money from the banks
4. Cash Reserve Ratio (CRR) Its the ratio of total deposits of banks which has to be
deposited in RBI. Purpose of CRR is to safeguard the certain amount of deposits as risk free
and to maintain liquidity ( money supply and demand) in the country
5. Statutory Liquidity Ratio (SLR) The ratio of liquid assets (such as gold, cash and securities)
to demand and time liabilities is known as SLR. In Simple words, its the percentage of total
deposits banks have to invest in government bonds and other securities.
6. Call rate It is an interest rate at which banks borrows money from other banks to meet
their day to day funding requirements
7. Basis Point Its one hundredth of one percent. 1 basis point means 0.01%. Eg: RBI reduces
the repo rate by 5 basis points and it refers to the reduction of 0.05% repo rate. It is used
while announcing the changes in interest rate
8. CASA Deposit Deposit in Current Account and Savings Account
9. Selective Credit Control To regulate credit for specific purposes i.e. allocating funds to
sectors which need funds to rejuvenate
10. Marginal Standing Facility Banks are able to borrow up to 2% of their net demand and
liabilities.
BANKING OMBUDSMAN
- Banking Ombudsman is a forum which is regulated by RBI
- Its implemented in the year of 1995 and revised in 2002 & 2006
- RBI appoints a service official as banking ombudsman to address the complaints and
grievances of customers against banks.
- Totally 15 offices of banking ombudsman at present in India
- Banking Ombudsman handles issues against all commercial banks, co-operative banks as well as
Regional Rural Banks (RRBs)
- The cases which is less than 10 lakhs will be taken up by Banking Ombudsman




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MONETARY POLICY
- Monetary Policy is policy framed, regulated and monitored by RBI
- It involves controlling the supply of money in economy to maintain price stability and higher
economic growth
- Control measures to regulate money supply are
1. Open market operations
2. Cash Reserve ratio (CRR)
3. Statutory Liquidity ratio (SLR)
4. Repo rate
5. Reverse repo rate
6. Bank rate policy
7. Marginal Standing Facility (MSF)
- Main aim of monetary policy is to
1. Control the inflation
2. Stabilize the prices
3. Stabilize the exchange rate
4. Promote economic growth
5. Control the money supply
6. Control the interest rate of loans by banks so people can improve their livelihood and
industrial growth



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