DATE OF VISIT: 31

st
dec 2009
PLACE: trivandrum
SUBMITTED BY: muneer.m.k
Roll no: u3bbm08036
SUBMISSION DATE: 4 jan 2010
CONTENTS
INTRODUCTION TO THE REPORT
INDUSTRY PROFILE
History of reserve bank
Need for establishing reserve bank
Service offered to government and to
other banks
Products of reserve bank
Role played by the reserve bank in the
Indian economy
Organizational profile
Objectives of reserve bank
Departments





Introduction
Reserve bank of India
Introduction to the report
As the part of my industrial visit to the reserve bank of India, Trivandrum branch on 31
st
December
2009. This is the largest bank in India and is the apex bank of our country. This is a brief report about
this banking industry and its functions.









Industry profile
History of reserve bank
The Reserve Bank of India is the central bank of the country entrusted with monetary stability,
the management of currency and the supervision of the financial as well as the payments system.
Established in 1935, its functions and focus have evolved in response to the changing economic
environment. Its history is not only intrinsically interwoven with the economic and financial
history of the country, but also gives insights into the thought processes that have helped shape the
country's economic policies.
The reserve bank was established on April 1
st
1935 in accordance with the provisions of reserve
bank of India Act, 1934.
The central office of the reserve bank was initially established in Calcutta but was permanently
moved to Mumbai in 1937.
In the begging the reserve bank of India was established with a capital of Rs.5crores on the basics
of the recommendations of the Hilton young commission. The share capital was divided into
shares of 100 each fully owned by private share holders in the beginning. The movement held the
shares of nominal value of Rs. 220000.
After the country was formed the private owners was removed and the government nationalized
the bank in the year 1949. The general superintendence and direction of the Bank is entrusted to
Central Board of Directors of 20 members, the Governor and four Deputy Governors, one
Government official from the Ministry of Finance, ten nominated Directors by the Government to
give representation to important elements in the economic life of the country, and four nominated
Directors by the Central Government to represent the four local Boards with the headquarters at
Mumbai, Kolkata, Chennai and New Delhi.




The reserve bank was established to fulfill the following
needs in the early times
To regulate the issue of banknotes
To maintain reserves with a view to securing monetary stability
To operate the credit and currency system of the country to its advantage.














Here is some of the service offered by the reserve bank of
India to the government and to the banks of India
Banker to Government

The second important function of the Reserve Bank of India is to act as Government banker, agent and
adviser. The Reserve Bank is agent of Central Government and of all State Governments in India
excepting that of Jammu and Kashmir. The Reserve Bank has the obligation to transact Government
business, via. to keep the cash balances as deposits free of interest, to receive and to make payments on
behalf of the Government and to carry out their exchange remittances and other banking operations. The
Reserve Bank of India helps the Government - both the Union and the States to float new loans and to
manage public debt. The Bank makes ways and means advances to the Governments for 90 days. It
makes loans and advances to the States and local authorities. It acts as adviser to the Government on all
monetary and banking matters.

Bankers' Bank and Lender of the Last Resort

The Reserve Bank of India acts as the bankers' bank. According to the provisions of the Banking
Companies Act of 1949, every scheduled bank was required to maintain with the Reserve Bank a cash
balance equivalent to 5% of its demand liabilites and 2 per cent of its time liabilities in India. By an
amendment of 1962, the distinction between demand and time liabilities was abolished and banks have
been asked to keep cash reserves equal to 3 per cent of their aggregate deposit liabilities. The minimum
cash requirements can be changed by the Reserve Bank of India.

The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible securities or get
financial accommodation in times of need or stringency by rediscounting bills of exchange. Since
commercial banks can always expect the Reserve Bank of India to come to their help in times of
banking crisis the Reserve Bank becomes not only the banker's bank but also the lender of the last resort.







Controller of Credit

The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume of
credit created by banks in India. It can do so through changing the Bank rate or through open market
operations. According to the Banking Regulation Act of 1949, the Reserve Bank of India can ask any
particular bank or the whole banking system not to lend to particular groups or persons on the basis of
certain types of securities. Since 1956, selective controls of credit are increasingly being used by the
Reserve Bank.

The Reserve Bank of India is armed with many more powers to control the Indian money market. Every
bank has to get a licence from the Reserve Bank of India to do banking business within India, the licence
can be cancelled by the Reserve Bank of certain stipulated conditions are not fulfilled. Every bank will
have to get the permission of the Reserve Bank before it can open a new branch. Each scheduled bank
must send a weekly return to the Reserve Bank showing, in detail, its assets and liabilities. This power
of the Bank to call for information is also intended to give it effective control of the credit system. The
Reserve Bank has also the power to inspect the accounts of any commercial bank.

As supereme banking authority in the country, the Reserve Bank of India, therefore, has the following
powers:
(a) It holds the cash reserves of all the scheduled banks.

(b) It controls the credit operations of banks through quantitative and qualitative controls.

(c) It controls the banking system through the system of licensing, inspection and calling for
information.

(d) It acts as the lender of the last resort by providing rediscount facilities to scheduled banks.

Custodian of Foreign Reserves

The Reserve Bank of India has the responsibility to maintain the official rate of exchange. According to
the Reserve Bank of India Act of 1934, the Bank was required to buy and sell at fixed rates any amount
of sterling in lots of not less than Rs. 10,000. The rate of exchange fixed was Re. 1 = sh. 6d. Since 1935
the Bank was able to maintain the exchange rate fixed at lsh.6d. though there were periods of extreme
pressure in favour of or against

the rupee. After India became a member of the International Monetary Fund in 1946, the Reserve Bank
has the responsibility of maintaining fixed exchange rates with all other member countries of the I.M.F.

Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the custodian of
India's reserve of international currencies. The vast sterling balances were acquired and managed by the
Bank. Further, the RBI has the responsibility of administering the exchange controls of the country.

Supervisory functions

In addition to its traditional central banking functions, the Reserve bank has certain non-monetary
functions of the nature of supervision of banks and promotion of sound banking in India. The Reserve
Bank Act, 1934, and the Banking Regulation Act, 1949 have given the RBI wide powers of supervision
and control over commercial and co-operative banks, relating to licensing and establishments, branch
expansion, liquidity of their assets, management and methods of working, amalgamation, reconstruction,
and liquidation. The RBI is authorised to carry out periodical inspections of the banks and to call for
returns and necessary information from them. The nationalisation of 14 major Indian scheduled banks in
July 1969 has imposed new responsibilities on the RBI for directing the growth of banking and credit
policies towards more rapid development of the economy and realisation of certain desired social
objectives. The supervisory functions of the RBI have helped a great deal in improving the standard of
banking in India to develop on sound lines and to improve the methods of their operation.

Promotional functions

With economic growth assuming a new urgency since Independence, the range of the Reserve Bank's
functions has steadily widened. The Bank now performs a varietyof developmental and promotional
functions, which, at one time, were regarded as outside the normal scope of central banking. The
Reserve Bank was asked to promote banking habit, extend banking facilities to rural and semi-urban
areas, and establish and promote new specialised financing agencies. Accordingly, the Reserve Bank has
helped in the setting up of the IFCI and the SFC; it set up the Deposit Insurance Corporation in 1962, the
Unit Trust of India in 1964, the Industrial Development Bank of India also in 1964, the Agricultural
Refinance Corporation of India in 1963 and the Industrial Reconstruction Corporation of India in 1972.
These institutions were set up directly or indirectly by the Reserve Bank to promote saving habit and to
mobilise savings, and to provide industrial finance as well as agricultural finance. As far back as 1935,
the Reserve Bank of India set up the Agricultural Credit Department to provide agricultural credit. But
only since 1951 the Bank's role in this field has become extremely important. The Bank has developed
the co-operative credit movement to encourage saving, to eliminate moneylenders from the villages and
to route its short term credit to agriculture. The RBI has set up the Agricultural Refinance and
Development Corporation to provide long-term finance to farmers.



Products of reserve bank
THE ROLE OF RESERVE BANK IN CURRENCY MANAGEMENT
The Reserve Bank manages currency in India. The Government, on the advice of the Reserve
Bank, decides on the various denominations. The Reserve Bank also co-ordinates with the
Government in the designing of bank notes, including the security features. The Reserve Bank
estimates the quantity of notes that are likely to be needed denomination-wise and places the
indent with the various presses through the Government of India. The notes received from the
presses are issued and a reserve stock maintained. Notes received from banks and currency chests
are examined. Notes fit for circulation are reissued and the others (soiled and mutilated) are
destroyed so as to maintain the quality of notes in circulation. The Reserve Bank derives its role in
currency management on the basis of the Reserve Bank of India Act, 1934. Who decides on the
volume and value of bank notes to be printed and on what basis?

The Reserve Bank decides upon the volume and value of bank notes to be printed. The quantum
of bank notes that needs to be printed broadly depends on the annual increase in bank notes
required for circulation purposes, replacement of soiled notes and reserve requirements.
HOW DOES THE RESERVE BANK ESTIMATE THE DEMAND FOR BANK
NOTES?
The Reserve Bank estimates the demand for bank notes on the basis of the growth rate of the
economy, the replacement demand and reserve requirements by using statistical models.
Meanwhile, are some steps being taken to increase the supply of bank notes and coins?

Yes, several steps have been taken to augment the supply of bank notes and coins. Some of these
are:
the existing note printing presses and the mints owned by the Government are being modernised.
Two new currency printing presses with the state-of-the-art technology have been set up under
the aegis of the Bharatiya Reserve Bank Note Mudran Ltd., a wholly owned subsidiary of the
Reserve Bank.
To bridge the demand-supply gap, the Government had, as a one-time measure, even imported
bank notes.
The production capacity of the four India Government Mints are being augmented.
Government of India has also been importing rupee coins to supplement the supply of coins from
the four mints. Till date 2 billion rupee coins have been imported.


Currency of India








Role played by reserve bank in the Indian economy
The Reserve Bank of India has a rich tradition of economic research. Its Department of Economic
Analysis and Policy (DEAP):
Studies and analyses the basic issues and problems (both domestic and international) affecting
the Indian economy;
Serves as a primary source of data and information relating to aspects of the Indian economy,
such as,
Prepares monetary and credit aggregates, balance of payments and external debt statistics,
internal debt and government finance statistics, and flow-of-funds and financial saving.
Renders advice/assistance and offer its views in the realm of economic policy formulation and in
shaping monetary, banking and financial policies; and
Prepares the Bank's economic publications.
Meanwhile, are some steps being taken to increase the supply of bank notes and coins?
Yes, several steps have been taken to augment the supply of bank notes and coins. Some of these
are:
The existing note printing presses and the mints owned by the Government are being
modernised.
Two new currency printing presses with the state-of-the-art technology have been set up
under the aegis of the Bharatiya Reserve Bank Note Mudran Ltd., a wholly owned
subsidiary of the Reserve Bank.
To bridge the demand-supply gap, the Government had, as a one-time measure, even
imported bank notes.
The production capacity of the four India Government Mints are being augmented.
Government of India has also been importing rupee coins to supplement the supply of coins
from the four mints. Till date 2 billion rupee coins have been imported.





Organizational profile
Objectives of reserve bank
To render assistance and to provide various common services to Members and to the
banking industry.
To promote and develop in India sound and progressive banking principles, practices and
conventions and to contribute to the developments of creative banking.
To provide assistance and guidance to members in interpretation and implementation of
Awards, Settlements, etc.
To assist, advise and guide all members and the smaller members in particular on all their
needs, difficulties and problems of growth, development and working.
To act as an agent or a representative of a member or members in respect of matters
connected with any of their operations working or administration.
To maintain close co-ordination and liaison with Reserve Bank of India, All Financial
Institutions, Chambers of Commerce, Organizations of Banking Industry, Management or
Educational Institutes, Universities and such other Organizations for realizing the subject
and purposes of the Association.
Generally to do all and any other thing that may be necessary or relevant for the
realization of the objects and purposes of the Association directly or indirectly.
To carry on publicity for the purpose of educating public opinion with regard to the scope,
importance and activities of the banking industry, for creative growth and development.
To do all and such other things as are incidental or conductive to the attainment of any or
all of the above objects.
To develop and implement new ideas and innovations in banking services, operations and
procedures.
To organize co-ordination and co-operation on procedural, legal, technical, administrative
or professional problems and practices of banks and the banking industry.
To initiate advance planning for introduction of new systems or services in the banking
industry.
To collect, classify and circulate statistical and other information on the structure and
working of the banking system.
To act as a clearing house for dissemination and exchange of statistical data, information,
views and opinions on the systems, procedures and practices, and organization and
methods of banks and on the structure, working and operations of the banking system.
To explore, plan, co-ordinate and organize detailed surveys on banking, business,
resources, personnel and management development programmers of banks and the
banking industry.
To pool together talents and resources available with members and to organize exchange of
expertise and experiences of members for simplifying forms and procedures, for reducing
cost of operations, for increasing efficiency and productivity and for such other common
purposes as may be necessary or relevant to banks and the banking industry.
To organize exchange of credit information and opinions, export information or
information and views on any other aspects of interest to banks or the banking industry.
To promote education and knowledge of the law and practice of banking.
To issue periodical newsletters, bulletins or magazines and publish books, pamphlets or
other literature on matters of interest to members and to the banking industry.
To project a good public image of banking as a service industry and develop good public
relations.
To promote harmonious personnel relations in banking industry and to devise ways and
means for involving banking personnel in the endeavors of banks for growth and
development of banking and the economy of the country.
To organize, promote and afford facilities for indoor and outdoor games, any form of
sports, recreation, sports competitions, events, cultural activities, social activities, fine arts,
social meetings, entertainments and to organize meetings for the above purposes and to
provide for purposes by purchasing, acquiring, taking on lease, own, hire or otherwise
playing fields, grounds, buildings, pavilions and other facilities.
To give financial assistance to individuals or bodies, from out of its own funds, or by
collection from its members, or from any other source, and for the purpose of such
collection, to accept grants, donations, etc. in cash or kind from Government, its members,
other organizations, members of the public, etc. and to collect subscriptions, membership
and other fees and to levy fees or charges for the use of the facilities and to raise funds in
any manner to strengthen the financial position of the Association, from time to time, for
the purpose of providing education, training and facilities for imparting basic, advance
knowledge and techniques in games, sports, cultural activities, social activities, fine arts,
etc. and to give donations, technical and other assistance, sports equipments, sports
facilities and expert guidance to organizers for this purpose whether its members or not
and to conduct, organize, participate or to associate itself in State-Level, Nation,
International Tournaments and competitions pertaining to sports, cultural activities, social
activities, fine arts, etc., held in or outside India.
To found, establish, develop and finance a separate body for the promotion of objects
contained in Clauses n, and generally, and to register it as a Society and/or Public Trust, or
a Company under the provisions or relevant Acts, as the case may be.
To maintain continuous communications with the representatives of bank employees, to
conduct talks, discussions, and negotiations with them and to arrive at Settlements.






The Departments

Issue Department
The jurisdiction of the Issue Department spreads over the state of Kerala, Union Territory of
Lakshadweep and Mahe (UT of Pondicherry). It is actively involved in the implementation of the
Reserve Banks "Clean Note" policy.
Banking Departments
Deposit Accounts Department, Public Accounts Department, Public Debt Office and
Establishment Section function under the overall in charge of Smt. Vijaylakshmi D Kini, DGM.
Deposit Accounts Department
The Department maintains the current accounts of banks and financial institutions and the
internal accounts of the Bank
Public Accounts Department

The department carries out the statutory function of the Reserve Bank as Bankers to the
Government. It maintains the accounts of Central Government departments like Railways,
Defence, Post and Telegraph etc and the State Government (for the limited purpose of payment of
interest warrants and discharge values).
The PAD at Thiruvananthapuram is fully computerized and provides data dissemination to
customers by e-mail on request. The Online Tax Accounting System (OLTAS) package has been
operationalised since 1 April 2004 in this Department.
Public Debt Office

The main function of Public Debt Office is to manage and service the public debt of Central and
State Governments. PDO Thiruvananthapuram has implemented the Negotiated Dealing System
(NDS) which facilitates on-line servicing of public debt.
Establishment
The Establishment Section deals with payment of salary, loans, advances, medical assistance, leave
fare concession, provident fund, income tax etc in respect of all employees of the Office. The
section also handles pension and other benefits of retired employees.

Administration
Department of Administration and Personnel Management, Estate Department and Audit Budget
and Coordination Cell function under the overall in charge of Sh R Vasan, GM.
Department of Administration and Personnel Management
This department handles all HRD related matters such as recruitment, postings, transfers,
promotion, training, leave, discipline, etc of all the personnel of the Office.
Estate Department


The Department is responsible for acquisition and maintenance of the Banks premises and
quarters of staff and officers.
Department of Information Technology Cell
The Thiruvananthapuram Office is a part of the Indian Financial Network (INFINET) and the
DIT Cell manages the servers for INFINET as well as for running the applications of specialized
departments such as UBD and DNBS.
The DIT Cell has also implemented the Security Solutions formulated by IDRBT. Besides, it
maintains the Cluster Server for connectivity of the various Central Office packages like PDO-
NDS, CFMS and SFMS.
Department of Banking Supervision
The Department supervises the functioning of two public sector banks and five private sector
banks, whose headquarters/local head office are in Kerala. The department undertakes the
supervisory functions through periodical on-site inspections, off-site surveillance and periodic
review with the top management of these banks. It is entrusted
Department of Non-Banking Supervision
The Department was set up in 1997 following the decision to have a separate department in the
Reserve Bank of India, to oversee the functioning of non-banking financial companies in the state
of Kerala and Union Territory of Lakshadweep.


Department of Non-Banking Supervision
The Department was set up in 1997 following the decision to have a separate department in
the Reserve Bank of India, to oversee the functioning of non-banking financial companies in
the state of Kerala and Union Territory of Lakshadweep. It also regulates the public deposit
taking activities of Mutual Benefit Finance Companies (Nidhis) and Miscellaneous Non-
Banking Companies (MNBCs or chit companies). There are 156 registered Non Banking
companies in the state as on 30 November,2009. Out of these 15 companies are deposits
accepting and 141 are in non deposits taking category.complied with by these Co-operative
institutions.