Atul arikh

RESERVE BANK OF INDIA.

R B I ORGANISATION
RESERVE BANK OF INDIA: ORGANISATION AND FUNCTIONS Establishment: Established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act 1934 Though originally privately owned, since nationalization in 1949 fully owned by the Government of India. Preamble : The preamble prescribes the objective as : to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage
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Atul arikh

RESERVE BANK OF INDIA.

The RBI was set up in 1934 with following objectives & commenced operations from 1st April 1935. 1. Regulate the issue of Bank notes. (Currency Notes). 2.Maitain reserves to securing monetary stability. 3. To operate the credit & Currency system of the country. The bank took over from Imperial Bank the operations of Govt. accounts & Public Debt. The RBI was nationalized in 1949 post independent. With liberalization, the bank became focused on core functions viz; Monetary Policy; Banking supervision & Regulations ; Developing financial markets besides Payment & Settlement system for the

Atul arikh

RESERVE BANK

RBI was instrumental in launching the subsidiary institutions: 1.National Housing Bank (NHB). 2. National Bank for Agriculture & Development. 3.Deposit Insurance & Credit Guarantee Corporations of India.(DICGCI). 4. Bhartiya Reserve Bank Note Mudran Pvt. Ltd. (BRBNMPL).
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RESERVE BANK

LEGAL FRAMEWORK:
Umbrella Acts: R B I Act 1934, governing RBI functions; B R Act 1949 which governs the financial sector. Acts giverning specific Functions: Public Debt Act,1944; Securities Contract (Regulations)Act, 1956 which regulates securities market . Indian Coinage Act, 1906 which governs currency & Coins. FERA- 1973 & FEMA-1999 which governs trade & foreign exchange market.

Atul arikh

RESERVE BANK

Acts Governing Banking Operations:

Companies Act 1956 which govern banks as companies. Banking Companies (Acquisition & Transfer of Undertaking)Act 1970 & 1980. Bankers Books Evidence Act which forms basis for evidence. Banking Secrecy Act which governs all concern in the banking industry. Negotiable Instrument Act (N I Act ) 1881.

The Reserve Bank of India is constituted under section 3 of RBI Act 1934 for taking over the management of currency from the Central Government and carrying on the business of banking in accordance with the provisions of the Act. The role of the RBI as regulator of banking sector is mainly by virtue of the provisions of the Banking Regulation Act 1949 in exercise of the powers under Act the RBI regulates the entry into banking business by licensing, exercise control over shareholding and voting powers of shareholders.

Main Functions: 1 Monetary Formulates, implements and monitors the monetary policy. Objective : maintaining price stability and ensuring adequate flow of credit to productive sectors. 2. Regulator and supervisor of the financial system: Prescribes broad parameters of banking operations within which the countrys banking and financial system functions. Objective: Maintain public confidence in the system, project depositors interest and provide cost-effective banking services to the public. 3. Manager of Exchange Control: Manages the Foreign Exchange Management Act.1999 Objective : to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Atul arikh

MAIN FUNCTIONS OF R B I.

MONETARY POLICY DEPTT: (Maintenance of price level):

To control adequate liquidity in the system for sound credit growth (Both domestic & export ) ; support investment and Price Stability. Interest rate environment conducive to macro economy, For inflation control; growth momentum & price stability. Periodic review of monetary and credit development. Monitoring compliance of CRR & SLR by commercial banks. Sanctioning & Monitoring of refinance limits/utilization by banks. Collection, compilation & analysis of data on development in the Money market. Monitoring & review of price & credit flow in respect of 9 sensitive commodities.

Monetary Policy Department.

The core activities of the department include:
*

Monetary projections and preparation of monetary budget. *Monitoring of movements in key monetary and banking aggregates including interest rates. * Periodic review of monetary and credit developments. *Monitoring and review of compliance of scheduled commercial banks with CRR and SLR stipulations. * Sanctioning and monitoring of refinance limits/utilisation in respect of scheduled commercial banks. * Collection, compilation and analysis of data on developments in the money market. * Collection, compilation and analysis of data on mobilisation of resources by select all-India financial institutions. * Analysis and discussions on resource management plans of banks. * Continuous monitoring and review of prices and credit floor in respect of sensitive commodities.

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REGULATOR & SUPERVISOR OF FINANCIAL SYSTEM.

RBI prescribes broad parameters within which the banking system functions. The broader role is effectively discharged by RBI through its various depts. Viz; Inspection dept; Dept. of Banking Supervision; Dept. of Non-banking supervision; Dept. of Banking Operations & Development (DBOD).

Inspection Dept: Major Functions:

1. To assess the performance (achieved/achievable) by branches/ Central Office with available resources. 2.To suggest the appropriate improvement. 3.To oversee overall audit functions and various policy guidelines issued by the bank. 4. To give feed back to the top mgt. on the performance of audited branches and depts of Central Office.
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DEPARTMENT OF BANKING SUPERVISION.

Major Functions: 1. Undertaking special onsite inspections of banks and off site surveillance and post inspection follow up. 2. Appointment statutory auditors for annual inspection of banks. 3. Dealing with financial sector frauds and attending to the complaints received against banks & FIs from public banks; Govt. 4. Recommends through supervisory intervention for removal of key managerial persons; suspension of business; merger or winding up and imposition of penalties.
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DEPT. OF NON BANKING SUPERVISION.

Regulatory & Supervisory Framework:

Aims for healthy development of NBFC and to protect the interest of the depositors. RBI Act was amended in 1997with stringent regulatory measures. Entry norms for NBFC & prohibitions for deposit acceptance by unincorporated bodies. Compulsory registration, maintenance of liquid assets & reserve funds. Comprehensive regulations for deposit taking NBFC. Punitive actions like cancelation of registration; ban on acceptance of deposits; winding up petition etc.
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DEPT OF BANKING OPERATIONS AND DEVELOPMENT (DBOD).

Major Functions: 1. To regulate commercial banks under provisions of B R Act 1949 & RBI Act 1934. 2. Monitoring of banks maintaining the prescribed Cash & Statutory Liquidity reserves. 3. To approve appointment of CEO; MD; Chairman of banks. 4. To work for promoting sound & competitive banking system through prudential guidelines briefly as : A. Capital adequacy ratio; B. Income recognition; C. Classification of assets; D. Investment Valuations; E. Provisioning for loans & other assets. F. Risk Mgt. System G. Accounting & Disclosure Standards. H. Asset Liability Mgt. Other Functions: Licensing of New Branch/ Banks; approval of setting subsidiaries & undertaking new activities; Rehabilitation of weak banks.

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Department of Banking Operations and Development

Current Focus
* Corporate Governance. * Discussion paper on Exposure Norms. * Asset Reconstruction Company. * Corporate debt restructuring. * Amendment of Banking Regulation Act. * Setting up international accounting standards for banks. * Credit Information Bureau. * New Capital Adequacy Framework. * Restructuring of weak banks. * Improving prudential norms in keeping with international best practices.

* Legal reforms * Entry of banks into insurance. * Regulation for e-banking. * Licensing norm for entry of new banks in private sector. * Reduction of government equity in nationalised banks. * Improvement in bank transparency.

Department of Technology.
Functions: (i) Computerisation in RBI (Regional Offices and Central Office Departments). (ii) Design and development of projects for use of banks and financial institutions. (iii) Monitoring progress of technology in banks.

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FINANCIAL SUPERVISION.

The RBI performs the supervisory role under guidance of the Board of Financial Supervision (BFS). The board was constituted in 1994 as committee of Central Board of Directors of the RBI chaired by the Governor. Functions: Some of the initiatives taken by the BFS; 1. Restructuring of the system of the banks inspection. 2. Introduction of off-site surveillance; 3. Strengthening of the role of statutory 17

BANKING FINANCIAL SUPERVISION. The BFS oversees the functioning of Department of Banking Supervision (DBS), Department of Non Banking Supervision (DNBS) and Financial Institutions Division (FID) and gives directions on the regulatory and supervisory issues. Some of the initiatives taken by BFS include: * Restructuring of the system of bank inspections, * Introduction of off-site surveillance * Strengthening of the role of statutory auditors, and * Strengthening of the internal defenses of supervised institutions.

Current Focus * Supervision of financial institutions * Consolidated accounting

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URBAN BANKS DEPARTMENT.

MAJOR FUNCTIONS: The regulations & Supervision of Urban Co-op Banks is performed by the Urban Bank Dept in coordination with Registrar of Co-op. Societies of the State Govts. Regulates interest on deposits for Savings Bank and Minimum Lending rates on Advances. It prescribes minimum Cash Reserve & liquid assets to be maintained as ratio of net demand & time liability. Besides lays down guidelines for investment in other assets by the coop banks. In coordination with state co-op banks and the apex co-op banks, RBI closely monitors the performance of weak banks.
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RURAL PLANNING & CREDIT DEPT.

Broad Functions:
Monitoring & facilitating the flow of credit to rural, agriculture and SSI sectors for development of rural economy & employment generation. Framing policy on Priority Sector lending. Implementation & monitoring lead bank scheme as coordinated approach for bank credit to achieve integrated rural development. Monitoring implementation of Govt. sponsored schemes for poverty alleviation. Acting as regulators for R R Bs and State / Central Co-op banks. Extending financial and policy support to NABARD. Thrust Area: Credit delivery innovations to Kisan Credit Card and Micro Finance towards Financial Inclusion plan.
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INTERNAL DEBT MANAGEMENT

RBI manages public debt & issue of new loans on behalf of Central & State Govt. It undertakes cash and liquidity management for GOI and State Govt. Internal debt management dept is involved in auctioning of Govt. debt from time to time; introduces new instruments for borrowings; Involved in developing active secondary market for Govt. security and bonds. It also manages liquidity for Govt. through open market operations; repo & reverse repos etc.
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Atul arikh

DEPT. OF PAYMENT & SETTLEMENT SYSTEM.

Functions: To formulate and develop sound, secure, cost effective and efficient payment & settlement system to facilitate domestic as well as global trade and monetary transactions. To operate, regulate, supervise and monitor payment & settlement systems.

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FOREIGN EXCHANGE DEPT.

Foreign Exchange Management act 1999 (FEMA) became operative from 1st June2000. The main focus of the RBI was to facilitate foreign trade & payment and promoting orderly development and maintenance of forex market in India. Major Functions: To ensure timely realization of Export Proceeds of bills. To lay down policy guidelines for Risk Management relating to Forex transactions in banks. The dept collects data relating to forex transactions from authorized dealers on daily basis for exchange rate management. And on fortnightly basis for quick estimate of balance of payment position. There is standing Consultative Committee on Exchange Control fro various trade bodies & authorized dealers meet on half yearly basis and make suitable recommendation for amendment/ modification in policy framework.

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DEPT. OF GOVT. & BANK ACCOUNTS. (DGBA)

Major Functions:
RBI through this dept. discharges certain traditional central banking functions & acts as Banker to the banks and Govt. To maintain the accounts of all banks besides Financial Institutions. To maintain RBI internal accounts & compilation of its weekly statement of affairs and annual balance sheet. It administers and maintain transactions of public debt of Central Govt. as wells as state govt. To dispose of complaints from the public related to unsatisfactory services rendered by various dept. of the RBI.
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Atul arikh

CURRENCY MANAGEMENT.

Major Functions: Notes and Coin issue and currency management. Administering RBI (Note Refund ) rules. The rule lays down the circumstances in which the value of torn and mutilated notes be refunded. Moping up soiled bank notes unfit for circulation. Reviewing various security features of currency notes for incorporation in the banknotes from time to time. Studying features of counterfeit bank notes and to strengthen the system and integrity of bank notes. To generate the awareness in public with security feature of large denomination currency notes. Acting as nodal dept. for the Bahrtiya Reserve Bank Note Mudran Pvt. Ltd.
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RBI and Credit Planning:

(a) To regulate the expansion in the overall quantum of funds to a desired level. (b) To direct flows of funds to desired sectors, areas purposes uses, so that objectives of monetary policy are achieved.

8.2 Major powers:

The major powers of the Bank, indifferent roles as regulator and supervisor can be summed up asunder: (i) power to sanction license for opening new bank. (ii) power of appointment and removal of banking boards/personnel (iii) power to regulate the business of banks and NBFCs. (iv) power to give directions

(v) power to inspect and supervise banks (vi) power regarding audit of banks (vii) power to collect and furnish credit information (viii) power relating to moratorium, amalgamation and winding up, and (ix) power to impose penalties

8.3 Amalgamation
(1) During the period of moratorium, RBI may prepare a scheme either; (a) for reconstruction of the banking company, or (b) for amalgamation of the banking company with any other banking companies such scheme may be prepared if the RBI is satisfied that it is necessary to do so;

(2)

The scheme of amalgamation or reconstruction may contain certain provisions for all or any of the matters specified in clauses (a) to (l) of Sec. 45 (5). These include:

(a) Constitution, name, registered office, capital assets, powers, rights, duties obligation, etc., of the banking company after reconstruction or of the transferee company. (b) Transfer of assets from transferor bank to transferee bank and terms and conditions thereof in the case of amalgamation. (c) Change in or appointment of bond of directors (d) Alteration in memorandum and articles. (e) Continuation of action by or against the banking company after amalgamation or reconstruction. (f) Reconstruction of the interest or rights of members, depositors or other creditors in public interest or in the interest of members, depositors, creditors or for maintenance of the business of banking company.

(g) Payment in cash or otherwise to creditors and other depositors. (h) Allotment of shares of the transferee bank to the shareholders of transferor bank for shares held by them in the transferor bank. (i) Continuance of service of employees after reconstruction or amalgamation.

8.4 Winding up of banks

(1) The High Court shall order the winding up of a banking company in the circumstances mentioned in Section 38 of B.R.Act, these are: (a) the banking company is unable to pay its debts. (b) an application for winding up has been made by the RBI under Section 37 or Section 38. (2) The RBI is bound to make an application for winding up under Sections 37 or 38, if directed by the High Court.

(3) It is open to the RBI to apply for winding up of a company in certain other cases as followed: (a) failure to comply with the requirements of Section 11 regarding minimum paid-up capital and reserves. (b) banks becomes not entitled to carry on banking business in India under Section 22 by reason of rejection or cancellation of license. (c) prohibited to accept fresh deposits under Section 35(4) of B.R. Act or Section 42 (3A) (b) of RBI Act. (d) failure to comply with the requirements of the B.R. Act other than Section 11 and continuance of such failure or contravention beyond the period or periods specified by RBI in this behalf and after notice in writing of such failure or contravention.

Atul arikh

OTHER FUNCTIONS.

External investment & operations:

management of foreign currency and gold assets of the rbi. Handling external transactions on behalf of GOI including related to the I M F. Dept. of economic analysis & policy: Studies & analyses basic issues and problems (both domestic & international) affecting the Indian economy. Serves as primary source of data and information relating to the aspect s of Indian Economy. Prepares Banks economic publications.
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