Indian Banking System part-2 RBI Structure

The Reserve Bank Of India — The Organisational Structure 

The affairs of the Bank are controlled by a Central Board Directors.The Central Board consists of the following members:

•  One Governor (present D.Subba Rao) and four Deputy Governors appointed by the Central Government for such periods not exceeding five years.
•  Four Directors nominated by Central Government one from each of the four Local Boards.The term of office of the Directors is related to their membership in the Local Boards.
•  The other ten directors are nominated by Central Government.These directors hold office for tour years and there is provision in the Act for their retirement by rotation.
•  One Government official to be nominated by the Central Government.He/She shall hold office during the pleasure of the Central Government.

• In 1949 after Nationalisation RBI first Indian Governor — C .D.Deshmukh(Chinthamani Dwarakanadh Deshmukh)
• Reserve Bank Of India Head Quarter                            — Mumbai
• Reserve Bank Of India present Governor                      — Sri D.Subbarao( 22nd Governor)
• Reserve Bank Of India present Deputy Governors        –  Sri K.C Chakravarthy ,Sri Subir Gokarn

 RESERVE BANK OF INDIA FUNCTIONS :

         

Monopoly of issuing Notes :
                           In Indian Banking system Under section 22 of the Reserve Bank of India Act,the Reserve Bank has the sole rigth for issuing currency (Rs. 2 to Rs .1000) other than one rupee coins and notes. One rupee note was issued by Finance Secretary Of India (Govt of India )

• RBI issued the currency under the system of minimum reserve ratio.It applied from 1956.
• RBI Currency Security Press Places : Nasik,Salboni,Dewas,Mysore.
•  RBI coin mints – Mumbai,Hyderabad,Kolkata,Noida            
• Bankers to Government :
                                                   Under  Sections 20,21 and 21 A of the Reserve Bank of India Act the statutory basis for these functions.In terms of the first two sections,the bank has the obligation to transact the banking business of the Central Government , which in turn is required to entrust the conduct of such Government , to make payments on its behalf up to the amount outstanding to the credit of its account and also to carry out the Government exchange ,remittance and other banking operations including the management of the public debt .Central Government is obliged to deposit free interest , all its cash balances with the Bank and to entrust it with all its banking remittance and other transactions in India, the management of its public debt and issue of new loans. The Bank performs similar functions on behalf of the State Government by virtue of agreements entered into with them under sections 21A.
  
  
  BANKER to BANKS :
                                          Under the Reserve Bank of India Act the Scheduled Banks are eligible for certain financial facilities from the Reserve Bank of India.In return bear certain obligations to the Reserve Bank.They are required to submit to the bank a weekly statement showing their position in the form prescribed by the Reserve Bank Of India Act . Failure to submit the return involves penal measures under the Act . Similarly , Banks have to maintain the required amount of reserves as prescribed in the Act ,failing which apart from paying penal interest ,Banks are prohibited from accepting fresh deposit during the period of default.
• FOREIGN EXCHANGE CONTROL :
                                                                In Indian Banking System  Reserve Bank of India control the foreign exchange reserves in India through FEMA (Foreign Exchange Management Act) rules.RBI permission given to Scheduled commercial Banks to deal in foreign exchange and these are known as authorized dealers in Foreign Exchange.
  Representative of the International Monetary Fund :
                                                                                               RBI represents the monetary functions like special drawing rights and other international functions on behalf of Indian Government.
• Strengthening the Co-operative structure :                                
                                                                          The Bank has taken a number of steps to strengthen the cooperative structure in the country.Many societies were operating at a loss and has poor management practices. The Bank took the initiative to strengthen these societies by merging the weak societies ,providing necessary training in management practices and injecting the required share capital in many cases. Personal contacts were also established by the Regional Offices of the Bank so as to sustain and strengthen these societies.The Bank could get tremendous support from the State Governments and the Central Government in this regard.
• Collection of Data and Publication :
                                                            In Indian Banking System the Reserve Bank has been empowered to collect on a periodical basis various information from the banks and the financial institutions as per various provisions of the Reserve Bank of India Act. All these information and data are compiled and made available through publication of the following.
1. The Reserve Bank of India Bulletin
2. Credit Information Review
3. Annual Report of the Reserve Bank of India
4. Report on Currency and Finance
5. Report on Trends in Banking .                             

Bank of Central Clearance,settlement and Transfer :
The Reserve Bank of India acts as a Clearing House of Member Banks.Since banks keep cash reserves and deposits with the Central Bank,settlements between them can be more easily effected in the books of the Central Bank .

By optimal use of money in banking operations,this particular function provides strength to the banking system.In this way,the Reserve Bank of India is operating as a Clearing House.

Control of Credit through Monetary policy :
Reserve Bank Of India control all banking system under the mechanism of Bank rate,cash reserve ratio (CRR),Statutory Liquidity Ratio(SLR),REPO,Reserve REPO and Open Market Operations . These are the main controlling factors in Indian banking System.

BANK RATE :

It is the initial bills discount rate of RBI to banks.Now it is 6%

Cash Reserve Ratio (CRR) :
                  Banks have to park sum ratio of their deposits with RBI. This rate can be used to manage liquidity. CRR is very important tool to control inflation. It is oftentimes changed between 3 to 15% .Now it is 6%.

Statutory Liquidity Ratio (SLR) :
                           This ratio indicate the sum of total bank assets have to invest in RBI approved Government securities.This rate is used to provide security to depositors and to help asking of Government  borrowing .Now it is 24% .

Repurchase Option Rate (REPO) :
                                            It is the rate of which the banks borrow money from the RBI by parking their excess SLR. However it is only a short term interest transaction between RBI and Banks.Now it is 8%.

Reverse Repurchase Option Rate (R.REPO):
                                                    This ratio of interest rate paid by the RBI to banks that park their surplus liquidity with it.Now it is 7%.

                     With this a majority of the portion of Indian Banking System is covered and the remaining points will be covered in other topics