SOURCES AND USES OF FUNDS FOR BANKS SOURCE A.

CAPITAL TIER I TIER - II

1.Paid up share capital 1.Subordinated debt 2.Share premium 2.Revaluation reserve. 3.Statutory reserve 3.Provision for standard Asset 4.Capital reserve.
B.DEPOSITS C.BORROWINGS D.REFINANCES USES 1.CASH

2. Investments in securities 3. Deposit with RBI and other banks 4. Advances 5. Fixed Assets Capital Adequacy : BASEL II COMPLIANCE CRAR-- 8 % , of which capital in Tier-I not Less than 50 %.

FUNCTIONS OF RBI
Reserve Bank of India acts as the central bank of our country like different other countries. Federal Reserve System- USA Bank of England UK Bank of France- France Reserve Bank of India-India Reserve Bank of India has been established through the Reserve Bank of India Act. 1934 and commenced operation in April 1935.It also draws power and responsibilities through other legislations also such as Banking Regulation Act 1949. The preamble to the RBI Act 1934 sets out the tone of RBIs Monetary Policy objectives : 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. The twin objective of the monetary policy is a) to maintain price stability and b) ensuring adequate flow of credit to the productive sectors of economy. But the ongoing financial openness during late 1990s and increasing evidence of changes in the underlying transmissions mechanism with interest rates and exchange rates getting importance it was felt monetary policy exclusively based on demand function for money could lack precision. RBI adopted a multiple indicator approach in April 1998 whereby interest rates of returns in different financial markets along with data in currency, credit, trade, capital flow, fiscal position, inflation, exchange rates are analyzed with the output data for drawing policy perspective. Such shift was gradual and logical outcome of measures taken during the reform period since 1990s. The multiple indicator approach provided necessary flexibility to respond more effectively to changes in domestic and international environment. Issue of notes- sole authority for issue of currency notes of different denominations as per govt. rule. Bankers to the Government Acts as Banker, Agent and Advisor to Government. It performs all the banking functions of Central and State Government. Bankers Bank Supervision and control of all the banking functions in India, Fixing up repo rate and reverse repo rate, CRR and SLR. Controller of credit It has regulatory powers for control of credit portfolio of banks. RBI advises Credit Monitoring Policy quarterly. Custodian of Foreign Exchange Reserve- Buy and sale of currency , maintains and protects foreign exchange funds.

Key policy rates: Bank Rate6.0 % Repo Rate6.75% Reverse Repo Rate- 5.75% Cash Reserve Ratio- 6.0% Statutory Liquidity Ratio- 24% Prime lending rate- 12.5-13.0% Savings Banks Rate4.0 % CRR: Commercial Banks are required to maintain an average cash balance of 6.0% of the Total Net Demand and Time Liabilities (NDTL) as per section 42(1) of RBI Act 1934 . Demand Liabilities: These include all liabilities payable on demand and include savings bank balance, current account balance, margins held against letter of credit/guarantee, balances in overdue fixed deposit, cash certificates, cumulative recurring deposit, telegraphic transfers, mail transfers, unclaimed deposits, credit balance in cash credit accounts, deposit held as security payable on demand, money at call and short notice. Term liabilities : These are liabilities otherwise payable than on demand include fixed deposits, term liabilities portion in savings bank account ,staff security deposit, deposits held as security for advance not payable on demand. Borrowings from abroad: Banks borrowings from abroad will attract CRR/SLR . Arrangements with the correspondent bank for remittance facilities- Remittances outstanding with correspondent bank by remittances will be shown as liability to the banking system. Other demand and term liabilities (ODTL): ODTL include bills payable, unpaid dividends, interest warrants, suspense account balances payable to bank or public. Scheduled commercial banks are required to submit returns in Form A to RBI fortnightly. Liabilities not to be included: 1.Paid up capital, reserve, credit balances in profit and loss account, refinance from RBI, NABARD,EXIM BANK ,NHB,SIDBI, 2. Amount of provision for income tax in excess of actual estimated liabilities. 3. Amount of DICGC claim received 4. Amount of claim received from ECGC 5. Ad-hoc claim received from insurance companies 6. Amount received from court 7. Balances in ACU accounts 8. Transactions in collateralized borrowing and lending obligations Statutory Liquidity Ratio: In terms of section24 (2-A) of Banking Regulation Act 1949 Scheduled Commercial banks are required to maintain SLR of 24 % of total of Demand and Term Liabilities. The balance is to be kept in the form of cash or gold or approved unencumbered Government securities.