Reserve Bank of India

Structure: Central Board of Directors is the main committee of the central bank. The Government of India appoints the directors for a four-year term. The Board consists of a governor, four deputy governors, four directors to represent the regional boards, one from the Ministry of Finance and ten other directors from various fields

The Reserve Bank of India has four regional representations: North in New Delhi, South in Chennai, East in Kolkata and West in Mumbai. The Reserve Bank of India has 4 zonal offices. It has 22 regional offices at most state capitals and at a few major cities in India.

Functions of RBI
The Bank has the sole right to issue bank notes of all denominations. The distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent of the Government

Issue Department and Principle of Issuing Money

Since 1957, the Reserve Bank of India is required to maintain gold and foreign exchange reserves of $200 crore ($2 billion), of which at least $115 crore ($1.15 billion) should be in gold and $85 crore ($850 million) in the form of Government Securities. The system as it exists today is known as the minimum reserve system

Monetary authority
The main Monetary authority Banker to the Central and the state Govts. It formulates, implements and monitors the monetary policy as well as it has to ensure an adequate flow of credit to productive sectors. Objectives are maintaining price stability and ensuring adequate flow of credit to productive sectors. The national economy depends on the public sector and the central bank promotes an expansive monetary policy to push the private sector since the financial market reforms of the 1990s.

The institution is also the regulator and supervisor of the financial system and prescribes broad parameters of banking operations within which the country's banking and financial system functions.

Banker to Government
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 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
Bank Rate : RBI lends to the Commercial Bank at the rate of Interest for liquidity needs. At present this is 6 per cent Cash Reserve Ratio: RBI can vary this rate between 3% and 15 of total deposits Statutory Liquidity Ratio (SLR): 24 per cent of Bank deposits should be kept in the form of govt securities.

Manager of exchange control

RBI is responsible to maintain the external value of Rupee. It can undertake buying and selling operation in the foreign exchange market to avoid appreciation and depression of Rupee

Selective Credit Control

Generally RBI uses three kinds of selective credit controls: Minimum margins for lending against specific securities. Ceiling on the amounts of credit for certain purposes. Discriminatory rate of interest charged on certain types of advances

Direct Credit Control

Part of the interest rate structure i.e. on small savings and provident funds, are administratively set. Banks are mandatory required to keep 24% of their deposits in the form of government securities. Banks are required to lend to the priority sectors to the extent of 40% of their advances

Responsibility of RBI is to provide enough Liquidity in the Economy

For this RBI introduces different Money market instruments and regulates interest rates on them Call rate Repo and Reverse Repo rate Commercial papers (CP) Certificate of Deposits

Some rates fixed by RBI

Bank Rate 6.0% Repo Rate 8.50% Reverse Repo Rate 7.50% Cash Reserve Ratio (CRR) 6.0% Statutory Liquidity Ratio (SLR) 24.0% Base Rate 10.00%10.75% Reserve Bank Rate 4% Deposit Rate 8.50%9.50%

Developmental Role
RBI has promotional Role to encourage Micro Finance Cooperative banks Export import Bank IFCI and the SFC; Industrial Development Bank of India NABARD: National Bank of Agriculture and Rural Development