Reserve Bank of India

Dr. Punkaj Goyal

History…

• Need felt by British Govt. – General Bank of Bengal & Bihar (1773)– Performance was not up to the mark.

• Establishment:– Apr 1, 1935 (Kolkata)– Moved to Mumbai (1937)– Nationalized in Jan 1, 1949

Preamble

• “To regulate the issue of Bank Notes & keeping reserves with a view to securing monetary stability in India & generally to operate the currency and the credit system of the country to its advantage”.

Objectives…

• To stabilize the value of Indian Currency.• To adopt an appropriate credit policy

according to varying needs of economy.• To control banking system of the country.• To lead the money market.

Management…• Central Board– Official & Non-Official

• Official – 1 Governor & 4 Dy. Governor• Non Official – 10 Directors from various fields, 1 Govt.

official, all are nominated by GOI.• Others : Four Directors – one each from four local Banks.

• Local Board– One each for the four regions of the country.

• Membership:– Consist of five members each.– Appointed by Central Government.– For a term of Four Years.

Functions…

• Regulation of the Currency• Banker, Adviser and Agent to the Govt.• Custody of Cash Researve• Custody of Exchange Researve• Clearing House of Banks• Controller of Credit

Credit Control…

• Objectives:• To stabilize the domestic prices;• To bring out stability in the Foreign Exchange Rates;• To stop undue outflow of the gold;• To exercise control over the deflationary and

inflationary conditions;• To provide for the required credit demand of the

business sector;

Techniques to control the credit• Quantitative :– Bank Rate Policy– Open market operations– Variable Reserve Ratio

• Qualitative– Regulation of Consumer Credit– Regulation of Margin Requirement– Rationing of the Credit– Direct Action– Publicity

Thanks a lot!!!