Functions of Banks

Secondary functions

Agency functions

 Funds transfer

 Cheques collection

 Periodic payments/collection

 Portfolio management

Utility functions

 Issue of draft, letter of credit etc :-Letter of credit acts as an assurance that in case the borrower defaults in making the payment, bank will make the payment up to the amount mentioned in letter of credit

 Locker facility

 Underwriting of shares

 Dealing in foreign exchanges

 Project reports

 Social welfare programs

RBI: The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the RBI Act, 1934. RBI was nationalized in 1949 and it is fully owned by the Government of India. RBI was established on the recommendation of the Hilton Young Commission.

RBI’s FUNCTIONS:

1. Issue of currency notes

2. Controlling the monetary policy

3. Regulator and supervisor of the financial system

4. Banker to other banks

5. Banker to the government

6. Granting licenses to banks

7. Control over NBFIs (Non Banking Financial Institutions)

8. Manager of Foreign Exchange of India (also known as FOREX)

RBI & Monetary Policy:

Monetary policy refers to the use of instruments under the control of the central bank to regulate the availability, cost and use of money and credit.

The main objectives of monetary policy in India are:

Maintaining price stability

Ensuring adequate flow of credit to the productive sectors of the economy to support economic growth

Financial stability

There are several direct and indirect instruments that are used in the formulation and implementation of monetary policy.