Reserve Bank of India (RBI)

a) What do you know by currency chest?

Currency chests are operated by RBI so that they can provide

good quality currency notes to the public. However, RBI has

appointed commercial banks to open and monitor currency

chests on behalf of RBI. The cash kept in currency chests is

considered to be kept in RBI.

b) What is a small coin depot?

The bank branches are also authorised to establish Small Coin

Depots to stock small coins. The Small Coin Depots also distribute small coins to other bank branches in their area of operation.

Banking Awareness

Bank Rate 

 Bank rate is the rate of interest which is levied on Long Term loans and Advances taken by commercial banks from RBI.

MSF Rate

  MSF (Marginal Standing Facility Rate) is the rate at which banks can borrow overnight from RBI.

 This was introduced in the monetary policy of RBI for the year 2011-2012.

 Banks can borrow funds through MSF when there is a considerable shortfall of liquidity. This measure has been introduced by RBI to regulate short-term asset liability

mismatches more effectively.

IMPORTANT POINTS ON RBI

 RBI is not expected to perform the function of accepting  deposits from the general public. 

 RBI has its headquarters at Mumbai. 

 Prime lending rate is not decided by RBI. 

 Prime lending rate is decided by the individual banks. 

 RBI decides the following rates namely; Bank rate, repo rate,  reverse repo rate and cash reserve ratio. 

 RBI was set up on the recommendations of Hilton Young  commission. 

 The quantitative instruments of RBI are – bank rate policy,  cash reserve ratio and statutory liquidity ratio. 

 The objective of monetary policy of RBI is to control inflation; discourage hoarding of commodities and  encourage flow of credit into neglected sector. 

 When RBI is lender of the last resort, it means that RBI  advances credit against eligible securities. 

 Government of India decides the quantity of coins to be  minted. 

 The method which is used currently in India to issue  currency note – minimum reserve system. 

 For issuing notes, RBI is required to hold the minimum reserves of Rs. 200 crore of which note less than Rs. 115 crore is to be held in gold. 

RBI & ITS ROLE

1) RBI is the central Bank of India and controls the entire money issue, circulation and control by its monetary policies and lending policies.

2) It is also known as the lender of last resort.

3) It was established on April 1, 1935 in accordance with the

provisions of the Reserve Bank of India Act, 1934 & ntionalized

in 1949.

Main Functions

1) Monetary Authority: Formulate, implements and monitors

the monetary policy.

2) Regulator and supervisor of the financial system:

Prescribes broad parameters of banking operations within

which the country’s banking and financial system functions.

3) Manager of Foreign Exchange: Manages the Foreign

Exchange Management Act, 1999.

4) Issuer of Currency: Issues and exchanges or destroys

currency and coins not fit for circulations.
5) Development role: Performs a wide range of promotional
functions to support national objectives.
6) Bankers to the Government: performs merchant banking
function for the central and the state governments; also acts
as their banker.
7) Bankers to banks: maintains banking accounts of all

scheduled banks.

New Projects Started by Railways This Year

1. 1600 kms electrification will be done this year and 2000 km electrification will be done next year.

2. Mizoram and Manipur soon will be connected through Broad Gauge.

3. Special purpose vehicle for the Ahmedabad-Mumbai high speed corridor registered this month.

4. Broad Gauge Lumding-Silchar section in Assam will be implemented this year which will connect Barak Valley with rest of country.

5. Overnight double-decker trains will be introduced on business travel routes.

RBI Current Reserve Ratios and Policy

Rates as on 1ST December 2015

1 Bank Rate 7.75%

2 Repo Rate 6.75%

3 Reverse Repo Rate 5.75%

4 CRR 4%

5 SLR 21.5%

6 MSF 7.75%

The structure divides the banks into two categories: scheduled

banks and non-scheduled banks. However, the Reserve Bank

of India is at the center of the banking structure.

Scheduled Banks in India

The eligibility criteria exist for scheduled banks:

a) The first of which entails carrying on the business of banking in India.

b) All scheduled banks must maintain a reserve capital of 5

lakhs rupees in the Reserve Bank of India.  

c) These are registered under the second schedule of RBI Act,

1934.