What is RBI - Reserve bank of india.,tradecareer.blogspot.com

                                                     Reserve Bank of India

 RBI started functioning on 1 April 1935. 

 It was established by the RBI Act 1934. 

 There was a provision for establishment of Central Bank in Government of 

India ACT 1935. 

 RBI was founded by the recommendation of Young Hilton committee.

 From the very beginning it was founded as central bank. 

 It was a private Bank 

 It was nationalized on 1st January 1949 

 It is an autonomous body 

 It also functioned as a central bank of Burma and Pakistan. 

                                                                             


 Functions of RBI 

 To issue currency notes 

 Two rupee or above value rupee notes are issued by RBI 

 one rupee note and coins are issued by finance ministry 

 But One rupee note and coins are circulated in market by RBI 

 RBI issues currency note by the minimum reserve system 

 RBI has to maintain 200 crore reserve 

 200 core 115 crore gold 

 85 crore rupees – Foreign Assets 

 In 1956, RBI adopted minimum Reserve System 

 Before it, Proportional Reserve System was used. 

 According to MRS, RBI Reduced its reserves from 515 crore to 200 crore.

RBI is a regulatory body for Banking system 

- It frames rules and regulations for banking system and implement them. 

- It works as a Banker of Government of India and arranges all kinds of 

borrowings for Government of India. 

 DMO – Debt Management Office

 Established in 2008 

 In future it would arrange borrowings for Government of India. 

 To maintain Forex Reserve 

 At present, RBI has 371 billion Forex Reserves 

                                                                        


 Forex Reserve

I. Foreign Assets 

II. Gold 

III. Our deposits at IMF( Reserve Tranche IMF) 

IV. SDR – Special Drawing Rights ( issued by IMF, used as an international 

Currency) 

 To manage the exchange rate of rupee. 

 It provides the facility of clearing house to Banks ( clearing house –

solve the mutual disputes) 

 To control the liquidity of Market.

Two types of measures to control the liquidity use by RBI – 

 1. Quantitative 

 2. Qualitative 

QUANTITATIVE MEASURES:- 

 Tools of RBI: 

- Bank Rate\ 

- CRR – Cash Reserve Ratio 

- SLR – Statutory Liquidity Ratio 

- Repo Rate 

- Reverse Repo Rate 

- MSF – Marginal Standing Facility

QUALITATIVE MEASURES:- 

1. Marginal Requirement 

2. Consumer credit 

3. Rationing of Credit 

4. Moral Pressure


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