INSTITUTE - USB

DEPARTMENT - BBA
Subject Name- Banking & Insurance
Subject Code- 22BAT-324
Faculty Name – Mr. Vivek Sharma (E13500)

DISCOVER . LEARN . EMPOWER

Role and Functions of RBI
 Role and Functions of
RBI
Course Objective
1. To create awareness among the students regarding banking
and insurance concepts for better careers in this field
2. To apply the practical knowledge of Banking and
Insurance in a dynamic business environment.
Course Outcome
Image Address
CO Title Level
https://media.geeksforgeeks.org/wp-content/
Number uploads/20220705164109/C272-660x330.png
CO1 To describe about the Indian Remember
Banking structure and the reforms in
Indian financial system.

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 Table of Contents
S No. Contents Slide No.

1 Introduction To Banking Regulation Act 1949 4-6

2 Key Objectives of Banking Regulation Act 7

1949

3 8-10
Section 6 of the Banking Regulation Act 1949
(Business Bank can do)
4 Key Amendments in Banking Regulation Act 11-14
1949
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 1. Role of Reserve Bank of India

The central bank issues and regulates currency notes. It keeps reserves
with a view to securing monetary stability and is called a banker to
banks. The RBI plays a vital role in the economic growth of the
country and in maintaining price stability.Some of the key areas are as
follows:
• Monetary Policy of the country: The RBI has been tasked to have
a modern monetary policy framework to meet the challenges of an
increasingly complex economy and to maintain price stability while
keeping in mind the objective of growth.
• Inflation control: The RBI has targeted to keep the mid-term
inflation at 4 four percent (+/- 2 percent).
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• RBI decides benchmark interest rate: A six-member Monetary Policy
Committee, headed by the RBI Governor, decides the benchmark repo rate
through voting that acts as a guide for banks to set interest rates for lending and
deposit. In case of a tie, the Governor has the casting vote. Earlier, the RBI
Governor used to decide the interest rate in consultation with the Technical
Advisory Committee (TAC) consisting of RBI officials and external experts.
• RBI announces benchmark interest rate every two months: The MPC meets
every two months for 2-3 days and the decision of the committee on monetary
policy is announced at the end of the meeting on the RBI's website. It has been a
practice that the RBI Governor along with deputy governors holds a press
conference after the MPC meeting.

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• RBI and financial literacy: The central bank plays a key role in
creating financial awareness among the masses through various
mediums, including television. It also supervises if the banks and
other financial institutions are doing the job assigned to them
regarding financial inclusion.
• Government's banker: RBI acts as a banker for both the central as
well as state governments. It sells and purchases government
securities on its behalf. It also manages liquidity in the system.

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 3. Functions of RBI
RBI carries out a diverse range of monetary, financial, and regulatory
responsibilities as the Central Bank of India. The different functions of RBI are
discussed as follows:
1) Issuer of Currency – RBI monitors the currency and credit aspects by
maintaining the optimum liquidity position of the country on a day-to-day basis.
RBI issues banknotes and coins and withdraws the notes and coins that are no more
suitable for circulation in the market. The RBI has also the authority to withdraw
notes in exchange for issuing notes of different denominations. Reserve Bank is the
single authorized entity or legal tender in the country to issue notes into circulation
except for one rupee notes and coins (the Ministry of Finance of the Government of
India issues One-rupee notes and coins). India has four-note printing presses located
at Nasik, Dewas, Mysore, and Salboni. India’s four-coin minting facilities in
Mumbai, Noida, Kolkata, and Hyderabad fulfill the requirements of currency.
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2) Monetary functions – RBI formulates the country’s monetary policy as
part of its role as Central Bank. This is the macroeconomic policy that is
intended to stabilize commodity prices, control inflation, manage
consumption, monitor the adequate flow of credit in the different sectors,
and increase the overall economic development of the country. Monetary
policy is implemented through different instruments in the open market.
Some of the major ones are discussed below:
• Bank Rate – RBI lends money to banks against government securities
kept as collateral to increase the liquidity position of the bank. The fixed
interest rate charged for lending money by RBI is known as Repo
(Repurchase) Rate. Also, RBI absorbs liquidity from the bank against
government securities as collateral. This is called Reverse Repo. The
control of these interest rates enables RBI to control the economy by
altering the credit supply to commercial banks.
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3) Banker of the banks – With the objective of developing and maintaining public
confidence in the financial system of the country, the RBI regulates and supervises
certain parameters of banking operations in India. Reserve Bank acts like a bank to
commercial banks where the latter borrow money from RBI. Statutory obligation
makes every bank deposit a minimum cash reserve with RBI. RBI maintains the
accounts for all the scheduled banks. RBI also supports the scheduled banks by
providing financial assistance to them through loans and advances which banks can
avail themselves of against approved securities.
As per the Banking Regulation Act of 1949 and the subsequent amendments, RBI is
given the control and power of supervision over the banking system extensively.
These include regulatory authority for offering bank licenses, opening new branches
and extension counters, controlling the management and working methods of the
banks, monitoring the liquidity of bank assets, collation of periodic information
regarding various components of assets and liabilities, amalgamation, an inspection of
banks, liquidation, and reconstruction of banks.
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4) Credit Control – This is one of the most important functions of RBI.
RBI has the power and authority to take responsibility for credit control
to ensure internal control of prices and sustainable economic growth.
This is an important tool for RBI to regulate the demand and supply of
money (that is liquidity) in the economy. This measure prevents the
inflation or deflation of the economy and stabilizes the market pricing,
an essential component for economic development.

5)Supervisor of Foreign Exchange

oversees the 1999 Foreign Exchange Management Act.
The goal is to enable payments and trade with other countries while
encouraging the disciplined growth and upkeep of India's foreign
exchange market. 10
 Summary
• The Reserve Bank of India (RBI) regulates and supervises the
financial system, formulates monetary policy, manages currency
issuance, and oversees foreign exchange. It ensures financial
stability, controls inflation, and promotes economic growth.
Additionally, the RBI acts as a banker to the government and
maintains public confidence in the banking system.

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 Applications
• Gain knowledge about the Indian Banking & Insurance
System and how it is evolved over a number of years
• Banking & Insurance sector offers a fast-paced,
continuously challenging career
• Banking & Insurance Sector provides Professional
training & development opportunities

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 REFERENCES
• Reference Books
1. J.N. Jain & R.K. Jain: Modern Banking and Insurance, Regal Publications
2. A. Ranga Reddy, C. Rangarajan: Rural Banking and Overdues Management,
Mittal Publication
• Reference Website
•https://www.rbi.org.in/Scripts/AboutusDisplay.aspx

• https://www.rbi.org.in/commonperson/English/Scripts/Organisation.aspx#:~:text=Regulator%20and%
20supervisor%20of%20the,banking%20services%20to%20the%20public

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THANK YOU

For any queries

Kindly Email: vivek.e13500@cumail.in