Eem presentation
- 1. Gandhinagar Institute Of Technology Engineering Economics & Management Active Learning Assignment Prepared by: Aniruddh Joshi 001 Dheeraj Yadav 010 Abhishek Rana Guided By – Prof. Prashant Pandya Branch : Electrical
- 2. TOPIC Central Bank – Reserve Bank of India, its function and some following concepts CCR (Cash Reserve Ratio), Bank Rate, Repo (repurchase) Rate, Reserve Repo Rate, Call Rate.
- 3. CENTRAL BANK – RESERVE BANK OF INDIA The Reserve Bank of India is the central bank of India, it was established as a shareholder’s bank on 1st April 1935. On 1st January 1949 it was nationalised. Its headquarters is at Mumbai. RBI, like any other bank performs almost all traditional Central Banking function. Due to country’s development it has also undertaken developmental & promotional function.
- 4. FUNCTIONS OF RBI (RESERVE BANK OF INDIA) Issue of Currency Notes: Under section 22 of RBI act the bank has the right to issue currency notes of all denominations except one rupee coins and notes. The one rupee notes & coins & small coins are issued by Central Government & their distribution is undertaken by RBI as the agent of government. The RBI has separate issue department which is entrusted with the issue of currency notes.
- 5. Banker to the Government: The RBI acts as a banker agent and adviser to the government. It has obligation to transact the banking business of Central Government as well State Government. E.g.: RBI receives and makes all payments on behalf of government, remits its fund, buys and sells foreign currencies for it & give it advice on all banking matters. RBI helps the Government; both central ad state to float new loans and manage public debt. The bank makes ways & meets advances of the government. On behalf of central government it sells treasury bills & there by provides short term finance.
- 6. Banker’s bank & Lender of Last Resort: RBI acts as a banker to other bank. It provides financial assistance to scheduled bank and state co-operative banks in form of rediscounting of eligible bills & loans and advances again approved securities. RBI acts as a lender of last resort. I provides funds to bank when they fail to get it from other sources. It also acts as a clearing house Controller of Credit: RBI has the power to control the volume of credit created by banks. The RBI through its various quantitative & qualitative technique regulates total supple of money & bank credit in the interest of economy. RBI pumps in the money during busy season & withdraw money during slack season.
- 7. Exchange Control & Custodian of Foreign Reserve: RBI has the responsibility of maintaining fixed exchange rate with all member countries of IMF. For this. RBI has centralised all foreign exchange reserve. RBI function as custodian of nation’s foreign exchange reserve. It has to maintain external value of rupee. Collection and Publication of Data: The RBI collects & complies statistical information on banking and financial operation of the economy. The reserve bank of India’ Bulletins is a monthly publication. It not only provide information, but also results of important studies and investigation conducted by reserve bank are given. ‘The report on currency & finance is an annual publication. It provides review of various developments of economics & financial important.
- 8. Regulatory & Supervisory Function: The RBI has wide power of supervision and control over commercial & co-operative bank, relating to licensing, establishment, branch expansion, management & methods of working. The supervisory function of RBI have helped a great improving the standard of banking in India to develop & improve the methods of their operation. Clearing house finance: The RBI acts as clearing house for all member banks. This avoids unnecessary transfer of funds between the various banks.
- 9. Development & Promotional Functions: The RBI has helped in setting up Industrial Finance Corporation of India (IFCI), State Financial Corporation (SFCs), Deposit Insurance Corporation, Agriculture Refinance & Development Corporation (ARDC) etc. these institutions were set up to mobilize saving, & to provide industrial and agricultural finance.
- 10. SOME BASIC CONCEPTS CCR: CCR is also called the cash reserve ratio, refers to a portion of deposit which banks have to keep with the RBI. This serves two purposes. It ensures that a portion of bank deposits is totally risk free & secondly it enables that RBI control liquidity in the system. Bank Rate: This is a rate at which RBI lends money to other bank. The bank rate signals the central banks long term outlook on interest rates. If the bank rate moves up, long term interest rates also tend to move up & vice-versa. Banks make a profile by borrowing at a lower rate and leading the same funds as a higher rate of interest.
- 11. Repo (Repurchase) Rate: Repo rate is the rate at which banks borrow funds from the RBI to meet the gap between the demands they are facing for money & how much they have on hand to lend. If the RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate. Reverse Repo Rate: This is the exact opposite of repo rate. The rate at which RBI borrows money from the banks is termed the reverse repo rate. The RBI uses this tool to when it feels there is too much money floating in the banking system. If the reverse repo rate is increase, it means the RBI will borrow money from the bank and offer them a lucrative rate of interest. As a result, banks would prefer to keep this money with RBI instead of lending it out. This helps steam the flow of excess money in to the economy.
- 12. Call Rate: Call rate is the interest rate paid by banks for lending & borrowing for daily fund requirement. Since banks need funds on a daily basis, they lend to and borrow from other banks according to their daily or short term requirement on a regular basis.
- 13. Bibliography EEM BY PRASHANT R. PANDYA