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Role of Reserve Bank of India as

Regulator

Afeefa T K B140341EC
Aiswariya M B140355EC
Anna Rose Dominic B140483EC
Anushree Bhat B140246EC
Ashna Sahir B140412EC
Bhagyashree D B140155EC
Bhogoju Tejaswini B140697EC 1
Table of
Contents
Introduction to RBI

Regulator of the Banking System

Regulator of Payment and Settlement System

Regulator of the Credit

Regulator of the Foreign Exchange

Regulator of the Financial System

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Introduction to
RBI
The central bank of the country is the Reserve Bank of India (RBI).

It was established in April 1935 with a share capital of Rs. 5 crores on the
basis of the recommendations of the Hilton Young Commission.

The share capital was divided into shares of Rs. 100 each fully paid which
was entirely owned by private shareholders in the beginning.

The Government held shares of nominal value of Rs. 2,20,000.

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Introduction to
RBI
The Bank was constituted for the need of following:

To regulate the issue of banknotes.

To maintain reserves with a view to securing monetary stability and,

To operate the credit and currency system of the country to its advantage.

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Regulator of the Banking
System
The Reserve Bank regulates and supervises the nations financial system. Different
departments of the Reserve Bank oversee the various entities that comprise Indias
financial infrastructure. They oversee:

Commercial banks Urban cooperative Regional Rural Non-Banking


And all-India banks: Banks (RRB), Financial
development District Central Companies
financial Regulated and Cooperative Banks (NBFC):
institutions: Supervised by the and State Co-
Urban Banks operative Banks: Regulated
Regulated by the Department supervised by the
Department of Regulated by the Department of
Banking Operations Rural Planning and Non-Banking
and Development. Credit department Supervision
And supervised by
NABARD

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The RBIs Regulatory Role

Licensing

Prescribing capital requirements

Monitoring governance

Setting prudential regulations to ensure solvency and liquidity of the banks

Prescribing lending to certain priority sectors of the economy

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The RBIs Regulatory Role

Regulating interest rates in specific areas

Setting appropriate regulatory norms related to income recognition, asset


classification, provisioning, investment valuation, exposure limits .

Initiating new regulation

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Challenges
For commercial banks: Focus is on implementing Basel III norms, which will
require improved capital planning and risk management skills.

For urban cooperative banks: Focus is on profitability, professional management


and technology enhancement.

For NBFCs: Focus is on identifying the interconnections and the roles these
institutions should play as the financial system deepens.

For regional rural banks: Focus is on enhancing capability through IT and HR for
serving the rural areas.

For rural cooperative banks: Focus is on ensuring that they meet minimum
prudential standards.

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RBI as Regulator and
Supervisor of Payment and
Settlement Systems
The Payment and Settlement Systems Act of 2007 (PSS Act) gives the Reserve
Bank oversight authority, including regulation and supervision, for the payment
and settlement systems in the country.

In this role, RBI focus on the development and functioning of safe, secure and
efficient payment and settlement mechanisms.

The Reserve Bank has a two-tiered structure. The first tier provides the basic
framework for our payment systems. The second tier focuses on supervision of this
framework.

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RBI as a Regulator of
Credit
The Reserve Bank of India is the controller of credit i.e. it has the power to
influence the volume of credit created by banks in India.

It holds the cash reserves of all the scheduled banks.


It controls the credit operations of banks through quantitative and qualitative
controls.

It controls the banking system through the system of licensing, inspection and
calling for information.

It acts as the lender of the last resort by providing rediscount facilities to scheduled
banks.

It can do so through changing the Bank rate or through open market operations.

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RBI as a Regulator of Foreign
Exchange
The RBI is responsible for administration of the Foreign Exchange Management
Act,1999 and regulates the market by issuing licences to banks and other select
institutions to act as Authorized Dealers in foreign exchange. The Foreign
Exchange Department (FED) is responsible for the regulation and development of
the market.

Regulating transactions related to the external sector and facilitating the


development of the foreign exchange market.
Ensuring smooth conduct and orderly conditions in the domestic foreign exchange
market

Managing the foreign currency assets and gold reserves of the country

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Regulator and Supervisor of the
Financial System
The institution is also the regulator and supervisor of the financial system and
prescribes broad parameters of banking operations within which the country's
banking and financial system functions.

Its objectives are to maintain public confidence in the system, protect depositors'
interest and provide cost-effective banking services to the public.

The Banking Ombudsman Scheme has been formulated by the Reserve Bank of
India (RBI) for effective redress of complaints by bank customers.

The RBI controls the monetary supply, monitors economic indicators like the gross
domestic product and has to decide the design of the rupee banknotes as well as
coins.

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Thank you

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