University of Mumbai

“ROLE OF RESERVE BANK OF INDIA IN FINANCIAL MARKET”

Under the Partial fulfilment of the requirement of

BACHELOR OF COMMERCE
(BAF)
Submitted by
MR. SHUBHAM SURESH NANEKAR
TYBAF
Roll No. 222312043

Under guidance of
ASSISTANT PROFESSOR
MS. LAVEENA BHATIA

SINDHU EDUCATION SOCIETY’S

SWAMI HANSMUNI MAHARAJ DEGREE COLLEGE OF
COMMERCE
NETAJI ROAD, ULHASNAGAR-421004 DIST.
THANE(M.S)

2022-2023
ROLE OF RESERVE BANK OF INDIA IN FINANCIAL MARKET

A project submitted to

University of Mumbai for partial completion of the degree of

Bachelor of Accounting and Finance

Under the Faculty of Commerce

By

MRS.SHUBHAM NANEKAR

Under the Guidance of

MS.LAVEENA BHATIA

Swami Hansmuni Maharaj Degree College Of Commerce

Opp. Dena Bank, Netaji Chowk

Ulhasnagar – 421 004

April 2022-23
 CERTIFICATE OF EVALUATION

This is to certify that Mr./SHUBHAM SURESH NANEKAR has worked and duly
completed her Project Work for the degree of Bachelor of Commerce (BAF)under
the Faculty of Commerce and his/her project is entitled, “ROLE OF RESERVE
BANK OF INDIA IN FINANCIAL MARKET ”,

I further certify that the entire work has been done by the learner and that no part of
it has been submitted previously for any Degree or Diploma of any University.

It is her own work and facts supported by her personal findings and investigations.

Date: / /2023

Place: Ulhasnagar
 DECLARATION

I the undersigned SHUBHAM NANEKAR here by, declare that the work
embodied in this project work titled “ROLE OF RESERVE BANK OF INDIA IN
FINANCIAL MARKET ”, forms my own contribution to the research work carried
out under the guidance of MISS.LAVEENA BHATIA is a result of my own research
work and has not been previously submitted to any other university for any other
Degree/ Diploma to this or any other University. Wherever reference has been
made to previous work of others, it has been clearly indicated as such and included
in the bibliography.

I, hereby further declare that all information of this document has been obtained
presented in accordance with academic rules and ethical conduct.

Date:
Place:Ulhasnagar

Name : SHUBHAM NANEKAR

Roll no: 222312043

Certified by

Asst Prof Ms. Laveena Bhatia

 ACKNOWLEDGEMENT

To list all who have helped me is difficult because they are so numerous and the
depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me the chance
to do this project.

I would like to thank my Principal, KIRAN CHIMNANI MAM for providing the
necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator HETAL UTTHAMANI MAM,

forher moral support and guidance.

I would like to express my sincere gratitude towards my project guide

MISS.LAVEENA BHATIA whose guidance and care made the project

successful.

I would like to thank my College Library, for having provided various reference
books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped
me in the completion of the project, especially my Parents and Peers who supported
me throughout my project.
 INDEX

SR NO TOPIC NAME PAGENO

1 INTRODUCTION 1-7

2 RESEARCH METHODOLOGY 8-55

2.1 Organisation and structure
2.2 Main activities
2.3 Research Data and Knowledge Sharing
2.4 Customer Service How Can We Help You
2.5 The RBI Logo
3 REVIEW OF LITERATURE 56-63
3.1 Bank ATM Stop sucking in cash after RBI
direction
3.2 Expert views on RBI monetory policy revie

4 DATA ANALYSIS 64-70

5 CONCLUSION 71-72

6 BIBLIOGRAPHY AND REFERENCE 73

7 APPENDIX 74-76
SUMMARYIn this paper we quantitatively analyse monetary policy statements of the Reserve Bank of
India (RBI) from 1998 to 2017, across the regimes of five governors. We first ask whether the content and
focus of the statements have changed with the adoption of inflation-targeting as a framework for
conducting monetary policy. Next, we study the influence of various aspects of monetary policy
communication on financial markets. Using natural language processing tools, we construct measures of
linguistic and structural complexity that capture governor-specific trends in communication. We find that
while RBI’s monetary policy communication is linguistically complex on average, the length of monetary
policy statements has gone down and readability has improved significantly in the recent years. We also
find that there has been a persistent semantic shift in RBI’s monetary policy communication since the
adoption of inflationtargeting. Finally, using a simple regression model we find that lengthier and less
readable statements are linked to both higher trading volumes and higher returns volatility in the equity
markets, though the effects are not persistent.

Keywords: Monetary policy, central bank communication, linguistic complexity, financial markets, textual
analysis, natural language processing

JEL Classification: E52, E58, G12, G14

Suggested Citation:

The purpose of this paper is to investigate empirically the extent and evolution of fiscal (de)centralization in
a sample of OECD countries. We ask whether and how some factors derived by the economic theory on this
issue are empirically significant either for centralization or decentralization. Then, building a new panel data
set, we test the significance of these factors using a random effects model. Our results seem to confirm that
land area, population, degree of urbanization and income per capita are negatively correlated with
centralization. Moreover, we find that heterogeneity in ethno-linguistic groups is significantly related to the
observed decentralization in the patterns of expenditure on education and on religious, cultural and
recreational services.

Major agricultural exporters have adopted genetic engineering in agriculture to increase

productivity. However, consumers in certain importing countries, particularly the EU and Japan,
are wary of these products. In this paper, we analyze the impact of consumer attitudes towards
genetically modified (GM) food on global production, prices, and trade patterns. We find that the
potential benefits for GM producers depend crucially on consumer willingness to accept these new
varieties. If consumers in some countries reject GM foods, then the global benefits from GM
products are reduced and distributed differently.

Production of non-GM foods may increase, despite the productivity gains in GM varieties. This
study explores economic effects of environmental taxation using an energy–economy–environment
computable general equilibrium model of the Turkish economy. The model disaggregates the
Turkish economy into seven sectors and describes production within a nested CES representation.
Results, which are obtained under a Business-As-Usual as well as various environmental tax
scenarios, provide insight into energy–economy–environment interactions in Turkey and indicate
opportunities for an ecologically and economically sustainable development of the country. Besides
general policy implications, it is found that a second dividend of environmental taxation, that is
economic benefits in addition to environmental improvements, is possible when imported fuels are
the primary source of pollutant emissions. This result has been obtained under tax revenue recycling
that assumes public consumption of tax revenues instead of the common practice of using tax
revenues for reducing existing tax distortions in order to obtain a second dividend.

1
 INTRODUCTION

Who We Are

The Reserve Bank Of India is the nation central bank--

Since 1935, when we began operation we have stood at the centre of India‘s
financial system, with a fundamental commitment to maintaining the nation‘s
monetary and financial stability.

From ensuring stability of interest and exchange rates to providing liquidity and an
adequate supply of currency and credit for the real sector; from ensuring bank
penetration and safety of depositor‘s funds to promoting and developing financial
institutions and markets, the Reserve Bank plays a crucial role in the economy.
Our decisions touch the daily life of all Indians and help chart the country‘s current
and future economic and financial course.

Over the years, our specific roles and functions have evolved. However ,there have
been certain constants ,such as the integrity and professionalism with which the
Reserve Bank discharges its man date.

RBI at a Glance

ManagedbyCentralBoardofDirectors

2
India‘smonetaryauthority

Supervisoroffinancialsystem

Issuerofcurrency

Managerofforeignexchangereserves

Bankeranddebtmanagertogovernment

Supervisorofpaymentsystem

Bankertobanks

Developmentalfunctions

Research,dataandknowledgesharing

Celebrating Our Platinum Jubilee 1935-2010As Reserve Bank of India commence

Operations today I take the opportunity

3
 To--- express my
confidencethat this great undertaking
willcontribute largely to the
economicwell being of India
and…its people.

- Excerpt from telegram sent by the to

Osborne Smith, first governor of the Reserve
Bank,
1935

Osborne Smith The

Reserve Bank:
Tradition and Change

The origin of the Reserve Bank can be traced to 1926, when the Royal

Commission on Indian Currency and Finance—also known as the Hilton-Young

Commission—recommended the creation of a central bankto separate the control of
currency and credit from the government and to augment banking facilities
throughout the country.The Reserve Bank of India Act of 1934 established the
Reserve Bank as the banker to the central government and set in motional series of
actions culminating in the start of operations in 1935. Since then, the Reserve Bank‘s

4
role and functions have undergone numerous changes—as the nature of the Indian
economy has changed.

Today‘s RBI bears some resemblance to the original institution, although our mission
has expanded along with our deepened, broadened and increasingly globalised
economy.

a :
1935 :-

Operation begin on April 1

1949:-

Nationalisation of the Reserve Bank of India; Banking Regulation Act

enacted.

1950:-

5
India Embarks on planed economic development. The Reserve Bank of India
becomes active agent and participants.

1966:-

Cooperative Bank came under RBI Regulation.

1969:-

Nationalisation of 14 major commercial Bank

(Six more bank nationalize in 1980)

1973:-

RBI strengthen exchange control by amendingForeign Exchange Regulation

Act.

1974:-

Introduction of priority sector lending targets

1975:-

Regional Rural Bank Setup

1985:-

Financial market reforms begins with Sukhamoy Chakravaty and Vaghul

Committee Report.

1991:-

India faces Balance of Payment crisis, pledges gold to shore up reserve.

6
 Rupee devalued.

1993:-

Exchange rate become market determined

1994:-

Board of Financial Supervision Setup.

Highlights

1997:-

Ad hoc treasury bill phased out ending automatic monetization.

1997:-

Regulation of Non-Banking Finance Companies Strengthened.

1998:-

Multiple indicator Approach for monetary policy adopted.

2000:-

Foreign Exchange Management Act replace FERA.

2002:-

Clearing Corporation of India Limited (CCIL) commences clearing and settlement

in government securities.

7
2003:-

Fiscal Responsibility and Budget Management Act enacted.

2004:-

Transition to a full-fledged daily liquidity adjustment facility (LAF) completed.

Market Stabilisation Scheme (MSS) introduced to sterilize capital flows.

2004:-

Real Time Gross Settlement System commences.

2005:-

Focus on financial inclusion and increasing the outreach of the banking sector.

2006:-

RBI empowered to regulate money, forex, G-sec and gold related securities market.

2007:-

RBI empowered to regulate Payment System.

2008/9:-

Pro-active efforts to minimize impacts of global financial crisis.

8
RESEARCH METHODOLOGY

Research in common parlance refers to a search for knowledge. One can also
define research as a scientific & systematic search for pertinent information on a
specific topic. In fact, research is an art of scientific investigation. The Advanced
Learner‘s Dictionary of Current English lays down the meaning of research as ―a
careful investigation or inquiry especially through search for new facts in any
branch of knowledge.‖ Redman & Mory defined research as a ―systemized effort
to gain new knowledge.‖

OBJECTIVES OF RESEARCH:

The purpose of research is to discover answers to questions through the

application of scientific procedures. The main aim of research is to find out the truth
which is hidden & which has not been discovered as yet. Though each research study
has its own specific purpose.

TYPES OF RESEARCH:

The basic types of research are as follows:

1. Descriptive V/s Analytical.

2. Applied V/s Fundamental.

3. Quantitative V/s Qualitative.

4. Conceptual V/s Empirical.

5. Some other types of research.

9
Types of Data

Primary Data:

Data that has been collected from first-hand-experience is known as primary data.
Primary data has not been published yet and is more reliable, authentic and objective.
Primary data has not been changed or altered by human beings, therefore its validity
is greater than secondary data.

Importance of Primary Data:

Importance of Primary data cannot be neglected. A research can be conducted

without secondary data but a research based on only secondary data is least reliable
and may have biases because secondary data has already been manipulated by human
beings. In statistical surveys it is necessary to get information from primary sources
and work on primary data: for example, the statistical records of female population
in a country cannot be based on newspaper, magazine and other printed sources. One
such sources are old and secondly they contain limited information as well as they
can be misleading and biased.

Validity: Validity is one of the major concerns in a research. Validity is the quality
of a research that makes it trustworthy and scientific. Validity is the use of scientific
methods in research to make it logical and acceptable. Using primary data in research
can improves the validity of research. First hand information obtained from a sample
that is representative of the target population will yield data that will be valid for the
entire target population.

Authenticity: Authenticity is the genuineness of the research. Authenticity can be at

stake if the researcher invests personal biases or uses misleading information int he
research. Primary research tools and data can become more authentic if the methods

10
chosen to analyze and interpret data are valid and reasonably suitable for the data
type. . Primary sources are more authentic because the facts have not been overdone.
Primary source can be less authentic if the source hides information or alters facts
due to some personal reasons. Their are methods that can be employed to ensure
factual yielding of data from the source.

Reliability: Reliability is the certainty that the research is enough true to be trusted
on. For example, if a research study concludes that junk food consumption does not
increase the risk of cancer and heart diseases. This conclusion should have to be
drawn from a sample whose size, sampling technique and variability is not
questionable. Reliability improves with using primary data. In the similar research
mentioned above if the researcher uses experimental method and questionnaires the
results will be highly reliable. On the other hand, if he relies on the data available in
books and on internet he will collect information that does not represent the real
facts.

Sources of Primary Data:

Sources for primary data are limited and at times it becomes difficult to obtain data
from primary source because of either scarcity of population or lack of cooperation.
Regardless of any difficulty one can face in collecting primary data; it is the most
authentic and reliable data source. Following are some of the sources of primary
data.

Experiments: Experiments require an artificial or natural setting in which to perform

logical study to collect data. Experiments are more suitable for medicine,
psychological studies, nutrition and for other scientific studies. In experiments the
experimenter has to keep control over the influence of any extraneous variable on
the results.

11
Survey: Survey is most commonly used method in social sciences, management,
marketing and psychology to some extent. Surveys can be conducted in different
methods.

Questionnaire: is the most commonly used method in survey. Questionnaires

are a list of questions either open-ended or close -ended for which the
respondent give answers. Questionnaire can be conducted via telephone, mail,
live in a public area, or in an institute, through electronic mail or through fax
and other methods.
Interview: Interview is a face-to-face conversation with the respondent. In
interview the main problem arises when the respondent deliberately hides
information otherwise it is an in depth source of information. The interviewer
can not only record the statements the interviewee speaks but he can observe
the body language, expressions and other reactions to the questions too. This
enables the interviewer to draw conclusions easily.
Observations: Observation can be done while letting the observing person
know that he is being observed or without letting him know. Observations can
also be made in natural settings as well as in artificially created environment.

Secondary Data:

Data collected from a source that has already been published in any form is called as
secondary data. The review of literature in nay research is based on secondary data.
MNostly from books, journals and periodicals.

12
Importance of Secondary Data:

Secondary data can be less valid but its importance is still there. Sometimes it is
difficult to obtain primary data; in these cases getting information from secondary
sources is easier and possible. Sometimes primary data does not exist in such
situation one has to confine the research on secondary data. Sometimes primary data
is present but the respondents are not willing to reveal it in such case too secondary
data can suffice: for example, if the research is on the psychology of transsexuals
first it is difficult to find out transsexuals and second they may not be willing to give
information you want for your research, so you can collect data from books or other
published sources.

Sources of Secondary Data:

Secondary data is often readily available. After the expense of electronic media and
internet the availability of secondary data has become much easier.

Published Printed Sources: There are variety of published printed sources. Their
credibility depends on many factors. For example, on the writer, publishing company
and time and date when published. New sources are preferred and old sources should
be avoided as new technology and researches bring new facts into light.

Books: Books are available today on any topic that you want to research. The
use of books start before even you have selected the topic. After selection of
topics books provide insight on how much work has already been done on the
same topic and you can prepare your literature review.
Books are secondary source but most authentic one in secondary sources.

Journals/periodicals: Journals and periodicals are becoming more important

as far as data collection is concerned. The reason is that journals provide

13
 uptodate information which at times books cannot and secondly, journals can
give information on the very specific topic on which you are researching rather
talking about more general topics.
Magazines/Newspapers: Magazines are also effective but not very reliable.
Newspaper on the other hand are more reliable and in some cases the
information can only be obtained from newspapers as in the case of some
political studies.

Published Electronic Sources: As internet is becoming more advance, fast and

reachable to the masses; it has been seen that much information that is not available in
printed form is available on internet. In the past the credibility of internet was
questionable but today it is not. The reason is that in the past journals and books were
seldom published on internet but today almost every journal and book is available
online. Some are free and for others you have to pay the price. ejournals: e-journals
are more commonly available than printed journals. Latest journals are difficult to
retrieve without subscription but if your university has an elibrary you can view any
journal, print it and those that are not available you can make an order for them.
General websites; Generally websites do not contain very reliable information
so their content should be checked for the reliability before quoting from them.
Weblogs: Weblogs are also becoming common. They are actually diaries
written by different people. These diaries are as reliable to use as personal
written diaries.

Unpublished Personal Records: Some unpublished data may also be useful in some
cases.

Diaries: Diaries are personal records and are rarely available but if you are
conducting a descriptive research then they might be very useful. The Anne
SIGNIFICANCE OF RESEARCH:

14
 The role of research in several fields of applied economics, whether related to
business or to the economy as a whole, has greatly increased in modern times. The
increasingly complex nature of business & government has focused attention on the
use of research in solving operational problems. Research, as an aid to economic
policy, has gained added importance, both for government & business.

RESEARCH & SCIENTIFIC METHOD:

The scientific method is, thus, based on certain basic postulates which can be stated
as:
1. It relies on empirical evidence.

2. It utilizes relevant concepts.

3. It is committed only to objective considerations.

4. It pre supposes ethical neutrality.

5. It results in to probabilistic predictions.

6. Its methodology is made known to all concerned for critical scrutiny & for use
in testing the conclusions through replications.
7. It aims at formulating more general axioms or what can be termed as scientific
theories.

RESEARCH PROCESS:

Research process consists of series of actions or steps necessary to

effectively carry out research & the desired sequencing of its steps: However,
the following order concerning various steps provides a useful procedural
guideline regarding the research process:

1. Formulating the research problem.

15
2. Extensive literature survey

3. Developing the hypothesis.

4. Preparing the research design

5. Determining the sample design.

a. Deliberate sampling.

b. Simple random sampling.

c. Systematic sampling.

d. Stratified sampling.

e. Quota sampling.

f. Cluster sampling & area sampling.

g. Multi-stage sampling.

h. Sequential sampling.

6. Collecting the data.

a. By observation.

b. Through personal interviews.

c. Through telephone interview.

d. By mailing of Questionnaire.

e. Through schedules.

7. Execution of the project.

8. Analysis of the data.

9. Hypothesis testing.

10.Generalizations & interpretations.

16
 11. Preparation of the report or presentation of the results.

a. Introduction.

b. Summary of findings.

c. Main report.

In this case since RBI is a bank so Basic Research is taken into consideration for the
purpose of preparing this project.

Details about basic research are given below.

BASIC RESEARCH

Pure research advances fundamental knowledge about the human world. It focuses
on refuting or supporting theories that explain how this world operates, what makes
things happen, why social relations are a certain way, and why society changes. Pure
research is the source of most new scientific ideas and ways of thinking about the
world. It can be exploratory, descriptive, or explanatory; however, explanatory
research is the most common.

Pure research generates new ideas, principles and theories, which may not be
immediately utilized; though are the foundations of modern progress and
development in different fields. Today's computers could not exist without the pure
research in mathematics conducted over a century ago, for which there was no known
practical application at that time. Pure research rarely helps practitioners directly
with their everyday concerns. Nevertheless, it stimulates new ways of thinking about
deviance that have the potential to revolutionize and dramatically improve how
practitioners deal with a problem.

17
A new idea or fundamental knowledge is not generated only by pure research, but
pure research can build new knowledge. In any case, pure research is essential for
nourishing the expansion of knowledge. Researchers at the center of the scientific
community conduct most of what is pure research.

Structure, Organisation and Governance:

How We Function

The Reserve Bank is wholly owned by the Government of India. The

Central Board of Directors oversees the Reserve Bank‘s business.

About the Central Board

The Central Board has primary authority for the oversight of the Reserve Bank. It
delegatesspecific functions to its committees and sub-committees.

Central Board:

Includes the Governor,Deputy Governors and the nominatedDirectors and

agovernment nominee-Director

Committee of Central Board:

Overseesthe current business of the centralbank and typically meets every week,
onWednesdays. The agenda focusses oncurrent business, including approval of the
weekly statement of accounts related to the Issue and Banking Departments.

18
Board for Financial Supervision:

Regulates and supervises commercial banks, Non-Banking Finance Companies

(NBFCs), development finance institutions, urban co-operative banks and primary
dealers.

Board for Payment and Settlement Systems:

Regulates and supervises thepayment and settlement systems Sub-committees of

the Central Board:
Includes those on Inspection and Audit; Staff; and Building. Focus of each
subcommittee is on specific areas of operations.

Local Boards:

In Chennai, Kolkata, Mumbai and New Delhi, representing the country‘s four
regions. Local board members, appointed by the Central Government for four-year
terms, represent regional and economic interests and the interests of co-operative and
indigenous banks.

19
Central Board of Directors by the Numbers

Official Directors

1 Governor

4 Deputy Governors, at a maximum

Non-Official Directors

4 directors—nominated by the Central Government to represent each local board

10 directors nominated by the Central Government with expertise in various

segments of the economy 1 representative of the Central Government

6 meetings—at a minimum—each year 1

meeting—at a minimum—each quarter

20
Management and Structure

The Governor is the Reserve Bank’s chief executive. The Governor

supervises and directs the affairs and business of the Reserve Bank. The
management team also includes Deputy Governors and Executive
Directors.

Governor Deputy Governor Deputy Governor

Deputy Governor Depu ty Governor
Dr. D. Subbarao Smt. ShyamalaGopinath Dr. K. C. Chakrabarty
Smt. UshaThorat Dr. SubirGokarn

Executive Directors

1) Shri V K Sharma 2) Shri C Krishnan

3) ShriAnandSinha 4) Shri V S Das

4) Shri Gopalkrishna 6) Shri H R Khan7) Shri D K Mohanty

21
Departments 1)
Market

22
3) Regulation And Supervision

23
 5) Support

The Reserve Bank of India is Made up of-

26 Departments:

These focus on policy issues in the Reserve Bank’s functional areas and
internal operations.

26 Regional Offices and Branches:

24
These are the Reserve Bank’s operational arms and customer interfaces,
headed by Regional Directors. Smaller branches / sub-offices are headed by
a General Manager / Deputy General Manager.

Training centers:

The Reserve Bank Staff College at Chennai addresses the training needs of
RBI officers; the College of Agricultural Banking at Pune trains staff of
cooperative and commercial banks, including regional rural banks. The Zonal
Training Centres, located at regional offices, train non-executive staff.

Research institutes:

RBI-funded institutions to advance training and research on banking issues,

economic growth and banking technology, such as, National Institute of Bank
Management (NIBM) at Pune, Indira Gandhi Institute of Development
Research (IGIDR) at Mumbai, and Institute for Development and Researchin
Banking Technology (IDRBT) at Hyderabad.

Subsidiaries:

Fully-owned subsidiaries include National Housing Bank (NHB), Deposit

Insurance and Credit Guarantee Corporation (DICGC), Bharatiya Reserve
Bank Note Mudran Private Limited (BRBNMPL). The Reserve Bank also has
a majority stake in the National Bank for Agriculture and Rural Development
(NABARD).

25
Main Activities of the RBI:

What We Do

The Reserve Bank is the umbrella network for numerous activities,all related
to the nation’s financial sector, encompassing andextending beyond the
functions of a typical central bank. Thissection provides an overview of our
primary activities:

Monetary Authority

Issuer of Currency

Banker and Debt Manager to Government

Banker to Banks

Regulator of the Banking System

Manager of Foreign Exchange

Regulator and Supervisor of the Payment and

Settlement Systems

Developmental Role

26
Monetary Authority
Monetary policy refers to the use of instruments under the control of the central bank
to regulate the availability, cost and use of money and credit.The goal: achieving
specific economic objectives, such as low and stableinflation and promoting growth.

The main objectives of monetary policy in India are:

Maintaining price stability Ensuring adequate flow of credit to the productivesectors
of the economy to support economic growth Financial stability The relative emphasis
among the objectives varies from time to time, depending on evolving
macroeconomic developments.

27
The basic functions of the Reserve Bank of India are to regulate the issue of Bank
notes and the keeping of reserves with a view to securing ― - From the
Preamble of monetary stability in India and the Reserve Bank of

India Act, 1934‖ generally to operate the currency and credit

system of the country to its advantage.
Our Approach

Our operating framework is based on a multiple indicator approach. This means that
we monitor and analyse the movement of a number of indicators including interest
rates, inflation rate, money supply, credit, exchange rate, trade, capital flows and
fiscal position, along with trends in output as we develop our policy perspectives.

Our Tools

The Reserve Bank‘s Monetary Policy Department (MPD) formulates monetary

policy. The Financial Markets Department (FMD) handles day-to-day liquidity
management operations. There are several direct and indirect instruments that are
used in the formulation and implementation of monetary policy.

Direct Instruments

Cash Reserve Ratio (CRR):

The share of net demand and time liabilities that banks must maintain as cash balance
with the Reserve Bank. Statutory Liquidity Ratio (SLR):
The share of net demand and time liabilities that banks must maintain in safe and
liquid assets, such as, government securities, cash and gold.
Refinance facilities:

28
Sector-specific refinance facilities (e.g., against lending to export sector) provided
to banks.

Indirect Instruments

Liquidity Adjustment Facility (LAF):

Consists of daily infusion or absorption of liquidity on a repurchase basis, through

repo (liquidity injection)and reverse repo (liquidity absorption) auction operations,
using government securities as collateral.
Open Market Operations (OMO):

Outright sales/purchases of government securities, in addition to LAF, as a tool to

determine the level of liquidity over the medium term.
Market Stabilisation Scheme (MSS):

This instrument for monetary management was introduced in 2004. Liquidity of a

more enduring nature arising from large capital flows is absorbed through sale of
short-dated government securities and treasury bills. The mobilised cash is held in a
separate government account with the Reserve Bank.

Repo/reverse repo rate:

These rates under the Liquidity Adjustment Facility (LAF) determine the corridor
for short-term money market interest rates. In turn, this is expected to trigger
movement in other segments of the financial market and the real economy.
Bank rate:

It is the rate at which the Reserve Bank is ready to buy or rediscount bills of
exchange orother commercial papers. It also signals themedium-term stance of
monetary policy.

29
What is the Cash Reserve Ratio?

The Reserve Bank requires banksto maintain a certain amount ofcash in reserve as a
percentageof their deposits to ensure thatbanks have sufficient cash tocover customer
withdrawals. Weadjust this ratio on occasion,as an instrument of monetarypolicy,
depending on prevailingconditions. Our centralised andcomputerised system allows
forefficient and accurate monitoring of the balances maintained bybanks with the
Reserve Bank.

RBI Governor responds to questions following the release of the

annual policy statement. “
Improving transparency in our decisions and actions is a constant endeavour
at RBI.

30
 ”
Open and Transparent Monetary Policy-Making

The Reserve Bank explains the relative importanceof its objectives in a given context
in a transparentmanner, emphasises a consultative approach inpolicy formulation as
well as autonomy in policyoperations and harmony with other elementsof
macroeconomic policies. The monetary policyformulation is aided by advice and
input from:

Technical Advisory Committee on Monetary Policy

Pre-policy consultations with bankers, economists, market participants, chambers

of commerce and industry and otherstakeholders Regular discussions with credit
heads of banks

Feedback from banks andfinancial institutions

Internal analysis

The Reserve Bank‘s Annual Policy Statements,Announced in April, are followed by

three quarterlyreviews, in July, October and January. A detailedbackground report
— Review of Macroeconomicand Monetary Developments — is released theday
before the policy review. Faced with multipletasks and a complex mandate, the
Reserve Bankemphasizes clear and structured communicationfor effective
functioning. Improving transparency inour decisions and actions is a constant
endeavour at the Reserve Bank.

Looking Ahead

The Reserve Bank looks at both short term and longerterm issues related to liquidity
management. In thelonger term, we monitor the developments in inflationary

31
pressures, with an eye towardencouraging strong and sustainable globalfinancial
markets, capital flows, the government‘s fiscalposition and economic growth.

Issuer of Currency
The Reserve Bank is the nation‘s sole note issuing authority. Along with the
Government of India, we are responsible for the design and production and overall
management of the nation‘s currency, with the goal of ensuring an adequate supply
of clean and genuine notes. The Reserve Bank also makes sure there is an adequate
supply of coins, produced by the government.In consultation with the government,
we routinely addresssecurity issues and target ways to enhance security features to
reduce the risk of counterfeiting or forgery.

Our Approach

The Department of Currency Management inMumbai, in cooperation with the

Issue Departmentsin the Reserve Bank‘s regional offices, oversees the production
and manages the distribution of currency.

Currency chests at more than 4,000 bank branches—typically commercial banks—

contain adequatequantity of notes and coins so that currency is accessible to the
public in all parts of the country.

The Reserve Bank has the authority to issue notes upto value of Rupees Ten
Thousand.

32
Our note Printing Press at Mysore: The Reserve Bank is the government’s agent for
issue and distribution of coins

RBI’s Clean Note Policy

Education campaign on preferred way to handle notes: no stapling, writing,

excessive folding andthe like
Timely removal of soiled notes: use of currencyverification and processing systems
and sortingmachines
Exchange facility for torn, mutilated or defectivenotes: at currency chests of
commercial banksand in Reserve Bank issue offices

Our Tools

Four printing presses actively print notes: Dewas inMadhya Pradesh, Nasik in

Maharashtra, Mysore inKarnataka, and Salboni in West Bengal.The presses in

Madhya Pradesh and Maharashtra areowned by the Security Printing and Minting
Corporationof India (SPMCIL), a wholly owned company of theGovernment of
India. The presses in Karnataka andWest Bengal are set up by BRBNMPL, a wholly
owned subsidiary of the Reserve Bank. Coins are minted by the Government of
India. RBI isthe agent of the Government for distribution, issue andhandling of coins.

33
Four mints are in operation: Mumbai,Noida in Uttar Pradesh, Kolkata, and
Hyderabad.

RBI’s Anti-counterfeiting Measures

Continual upgrades of bank note security features

Public awareness campaigns to educate citizensto help prevent circulation of forged

or counterfeit notes
Installation of note sorting machinesOur note Printing Press at Mysore: The

Reserve Bank is the government’s agent for issueand distribution of coins

Looking Ahead

Focus continues on ensuring availability of clean notesand on strengthening the

security features of banknotes. Given the volumes involved and costs incurredin the
printing, transport, storage and removal of unfit/soiled notes, the Reserve Bank is
evaluating ways toextend the life of bank notes—particularly in the
lowerdenominations. For example, we are considering issues ofRs.10 banknotes in
polymer.

Denominations of coins and notes in circulation:

Coins in circulation: 25 paise, 50 paise, 1, 2, 5 and 10 Rupee

Notes in circulation: Rs. 5, 10, 20, 50,100, 500 and 1000

34
Bank notes are legal tender at any place in India for payment without limit.

As per Indian Coinage Act-

Rupee coin (1 and above) can be used to pay /settle for any sum

Paise 50 can be used to pay /settle any sum not exceeding Ten Rupees

In case of smaller coins below 50 paise, any sum not exceeding One Rupee

The Reserve Bank is the nation‘s sole note issuing authority. Along with the Government
of India, we are responsible for the design and production and overall management of the
nation‘s currency, with the goal of ensuring an adequate supply of clean and genuine notes.

Banker and Debt Manager to Government

Managing the government‘s banking transactions is a key RBI role. Like individuals,
businesses and banks, governments need a banker to carry out their
financialtransactions in an efficient and effective manner, including the raising of
resourcesfrom the public. As a banker to the central government, the Reserve
Bankmaintains its accounts, receives money into and makes payments out of these
Accounts and facilitates the transfer of government funds. We also act as thebanker
to those state governments that have entered into an agreement with us.

Our Approach

35
The role as banker and debt manager to governmentincludes several distinct
functions:

Undertaking banking transactions for the central andstate governments to facilitate

receipts andpayments and maintaining their accounts.

Managing the governments‘ domestic debt with theobjective of raising therequired

amount of publicdebt in a cost-effective and timely manner.
Developing the market for government securitiesto enable the government toraise
debt at areasonable cost, provide benchmarks for raisingresources by other entities
and facilitate transmissionof monetary policy actions.

Our Tools

At the end of each day, our electronic systemautomatically consolidates all of the
government‘s transactions to determine the net final position. If thebalance in the
government‘s account shows a negativeposition, we extend a short-term,
interestbearingadvance, called a Ways and Means Advance—WMA—thelimit or
amount for which is set at the beginning of eachfinancial year in April.

The RBI’s Government Finance Operating Structure

The Reserve Bank‘s Department of Government and Bank Accounts oversees

governments‘ banking related activities. This department encompasses:

Public accounts departments: manage the day-to-day aspects of

ourGovernment‘s banking operations. The Reserve Bank also appointscommercial
banks as its agents and uses their branches for greater access tothe government‘s
customers.

36
Public debt offices: provide depository services for government securities for
institutions and service government loans.

Central Accounts Section at Nagpur: consolidates the government‘sbanking

transactions.The Internal Debt Management Department based in Mumbai raises
thegovernment‘s domestic debt and regulates and develops the governmentsecurities
market.

Looking Ahead

Going forward, we will continue to enhance efficient anduser-friendly conduct of

banking transactions for centraland state governments while ensuring
costeffectivecash and debt management by deepening and wideningof the market for
government securities.The RBI plays a critical role managing the issuance of public
debt.Part of this role includes informing potential investors aboutupcoming debt
auctions through notices such as these.

RBI as the Government’s Debt Manager

In this role, we set policies,in consultation with thegovernment and determinethe

operational aspects ofraising money to help thegovernment finance itsrequirements:

Determine the size,tenure and nature(fixed or floating rate)of the loan

Define the issuing process including holding of auctions

Inform the public and potential investors about upcoming government loan auctions
The Reserve Bank also undertakes market development efforts, including enhanced
secondary market trading and settlement mechanisms, authorisation of primary
dealers and improved transparency of issuing process to increase investor

37
confidence, with the objective of broadening and deepening the government
securities market

The RBI plays a critical role managing the issuance of public debt. Part of this role
includes informing potential investors about upcoming debt auctions through notices
such as these.

Banker to Banks
Like individual consumers, businesses and organisations of all kinds, banks need
their own mechanism to transfer funds and settle inter-bank transactions—such as
borrowing from and lending to other banks—and customer transactions. As the
banker to banks, the Reserve Bank fulfills this role. In effect, all banks operating in
the country have accounts with the Reserve Bank, just as individuals and businesses
have accounts with their banks.

Our Approach

As the banker to banks, we focus on:

38
Enabling smooth, swift and seamless clearing andsettlement of inter-bank
obligations.

Providing an efficient means of funds transferfor banks.

Enabling banks to maintain their accounts withus for purpose of statutory reserve
requirementsand maintain transaction balances.
Acting as lender of the last resort.

RBI provides liquidity support to banks. Cash being transported

from Musore Press.

39
Our Tools

The Reserve Bank provides similar products and servicesfor the nation‘s banks to
what banks offer their owncustomers. Here‘s a look at how we help:

Non-interest earning current accounts:

Bankshold accounts with the Reserve Bank based oncertain terms and conditions,
such as maintenance ofminimum balances. They can hold accounts at eachof our
regional offices. Banks draw on these accountsto settle their obligations arising from
inter-banksettlement systems. Banks can electronically transferpayments to other
banks from this account, usingthe Real Time Gross Settlement System (RTGS).
Deposit Account Department:

This department‘scomputerised central monitoring system helpsbanks manage their

funds position in real timeto maintain the optimum balance betweensurplus and
deficit centres.
Remittance facilities:

Banks and governmentdepartments can use these facilities totransfer funds. Lender
of the last resort:

The Reserve Bankprovides liquidity to banks unable to raise shorttermliquid

resources from the inter-bank market.Like other central banks, the Reserve Bank
considersthis a critical function because it protects theinterests of depositors, which
in turn, hasa stabilising impact on the financial systemand on the economy as a
whole.
Loans and advances:

40
The Reserve Bank providesshort-term loans and advances to banks /
financialinstitutions, when necessary, to facilitate lendingfor specified purposes.

Looking Ahead

Challenges going forward include implementing corebanking solutions for our

customers and enhancing thesafety and efficiency of the payments and settlement
services in the country.
Inform the public and potential investors about upcoming government loan
auctions The Reserve Bank also undertakes market development efforts, including
enhanced secondary market trading and settlement mechanisms, authorisation of
primary dealers and improved transparency of issuing process to increase investor
confidence, with the objective of broadening and deepening the government
securities market

Regulator of the Banking System Manager

of Foreign Exchange

With the transition to a market-based system for determining the external value of
the Indian rupee, the foreign exchange market in India gained importance in the early
reform period. In recent years, with increasing integration of the Indian economy
with the global economy arising from greater trade and capital flows, the foreign
exchange market has evolved as a key segment of the Indian financial market.

Our Approach

41
The Reserve Bank plays a key role in the regulationand development of the foreign
exchange market andassumes three broad roles relating to foreign exchange:

Regulating transactions related to the external sectorand facilitating the development

of the foreignexchange market
Ensuring smooth conduct and orderly conditions inthe domestic foreign exchange
market
Managing the foreign currency assets and goldreserves of the country

Our Tools

The Reserve Bank is responsible for administration of the Foreign Exchange

Management Act,1999 and regulatesthe market by issuing licences to banks and
other selectinstitutions to act as Authorised Dealers in foreignexchange. The Foreign
Exchange Department (FED) isresponsible for the regulation and development of
themarket.

On a given day, the foreign exchange rate reflects thedemand for and supply of
foreign exchange arisingfrom trade and capital transactions. The RBI‘s
FinancialMarkets Department (FMD) participates in the foreignexchange market by
undertaking sales / purchases offoreign currency to ease volatility in periods of
excessdemand for/supply of foreign currency.The Department of External

42
Investments andOperations (DEIO) invests the country‘s foreignexchange reserves
built up by purchase of foreigncurrency from the market. In investing its
foreignassets, the Reserve Bank is guided by three principles:safety, liquidity and
return.

The Department of External Investments &Operations manages a multi-currency

multi-instrument portfolio of foreign currency assets. A well-equipped dealing room
executes transactions. Looking Ahead

The challenge now is to liberalise and develop the foreignexchange market, with an
eye toward ushering in greatermarket efficiency while ensuring financial stability in
anincreasingly global financial market environment. Withcurrent account
convertibility achieved in 1994, the keyfocus is now on capital account management.

Regulator and Supervisorof Payment and Settlement Systems

Payment and settlement systems play an important role in improvingoverall

economic efficiency. They consist of all the diverse arrangementsthat we use to
systematically transfer money—currency, paper instrumentssuch as cheques, and
various electronic channels.

43
Our Approach

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,we focus on the development and
functioning ofsafe, secure and efficient payment and settlement mechanisms.

Our Tools

The Reserve Bank has a two-tiered structure. The firsttier provides the basic
framework for our paymentsystems. The second tier focusses on supervision of
thisframework. As part of the basic framework, the ReserveBank‘s network of secure
systems handles various typesof payment and settlement activities. Most operate on
the security platform of the IndianFInancialNETwork(INFINET), using digital
signatures for further security oftransactions. Here is an overview of the various
systemsused:

Retail payment systems:

Facilitating cheque clearing, electronic funds transfer, through NationalElectronic

44
Funds Transfer (NEFT), settlement ofcard payments and bulk payments, such as
electronicclearing services. Operated through local clearing houses throughout the
country.

Large value systems:

Facilitating settlement offender-bank transactions from financial markets. These

include:

- Real Time Gross Settlement System (RTGS):for funds transfers

- Securities Settlement System: for thegovernment securities market

- Foreign Exchange Clearing: for transactionsinvolving foreign currency

Department of Payment and Settlement Systems:

The Reserve Bank‘s payment and settlement systemsregulatory arm.

Department of Information Technology:

Tech support for the payment systems and for theReserve Bank‘s internal IT systems.

Looking Ahead

Going forward, we are proactively identifying andaddressing issues that help

mitigate the risks for largevalue systems. Efforts on the retail payment system

45
Developmental Role

This role is, perhaps, the most unheralded aspect of our activities,yet it remains
among the most critical. This includes ensuring that creditis available to the
productive sectors of the economy, establishinginstitutions designed to build the
country‘s financial infrastructure,expanding access to affordable financial services
andpromoting financial education and literacy.

Our Approach

Over the years, the Reserve Bank has added newinstitutions as the economy has
evolved. Some of theinstitutions established by the RBI include:

Deposit Insurance and Credit Guarantee Corporation (1962), to provide protection

to bank depositorsand guarantee cover to credit facilities extendedto certain
categories of small borrowers
Unit Trust of India (1964), the first mutual fundof the country

Industrial Development Bank of India (1964),a development finance institution for

industry
National Bank of Agriculture and Rural Development(1982), for promoting rural and
agricultural credit
Discount and Finance House of India (1988), a moneymarket intermediary and a
primary dealer ingovernment securities
National Housing Bank (1989), an apexfinancial institution for promoting and
regulatinghousing finance
Securities and Trading Corporation of India (1994), a primary dealer

Our Tools

46
The Reserve Bank continues its developmental role, while specifically focussing on
financial inclusion. Key tools inthis on-going effort include:

Directed credit for lending to priority sector andweaker sections:

The goal here is to facilitate/enhance credit flow to employment intensive sectors

such as agriculture, micro and small enterprises(MSE), as well as for affordable
housing and education loans.
Lead Bank Scheme:

A commercial bank isdesignated as a lead bank in each district in thecountry and this
bank is responsible for ensuringbanking development in the
district throughcoordinated efforts between banks and governmentofficials.
The Reserve Bank has assigned a LeadDistrict Manager for each district who acts as
acatalytic force for promoting financial inclusion andsmooth working between
government and banks.
Sector specific refinance:

The Reserve Bankmakes available refinance to banks against theircredit to the export
sector. In exceptionalcircumstances, it can provide refinance againstlending to other
sectors
Strengthening and supporting smalllocal banks: This includes regional rural
banks and cooperative banks

Financial inclusion:

Expanding access to financeand promoting financial literacy are a part of

ouroutreach efforts.

Looking Ahead

The development role of the Reserve Bank will continueto evolve, along with the

47
Indian economy. Through theoutreach efforts and emphasis on customer service,
theReserve Bank will continue to make efforts to fill thegaps to promote inclusive
economic growth and stability.

RBI aims to ensure that credit is available to the productive sectors of the
economy.
Financial Inclusion and Literacy:
Expanding Access; Encouraging Education

Expanding access to and knowledge about financeis a fundamental aspect of the

Reserve Bank‘soperations. These efforts are critical to ensuringthat the benefits of a

growing and healthy economyreach all segments of the population. Our work
hereincludes:

Encouraging provision of affordable financialservices like zero-balance, no-frills

bank accounts,access to payments and remittance facilities,savings, loans and
insurance services

48
Expanding banking outreach through use oftechnology, such as banking by cell
phone, smartcards and the like
Encouraging bank branch expansion in parts ofthe country with few banking
facilities
Facilitating use of specified persons to act asagents to perform banking functions in
hard-to reach parts of the country Our work to promote financial literacy focuses on
educating people about responsible financial management. Efforts here include:
Information and knowledge-sharing:

User-friendly website includes easy-to understand tips and guidance in

multiplelanguages; brochures, advertisements andother marketing materials
educatethe public about banking services.
Credit counseling:

The Reserve Bank encouragescommercial banks to set up financial literacy and

Credit counseling centers, to help people developbetter financial planning skills.

49
Research, Data and Knowledge-Sharing: How We Communicate

The Reserve Bank has a rich tradition of generating sound economic research, data
collection and knowledge-sharing. Our economic research focuses on study and
analysisof domestic and international issues affecting the Indianeconomy. This is
mainly done by the Department of EconomicAnalysis and Policy and the Department
of Statistics andInformation Management.

This important work is designed to:

Educate the public

Provide reliable, data-driveninformation for policy anddecision-making

Supply accurate and timely data foracademic research as well as thegeneral public

Communicating with the Public

Our emphasis on communication involves a range of activities, all aimed at sharing
knowledge about the financial arena. The Reserve Bank‘s web site posts relevant
informationfor citizens in 13 local languages.The Reserve Bank‘s web site
(www.rbi.org.in) provides a full range of information about ouractivities, our
publications, our history and our organisation. The web site is updated regularly,with
the most recent publications, speeches, press releases and circulars.
Of note, relevantpress releases and circulars are posted in 13 local languages.

The Reserve Bank’s web site posts relevant information for citizens in 13 local languages.

50
 ‖

Publications produced on a regularbasis include:

Annual

Annual Report

Report on Currency and Finance

Report on Trend and Progress of Banking in India

Handbook of Statistics on the Indian Economy

State Finances: A Study of Budgets

Statistical Tables Relating to Banks in India

Basic Statistical Returns of

Scheduled Commercial Banks in India

Quarterly

Macroeconomics and Monetary Development

Occasional Papers

Quarterly Statistics on Deposits and Credit of

Scheduled Commercial Banks

Monthly

RBI Bulletin

Monetary and Credit Information Review

51
Weekly

Weekly Statistical Supplement

A Central Resource: the RBI’s Data Warehouse

Enterprise-wide data warehouse

User-friendly, public accessvia RBI web site, www.dbie.rbi.org.in Pre-formatted

reports
Simple and advanced queries

Definitions of basic concepts

Looking Ahead

Future plans include publishing a regular report onfinancial stability.

Addressing Current andFuture Challenges

Building on the firm foundation of our rich tradition,the Reserve Bank is also
changing with the times.

The Reserve Bank‘s mandate—yesterday, today and tomorrow—is to set a monetary

andfinancial course that will sustain the nation‘s economic growth and health during
globaldownturns, periods of volatility and global upturns alike.Our actions prior to
and during the recent period of global financial upheaval exemplify these
commitments. We have demonstrated a willingness to take pro-active measures
topreserve gains and to ensure that progress is sustainable. The Reserve Bank
responsesduring extraordinary times are aimed at maintaining stability while
ensuring sufficient rupeeand foreign exchange liquidity to ensure that credit will

52
continue to flow to businesses andconsumers alike.We also continue to address the
challenge of ensuring that the national financial andmonetary policy-making
contribute to positive, sustainable impact for all citizens of India,across the income
spectrum.

RBI: Actions in Times of Crisis

The Reserve Bank‘s willingness to use conventional and unconventional measures

help buffer the nation from severe crisis. Here are some examples of our responses
during the 2008-9 global financial crisis:

Carefully considered and calibrated reduction of interest rates until situation has
stabilised
Loosened restrictions on access to foreign currency

Creation of a rupee-dollar swap facility to manage short-term funding requirements

Establishment of a refinancing window and special-purpose vehicle for nonbanking
financial companies
Expansion of funding sources for umbrella financial institutions to keep credit
flowing to small businesses, housing and export businesses

53
Customer Service: How Can We Help You?

Our customer outreach policy is aimed at informing the public, so that they know
what to expect, what choices they have and what rights and obligations they have in
relation to banking services. Our customer service initiatives are designed to protect
customers‘ rights, enhance the quality of customer service and strengthen the
grievance redressal mechanism in the banking sector as a whole—and at the Reserve
Bank itself. Our efforts include:

Customer Service Department (CSD):

Questions?Problems?Concerns? Communicate with this department

(helpcsd@rbi.org.in) which was set up in 2006, based at the central office in
Mumbai, to respond to system-level customer issues.

Banking Codes and Standards Board of India:

The Reserve Bank established this board to encourage transparency in lending and
fair pricing. This will give customers more confidence in the system and encourage
more usage of formal banking. (www.bcsbi.org.in)

Banking Ombudsman:

The Reserve Bank‘s quasi-judicial authority for resolving disputes between

commercial banks, primary cooperative banks and regional rural banks and their
customers. There is one Banking Ombudsman in virtually every state.

54
The RBI Logo

The selection of the Bank‘s common seal to be used as the emblem ofthe Bank on
currency notes, cheques and publications, was an issue that had to be taken up at an
early stage of the Bank‘s formation. The Government‘s general ideas on the seal
were as follows:

1. The seal should emphasis the Governmental status of the Bank, but not tooclosely;
2. It should have something Indian in the design;
3. It should be simple, artistic and heraldically correct; and
4. The design should be such that it could be used without substantial alteration
forletter heading, etc.

For this purpose, various seals, medals and coins were examined. The East India
Company Double Mohur, with the sketch of the Lion and Palm Tree, was found most
suitable; however, it was decided to replace the lion by the tiger, the latter being
regarded as the more characteristic animal of India! To meet the immediate
requirements in connection with the stamping of the Bank‘s share certificates, the
work was entrusted to a Madras firm. The Board, at its meeting on February 23,
1935, approved the design of the seal but desired improvement of the animal‘s

55
appearance. Unfortunately it was not possible to make any major changes at that
stage. But the Deputy Governor, Sir James Taylor,did not rest content with this. He
took keen interest in getting fresh sketches prepared by the Government of India
Mint and the Security Printing Press, Nasik. As a basis for good design, he arranged
for a photograph to be taken of the statue of the tiger on the entrance gate at
Belvedere, Calcutta. Something or the other went wrong with the sketches so that Sir
James, writing in September I938, was led to remark:

......‘s tree is all right but his tiger looks too like some species of dog, and I am afraid
that a design of a dog and a tree would arouse derision among the irreverent ‘s
tiger is distinctly good but the tree has spoiled it. The stem is too long and the
branches too spidery, but I should have thought that by putting a firm line under the
feet of his tiger and making his tree stronger and lower we could get quite a good
result from his design. Later, with further efforts, it was possible to have better proofs
prepared by the Security Printing Press, Nasik. However, it was eventually decided
not to make any change in the existing seal of the Bank, and the new sketches came
to be used as an emblem for the Bank‘s currency notes, letterheads, cheques and
publications issued by the Bank. Source: ‘History of the Reserve Bank of India’

56
 Review of Literature

RBI must amend FEMA rules on FDI in retail: Supreme Court

New Delhi, Oct 15: The Foreign Exchange Management Act regulations should have
been amended by the Reserve Bank of India before the Centre cleared 51 per cent
FDI in multi-brand retail, the Supreme Court said today. The apex court made this
observation while hearing a Public Interest Litigation that was filed by Advocate ML
Sharma. He argued that retail trading is barred under the existing FEMA regulations.
Attorney General GE Vahanvati admitted that the government had erred since the
RBI had not effected any change in the regulations after 2008.

The Supreme Court bench of Justice RM Lodha and Justice AR Dave then said that
"it is an irregularity that is curable and as soon as amendment is brought, it would be
cured." Stating that this irregularity is not enough to warrant a stay on the policy, the
court emphasised that RBI must amend the rules without delay. "This is a must
before the policy is given a legal shape," the judges said. They demanded to know
when the RBI will take the necessary steps. Vahanvati assured that he will ask the
RBI governor to immediately amend the FEMA regulations. The court, however,
rejected the petitioner's other contention that prior approval from the President or
Parliament was needed for the Centre's notification on FDI in retail.

"This assumption that the policy has to be in the name of the President is flawed and
unfounded. The Constitution does not provide that the policy should be in the name
of the President," the judges said. Pointing out that Parliament does not look into
policies, the court said that a policy can be deemed as incorrect only if the relevant
notification is ultra vires of the law. The court has given the government time till the
next hearing on Nov 5 to amend the FEMA regulations. It is to be noted that the

57
Trinamool Congress walked out of the ruling coalition just days after the UPA
allowed 51 per cent FDI in retail. The exit of the Mamata Banerjee-led party meant
that the government was reduced to a minority.

India can recover faster than China: RBI deputy governor

Beijing, Sep 30: India can recover from global economic slowdown faster than China
as the economy is driven by domestic consumption, but the country needs to "get its
act together" for this to happen, Reserve Bank Deputy Governor Anand Sinha said
here today. Speaking to PTI, Sinha also said "confidence issues like the general
pessimism and not-so-good-feel factor also affected the economy".

"Both economies (India and China) are affected by the global economic slowdown
but India being a domestic consumption driven economy could recover faster," he
said.

"But for that we have to get our act together. Being dependent on domestic economy,
we would be less affected by export sector performance. So, that could be our
strength. But we have to get our act together and whatever weaknesses we have to
get around them," he said responding to a question. When asked what should be done
by India to arrest the slide in growth, he said, "We have to get hold of inflation. If
we get hold of it, growth will have better prospect. Once growth takes off things
would be better."

Retail inflation in India is in double digits at 10.03 per cent. RBI had been repeatedly
saying that focus of its monetary policy is on controlling inflation.

"We must realise that even if we put our domestic situation on sound footing, what
happens in the rest of the world, we cannot be totally immune to that. So you will
not have the same growth rate as we would have had if the world economy is in good
shape."

58
Sinha also blamed "not so good feel factor", besides the global economic slowdown,
for the current domestic situation.

"One reason is global economic slowdown. That has affected us is the trade channel.
We are not export dependent but exports suffered due to global economic crisis.
Apart from trade issues, confidence issues like the general pessimism and not so
good feel factor also affected the economy," he said apparently referring to criticism
about policy paralysis.

"Sentiments are very important when it comes to taking business decision," he said.

Bank ATMs stop sucking in cash after RBI direction

New Delhi, Sept 23: Next time you go to an ATM to withdraw cash, don't worry
about the banknotes getting sucked back by the machine if not collected
immediately, as RBI has asked all banks to immobilise the 'cash retraction facility'.

At the same time, customers will have to be extra careful in collecting the cash
dispensed by the ATM, as they cannot later claim the money from the bank, which
was the case when this 'cash retraction facility' was in place at the ATMs.

Most of the banks, including HDFC Bank, Axis Bank and Canara Bank, have already
removed the cash retraction facility from all their ATMs, while the withdrawal
process for this facility is underway for few remaining ATMs.

As per RBI directions, the banks are communicating to their customers about the
withdrawal of this facility, under which the cash goes back into the ATM machine if
not collected within a stipulated time, which is generally 10-15 seconds, but varies
from bank to bank. The facility was initially implemented to avoid the cases of
someone else getting the money, if the actual cardholder forgets to collect the
withdrawn cash before leaving the ATM. However, RBI in the past one year has

59
come across banks reporting several instances of frauds pertaining to mis-use of cash
retraction facility at the ATMs.

The typical modus operandi has been to hold on to a few pieces of notes in ATM
machines that have cash retraction system, while allowing one or two pieces of notes
to be retracted and then claiming non-receipt of cash. Since retracted transactions are
credited back to the customer's account, the balance in the fraudster's account
remains unaffected even after collecting bulk of the delivered cash. The ATMs do
not have the capability to count the pieces of retracted notes, thus leaving a loophole
for committing such frauds.

2G scam: RBI Governor Subbarao to appear before JPC

New Delhi, Sept 7: RBI Governor D Subbarao, who was the Finance Secretary when
2G licences were allocated, will appear before the Joint Parliamentary Committee
examining the issue as a witness on Sept 18. He was the Finance Secretary between
Apr 2007 and Sept 2008. The controversial 2G radiowave licences were allocated in
Jan 2008. Sources said the meeting of the committee slated for Sept 14, in which
former Cabinet Secretary KM Chandrasekhar was to appear, has been rescheduled.

A fresh date will be decided to call Chandrasekhar, who was the top bureaucrat
between Jun 2007 and Jun 2011. The JPC meeting on Sept 18 is taking place after a
gap of nearly a month. BJP members had stormed out of the proceedings on Aug 22
insisting on calling Prime Minister Manmohan Singh and Finance Minister P
Chidambaram as witnesses before the panel. Sources said besides the former Cabinet

Secretary, the other "essential witnesses" the committee seeks to examine before
drafting the report are the Telecom and Finance Secretaries, former Law Secretary,
the present incumbent and the Attorney General.

60
It is not yet clear whether the six BJP members on the panel will attend the next
meeting. Amid growing bitterness between ruling and opposition sides in the
30member JPC, five out of the six BJP members present at the meeting had walked
out, claiming that Congress members had used foul language when they pressed for
calling Singh and Chidambaram. Congress had refuted the allegation.

RBI may hike NPA provision ratio if needed: K C Chakrabarty

MUMBAI: RBI Deputy Governor K C Chakrabarty has come down heavily on banks
showing higher profits without providing adequately for bad loans, and said if need
be, the central bank may hike provision coverage ratio (PCR) levels.

"Why banks need to show profits as high as 25 per cent? They can show 5 per cent
growth in their profits. If they are not doing (providing more), I will increase it
(PCR)," he told PTI in an interview.

Expert’s views on RBI monetary policy review

Mumbai, (IANS) The Reserve Bank of India (RBI) kept key policy rates unchanged
have been already eased out since the April policy, which included injection of
liquidity by way of open market operations.‖
–Harsh Pati Singhania, president, International Chamber of Commerce India and
managing director, JK Paper Ltd.

―It is disappointing that RBI has chosen not to cut policy rates. Reduction in the
SLR does not make any difference in the present scenario as credit growth has not
picked up due to higher rates of interest. In fact, by following this path RBI is not
taking any constructive steps to either control inflation or stimulate economic
growth. It has squarely put the onus of reviving growth with the government. May

61
be it is time we started looking at the paradigm of living with a slightly higher
inflation accompanied with higher growth.‖

–R.V. Kanoria, president, Federation of Indian Chambers of Commerce and Industry

(FICCI)
―The central bank and the government need to coordinate and find a solution to
balance the monetary policy, improve the fiscal situation and to get growth back in
the economy. The situation in the economy calls for urgent and decisive action and
the two primary agencies – RBI and government – responsible for policy making
should prepare an effective roadmap together.‖

–Chandrajit Banerjee, director general, Confederation of Indian Industry (CII)

―A cut in policy rates, at this juncture, would have done much to infuse liquidity in
the system which is facing tight liquidity conditions, spur investments among
corporates and rev up growth momentum in the economy. RBI had sufficient head
in the first quarter review of monetary policy announced Tuesday.
Following are the comments from experts on the monetary policy statement.

–Anis Chakravarty, senior director, Deloitte in India

―This is a bold step from RBI and it certainly needs to be appreciated. With headline
inflation persistently remaining above comfort level of 7 percent, this policy stance
of retaining repo rate looks justified despite obvious impact of tight monetary policy
for past two years on the growth slowdown. Although SLR is expected to maintain
liquidity levels, it may not show any significant impact as the liquidity conditions
room to cut interest rates as falling global commodity prices, stable core and
manufacturing inflation would ease the pressure on prices. In fact, despite having
raised interest rates in the past, inflation has persisted while adversely impacting
industrial growth and business sentiment. The need of the hour is administrative

62
actions on the part of the government to ease supply bottlenecks which will help ease
inflationary pressure.‖

–Siddharth Shankar, Director, KASSA group

―Monetary policy will not stimulate growth nor would government policy, now it
is for the industry to act and make itself more efficient. From the policy front I feel
government will have to keep the social and agricultural aspect in mind, much over
the industry. Growth in India is likely to remain low with high inflation something
and this is a very uncomfortable situation of stagflation. While the GDP forecast is
6.5 percent to my mind it would be below 6 percent mark for current financial year.‖

–A Sakthivel, chairman, Apparel Export Promotion Council (AEPC)

―The Reserve Bank of India has kept interest rate unchanged, thereby keeping the
cost of funds very high. The industry was expecting downward trend in the interest
rate so that cost of manufacturing can be reduced.‖

–Murthy Nagarajan, head, fixed income, Tata Asset Management Limited

―RBI focus is clearly on managing inflation expectations getting retrenched in the

economy even against a scenario of falling GDP growth rates. By cutting SLR, it is
releasing more money for banks who have SLR at the margin, to lend to the corporate
sector. RBI has stated it is ready to do what is required, if government cuts its subsidy
burden and reduce supply side bottleneck pressure on the economy.‖ –Lalit Kumar
Jain, chairman, Kumar Urban Development and president, CREDAI ―There is
once again disappointment from RBI. There was no change in the rates in previous
policy announcement and the real estate sector was expecting a rate cut this time.
Both, the developer community and the home buyers .

63
DATA ANALYSIS

OPTION PERCENTAGE COUNT

18-20 35.1 39

20-30 50.5 57

30-50 12.6 14

50 above 1.8 1

OPTION PERCENTAGE COUNT

MALE 61.8 62

FEMALE 38.2 38

OTHER 0 0

64
OPTION PERCENTAGE COUNT

PRIMARY 0 0

SECONDARY 23.2 23

UNDER 29.5 31
GRADUATE

GRADUATE 37.5 37

POST GRADUATE 9.8 9

65
OPTION PERCENTAGE COUNT

AXIS 59.3 9

RBI 57.9 58

HDFC 15 15

SBI 17.8 18

OPTION PERCENTAGE COUNT

MUMBAI 54.5 55

NEW DELHI 3.6 36

KOLKATA 8.9 9

CHENNAI 33 33

66
OPTION PERCENTAGE COUNT

P V NARSIMHA RAO 21.6 21

MANMOHAN SINGH 62.2 62

LAL BAHADUR SHASTRI 10.8 11

INDIRA GANDHI 5.4 5

67
OPTION PERCENTAGE COUNT

SBI 12.6 13

RBI 68.5 68

NABARD 15.3 15

SEBI 3.6 4

OPTION PERCENTAGE COUNT

V V CHARI 6.4 6

RAGHURAM RAJAN 21.1 21

SHAKTIKANTA DAS 63.3 64

URJIT PATEL 9.3 9

68
OPTION PERCENTAGE COUNT
1971 7.5 8
1956 15 15
1949 68.2 68
1935 9.3 9

OPTION PERCENTAGE COUNT

INTAGLIO PRINTING 41.3 41
MICRO LETTERING 33 33
LATEST PRINTING 17.4 18

69
SCREEN PRINTING 8.3 8

OPTION PERCENTAGE COUNT

RBI GUIDELINES 58.9 59
MORAL SUASION 21.5 21
OPEN MARKET OPERATION 10.3 10
RATIONING OF CREDIT 9.3 10

70
Conclusion

From the above all mentioned fact in this project one can easily say that The Reserve
Bank of India is the central bank of the country. Central banks are a relatively recent
innovation and most central banks, as we know them today, were established around
the early twentieth century. The Reserve Bank of India was set up on the basis of
the recommendations of the Hilton 1934) provides the statutory basis of the
functioning of the Bank, which commenced operations on April 1, 1935 Young
Commission

Following given below are some important- I.

Objectives of the Reserve Bank of India

The Reserve Bank of India Act, 1934 sets out the objectives of the Reserve Bank:
'...to regulate the issue of Bank notes and the keeping of reserves with a view to
securing monetary stability in India and generally to operate the currency and credit
system of the country to its advantage.'

The formulation, framework and institutional architecture of monetary policy in

India have evolved around these objectives – maintaining price stability, ensuring
adequate flow of credit to sustain the growth momentum, and securing financial
stability.

The responsibility for ensuring financial stability has entailed the vesting of
extensive powers in and operational objectives for the Reserve Bank for regulation
and supervision of the financial system and its constituents, the money, debt and
foreign exchange segments of the financial markets in India and the payment and

71
settlement system. The endeavour of the Reserve Bank has been to develop a robust,
efficient and diversified financial system so as to anchor financial stability and to
facilitate effective transmission of monetary policy. In addition, the Reserve Bank
pursues operational objectives in the context of its core function of issuance of bank
notes and currency management as well as its agency functions such as banker to
Government (Centre and States) and management of public debt; banker to the
banking system including regulation of bank reserves and the lender of the last resort.

The specific features of the Indian economy, including its socio-economic

characteristics, make it necessary for the Reserve Bank to operate with multiple
objectives. Regulation, supervision and development of the financial system remain
within the legitimate ambit of monetary policy broadly interpreted in India. The role
of communication policy, therefore, lies in articulating the hierarchy of objectives in
a given context in a transparent manner, emphasising a consultative approach as well
as autonomy in policy operations and harmony with other elements of
macroeconomic policies.

II. The Goals of Communication Policy The long-term goals of the Reserve
Bank‘s communication policy are intimately interlinked to its objectives. Faced with
multiple tasks and a complex mandate, clear and structured communication is critical
for effective functioning as well as enlarging the spheres of traditional policy
instruments. The goal of communication policy thus would be to anchor inflation
expectation by promoting credibility and understanding of monetary policy; and
enabling private stakeholders to map the changing economic circumstances into
anticipation of the broad policy direction with reasonable accuracy. In order to be
realistic, the communication policy also highlights impediments to achieving stated
objectives in a conditional sense.

72
Bibliography & References

Websites

http://www.allbankingsolutions.com
http://www.bestguru.com
http://www.accountingtools.com
http://www.ibpsquestionpapers.in
http://www.livecareer.com
http://www.bestguru.com http://www.indiabix.com
http://bankclerkpo.com
www.caclubindia.com taxguru.in
www.mbaclubindia.com
www.rbi.org.in

73
 APPENDIX

Questionaire:

Name:

Age:
 18-20
 20-30
 30-50
 50 Above

Gender:
 Male
 female
 Others

Education qualification:

 Primary

 Secondary

 Under graduate

 Graduate

 Post graduate

Occupations:

 Students

 Self employed

 Business

 Salaried

 Profession

 Retired

1
74
Which bank has implemented strignment know your customer (KYC )norms

 Axis

 RBI

 HDFC

 SBI

Reserve bank staff college is situated at?

 Mumbai

 New delhi

 Kolkata

 Chennai

Who is the only Prime Minister to have served as the Governor of RBI?

 P.V. Narsimha Rao

 Manmohan Singh
 Lal Bahadur Shastri
 Indira Gandhi

Who is the "lender of the last resort" in India?

 SBI
 RBI
 NABARD
 SEBI

Who is the present Governor of RBI of India (As of Sep 2022)?

 V.V. Chari
 Raghuram Rajan
 Shaktikanta Das
 Urjit Patel

1
75
In which year was the RBI nationalised?

 1971
 1956
 1949
 1935
Which of these institutions fixes the Repo Rate and the Reverse Repo Rate in Indian?

 Ministry of finance
 State Bank of India
 Comptroller and Auditor General of India
 Reserve Bank of India

The technique used for printing ‘RESERVE BANK OF INDIA’ appearing on the face of the Indian
currency notes is?

 Intaglio Printing
 Micro Lettering
 Latest Printing
 Screen Printing

RBI was set up on the basis of the recommendation of?

 Indian Central Bank of Enquiry

 Committee
 Royal commission
 Simon Commission
 Nehru Report
Which of the following is not a qualitative tool used by RBI to control the flow of liquidity?

 RBI Guidelines
 Moral Suasion
 Open Market Operations
 Rationing of Credit
1
76
1
77