Presented By:: Madhuri Koul Narayan Ambulgekar Vrushali Hadawale Anupam Sinha Prajakta Kamble

Presented By:
 Madhuri Koul
 Narayan Ambulgekar
 Vrushali Hadawale
 Anupam Sinha
 Prajakta Kamble
What is RBI?
The Reserve Bank of India(RBI)was established in 1935.It

was formerly a shareholders bank. In 1948, it was
nationalized and its ownership and control was
transferred to the government.
Reserve Bank of India is the only bank in the world
which has worked as the central Bank for more than
two countries i.e. India & Myanmar for few months in
1948.
What is commercial bank?
An institution which accepts deposits

makes business loans and offer related
services. They are primarily concerned
with receiving deposits and lending services.
1) Monetary policy
Monitory policy is a regulatory policy by which the RBI
or the central bank maintains its control over the
supply of money for the realization of general economic
goals such as- Full employment, Exchange rate
stability, Economic growth & Price stability.
Monetary policy decisions influence commercial banks’

refinancing costs; banks are inclined to pass the
changes on to their customers. If financing costs
diminish, investment and consumer spending rise,
contributing to an acceleration of growth and
inflation.
2) Credit Control Policy
The RBI has the responsibility to control the excess
credit and to maintain the proper and adequate flow
of credit. The credit control policy by the RBI
includes not only the credit control but
the use to which credit is put. It uses
tools for credit control such as :
a) CRR: CRR is a major qualitative monetary tool used

by the RBI to control money supply in the economy.
Cash reserve Ratio (CRR) is the amount of funds that
the banks have to keep with RBI.
b) SLR: It is the ratio of liquid assets in the form of
excess cash, Gold, T-Bills, Govt. Securities etc. to total
Net demand and time liabilities.
c) Open Market Operations: OMO refers to the direct

purchases and sales of Govt. securities, T-Bills, Foreign
exchange by RBI to control credit.
3) Bank Rate Policy
Bank rate is the basic cost of refinance and

rediscounting facilities. It is a standard rate at which
RBI buys or rediscounts bill of exchange or other
eligible CPs.
1.Permission:
Any company interested in banking business has to
obtain permission from RBI. Before granting
permission, RBI ensures that the norms regarding bank
management are fulfilled.
2.Cash Reserves:
Banks has to maintain cash reserves of 5% against time
and 20% against demand liabilities with RBI on which
they get no interest.
3.Details Regarding Balance-sheet:
The banks have to prepare and present the
balance sheet as and when required by RBI.
4.Use of loans:
RBI issues directives from time to time regarding
purpose of loan and accordingly banks advance
loans.
5.CRR:
 When RBI increases CRR, banks have to keep
additional funds with the RBI.
 If banks keep more with RBI they can offer less at
high rate of interest to customers.
 Hence RBI increases CRR when they want to take
away the excess money from markets and vise-versa.
6. SLR:
 An increase in SLR restricts the expansion of bank
credit as banks have to maintain more assets in
liquid form with themselves.
 SLR is used to boost banks investment in govt.
securities.
 SLR is used to ensure solvency of banks.
7.OMO:
 RBI uses OMO along with bank rate.
 When bank rate increases RBI sells securities & vice-
versa.
 Sale of securities will increase available cash reserves
with banks which enables them to expand Credit and

money supply.
 Thus RBI uses OMO to encourage credit expansion.
8. Bank Rate Policy:
 When bank rate is raised/reduced, commercial banks
find it difficult/easy to approach the central bank for
loans, which limits/increases their ability to create
credit respectively.
 Banks have to increase/decrease their ROI according to
bank rate.
 Thus the credit becomes dearer/cheaper.
9. Exchange rate fluctuations:

Interest rate reductions that entail a depreciation of
the national currency raise the debt of domestic banks
and companies which have foreign currency-
denominated debt contracts.
10.Credit Rationing:
It refers to policy of RBI to advance credit majorly to

priority sectors like Infrastructure, Agriculture and SSIs.
RBI formulates such Credit Rationing policies of
advancing less credit to non-priority sectors and
thereby controls inflation.

Presented By:: Madhuri Koul Narayan Ambulgekar Vrushali Hadawale Anupam Sinha Prajakta Kamble

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Presented By:

The Reserve Bank of India(RBI)was established in 1935.It

An institution which accepts deposits

Monetary policy decisions influence commercial banks’

a) CRR: CRR is a major qualitative monetary tool used

c) Open Market Operations: OMO refers to the direct

Bank rate is the basic cost of refinance and

with banks which enables them to expand Credit and

9. Exchange rate fluctuations:

It refers to policy of RBI to advance credit majorly to

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