About this video

• Video Title: Central Bank, Functions of Central Bank, RBI Functions, Currency banking and Exchange bcom
• Channel: DWIVIDI GUIDANCE
• Speakers: Not explicitly mentioned in the transcript.
• Duration: 23:30

Overview

This video explains the role and functions of the Reserve Bank of India (RBI) as a central bank. It covers the establishment and organizational structure of the RBI, including its board of directors and local boards. The video then details the primary, promotional, and supervisory functions of the RBI, such as currency issuance, credit control, foreign exchange management, and oversight of the banking system.

Key takeaways

• Establishment and Structure: The RBI was established on April 1, 1935, based on the recommendations of the Hilton-Young Commission. Initially a private institution, it was nationalized and is now fully owned by the Government of India. Its management is overseen by a Central Board and Local Boards.
• Central Banking Functions: These include the monopoly of note issuance (with exceptions for ₹1 notes and coins), acting as the government's bank, serving as the banker's bank, maintaining foreign exchange reserves, controlling credit through various quantitative and qualitative tools, managing the clearinghouse system, and collecting/publishing financial data.
• Promotional Functions: The RBI actively promotes the development of agriculture, industry, exports, and the overall banking system. This includes establishing specialized banks like NABARD, EXIM Bank, and developing financial instruments and markets.
• Supervisory Functions: The RBI oversees the banking sector by issuing licenses, conducting regular inspections and audits (statutory audits), and controlling bank management to ensure financial stability and adherence to regulations.

Central Bank Functions: A Detailed Look at the Reserve Bank of India (RBI)

This video provides a comprehensive overview of the Reserve Bank of India (RBI), focusing on its establishment, organizational structure, and multifaceted functions as a central bank.

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I. Establishment and Organizational Structure of RBI

• Founding and Legal Basis:
  • The RBI was established on April 1, 1935, with the RBI Act being framed in 1934.
  • Its establishment was a recommendation of the Hilton-Young Commission.
• Initial and Current Ownership:
  • Initially, the RBI operated as a private joint-stock company.
  • Following bank nationalization, it became fully owned and controlled by the Government of India.
• Location:
  • The initial central office was in Kolkata, but it was permanently shifted to Mumbai in 1937.
• Management Structure:
  • Central Board of Directors: Appointed by the Government of India, it includes a Governor, four Deputy Governors (each serving a 5-year term), and 10 other directors nominated by the government (4-year term).
  • Local Boards: Four boards (Mumbai, Kolkata, Chennai, New Delhi) with five members each, also nominated by the Central Government for a 4-year term. Their role is to advise the Central Board and manage regional commercial transactions.
• Government Representation:
  • A government officer attends Central Board meetings as a representative of the government, without voting power and with no fixed tenure.
• Meeting Frequency:
  • The Central Board must meet at least six times a year, with additional meetings called as needed by the Governor.
• Training and Staff:
  • The RBI operates training colleges (e.g., Banking Training College in Mumbai, College of Agricultural Banking in Pune, Reserve Bank Staff College in Chennai) to update its staff and banking professionals.
  • It also has central office departments staffed to support its operations.

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II. Functions of the Reserve Bank of India

The functions are broadly categorized into three main areas: Central Banking, Promotional, and Supervisory.

• A. Central Banking Functions: These are the core functions critical for managing the monetary system.

  • Monopoly of Note Issue:
    • The RBI has the sole authority to issue currency notes in India.
    • Exceptions include the ₹1 note and coins, which are issued by the Government of India (Ministry of Finance).
    • India follows the Minimum Reserve System for note issuance, requiring a reserve of gold and securities.
  • Banker and Financial Advisor to the Government:
    • Manages government banking accounts, provides short-term credit, and handles public debt.
    • Acts as the government's financial advisor.
  • Banker's Bank:
    • Maintains deposit accounts for commercial banks.
    • Provides liquidity and financial accommodation (loans) to banks.
    • Acts as a lender of last resort, providing funds to banks in times of crisis.
  • Custodian of Foreign Exchange Reserves:
    • Manages India's foreign exchange reserves.
    • Maintains the value of the Indian Rupee in the foreign exchange market to ensure stability.
  • Controller of Credit:
    • Regulates the supply of money and credit in the economy using tools like the Bank Rate, Repo Rate, Reverse Repo Rate, CRR, SLR, and Open Market Operations (Quantitative Techniques).
    • Also employs Qualitative Techniques like selective credit control, publicity, and moral suasion.
    • The aim is to control inflation, deflation, and promote economic growth.
  • Clearing House Function:
    • Provides a clearinghouse facility for banks to settle their mutual claims efficiently, speeding up check clearance.
  • Collection and Publication of Data:
    • Collects, compiles, and publishes statistical data related to banking, finance, and the economy, which is crucial for policy-making.
  • Development of Financial Infrastructure:
    • Facilitates the development of financial markets and instruments like treasury bills and commercial papers.

• B. Promotional Functions: These functions aim to foster economic development.

  • Agricultural Finance:
    • Promotes agricultural credit through institutions like Regional Rural Banks (RRBs), Cooperative Banks, and apex bodies like NABARD (National Bank for Agriculture and Rural Development).
  • Industrial Finance:
    • Supports industrial development by facilitating finance through institutions like ICICI, IDBI, and State Financial Corporations (SFCs).
  • Export Credit:
    • Encourages exports by providing credit facilities and establishing institutions like the Export-Import Bank of India (EXIM Bank).
    • Develops mechanisms like the bill market to support trade finance.
  • Banking System Development:
    • Works to expand banking reach, promote banking habits, and ensure the healthy growth of the entire banking system, including priority sectors and weaker sections of society.

• C. Supervisory Functions: These functions ensure the soundness and stability of the financial system.

  • Licensing:
    • Grants licenses for establishing new banks, branches, and expanding banking operations, ensuring they meet capital and other regulatory requirements.
  • Inspection:
    • Conducts periodic inspections of banks to assess their financial health, capital adequacy, asset quality (NPAs), and compliance with regulations.
  • Control over Management:
    • Exercises control over the management of banks, including appointments, remuneration, and overall governance, especially for private sector banks.
  • Auditing:
    • Conducts statutory audits of commercial banks to verify their financial statements and true financial position.
  • Regulation of Banking Practices:
    • Sets guidelines and regulations for banking operations, including credit classification and provisioning for bad loans, to maintain stability.

Central Bank Functions: A Detailed Look at the Reserve Bank of India (RBI)

This video provides a comprehensive overview of the Reserve Bank of India (RBI), focusing on its establishment, organizational structure, and multifaceted functions as a central bank.

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I. Establishment and Organizational Structure of RBI

• Founding and Legal Basis:
  • "से पहले हम कुछ बेसिक पॉइंट्स को देख लेते हैं जो की इंपॉर्टेंट है तो आरबीआई क्या रिज़र्व बैंक ऑफ इंडिया एक सेंट्रल बैंक है" (Before this, let's look at some basic points that are important. So, what is the RBI? Reserve Bank of India is a central bank.)
  • "तो सेंट्रल बैंक ऑफ इंडिया की सेंट्रल बैंक मिन बैंक है की अपेक्स बॉडी है" (So, the central bank of India is the main bank, the apex body.)
  • "और आरबीआई कब एस्टेब्लिश हुई थी तो आरबीआई की जो एस्टेब्लिशमेंट के ईयर है वो फर्स्ट अप्रैल 1935 है" (And when was the RBI established? The year of RBI's establishment is the first of April 1935.)
  • "और आरबीआई का जब एक्ट फ्रेम हुआ था वो एक्ट कब बना था 1934 में" (And when the RBI Act was framed, that act was made in 1934.)
  • "तो पहले एक्ट आगे दें आरबीआई एस्टेब्लिश हुई" (So, the act came first, then the RBI was established.)
  • "तो आरबीआई किसकी raycommendation पे एस्टेब्लिश हुई थी तो हिल्टन गैंग कमीशन जो थी उनकी रिपोर्ट और उनकी रिकमेंडेशन के बेसिस पे आरबीआई के एस्टेब्लिशमेंट हुई थी" (So, on whose recommendation was the RBI established? The Hilton-Young Commission's report and their recommendations were the basis for the RBI's establishment.)
  • "तो पहले एक्ट बना दें एस्टेब्लिशमेंट हुई" (So, the act was made first, then the establishment happened.)
• Initial and Current Ownership:
  • "तो आरबीआई कैसी है गवर्नमेंट ऑफ इंडिया के थ्रू फुल्ली आंड है" (So, how is the RBI? It is fully owned by the Government of India.)
  • "लेकिन जब आरबीआई के एस्टेब्लिशमेंट हुई थी तो उसे टाइम पे आरबीआई प्राइवेट जॉइंट और स्टॉक कंपनी थी मतलब प्राइवेटली होल्ड की गई थी और एक जॉइंट स्टॉक कंपनी थी" (But at the time of RBI's establishment, the RBI was a private joint and stock company, meaning it was privately held and was a joint-stock company.)
  • "लेकिन बाद में जब बैंकों का नेशनलाइजेशन हुआ तो उसे टाइम पे आर्मी को नेशनलाइज्ड किया गया और ये गवर्नमेंट ऑफ इंडिया के थ्रू फुल्ली ऊंट कर ली गई" (But later, when the banks were nationalized, the RBI was also nationalized at that time, and it was fully taken over by the Government of India.)
• Location:
  • "तो इनिशियली सेंट्रल ऑफिस कहां पे था आरबीआई का कोलकाता में था" (So, where was the initial central office of the RBI? It was in Kolkata.)
  • "जो की 1937 के बाद परमानेंटली शिफ्ट हो गया मुंबई में" (Which, after 1937, was permanently shifted to Mumbai.)
• Management Structure:
  • "तो पुरी आरबीआई के मैनेजमेंट है वो कैसे मैनेज की जाती है सेंट्रल बोर्ड और लोकल बोर्ड के थ्रू मैनेज की जाती है" (So, how is the entire management of the RBI managed? It is managed through the Central Board and Local Boards.)
  • Central Board of Directors:
    • "तो सेंट्रल बोर्ड को जो अपॉइंटमेंट होती है वो कौन करती है गवर्नमेंट ऑफ इंडिया करती है" (So, who makes the appointments to the Central Board? The Government of India does.)
    • "वहां पे एक गवर्नर और चार डिप्टी गवर्नर होते हैं" (There, there is one Governor and four Deputy Governors.)
    • "जिनके अपॉइंटमेंट कितने का जो टाइम टेन्योर होता है वो कितने साल का होता है 5 इयर्स का" (Whose appointment, what is the tenure? It is for 5 years.)
    • "तो वैन गवर्नर की जो बात कर रहे हैं वो कौन है इस टाइम पे शक्ति का अंदाज़ है" (So, the one Governor we are talking about, who is it? Currently, it is Shaktikanta Das.)
    • "और जो चार गवर्नर की बात करते तो वह कौन है तो वो है आपके एम राजेश्वर राव जो की 2020 में इलेक्ट हुए हैं अभी ये पॉइंट वे 2020 में और बीपी कानून को उसके अलावा एम की जान है एमडी पत्र हैं तो ये चार डिप्टी गवर्नर है जो की पॉइंटेड है और इनका कार्यकाल जितना है 5 साल का है" (And talking about the four Governors, who are they? They are M. Rajeshwar Rao, who was elected in 2020, appointed in 2020, and B.P. Kanungo, and besides them, M.K. Jan and M.D. Patra. So, these are the four Deputy Governors who are appointed, and their tenure is 5 years.)
    • "इसके अलावा दर 10 आदर डायरेक्टर्स भी होते हैं जिनको कंडोम मिनट करता है गवर्नमेंट ऑफ इंडिया ही नॉमिनेट करती है" (Besides them, there are 10 other directors who are nominated by the Government of India.)
    • "और ये जो चार डायरेक्टर्स होते हैं इनका जो टेन्योर होता है वो 4 इयर्स का होता है" (And these directors, their tenure is 4 years.)
    • "और ये अलग-अलग फील्ड से आते हैं जैसे की कोई इकोनॉमिस्ट हो गया कोई इंडस्ट्रियलिस्ट हो गया पर क्या अपने अपने फील्ड में बहुत ही फेमस पर्सनैलिटी होते हैं" (And they come from different fields, like an economist, an industrialist, but they are very famous personalities in their respective fields.)
    • "तो 10 डायरेक्टर्स जो होते हैं वो ए जाते हैं और कौन आते हैं चार डायरेक्टर्स आते हैं जो की नॉमिनेट किए जाते हैं लोकल बोट से" (So, 10 directors come, and four directors come who are nominated from the Local Boards.)
  • Local Boards:
    • "तो 4 इंच की लोकल बोर्ड होती है" (So, there are 4 such Local Boards.)
    • "और इनका ताने और कितना होता है 5 इयर्स का होता है" (And their tenure is 5 years.)
    • "तो लोकल बोर्ड के बाद अगर करते हैं तो चार रीजंस होते हैं अब कंट्री में इनके चार रीजंस हैं और वहीं से चार जो है लोकल बोट की बात कही जा रही है कौन-कौन से हो गए रीजन एक तो मुंबई हो गया कलकत्ता हो गया चेन्नई हो गया और आपका न्यू दिल्ली हो गया" (So, if we talk about Local Boards, there are four regions in the country. They have four regions, and from there, four Local Boards are mentioned. Which regions are they? One is Mumbai, Kolkata, Chennai, and your New Delhi.)
    • "तो हर एक डायरेक्टर होते चारों वोट से डायरेक्टर होते जो जितने रीजन है और हर बोर्ड में पंच मेंबर रहते हैं तो एच बोर्ड कंसिस्ट फाइव मेंबर्स" (So, each director, there are directors from all four boards, from all the regions, and each board has five members. So, each board consists of five members.)
    • "तो मुंबई के अलग कलकत्ता के अलग चेन्नई केरल न्यू दिल्ली की अलग होगी ठीक है तो चार ये आपके हो गए लोकल बोट होते हैं चार रीजंस से होते हैं" (So, Mumbai's will be separate, Kolkata's separate, Chennai's, Kerala's, New Delhi's will be separate. Okay, so these are your four Local Boards, coming from four regions.)
    • "उसके अलावा इनके poement कौन करता है सेंट्रल गवर्नमेंट करती है" (Besides that, who appoints them? The Central Government does.)
    • "इनका जो टेन्योर होता है वो कितने सालों का होता है 4 इयर्स का होता है" (Their tenure is 4 years.)
• Government Representation:
  • "इसके अलावा गवर्नमेंट का एक ऑफिसर होता है जो की जितनी भी सेंट्रल बोर्ड की मीटिंग्स होंगी उसको अटेंड करेगा इनका कोई टेन्योर फिक्स नहीं होता है की वो कितने साल के लिए रहेंगे लेकिन हान इनके पास कोई वोटिंग की पावर नहीं होती है तो ये सिर्फ गवर्नमेंट के रिप्रेजेंटेटिव की सार्थक आप समझ सकते हैं की गवर्नमेंट का एक ऑफिस से होगा जो ये हर मीटिंग में रहेगा प्रेजेंट रहेगा पर वो इनके पास वोटिंग के पावर नहीं होती है और कोई कार्यकाल का टाइम भी फिक्स नहीं होता है" (Besides this, there is a Government officer who will attend all the Central Board meetings. Their tenure is not fixed for how many years they will remain, but yes, they do not have any voting power. So, you can understand them as a representative of the Government; there will be a Government official who will be present in every meeting, but they do not have voting power, and there is no fixed term for their role.)
• Meeting Frequency:
  • "सो सेंट्रल बोर्ड जो होता है वो साल में छह बार कम से कम छह बार उनकी मीटिंग होनी चाहिए एटलिस्ट सिक्स टाइम्स वो एक साल में मीत कर रहे हो" (So, the Central Board, its meetings must happen at least six times a year. At least six times they should meet in a year.)
  • "सेंट्रल बोर्ड इसके अलावा भी गवर्नर जब चाहेगा जब उनको लगेगा की जरूरी है वो इनकी मीटिंग को कॉल कर सकते हैं" (Besides this, the Governor can call their meeting whenever they deem it necessary.)
• Training and Staff:
  • "सेंटर ट्रेनिंग डिपार्टमेंट के अलावा जो है सेंट्रल ऑफिस डिपार्टमेंट भी इनका होता है जिसमें स्टाफ मेंबर्स होते हैं जो हेल्प कर रहे होते हैं" (Besides the central training department, they also have a central office department which has staff members who are helping.)
  • "बैंकिंग ट्रेनिंग कॉलेज मुंबई में है इसके अलावा कॉलेज ऑफ एग्रीकल्चर बैंकिंग पुणे में है और एक और आपका रिज़र्व बैंक स्टाफ कॉलेज जो की चेन्नई में है तो ये पूरा इनको ऑर्गेनाइजेशन सेटअप है आरबीआई का" (There is a Banking Training College in Mumbai. Besides this, the College of Agricultural Banking is in Pune, and there is another, the Reserve Bank Staff College, which is in Chennai. So, this is the entire organizational setup of the RBI.)

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II. Functions of the Reserve Bank of India

• A. Central Banking Functions:

  • Monopoly of Note Issue:
    • "मोनोपोली ऑफ नॉट इश्यू मोनोपोली ऑफ noticeo मतलब आरबीआई के मोनोपोली है नोटेशन करने की मतलब नो टीटी करने का जो इकलौता पावर है वो किसके पास है आरबीआई के पास है" (Monopoly of note issue, monopoly of notice, meaning the RBI has a monopoly on issuing notes. The sole power to issue notes rests with the RBI.)
    • "लेकिन इसमें एक एक्सेप्शन है की ₹1 का नोट और जो स्मॉल कोइंस है वो भारत सरकार इशू करती है मतलब मिनिस्ट्री ऑफ फाइनेंस गवर्नमेंट ऑफ इंडिया की वो इशू करती है" (But there is an exception to this: the ₹1 note and small coins are issued by the Government of India, meaning the Ministry of Finance, Government of India, issues them.)
    • "रदर दिन मतलब एक्सेप्ट डीज जितने भी नोट हैं वो किसकी थ्रू इशू किए जाते हैं आरबीआई के थ्रू" (Rather than, meaning except for these, all other notes are issued through the RBI.)
    • "लेकिन इसके साथ आप ये भी याद रखिएगा की आरबीआई जब नोट इश्यू करती है तो न्यूड इशू करने के लिए कुछ मैथर्ड हैं की आप नोट इश्यू के मेथड को अप्लाई करके कर सकते हैं 7 मैथर्ड दिए गए हैं शो के" (But along with this, remember that when the RBI issues notes, there are certain methods for issuing notes that you can apply. There are 7 methods given.)
    • "तो हमारी जो कंट्री है ड्रॉप करके राखी है वो मिनिमम रिज़र्व सिस्टम राखी है पहले हम प्रोपोर्शनल रिज़र्व सिस्टम अडॉप्ट करके बैठे द अब हमारी कंट्री मिनिमम रिजल्ट सिस्टम अडॉप्ट करके राखी हुई है" (So, the system our country has adopted is the Minimum Reserve System. Earlier, we adopted the Proportional Reserve System, but now our country follows the Minimum Reserve System.)
    • "तो मिनिमम सिस्टम क्या कहते हैं की मिनिमम रिज़र्व आपको आगे अन गोल्ड फॉर्म में और आदर सिक्योरिटी के फॉर्म में रखना होगा और उसकी बेस बना के उसी के बेसिस पे आप नोट इशू कर सकते हैं जितनी आपकी रिटायरमेंट हो" (So, what does the minimum system say? You have to keep a minimum reserve in the form of gold and other securities, and based on that, you can issue notes as per your requirement.)
  • Banker and Financial Advisor to the Government:
    • "तो यह आरबीआई क्या है गवर्नमेंट की भी बैंक होती है" (So, this RBI is also the bank of the Government.)
    • "गवर्नमेंट को फंडिंग चाहिए तो आरबीआई प्रोवाइड करती है उनके रिजर्व्स और बाकी चीजों के लिए भी बैंक है" (If the Government needs funding, the RBI provides it; it is also a bank for their reserves and other things.)
  • Banker's Bank:
    • "बैंकर्स बैंक आरबीआई बैंकों की भी बैंक है" (Banker's Bank, the RBI is also the bank of banks.)
    • "तो जैसे हमारे लिए बैंक का मतलब क्या होता है की जब हमें डिपॉजिट अपने सेविंग्स को रिपोजिट करना है हमें लोन चाहिए तो हम क्या करते बैंक से लोन ले लेते हैं" (So, just like for us, what does a bank mean? When we need to deposit our savings, when we need a loan, we take a loan from the bank.)
    • "इसके अलावा भी बैंक बहुत सारे एजेंसी फंक्शंस भी परफॉर्म करती है नॉर्मल कमर्शियल बैंक्स बहुत सारे एजेंसी फंक्शंस को फॉर्म करती है" (Besides this, banks also perform many agency functions; normal commercial banks perform many agency functions.)
    • "नॉर्मल कमर्शियल बैंक्स बहुत सारे एजेंसी फंक्शंस को फॉर्म करती है तो हम बैंक के लिए बैंक के पास अगर हमें जो भी कम करना है तो उसके लिए बैंक के पास आते हैं इसी तरह बैंक को जब ये सब एक्टिविटीज परफॉर्म करनी होती तो उनके लिए भी कोई बैंक होनी चाहिए सो अभी आई बैंकों की बैंक होती है मतलब उनके डिपॉजिट रखती है उनको लोन प्रोवाइड करती है तो ये बैंकर्स है बैंक की" (Normal commercial banks perform many agency functions. So, for banks, if they need to do any work, they come to a bank. Similarly, when banks need to perform all these activities, they also need a bank. So, the RBI is the bank of banks, meaning it holds their deposits and provides them with loans. So, this is the banker's bank.)
  • Custodian of Foreign Exchange Reserves:
    • "तो फॉरेन एक्सचेंज मतलब samjhiega की जब फॉरेन करेंसी का कन्वर्जन होता है करेक्ट मतलब लेन-देन करना एक्सचेंज करना तो फॉरेन एक्सचेंज मतलब जो फॉरेन करेंसी में लिन-दिन होता है मतलब हमारी करेंसी उनमें कन्वर्ट हो उनकी करेंसी हमारे में आए तो करेंसी कन्वर्जन को हम फॉरेन एक्सचेंज से दिनो करते हैं" (So, foreign exchange means, understand that when foreign currency is converted, correct, meaning to transact, to exchange. So, foreign exchange means the transaction in foreign currency, meaning our currency converts into theirs, their currency comes into ours. So, we denote currency conversion by foreign exchange.)
    • "तो जो रुपीस की वैल्यू है उसको मेंटेन करना फॉरेन एक्सचेंज में रुपीस की जो वैल्यू होती है जैसे डॉलर एक डॉलर इक्वल तू कितने रुपए 17 है तो $1 की जो ये बार-बार फ्लकचुएट करती है कभी 73 है कभी 60 पहुंच जाए कभी 50 पहुंच जाएगी ये जो flucashion है उसे फ्लक्स सेशन हो जाएगा तो ये इतना ज्यादा फ्लकचुएट होगा तो कोई भी कंट्री आप पे डील नहीं करना चाहिए कोई भी फॉरेन कंट्री आपसे दे लिंक करना चाहिए क्योंकि आपकी वैल्यू क्या है बार-बार फ्लेक्स फिट कर रही है और आपकी भी कंट्री एक्सपोर्ट या इंपोर्ट करने से पहले सौ बार सोचेगी क्योंकि इससे उनको लॉस हो सकता है" (So, maintaining the value of rupees in foreign exchange, the value of rupees in foreign exchange, like if 1 dollar equals how many rupees, say 73. So, this fluctuation of $1, sometimes it's 73, sometimes it reaches 60, sometimes it reaches 50. If this fluctuation becomes too much, no country should deal with you, no foreign country should link with you because your value is fluctuating repeatedly, and your country will think a hundred times before exporting or importing because they might incur losses.)
    • "तो जो ये फॉरेन एक्सचेंज में रुपीस की जो वैल्यू है उसको क्या करना है मेंटेन करना उसको सबल करने का भी कम आरबीआई का होता है" (So, what needs to be done is to maintain the value of rupees in foreign exchange; stabilizing it is also a function of the RBI.)
  • Controller of Credit:
    • "कंट्रोलर ऑफ क्रेडिट का मतलब क्या होगा क्रेडिट को कंट्रोल करना जैसे की इन्फ्लेशन की सिचुएशन है तो इन्फ्लेशन के सिचुएशन है तो इसका मतलब क्या हो गया की प्राइस मतलब जो कमोडिटीज हैं गुड सर्विसेज उनकी प्राइस बहुत ज्यादा है लेकिन जो मणि की वैल्यू है वो क्या है बहुत ही कम है ऐसा क्यों होता है जब कंट्री में मणि की सप्लाई नोट्स बहुत बढ़ जाते हैं मैंने की सप्लाई इंक्रीज कर जाती है" (What does controller of credit mean? It means controlling credit. For example, if there is a situation of inflation. So, if there is a situation of inflation, what does it mean? The prices of commodities, goods, and services are very high, but the value of money is very low. Why does this happen? When the supply of money in the country increases significantly, the supply of money increases.)
    • "तो हमें क्या करना होगा मणि की सप्लाई को कंट्रोल करना होगा कैसे करेंगे तो एक रीजन बैंक्स होती हैं तो क्या करेंगे कमर्शियल बैंक्स को बोलेंगे की भाई आप लोन कम प्रोवाइड करो तो जब लोन कप्राइड करेंगे तो कहीं ना कहीं मणि की सप्लाई कम हो जाएगी या हम कहें की हम आपको इंटरेस्ट बहुत प्रोवाइड करेंगे बैंक बोले हम सेविंग्स पे इंटरेस्ट बहुत देंगे तो लोग क्या करेंगे अपने पैसों को जा के डिपॉजिट करना शुरू कर देंगे बैंक के पास तो उससे क्या हो जाएगा इन आपको क्या होगा की मणि इकोनॉमी से मणि की जो सप्लाई है वो कंट्रोल होगी" (So, we will have to control the supply of money. How will we do it? There are regional banks. So, what will happen is they will tell the commercial banks, "Please provide less loans." So, when loans are provided less, the supply of money will decrease somewhere. Or, we can say that we will provide a lot of interest. The bank will say, "We will give a lot of interest on savings," so people will start depositing their money in the bank. Due to this, what will happen? The supply of money in the economy will be controlled.)
    • "तो कंट्रोल जो करना है क्रेडिट को वो तकनीक भी किसके पास है आरबीआई के मैनली दो टेक्निक्स होती हैं एक होती है आपकी क्वानटेटिव दूसरी होती है क्वानटेटिव" (So, the technique to control credit is also with the RBI. Mainly, there are two techniques: one is quantitative, and the other is qualitative.)
    • "क्वानटेटिव मतलब क्र हो गया एसएलआर हो गया बैंक रेट हो गया रेपो रेट हो गया ओपन मार्केट ऑपरेशन हो गया इन सब के थ्रू क्या करती है रब क्रेडिट को कंट्रोल करती है" (Quantitative means CRR, SLR, Bank Rate, Repo Rate, Open Market Operations – through all these, the RBI controls credit.)
    • "वहीं जब क्वालिटी टेक्निक्स हो गई तो क्वालिटेटिव टेक्निक्स में बहुत सारी चीजें ए जाती हैं और बहुत सारी चीज मतलब जैसे की आपका ए जाता है पब्लिसिटी ए गया डायरेक्ट और एक्शन्स ए गए तो ये सारे कुछ टेक्निक्स हैं टोटल 7 टेक्निक्स दी गई है जो क्वालिटेटिव टेक्निक्स के अंदर आती हैं इनके थ्रू क्या करती है आरबीआई कंट्रोल क्रेडिट को कंट्रोल करती है" (Whereas when it comes to qualitative techniques, many things come under it. Many things, for example, publicity, direct action, etc. So, these are some techniques. A total of 7 techniques are given that fall under qualitative techniques. Through these, the RBI controls credit.)
  • Clearing House Function:
    • "क्लीयरिंग हाउस तो क्लीयरिंग हाउस भी आरबीआई का वर्क होता है जैसे आज चेक लगाते हैं तो तुरंत तो क्लियर नहीं होता है तो वो क्या होता है बैंकों का सेटलमेंट होता है की एक बैंक के पास कितना dibbit है दूसरी बैंक का कितना क्रेडिट है तो बैंकों का सेटलमेंट जो होता है वो क्लीयरिंग हाउस में होता है तो ये भी फंक्शन किसका हो जाता है आरबीआई का हो जाता है" (Clearing House – so, the clearinghouse is also a function of the RBI. For example, when you issue a check today, it doesn't clear immediately. So, what happens is the settlement of banks – how much debit one bank has, how much credit another bank has. So, the settlement of banks happens in the clearinghouse. So, this also becomes a function of the RBI.)
  • Collection and Publication of Data:
    • "कलेक्शन ऑफ डाटा एंड पब्लिकेशन तो डाटा को कलर करना और पब्लिश करना जो है वो भी आरबीआई के में फंक्शंस में ए जाता है" (Collection of data and publication – so, collecting and publishing data is also among the main functions of the RBI.)
    • "की हमारे पास जैसे सपोस करिए गवर्नमेंट को डाटा चाहिए की कितने लोगों की कितने लोगों के अकाउंट्स हैं कितना डिपॉजिट्स आता है जो स्टैटिसटिक्स डाटा होता है कितने कितना रेवेन्यू ए जा रहा है कितने डिपॉजिट आते हैं अमाउंट कितना ए रहा है ये सब जो स्टैटिसटिक्स रेट है वो भी कौन प्रोवाइड कर देता है आरबीआई प्रोवाइड करती है" (Suppose the government needs data on how many people have accounts, how much deposit comes in – the statistical data – how much revenue is coming in, how many deposits are received, how much amount is coming in. All this statistical data is also provided by the RBI.)
    • "वह अलग-अलग बैंकों से भी डाटा कलेक्ट करती है उनको पब्लिश करती है अपनी रिपोर्ट्स में तो यह आरबीआई का काम है" (It also collects data from various banks and publishes it in its reports. So, this is the work of the RBI.)
  • Development of Financial Infrastructure:
    • "इसके अलावा क्या है बिल मार्केट स्कीम लाई हमारे पास क्या था हमारे जो बिल मार्केट से बिल्कुल अनोर्गनाइज्ड जिससे उंडी वगैरा जैसे ऑन ऑर्गेनाइज्ड था हमारे जो मणि मार्केट इंस्ट्रूमेंट था उसके लिए कोई प्रॉपर मार्केटिंग नहीं थी की कहां पे ट्रेजरी बिल्कुल किया जाएगा कमर्शियल पेपर को डील की जगह बिल ऑफ एक्सचेंज को डील किया जाए प्रॉमिस reacodo किया जाए तो इनके लिए भी एक स्कीम रेगन की मार्केट बनाई गई की आपको डिस्काउंट करना है बिल ऑफ एक्सचेंज को आप वहां डिस्काउंट को डिस्काउंट करना आप कर सकते हैं तो पूरा बिल मार्केट को डिवेलप किया उसे स्कीम को लाया है इन्होंने" (Besides this, a Bill Market Scheme was introduced. What did we have? Our bill market was completely unorganized, like undi, etc., it was unorganized. There was no proper market for our money market instruments – where treasury bills would be dealt with, commercial papers, bills of exchange, promissory notes would be dealt with. So, for these too, a scheme and market were created: you want to discount a bill of exchange, you can get it discounted there. So, they have developed the entire bill market and introduced that scheme.)

• B. Promotional Functions:

  • Agricultural Finance:
    • "लाइक एग्रीकल्चर फाइनेंस के लिए उन्होंने क्या किया एग्रीकल्चर के बैंक को डिवेलप किया आरआरबी को डिवेलप किया नाबार्ड को ले आया तो नाबार्ड एग्रीकल्चर के लिए अपेक्स बॉडी मणि जाती है तो वो क्या कर रही है एग्रीकल्चर को फाइनेंस करने के लिए कैसे हम आरआरबी कोऑपरेटिव सोसाइटी और ये आ रहा है नाबार्ड के थ्रू उनको हेल्प कर सकते हैं उनको प्रमोट कर सकते हैं" (Like for agricultural finance, what did they do? They developed banks for agriculture, developed RRBs, brought in NABARD. So, NABARD is considered the apex body for agriculture. So, what is it doing to finance agriculture? How can we help them through RRBs, cooperative societies, and this coming through NABARD? How can we promote them?)
  • Industrial Finance:
    • "इंडस्ट्रियल फाइनेंस प्रोवाइड करती है फाइनेंस प्रोवाइड करने के लिए क्या हो गया इंडस्ट्रियल बैंक को डिवेलप किया जैसे आईसीआईसीआई हो गया आईडीबीआई हो गया ये सारी कैसी बैंक है इंडस्ट्रियल पर्पस के लिए डिवेलप की ढककर एस्टेब्लिश की गई है सारी बैंक एसएफसी हो गई सिर्फ फाइनेंस कॉर्पोरेशन हो गई तो ये सब क्या है में मोटिव इनका इंडस्ट्री फाइनेंस था" (It provides industrial finance. To provide finance, what happened? Industrial banks were developed, like ICICI, IDBI. What kind of banks are these? They are developed and established for industrial purposes. All these banks, SFCs, State Finance Corporations – what is their main motive? It was industry finance.)
  • Export Credit:
    • "एक्सपोर्ट इंपोर्ट करना है तो इनके अपने रिटायरमेंट होती है लाइक आपको एक स्पोर्ट करना है तो आपको क्या चाहिए फंडिंग चाहिए अभी चाहिए जब हम एक्सपोर्ट कर देंगे और सामने की पार्टी हमें बिल क्लियर करके पैसे देगी तो हम लोमड़ी पे कर पाएंगे या हमें कस्टम ड्यूटी पे करनी है एक्साइज ड्यूटी पे करनी है उसके लिए मैं पैसे चाहिए हमारा जो गुड्स है वो इंपोर्ट होकर आया है पर अभी रिपोर्ट है पोर्ट तो ये अटका पढ़ा है क्योंकि हमने अभी तक उसकी ड्यूटी पे ही नहीं की उसके लिए हमारे पास पैसे नहीं है तो अब उसके लिए लोन चाहिए तो हम लोन कैसे देंगे नॉर्मल बैंक नहीं प्रोवाइड कर पाएगी तो अब उसके लिए स्पेसिफिक होनी चाहिए जो उसे पर्पस को समझे तो वो क्या करेगी आपकी गोडाउन आपका इतना मल आया है उसकी वैल्यू कितनी आई उसके अकॉर्डिंग वो आपको लोन मिल सकती है" (If you have to export and import, then there are specific requirements. Like, if you have to export, what do you need? Funding. You need it now. When we export and the other party clears the bill and gives us the money, we can repay the loan. Or, we have to pay customs duty, excise duty. For that, we need money. Our goods have been imported, but they are stuck at the port because we haven't paid the duty yet, and we don't have the money for it. So, now we need a loan for that. How will we provide the loan? A normal bank won't be able to provide it. So, there should be a specific entity for that which understands that purpose. So, what will it do? Your warehouse, the amount of goods that have arrived, what is its value? Accordingly, it can provide you with a loan.)
    • "तो एक्सपोर्ट क्रेडिट को प्रमोट करने के लिए उन्होंने क्या कर दिया एक्सिम बैंक को डिवेलप किया है एक्सपोर्ट एंड इंपोर्ट बैंक जो है एक जिम बैंक को डिवेलप कर दिया" (So, to promote export credit, what did they do? They developed EXIM Bank. The Export and Import Bank, that is EXIM Bank, was developed.)
  • Banking System Development:
    • "इसके अलावा क्या है बैंकिंग सिस्टम को अच्छे से रेगुलेट किया है इन्होंने ये पूरा बैंकिंग सिस्टम से यूनिवर्सल बैंकिंग बैंकिंग यूनिट बैंकिंग तो जो बैंकिंग सिस्टम को उसको अच्छे से इन्होंने क्या किया रेगुलेट किया" (Besides this, what is it? They have regulated the banking system well. This entire banking system, from universal banking to unit banking, they have regulated the banking system well.)
    • "क्रेडिट प्रायोरिटी सेक्टर एंड विकार सेक्शन प्रायोरिटी सेक्टर को कितना क्रेडिट मिलना चाहिए vikras सेक्शन को कितना क्रेडिट मिलना चाहिए उनके अकॉर्डिंग उनको फंडिंग प्रोवाइड किया यह भी इनके प्रमोशन फंक्शन में आ गए" (Credit to the priority sector and weaker sections. How much credit should the priority sector receive? How much credit should the weaker sections receive? Accordingly, funding was provided to them. This also falls under their promotional functions.)

• C. Supervisory Functions:

  • Licensing:
    • "इसमें लाइसेंस इंप्रूव्ड करना कोई नई बैंक ओपन करनी है नहीं ब्रांच ओपन करनी है तो उसके लिए आपको लाइसेंस कहां से मिलेगा आरबीआई प्रोवाइड करेंगे तो आरबीआई चेक करेगी की भाई आपका जो भी हमारी रिटायरमेंट है उसके हिसाब से कैपिटल है की नहीं है प्लेस है की नहीं है नेटवर्क है की नहीं है और उसे हिसाब से आपको लाइसेंस प्रोवाइड की जाएगी" (In this, improving licenses, if you want to open a new bank, open a new branch, where will you get the license for that? The RBI will provide it. So, the RBI will check if you have the capital as per our requirements, if you have the place, if you have the network, and accordingly, the license will be provided to you.)
  • Inspection:
    • "इन्फेक्शन ऑफ अन बैंक तू टाइम तू टाइम इंफेक्शन करती है की आपका जो कैपिटल का अमाउंट है वो कैपिटल अमाउंट आप एक्जिस्ट कर रहे हैं की नहीं है आपकी डेप्थ इक्विटी का रेश्यो जो होना चाहिए वो है की नहीं है आपकी क्या लोन की पोजिशनिंग है एडवांस उसकी पोजिशनिंग क्या है तो इस हिसाब से आपकी हर एक चीज टायर 1 की कैपिटल टी है तू की कैपिटल आप करार को फॉलो कर पा रहे हैं की नहीं मतलब ये क्या करें की वो टाइम इन्फेक्शन करती रहेगी सब चीजों की" (Inspection of a bank – it conducts inspections from time to time to see if your capital amount is existing or not, if the debt-equity ratio is as it should be, what is your loan positioning, what is the positioning of advances. So, accordingly, every aspect, Tier 1 capital, Tier 2 capital, are you able to follow the regulations? Meaning, they will keep conducting timely inspections of all these things.)
  • Control over Management:
    • "कंट्रोल ओवर मैनेजमेंट तो जितने भी बैंक्स हैं जो उनके मैनेजमेंट है उनका पूरा कंट्रोल आरबीआई देखती है उनके अपॉइंटमेंट की कैसे इनको अप्वॉइंट करना है रिप्वाइंट करना है उनकी सैलरी में बाकी चीजों को पूरा मैनेजमेंट है इवेंट प्राइवेट सेक्टर बैंक के भी खासकर इन चीजों को वो अच्छे से सुपरवाइज करती है" (Control over management – all the banks, their management, the RBI oversees their entire management. How to appoint them, reappoint them, their salaries, and other things – the complete management. Even for private sector banks, they supervise these things particularly well.)
  • Auditing:
    • "देन ऑडिट करती है बैंक क्या करती आरबीआई क्या करती है टाइम तू टाइम बैंकों की ऑडिट करती रहती है जैसे की मैं आपसे मुझे कमर्शियल बैंक्स हो गई तो दिस इसे बैंक हो गई या प्राइवेट बैंक होगी इनकी गवर्नमेंट आरबीआई क्या करती है एक टाइम पे ऑडिट करती है इसे कहते हैं स्टेट्यूटरी ऑडिट मतलब वह ऑडिट आरबीआई करती है साल में एक बार करती है मार्च या अप्रैल में मंथ में कर देती है" (Then it audits. What do banks do? What does the RBI do? It keeps auditing banks from time to time. For example, if I ask you, commercial banks, so this bank, or private banks, their government, the RBI conducts an audit at a certain time. This is called a statutory audit, meaning that audit is done by the RBI once a year, usually in March or April.)
    • "तो आरबीआई ऑर्डर कर के क्या देखती है की आपकी एग्जैक्ट पोजिशनिंग क्या आप जो बैलेंस शीट हमें दिखाते हैं उसमें जो पोजिशनिंग दिख रही है वो और आपके रियल कंडीशन क्या है एनपीए के क्या कंडीशन है नॉन परफॉर्मिंग असेट्स जिन्हें हम कहते हैं ऐसा तो नहीं की आपके लोन अन रिपेयर करने की कैपेसिटी में ही नहीं है क्योंकि बैंकों के लिए लोन जो था उनके से होती है डिपॉजिट जो होते हैं उनके लायबिलिटी होती है तो क्या आपके से आपको अच्छे से परफॉर्म कर रहे हैं की नहीं रेवेन्यू जेनरेट कर रहे हैं की नहीं कर रहे हैं ये सब चीज ज्यादा तो नहीं हो गया एंड प्लीज ज्यादा होगा तो बैंक लॉस में जाएगी क्योंकि प्रोविजनल करनी पड़ेगी तो रियल कंडीशन आपके बैंक के क्या है यह आरबीआई क्या करती है टाइम तू टाइम ऑर्डर करके देखती है तो आरबीआई जो ऑडिट करती है उसको क्या नाम देते हैं स्टेट्यूटरी ऑर्डर देते हैं हम" (So, by auditing, the RBI checks what your exact positioning is. What is shown in the balance sheet and your real condition? What is the condition of NPAs (Non-Performing Assets)? Isn't it that your loans are not even in a repayable capacity? Because for banks, loans are their assets, and deposits are their liabilities. So, are your assets performing well or not? Are you generating revenue or not? If all these things become excessive, the bank will go into loss because provisions will have to be made. So, what is the real condition of your bank? The RBI checks this by auditing from time to time. So, the audit that the RBI does, what do we call it? We call it statutory audit.)

Central Bank Functions: A Detailed Look at the Reserve Bank of India (RBI)

This video provides a comprehensive overview of the Reserve Bank of India (RBI), focusing on its establishment, organizational structure, and multifaceted functions as a central bank.

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I. Establishment and Organizational Structure of RBI

• Founding and Legal Basis:
  • "Before this, let's look at some basic points that are important. So, what is the RBI? Reserve Bank of India is a central bank."
  • "So, the central bank of India is the main bank, the apex body."
  • "And when was the RBI established? The year of RBI's establishment is the first of April 1935."
  • "And when the RBI Act was framed, that act was made in 1934."
  • "So, the act came first, then the RBI was established."
  • "So, on whose recommendation was the RBI established? The Hilton-Young Commission's report and their recommendations were the basis for the RBI's establishment."
  • "So, the act was made first, then the establishment happened."
• Initial and Current Ownership:
  • "So, how is the RBI? It is fully owned by the Government of India."
  • "But at the time of RBI's establishment, the RBI was a private joint and stock company, meaning it was privately held and was a joint-stock company."
  • "But later, when the banks were nationalized, the RBI was also nationalized at that time, and it was fully taken over by the Government of India."
• Location:
  • "So, where was the initial central office of the RBI? It was in Kolkata."
  • "Which, after 1937, was permanently shifted to Mumbai."
• Management Structure:
  • "So, how is the entire management of the RBI managed? It is managed through the Central Board and Local Boards."
  • Central Board of Directors:
    • "So, who makes the appointments to the Central Board? The Government of India does."
    • "There, there is one Governor and four Deputy Governors."
    • "Whose appointment, what is the tenure? It is for 5 years."
    • "So, the one Governor we are talking about, who is it? Currently, it is Shaktikanta Das."
    • "And talking about the four Governors, who are they? They are M. Rajeshwar Rao, who was elected in 2020, appointed in 2020, and B.P. Kanungo, and besides them, M.K. Jan and M.D. Patra. So, these are the four Deputy Governors who are appointed, and their tenure is 5 years."
    • "Besides them, there are 10 other directors who are nominated by the Government of India."
    • "And these directors, their tenure is 4 years."
    • "And they come from different fields, like an economist, an industrialist, but they are very famous personalities in their respective fields."
    • "So, 10 directors come, and four directors come who are nominated from the Local Boards."
  • Local Boards:
    • "So, there are 4 such Local Boards."
    • "And their tenure is 5 years."
    • "So, if we talk about Local Boards, there are four regions in the country. They have four regions, and from there, four Local Boards are mentioned. Which regions are they? One is Mumbai, Kolkata, Chennai, and your New Delhi."
    • "So, each director, there are directors from all four boards, from all the regions, and each board has five members. So, each board consists of five members."
    • "So, Mumbai's will be separate, Kolkata's separate, Chennai's, Kerala's, New Delhi's will be separate. Okay, so these are your four Local Boards, coming from four regions."
    • "Besides that, who appoints them? The Central Government does."
    • "Their tenure is 4 years."
• Government Representation:
  • "Besides this, there is a Government officer who will attend all the Central Board meetings. Their tenure is not fixed for how many years they will remain, but yes, they do not have any voting power. So, you can understand them as a representative of the Government; there will be a Government official who will be present in every meeting, but they do not have voting power, and there is no fixed term for their role."
• Meeting Frequency:
  • "So, the Central Board, its meetings must happen at least six times a year. At least six times they should meet in a year."
  • "Besides this, the Governor can call their meeting whenever they deem it necessary."
• Training and Staff:
  • "Besides the central training department, they also have a central office department which has staff members who are helping."
  • "There is a Banking Training College in Mumbai. Besides this, the College of Agricultural Banking is in Pune, and there is another, the Reserve Bank Staff College, which is in Chennai. So, this is the entire organizational setup of the RBI."

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II. Functions of the Reserve Bank of India

The functions are broadly categorized into three main areas: Central Banking, Promotional, and Supervisory.

• A. Central Banking Functions: These are the core functions critical for managing the monetary system.

  • Monopoly of Note Issue:
    • "Monopoly of note issue, monopoly of notice, meaning the RBI has a monopoly on issuing notes. The sole power to issue notes rests with the RBI."
    • "But there is an exception to this: the ₹1 note and small coins are issued by the Government of India, meaning the Ministry of Finance, Government of India, issues them."
    • "Rather than, meaning except for these, all other notes are issued through the RBI."
    • "But along with this, remember that when the RBI issues notes, there are certain methods for issuing notes that you can apply. There are 7 methods given."
    • "So, the system our country has adopted is the Minimum Reserve System. Earlier, we adopted the Proportional Reserve System, but now our country follows the Minimum Reserve System."
    • "So, what does the minimum system say? You have to keep a minimum reserve in the form of gold and other securities, and based on that, you can issue notes as per your requirement."
  • Banker and Financial Advisor to the Government:
    • "So, this RBI is also the bank of the Government."
    • "If the Government needs funding, the RBI provides it; it is also a bank for their reserves and other things."
  • Banker's Bank:
    • "Banker's Bank, the RBI is also the bank of banks."
    • "So, just like for us, what does a bank mean? When we need to deposit our savings, when we need a loan, we take a loan from the bank."
    • "Besides this, banks also perform many agency functions; normal commercial banks perform many agency functions."
    • "Normal commercial banks perform many agency functions. So, for banks, if they need to do any work, they come to a bank. Similarly, when banks need to perform all these activities, they also need a bank. So, the RBI is the bank of banks, meaning it holds their deposits and provides them with loans. So, this is the banker's bank."
  • Custodian of Foreign Exchange Reserves:
    • "So, foreign exchange means, understand that when foreign currency is converted, correct, meaning to transact, to exchange. So, foreign exchange means the transaction in foreign currency, meaning our currency converts into theirs, their currency comes into ours. So, we denote currency conversion by foreign exchange."
    • "So, maintaining the value of rupees in foreign exchange, the value of rupees in foreign exchange, like if 1 dollar equals how many rupees, say 73. So, this fluctuation of $1, sometimes it's 73, sometimes it reaches 60, sometimes it reaches 50. If this fluctuation becomes too much, no country should deal with you, no foreign country should link with you because your value is fluctuating repeatedly, and your country will think a hundred times before exporting or importing because they might incur losses."
    • "So, what needs to be done is to maintain the value of rupees in foreign exchange; stabilizing it is also a function of the RBI."
  • Controller of Credit:
    • "What does controller of credit mean? It means controlling credit. For example, if there is a situation of inflation. So, if there is a situation of inflation, what does it mean? The prices of commodities, goods, and services are very high, but the value of money is very low. Why does this happen? When the supply of money in the country increases significantly, the supply of money increases."
    • "So, we will have to control the supply of money. How will we do it? There are regional banks. So, what will happen is they will tell the commercial banks, 'Please provide less loans.' So, when loans are provided less, the supply of money will decrease somewhere. Or, we can say that we will provide a lot of interest. The bank will say, 'We will give a lot of interest on savings,' so people will start depositing their money in the bank. Due to this, what will happen? The supply of money in the economy will be controlled."
    • "So, the technique to control credit is also with the RBI. Mainly, there are two techniques: one is quantitative, and the other is qualitative."
    • "Quantitative means CRR, SLR, Bank Rate, Repo Rate, Open Market Operations – through all these, the RBI controls credit."
    • "Whereas when it comes to qualitative techniques, many things come under it. Many things, for example, publicity, direct action, etc. So, these are some techniques. A total of 7 techniques are given that fall under qualitative techniques. Through these, the RBI controls credit."
  • Clearing House Function:
    • "Clearing House – so, the clearinghouse is also a function of the RBI. For example, when you issue a check today, it doesn't clear immediately. So, what happens is the settlement of banks – how much debit one bank has, how much credit another bank has. So, the settlement of banks happens in the clearinghouse. So, this also becomes a function of the RBI."
  • Collection and Publication of Data:
    • "Collection of data and publication – so, collecting and publishing data is also among the main functions of the RBI."
    • "Suppose the government needs data on how many people have accounts, how much deposit comes in – the statistical data – how much revenue is coming in, how many deposits are received, how much amount is coming in. All this statistical data is also provided by the RBI."
    • "It also collects data from various banks and publishes it in its reports. So, this is the work of the RBI."
  • Development of Financial Infrastructure:
    • "Besides this, a Bill Market Scheme was introduced. What did we have? Our bill market was completely unorganized, like undi, etc., it was unorganized. There was no proper market for our money market instruments – where treasury bills would be dealt with, commercial papers, bills of exchange, promissory notes would be dealt with. So, for these too, a scheme and market were created: you want to discount a bill of exchange, you can get it discounted there. So, they have developed the entire bill market and introduced that scheme."

• B. Promotional Functions: These functions aim to foster economic development.

  • Agricultural Finance:
    • "Like for agricultural finance, what did they do? They developed banks for agriculture, developed RRBs, brought in NABARD. So, NABARD is considered the apex body for agriculture. So, what is it doing to finance agriculture? How can we help them through RRBs, cooperative societies, and this coming through NABARD? How can we promote them?"
  • Industrial Finance:
    • "It provides industrial finance. To provide finance, what happened? Industrial banks were developed, like ICICI, IDBI. What kind of banks are these? They are developed and established for industrial purposes. All these banks, SFCs, State Finance Corporations – what is their main motive? It was industry finance."
  • Export Credit:
    • "If you have to export and import, then there are specific requirements. Like, if you have to export, what do you need? Funding. You need it now. When we export and the other party clears the bill and gives us the money, we can repay the loan. Or, we have to pay customs duty, excise duty. For that, we need money. Our goods have been imported, but they are stuck at the port because we haven't paid the duty yet, and we don't have the money for it. So, now we need a loan for that. How will we provide the loan? A normal bank won't be able to provide it. So, there should be a specific entity for that which understands that purpose. So, what will it do? Your warehouse, the amount of goods that have arrived, what is its value? Accordingly, it can provide you with a loan."
    • "So, to promote export credit, what did they do? They developed EXIM Bank. The Export and Import Bank, that is EXIM Bank, was developed."
  • Banking System Development:
    • "Besides this, what is it? They have regulated the banking system well. This entire banking system, from universal banking to unit banking, they have regulated the banking system well."
    • "Credit to the priority sector and weaker sections. How much credit should the priority sector receive? How much credit should the weaker sections receive? Accordingly, funding was provided to them. This also falls under their promotional functions."

• C. Supervisory Functions: These functions ensure the soundness and stability of the financial system.

  • Licensing:
    • "In this, improving licenses, if you want to open a new bank, open a new branch, where will you get the license for that? The RBI will provide it. So, the RBI will check if you have the capital as per our requirements, if you have the place, if you have the network, and accordingly, the license will be provided to you."
  • Inspection:
    • "Inspection of a bank – it conducts inspections from time to time to assess its financial health, capital adequacy, asset quality (NPAs), and compliance with regulations. It checks if your capital amount is existing or not, if the debt-equity ratio is as it should be, what is your loan positioning, what is the positioning of advances. So, accordingly, every aspect, Tier 1 capital, Tier 2 capital, are you able to follow the regulations? Meaning, they will keep conducting timely inspections of all these things."
  • Control over Management:
    • "Control over management – all the banks, their management, the RBI oversees their entire management. How to appoint them, reappoint them, their salaries, and other things – the complete management. Even for private sector banks, they supervise these things particularly well."
  • Auditing:
    • "Then it audits. What do banks do? What does the RBI do? It keeps auditing banks from time to time. For example, if I ask you, commercial banks, so this bank, or private banks, their government, the RBI conducts an audit at a certain time. This is called a statutory audit, meaning that audit is done by the RBI once a year, usually in March or April."
    • "So, by auditing, the RBI checks what your exact positioning is. What is shown in the balance sheet and your real condition? What is the condition of NPAs (Non-Performing Assets)? Isn't it that your loans are not even in a repayable capacity? Because for banks, loans are their assets, and deposits are their liabilities. So, are your assets performing well or not? Are you generating revenue or not? If all these things become excessive, the bank will go into loss because provisions will have to be made. So, what is the real condition of your bank? The RBI checks this by auditing from time to time. So, the audit that the RBI does, what do we call it? We call it statutory audit."