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In the first half of the nineteenth century, three Presidency Banks were started in Madras, Bombay and Bengal with the financial participation of the government for conducting banking business and issue currency notes. Towards the end of the 19th Century the cash balances of the government were kept in the government treasuries and the government shed its connections with the Presidency Banks.
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Banking History
The Imperial Bank came into existence on the 27th January, 1921 by the Imperial Bank of India Act of 1920. It was established by the amalgamation of the three Presidency Banks. The Imperial Bank was the biggest bank until 1935. Until the establishment of the Reserve Bank of India in 1935, the Imperial Bank performed certain central banking functions, although it was purely a commercial bank. It acted as the sole-banker to the Government.
Introduction
It is the Central Bank of India Established in 1934 under the RESERVE BANK OF INDIA ACT 1934. Its head quarters is in Mumbai (Maharashtra). Its present governor is Duvvuri Subbarao. It has 26 offices in which four are regional offices located in metropolitan cities.
Preamble
The Preamble of the Reserve Bank of India describes the basic objectives of the Reserve Bank as
"...to regulate the issue of Bank Notes and 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."
Subsidiaries
The Reserve Bank of India has fully-owned four subsidiaries which include National Housing Bank(NHB). Deposit Insurance and Credit Guarantee Corporation of India(DICGC). Bharatiya Reserve Bank Note Mudran Private Limited(BRBNMPL). National Bank for Agriculture and Rural Development (NABARD, 12 July, 1982). The Reserve Bank of India has recently divested its stake in State Bank of India to the Government of India. RBI has also set up some trainning institutions.
Functions of RBI
Monetary functions
Note issue (except one rupee note all other notes are issued) Banker to the government Bankers bank Custodian of foreign reserves Controller of credit
Bank Rate Open market operations Variable reserve requirements (Cash Reserve Requirement & Statutory Liquidity Requirements)
Non-Monetary Functions
Supervisory functions Promotional functions
interest.
Receiving Carrying
Helping
both Central and State Govts float new loans and mange public debt.
ways and means advances to the state and local authorities.
Making Acting
Bankers Bank
Apex banking institution Controls the banking activities and credit system in India It provides financial assistance to scheduled banks by rediscounting eligible securities
Controller of Credit
Bank Rate
Sec.49 of RBI Act, empowers the Reserve Bank to publish the bank rate from time to time. Standard rate which is prepared to buy or rediscount bills of exchange or other commercial papers eligible for purchase under this act. RBI is able to regulate commercial bank credit and the general credit situation in the country to a certain extent. 9.00% (w.e.f. close of business of 17/04/2012) Decreased from 9.50% to 9.00% which was continuing since 13/02/2012
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Controller of Credit
Open market operations
The purchase and sale of Govt. securities by the RBI from/to the public and bank on its own account. Section 17(8) provides this right to RBI. To provide seasonal finance to commercial banks by purchase of securities from them.
Non-Monetary Functions
Supervisory Function
RBI Act 1934 & than Banking Regulations Act 1949 have given wide range of powers to RBI to control over commercial banks. The Section 22 of Banking Regulations Act 1949, every bank has to obtain a license from RBI carrying on banking business. Sanction of new branch or a new place of business.
Promotional Functions
It promotes banking habits Extend banking facilities to rural and semi urban areas Establish and promote new specialized financing agencies
Central Bank
Introduction
It regulates and makes policy relating to monetary management in the country. It is an organ of the government which participates in financial markets in different ways. By issuing of currency notes which is directly and solely under the purview of the Central Bank.
Introduction
By working as the agent and adviser of the Government specifically concerning to the financial matters, such as loans, advances, servicing of debts, etc. By acting as bankers bank in the financial market and it regulates the banking operations in the country. By maintaining adequate foreign exchange reserve for meeting the requirements of foreign trade and servicing of foreign debts.
Functions
Note issue Governments banker, agent and adviser Bankers bank and lender of last resort Custodian of foreign balances of the country Central clearance, settlement and transfer Credit control