Reserve Bank Of India Case Analysis

Executive Summary

RBI- Reserve bank of India, the central authority of India and the key responsible for the flow of money in the country and for the sustainable and continuous growth of the economy, how RBI does that? What is that unique thing that only RBI is having? And there are so many such questions that we all are having in our mind those need to be answered.

Indian economy is the 7th largest economy in the world and is booming in very high rate and the big economist see India as a super power in next decade. So how these could be possible and what are the key factors responsible for that. All these questions required a research and as the research methodology can’t be primary in this case. We have done a secondary research to

The foundation of RBI was set up in 1934 when The Reserve Bank of India Act, 1934 came and then it provides the basis of the functioning of the bank and RBI started on 1 April,1935. It was first set up as the shareholder’s bank and then nationalized in 1949. With liberalisation, the Bank's focus has shifted back to core central banking functions like Monetary Policy, Bank Supervision and Regulation, and overseeing the payments System and onto developing the financial markets.

Now currently there are 7 major roles of RBI:

1. Issue of Bank Notes:

The Reserve Bank of India has the right to issue currency notes except one rupee notes which are issued by the Ministry of Finance.

2. Banker to Government:

For the Government of India RB acts as a regular bank and manages all its banking needs and is responsible for the govt. deposit account as it collects receipts and makes payments on the behalf of the govt. and in financial sector RBI represents India in World bank.

3. Custodian of Cash Reserves of Commercial Banks:

Commercial banks deposits the cash with the RBI and it becomes the custodian of the

Marginal Standing Facility (MSF) Rate: Marginal Standing Facility (MSF) is a new scheme announced by the Reserve Bank of India (RBI) in its Monetary Policy (2011-12) and refers to the penal rate at which banks can borrow money from the central bank over and above what is available to them through the LAF

Bank rate: Bank Rate is the rate at which central bank of the country (in India it is RBI) allows finance to commercial banks. Bank Rate is a tool, which central bank uses for short-term purposes. Any upward revision in Bank Rate by central bank is an indication that banks should also increase deposit rates as well as Base Rate / Benchmark Prime Lending Rate.

Base rate: Base rate is the minimum rate below which banks are not allowed to charge from its customers. This is the RBI rule that no bank can offer a loan at rate lower than this base