Thus it regulates the credit creation capacity of commercial banks by using various credit control tools. Under this system, deposits up to Rs. Bank of Issue: Under section 22 of the Reserve Bank of India Act, the bank has the sole right to issue bank notes of all denominations. There is a separate route for clearing high value cheques of Rs. It includes fundamental functions of the Central Bank.
This data proves to be quite useful for researchers and policy makers. Promotional Role Along with the routine traditional functions, central banks especially in the developing country like India have to perform numerous promotional functions. The one rupee note and smaller coins are issued by the government and they are called limited legal tender which means that they can be demanded as a medium of payment only to a limited extent. Local Board 20,000 1,200 3. Since its inception the Reserve Bank of India had played an important role in the economic development and monetary stability in the country.
Without the license of Reserve Bank of India no one can deal in foreign exchange. Licenses are also required to open new branches or closure of branches. The external value of rupee is now determined by market forces. The Reserve Bank regulates and supervises the major part of the financial system. This became necessary since other countries Indonesia, Mauritius, Nepal, Pakistan and the Seychelles also called their currencies rupee.
There is Chairperson of the Board who is elected among the member. These regulatory powers relate to the licensing of banks and their branch expansion; liquidity of assets of the banks; management and methods of working of the banks; amalgamation, reconstruction and liquidation of banks; inspection of banks; etc. The Reserve Bank of India is now a government-owned bank and whatever be its profits, they go to the government treasury. All affairs of the Bank relating to note issue are conducted through its Issue Department. It also acts as the representative of Government in and represents the membership of India. The flow of credit is reduced by increasing this liquidity ratio and vice-versa. Traditional functions are those functions which every central bank of each nation performs all over the world.
The Deputy Governors of the Reserve Bank are ex-officio members. In 1st April 1935, Reserve Bank of India was set up. In order to meet the above objectives, in India, the Reserve Bank provides banks with the facility of opening accounts with itself. Promotion of Small Scale Industries Micro Small and Medium Enterprises are included in the priority sector. Shri Mahesh Kumar Jain Deputy Governor 14. The value of currency with public as on June 1991 was only to the extent of Rs. Member bank of the Asian Clearing Union 6.
On the volume of credit depends largely the level of employment and the level of prices in the country?. Since 1957, it maintains gold and foreign exchange reserves of Rs. It publishes periodically an analytical account of the operations of joint stock and co-operative banks. This department will also perform the duties of developing and monitoring the instruments of the money market and also monitoring the government securities and foreign money markets. It takes up the responsibility of investment of the surplus Government funds.
The general supervision and direction of the affairs of the Reserve Bank is entrusted with Central Board of Directors. The Reserve Bank of India performs all these functions for the Central and State Governments in India. It issues notes of every denomination, except one-rupee note and coins and small coins, through the Issue Department of the Bank. Issue of Notes —The Reserve Bank has the monopoly for printing the currency notes in the country. It includes interest rate, inflation, savings and investments etc. Varying reserve ratios — The reserve ratio determines the reserve requirements that banks are liable to maintain with the central bank. In order to facilitate a smooth inter-bank transfer of funds, or to make payments and to receive funds on their behalf, banks need a common banker.
In view of the importance of credit control, it is discussed in detail below in a separate section. It not only issues currency but also exchanges or destroys currency and coins not fit for circulation. The Central Office of the Reserve Bank was initially established in Kolkata, Bengal, but was permanently moved to Mumbai in 1937. The fundamental object of the Reserve Bank of India is to discharge purely central banking functions in the Indian money market, i. S Dollar close to each other.