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INDIAN FINANCIAL SYSTEM CIA-III

RBI AND IT’S CREDIT CONTROL MEASURES. INDIAN FINANCIAL SYSTEM CIA-III. CENTRAL BANK-MEANING AND DEFINITION ORIGIN, HISTORY AND STRUCTURE QUANTITATIVE AND QUALITATIVE MEASURES CONCLUSION. “ A central bank is a lender of last resort” -- Prof.Hawtry

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INDIAN FINANCIAL SYSTEM CIA-III

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  1. RBI AND IT’S CREDIT CONTROL MEASURES INDIAN FINANCIAL SYSTEMCIA-III

  2. CENTRAL BANK-MEANING AND DEFINITION • ORIGIN, HISTORY AND STRUCTURE • QUANTITATIVE AND QUALITATIVE MEASURES • CONCLUSION

  3. “A central bank is a lender of last resort” -- Prof.Hawtry “It is a bank of banker” -- Samuelson “Bank which has monopoly over note issue” -- Vera Smith “Central bank is the government’s bank” -- Sayers

  4. Commenced Operations on 1st April 1935 as per The Reserve Bank of India Act, 1934 (II of 1934) and Nationalise on 1st Jan 1949. • To regulate the issue of banknotes • To maintain reserves with a view to securing monetary stability and • To operate the credit and currency system of the country to its advantage.

  5. RESERVE BANK OF INDIA COMMERCIAL BANK CO OPERATIVE BANK -PUBLIC SECTOR BANK -STATE CO-OP BANK -PRIVATE SECTOR BANK -CENTRAL CO-OP BANK -REGIONAL RURAL BANK -PRIMARY CO-OP SOC

  6. To stabilise internal price level • To stabilise the rate of foreign exchange • To protect the outflow of gold • To control business cycles • To meet business needs • To have growth & stability

  7. BANK RATE:- -SECTION 49 OF THE RESERVE BANK OF INDIA ACT -”THE STANDARD RATE AT WHICH THE BANK IS PREPARED TO BUY OR DISCOUNT BILLS OF EXCHANGE OR OTHER COMMERCIAL PAPERS ELIGIBLE FOR PURCHASE UNDER THIS ACT.” -PACE SETTER TO OTHER MARKETS -CURRENT BANK RATE-6%

  8. VARIABLE RESERVE RATIO:- -SECTION 42(1) -DISPARITY BETWEEN DEMAND LIABILITIES AND TIME LIABILITIES -WHAT IS CRR? -CURRENT CRR-5%

  9. STATUTORY LIQUIDITY REQUIREMENTS:- -TO OFFSET THE IMPACT OF VARIABLE RESERVE RATIO -SECTION 24 -LIQUID ASSETS-CASH, GOLD AND UNENCUMBERED SECURITIES.

  10. SYSTEM OF DIFFERENTIAL RATES:- -SLAB BASIS -BASIC QUOTA TO A SPECIFIC PERCENTAGE OF STATUTORY REQUIREMENTS

  11. NET LIQUIDITY RATIO (N.L.R.):- -FORMULA -EVERY PERCENTAGE DROP IN THE RATIO, THE COST OF BORROWING FROM RBI ON THE ENTIRE AMOUNT WAS TO GO UP BY ½% -CURRENT N.L.R.

  12. OPEN MARKET OPERATIONS:- -PURCHASE AND SALE, BY CENTRAL BANK, OF A VARIETY OF ASSETS SUCH AS GOLD, GOVERNMENT SECURITIES, FOREIGN EXCHANGE AND EVEN COMPANY SHARES. -INSTRUMENTS OF MONETARY POLICY AND ALSO OF PUBLIC DEBT.

  13. MINIMUM MARGIN FOR LENDING AGAINST SPECIFIC SECURITIES:- -SINCE 1955 -RESTRICT ADVANCES AGAINST SPECIFIC SECURITIES -PADDY, RICE, PULSES, COTTON, TEXTILES.

  14. CEILING ON THE AMOUNT OF CREDIT FOR CERTAIN PURPOSE:- -CREDIT AUTHORIZATION SCHEME(CAS)

  15. DISCRIMINATORY RATES OF INTEREST ON CERTAIN TYPES OF ADVANCES • MORAL SUASION:- -PERSUASION -NO LEGAL COMPULSION

  16. DIRECT ACTION:- -PERIODIC LETTERS -DISCUSSIONS • PUBLICITY:- -CONFERENCE CONVENED BY THE GOVERNOR OF INDIA.

  17. Quantitative • Total Volume or Quantity of Money • It controls credit indirectly • Lenders are controlled not the borrowers • It is known as general credit control • Instruments used are bank rate, open market operations., CRR etc • Qualitative • Quality or use or purpose of credit • It controls credit directly • Lenders and borrowers both are influenced • It is known as selective credit control • Instruments are variations in market requlations, • Consumer credit regulation, direct action etc

  18. CENTRAL BANK PLAYS IMPORTANT ROLE IN ACHIEVING ECONOMIC GROWTH OF A DEVELOPING COUNTRY. • IT PROMOTES ECONOMIC GROWTH WITH STABILITY. • IT HELPS IN ATTAINING FULL EMPLOYMENT OF RESOURCES, IN OVERCOMING BALANCE OF PAYMENT DISEQUILIBRIUM & IN STABILIZING EXCHANGE RATES.

  19. THANK YOU

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