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Role of RBI in Financial Market: 1. Ensuring Stability and Growth of The Infrastructure

The Reserve Bank of India (RBI) plays several key roles in regulating and overseeing India's financial markets. As the central bank, the RBI works to ensure stability and growth of critical financial market infrastructure like payment systems, securities settlement systems, and derivatives markets. It supervises these systems, sets standards and regulations, and establishes organizations to manage risks. The RBI also influences money supply and interest rates to meet economic needs and manages currency stability through foreign exchange reserves. Overall, the RBI has become a crucial regulator in maintaining stability of India's financial system.

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Kunal Patil.22
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64 views

Role of RBI in Financial Market: 1. Ensuring Stability and Growth of The Infrastructure

The Reserve Bank of India (RBI) plays several key roles in regulating and overseeing India's financial markets. As the central bank, the RBI works to ensure stability and growth of critical financial market infrastructure like payment systems, securities settlement systems, and derivatives markets. It supervises these systems, sets standards and regulations, and establishes organizations to manage risks. The RBI also influences money supply and interest rates to meet economic needs and manages currency stability through foreign exchange reserves. Overall, the RBI has become a crucial regulator in maintaining stability of India's financial system.

Uploaded by

Kunal Patil.22
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Understanding the Role of RBI in Financial Market: In the current times while dealing

the RBI has been a hot topic. This is because everyone looks up to the RBI and awaits
economy once again. Today we take a look at the responsibilities and role of RBI in fina
the banker to the government plays in our financial system.

Reserve Bank of India (RBI) is the Central Bank of the country and so its roles differ from
was established in 1935 and was privately owned until 1949 post which it was fully own
greater responsibilities like ensuring credit supply, managing payment systems with the

Role of RBI in Financial Market


The RBI plays the following role when it comes to the financial markets of the country
1. Ensuring stability and Growth of the Infrastructure
The financial markets play a very important role in the financial system and very few ent
to ensure their stability, one of them being the RBI. Financial Market Infrastructure (FMI
institutions where the operator looks after the clearing, settling, recording payments, sec
The FMI includes PAyment Systems, Central Securities Depository, Securities Settleme
repositories(an entity that maintains electronic records of transaction data), etc.

It is very important that these functions work as smoothly as possible and have the right
channels that concentrate risks in the economy which if not managed properly can trans
address these problems, the RBI sets up organizations and committees to look after an
markets.
Some of these infrastructures include the Securities Settlement Systems (SSS), Real-T
Clearing Corporation of India Ltd (CCIL), Negotiated Dealing System- Order Matching (N
owned by the RBI and is an electronic order-driven trading system for govt securities. T
volume in government securities.
2. Ensuring the growth of Payment systems in India
The RBI oversees these payment infrastructures out in place in order to ensure its efficiency and safety of its participants

This is only possible because the RBI ensures that the payment and settlement systems
country.
3. Supervising the Payment and Settlement systems 
The RBI designates specific responsibilities to various other institutions it sets up in orde
supervised. The RBI also sets up the legal framework that governs these systems. For e
Settlement Systems Act, 2007).
This act empowers the RBI to set standards for the format of payment instructions, timin
The RBI is also given the power to access any information relating to the operation of an
where the payment system is operated, and carry out audits and inspections.
4. Regulating OTC Derivatives
The trade repository for Over-the-counter(OTC) derivatives are set up as required by th
frameworks i.e. the Reserve Bank of India Act, 1934, and  Forward Contracts (Regulatio
OTC derivatives here include interest rate swaps, forward rate agreements, foreign curr
foreign currency options, foreign currency-rupee options.
5. Other functions of the RBI
The RBI has the power to influence the supply of money by adjusting the deposits, rese
and interest rates that it charges commercial banks that wish to borrow money. These r
the requirements of the economy.
The RBI also plays an important role when in stabilizing the value of the Indian currency
reserves. Another important aspect that the RBI looks into is controlling its arch-nemesi
Closing Thoughts 
Today, we discussed the role of RBI in financial market. The RBI has evolved into one o
the country over the last 85 years. This can be seen even today where the RBI is looked
exposed to global and internal shocks.

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