preamble of RBI elaborates its basic functions as below:

“..to regulate the issue of Bank Notes and keeping of reserves to secure monetary stability in India
and generally to operate the credit system and currency of the country to its advantage.”

Objectives of Reserve Bank of India

(RBI)
Some of its major objectives can be seen as follows:

 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.
 To maintain price stability while keeping in mind the
objective of growth.

Composition of the Reserve Bank of India

All the affairs of the RBI are regulated by a central board of directors. Following are the important
details regarding the structure of the Reserve Bank of India:

The board of RBI follows the guidelines of the RBI Act and is appointed by the government of India

The directors of RBI are either appointed or nominated for a term of four years

The official directors include: one full-time governor and not more than four deputy governors
Non-official Directors: 10 directors nominated by the government from miscellaneous sectors along
with 02 government officials

Others: 04 directors, one each from four regional boards

Functions of Reserve Bank of India

(RBI)
Major functions of the RBI can be seen under the following 2 heads:

Monetary Functions of RBI

Monetary Functions of the Reserve Bank of India include

those functions which are concerned with money and money
supply in the economy. Major functions coming in this category
include:

 Issuer of Bank Notes: The Reserve Bank of India has the

monopoly of issuing currency notes except for 1 Rupee note
and coins as under section 22 of the RBI Act.
o The 1 Rupee note and the coins of all
denominations are minted and issue by the
Government of India, not the RBI. But, they
are circulated by the RBI.
o The RBI issues currency notes under a system
called Minimum Reserve System.
o RBI issues currency of diff denominations based on
the recommendations made by central board of the
bank from time to time.
o Printing of currency is handled by Security printing
and Minting corporation of India Ltd (SPMCIL).
o RBI acts as agent for Central Govt for issue
distribution withdrawing of the coins.
 Banker to the Government: The RBI acts as a banking
agent and financial advisor to the Central as well as the
State Governments. In this capacity, the RBI:
o Manages Government accounts and treasuries.
o Keeps deposits of the Government.
o Lends to the Governments without any interest for
the short term
o Receives and pays money on behalf of various
government depts.
o Buys and sells Government Securities (G-Secs) on
the Government’s behalf.
o Gives monetary and financial advice to the
Governments.
o Maintains central and state govt funds like
consolidated funds, contingency funds, public
account.
o Also provides loans to central/state/UT governments
as a banker to the government.

 Bankers’ Bank: The RBI is the banker of all Scheduled

commercial banks (SCBs). In this capacity, it performs the
following functions:
o Keeps the reserves of banks in the form of Cash
Reserve Ratio (CRR) with itself.
o Provides financial assistance to banks against
mortgaged securities
o Rediscounts Bills of Exchange.
 Lender of Last Resort: It also acts as a lender of last
resort for the Scheduled Commercial Banks (SCBs). Usually,
banks and other financial institutions borrow and lend
among themselves to meet their financial needs. But, in
times of crisis, the SCBs approach the RBI to get financial
assistance.
 Custodian and Manager of Foreign Exchange
Reserves: In order to stabilize the external value of Indian
currency, the RBI maintains the reserves of foreign
currencies to stabilize the exchange rate.
 o This function of the RBI also helps promote
international trade.
o RBI deposits money with banks for international
settlement
o Deposits with foreign Commercial banks

 Controller of Credit or Money Supply: It uses its

monetary policy tools to control the volume of money supply
according to the economic situation of the nation.
o This helps in controlling inflation and deflation and
hence stabilizing the general price level in the
economy.

General Functions of RBI

The General Functions of the RBI include functions related to general

regulation and promotion of the banking system so as to maintain
the health and growth of the banking system in the country. Major
functions included in this category are as follows:

 Regulator of the Banks: The RBI Act of 1934 and the

Banking Regulation Act of 1949 entrust the RBI with the
powers to regulate the banks in the country. In this capacity,
the RBI performs functions such as:
o Licensing banks,
o Prescribing minimum requirements of paid-up capital
and reserves, etc.
o Supervises monetary policies, ensuring price
stability in the country with respect to the national
economic growth.

 Supervisory functions

RBI functions to protect the interest of depositors through an

effective regulatory framework.

Keeps an eye on the conduct of banking operations and

solvency of the banks and also ensuring financial stability.
  Promotional Functions: The RBI works towards the
promotion of the Indian Financial System through functions
such as
o Enabling expansion of the Commercial Banks in
terms of their branches in the country or aboard,
o Promoting baking habits of people,
o Promoting financial inclusion,
o Consumer education and protection,
o Promoting Digital India initiatives in financial sector,
etc.
o RBI provides training to banks and govt treasury
officers.

 Regulator of payment and settlement systems. - RBI

ensures upgradation of payment systems in the country.
 Developmental role- RBI focuses on issues and problems
arising and conducts research initiatives at national and
international levels. RBI publishes two reports every year in
order to check the progress of the banking sector. RBI creates
institutions to build financial infrastructure, ensuring credit to
the productive sector of the economy. Several schemes of RBI
include:

Priority sector lending for sectors like Agriculture, MSME,

education etc.

Lead bank scheme: introduced in 1969 which aims at

coordinating the activities of banks and other developmental
agencies with an objective to enhance the flow of bank finance
to priority sectors.

RBI Instruments of Monetary policy

Statutory Liquidity Ratio- a minimum percentage of deposits
that a commercial bank has to maintain in the form of liquid
cash, gold or other securities.

Bank Rate- is the interest rate at which a nation's central bank

lends money to domestic banks, often in the form of very
short-term loans
Repo Rate- is the interest rate at which the Reserve Bank of
India (RBI) loans money to commercial banks.

Reverse Repo Rate - The reverse repo rate is the rate at

which the RBI borrows funds from the country's commercial
banks.

Cash Reserve ratio

Powers of RBI

Inspect the bank and its books and accounts as u/s 35(1)

Examine on oath any director or other officer of the bank

Give directions to secure the proper management of the bank

Direct special audit of the bank u/s 30

Direct the bank to initiate insolvency resolution process in

respect of a default under the provisions of the IBC 2016.

Power to determine policies u/s 21

Issuing licenses to the banking companies u/s 22

PROCEDURE AND FUNCTIONING OF OPENING BANK A/Cs

BY DIFFERENT PERSONS

TYPES of bank Accounts

Savings account – A savings account can be defined as a
deposit account held at a bank or financial institution, allowing
customers to save money while earning interest. Savings a/c
can be opened either by an individual jointly or by two
individuals with a prime object of saving money. It can be
withdrawn when ever needed. Must be an Indian national, but
in few cases where the indibidual stays in a country for long
due to work or business then he can open a savings account.

No limit of the number of times the account holder can deposit

money in the account. However, there is a restriction on the
number of times money can be withdrawn by the account
holder. The rate of interest varies from 4% to 6% per annum

No minimum balance required to be maintained.

Internet bank service is provided

Account holders are provided with an ATM/ Debit/ Rupay Card

Savings bank account is further categorized as Basic Savings

Bank Deposit (BSBDA) and Basic Savings Bank Deposit
Accounts Small (BSBDS)

Current account - Current Account is the second type of bank

a/c. such an account is not used f0or the purpose of savings. It
is only opened by businessman who have larger number of
general transactions with the banking organization.

Apart from businessmen, current bank accounts are opened by

associations, companies, institutions, religious institutions, etc.

There is no fixed number of times that the current bank

account holders can deposit or withdraw money from it.

Internet banking feature is available.

It does not have any fixed maturity

Overdraft facility is provided

There is no rate of interest paid on current bank accounts

 Fixed deposit account – FD a/c can be opened by customers
in any public or private sector bank. It provides investors a
higher rate of interest than regular savings account on the
given maturity date.

It is a one-time deposit and take away account.

The account holder needs to deposit a fixed amount of funds

for a fixed period of time.

The amount deposited in a fixed deposit account is

withdrawable just once and not anytime as per the account
holders’ requirements.

A certain amount of interest is paid on the fixed deposit

account

The rate of interest of a fixed deposit account depends on the

amount deposited and the time duration for which the amount
is deposited.

The bank is liable to repay the full amount deposited in the FD

before the maturity date.

Recurring deposit account - Recurring Deposit or RD

account is a type of account in which the account holder
is required to deposit a fixed amount of money every
month till

the time it reaches the fixed maturity date. The

account is an investment tool that encourages

people to make regular deposits and receive decent

returns on their investment.

DEMAT account

NRI account

DEBT RECOVERY TRIBUNAL

 Section 17 of the RDDBFI Act vests the authority with DRT to
entertain applications from banks and financial institutions for
recovery of debts which are due to such banks and financial
institutions. Section 18 of the Act bars all other Courts from the
adjudication of matters relating to debt recovery apart from
the Supreme Court and High Court, exercising jurisdiction
under Article 226 and 227 of the Constitution.

o The Debt Recovery Tribunal (DRT) is established to settle cases to restore the
unpaid amounts of the NPAs (Non Performing Assets). The Banks declare
these as per RBI guidelines.
o Under Section 4 of the Recovery of Debt and Bankruptcy Act-1993, the DRT
shall have only one member (called Presiding Officer).
o The notification of the Central Government shall appoint him.
o The Presiding Officer of one Tribunal can also preside over other
Tribunals if the Central Government authorizes it.
o The Presiding Officer will have a term of 5 years or till the age of 65
years, whichever is earlier. He shall be eligible for reappointment.
o He should be qualified enough to be the District Judge.
o For cases of recovery of debt greater than 20 Lakh Rs, Banks, and Financial
Institutions can approach the DRT.
o For amounts lower than this, Banks and Financial Institutions approach
the Civil Courts.
o DRT and DRAT need to maintain the Principles of Natural Justice.
o However, they can regulate their own procedures. For this, they are not
bound by the CPC (Civil Procedure Code) provisions.
o One does not need a degree in Law to argue cases before the DRT.
o DRTs are mandated to resolve the cases within 6 months.
o The appeals against the orders passed by DRT can be made before a
DRAT within 45 days of such judgment.
o In the case of the SARFAESI Act, the time duration to dispose of the
cases is 60 days to 4 months.
o The appeals before the Appellate Tribunal (DRAT) shall be disposed of
within 6 months from the receiving date.
o Before approaching the DRAT against the order of DRT, the aggrieved party
needs to deposit 75% of the amount fixed by the order.
o The Centre can appoint one or more Recovery Officers as an employee of the
Tribunal.
o They will discharge their duties under the superintendence of the
Presiding Officer of the DRT.

Powers and Functions of Debt Recovery

Tribunal
 The Debt Recovery Tribunal enforces the RDB Act, 1993, and the
SARFAESI ACT, 2002.
  The DRT has to resolve the claim within six months. An appeal
against the order of the DRT can be made to the DRAT within 45
days of the judgment.
 DRTs are empowered to pass comprehensive orders that can travel
beyond civil procedures to render complete justice. They can also
hear cross-suit counterclaims and allow set-offs.
 However, it cannot listen to claims of damages, deficiency of
service, breach of contract, or criminal negligence on the lender’s
part.
 DRTs have the power to examine their own decisions. They can also
hear appeals against orders passed by their Recovery Officers.

As per Section 22 (2) of the RDDBFI Act, 1993 DRT has the following
powers:
 summoning and enforcing the attendance of any person and
examining him on oath;
 requiring the discovery and production of documents;
 receiving evidence on affidavits;
 issuing commissions for the examination of witnesses or documents;
 reviewing its decisions;
 dismissing an application for default or deciding it ex parte;
 setting aside any order of dismissal of any application for default or
any order passed by it ex parte;
 any other matter which may be prescribed.

DRT Process