RBI

Unit 3
 Introduction
• The Reserve Bank of India was established on April 1, 1935 in accordance with
the provisions of the Reserve Bank of India Act, 1934.

• The Central Office of the Reserve Bank was initially established in Kolkata but
was permanently moved to Mumbai in 1937.
• The Central Office is where the Governor sits and where policies are
formulated.
• Though originally privately owned, since nationalization in 1949, the Reserve
Bank is fully owned by the Government of India.
• Plays a critical role in managing India’s monetary and financial system, regulating
the country’s currency, and overseeing the functioning of the banking sector.
• The RBI's responsibilities have evolved over time, and today, it is at the forefront
of maintaining financial stability, managing inflation, and fostering economic
growth.
 Preamble
• The Preamble of the Reserve Bank of India describes the basic functions of the
Reserve Bank as:
• "to regulate the issue of Bank notes and keeping of reserves with a view to securing monetary
stability in India and generally to operate the currency and credit system of the country to its
advantage; to have a modern monetary policy framework to meet the challenge of an
increasingly complex economy, to maintain price stability while keeping in mind the objective
of growth."
 Organization of the RBI
• The RBI's organizational structure ensures efficient decision-making and
execution of policies.
• Central Board
• The Reserve Bank''s affairs are governed by a central board of
directors. The board is appointed by the Government of India in
keeping with the Reserve Bank of India Act.
• Appointed/nominated for a period of four years
• Constitution:
• Official Directors
• Full-time : Governor and not more than four Deputy
Governors
• Non-Official Directors
• Nominated by Government: ten Directors from various
fields and two government officials
• Others: four Directors - one each from four local boards
 Organization of the RBI
• Local Boards
• Constituted for Western Area, Eastern Area, Northern Area and Southern Area.
• Consist of five members each.
• Members appointed by the Central Government.
• Member shall hold office for a term of four years.

• Board for Financial Supervision

• The Board for Financial Supervision (BFS) was constituted in November 1994
as a committee of the Central Board of Directors of the Reserve Bank of India
under the Reserve Bank of India (Board for Financial Supervision)
Regulations, 1994.
• The BFS was set up to strengthen supervision and surveillance over the
financial system and providing sharper focus to supervisory policy and skills.
• The BFS exercises integrated supervision over commercial banks, financial
institutions and non-banking financial intermediaries. The Department of
Supervision assists and provides secretarial support to BFS.
 Acts administered by Reserve Bank of India
• Reserve Bank of India Act, 1934
• Public Debt Act, 1944/Government Securities Act, 2006
• Government Securities Regulations, 2007
• Banking Regulation Act, 1949
• Foreign Exchange Management Act, 1999
• Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (Chapter II)
• Credit Information Companies (Regulation) Act, 2005
• Payment and Settlement Systems Act, 2007
• Payment and Settlement Systems Act, 2007 As Amended up to 2019
• Payment and Settlement Systems Regulations, 2008 As Amended up to 2022
• Factoring Regulation Act, 2011
 Other relevant Acts
Administered by Reserve Bank of India
• Negotiable Instruments Act, 1881 • Regional Rural Banks Act, 1976
• Bankers' Books Evidence Act, 1891 • National Bank for Agriculture and Rural
• State Bank of India Act, 1955 Development Act, 1981
• National Housing Bank Act, 1987
• Companies Act, 1956/ Companies Act,
2013 • Recovery of Debts Due to Banks and Financial
• Securities Contract (Regulation) Act, 1956 Institutions Act, 1993
• Competition Act, 2002
• State Bank of India (Subsidiary Banks)
Act, 1959 • Indian Coinage Act, 2011 : Governs currency and
• Deposit Insurance and Credit Guarantee coins
Corporation Act, 1961 • Banking Secrecy Act
• Banking Companies (Acquisition and • The Industrial Development Bank (Transfer of
Transfer of Undertakings) Act, 1970 Undertaking and Repeal) Act, 2003
• Banking Companies (Acquisition and • The Industrial Finance Corporation (Transfer of
Transfer of Undertakings) Act, 1980 Undertaking and Repeal) Act, 1993
 Departments of RBI
• Consumer Education and • Department of Payment and • Foreign Exchange Department
Protection Department Settlement Systems • Human Resource Management
• Corporate Strategy and • Department of Regulation Department
Budget Department • Department of Statistics and • Inspection Department
• Department of Information Management • Internal Debt Management
Communication • Department of Supervision Department
• Department of Currency • Enforcement Department • International Department
Management
• Financial Inclusion and • Legal Department
• Department of Economic
Development Department • Monetary Policy Department
and Policy Research
• Financial Markets Operations
• Department of External • Premises Department
Department
Investments and Operations • Rajbhasha Department
• Financial Markets Regulation
• Department of Government • Risk Monitoring Department
Department
and Bank Accounts
• Financial Stability Department • Secretary's Department
• Department of Information
Technology • FinTech Department • Central Vigilance Cell
 Consumer Education and Protection Department
• The Consumer Education and Protection Department (CEPD), set up in 2006 as Customer
Service Department
• It frames policy guidelines for consumer protection and oversees the functioning of the 24
Offices of RBI Ombudsman (ORBIOs) and 32 Consumer Education and Protection Cells
(CEPCs).
• The major functions of CEPD include:
• Administering the Reserve Bank – Integrated Ombudsman Scheme (RB-IOS), 2021;
• Handling complaints regarding deficiencies in customer service in banks, received in RBI
through the Centralized Public Grievance Redress and Monitoring System (CPGRAMS)
portal of Government of India (GoI);
• Serving as the Secretariat to the Appellate Authority (AA) under the RB-IOS, 2021;
• Overseeing the grievance redress mechanism in respect of services rendered by various
offices/departments of RBI;
• Liaising with banks, Indian Banks' Association, ORBIOs and the regulatory departments of
RBI on matters relating to customer service and grievance redress, and providing policy
inputs;
• Creating consumer awareness and disseminating information relating to customer service and
grievance redress by banks and RBI;
• Compiling and publishing the Annual Report of the RB-IOS.
 Corporate Strategy and Budget Department
• Functions:
• Formulation of Bank's budget and monitoring thereof; Expenditure Rules
• Corporate Strategy – Monitoring of Implementation
• Formulate Business Continuity Policy and implement BCM throughout the
Bank
• Management of Superannuation Funds, actuarial valuation of liabilities
annually
• Work related to (i) Opening of offices and (ii) Institutes funded by the Bank
 Department of Currency Management
• The Department of Currency Management provides focused attention on the
management of currency notes and coins.
• The mandated functions of the Department include those related to:
• Management of currency notes, such as, design, printing and timely supply of
currency notes and withdrawal of currency notes and distribution of coins.
• Keeping circulation of counterfeit banknotes in check.
• Monitoring currency chests and availability of customer service to the public by
facilitating exchange of notes and coins.
• Under this mandate the Department undertakes the following functions:
• Planning, Research and Development
• Resource and Remittance Operations
• Currency Chest Operations
• Note Exchange Operations Reserve Bank of India (Note Refund) Rules
• Forged Notes Vigilance Operations
• Note Processing Operations
• Security Related Operations
 Department of Currency Management
• The Department of Currency Management provides focused attention on the
management of currency notes and coins.
• The mandated functions of the Department include those related to:
• Management of currency notes, such as, design, printing and timely supply of
currency notes and withdrawal of currency notes and distribution of coins.
• Keeping circulation of counterfeit banknotes in check.
• Monitoring currency chests and availability of customer service to the public by
facilitating exchange of notes and coins.
• Under this mandate the Department undertakes the following functions:
• Planning, Research and Development
• Resource and Remittance Operations
• Currency Chest Operations
• Note Exchange Operations Reserve Bank of India (Note Refund) Rules
• Forged Notes Vigilance Operations
• Note Processing Operations
• Security Related Operations
 Department of Economic and Policy Research
• A knowledge centre for macroeconomic policy oriented research, the Department of
Economic and Policy Research (DEPR) of the Reserve Bank is entrusted with the task
of providing research inputs and management information system (MIS) services for
policy-related decision making.
• The research agenda of the department primarily focuses on macroeconomic
challenges facing the Indian economy and covers multi-dimensional issues relating to
monetary policy, growth and inflation dynamics, financial markets, forecasting of
macroeconomic variables, banking sector, financial stability and external sector
management.
• The department is responsible for publishing the statutory reports of the Reserve
Bank, viz., the Annual Report and the Report on Trend and Progress of Banking in
India.
• Other publications of the department include State Finances: A Study of Budgets; the
Reserve Bank of India Bulletin; the Handbook of Statistics on Indian States; and RBI
Occasional Papers.
• The History of the Reserve Bank is also published by the department.
 Department of Economic and Policy Research
• The department is a source of primary statistics on monetary aggregates, balance of
payments and external debt, flow of funds, financial savings and state finances.
• The department has also been playing a crucial role in dissemination of long time
series data on a host of macroeconomic variables through print and electronic media.
• The department supports and encourages academic research across the country
through RBI Professorial Chairs, fellowships and sponsoring of research projects and
studies.
• The department also invites eminent researchers, scholars and policy makers from
around the world for talks, seminars and interactive sessions with RBI researchers, the
media and private sector analysts.
• The department organises four lectures - two in the memory of former Governors viz.,
Shri C.D. Deshmukh and Shri L.K. Jha; and two lectures in the memory of eminent
scholars viz., Professor P. R. Brahmananda and Professor Suresh Tendulkar.
Department of External Investments and Operations
• Functions
• Investment and management of the foreign currency and gold assets of the
Reserve Bank of India,
• Handling external transactions on behalf of Government of India (GOI)
including transactions relating to International Monetary Fund (IMF)
• All policy matters incidental to India's membership of the Asian Clearing
Union, and
• Other matters relating to gold policy, membership of the Bank for
International Settlements (BIS) and bilateral banking arrangements between
India and other countries like Russia, bilateral and South Asian Association for
Regional Cooperation(SAARC) currency swap arrangements
 Department of Government and Bank Accounts
• The Department of Government and Bank Accounts (DGBA) discharges the core
central banking function of being a banker to the government and banker to banks.
• Banker to Government
• maintains principal deposit accounts of Central and State Governments at Central Accounts Section
of the Reserve Bank of India, Nagpur
• carry out the day to day operations pertaining to reporting of Government transactions by agency
bank for fund settlement, at Banking Departments in Regional Offices.
• attends to matters relating to government business
• Monitors the integration of Central/State Government systems with Reserve Bank’s core banking
solution – e-Kuber – for direct collection of their e-receipts and making e-payments.
• Banker to banks
• issues instruction for opening of current accounts of banks with RBI which is used by the banks to
maintain statutorily prescribed cash reserves with RBI as well as to carry out inter-bank
transactions including interbank clearing settlements
• Others
• finalises the weekly statement of accounts and the annual financial statements (balance sheet and
income statement) of the Reserve Bank.
• The Department of Government and Bank Accounts (DGBA) also functions as the central office of
the Banking Departments at Regional Offices.
 Department of Payment and Settlement Systems
• The Department of Payment and Settlement Systems (DPSS), as a separate
department of the Reserve Bank, came into existence in March 2005.
• The functions of the Department include:
• Policy formulation in respect of payment and settlement systems
• Authorisation of payment and settlement systems/operators
• Regulation of payment and settlement systems
• Supervision and monitoring of payment and settlement systems
• Laying down standards for payment and settlement systems
• Designing, developing and integrating payment system projects of national
importance and / or facilitating such implementation
• Implementation of the international principles relating to payment systems as
enunciated by the Bank for International Settlements
 Financial Inclusion and Development Department
• Financial inclusion and development role of the Reserve Bank envisages
formulating policies to make credit available to productive sectors of the economy
including rural, and Micro, Small and Medium Enterprises (MSME) sectors.
• Promoting financial education and financial literacy are the current focus of the
function and encapsulates the renewed national focus on Financial Inclusion.
• The functions of the Department in brief are:
• To formulate macro policy to strengthen credit flow to the priority sectors
• To ensure that priority sector lending becomes a tool for banks to capture untapped business
opportunities among financially excluded sections of the society
• Ensuring access to an array of basic formal financial services and products and scaling up
financial awareness initiatives
• To step up credit flow to MSME sector and to provide a simpler and faster mechanism to
address the stress in the accounts of MSMEs
• To enhance flow of credit to individuals, Self Help Groups, persons belonging to SC/ST
category and Minority Communities through select Government Sponsored Schemes.
• To strengthen institutional arrangement, such as, state level bankers committee and Lead Bank
Scheme to facilitate these objectives
 Financial Markets Operations Department
• Carved out of the Financial Markets Department in November 2014, the Financial
Markets Operation Department (FMOD) has been entrusted with the
responsibility of carrying out market operations towards implementing the
Reserve Bank’s monetary policy objectives.
• The Department conducts operations in the money, government securities and
forex markets.
• As a part of this responsibility, FMOD also undertakes analysis of various market
segments and provides inputs to the top management for informed decision
making.
• The specific functions of FMOD include:
• Forex market operations in the onshore/offshore OTC and Exchange Traded Currency
Derivatives (ETCD) Segments
• Liquidity Adjustment Facility (LAF) operations (Repo, Reverse repo, Marginal
Standing Facility) including Open Market Operations (Outright sale/purchase of gilts)
under the extant liquidity management framework
• Special Market Operations (SMO) for specific purposes
 Financial Markets Operations Department
• Computation of 6-currency Nominal Effective Exchange Rate (NEER) and Real
Effective Exchange Rate (REER)
• Issuance and buyback of dated securities under Market Stabilisation Scheme
(MSS)
• Analysis of market developments
• Carrying out market-oriented research and analysis
• Estimation of liquidity requirement in the banking system
• Providing secretarial assistance to the Financial Markets Committee (FMC) of the
Reserve Bank
• Coordinating meetings of Early Warning Group (EWG) comprising financial
sector regulators and Ministry of Finance
• In addition, FMOD also attends to policy issues relating to various segments of
financial markets, fixation of Intra-Day Limits (IDL) for operations of Real Time
Gross Settlement Accounts and Liquidity Support(LS) facility limits.
 Financial Markets Regulation Department
• The Financial Markets Regulation Department (FMRD) has been set up on
November 3, 2014 with a mandate to regulate, develop and oversee financial
markets.
• The primary activities of the department include:
• Regulation and development of the money, government securities, foreign exchange markets
and related derivative markets;
• Regulation and supervision of financial benchmarks for interest rates and foreign exchange
markets;
• Development work related to financial market infrastructure for the money, government
securities, foreign exchange markets and related derivative markets, including trade repository
for over-the-counter(OTC) derivative transactions;
• Oversight / surveillance of the money, government securities, foreign exchange markets and
related derivative markets; and
• Secretarial support to the Technical Advisory Committee on Money, Government Securities
and Foreign Exchange Markets and RBI-SEBI Technical Committee on Interest Rate and
Currency Futures.
• In addition, a Market Intelligence Cell is proposed to be set up as part of FMRD.
 Financial Markets Regulation Department
• The Financial Markets Regulation Department (FMRD) has been set up on
November 3, 2014 with a mandate to regulate, develop and oversee financial
markets.
• The primary activities of the department include:
• Regulation and development of the money, government securities, foreign exchange markets
and related derivative markets;
• Regulation and supervision of financial benchmarks for interest rates and foreign exchange
markets;
• Development work related to financial market infrastructure for the money, government
securities, foreign exchange markets and related derivative markets, including trade repository
for over-the-counter(OTC) derivative transactions;
• Oversight / surveillance of the money, government securities, foreign exchange markets and
related derivative markets; and
• Secretarial support to the Technical Advisory Committee on Money, Government Securities
and Foreign Exchange Markets and RBI-SEBI Technical Committee on Interest Rate and
Currency Futures.
• In addition, a Market Intelligence Cell is proposed to be set up as part of FMRD.
Trends and Developments in RBI Policy and Guidelines - 2020
• Additional Liquidity Facility for National Housing Bank
• Special refinance facilities for a total amount of ₹65,000 crore were provided
to all India financial institutions (AIFIs)
• the National Bank for Agriculture and Rural Development (NABARD);
the Small Industries Development Bank of India (SIDBI); the National
Housing Bank (NHB); and EXIM Bank
• in order to support their role in meeting funding requirements of
various sectors.
• In order to shield the housing sector from liquidity disruptions under the
prevailing conditions and augment the flow of finance to the sector, it has been
decided to provide an additional standing liquidity facility (ASLF) of ₹5,000
crore to NHB – over and above ₹10,000 crore already provided – for
supporting housing finance companies (HFCs).
• The facility will be for a period of one year and will be charged at the RBI’s
repo rate.
Trends and Developments in RBI Policy and Guidelines - 2020
• Additional Liquidity Facility for NABARD
• Liquidity support of ₹25,000 crore was extended to the National Bank for
Agriculture and Rural Development (NABARD) in April 2020
• to back agricultural operations in the wake of challenges posed by
COVID-19 and in view of the brightening prospects of the farm sector,
• Also to improve its capacity to provide employment in these trying times,
and its backward and forward linkages.
• In order to ameliorate the stress being faced by smaller non-bank finance
companies (NBFCs) and micro-finance institutions in obtaining access to
liquidity, it has now been decided to provide an additional special liquidity
facility (ASLF) of ₹5,000 crore to NABARD for a period of one year at the
RBI’s policy repo rate for refinancing NBFC-MFIs and other smaller NBFCs
of asset size of ₹ 500 crore and less to support agriculture and allied activities
and the rural non-farm sector.
Trends and Developments in RBI Policy and Guidelines - 2020
• Introduction of a Flexible Automated Option for Managing CRR Balances
• The Reserve Bank will introduce an optional facility to provide banks more flexibility/discretion
to manage their day end cash reserve ratio (CRR) balances.
• Using this facility in e-Kuber system, banks will be able to set the amount (specific or range)
that they wish to keep as balance in their current account with RBI at the end of the day.
• Depending upon this pre-set amount, marginal standing facility (MSF) and reverse repo bids, as
the case may be, will be auto-generated at the end of the day.
• Restructuring of MSME debt
• Advances against Gold Ornaments and Jewelry
• Streamlining the Use of Multiple Operating Accounts by Large Borrowers
• Review of Priority Sector Lending Guidelines
• encourage and support environment friendly lending policies to help achieve Sustainable
Development Goals (SDGs)
• address the regional disparities in the flow of priority sector credit
• broadening the scope of PSL to include start-ups
• increasing the limits for renewable energy, including solar power and compressed bio gas plants
• increasing the targets for lending to ‘Small and Marginal Farmers’ and ‘Weaker Sections’
Trends and Developments in RBI Policy and Guidelines - 2020
• Scheme of Offline Retail Payments Using Cards and Mobile Devices
• proposed to allow a pilot scheme for small value payments in off-line mode with
built-in features for safeguarding interest of users, liability protection, etc.
• Increased transaction limit
• UPI Lite
• Auto top-up
• Online Dispute Resolution (ODR) for Digital Payments
• authorized PSOs shall be required to implement ODR systems for failed
transactions in their respective Payment Systems
• Positive Pay Mechanism for Cheques
• Creation of Reserve Bank Innovation Hub
Trends and Developments in RBI Policy and Guidelines - 2021
• Infusion of Capital in Overseas Branches and Subsidiaries of Banks and
Retention/Repatriation/Transfer of Profits by these entities
• External Commercial Borrowing (ECB)/Trade Credit (TC) - Transition from
LIBOR to Alternative Reference Rate (ARR)
• UPI for Feature Phone Users
• Simplification of Process Flow for Small Value Transactions over UPI
• Increase in UPI Transaction Limit for Specified Categories
Trends and Developments in RBI Policy and Guidelines - 2022
• SLR Holdings in Held to Maturity (HTM) category
• Enhancements to Unified Payments Interface (UPI) – Processing Mandates with
Single-Block-and-Multiple-Debits
• Expanding the Scope of Bharat Bill Payment System (BBPS) to include all
Payments and Collections
• Hedging of Gold Price Risk in the International Financial Services Centre (IFSC)
Trends and Developments in RBI Policy and Guidelines - 2023

• Review of the regulatory framework for hedging of foreign exchange

risks
• Framework for Connected Lending
• Regulatory Framework for Web-Aggregation of loan products
• Enhancing UPI transaction limit for Specified Categories
• e-Mandates for recurring online transactions – Enhancement of limit for
specified categories
• Establishment of Cloud Facility for the Financial Sector in India
• Setting up of Fintech Repository
Trends and Developments in RBI Policy and Guidelines - 2024

• Responsible Lending Conduct – Levy of Foreclosure Charges/ Pre-

payment Penalties on Loans
• Creation of Reserve Bank Climate Risk Information System (RB-CRIS)
• UPI - Enhancement of limits
• Increased transaction limit
• UPI123Pay
• UPI Lite
• Auto top-up
• Introduction of beneficiary account name look-up facility
Recent Trends, Changes, and Developments in RBI Structure,
Roles, and Policy Guidelines
• Strengthening the Monetary Policy Committee (MPC)
• Strengthening Regional Offices
• 2022 - Regulation of Digital Lending
• all loan disbursements and repayments in digital lending must occur directly between
borrowers and regulated financial entities
• 2021 - Scale-Based Regulation for NBFCs
• Regulation of Fintech and Payment Systems
• Policy Changes in Monetary Policy
• Dynamic Interest Rate Policies
• Introduction of Standing Deposit Facility (SDF)
• Guidelines in Financial Inclusion
• Green Finance Initiatives
• Financial Inclusion through Priority Sector Lending (PSL)