Public Sector Banks:
State Bank of India and its Associates It was established after the nationalisation of Imperial bank of India in July, 1955. The nationalisation was done on the recommendations of Rural Credit Survey Committee. State Bank Group is comprised of State Bank of India and seven associates
Seven Associates of SBI are
- State Bank of Hyderabad
- State Bank of Indore
- State Bank of Saurashtra
- State Bank of Mysore
- State Bank of Travancore
- State Bank of Patiala
- State Bank of Bikaner & Jaipur
Presently there are only 19 nationalised banks(excluding SBI and associates) in the country.
Bank of Baroda is having the largest concentration of the branches abroad.
Regional Rural Banks(RRBs):
These were set up under the RRB act of 1976, as per the recommendations of working group on Rural Banks Chaired by M. Narsimham. These are working in every state of India except Sikkim and Goa. As on June 30, 2004, there were 196 RRBs. Since 1987, no new RRB has been started as per Kelkar Committee recommendations.
Scheduled Banks
Scheduled Banks are those banks which are included in the second schedule of the RBI Act, 1934
These banks shall fulfill following conditions:
- At least Rs.5 lakh as capital
- Any activity of the bank shall not be derogatory to the interest of the depositors.
Those banks which are not included in the second schedule, are called non-scheduled banks.
Reserve Bank of India:
It is the Central Bank of the country which was established on Apr 1, 1935 with a capital of Rs. 5 crore. It was nationalized on Jan 1, 1949 as govt. acquired the private share holdings.
Administration : 14 directors in Central Board of Directors besides the Governor,4 Deputy Governors and one Government official. The Governor is the Chairman of the board and Chief Executive of the Bank.
Governors :
- Ist Governor-Sir Smith (1935-37)
- Ist Indian Governor: CD Deshmukh (1948-49)
Functions
Issue of Notes: Regulates issue of bank notes above 1 rupee. It acts as the only source of legal tender money because the one rupee notes issued by Ministry of finance are also circulated through it. The Reserve Bank has adopted the Minimum reserve System for the note issue. Since 1957, it maintains gold and foreign exchange reserves of Rs. 200 crore, of which at least 115 crore should be in gold.
Banker to the Government: Acts as the banker, agent and advisor the Govt of India. It also manages the public debt for the Government.
Bankers Bank: The Reserve Bank Performs the same function for other banks as the other banks ordinarily perform for their customers.
Controller of Credit : The Reserve Bank undertakes the responsibility of controlling credits created by the commercial banks. To achieve this objective it makes extensive use of quantitative and qualitative techniques to control and regulate the credit effectively in the country.
Custodian of Foreign Reserves : For the purpose of keeping me foreign exchange rates stable, the Reserve Banks buys and sells the foreign currencies and also protects the country's foreign exchange funds.
It formulates and administers the monetary policy.
Acts as the agent of the government of Indian in respect to India's membership of the IMF and the World Bank. No personal accounts are maintained in RBI.
Bank Rate
It is deï¬ned as the standard rate at which RBI is prepared to buy or rediscount bills of exchange or other commercial papers eligible for purchase under RBI Act. It is generally raised during a period of inflation, which is called Dear Money Policy. It is lowered at the time of recession which is called Cheap Money Policy.
Open Market Operation (OMO):
As deï¬ned by RBI, under OMO, RBI purchase and sells the variety of assets such as foreign exchange, gold, government securities and even company shares. However, in practice OMO are conï¬ned to purchase and sale, of government securities only. RBI generally conduct these operations through banks and ï¬nancial institutions.
Cash Reserve Ratio (CRR)
Scheduled commercial banks are required to keep certain percentage of their total deposit (Net Demand and Time Liability) in the form of cash reserves with RBI.
Credit Squeeze or Tight Money Policy means increase in CRR.
Liberal Money Policy means decrease in CRR.
Statutory Liquidity Ratio (SLR)
It is the ratio of total deposits of a commercial bank which it has to keep with itself in the form of liquid assets.Liquid assets may consist of the following
- cash in hand
- reserves with RBI
- Excess reserves
- government securities
- other encumbered securities
- gold, etc.
Repo and Reverse Repo
With effect from Oct 29, 2004, RBI has switched over to international usage of the terms Repo and Reverse Repo. As per these terms, absorptions of liquidity by the RBI is called Reverse Repo and injection of liquidity is called Repo (earlier these were having the meaning reverse to this).
Related Questions
1. An essential attribute of inflation is : -- View Answer2. The best means of saving during inflation is to keep : -- View Answer
3. The period of high inflation and low economic growth is termed as : -- View Answer
4. Stagflation implies a case of : -- View Answer
5. Inflation can be contained by : -- View Answer
6. Deficit financing creates additional paper currency to fill the gap between
expenditure and revenue. This device aims at economic development but if it
fails, it generates : -- View Answer
7. A steady increase in the general level of prices as a result of excessive increase
in aggregate demand as compared to aggregate supply is termed as : -- View Answer
8. Which of the following are definite implications of a fall in inflation?
1. Prices have fallen
2. Prices are increasing more slowly than before
3. Food supply has increased
4. There is industrial stagnation -- View Answer
9. Among the causes of inflation can be listed :
1. slow growth in agricultural output
2. increasing non-development expenditure of Government
3. rapid population growth
4. rapid growth in costly imports -- View Answer
10. Among the remedies of inflation we cannot include : -- View Answer
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