NTE Praxis: Banking System
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Reserve Bank of India (RBI)
The RBI was established by passing “trasfer of public ownership Act” in Sep-1948 under which the ownership of the bank was passed into the hands of the Government of India with effect from 1st january 1949.
RBI Functions
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Traditional functions
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Monopoly of currency notes issue
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Banker to the Government (both the central and state)
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Agent and advisor to the Government
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Banker to the bankers
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Acts as the clearing house of the country
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Lender of the last resort
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Custodian of the foreign exchange reserves
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Maintaining the external value of domestic currency
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Controller of forex and credit
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Ensures the internal value of the currency
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Publishes the Economic statistical data
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Fight against economic crisis and ensures stability of indian economy.
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Promotional functions
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Promotion of banking habit and expansion of banking systems.
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Provides refinance for export promotion
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Expansion of the facilities for the provision of the agricultural credit through NABARD
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Extension of the facilities for the small scale industries
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Helping the Co-operative sectors.
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Prescribe the minimum statutory requirement.
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Innovating the new banking business transactions.
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Supervisory functions
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Granting licence to Banks.
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Inspects and makes enquiry or determine position in respect of matters under various sections of RBI and Banking regulations
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Implements Deposit insurence scheme
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Periodical review of the work of the commercial banks
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Giving directives to commercial banks
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Control the non-banking finance corporation
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Ensuring the health of financial system through on-site and off-site verification.
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NBFCS (Non-Banking Financial Coorporations)
They are discribed by acronym: CAMELS
- C: Capital Adequacy requirement
- A: Asset quality like standerd ect. asset
- M: Management of the level and expertise and praisal capacity of management
- E: Earning capacity
- L: Liquidity, the level of liquidity and the components of liquidity are verified
- S: System and control exist in the NBFC, and its effectiveness.