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CENTRAL BANKING

PRESENTATIONBY

S.DURGANANDA SWAMY

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CENTRAL BANKING

• COMMODITY MONEY---PRIOR TO 17TH

CENTURY

• ‘PROMISES TO PAY’ ACCEPTED AS

MONEY 500 YEARS BEFORE

• ORIGIN OF BANKING — GOLDSMITHS

• BANCA (BENCH) BANK

• FIAT MONEY/SOVEREIGN MONEY

• BOE-1694-MODERN CONCEPT OF

CENTRAL BANKING

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CENTRAL BANK POLICY

OBJECTIVES• TRADITIONALLY SINGLE OBJECTIVE-PRICE STABILITY

PURSUED BY BOE, ECB & BOJ

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CENTRAL BANK POLICY

OBJECTIVES• STABLE PRICES

• STABLE INTEREST RATES

• CREDIT FLOW &MAXIMUMEMPLOYMENT

• EXCHANGE RATE MGMT.

• FIN.STABILITY ASSUMEDSIGNIFICANCE AFTER FIN.CRISES OF1990s

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WHAT IS FINANCIAL

STABILITY?• ENSURING UNINTERRUPTED

FIN.TRANSACTIONS

• MAINTENANCE OF A LEVEL OFCONFIDENCE IN THE SYSTEM

AMONGST ALL PARTICIPANTS

• ABSENCE OF EXCESS VOLATILITYTHAT AFFECTS ECO.ACTIVITY

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RESERVE BANK OF INDIA

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RESERVE BANK OF INDIA

• APRIL 1, 1935

• ‘TO REGULATE THE ISSUE OF BANK

NOTES AND KEEPING RESERVESWITH A VIEW TO SECURING

MONETARY STABILITY IN INDIA

AND GENERALLY TO OPERATE THE

CURRENCY AND CREDIT SYSTEM OF

THE COUNTRY TO ITS ADVANTAGE’

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MONETARY POLICY

• TRANSMISSION OF POLICY

• CHANNELS — QUANTUM, INTEREST

RATE, EXCHANGE RATE, ASSET

PRICES• NOT MUTUALLY EXCLUSIVE

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PROCEDURES &

INSTRUMENTS

DIRECT INSTRUMENTS

• CASH & LIQUIDITY RESERVE

RATIOS• DIRECTED CREDIT

• ADMINISTERED INTEREST RATES

• LIQUIDITY SUPPORT

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PROCEDURES &

INSTRUMENTS

• INDIRECT INSTRUMENTS

• OPEN MARKET OPERATIONS —

BUYING AND SELLING SECURITIES,REPO, REFINANCE, DISCOUNT

WINDOW

• LIQUIDITY ADJUSTMENT FACILITY

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RBI-CURENCY AUTHORITY

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• STATUTORY POWERS-SECTION 22

• ASSET BACKING – SECTION 33

• GOLD & F.SECURITIES 200 CR • GOLD 115 CR

• BIG CHANGE DUE TO REFORMS

• RUPEE SEC 95% TO 0.2%

• F.SECURITIES 3% TO 94%

• GOLD 6.8%

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• PRINTING OF NOTES

• ADMINISTRATIVE ARRANGEMETS

15 OFFICES, 3 SUB-OFFICES, 4300CURRENCY CHESTS & 3600 SMALL

COIN DEPOTS

• SET PROCEDURES FOR EXCHANGEOF SOILED & DAMAGED NOTES

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RBI-BANKER TO GOVT.

• BANKER TO GOI-Sns. 20 & 21

• TO STATE GOVTs. Sn.21 A

• FULL RANGE OF BANKINGSERVICES

• PRINCIPAL ACCOUNTS AT NAGPUR

• AGENTS OF RBI FOR GOVT.BUSINESS

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RBI-BANKER TO GOVT.

• MANAGEMENT OF PUBLIC DEBT-

ADVISE ON TIMING & TERMS OF

ISSUE• BORROWING AT MARKET RATES

• DEVELOPMENT OF DEBT MARKET

• PRIMARY DEALERS, INSTITUTIONALINVESTORS

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FOREIGN EXCHANGE

MANAGEMENT

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FOREIGN EXCHANGE

MANAGEMENT

• CUSTODIAN OF FOREX RESERVES

• FOREX RATE MANAGEMENT

• LINKED TO POUND STERLING

• IMF-PAR VALUES-GOLDCONVERTIBILITY @$35/OZ UPTO ’71

• 1975-BASKET OF CURRENCIES

• MARCH 1993-MARKET DETERMINEDRATES

• ORDERLY MARKETS----FERA TO FEMA

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REGULATION OF BANKS

• AIM-PROTECTION OF DEPOSITORS’

INTERESTS AND STABILITY OF

FINANCIAL SECTOR

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REGULATION OF BANKS

• BANKING REGULATION ACT, 1949,RBI ACT, 1934, SBI ACT, 1955,BANKING COMPANIES ACT, 1970,

RRBs ACT, 1976 ETC.,

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REGULATION OF BANKS

• LICENSING & BRANCH EXPANSION

• LIQUIDITY OF ASSETS

• MANAGEMENT-FIT & PROPER

• PRUDENTIAL NORMS• EXPOSURE LIMITS, TRANSPARANCY

• DISCLOSURE NORMS

• RISK MANAGEMENT, CAPITAL

ADEQUACY (BASEL)• CONSOLIDATION-AMALGAMATION,

LIQUIDATION

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SUPERVISION OF BANKS

• INSPECTIONS SINCE 1949

• COVERING ALL ASPECTS OF BANKS’

WORKING• OFF-SITE SURVEILLANCE-

-IN-HOUSE MONITORING THRU

REPORTS

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SUPERVISION OF BANKS-

NEW STRATEGY

• ON-SITE INSPECTIONS — CAMELS

• BIG TICKET LOANS-APPRAISAL, POST-SANCTION MONITORING

• ASSET CLASSIFICATION, IRAC NORMS,EXPOSURES, PROVISIONING

• ALM, PROFITABILITY

• INTERNAL CONTROL SYSTEMS

• MANAGEMENT, MIS• RISK MANAGEMENT SET UP

• AUDITS

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REGULATION & SUPERVISION OF

FINANCIAL SYSTEM

• URBAN CO-OP BANKS & NON-BANKING FINANCIAL COMPANIES

• PRIMARY DEALERS IN SECURITYMKT

• AUTHORISED DEALERS IN FOREX &MONEY CHANGERS

• NABARD, EXIM BANK, NHB,SIDBI,IIBI

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PRUDENTIAL REGULATION -RBI

• EASING OF CRR/SLR PRESCRIPTIONS

• FREEDOM IN LENDING & INT.RATES

• CAPITAL ADEQUACY, INCOME

RECOGNITION, ASSET CLASSIFICATION,PROVISIONING

• NPA MANAGEMENT, CDR, DRT,

LOK ADALATS• EXPOSURE NORMS, DISCLOSURE NORMS

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REGULATION……

• CONSOLIDATION/MERGERS/ACQUISITION

• WELL-DIVERSIFIED OWNERSHIP

• CORPORTAE GOVERNANCE

• ANTI-MONEY LAUNDERING

• CUSTOMER SERVICE

• ADOPTING INTERNATIONAL BEST

PRACTICES

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DEVELOPMENTAL ROLE

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DEVELOPMENTAL ROLE

• CO-OPERATIVE STRUCTURE, RURAL

CREDIT — NABARD

• LEAD BANK SCHEME• SERVICE AREA APPROACH

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INDUSTRIAL CREDIT & EXPORT

CREDIT---IFCI, IDBI, EXIM

INDUSTRIAL CREDIT & EXPORT

CREDIT---IFCI, IDBI, EXIM

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• HOUSING---NHB

• DEPOSIT INSURANCE — DICGC

• PAYMENT & SETTLEMENT SYSTEM

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• THANK YOU & BEST WISHES

RBI-

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