Role of Rbi

Topics: Bank, Monetary policy, Fractional-reserve banking Pages: 8 (2251 words) Published: June 19, 2013

Reserve bank of India is central bank of India which is functioning for different activities in Indian financial sector, their main intension is to stabilise the financial and monetary systems for growth. It regulates and supervises the banking industry, having authority of monetarism, currency issuer, banker to all banks, manages the foreign exchange, debt management to central government and developing leader of country...etc. some of the main activities we are going to analyze below are

RBI as regulator
Monetary policy
Basel norms and impact on Indian industry

Howe these typical concepts affect the Indian banking system is the main aim of the project.

Fundamentally, Indian financial system is supporting by banks, reserve bank of India (RBI) is playing the critical role of regulating and supervising such banks as well as ensuring the soundness and safety of banking system which leads to financial stability. As a regulator and supervisor, RBI ensures a frame work for operations and development of banking industry which is focusing for the conductive customer interests and financial stability of the country through certain preventive measures. RBI tools

For supervision and regulation RBI ensures some tools which are
On-site inspection
Off-site scrutiny which is tending to get reports from regulated entities
Thematic inspections, surveillance and periodic meetings
RBI’s regulatory role
A range of activities are comprised by the national financial regulator, they are
Monitoring governance
Prescribing capital requirements
Regulating interest rates
Setting prudential regulations to make sure solvency and liquidity of the banks
Ordering the lending to certain priority sectors of economy
Setting appropriate regulatory norms related to income recognition, asset classification, Provisioning, investment valuation, exposure limits and the like
Initiating new regulation

For instance let us apply for banks in India; licensing is an authority for banks given by RBI for banking business, such banks should have certain standards, operating plan, skilled management, bank’s ownership structure, anticipated financial conditions comprising capital. RBI interfere the governance of banks through their financial statements of periodical reports (either annual or monthly in a periodical manner). Order based capital requirements and corresponding interest rates fallowed by establishing regulations for prudential planning there by guiding all accounting statements for the valuation of investment along with updated regulations.

In these circumstances some challenges are going to face ahead, those are

For commercial banks, Basel III norms should have implemented for new risk management skills and improved capital planning
For cooperative banks in urban, targeting on profitability, skilled management and enhanced technology
For NBFC’s, focusing on involvement in financial system deepens by analyzing their roles and interconnections
For regional rural banks, developing the human and IT resources for enhancing their capabilities
For cooperative banks in rural, focusing to meet average prudential standards

Basel norms
Bank for international settlements (BIS) is the oldest international financial organization that was established in 1930. A Head quarter of BIS is residing in Basel, Switzerland. BIS had appointed a committee for supervision of banks comprising a set of agreements along with certain regulations and guidelines credit, market and operational risks, the main aim of BIS is to ensure sufficient capital on account to avoid obligations and unexpected losses.

Basel I
For the prevention of comprehensive risk exposures, BIS introduced Basel I which comprises strengthen the stability of international banking system and setting up a fair and consistent banking system internationally to decrease competitive inequality among the all central banks....
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