Rbi and Its Roles

1. rbi and its Roles backwardness Bank of India ( rbi) Reserve Bank of India ( rbi) is the primaeval bank of India. It monitors, bodyulates and implements Indias fiscal policy. Established in the year 1935, run batted in was nationalized in the year 1949. Owned fully by the Government of India, Reserve Bank has 22 regional offices in various state heavy(p)s of India with its provide located in Mumbai. It has a majority stake in the dry land Bank of India. Role of run batted in RBI formulates the monetary policy, thus unfluctuatingization and supervising the economy of India. RBI is the supreme banking authority in India.It sets the guidelines harmonize to which the banking operations and financial systems within the country functions. i. Issuer of currency RBI is the furbish up authority for the issue of currency in India. Major currency is in the form of RBI notes, such as notes in the denominations of two, fin, ten, twenty, fifty, one hundred, five hundred, and one tho usand. RBI has two incisions the Issue department and Banking department. The issue department is dedicated to issuing currency. All the currency issued is the monetary liability of RBI that is backed by assets of equal value held by this department.Assets consist of gold, coin, bullion, remote securities, rupee coins, and the governments rupee securities. The department acquires these assets whenever required by issuing currency. The conditions governing the composition of these assets determine the nature of the currency measuring rod that prevails in India. The Banking department of RBI looks after the banking operations. It takes c be of the currency in circulation and its withdrawal from circulation. Issuing new currency is known as involution of currency and withdrawal of currency is known as contraction of currency. ii. Banker to the governmentRBI acts as banker, both(prenominal) to the central government and state governments. It manages all in all the banking transa ctions of the government involving the receipt and payment of money. In addition, RBI remits exchange and transacts some separate banking operations. RBI provides briefly-term credit to the central government. Such credit helps the government to sate any shortfalls in its receipts over its disbursements. RBI also provides short term credit to state governments as advances. RBI also manages all new issues of government loans, servicing the government debt outstanding, and nurturing the market for governments securities.RBI advises the government on banking and financial subjects, international finance, financing of five-year plans, mobilizing resources, and banking legislation. iii. Managing government securities Various financial institutions such as commercial banks atomic number 18 required by law to devote specified minimum proportions of their total assets/liabilities in government securities. RBI administers these autho sharpenments of institutions. The opposite respo nsibilities of RBI regarding these securities are to ensure * Smooth functioning of the market * pronto available to potential buyers * Easily available in large rime Undisturbed maturity-structure of interest governs because of excess or deficit come forth * Not subject to quick and huge fluctuations * Reasonable liquidness of coronations * uncorrupted reception of the new issues of government loans iv. Banker to other Banks The role of RBI as a banker to other banks is as fol embarrasseds * Holds some of the interchange reserves of banks * Lends silver for short period * Provides centralized alter and quick remittance facilities RBI has the authority to statutorily ensure that the scheduled commercial banks deposit a stipulated ratio of their total net liabilities. This ratio is known as cash reserve ratio CRR.However, banks jakes use these deposits to meet their temporary requirements for interbank clearing as the maintenance of CRR is calculated based on the average chemical equilibrium over a period. v. Controller of money supply and credit RBI has to regulate the claims of competing banks on money supply and credit. RBI also inescapably to meet the credit requirements of the rest of the banking system. RBI needs to ensure promotion of maximum output, and maintain price stability and a high rate of economic growth. To perform these functions effectively, RBI uses several control instruments such as * Open Market Operations Changes in statutory reserve requirements for banks * modify policies towards banks * Control over interest rate structure * Statutory liquidity ration of banks vi. Exchange manager and controller RBI manages exchange control, and represents India as a member of the international Monetary Fund IMF. According to contrary exchange regulations, all foreign exchange receipts, whether on account of exportation earnings, decoratement earnings, or capital receipts, whether of private or government accounts, mustiness be sold to RBI either directly or done authorized dealers. Most commercial banks are authorized dealers of RBI. ii. Publisher of monetary data and other data RBI maintains and provides all essential banking and other economic data, formulating and critically evaluating the economic policies in India. In order to perform this function, RBI collects, collates and publishes data regularly. Users tin can avail this data in the each week statements, the RBI monthly bulletin, annual report on currency and finance, and other diurnal publications. 2. Asset and Wealth Management vernacular ancestry, different types of mutual memory board and various products and services offered by mutual fund companies shared FundA mutual fund is a professionally managed Medium or fomite that pools money from many investors and invests it in stocks, bonds, short-term money market instruments and other securities. Mutual fund is managed by professional managers who reach deep acquaintance and understandin g of Stock Market, Bonds, money market. The combined holdings the mutual fund owns are known as its portfolio. Types of mutual fund Mutual Funds are of various types depending upon the following 1) On the basis of structure This includes open-ended property and close ended funds I.Open-ended funds Liquidity is the key feature of speech involved which means these funds are like Open concussion where investors can enter into or exit from an open-ended scheme any prison term at NAV (Net Asset Value) related prices. Open ended funds are touristy with investors because they operate in similar way to stock market where no maturity or lock-in period is involved. II. Close-ended funds A close-ended fund or scheme has a stipulated maturity period for eg. 5 7 years. The fund is open for subscription only during a specified period at the cadence of the launch of the scheme. localizeors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell th e units of the scheme on the stock exchange where the units are listed. In order to provide an exit route to the investors, some close-ended funds name the option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. 2) On the basis of asset kinsperson On the basis of Asset classes there can be comeliness scheme wherein you invest in shares, Debt or Income scheme wherein you can invest in govt. ecurities, balanced scheme wherein you can invest in both equities and fixed income securities. 3) On the basis of investment objectives thronement objectives can be crop scheme or Income scheme or Balanced scheme. Growth Scheme Income Scheme Balanced Scheme Aim To provide capital appreciation over medium to long term To provide regular and steady income to investors To provide both growth and income by periodically distributing a part of the income capital gains they earn Invests Invests a major part of their fund in equities Invest in fixed in come securities like bonds and corporate debentures. Invest in both bonds and shares 4) Other types A. Sector specific scheme Invest only in sector for eg. Infrastructure fund would invest in infrastructure companies. Sectoral funds carry a higher risk on with a higher potential to generate returns. This is because their fate moves with the sector in which they invest. Therefore if that sector performs well, they generate excellent returns. B. proponent scheme Index attempts to replicate a stock market superpower or as closely as possible by investing in the stocks that form that index in the very same proportion.So a NIFTY index fund would have the same 50 companies that make up bang-up in the same weightage. The aim of an index fund is to replicate the execution of instrument of that market index. So if the markets are rising, then your investment will rise with almost the same percentage and if it is falling, you will get similar cast out returns. The main advantage of inves ting in an index fund is the low Expense Ratio that is incurred in these funds as compared to other investments because it is passively managed funds. C. ELSS (Equity linked saving schemes)An Equity-linked saving scheme (ELSS) is a great investment option that offers the double benefits of Tax saving and capital Gains. Money pile up under ELSS is mainly invested in equity and equity related instruments. ELSS Schemes have 3 years Lock-in period. Because of this, fund manager can have portfolio of stocks that can outperform over a period of time. The best way to invest in ELSS is through Systematic Investment Plan (SIP). With SIP you can invest a small amount every month for a specific time period.