Page 53 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Financial Institutions and Services

Notes within India, the licence can be cancelled by the Reserve Bank of certain stipulated conditions
are not fulfilled. Every bank will have to get the permission of the Reserve Bank before it can
open a new branch. Each scheduled bank must send a weekly return to the Reserve Bank showing,
in detail, its assets and liabilities. This power of the Bank to call for information is also intended
to give it effective control of the credit system. The Reserve Bank has also the power to inspect
the accounts of any commercial bank.
As supreme banking authority in the country, the Reserve Bank of India, therefore, has the
following powers:
1. It holds the cash reserves of all the scheduled banks.
2. It controls the credit operations of banks through quantitative and qualitative controls.
3. It controls the banking system through the system of licensing, inspection and calling for
information.
4. It acts as the lender of the last resort by providing rediscount facilities to scheduled banks.

Custodian of Foreign Reserves

The Reserve Bank of India has the responsibility to maintain the official rate of exchange.
According to the Reserve Bank of India Act of 1934, the Bank was required to buy and sell at fixed
rates any amount of sterling in lots of not less than 10,000. After India became a member of the
International Monetary Fund in 1946, the Reserve Bank has the responsibility of maintaining
fixed exchange rates with all other member countries of the I.M.F.
Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the custodian
of India's reserve of international currencies. Further, the RBI has the responsibility of
administering the exchange controls of the country.

Supervisory Functions

In addition to its traditional central banking functions, the Reserve bank has certain non-monetary
functions of the nature of supervision of banks and promotion of sound banking in India. The
Reserve Bank Act, 1934, and the Banking Regulation Act, 1949 have given the RBI wide powers
of supervision and control over commercial and co-operative banks, relating to licensing and
establishments, branch expansion, liquidity of their assets, management and methods of working,
amalgamation, reconstruction, and liquidation.

The supervisory functions of the RBI have helped a great deal in improving the standard of
banking in India to develop on sound lines and to improve the methods of their operation.

Notes The RBI is authorised to carry out periodical inspections of the banks and to call for
returns and necessary information from them. The nationalisation of 14 major Indian
scheduled banks in July 1969 has imposed new responsibilities on the RBI for directing the
growth of banking and credit policies towards more rapid development of the economy
and realisation of certain desired social objectives.

Publication of Data

The Reserve Bank of India collects data related to all economic matters such as finance, production,
balance of payments, prices etc. and are published in the form of reports, bulletins etc.

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