Banking System of India
A bank is a financial institution that provides banking and other financial services to their customers. A bank generally provides banking services such as accepting deposits and providing loans.
There are also non-banking institutions that provide certain banking services.
The following are functions of bank:
• To provide security to the savings of customers.
• To control the supply of money and credit.
• To encourage public confidence in the working of the financial system increase savings speedily and efficiently.
• To avoid focus of financial powers in the hands of a few individuals and institutions.
• To set equal norms and conditions (i.e.; rate interest, period of lending etc) to all types of customers.
Reserve Bank of India (RBI)
Reserve Bank of India Bank of India is the Central Bank of our country. On the recommendation Hilton Young Commission, it was established on 1st April 1935 and in 1949 it was nationalized. Reserve Bank is the Central Bank of India. RBI (Reserve Bank of India) is constituted under RBI act 1934, and started functioning on 1st April 1949 with a capital of Rs.5 crore. Central Banking Functions are as under Issue of Paper Currency: The Reserve Bank is one nation’s sole note issuing authority. Indian Currency System: The Present Monetary system of India is based on inconvertible paper Currency and is managed by the Reserve Bank of India. The Present currency system is based on Minimum reserve system, of note issue. It was adopted in 1957 under the minimum reserve system, minimum of Gold and foreign securities to the extent of Rs.200 crore (of which Gold should be value Rs.115 crore) and the balance in rupees securities maintained.
Important Function of the Reserve Bank Of India
As Central Bank —————–Function————–As an ordinary Bank
Note issuing Authority —————————————Granting short-term loans
Banker of Government —————————————Recovering short-term loans
Banker’s Bank ————————————————–Buying/ Selling of bills
Collects and Publishes Banking Data ——————- Accepting Deposits
Custodian of Foreign Exchange Reserves———– Buying and selling of agricultural bills
Provision of Agricultural Credit ————————-Dealing with foreign Securities
Provision of industrial Credit—————————- Dealing with costly metals
Training Facilitation —————————————Dealing with banks of other countries
Controller of Credit
Clearing House Function
First Governor Of RBI:- Sir Osborne Smith
Current Governor Of RBI:- Dr. Raghuram Rajan.
Banker of the Government: The RBI deals as an agent of the Central and State Governments. It Performs various banking functions such as to accept deposits, taxes and make payments on Behalf of the government.
Banker of Bank and Lender of the Last Resort: RBI acts as a banker for all the commercial banks. All scheduled banks come under the direct control of RBI and follow the Rules and Regulation of RBI.
By performing the following functions, the RBI helps the member bank significantly.
• It acts as the lender of the last resort
• It is the custodian of cash reserves of commercial banks.