Functions of RBI Video Lecture | Business Economics for CA Foundation

so in this lecture I will discuss about
functions of RTA and by discussing
functions of valuation of the quarterly
banking terms making conceptual comment
so first function of important function
of re is issuance of currency issuance
of current this is the first function of
yet
and unless section 22 of RBI act and in
34th RBI has the sole authority to issue
currency notes which are also called as
bank notes and books and as I know
governor of RBI and accept one rupee
note showed by the Ministry of Finance
which is with the side of my integrity
so this is the case is issuance of
currencies of important topic important
point valid issues of currency since
1957 area is required to maintain gold
and foreign exchange reserve hole and
the foreign exchange foreign exchange
results of rupees to let go of value 200
close and out of this code of at least
value is 1 1 5 color in out of which at
least appease 115 curves should be in
gold home should be in or home and they
have
available to this concept this concept
as long as the minimum is a question
minimum reserve system this is the main
function of RBA now comes the second
function up again then cotton functional
banker to go our way act as a banker to
central dogma bargaining world even for
state government also how to that test
Bank ergo government because under
Section 20 under section 24 central
government and section called emoni for
state government for a second of RBI yet
1934 are we a transact government
business and manages public debt means
whenever there is mismatch between
mismatch whenever there is mismatch
between
message and expenditure it is nothing
but income income economy
whenever the mismatch between income and
expenditures then FBI towards the
necessary cash flow to both state and
central oh it is just a simple concept
like when our expenditures increased oil
income and all the time we face some
problem and we need money from our
friends from up and so it is just like
that when government comes in that
situation in that situation our day
provides the credit necessary - flow to
the central government all stable and
this phenomena this phenomena so Edison
has irritated who stated that government
is known as reception expenditure of RBA
for the cash flow I'll give the large
potential engagement now that is nice
between research and expenditures of
both the central on a second and this
phenomena is known as phase and means
advances is and means advances this
fortune of mine with a music under and
under this if the government can patrol
and ward off for maximum state
government in whistle or rock or fog for
maximum 14 days and central government
him with low order for maximum endless
and continue to live apart from that it
RDH other heavily that is language
reported that a reader you later
what is record shows the concept behind
this function of a banker to the
government
next comes controller
and supervisor of X all the commercial
and Cretaceous actor the controller and
supervisor all the commercial no in this
case are very responsible for
controlling overall operations of all
the commercial banks in India what are
the banks of lik sector banks private
sector net
foreign language
cooperative man
and Regional Rural Banks armies so these
are the types of men for which they has
the control and supervision and most of
the time question comes that what is
what are the two main acts which are
responsible which are used by RBA for
controlling and supervision of all the
commercial and the to act our first
women are VI yet a vis 1934 and second
one is banking regulation and banking
regulation at 1949 these are the two
main acts two main act which are
responsible for control and supervision
of all the commercial banks in
combination of both piece act of vehicle
cause the overall operations of facts
now comes the next function next another
very important function is formulator
formulator of monetary policy monetary
policy of
she's again very very important
functional at the end now what is this
about away from glades monetary policy
twice a year industry policy so twice
plus a home let me into makes fresh
quality monetary policy goes in here
dream sex monthly and it reviewed the
policy safe use monetary policy in every
quarter in every quarter in a recorder
in four days four times in here it
reviews and two times in is a formulate
monetary policy so what is the main
objective of monetary policy objectives
are objectives of mana triples here
first inflation control inflation what
is inflation inflation is nothing but
general increase of price with respect
to the previous e next second objective
is control on control and then credit
roll or you can get it and a third one
is interest rate control interest rate
so these are the three main objectives
of monetary policy session control and
roll on my credit in the second row and
when you combine these two it is again a
separate function which you know arpa-e
has main fabric function is credit
control so this is all about monetary
policy and objectives of monetary policy
now some of the tools used by RBI and
the monetary policy formulation and
monitoring tools what are the rules
first open market operations
now the question comes what is open
market operation open market operation
has nothing but buying and selling
buying and selling government securities
government securities by RBI in open
market in open market to control the
control supply of a what is the supply
of money and especially in banking
system so most of the time we didn't
understand what is the control of apply
of money and banking system how it will
control by buying and selling government
securities so the competitors and there
is excess supply of money in the market
or in the Tanami and then central max
sales girl insecurities for example this
is our being these are the different end
Thanks okay so here what are you my data
access of life is a huge amount of money
the amount of money in the banking
system are being used to sell government
securities in it will sell command
securities summon securities in exchange
of money change of money so all the
excess money which is tangent system has
had to give to the RBA and they have to
get the government's ability this is the
open market operation so whenever there
is excess supply of money in the market
and central government central lands are
we a same government securities thereby
sucking off excess liquidity from the
market and similarly when the liquid it
is a liquid it is nothing liquidity is
nothing but supply of money supply of
moving in the NAM you can't invest
whatever you can see
so whenever the liquidity
type means less money in the market when
RBI will that it's just labels when I
was it a liquidity less meat less money
in the market then it will buy back to
their insecurities and give the money to
the banking system so this is the main
concept of open market operation buying
and selling of normal securities and
thereby maintaining the supply of money
in the market this is the first tool
used under monetary policy now comes the
second one see our what it is cash
reserve ratio what is this all over the
main concept behind it is for example
just take it totally is are being either
of the banks to filmin okay
this is another thing this is your
anything just okay now what is this
casual ratio is all commercial then all
the commercial banks are required to
keep certain amount of it deposit in
cash with obvious means they have to
keep daily they have to keep daily
certain amount certain amount of it
daily deposits in cash in cash with RBI
and this person that is called Cash's
official means they have to keep certain
amount of its suppose it with currency
chests and currency chests will in turn
provided to the the - way back to the
RBA up now the question comes what is
why I have till the very top of column
features the logic behind this is are we
at the limited space limited office
space limited space to keep all the cash
all the assets and important documents
government securities of the pen now the
question comes that on daily basis how
are the 18 the CRR cash reserve ratio
demand with v himself
so for that purpose our Gail has a lined
currency chest in every district in
every city with regard to one particular
bank there are different entities okay
so on days is they have to keep the cash
reserve ratio money certain percentage
of money offered deposit with the
currency and currency just is nothing
but agent of our be airing it acts as
the agent of
so here currency just will maintain the
cash reserve ratio amount of the bank
and it will go back to the FBI
whenever are being hinted so cash is a
ratios nothing but certain amount of
certain amount of thanks deposit they
have to keep certain amount of its
deposits in cash specifically in cash
not in gold of securities with RBI so
what it will basically do is what are
the main objective of maintaining Ciera
is it ensures that the portion of banks
deposit totally risk-free both h3 means
in case of emergency it is nothing but a
forceful saving by tax force will famous
by man okay so it makes the bank deposit
totally risk-free in shinchon whenever
they catch crunch or any problem occurs
then every bank has its own fear among
at least owns here a amount ready to use
that site is it is the bank deposit
totally risk-free and secondly it
enables that IJ controls it could UT in
the system and they're like installation
means whenever there is excess again
whenever there is excess money in excess
liquidity excess liquidity in the
banking system or economic then it will
increase the CL Ramu
so that so that will make banks have to
keep that much amount of money Reza RBA
so it will suck so again sucks out
excess and controls the insulation so
again I will tell you the main decision
all commercial banks are required to
keep certain amount of deposit in cash
with RBA and this project is called
caches are ratios and it's ensure that a
portion of bank deposit is totally
risk-free and secondly it enables our
way control liquidity in the system and
they're like insulation now comes the
turtle SLR a statutory liquidity ratio
actually it is defined under section 24
- it of Banking Regulation Act 1949 now
water basically these are the vents
there's an commercial and so the concept
behind SLRs that banks in India are
required to maintain certain percentage
of their total of their total net demand
and time liabilities total net demand
and time liabilities in form of normal
duties and approval faculties such as
cold cash other approach abilities
precious metals or number so and they
have to keep this securities and a
specious metal certain percentage fill
themselves not with RBA so what a seller
does is again restrict the bank leverage
restrict the back leverage in pumping
more money into the economy by investing
a portion of their deposits in
government securities in government
securities human security
lishus method
shift measures such as gold and in cash
also okay and they have to keep these
securities preciate myself and approve
securities with themselves with
themselves not with RTA this is the main
difference and it is around the 22
mostly it is around 20 to 25 percent and
the percentage count is again regarding
total percentage of total net demand and
time liabilities now the question comes
what is this net demand and gain level
demand demand level T is nothing but
demand liability in one level before
bank is nothing but current current
account balance and saving levels
because they are demand accounts
how come means in case of current
account and saving account customer can
withdraw or cancel much money can
deposit money and again whenever they
demand so it is not restricted so this
is the demand liability for time and
time liability is nothing good f DS
takes deposit our DS gold securities
these are all these was all time life
time
okay so the portion of some of the
portion of this and this and in epsilon
capable of saving accounts balance is
not included current account only
current account and enter input and in
case of FL are some of the components
which include which banks have to
include maintaining SLR cash it hand
balance with RBI - Loraine net valence
net valence is current account not in
failing account current account and
investment in investment in government
securities across foreign government
recorded another of two figures and good
and other preciate okay these are the
main components that tank has to
maintain a statutory liquidity issue