Functions of RBI

Indian-Rupees

Money

Anything that can be generally acceptable as payment for goods and services or settlement of debts is Money. It is the element of confidence that others will accept it as a payment is what gives the purchasing power to money.…

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Modernizing the monetary policy framework

Deciding on monetary policy framework by a committee is the practice of US and UK. However the objective of the monetary policy committee differs among the nations. In UK the objective is to stabilize the price mandated by the government.…

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Marginal Standing Facility

Marginal Standing Facility is a new Liquidity Adjustment Facility (LAF) window created by Reserve Bank of India in its credit policy of May 2011.  MSF is the rate at which the banks are able to borrow overnight funds from RBI…

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Reverse Repo Rate

Reverse repo rate is the rate of interest at which the RBI borrows funds from other banks in the short term . This is done by RBI selling government bonds / securities to banks with the commitment to buy them…

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Liquidity Adjustment Facility (LAF)

Liquidity Adjustment Facility (LAF) is the primary instrument of Reserve Bank of India for modulating liquidity and transmitting interest rate signals to the market. It refers to the difference between the two key rates viz. repo rate and reverse repo rate.…

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Open Market Operations

Open Market Operations refer to the purchase and sale of the Government securities (G-Secs) by RBI from / to market. The objective of Open Market Operations is to adjust the rupee liquidity conditions in the economy on a durable basis.…

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How RBI regulates Foreign Banks ?

On February 28, 2005, RBI had released a road map for the presence of foreign banks in India. This was the first ever documented policy on foreign banks in India. This road map suggested two phases. During the first phase…

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How RBI regulates Commercial Banks?

One of the most important functions of RBI is to work as regulator and supervisor of financial system. The financial system in India includes Commercial Banks, Regional Rural Banks, Local Area Banks, Cooperative Banks, Financial Institutions including Development Financial Institutions…

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RBI as Banker of Banks

RBI is bank of all banks in India. As a banker of banks, RBI: Enables smooth and swift clearing and settlements of inter-bank transactions Provides efficient means of funds transfer for all banks Enables banks to maintain their accounts with…

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Ways and Means Advances

RBI works as a banker to the State Governments by agreement. But there is no fixed minimum reserve balance for the State Governments. All state Governments are required to maintain a minimum reserve balance with RBI, but it depends upon the size…