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    Central Banking: I. Role of Central Bank

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    The document discusses the role and evolution of central banking. It outlines how central banks first emerged in Europe in the late 19th century and then spread globally in the early 20th century. Specifically, it examines the genesis and objectives of India's central bank, the Reserve Bank of India, which was established in 1934 and nationalized in 1949 to regulate banking, currency and credit in India.

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    Central Banking: I. Role of Central Bank

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    Manu
    89 views14 pages
    The document discusses the role and evolution of central banking. It outlines how central banks first emerged in Europe in the late 19th century and then spread globally in the early 20th century. Specifically, it examines the genesis and objectives of India's central bank, the Reserve Bank of India, which was established in 1934 and nationalized in 1949 to regulate banking, currency and credit in India.

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    The document discusses the role and evolution of central banking. It outlines how central banks first emerged in Europe in the late 19th century and then spread globally in the early 20th century. Specifically, it examines the genesis and objectives of India's central bank, the Reserve Bank of India, which was established in 1934 and nationalized in 1949 to regulate banking, currency and credit in India.

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    89 views14 pages

    Central Banking: I. Role of Central Bank

    Uploaded by

    Manu
    The document discusses the role and evolution of central banking. It outlines how central banks first emerged in Europe in the late 19th century and then spread globally in the early 20th century. Specifically, it examines the genesis and objectives of India's central bank, the Reserve Bank of India, which was established in 1934 and nationalized in 1949 to regulate banking, currency and credit in India.

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    of 14

    CENTRAL BANKING

    I. ROLE OF CENTRAL BANK

    A Central Bank is conceived as the apex


    institution in the financial system of an
    economy. According to one exponent
    (Will Rogers), a central bank is one of
    the three major inventions which have
    taken place since the beginning of
    civilization, the other two being the fire
    and the wheel.
    1
    ROLE OF CENTRAL BANK (Contd)

    While all may not agree to assign such an


    exalted place to the central bank, the latter is
    nevertheless recognized across the board
    as the key institution responsible to maintain
    and ensure orderly functioning of the
    financial system in any economy.

    2
    II. EVOLUTION OF CENTRAL
    BANKING
    1. By the end of the 19th century, almost
    every country in Europe had a Central
    Bank, though the conception of such an
    Institution was not clearly understood or
    articulated before the turn of the century.
    2. In the American Continent the process
    began after 1900. The Federal Reserve
    System was established in the U.S. in
    1913 and the Bank of Canada was set up
    in 1934.
    3
    EVOLUTION OF CENTRAL BANKING (Contd)
    3.The post war period, characterised by strong
    nationalism and state control over economic
    life of the community witnessed extensive
    additions to the list of Central Banks. A further
    fillip to the formation of Central Banks was
    provided by the International Financial
    Conference held at Brussels in 1920. This
    conference resolved that all those countries
    which had not yet established a central bank
    should proceed to do as soon as possible, not
    only with a view to facilitating the restoration
    and maintenance of stability in their monetary
    and banking systems but also in the interest of
    4
    international cooperation.
    EVOLUTION OF CENTRAL
    BANKING (Contd.)
    4.The period of more than three decades
    immediately following Brussels
    conference saw a rapid growth of central
    banks in various countries of the world.
    Like the way the Brussels conference
    speeded up the establishment of Central
    Banks, the IMF too facilitated the
    development of Central Banks in the
    newly independent Afro-Asian and Latin5
    EVOLUTION OF CENTRAL
    BANKING (Contd.)
    The Central Banks in these countries
    were perceived as an agency to handle
    foreign exchange and IMF-related
    issues more effectively. As of now,
    every independent country has a central
    bank, more than half of which having
    been established after 1940.

    6
    III. GENESIS OF A CENTRAL
    BANK IN INDIA
    (RESERVE BANK OF INDIA)

    Presidency Banks (1866)

    Imperial Bank of India (through


    merger of 3 Presidency Banks in
    1921)

    7
    III. GENESIS OF A CENTRAL
    BANK IN INDIA (Contd.)
    Proposal of the Royal Commission on
    Indian Currency & Finance (Chairman:
    Hilton-Young) to set up a Reserve Bank
    as a private Shareholders Bank
    independent of Imperial Bank of India
    (1926)
    Central Banking Enquiry Committee
    (1931)s recommendation for
    establishment of Reserve Bank
    Abortive attempts at passing Reserve
    8
    Bank bills, 1927
    III. GENESIS OF A CENTRAL
    BANK IN INDIA (Contd)
    Reserve Bank of India Act, 1934
    (received assent of the Governor
    General on March 06, 1934)

    Constitution of the Reserve Bank India


    (April 01, 1935) as a shareholders
    bank with a share capital of Rs 5 crore
    divided into 5 lakh fully paid-up share
    of Rs 100 each.
    9
    III.GENESIS OF A CENTRAL
    BANK IN INDIA (Contd.)

    The entire share capital was owned by


    private individuals with the exception of
    shares of the nominal value of Rs 2.20
    lakh which were allotted to the Central
    Government for issue to the directors of
    the central board of the bank seeking to
    obtain the minimum share qualification.

    Nationalisation of the Reserve Bank of


    India (1949) 10
    IV. OBJECTIVES OF RESERVE
    BANK OF INDA
    The preamble to the Reserve Bank of
    India Act sets out the objectives of the
    Bank as to regulate the issue of Bank
    notes and the keeping of reserves with
    a view to securing monetary stability in
    India and generally to operate the
    currency and credit system of the
    country to its advantage.
    11
    V. FUNCTIONS OF RESERVE
    BANK OF INDIA
    1 To exercise the exclusive authority to
    issue bank notes

    2 To act as the Banker to the Government

    3 To function as Bankers Bank and the


    lender of the last resort

    12
    V. FUNCTIONS OF RESERVE
    BANK OF INDIA (Contd.)

    4 To promote the growth of the


    economy within the framework of the
    general economic policy of the
    government consistent with the need
    for maintenance of price stability

    5 To function as the regulator of the


    monetary system of the country. 13
    V. FUNCTIONS OF RESERVE
    BANK OF INDIA
    6 In terms of Section 54 of RBI Act, the
    Bank may maintain expert staff to study
    various aspects of rural credit and
    development and, in particular, may (a)
    tender expert guidance and assistance to
    NABARD & (b) conduct special studies in
    such areas as it may consider necessary
    to do so for promoting integrated rural
    development. 14

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