The Reserve Bank of India prints notes of all denominations except 1 rupee and that’s because the one rupee note is issued by the Indian Ministry of Finance. The issue and printing of currency notes in India are regulated under the Minimum Reserve System (MRS). As per the MRS, the Reserve Bank of India keeps a reserve asset of Rs 200 crore out of which INR 120 crore would be in form of Gold and the rest in the form of foreign currency.
- Banks will provide exchange facility for these notes until further communication.
- In 1998, there were in all 860 clearing houses in operation of which 14 were run by RBI, 578 by SBI and others by public sector banks.
- In what ways does the Reserve Bank of India supervise the functioning of banks ?
- For this purpose banking system include accounts maintained with commercial banks, co- operative banks and RRBs.
Issue Currency Notes
RBI presently conducts inspection of commercial banks, Development Financial Institutions like IDBI, NABARD, etc. Urban Co- operative Banks and non banking financial companies like Lease Financing Companies, Loan Companies. In India RBI acts as the clearing house for settlement of banking transactions. This function of clearing house enables the other banks to settle their interbank claims easily. Where the RBI has no offices of its own, the function of clearing house is carried out in the premises of the State Bank of India. The entire clearing house operations carried on by RBI are computerized.
Regulator and supervisor of the financial system
Thus, supervisory functions of the RBI have helped a great deal in improving the standard of banking in India. The design, form and material of bank note are approved by Central Government on the recommendations of Central Board of the RBI. However, on recommendation of the Central Board, the Central Government may declare any series of bank notes of any denomination as not to be a legal tender.
Indian Financial Technology and Allied Services
Every bank has to get licence from the Reserve Bank of India to do banking business within India. The licence can be cancelled by the Reserve Bank if 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. According to the Banking Regulation Act of 1949, the Reserve Bank of India can ask any particular bank or the whole banking system not to lend to particular groups or persons on the basis of certain types of securities. Since 1956, selective controls of credit are increasingly being used by the Reserve Bank. By an amendment of 1962, the distinction between demand and time liabilities was abolished and banks have been asked to keep cash reserves equal to 3 percent of their aggregate deposit liabilities.
The issue function of bank notes is performed by the Issue Department, which is separated and kept wholly distinct from Banking Department. (b) To keep reserves with a view to securing monetary stability in India. As the Government’s banker, the RBI provides short-term credit to the Government of India. This short-term credit is obtainable through the sale of treasury bills.
There is a separate route for clearing high value cheques of Rs.1.00 lakh and above. Cheques drawn on banks in metropolitan cities are cleared on the same day. However, due to higher cost of printing small denomination notes these denominations are now coincides and issued by Government.
The RBI must navigate the challenges posed by global economic uncertainties, such as geopolitical tensions and trade disputes. It must remain vigilant and be prepared to take appropriate measures to safeguard India’s financial stability and economic growth. The RBI is responsible for granting licenses and authorizations to banks and other financial institutions, ensuring that they operate within the prescribed regulatory framework. The RBI oversees the payment and settlement systems in India to ensure their safety and explain the function of rbi efficiency. It operates the Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) systems, which facilitate interbank transactions and fund transfers. In terms of Sections 35AA & 35AB of the Banking Regulation Act, 1949, the RBI has been specifically authorized to issue directions to banking companies for resolution of stressed assets.
The Reserve Bank has a separate Issue Department which is entrusted with the issue of currency notes. The assets and liabilities of the Issue Department are kept separate from those other Banking Department. Under section 22 of the Reserve Bank of India Act, the bank has the sole right to issue bank notes of all denominations. The distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent of the Government. The RBI lays down operational rules for NBFCs (Non-banking Financial Institutions).