RBI Terms

Regulation of the Indian Banking System and issuing and supplying of the Indian rupee are the major functions of The Reserve Bank of India or RBI. It also promotes its economic development and manages its main payment systems. One of the specialised divisions of the RBI is the Bharatiya Reserve Bank Note Mudran. It is through this division that the Rbi mints Indian coins and banknotes. There is a 21-member central board of directors group that manages the overall direction of the RBI. This consists of two finance ministry representatives, four deputy governors, the governor himself, four directors representing local boards for Delhi, Kolkata, Chennai, and Mumbai, and ten government-nominated directors. 

What is RBI and how does it operate?

Our whole economy runs on the financial system regulated by the country’s central bank, the Reserve Bank of India. RBI manages the whole process of the Indian Banking System and is responsible for the flow of Indian currency throughout the country. It is important to have a pick on RBI being founded on April 1, 1935, based on The Reserve Bank of India Act, 1934, to respond to the economic troubles after the first world war. The ownership of RBI is under the Ministry of Finance, Government of India, with current reserves of above Rs.4,669,000 crores. The headquarters of RBI is located in Mumbai, Maharashtra.

Perceiving about RBI, the bank was formed to regulate the supply and issuance of the Indian rupee to maintain monetary stability, secure the country’s financial future, and resolve the financial challenges of the upcoming complex world while focusing on the growth of the nation.

RBI provides us with the benefits of effective supervision, money stability, credit regulation, and control over the entire banking system, which results in the smooth functioning of the economy. All the crucial decisions regarding the banking system are devised through the central bank, ensuring efficient working of the banks. It not only facilities the country with current financial aid but also works for future security by maintaining reserves. RBI services prove beneficiary bridging the gap between the need and supply of money, preventing any unbalancing of the financial system. Also, the government can circulate and manage domestic or international debts, investments or reserves with the help of the regulatory body.

RBI Divisions

• Bharatiya Reserve Bank Note Mudran private limited – established for balancing the discrepancies between requirement and availability of Indian notes

• Deposit Insurance and Credit Guarantee Corporation – insuring deposits and providing credit facilities to banks.

• Reserve Bank Information Technology – facilitating banking industry with its information technology and cyber security

• National Payments Corporation of India – with the purpose of settlement of financial transactions

• Indian Financial Technology and Allied Services – providing support to technology-related services to all financial institutions

RBI Services

RBI services include serving as a watchdog for the overall financial system, including banks, financial institutions and other non-banking financial institutions. It is a regulatory body and directs a broad framework of banking functions. The main RBI services provide valuable banking services, conserving depositors’ trust and public assurance. To carry out the government’s financial transactions effectively and efficiently, RBI serves the purpose of a banker and debt manager to the government. It also assists the central government in raising funds from the public by issuing bonds, which is an important RBI term and helps in the smooth functioning of the government’s financial system.

RBI Terms

While getting to know about RBI, there are various things that needs consideration. Some of the RBI terms include Company Finance, Cash Reserve Ratio, Capital Receipts, National Account Statistics, Capital Funds, Market Risk, Leverage and many more. There are a lot of RBI terms related to earnings, funds, investments, and asset securitisation that are of great importance and are used in the working or processing of RBI functions. 

Some Important Terminologies

• Repo Rate – Commercial banks borrow money from RBI at a certain rate called Repo rate.

• Cash Reserve Ratio – Ratio at which some amount of funds is kept by commercial banks reserves with RBI

• Capital Market – The market that deals with long term debts or investments.

• Money Market – It deals with short term funds, usually having a period of less than one year.

• Money Inflation – The situation in which the purchasing power of the consumer is reduced with an increase in money supply

• Bill of Exchange – It works as an instruction to the person for making the payment of a specified amount of money

• Insolvency – The situation in which the party is unable to pay its debts on time and becomes insolvent

• Credit Rating – A system to analyse the payback ability of an individual evaluating through its past dealings

About RBI being the only regulatory body of the country, it manages the foreign trade and helps in India’s development in the foreign exchange market. Also, the reserves are maintained in gold and forex, serving the same purpose for the country.

Conclusion

RBI or the Reserve Bank of India is referred to as head the manager of the country. It is called so because it handles the growth and economic stability of the country and manages all major monetary policies of India. We have well understood RBI and its divisions play in running the country. Also, we have discussed the major terminologies used in RBI. Many of them have been explained here, and a link has been added to all the RBI terms. So for more detailed information, you can refer to that.