CENTRAL BANK

Department of Management studiesSAKEC

Economic Environment of Business

Semester II Prof. Sanchita Chandra

2008-2009

NIKHIL K. 25

JITESH L.

26

ARCHANA L. 27

KASHYAP M. 28

SAGAR M. 29

ISHA M. 30

GROUP 5

INTRODUCTIONA universal monetary institute in modern

times

Constitutes the apex of the money structure of an economy.

Acts as the leader of the money market .

Supervises, controls and regulates the activities of commercial banks.

CENTRAL BANKS

India Reserve Bank of India.

U.S.A. Federal Reserve bank.

U.K. Bank of England.

Pakistan Bank of Pakistan.

DEFINITION

“Institute charged with the responsibility of managing the expansion and contraction of the volume of money in the interest of the general public welfare.”

IMPORTANCE !!!!To control credit.

To issue Paper currency.

To iron out economic crisis.

To implement Monetary and financial Policies.

ESTABLISHMENT OF RBI

Established in April 1935 with a share capital of Rs. 5 crores.

Nationalized in the year 1949. Initially established in Calcutta but

permanently moved to Mumbai in 1937.

FUNCTIONS OF CENTRAL BANK

MONETARY NON-MONETARY

Issue of Currency Notes

Bankers to Government

Banker’s BankCredit ControllerCustodian of Forex

Reserves

Bank’s SupervisionDevelopment

FunctionsData CollectionResearchClearness

CREDIT CONTROL MEASURES

GENERAL CREDIT CONTROLS SELECTIVE CREDIT CONTROLS

Bank RateOpen market

operationsCash Reserve RatioStatutory Liquidity

Ratio

Ceiling on CreditMargin

RequirementsDirectivesMoral Suasion

CURRENT SCENARIOCRR 5%

SLR 24%

Repo Rate 5.5%

Reverse Repo Rate 4%

Inflation 3.92%

RECESSION?

A decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year. A recession is also preceded by several quarters of slowing down.

CAUSES & EFFECTSCausesSlow down of normal Economic Cycle.Consumers lose confidence in growth.

EffectsDecreased demand for goods and services.Stock Market tumbles.

RBI IN RECESSIONCRR cut to 5% Repo rate cut to 5.5%Reverse Repo rate cut to 4%Short-term lending and borrowing rates

cutSlashed tax ratesInjection of MoneyOpening up new borrowing channels for

banksGovernment hikes its spending

RBI HELPING CORPORATE SECTORRestructuring of NPA’S

Diamond industry

Aviation Sector

NBFC’s , Mutual Funds and Banks

Real estate.

FEDERAL RESERVE BANK

Central banking system of the United States.

Created in 1913 by the enactment of the Federal Reserve Act.

Mr.Ben Bernanke, current chairman of the Federal Reserve.

A quasi-public (government entity with private components) banking system.

Changes in Fed Funds rate & Discount rate

CURRENT SCENARIODate

Discount rate

Fed funds rate

Jan – July, 2007 6.25% 5.25%

Dec 11, 2007 4.75% 4.25%

April 30, 2008 2.25% 2.00%

October 29, 2008

1.25% 1.00%

January 16, 2009

0.25% 0.25%

FEDERAL BANK IN RECESSIONCuts Fed funds rates to 0.25%Cuts Discount rates to 0.25%$250-billion bailout package in Tax CutsHigh spending in Energy & Power A.I.G. sought a $85 billion lifelineTakeover of Fannie Mae and Freddie Mac$75-billion package unveiled by ObamaTALF, a program of $200 billion to support Asset-

backed SecuritiesTARP, a program of $700 billion to insure troubled

assetsTerm Auction Facility

CONCLUSIONoCentral Bank is not a Profit Hunting

Institution.Profit is its secondary objective.Its Primary function is to stimulate economic growth of the Country.

oIt reveals complete Transperancy, & Prudence in Nations Economy.

oSo it clearly Justifies the Need & Importance of The Central Bank.

THANK YOU !!!!