Structure and Function of of Indian Financial System

• Financial System is a set of institutional arrangements through which financial surpluses in the economy are mobilised from surplus units and transferred to deficit spenders.

• The institutional arrangements include all conditions and mechanisms governing the production, distribution, exchange and holding of financial assets or instruments of all kinds and the organisations as well as the manner of operations of financial markets and institutions of all descriptions.

RBI (RESERVE BANK OF INDIA)

INTRODUCTION

It is the central Bank of India Established in 1st April 1935 under the “the Reserve Bank of

India Act”.

Its head quarter is in Mumbai (Maharshtra).

It has 22 Regional offices most of them in state capital.

Brief history

• It was set up on the recommendations of the Hilton young commission.

• It was started as share - Holders Bank with a paid up capital of 5 crores.

• Initially it was located in Kolkata.

• It moved to Mumbai in 1937.

• Initially it was Privately Owned.

• Since the Nationalization in 1949, the Reserve Bank is fully Owned by the Government of India.

RBI GOVERNOR’S

Since its establishment in 1935 by the British colonial government, the RBI has been headed by 23 governors.

•The inaugural officeholder was the Britisher Sir Osborne Smith.

• C. D. Deshmukh was the first Indian governor after Independence.

Present Governor of RBI

• RAGHURAM RAJAN

POWERS AND RESPONSIBILITIES

1. First of all, the Reserve Bank of India is responsible for maintaining the financial stability in an economy, since the governor of RBI is the head of the most prestigious financial institution, he plays a major role in formulating the policies of RBI.

2. Apart from formulating policies, the governor of the RBI also is responsible for issuing licenses to open new private and foreign banks.

3. The governor of the RBI is responsible for controlling the interest rates on deposits and advances of the country. However this control is limited to the extent of prescribing interest rates on savings account and a minimum lending rate.

4. The governor of the RBI is responsible for regulating and administering the financial system of the nation. He is responsible for setting parameters within which the whole financial system will function. Not a rupee can be moved without the permission of the governor of RBI.

5. The foreign exchange management Act, 1999 which is to facilitate external trade and payment and to promote orderly development and maintenance of foreign exchange market in India is managed by the governor of RBI.

6. The RBI governor is further responsible to monitor the issue and destruction of currency and coins which are not fit for circulation in public. He is also responsible to monitor the adequate quantity of currency notes and coins are supplied and in good quality.

7. He also has a major role to play when it comes to helping and promoting functions in order to support national objectives.

8. Along with his team, the governor of the Reserve Bank of India has to continually review rules and regulations in order to make them more customer friendly.

9. The RBI governor is responsible for leading and supervising primary co-operative banks which are in more popular terms known as “Urban co-operative banks”. He does this through his Urban Banks Department.

10. The governor of the Reserve Bank of India also has a part to play in monitoring and facilitating flow of credit to rural, agricultural and various small scale industries sectors. He is also responsible for framing policies on priority sector and supporting the agriculture banks. Further, the governor is responsible for regulating regional rural banks, state co-operative banks and various local area banks.

11. You must be aware that the government has various poverty alleviation schemes in order to eradicate poverty from India. The governor of RBI monitors these schemes as well.

Powers of the RBI Governor:

The man who is the governor of the Reserve Bank Of India is the head of all the commercial banks as well. His decisions have the power to influence both macro and microeconomics enormously. Not only the banks but even the stock market, the economy and the lives of people are influenced by his actions. He is the banker’s banker and is no less than a luminary in the world of banking. It can be said that whenever the RBI governor sneezes or coughs, the whole stock market may catch cold. Being the head of the only institution that can issue currency notes, the governor’s autograph appears on the currency notes and he is the one who controls the country’s monetary, currency and credit system.

Ownership of RBIRBI does not come under the Ministry of Finance. However Central Government holds the ownership of RBI and can regulate, supervise and give suggestions to RBI from time to time.

Board of Directors of RBIThe Government of India appoints the directors for a 4-year term. The Board consists of a Governor, and not more than 4 Deputy Governors, 15 Directors to represent the regional boards, 2 from the Ministry of Finance and 10 other directors from various fields.

The Board of Directors appointed will report to Chairman of RBI who will report to Central Government. Further, any new policies, procedures and regulations should be approved by Central Government.

PLANNING COMMISSION

What is Planning Commission?

• The Planning Commission ( योजनाआयोग ) was an institution in the Government of India, which formulated India's Five-Year Plans, among other functions.

• It should have some general goals as well as specific objectives which are to be achieved with in a specified period of time.

• In India plans are of five year duration and are called FIVE YEAR PLAN.

Objective of Planning

•Economic Growth.

•Self- Reliance.

•Removal of Unemployment.

•Reduction in Income inequalities.

•Elimination of Poverty.

History

• After India achieved Independence, a formal model of planning was adopted, and accordingly the Planning Commission, reporting directly to the Prime Minister of India, was established on 15 March 1950, with Prime Minister Jawaharlal Nehru as the Chairman.

FIRST FIVE YEAR PLAN (1951-1956)

• Presented by – JAWAHARLAL NEHRU

• Total outlay - Rs. 2069 Crores

• Target growth – 2.1%growth

• 7 AREAS COVERED : Agriculture as well as community development, Energy as well as irrigation, Communication and transportation, Land rehabilitation, Social services, Miscellaneous, Industrial sector.

ELEVENTH FIVE YEAR PLAN (2007 – 2012)

• This plan is titled with “ TOWARDS FASTER AND MORE INCLUSIVE GROWTH”.

• Creation of SEVEN CRORE JOB opportunities.

• Reduced Educated unemployment youth to below 5 PERCENT.

• CLEAN DRINKING WATER to all by 2009.

• Treat all urban WASTEWATER by 2011-12 to CLEAN RIVER WATERS.

• Connect every village by TELEPHONE by 2007 and BROADBAND connectivity to all villages by 2012 .

Structure of the Planning Commission

The Prime minister is the chairman of the Planning Commission. The chairman along with the Deputy Chairman and the full time members give advice and guidance for the formulation of Five Year Plan, Annual Plans, State Plans, Projects and Schemes, among others.

• Chairman: Dr. Manmohan Singh

• Deputy Chairman: Shri Montek Singh Ahluwalia• Minister of State: Shri M.V. Rajshekharan• Secretary: Dr. Subhas Pani• Members

Dr. Kirit ParikhProf. Abhijit SenDr. V.L. ChopraDr. Bhalchandra MungekarDr.(Ms.) Syeda HameedShri B.N. YugandharShri Anwar-ul-HodaShri B. K. Chaturvedi

Todays status

NITY AAYOG

• The National Institution for Transforming India Aayog (राष्ट्रीय भारत पररवततन संस्था), or NITI Aayog is a Government of India policy think-tank established by Prime Minister Narendra Modi to replace the Planning Commission.

• The stated aim for NITI Aayog's creation is to foster involvement and participation in the economic policy-making process by theStateGovernments of India. It has adopted a "bottom-up" approach in planning which is a remarkable contrast to the Planning Commission's tradition of "top-down" decision-making.

• The Prime Minister will serve as Chairperson for NITI Aayog.

• The Union Government of India announced formation of NITI Aayog on 1 January 2015, and the first meeting of NITI Aayog was held on 8 February 2015. "NITI Blogs", which provide public access to articles, field reports and work in progress as well as the published opinions of NITI officials, are available to the public on the Aayog website.

Securities and Exchange Board of India (SEBI)

Introduction

• The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in India. It was established in the year 1988 and given statutory powers on 12 April 1992 through the SEBI Act, 1992.

• Its main function is to stop fraudulent activities of stock market.

History

• It was established by The Government of India on 12 April 1988 and given statutory powers in 1992 with SEBI Act 1992 being passed by the Indian Parliament. SEBI has its headquarters at the business district of Bandra Kurla Complex in Mumbai.

• Initially SEBI was a non statutory body without any statutory power. However in 1995, the SEBI was given additional statutory power by the Government of India through an amendment to the Securities and Exchange Board of India Act, 1992. In April 1988 the SEBI was constituted as the regulator of capital markets in India under a resolution of the Government of India.

Organization structure

The SEBI is managed by its members, which consists of following:

• The chairman who is nominated by Union Government of India.

• Two members, i.e., Officers from Union Finance Ministry.

• One member from the Reserve Bank of India.

• The remaining five members are nominated by Union Government of India, out of them at least three shall be whole-time members.

Powers

For the discharge of its functions efficiently, SEBI has been vested with the following powers:

• to approve by−laws of stock exchanges.sebi

• to require the stock exchange to amend their by−laws.

• inspect the books of accounts and call for periodical returns from recognized stock exchanges.

• inspect the books of accounts of a financial intermediaries.

• compel certain companies to list their shares in one or more stock exchanges.

• registration brokers.

Banking sector

• Banking Regulation Act of India, 1949 defines Banking as “accepting, for the purpose of lending or of investment of deposits of money from the public, repayable on demand or otherwise or withdrawable by cheque, draft order or otherwise.” The Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949, govern the banking operations in India.

Banking Structure in India

Broad Classification of Banks in India

• 1) The RBI: The RBI is the supreme monetary and banking authority in the country and has the responsibility to control the banking system in the country. It keeps the reserves of all scheduled banks and hence is known as the “Reserve Bank”.

• ublic Sector Banks: State Bank of India and its Associates (8) Nationalized Banks (19) Regional Rural Banks Sponsored by Public Sector Banks (196) 3) Private Sector Banks: Old Generation Private Banks (22) Foreign New Generation Private Banks (8) Banks in India (40)

TOP 10 BANKS IN INDIA PUBLIC SECTOR BANKS

• State Bank of India(SBI).

• Punjab National Bank.

• Bank of Baroda.

• Canara Bank.

• Bank of India.

PRIVATE SECTOR BANKS• HDFC Bank.• ICICI Bank.• Axis Bank.• Citi Bank.• IDBI Bank.

THANK YOU…