Economics for SSC & BANK PO/Clerk Exam

Economics :- Banking System

Reserve Bank of India (RBI)

The RBI was established by passing “trasfer of public ownership Act” in Sep-1948 under which the ownership of the bank was passed into the hands of the Government of India with effect from 1st January 1949.

RBI Functions

1.      Traditional functions

·         Monopoly of currency notes issue

·         Banker to the Government (both the central and state)

·         Agent and advisor to the Government

·         Banker to the bankers

·         Acts as the clearing house of the country

·         Lender of the last resort

·         Custodian of the foreign exchange reserves

·         Maintaining the external value of domestic currency

·         Controller of forex and credit

·         Ensures the internal value of the currency

·         Publishes the Economic statistical data

·         Fight against economic crisis and ensures stability of Indian economy.

2.      Promotional functions

·         Promotion of banking habit and expansion of banking systems.

·         Provides refinance for export promotion

·         Expansion of the facilities for the provision of the agricultural credit through NABARD

·         Extension of the facilities for the small scale industries

·         Helping the Co-operative sectors.

·         Prescribe the minimum statutory requirement.

·         Innovating the new banking business transactions.

3.      Supervisory functions

·         Granting licence to Banks.

·         Inspects and makes enquiry or determine position in respect of matters under various sections of RBI and Banking regulations

·         Implements Deposit insurence scheme

·         Periodical review of the work of the commercial banks

·         Giving directives to commercial banks

·         Control the non-banking finance corporation

·         Ensuring the health of financial system through on-site and off-site verification.

NBFCS (Non-Banking Financial Coorporations)

They are discribed by acronym: CAMELS

C: Capital Adequacy requirement

A: Asset quality like standerd ect. asset

M: Management of the level and expertise and praisal capacity of management

E: Earning capacity

L: Liquidity, the level of liquidity and the components of liquidity are verified

S: System and control exist in the NBFC, and its effectiveness.