species Central Bank of India 1

CENTRAL BANK OF INDIA
Presented by:
Sarita Bele

M1104

Mamta Gajengi
Sriveni Gajengi
Amit Kamble
Rajesh Khatu
Priyanka Machhi
Akanksha Sharma
Rupali Sonawane

M1114
M1115
M1126
M1128
M1130
M1153
M1157

FUNCTIONS OF CENTRAL BANK
TRADITIONAL FUNCTION:

Monopoly of note issue

PROMOTIONAL FUNCTION:


EXIM



LIC



IDBI



SIDBI



NABARD

MONETARY POLICY
Definition:

According

to

A.G.Hart,

“A

policy which influences the public stock
of money substitute of public demand for

such assets of both that is policy which
influences

public

liquidity

known as monetary policy.”

position

is

QUANTITTATIVE
INSTRUMENTS:


Bank Rate



Open Market Operations(OMOs)



Cash Reserve Ratio

QUALITATIVE
INSTRUMENTS:


Credit Rationing



Direct Action



Margin Requirement



Moral Persuasion

CREDIT CREATION BY
COMMERCIAL BANK


First important source of money
supply.



Second important source of money
supply.



Process of credit creation.

Bank

Bank 1
Bank 2
Bank 3
Bank n
Total

Liabilit
ies
Deposi
t
100
95
90.5
00
2000

Asse Reser Total

ts
ve
Asset
credi
s
t
95
5
100
90.5
4.75
95
85.98 4.52
90.5
00
00
00
1900
100
2000

CASH RESERVE RATIO

Determines the amount that bank should hold in cash b

STATUTORY LIQUIDITY RATIO

OBJECTIVES FOR
MAINTAINING SLR:

BANK RATE







It is also called as discount rate.
It is the rate of interest which a central

bank charges on the loans & advances
provided to commercial banks.
It is the only rate which helps the
economy in controlling inflation &
deflation.
It serves as a basic parameter to the
commercial banks to fix interest on long
term loans.

REVERSE REPO RATE


Opposite of repo rate.



Rate at which RBI borrows the
money.



RBI uses this as a tool.



Increase in reverse repo rate.

MARGIN REQUIREMENT
The amount that an investor must
deposit in a margin account before
buying on margin or selling short,
as required by the Federal Reserve
Board’s regulation.

RATIONING OF CREDIT
The concept in economics and banking of
credit rationing describes the situation
when a bank limits the supply of loans,
although it has enough funds to loan out,
and the supply of loans has not yet equaled

the demand of prospective borrowers.

RATIONING OF CREDIT


The bank was unable to perfectly distinguish
the risky borrowers from safe ones.



The loan contracts were subject to limited
liability.

CONCLUSION:
To conclude, we can say that credit
creation by banks is one of the important
& only sources to generate income. And
when the reserve requirement increased by
the central bank it would directly affect on
the credit creation by bank because then
the lendable funds with the bank decreases
& vice versa.

K
N
A
TH
YOU