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Banking related general awareness--RESERE BANK OF INDIA


Financial Supervision

The Reserve Bank of India performs this function under the guidance of the Board for Financial Supervision (BFS). The Board was constituted in November 1994 as a committee of the Central Board of Directors of the Reserve Bank of India.


Primary objective of BFS is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies.


The Board is constituted by co-opting four Directors from the Central Board as members for a term of two years and is chaired by the Governor. The Deputy Governors of the Reserve Bank are ex-officio members. One Deputy Governor, usually, the Deputy Governor in charge of banking regulation and supervision, is nominated as the Vice-Chairman of the Board.

BFS meetings

The Board is required to meet normally once every month. It considers inspection reports and other supervisory issues placed before it by the supervisory departments.

BFS through the Audit Sub-Committee also aims at upgrading the quality of the statutory audit and internal audit functions in banks and financial institutions. The audit sub-committee includes Deputy Governor as the chairman and two Directors of the Central Board as members.

The BFS oversees the functioning of Department of Banking Supervision (DBS), Department of Non-Banking Supervision (DNBS) and Financial Institutions Division (FID) and gives directions on the regulatory and supervisory issues.


Some of the initiatives taken by BFS include:

restructuring of the system of bank inspections
introduction of off-site surveillance,
strengthening of the role of statutory auditors and
strengthening of the internal defences of supervised institutions.

The Audit Sub-committee of BFS has reviewed the current system of concurrent audit, norms of empanelment and appointment of statutory auditors, the quality and coverage of statutory audit reports, and the important issue of greater transparency and disclosure in the published accounts of supervised institutions.

Current Focus

supervision of financial institutions
consolidated accounting
legal issues in bank frauds
divergence in assessments of non-performing assets and
supervisory rating model for banks.


Legal Framework

Umbrella Acts

Reserve Bank of India Act, 1934: governs the Reserve Bank functions
Banking Regulation Act, 1949: governs the financial sector

Acts governing specific functions

Public Debt Act, 1944/Government Securities Act (Proposed): Governs government debt market
Securities Contract (Regulation) Act, 1956: Regulates government securities market
Indian Coinage Act, 1906:Governs currency and coins
Foreign Exchange Regulation Act, 1973/Foreign Exchange Management Act, 1999: Governs trade and foreign exchange market
"Payment and Settlement Systems Act, 2007: Provides for regulation and supervision of payment systems in India"

Acts governing Banking Operations

Companies Act, 1956:Governs banks as companies
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980: Relates to nationalisation of banks
Bankers' Books Evidence Act
Banking Secrecy Act
Negotiable Instruments Act, 1881

Acts governing Individual Institutions

State Bank of India Act, 1954
The Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003
The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993
National Bank for Agriculture and Rural Development Act
National Housing Bank Act
Deposit Insurance and Credit Guarantee Corporation Act


Main Functions

Monetary Authority:

Formulates, implements and monitors the monetary policy.
Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.

Regulator and supervisor of the financial system:

Prescribes broad parameters of banking operations within which the country's banking and financial system functions.
Objective: maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange

Manages the Foreign Exchange Management Act, 1999.
Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Issuer of currency:

Issues and exchanges or destroys currency and coins not fit for circulation.
Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role

Performs a wide range of promotional functions to support national objectives.

Related Functions

Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.
Banker to banks: maintains banking accounts of all scheduled banks.



Has 22 regional offices, most of them in state capitals.

Training Establishments

Has six training establishments

Three, namely, College of Agricultural Banking, Bankers Training College and Reserve Bank of India Staff College are part of the Reserve Bank
Others are autonomous, such as, National Institute for Bank Management, Indira Gandhi Institute for Development Research (IGIDR), Institute for Development and Research in Banking Technology (IDRBT)

For details on training establishments, please check their websites links for which are available in Other Links.


Fully owned: National Housing Bank(NHB), Deposit Insurance and Credit Guarantee Corporation of India(DICGC), Bharatiya Reserve Bank Note Mudran Private Limited(BRBNMPL)

Majority stake: National Bank for Agriculture and Rural Development (NABARD)
The Reserve Bank of India has recently divested its stake in State Bank of India to the Government of India.


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