BANKER
TO BANKS
Like individual
consumers, businesses and organisations of all kinds, banks need their own
mechanism to transfer funds and settle inter-bank transactions such as
borrowing from and lending to other banks and customer transactions. As the
banker to banks, the Reserve Bank fulfils this role. In effect, all banks
operating in the country have accounts with the Reserve Bank, just as
individuals and businesses have accounts with their banks.
As the banker to
banks, RBI focus on:
§ Enabling smooth,
swift and seamless clearing and settlement of inter-bank obligations.
§ Providing an
efficient means of funds transfer for banks.
§ Enabling banks
to maintain their accounts with us for purpose of statutory reserve
requirements and maintain transaction balances.
§ Acting as lender
of the last resort.
The Reserve Bank
provides products and services for the nation’s banks similar to what banks
offer their own customers. Here’s a look at how RBI help:
Non-interest
earning current accounts: Banks hold accounts with the Reserve Bank based on
certain terms and conditions, such as, maintenance of minimum balances. They
can hold accounts at each of our regional offices. Banks draw on these accounts
to settle their obligations arising from inter-bank settlement systems. Banks
can electronically transfer payments to other banks from this account, using
the Real Time Gross Settlement System (RTGS).
Deposit
Accounts Department:
This department’s computerised central monitoring system helps banks manage
their funds position in real time to maintain the optimum balance between surplus
and deficit centres.
Remittance
facilities:
Banks and government departments can use these facilities to transfer funds.
Lender
of the last resort:
The Reserve Bank provides liquidity to banks unable to raise short term liquid
resources from the inter-bank market. Like other central banks, the Reserve
Bank considers this a critical function because it protects the interests of
depositors, which in turn, has a stabilising impact on the financial system and
on the economy as a whole.
Loans
and advances:
The Reserve Bank provides short-term loans and advances to banks / financial institutions,
when necessary, to facilitate lending for specified purposes
TO BE CONTINUED......
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