RESERVE BANK OF INDIA (PART - 11)

DEVELOPMENTAL ROLE

This role is, perhaps, the most unheralded aspect of our activities, yet it remains among the most critical. This includes ensuring credit availability to the productive sectors of the economy, establishing institutions designed to build the country’s financial infrastructure, expanding access to affordable financial services and promoting financial education and literacy.

Over the years, the Reserve Bank has added new institutions as the economy has evolved. Some of the institutions established by the RBI include:

S  Deposit Insurance and Credit Guarantee Corporation (1962), to provide protection to bank depositors and guarantee cover to credit facilities extended to certain categories of small borrowers

S  Unit Trust of India (1964), the first mutual fund of the country

S  Industrial Development Bank of India (1964), a development finance institution for industry

S  National Bank for Agriculture and Rural Development (1982), for promoting rural and agricultural credit

S  Discount and Finance House of India (1988), a money market intermediary and a primary dealer in government securities

S  National Housing Bank (1989), an apex financial institution for promoting and regulating housing finance

S  Securities and Trading Corporation of India (1994), a primary dealer

The Reserve Bank continues its developmental role, while specifically focussing on financial inclusion. Key tools in this on-going effort include:

Directed credit for lending to priority sector and weaker sections: The goal here is to facilitate/ enhance credit flow to employment intensive sectors such as agriculture, micro and small enterprises (MSE), as well as for affordable housing and education loans.

Lead Bank Scheme: A commercial bank is designated as a lead bank in each district in the country and this bank is responsible for ensuring banking development in the district through coordinated efforts between banks and government officials. The Reserve Bank has assigned a Lead District Manager for each district who acts as a catalytic force for promoting financial inclusion and smooth working between government and banks.

Sector specific refinance: The Reserve Bank makes available refinance to banks against their credit to the export sector. In exceptional circumstances, it can provide refinance against lending to other sectors.

Strengthening and supporting small local banks: This includes regional rural banks and cooperative banks

Financial inclusion: Expanding access to finance and promoting financial literacy are a part of our outreach efforts.