Niti Aayog /Banking Of India:RBI

Rafi

NITI AAYOG & BANKING IN INDIA :RESERVE BANK OF INDIA
Niti Aayog:The term NITI stands for National Institution for Transforming India that will seek to provide a critical directional and strategic input into the developmental process.NITI Aayog was set up on 1 January 2015, replacing the 65-year-old Planning Commission.

Objectives:
1. Fostering active co-operative federalism,
involvement of states
2. Formulation of plans at village level, aggregation at higher levels
3. Special attention to sections at risk of not benefitting adequately from economic progress
4. Economic policy that incorporates national security interests
5. Feedback for constant innovative improvements
6. Partnerships with national and international think tanks
7. Platform for resolution of inter-sect oral and inter departmental issues
8. State-of-the-art resource centre for research on good governance
9. Focus on technology upgradation and capacity building.
Chairperson: Prime Minister
Vice-Chairperson: To be appointed by the PM.
Governing councils: Chief ministers (CMs) and Lieutenant Governors (LGs)
Regional Councils: To be setup to address specific issues for specified tenures; to comprise CMs and LGs.
Part-time members: Experts from relevant institutions in ex- officio capacity (maximum 2, on a rotational)
Ex-officio members: Union ministers to be nominated by the PM (maximum 4)
CEO: To be appointed by the PM in the rank of secretary for Member a fixed tenure
Secretariat: As deemed necessary
Special invitees: Experts, specialists and practitioners with relevant domain knowledge; nominated by PM.
Functions:
1. The centre-to-state one way flow of policy, that was the hallmark of the Planning Commission era, is sought to be replaced by a genuine and continuing partnership of states.
2. The Aayog will emerge as a “think-tank’ that will provide governments at the central and state levels with relevant strategic and technical advice across the spectrum of key elements of policy.
3. It will help evolve a shared vision of national development priorities, and foster co-operative federalism, recognising that strong states make a strong nation.
4. NITI Aayog will seek to provide a critical directional and strategic input into the development process.
5. The NITI Aayog will develop mechanisms to formulate credible plans at the village level and aggregate these progressively at higher levels of government.
6. It will ensure special attention to the sections of society that is at risk of not benefitting adequately from economic progress.
7. The NITI Aayog will create a knowledge
innovation, and entrepreneurial support system through a collaborative community of national and international experts, practitioners and partners.
8. Moreover, Aayog will monitor and evaluate implementation of programmes, technology upgradation and focus on capacity building.
Seven Pillars of NITI Aayog:
1. Pro-people: To fulfil aspirations of individual as well as society.
2. Pro-activity: In anticipation and in response to Citizens needs.
3. Participation: Involvement of citizenry – people’s participation
4. Empowering: Women in all aspects
5. Inclusion of all : SC, ST, OBC, Poor, Village and farmers
6. Equality: Equal opportunity for all, especially the youth
7. Transparency: Making government visible and responsive
Banking in India :
Banking in India started back in 1770 with the establishment of Bank of Hindustan.
Later, three presidency banks were set up:
basis fortnightly
1. Bank of Calcutta in 1806 (Renamed Bank of Bengal1809)
2. Bank of Madras in 1849
3. Bank of Bombay in 1840
These banks worked as quasi central banks for many years.
📝In 1921 all three banks amalgamated to form the Imperial Bank of India. Imperial Bank continued functioning till 1956.
📝In 1925,the Royal Commission on Indian Currency and Financewas established under the chairmanship of Hilton Young. This commission recommended the operation of money management.Based on the
recommendations of this commission, the RBI Act was passed in 1934 and came into effect on 1 April,1935.
📝Initially, during 1935-37, the headquarters of Reserve Bank of India (RBI) was located in Kolkata,but at present it is situated in Mumbai.
RBI continued to work as a Central Bank of:
(i) Burma, till 1944
(ii) Pakistan, till July 1948
(iii) Kuwait, till 1959
📝Imperial Bank of India was renamed as State Bank of India in 1956.Nationalisation of banks took place in 1969. 14 private banks were nationalised in 1969 and in 1980 six more were nationalised.
Reasons for Nationalisation:
1. Concentration of economic power in few hands
2. Private ownership of commercial banks
3. Previously located in urban areas, thereby, neglecting the development of agricultural and rural areas as it was not the priority sector.
Progress after Nationalisation:
1. Expansion of the number of branches
2. Priority sector lending increased
3. The level of deposit mobilisation and bank lending increases
4. Banks are now promoteentrepreneurship, like- Integrated Rural Development Programme (IRDP), Jawahar Rozgar Yojana (JRY), etc.
Reserve Bank of India (RBI): RBI was established in 1935 in accordance with the Reserve Bank of India Act1934 and is India’s central banking institution.
The Reserve Bank of India was set up on the basis of the recommendations of the Hilton Young Commission.
📝It started its operations on 1 April 1935 during the British rule as per the provisions of the Reserve Bank of India Act, 1934.
The first governor of RBI was Sir Osborne Smith (1935-1937).
📝RBI started as a shareholder’s company but it became nationalised in 1949 (1st January) and, thereafter, is fully owned by the Government of India.The first Indian governor was C.D. Deshmukh(1943-1949).The emblem of RBI is a tiger( panther) (earlier it was Lion) and a Palm tree.
The Reserve Bank’s affairs are governed by a Central Board of Directors. The Government of India appoints the Directors for a tenure of four years. The central board of Directors comprises the Governor,four deputy governor and fifteen directors.
Manmohan Singh(1982-1985) is the only prime minister who also was a Governor of RBI.
The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as:to regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and
credit system of the country to its advantage.’At first, RBI’s main office was located in Kolkata.It was moved to Mumbai in 1937. It has four zonal offices(Ahmedabad, Dellhi, Chennai, kolkata) and about twenty-two regional offices.
Functions of RBI
1. Issuing of notes:Central Bank (RBI) enjoys monopoly right of note issuing. It issues currency notes except one rupee notes (coins and coins of smaller denominations. The one rupee notes/ coins and lower denomination coins are issued by the central government but they are circulated through RBI, RBI adapted the minimum reserve system for note issue since 1957 according to which it maintains gold and foreign exchange reserves of worth Rs. 200 crore out of which minimum of Rs. 115 crore should be in gold & rest in cash.
2. Banker of government: RBI acts as banking agent and a financial advisor to the government. It manages government accounts and treasuries. It performs the functions of crediting loans to the government without any interest for short term. RBI buys and sells government securities (G-Secs) and treasuries on government’s behalf. It gives monetary and financial advices to the government.
3. Bankers bank: All the other banks in the country keep their part of cash balances with central bank as deposit to meet the liabilities in the time of crisis.
Commercial banks keeps cash balances in two ways:
(a) They keep part of cash balance with themselves and
(b) The other part is kept with central bank as deposits.
According to the banking Companies Act, 1949,every scheduled bank was required to maintain a cash balance equivalent to 15 per cent of it demand liabilities and 2 percent of time liabilities in India.
But the 1962’s amendment abolished this distinction between demand and time liabilities and banks now keep cash reserves equal to 3 per cent of their NET demand and time liabilities.
4. Lender of last resort: RBI is not only a banker to the banks but also a lender of last resort. That means,in times of crisis the scheduled banks approaches the central bank to get financial assistance. As RBI
is the lender of last resort it gives opportunity to exercise control over the banking system of the country.
5. Custodian of foreign reserves:Central bank functions as the custodian of nations foreign exchange reserves. In order to stabilise the country’s currency’s external value, the central bank maintains reserves of foreign currencies that also helps to stabilise exchange rate and to promote international
trade.
6. Control of credit: Central bank controls the increase or decrease in the volume of credit money according to the monetary requirement of the nation. This is important so as to control the inflation and deflation
in the country (by controlling money supply in market). More expansion of credit money can lead to inflation whereas huge contraction of credit money results in deflation. While checking these, central
bank stabilises general private level and increases the output.
7. Regulator and supervisor of the banks: RBI is entitled by regulatory powers under RBI Act and the Banking Regulation Act. Regulations of banks relate tolicensing of banks, expansion of the commercial banks in terms of their branches in country our abroad, prescribing minimum requirements of paid up capital and reserves, etc.