Chapter -1

LAW AND PRACTICE OF BANKING

Bank

As per section 5(b) of Banking Regulation Act, 1949

The term banking is defined as ―accepting, for the purpose of. lending or
investment of deposits of money from the public, repayable on. demand or
otherwise, and withdrawals by cheque, draft, order or. otherwise"

Banker -A banker is an employee of a bank or financial institution who

services the financial needs of clients. These clients can be individuals or
institutions, both with different needs. A banker tries to maximize the profit
of a bank while maintaining appropriate risk levels.
Customer - A customer means a person who seeks to open account which
banker accepts with proper introduction. The relationship is not based on
frequency of transactions, and durations.

Needs of the banks

Before the establishment of banks, the financial activities were handled

bymoney lenders and individuals. At that time the interest rates were very
[Link] there were no security of public savings and no uniformity
regarding loans. So, as to overcome such problems the organized banking
sector was established, which was fully regulated by the government. The
organized baking sector works within the financial system to provide loans,
accept deposits and provide other services to their customers.

The following functions of the bank explain the need of the bank

 To provide the security to the savings of customers.

 To control the supply of money and credit.
 To encourage public confidence in the working of the financial system,
increase savings speedily and efficiently.
 To avoid focus of financial powers in the hands of a few individuals
and [Link] set equal norms and conditions (i.e. rate of
interest, period of lending etc.) to all types of customers

Importance of Bank

Bring Economic Stability

Banking sector plays a crucial role in attaining the economic stability. They
are the one who assists in controlling the depression and inflation phases.
During depression, banks adopt cheap money policy and increase the flow of
money in economy. Whereas at the time of inflation, it follows strict money
policy to decrease the flow of money. It increases the interest rate on
borrowings to control the people’s spending during inflation.

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Creates Money

Banks generates money in an economy by advancing loans to all those who

are in need of funds. It is one which grants credit out of the money collected
by it from public. These institutions aim at maintaining sufficient flow of
funds.

Facilitates Trade

It helps in doing both internal and external trade. Banks enable merchants
in conducting trade by provide them proper payment facility, issuing letter
of credit, discounting bill of exchange and providing them other guarantee
documents.

Money Transfer
It enables people to transfer their funds rapidly even to far distant places.
Ithas facilitated the payment system by providing various instruments such
asdraft, cheque and bill of exchange. Payment done via these instruments is
more safe and convenient instead of paying in cash.

Transfer Savings Into Investment

Banking serve as the medium of transferring money from those who have
excess of it to those who are in need of it. It collects people savings and
provides loan out of these savings to entrepreneurs and companies for their

FUNCTIONS OF THE BANK

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The functions of any bank in India are

The primary Functions and the Secondary Functions.

The Primary Functions Of A Bank

The primary functions of a bank are two:

1. Accepting Deposits: Deposits are the amount of money that a

customer hands over to the bank. This is known as making a deposit.
The deposits are of a few types namely: Saving Deposit, Fixed Deposit,
Current Deposit, and the Recurrent Deposit. The various deposit
schemes are based on the type of deposit and the frequency of
depositing. For example, in a fixed deposit a definite sum is handed
over to the bank for a few years. The interest is only compounded if
the deposit term is complete. Providing these services of the deposit is
one of the primary functions of a bank.
Savings Bank Account, Current Account and Term Deposits.
2. Granting Loans and Advances: The bank lends people money on a
time-interest basis. Each loan amount is passed by the bank after due
consideration and securing the bank’s profit. The bank also gives
advances to its customers. These are also the primary functions of the
banks. The bank provides the services of an overdraft, cash credits,
loans, and discounting of the bill of exchange.

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Secondary Functions Of The Bank

The secondary functions of the Bank are either selling gold coins to the
public or selling insurance products and selling mutual fund products etc.
Let us make a more formal study. Following are the important secondary
functions of the Banks:

Agency Functions: The bank is an agent for its customers in a way that it
invests on behalf of its customers. Acting as the agent of the customer the
bank may transfer funds, the collection of cheques, periodic payments,
portfolio management, periodic collections, and several other agency
functions. All of these functions are the secondary functions of the bank.
General Utility Functions: The bank also performs several utility
functions. Some of the most important utility functions of the banks may
include the issue of drafts, letter of credits, etc., locker facility, underwriting
of shares, dealing in foreign exchange, project reports, social welfare
programs, other utility functions. The banks also provide several services
like the safe deposit locker facilities, safe custody facilities, and Demat
accounts. The opening of Demat accounts allows the account holder to trade
in the stock exchange or the money market directly. The customer that
holds a Demat account can directly buy or sell shares from the capital
market.
The General Utility Functions are also called as Social development
functions. In some areas, the banks will help you with all the transactions
that you will have to do during a course of time. For example, you will be
able to pay your phone, electricity and other utility bills from a center that is
run by the banks. This sums up the functions of the banks.

Modern Functions

 Automatic teller machines cum debit cards

 Credit cards
 Mail transfer and telegraphic transfer
 Tele banking
 Internet banking
 Round the clock banking
 POS

Relationship between Banker and Customer

PRIMARY RELATIONSHIP

a. DEBTOR AND CRDITOR RELATIONSHIP

b. CREDITOR AND DEBTOR RELATIONSHIP

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 Banker accepts deposits of money from his customers for the purpose of
lending and investment and repays it on demand as per the terms of the
contract of deposit. In fact, deposit accepted by the bank is technically
money loaned out to the bank from the depositors. Therefore, the general
relationship between a depositor and the banker is a relation of the debtor
and the creditor. The depositors are creditors and the bank is the debtor.
However, the relationship between the banker and customer is directly
opposite when the bank lends money to its customer. The bank becomes the
creditor and the customer becomes the debtor.

SECONDARY RELATIONSHIP

a. Principal and Agent

When a bank collects cheques, bills and other instruments for customers,
the relation between the bank and customer is that of Principal and Agent.
The bank also makes regular payments of insurance premium rent etc. as
per standing instruction received from the customer. In the above cases also
the relation between the bank and the customer is of Principal and agent.
The bank act as the agent and customer the principal.

b. Trustee and Beneficiary

A trustee holds property for the beneficiary, and the profit earned from this
property belongs to the beneficiary. If the customer deposits securities or
valuables with the banker for safe custody, banker becomes a trustee of his
customer. The customer is the beneficiary so the ownership remains with
the customer.

c. Bailor and Bailee

The relationship between banker and customer can be that of Bailor and
Bailee.

Bailment is a contract for delivering goods by one party to another to be held

in trust for a specific period and returned when the purpose is ended.

Bailor is the party that delivers property to another.

Bailee is the party to whom the property is delivered.

So, when a customer gives a sealed box to the bank for safe keeping, the
customer became the bailor, and the bank became the bailee.

d. Pledger and Pledgee

The relationship between customer and banker can be that of Pledger and
Pledgee. This happens when customer pledges (promises) certain assets or
security with the bank in order to get a loan. In this case, the customer
becomes the Pledger, and the bank becomes the Pledgee. Under this
agreement, the assets or security will remain with the bank until a customer
repays the loan.

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 e. Hypothecator and Hypothecatee

The relationship between customer and banker can be that of Hypothecator

and Hypotheatee. This happens when the customer hypothecates (pledges)
certain movable or non-movable property or assets with the banker in order
to get a loan. In this case, the customer became the Hypothecator, and the
Banker became the Hypothecatee.

History of commercial banks in India

Some commercial banks in India are even a century old. Their branches are
all over the country and expanding into the provinces. Since India’s
independence, commercial banks have gone through three different stages.

Between 1955 and 1970, a public sector emerged in Indian banking. It

began with the establishment of the National Bank of India in 1955 and
ended with the nationalisation of fourteen significant banks in 1969.

Twenty years after the nationalisation of Banks, the 1970s and 1980s saw a
shift from class banking to mass banking. A major branch expansion took
place during this period, followed by the employment of many bank
employees and increased funding for priority sectors, especially for the poor
and underserved sectors.

The post-nationalization era was not without complications. Inadequate

training has reduced staff efficiency and productivity, exacerbated the
problem of non-collection of loans, and increased funding expectations to
meet regulatory requirements, resulting in lower bank profitability. This was
the case in 1991 when the government announced a new economic policy.

A Financial Sector Committee chaired by Sri M. Narasimham was

established to propose a wide range of measures to improve the efficiency,
productivity, and profitability of banks.

History of Banking

The word ‘bank’ is used in the sense of a commercial bank. It is of Germanic

origin though some persons trace its origin to the French word ‘Banqui’ and
the Italian word ‘Banca’. It referred to a bench for keeping, lending, and
exchanging of money or coins in the market place by money lenders and
money changers.

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History of banking in India Origin and Development of Banking in India

Globally,the story of banking has much in common, as it evolved with the

moneylenders accepting deposits and issuing receipts in there place.
Banking was fairly varied and catered to the credit needs of the trade,
commerce, agriculture as well as individuals in the economy.

The pre- independence period was largely characterised by the existence of

private bank organised as joint stock companies. Most banks were small
and had private shareholding of the closely held variety. They were largely
localised and many of them failed.

The period beginning from 1967 to 1991 was characterised major

development, viz.., social control on banks in 1967 and nationalisation of 14
banks in 1969 and 6 more in 1980.
The period beginning from the early 1990s witnessed the transformation of
the banking sector as a result of financial sector reforms that were
introduced as a part of structural reforms initiated in 1991.

Early phase of Indian Banks, from 1786 to 1969

The first bank in India, the General Bank of India, was set-up in 1786. Bank
of Hindustan and Bengal Bank followed.

The East India Company established Bank of Bengal (1809),Bank of Bombay

(1840) and Bank of Madras (1843) as independent units and called them
Presidency banks. These three banks were amalgamated in 1920 and the
Imperial Bank of India, a bank of private shareholders, mostly Europeans,
was established.

Allahabad Banks was established, exclusively by Indians, in 1865.

Punjab National Bank was set-up in 1894 with headquarters in Lahore.

Between 1906 and 1913, Bank of India, Central Bank of India, Bank of
Baroda, Canara Bank, Indian Bank and Bank of Mysore were set-up.

The Reserve Bank of India came in 1935.

To streamline the functioning and activities of commercial banks, the

Government of india came up with the Banking Companies Act, 1949, which
was later changed to the Banking Regulation Act, 1949.

Banking sector Reforms from 1969 to 1991

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In 1955, government nationalised the Imperial Bank of India and started
offering extensive banking facilities, especially in rural and semi-urban
areas.

The government constituted the State Bank of India to act the principal
agent of the RBI and to handle banking transaction of the Union
Government and State Government all over the country.
7 banks owned by the Princely state were nationalised in 1959 and they
become subsidiaries of the 1959 and they became subsidiaries of the State
Bank of India. In 1969, 14 commercial bank in the country were
nationalised.
In the phase of banking sector reforms, 7 more banks were nationalised in
1980. With this, 80% of the banking sector in India came under the
government ownership.

New phase of indian Banking System, Reforms after 1991

This phase has introduced many more products and facilities in the banking
sector as part of the reforms process.

In 1991, under the chairmanship of M Narasimham, a committee was set-

up, which worked for the liberalisation of banking practices.

In the phas, the country is flood with foreign bank and their ATM stations.
Efforts are being put to give a satisfactory service to customers.

Phone banking and net banking are [Link] entire system became
more convenience and swift. Time is given importance in all money
transactions.

Nationalisation of Banks

The nationalisation of commercial banks took place with an aim to achieve

Social Welfare, Controlling Private Monopolies, Expansion of Banking,
Reducing Regional Imbalance, Priority Sector Lending and Developing
Banking Habits.

In order to have more control over banks, in 19th July, 1969 Mrs Indira
Gandhi the then Prime Minister nationalised 14 large commercial banks
whose reserves were more than Rs 50 crore. The main aim of nationalising
was to reach client in rural area and provide them which more quality
services.

Following is the list of bank, which got nationalised at this time

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Allahabad Bank,Bank of Baroda,Bank of India,Bank of
Maharashtra,Central Bank of
India,CanaraBankDenaBank,IndianBank,Indian Overseas Bank,Punjab
National Bank,SyndicateBank,UCOBank,UnionBank,United Bank of
India

In 15 April, 1980 the banks with more than Rs 200 crore of reserves got
nationalised.

Those six banks, which gotnationalised are the following

Andhra Bank,CorporationBank,New Bank of India,Oriental Bank of

Commerce,Punjab and Sindh Bank,Vijaya Bank

Later on, in year 1993, the government merged New Bank of India which
Punjab National Banks. It was the only merge between nationalised banks.

Banking system in India

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Reserve Bank of India (RBI):

The country had no central bank prior to the establishment of the RBI. The
RBI is the supreme monetary and banking authority in the country and
controls the banking system in India. It is called the Reserve Bank’ as it
keeps the reserves of all commercial banks.

Scheduled and Non-Scheduled Banks:

Scheduled banks are covered under the 2nd Schedule of the Reserve Bank
of India Act, 1934. To qualify as a scheduled bank, the bank should conform
to the following conditions:

A bank that has a paid-up capital of Rs. 5 Lakh and above qualifies for the
schedule bank category

A bank requires to satisfy the central bank that its affairs are not carried
out in a way that causes harm to the interest of the depositors

A bank should be a corporation rather than a sole-proprietorship or

partnership firm

Non-scheduled Banks

Non-scheduled banks refer to the local area banks which are not listed in
the Second Schedule of Reserve Bank of India. Non-Scheduled Banks are
also required to maintain the cash reserve requirement, not with the RBI,
but with them.

All commercial banks (Indian and foreign), regional rural banks, and state
cooperative banks are scheduled banks. Non- scheduled banks are those
which are not included in the second schedule of the RBI Act, 1934. At
present these are only three such banks in the country.

Commercial Banks:
Commercial banks mobilise savings of general public and make them
available to large and small industrial and trading units mainly for working
capital requirements.

Commercial banks in India are largely Indian-public sector and private

sector with a few foreign banks. The public sector banks account for more
than 92 percent of the entire banking business in India—occupying a
dominant position in the commercial banking. The State Bank of India and
its 7 associate banks along with another 19 banks are the public sector
banks.

Regional Rural Banks:

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The Regional Rural Banks (RRBs) the newest form of banks, came into
existence in the middle of 1970s (sponsored by individual nationalised
commercial banks) with the objective of developing rural economy by
providing credit and deposit facilities for agriculture and other productive
activities of al kinds in rural areas.

The emphasis is on providing such facilities to small and marginal farmers,

agricultural labourers, rural artisans and other small entrepreneurs in rural
areas.

Co-Operative Banks

Cooperative banks are so-called because they are organised under the
provisions of the Cooperative Credit Societies Act of the states. The major
beneficiary of the Cooperative Banking is the agricultural sector in
particular and the rural sector in general.

The cooperative credit institutions operating in the country are mainly of

two kinds: agricultural (dominant) and non-agricultural. There are two
separate cooperative agencies for the provision of agricultural credit: one for
short and medium-term credit, and the other for long-term credit. The
former has three tier and federal structure.

At the apex is the State Co-operative Bank (SCB) (cooperation being a state
subject in India), at the intermediate (district) level are the Central
Cooperative Banks (CCBs) and at the village level are Primary Agricultural
Credit Societies (PACs).

Long-term agriculture credit is provided by the Land Development Banks.

The funds of the RBI meant for the agriculture sector actually pass through
SCBs and CCBs. Originally based in rural sector, the cooperative credit
movement has now spread to urban areas also and there are many urban
cooperative banks coming under SCBs.

Public sector Banks

These are the nationalised banks and account for more than 75 per cent of
the total banking business in the country. Majority of stakes in these banks
are held by the government. In terms of volume, SBI is the largest public
sector bank in India and after its merger with its 5 associate banks (as on
1st April 2017) it has got a position among the top 50 banks of the world.

SBI Allahabd Bank Canara Bank India Overseas Bank…so on

Private Sector Banks

These include banks in which major stake or equity is held by private

shareholders. All the banking rules and regulations laid down by the RBI
will be applicable on private sector banks as well. Given below is the list of
private-sector banks in India-

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Axis bank,HDFC Bank, ICICI Bank,DCB Bank….so on

Foregin Banks

These include banks in which major stake or equity is held by private

shareholders. All the banking rules and regulations laid down by the RBI
will be applicable on private sector banks as well. Given below is the list of
private-sector banks in India-

Small Finance Banks

This is a niche banking segment in the country and is aimed to provide
financial inclusion to sections of the society that are not served by other
banks. The main customers of small finance banks include micro industries,
small and marginal farmers, unorganized sector entities and small business
units. These are licensed under Section 22 of the Banking Regulation Act,
1949 and are governed by the provisions of RBI Act, 1934 and FEMA.

Payments Bank

This is a relatively new model of bank in the Indian Banking industry. It was
conceptualised by the RBI and is allowed to accept a restricted deposit. The
amount is currently limited to Rs. 1 Lakh per customer. They also offer
services like ATM cards, debit cards, net-banking and mobile-banking.

BANK’s LENDING
Lending is the process by which a financial institution provides funds to a
borrower. Often called a lender, the institution typically receives interest in
return for the loan. Lending in banking benefits lenders and borrowers alike
by increasing liquidity within the marketplaces where loans are originated
and used.

This makes it possible for businesses to borrow so they can expand their
operations without having increased overheads from issuing new shares,
thereby diluting equity positions held by earlier investors, or taking on
expensive debt burdens that could push them into bankruptcy if there is
even a modest downturn in economic conditions as we have experienced in
recent years.

THE BENEFITS OF LENDING IN BANKING

The banking sector is one of the most important components of any
economy and is a key driver of economic growth. One of the main functions
that banks perform is providing loans to businesses and consumers, which
help finance new investments and stimulate demand in the economy. The
benefits associated with lending in banking are as follows:

Savitri.M MBA,[Link],PGDIRM,PGDHRM
  Increased economic growth - Banks play an important role in
financing new business investment, leading to increased production
and output, higher employment levels, greater innovation and more
competitive companies. In addition, when consumers have access to
credit, they can increase their spending on goods and services,
boosting overall economic activity.
 More jobs - By providing credit facilities for businesses that are
expanding or starting up operations, banks can create jobs that might
not otherwise exist. Furthermore, bank lending helps foster a healthy
business climate where firms are confident about investing in future
expansion plans, knowing that there will be adequate funding
available if needed. This contributes significantly to maintaining
stable employment levels during tough periods such as in a recession.
 Improved access to credit - One major benefit of having well-
functioning banks is improved access to debt instruments (loans).
 Reduced borrowing costs - Lower interest rates charged on loans by
banks result in companies having more cash flow to reinvest back into
their businesses, thereby stimulating economic growth. For
consumers, it means they can borrow money at a lower cost to finance
things like cars, homes and education.
 Improved economic stability - Finally, bank lending helps ensure an
economy's overall stability since creditworthy firms can obtain the
funding they need even during tough times. This prevents severe
contractions or credit crunches from happening, which can lead to
widespread layoffs and business failures.

Role of Commercial Banks in India

 Commercial banks in India play a crucial role in the country's

financial system and economic development. Here are some key
roles they fulfill:
 Intermediary Functions: Commercial banks act as intermediaries
between depositors and borrowers. They accept deposits from
individuals and institutions and lend these funds to businesses,
individuals, and government entities.
 Credit Creation: One of the most significant functions of
commercial banks is the creation of credit. Through the process of
fractional reserve banking, banks can lend out a portion of the
deposits they receive, thereby creating new money in the form of
loans.

Savitri.M MBA,[Link],PGDIRM,PGDHRM
  Capital Formation: By mobilizing savings from individuals and
channeling them into productive investments, commercial banks
facilitate capital formation in the economy. This capital is essential
for businesses to expand operations, invest in new projects, and
foster economic growth.
 Payment and Settlement Mechanism: Commercial banks provide
various payment and settlement services to facilitate transactions
in the economy. These include issuing checks, providing debit and
credit cards, facilitating electronic fund transfers, and offering
online banking services.
 Financial Intermediation: Commercial banks help allocate financial
resources efficiently by matching the needs of borrowers with the
preferences of savers. They assess the creditworthiness of
borrowers and allocate funds to projects with the highest potential
return, thereby enhancing overall economic efficiency.
 Risk Management: Banks play a crucial role in managing various
financial risks, including credit risk, interest rate risk, liquidity
risk, and operational risk. Through prudent risk management
practices, banks ensure the safety and soundness of the financial
system.
 Promotion of Financial Inclusion: Commercial banks contribute to
financial inclusion by extending banking services to underserved
and marginalized segments of the population. They offer basic
banking products such as savings accounts, loans, and insurance
to help improve access to financial services.
 Monetary Policy Transmission: Commercial banks play a vital role
in the transmission of monetary policy measures implemented by
the central bank. By adjusting their lending rates and deposit rates
in response to changes in monetary policy, banks influence the
overall level of economic activity and inflation.
 Developmental Role: Commercial banks support the development of
various sectors of the economy by providing targeted credit to
priority sectors such as agriculture, small and medium enterprises
(SMEs), and export-oriented industries. This promotes inclusive
growth and sustainable development.
 Overall, commercial banks are integral to the functioning of the
Indian economy, playing a central role in mobilizing savings,
allocating credit, facilitating transactions, and promoting economic
growth and development.

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Reserve Bank of India (RBI)

 The Reserve Bank of India, abbreviated as the RBI, is the Central

Bank of India, meaning it is the apex body in the Indian financial
system.
 It is owned by the Union Ministry of Finance.
 It acts as a regulatory body, responsible for the regulation of
the Indian banking system as well as the control, issuing, and
maintaining money supply in the Indian economy.

Objectives of Reserve Bank of India (RBI)

 To regulate the issue of banknotes

 To maintain reserves with a view to securing monetary stability and
 To operate the credit and currency system of the country to its
advantage.
 To maintain price stability while keeping in mind the objective of
growth.

History of Reserve Bank of India (RBI)

The Reserve Bank of India was established to tackle the economic turmoil
that occurred after World War-I. The timeline of origin and evolution of the
Reserve Bank of India (RBI) can be seen as follows:

Year Event

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Year Event

The 1926 Royal Commission on Indian Currency and

1926 Finance, also known as the Hilton Young Commission,
recommended setting up a Central Bank for India.

The Central Legislative Assembly accepted the

recommendation and passed the Reserve Bank of India Act,
1934
1934, which provides the statutory basis for the functioning
of the Bank.

As per the provision of the RBI Act, the RBI was established
1935 in Calcutta and commenced its operations on 1st April,
1935.

In 1937, the RBI was permanently moved from Calcutta to

1937
Mumbai, where its current Central Office is located.

In 1949, the RBI, which was held by private stakeholders till

1949
now, was nationalized.

FUNCTIONS OF RBI

Monetary Functions of RBI

Monetary Functions of the Reserve Bank of India include

those functions which are concerned with money and money supply in the
economy. Major functions coming in this category include:

 Issuer of Bank Notes: The Reserve Bank of India has the monopoly
of issuing currency notes except for 1 Rupee note and coins.
o The 1 Rupee note and the coins of all
denominations are minted and issue by the Government
of India, not the RBI. But, they are circulated by the
RBI.
o The RBI issues currency notes under a system
called Minimum Reserve System.
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  Banker to the Government: The RBI acts as a banking agent and
financial advisor to the Central as well as the State Governments.
In this capacity, the RBI:
o Manages Government accounts and treasuries.
o Keeps deposits of the Government.
o Lends to the Governments without any interest for the
short term
o Buys and sells Government Securities (G-Secs) on the
Government’s behalf.
oGives monetary and financial advice to the Governments.
 Bankers’ Bank: The RBI is the banker of all Scheduled commercial
banks (SCBs). In this capacity, it performs the following functions:
o Keeps the reserves of banks in the form of Cash Reserve
Ratio (CRR) with itself.
o Provides financial assistance to banks against mortgaged
securities
o Rediscounts Bills of Exchange.
 Lender of Last Resort: It also acts as a lender of last resort for the
Scheduled Commercial Banks (SCBs). Usually, banks and other
financial institutions borrow and lend among themselves to meet
their financial needs. But, in times of crisis, the SCBs approach the
RBI to get financial assistance.
 Custodian and Manager of Foreign Exchange Reserves: In order
to stabilize the external value of Indian currency, the RBI maintains
the reserves of foreign currencies to stabilize the exchange [Link]
function of the RBI also helps promote international trade.
 Controller of Credit or Money Supply: It uses its monetary policy
tools to control the volume of money supply according to the
economic situation of the [Link] helps in controlling inflation
and deflation and hence stabilizing the general price level in the
economy.

General Functions of RBI

The General Functions of the RBI include functions related to general

regulation and promotion of the banking system so as to maintain the
health and growth of the banking system in the country. Major functions
included in this category are as follows:

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  Regulator of the Banks: The RBI Act of 1934 and the Banking
Regulation Act of 1949 entrust the RBI with the powers to regulate
the banks in the country. In this capacity, the RBI performs
functions such as:
o Licensing banks,
o Prescribing minimum requirements of paid-up capital and
reserves, etc.

Promotional Functions: The RBI works towards the promotion of the

Indian Financial System through functions such as

o Enabling expansion of the Commercial Banks in terms of

their branches in the country or aboard,
o Promoting baking habits of people,
o Promoting financial inclusion,
o Consumer education and protection,
o Promoting Digital India initiatives in financial sector, etc.

The Reserve Bank of India (RBI) has about 22 regional offices, which play
a crucial role in the functioning of the RBI at the regional level. These offices
are mostly located in the capital cities of the states.

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