‘Utkarsh 2022’

  • Category
    Economy
  • Published
    22nd Jul, 2019

Context

The Reserve Bank of India (RBI) board, which met in New Delhi, finalised a three- year roadmap to improve regulation and supervision, among other functions of the central bank.

About

  • It is a three-year road map for medium term objective to be achieved for improving regulation, supervision of the central bank
  • This medium term strategy — named Utkarsh 2022 — is in line with the global central banks plan to strengthen the regulatory and supervisory mechanism
  • It is a roadmap to improve regulation and supervision, currency management and payment system etc.
  • An internal committee was formed, which was anchored by outgoing Deputy Governor Viral Acharya, to identify issues that needed to be addressed over the next three years.

Need for Utkarsh/Objectives:

  • Worldwide, all central banks strengthen the regulatory and supervisory mechanism, everybody is formulating a long-term plan and a medium-term plan. So, the RBI has also decided it will formulate a pragramme to outline what is to be achieved in the next three years.
  • The idea is that the central bank plays a proactive role and takes preemptive action to avoid any crisis highlighting the IL&FS debt default issue and the crisis of confidence the non-banking financial sector faced in the aftermath.
  • Further,the board has also approved the RBI’s budget for the July 2019 to June 2020 period.
  • The objective of the policy is to improve regulation and supervision of the central bank.

About RBI

  • The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
  • The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated.
  • Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.
  • The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act.

Main Functions of RBI:

Monetary Authority: Formulates, implements and monitors the monetary policy.

Objective: maintaining price stability while keeping in mind the objective of growth.

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.

Regulator and Supervisor of Payment and Settlement Systems:Introduces and upgrades safe and efficient modes of payment systems in the country to meet the requirements of the public at large.

Objective: maintain public confidence in payment and settlement system

The Reserve Bank of India (RBI) regulates and supervises Public Sector and Private Sector Banks. Under the Provisions of the Banking Regulation Act, 1949:

  • Inspect the bank and its books and accounts
  • Examine on oath any director or other officer of the bank
  • Cause a scrutiny to be made of the affairs of the bank
  • Give directions: (a) in public interest (b) in interest of banking policy (c) in the interest of the depositors (d) in the interest of the bank and (e) to secure proper management of the bank
  • Call for any information of account details
  • Determine the policy in relation to advances by the bank
  • Direct special audit of the bank
  • Direct the bank to initiate insolvency resolution process in respect of a default, under the provisions of Insolvency and Bankruptcy Code, 2016
  • Issue directions to banks for resolution of stressed assets
  • Direct changes in management of the bank
  • Caution or prohibit banks in particular against entering into any particular transaction or class of transactions, and generally give advice to any bank
  • Give assistance to any bank by means of the grant of a loan or advance
  • Direct banks to call a meeting of its directors for the purpose of considering any matter relating to or arising out of the affairs of the bank; or require an officer of the bank to discuss any such matter with an officer of the RBI
  • Appoint one or more of its officers to observe the manner in which the affairs of the bank or of its offices or branches are being conducted and make a report thereon
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