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Liquor baron Vijay Mallya, President & Chairman, Kingfisher Airlines Ltd. File photo: K. Gopinathan | The HinduKingfisher, the ailing airline has been on life support from the banking sector and it has managed to fund much of the business with outside money. File photo: E. Lakshmi Narayanan | The HinduFigures in Rs. crore. Source: BSEKingfisher Airlines was set up in 2003 but hasn't seen a single year of profit since it got listed in 2006.Let’s take a look at how the airline put the liquor baron Vijay Mallya on the rocks.May 9, 2005: Kingfisher Airlines’ maiden flight takes off. Alex Wilcox, CEO of Kingfisher, said the airline would not adopt the low-cost, no-frills model but chart the middle course.June 30, 2005: Becomes the first and only Indian carrierto order the Airbus A380. Orders five A380s (cancelled subsequently), five A350-800s and five A330-200s for over $3 billion.May 8, 2007: Vijay Mallya eyes stake in Air Deccan.June 2, 2007: Vijay Mallya buys over the crisis-ridden no-frills Air Deccan owned by Capt Gopinath in 2007. The merged group plans to save up to Rs. 300 crore on costswith a combined fleet strength of 71 aircraft. Through a reverse merger, Kingfisher Airlines became Air Deccan and once the entire acquisition was completes with necessary approvals from the regulator SEBI in place, Mr. Mallya quickly changed the airline's name back to Kingfisher Airlines in 2008.August 31, 2009: Kingfisher’s board approves aresolution to raise $100 million (nearly Rs 487.8 crore) by various instruments including Global Depository Receipts (GDRs). This was in addition to in addition to the decision for induction of capital for an amount not exceeding Rs 500 crore by a rights issue of equity shares taken on July 28.November 4, 2009: Kingfisher reports a net loss of Rs 418.77 crore during the second quarter of the fiscal. Its income from operations also declines by 13.6 per cent during the quarter compared to the same period last year.In view of the huge losses and capacity reduction, Kingfisher decides to lay off nearly 100 pilots. The air-carrier later hiked fuel surcharges.March 15, 2010: Despite operating losses, Kingfisherannounces flight to Europe.September 30, 2010: Kingfisher Airlines appoints Sanjay Aggarwal as CEO. Mr. Aggarwal is the former CEO of SpiceJet. Mr. Mallya also announced that staff would be pruned.November 25, 2010: Kingfisher Airlines Board approves debt recast package. The airline’s debt stood at over Rs 6,000 crore.September 15, 2011: The company’s auditors submit an annual report for 2010-11 which pointed out that the loss-making air carrier’s accumulated losses at the end of the financial year were more than 50 per cent of its net worth.September 28, 2011: Vijay Mallya decides to exit low-cost business.November 13, 2011: The airline, with a debt of around Rs 6,500 crore, looks at cutting costs and taking several steps to face the challenging times.November 15, 2011: Kingfisher Airlines loss doubles to Rs.469 crore for the September 2011 quarter.November 20, 2011: Vayalar Ravi says that the Centre hasno plan for any package to salvage the airlines.December 1, 2011: Mumbai International Airport Pvt. Ltd.sends a notice to the cash-strapped airlines to pay the Rs.90-crore outstanding dues.December 9, 2011: The Service Tax Department freezes11 accounts of Kingfisher Airlines for non-payment of Rs.70 crore.December 14, 2011: Govt de-freezes bank accounts after part-payment of the service tax dues.February 16, 2012: Kingfisher Airlines, reports a loss of Rs.444.26 crore at the third quarter results for 2011-12.February 20, 2012: Kingfisher Airlines cancels several of its flights after reports of the Income-Tax Department freezing some of its accounts.February 23, 2012: The carrier operates a truncated schedule and faced the prospect of losing a number of prime flying slots.March 8, 2012: Another blow to Kingfisher with International Air Transport Association asking travel agents to immediately stop booking tickets on the private airline's behalf for failure in settling dues since February.March 12, 2012: Furthertrouble, as employees protest delays in salary payment.March 14, 2012: Vijay Amritraj resigns from Kingfisher board.March 15, 2012: Kingfisher announces curtailing of its international operations.March 17, 2012: Revenue dept. threatens to take Kingfisher Airlines to court over alleged service tax evasion, saying the company has not deposited taxes it collected from travellers.March 19, 2012: Anil Kumar Ganguly, the only independent director on the board of Kingfisher Airlines,quits the company, leaving it with only three board members.March 20, 2012: Mr. Mallya explains the airline's position to the Directorate-General of Civil Aviation (DGCA) following summons and says that it is suspending all its international operations.March 27, 2012: Burdened by a debt of over Rs.7,000 crore, the airline suspends operations from Kolkata, Hyderabad, Patna, Lucknow, Thiruvananthapuram and Bhubaneshwar. The airline operated about 120 daily flights by this date, down from more than 400 earlier.March 28, 2012: The airlines inducts three independent directors in its board to comply with the listing norms.April 2, 2012: The company’s staff threaten to go on strike, demanding payment of salary dues.April 3, 2012: The standoff ends with the protestors accepting the assurance given by Mallya.April 9, 2012: Employees, including pilots and engineers,receive salaries after a delay of nearly four months.May 11, 2012: Kingfisher flights cancelled after the pilots report sick to protest non-payment of salaries.June 27, 2012: Kingfisher shares tumble over 13%following reports that 34 aircraft have been possessed due to non-payment of lease rentals.July 5, 2012: A 15-day time was given by the company’s lenders to come up with a plan to improve its operations. The airlines had a total outstanding debt of around Rs.7,500 crore to a consortium of 17 banks led by State Bank of India (SBI).July 14, 2012: Pilots go on strike against the non-payment of wages for almost five months.July 18, 2012: Minister for Civil Aviation Ajit Singh rules out bailout of Kingfisher Airlines.August 8, 2012: A section of its employees strike and 15 flights were cancelled.August 18, 2012: A section of pilots of the near-bankrupt airlines go on strike, second time in a month, demanding immediate payment of March salaries, leading to cancellation of seven flights from Mumbai.September 4, 2012: Chairman Vijay Mallya givesguarantees worth Rs. 5,904 crore for the carrier’s loans and other liabilities in 2011-12, but did not get any commission for the same because of lenders’ opposition.September 6, 2012: A section of the company’s engineers go on strike demanding payment of salaries. The airlines’lenders ask Mallya to spell out the airline’s revival plan by the end of the month.September 9, 2012: Pilots from both Delhi and Mumbaithreaten to strike work as part of mass agitation for immediate disbursal of salaries.September 26, 2012: Mr. Mallya announces that the carrier was in talks with overseas airlines for investment.September 28, 2012: Turning down a request for Rs.200-crore working loan by Kingfisher, the State Bank of India-led lenders consortium, asks SBI Capitals to chalk out a fresh revival plan for the cash-strapped airline in the next 2-3 weeks.October 1, 2012: Unpaid staff protest in Delhi, Mumbai and other airports and almost all of Kingfisher’s flights from all stations were cancelled as engineers did not certify the planes to fly.October 2, 2012: The carrier declared partial lock-outfollowing a strike by a section of its employees.October 4, 2012: Uncertainty continues over Kingfisher resuming operations.October 5, 2012: Banks give lifeline to the carrier, agreeing to release Rs.60 crore locked in an escrow account to pay employees’ salaries.October 6, 2012: DGCA issues show-cause notice to Kingfisher asking why its flying permit should not be suspended or cancelled.October 9, 2012: DGCA asks Kingfisher to stop ticket bookings, following reports that the airline planned to resume normal operations from October 13.October 12, 2012: Commercial banks which had lent over Rs.7,000 crore to the airlines, closely monitor the situation and tighten the noose around its promoter to protect their interest.The airlines further extends its partial lock-out until October 20 as it could not persuade the striking employees to join back duty without getting any salary.A non-bailable arrest warrant issued against Vijay Mallya, and four other directors for non-appearance in cases relating to bouncing of cheques issued in favour of GMR Hyderabad International Airport Limited (GHIAL) towards user charges.October 20, 2012: The airline’s permit got suspended and experts said Vijay Mallya’s United Breweries group needs to pump in over Rs. 3,000 crore to get Kingfisher airborne again as no foreign operator would come forward to invest in the airline in its present state.October 24, 2012: Employees reject the management’s fresh offer and demand payment of four months’ backlogin lumpsum before October 26.October 25, 2012: Engineers, technicians and pilots call off their 26-day strike and agreed to join work immediately by accepting the management’s offer of disbursal of three months salary.October 30, 2012: Vijay Mallya meets Civil Aviation Secretary K.N. Srivastava on the airlines’ revival plan and its intention to resume operations as soon as possible.November 1, 2012: The airlines pay April salary to its employees and the salary for March was paid the moment the employees called off their strike on October 25.November 9, 2012: The company’s Q2 loss widens to Rs. 754 crore, as compared to a net loss of Rs.469 crore in the corresponding period in the previous year.November 10, 2012: Mr. Mallya loses Royal Challenge when international liquor major Diageo announced its decision to acquire 53.4 per cent stake in Vijay Mallya-owned United Spirits Ltd. (USL) for Rs.11,166.50 crore.November 16, 2012: The company starts paying salariesto employees in batches and employees with low salaries received their May wage.December 5, 2012: Trying to help revive Kingfisher, says SBI, the lead banker in the 17-lenders consortium that extended Rs 7,000 crore loans to the carrier, and said that the banks are trying to do everything to find an amicable solution to the carrier’s financial troubles.Karnataka High Court directs Kingfisher to deposit 50 per cent of the total amount of Rs.371 crore that the company is required to remit to the Income Tax Department as tax deducted at source (TDS) from its employees and payments made towards company expenses.December 20, 2012: Kingfisher applies for renewal of its licence that would expire on December 31.December 25, 2012: The Airlines submits an interim revival plan to the DGCA, seeking approval to take to the skies once again after being grounded for almost three months.December 31, 2012: The carrier loses its flying licence as the DGCA refused to renew its Air Operator Permit (AOP).January 9, 2013: The company flies into more trouble, with its employees planning to head to court, a move that came after the management delayed in paying pending salaries.January 10, 2013: The airlines’ Chairman Vijay Mallyaappeals to his staff to stay on board, telling them that he was planning a limited restart with seven aircraft.January 22, 2013: SBI’s Chairman Pratip Chaudhuri says that Kingfisher needs Rs. 2,000 crore for revival.February 18, 2013: United Breweries Holdings seeksshareholders’ approval to provide additional loans of Rs.450 crore to the grounded airline.February 21, 2013: The Special Court for Economic Offences, Bangalore, issues summons to Vijay Mallya on a criminal case filed by the Income-Tax Department for not remitting to the government tax deducted at source (TDS).February 25, 2013: The beleaguered airlines losesinternational and domestic flying slots and the move came close on heels of a decision taken by the consortium of bankers to start recalling their loans amounting to Rs.7,500 crore.March 10, 2013: DGCA asks the carrier to clear all dues, including pending salaries of employees, before seeking licence renewal.March 15, 2013: Airports Authority of India says it would release the deregistered leased aircraft of Kingfisher for the lessors only after a formal nod from the Civil Aviation Ministry.March 21, 2013: Civil Aviation Minister Ajit Singh says that Kingfisher has not yet given a revival plan to restart operations.March 27, 2013: DGCA deregisters 15 Kingfisher aircraft.April 3, 2013: Bombay High Court refuses to grant any interim relief to United Breweries Holdings, which had filed a petition to prevent Kingfisher Airlines’ lenders from selling pledged shares of UB group companies.April 5, 2013: The airlines' staff protest in Bangalore demanding the immediate release of their pending salaries.June 2, 2013: Three senior Kingfisher executives quit.June 8, 2013: Mallya says he cannot pay his employees.August 15, 2013: Auditors red-flag Kingfisher’s revival plans.September 24, 2013: Kingfisher in talks with foreign investor for potential stake sale.October 29, 2013: Mallya ranks 84th in Forbes India rich list.January 7, 2014: Employees of grounded Kingfisher Airlines have intensified efforts to recover their unpaid salaries.February 12, 2014: Kingfisher Airlines reported a net lossof Rs. 822.42 crore for the third quarter ended December 31, 2013.February 17,2014: The CEO of the company, Sanjay Aggarwal quit Kingfisher airlines.July 17, 2014: The Kingfisher was declared to be the top NPA of the country as it failed to repay loans of over 4,000 crore, mostly borrowed from state-owned banks.July 31, 2014: Kingfisher Airlines head Vijay Mallyapersonally appears before the Special Court for Economic Offences in Bangalore, in connection with three criminal cases booked against him by the Income Tax Department. The court granted him bail while directing him to deposit Rs. 1 lakh as cash surety in each case, bail bonds and solvent surety for the same sum.August 9, 2014: CBI institues a preliminary inquiryagainst IDBI Bank and Kingfisher Airlines. The bank had sanctioned a loan of Rs. 950 crore, despite KFA having a negative rating.August 21, 2014: Punjab National Bank issues notice to KFA alleging the carrier has wilfully defaulted in payment of outstanding dues of over Rs 770 crore.September 1, 2014: United Bank of India declares Vijay Mallya and three directors of Kingfisher Airlines (KFA) aswilful defaulters.September 2, 2014: Supreme Court denies relief to KFA challenging the decision of the Grievance Redressal Committee of United Bank of India (UBI) to declare the airline and its promoter Vijay Mallya as wilful defaulters.September 4, 2014: Vijay Mallya reiterates his intention to seek legal recourse in the UBI case, during the Annual General Body Meeting of United Breweries.September 27, 2014: Kingfisher Airlines secures a stay from the Calcutta High Court on the decision of United Bank of India’s (UBI) Grievance Redressal Committee, which had earlier declared the airline and its directors, including its Chairman Vijay Mallya, as wilful defaulters.December 1, 2014: Centre rejects move to re-appoint Mallya as MD of Kingfisher AirlinesDecember 2, 2014: United Bank of India (UBI) identifies United Breweries Holdings, the guarantor of grounded airline Kingfisher, as wilful defaulter.The bank had already declared Kingfisher Airlines and its four directors, including Mr. Mallya, as wilful defaulters.February 24, 2015: A 17-bank consortium led by State Bank of India takes over possession of the prized Kingfisher House, estimated to be worth Rs.100 crore.April 25, 2015: Alleging fund diversion to Kingfisher and other UB group entities, United Spirits’ new owner Diageo has asked Vijay Mallya to step down as Chairman and Director of the Indian liquor firm, a demand he out rightly rejected.April 26, 2015: Mallya says only shareholders can ‘oust’ him from USLOctober 10, 2015: CBI conducts searches at Vijay Mallya's offices. Sources say raids connected to the case of a Rs. 950 crore loan that IDBI Bank had provided Kingfisher AirlinesNovember 25, 2015: Vijay Mallya has offered banks to pay the principal amount that he owes but not the interest component and he has approached the bankers seeking a meeting.December 10, 2015: The CBI questions Vijay Mallya as part of the ongoing probe into alleged wilful default of Rs.900-crore loan in conspiracy with unknown officials of IDBI bank.February 16, 2016: PNB declares United Breweries Holdings ‘wilful defaulter’February 19, 2016: As many as four banks are contemplating selling assets of beleaguered air carrier Kingfisher Airlines to asset reconstruction companies (ARCs) to recover part of their dues.February 27, 2016: The State Bank of India (SBI)-led consortium of lenders has moved the debt recovery tribunal (DRT) to attach defunct carrier Kingfisher Airlines’ promoter Vijay Mallya’s passport.February 28, 2016: Mallya exits USL but over 2 lakh investors still stuck in KFA Read moreMarch 3, 2016: KFA employees write open letter to Vijay MallyaMarch 7, 2016: Vijay Mallya says he is in talks to settle debt with lendersThe Enforcement Directorate registers a money-laundering case against Vijay Mallya and the CFO of Kingfisher Airlines A. Raghunathan in connection with the CBI’s probe into the alleged default of a Rs. 900-crore loan in collusion with IDBI officials.The Bengaluru Bench of the Debt Recovery Tribunal temporarily restrains U.K.-based Diageo Plc from paying $75 million to Mr. Mallya as per the reported agreement signed with him.March 8: 2016: Banks move Supreme Court to ban Vijay Mallya’s overseas travelMarch 9, 2016: Mallya left India on March 2, government tells courtMarch 11, 2016:The ED issues summons to businessman Vijay Mallya in connection with the money laundering case against him, while two of his former employees were quizzed by the agency. He has been asked to present himself before the investigating team on March 18.Refuting the allegations that he was evading the law, Mr. Mallya defends himself on the microblogging site, Twitter.March 30, 2016: Supreme Court hears Mallya's case. Mallya offers to repay Rs. 4000 cr. to banks by September. SC gives banks a week's time to decideApril 7, 2016: With the banks outrightly rejecting two offers made by Vijay Mallya towards payment of dues worth Rs. 9,000 crore, the Supreme Court orders him to file an affidavit on oath disclosing all assets as on March 31, 2016 in India and abroad, not only in his name but also in those of his wife and children.April 15, 2016: Within days of a request from the Enforcement Directorate, in connection with a money laundering probe in the over Rs. 900 crore IDBI Bank loan fraud case, the Ministry of External Affairs suspends Vijay Mallya’s diplomatic passport.April 20, 2016: Hyderabad court convicts Vijay Mallya in a cheque-bouncing case filed against him by GMR Hyderabad International Airport.April 21, 2016: PMLA court directs ED to execute the non-bailable warrant against Vijay Mallya | Banks have no right to seek information about my assets abroad, he says | ED seeks Vijay Mallya's deportationApril 24, 2016: MEA revokes Vijay Mallya’s passportApril 29, 2016: I am in ‘forced exile’, no plans to return to India, said Mallya in an interview to Financial Times.April 30, 2016: Seeking to recover their dues from beleaguered businessman Vijay Mallya, lenders initiate an auction of various brands and trademarks of the long-grounded Kingfisher Airlines, including its once-famous tagline ‘Fly The Goodtimes’, but bidders were hard to come by.May 02, 2016: Independent MP Mallya, facing the case of loan default of over Rs. 9,400 crore, resigned from Rajya Sabha.-the hindu article

The Reserve Bank of India (RBI) is India's central banking institution, which controls the issuance and supply of the Indian rupee. Until the Monetary Policy Committee was established in 2016, it also controlled monetary policy in India.[6]It commenced its operations on 1 April 1935 in accordance with the Reserve Bank of India Act, 1934.[7]The original share capital was divided into shares of 100 each fully paid, which were initially owned entirely by private shareholders.[8]Following India's independence on 15 August 1947, the RBI was nationalised on 1 January 1949.[9]The RBI plays an important part in the Development Strategy of the Government of India. It is a member bank of the Asian Clearing Union. The general superintendence and direction of the RBI is entrusted with the 21-member central board of directors: the governor; four deputy governors; two finance ministry representatives (usually the Economic Affairs Secretary and the Financial Services Secretary); ten government-nominated directors to represent important elements of India's economy; and four directors to represent local boards headquartered at Mumbai, Kolkata, Chennai and the capital New Delhi. Each of these local boards consists of five members who represent regional interests, the interests of co-operative and indigenous banks.The central bank was an independent apex monetary authority which regulates banks and provides important financial services like storing of foreign exchange reserves, control of inflation, monetary policy report till August 2016. A central bank is known by different names in different countries. The functions of a central bank vary from country to country and are autonomous or quasi-autonomous body and perform or through another agency vital monetary functions in the country. A central bank is a vital financial apex institution of an economy and the key objects of central banks may differ from country to country still they perform activities and functions with the goal of maintaining economic stability and growth of an economy.[10]The bank is also active in promoting financial inclusion policy and is a leading member of the Alliance for Financial Inclusion (AFI). The bank is often referred to by the name Mint Street.[11]RBI is also known as banker's bank.Contents1 Preamble2 History 2.1 1935–1949 2.2 1950–1960 2.3 1961–1968 2.4 1969–1984 2.5 1985–1990 2.6 1991–1999 2.7 Since 20003 Structure4 Branches and support bodies5 Functions 5.1 Financial Supervision 5.2 Regulator and supervisor of the financial system 5.3 Regulator and Supervisor of the Payment and Settlement Systems 5.4 Banker and Debt Manager to Government 5.5 Managing foreign exchange 5.6 Issue of currency 5.7 Banker's bank 5.8 Regulator of the Banking System 5.9 Detection of fake currency 5.10 Developmental role 5.11 Related functions 5.12 Custodian to foreign exchange6 2016 Demonetisation 6.1 Cash crunch and effects7 Policy Rates and Reserve Ratios 7.1 Repo Rate 7.2 Reverse Repo Rate (RRR) 7.3 Statutory liquidity ratio (SLR) 7.4 Bank Rate 7.5 Liquidity Adjustment Facility (LAF) 7.6 Cash Reserve Ratio (CRR) 7.7 Open Market Operation (OMO) 7.8 Marginal Standing Facility (MSF)8 Qualitative Tools 8.1 Margin Requirements or LTV 8.2 Selective credit control 8.3 Moral Suasion9 Limitations of Monetary Policy10 Publications11 References12 Further reading13 External linksPreambleThe 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; to have a modern monetary policy framework to meet the challenge of an increasingly complex economy, to maintain price stability while keeping in mind the objective of growth."HistoryA 2010 stamp dedicated to the 75th anniversary of the Reserve Bank of IndiaThe Reserve Bank of India was established following the Reserve Bank of India Act of 1934.[12]Though privately owned initially, it was nationalised in 1949 and since then fully owned by Government of India (GoI).1935–1949Reserve Bank of India-10 Rupees (1938), first year of banknote issue.The Reserve Bank of India was founded on 1 April 1935 to respond to economic troubles after the First World War.[13]The Reserve Bank of India was conceptualized based on the guidelines presented by the Central Legislative Assembly which passed these guidelines as the RBI Act 1934.[14]RBI was conceptualized as per the guidelines, working style and outlook presented by Dr. B. R. Ambedkar in his book titled “The Problem of the Rupee – Its origin and its solution” and presented to the Hilton Young Commission. The bank was set up based on the recommendations of the 1926 Royal Commission on Indian Currency and Finance, also known as the Hilton–Young Commission.[15]The original choice for the seal of RBI was The East India Company Double Mohur, with the sketch of the Lion and Palm Tree. However, it was decided to replace the lion with the tiger, the national animal of India. The Preamble of the RBI describes its basic functions to regulate the issue of bank notes, keep reserves to secure monetary stability in India, and generally to operate the currency and credit system in the best interests of the country. The Central Office of the RBI was established in Calcutta (now Kolkata) but was moved to Bombay (now Mumbai) in 1937. The RBI also acted as Burma's (now Myanmar) central bank until April 1947 (except during the years of Japanese occupation (1942–45)), even though Burma seceded from the Indian Union in 1937. After the Partition of India in August 1947, the bank served as the central bank for Pakistan until June 1948 when the State Bank of Pakistan commenced operations. Though set up as a shareholders’ bank, the RBI has been fully owned by the Government of India since its nationalization in 1949.[16]RBI has monopoly of note issue.1950–1960In the 1950s, the Indian government, under its first Prime Minister Jawaharlal Nehru, developed a centrally planned economic policy that focused on the agricultural sector. The administration nationalized commercial banks[17]and established, based on the Banking Companies Act, 1949 (later called the Banking Regulation Act), a central bank regulation as part of the RBI. Furthermore, the central bank was ordered to support economic plan with loans.[18]1961–1968As a result of bank crashes, the RBI was requested to establish and monitor a deposit insurance system. Meant to restore the trust in the national bank system, it was initialized on 7 December 1961. The Indian government founded funds to promote the economy, and used the slogan "Developing Banking". The government of India restructured the national bank market and nationalized a lot of institutes. As a result, the RBI had to play the central part in controlling and supporting this public banking sector.1969–1984In 1969, the Indira Gandhi-headed government nationalized 14 major commercial banks. Upon Indira Gandhi's return to power in 1980, a further six banks were nationalized.[15]The regulation of the economy and especially the financial sector was reinforced by the Government of India in the 1970s and 1980s.[19]The central bank became the central player and increased its policies a lot for various tasks like interests, reserve ratio and visible deposits.[20]These measures aimed at better economic development and had a huge effect on the company policy of the institutes. The banks lent money in selected sectors, like agricultural business and small trade companies.[21]The Banking Commission was established on Wednesday, 29 January 1969, to analyze banking costs, effects of legislations and banking procedures, including non banking financial intermediaries and indigenous banking on Government of India economy; with Mr. R.G. Saraiya as the chairman.[22][23][24]The branch was forced to establish two new offices in the country for every newly established office in a town.[25]The oil crises in 1973 resulted in increasing inflation, and the RBI restricted monetary policy to reduce the effects.[26]1985–1990A lot of committees analysed the Indian economy between 1985 and 1991. Their results had an effect on the RBI. The Board for Industrial and Financial Reconstruction, the Indira Gandhi Institute of Development Research and the Security & Exchange Board of India investigated the national economy as a whole, and the security and exchange board proposed better methods for more effective markets and the protection of investor interests. The Indian financial market was a leading example for so-called "financial repression" (Mckinnon and Shaw).[20]The Discount and Finance House of India began its operations in the monetary market in April 1988; the National Housing Bank, founded in July 1988, was forced to invest in the property market and a new financial law improved the versatility of direct deposit by more security measures and liberalisation.[27]1991–1999The national economy contracted in July 1991 as the Indian rupee was devalued.[28]The currency lost 18% of its value relative to the US dollar, and the Narsimham Committee advised restructuring the financial sector by a temporal reduced reserve ratio as well as the statutory liquidity ratio. New guidelines were published in 1993 to establish a private banking sector. This turning point was meant to reinforce the market and was often called neo-liberal.[19]The central bank deregulated bank interests and some sectors of the financial market like the trust and property markets.[29]This first phase was a success and the central government forced a diversity liberalisation to diversify owner structures in 1998.[20]The National Stock Exchange of India took the trade on in June 1994 and the RBI allowed nationalized banks in July to interact with the capital market to reinforce their capital base. The central bank founded a subsidiary company—the Bharatiya Reserve Bank Note Mudran Private Limited—on 3 February 1995 to produce banknotes.[30]Since 2000The Foreign Exchange Management Act, 1999 came into force in June 2000. It should improve the item in 2004–2005 (National Electronic Fund Transfer).[31]The Security Printing & Minting Corporation of India Ltd., a merger of nine institutions, was founded in 2006 and produces banknotes and coins.[32]The national economy's growth rate came down to 5.8% in the last quarter of 2008–2009[33]and the central bank promotes the economic development.[34]In 2016, the Government of India amended the RBI Act to establish the Monetary Policy Committee (MPC) to set . This limited the role of the RBI in setting interest rates, as the MPC membership is evenly divided between members of the RBI (including the RBI governor) and independent members appointed by the government. However, in the event of a tie, the vote of the RBI governor is decisive.[6]StructureRBI runs a monetary museum in MumbaiThe central board of directors is the main committee of the central bank. The Government of India appoints the directors for a four-year term. The Board consists of a governor, and not more than four deputy governors; four directors to represent the regional boards;[35]2 — usually the Economic Affairs Secretary and the Financial Services Secretary — from the Ministry of Finance and 10 other directors from various fields. The Reserve Bank — under Raghuram Rajan's governorship — wanted to create a post of a chief operating officer (COO), in the rank of deputy governor and wanted to re-allocate work between the five of them (four deputy governor and COO).[36][37]The bank is headed by the governor, currently Shaktikanta Das.[1]There are four deputy governors BP Kanungo,[38]N S Vishwanathan, Viral Acharya and Mahesh Kumar Jain.[39]Two of the four deputy governors are traditionally from RBI ranks and are selected from the Bank's Executive Directors. One is nominated from among the Chairpersons of public sector banks and the other is an economist. An Indian Administrative Service officer can also be appointed as deputy governor of RBI and later as the governor of RBI as with the case of Y. Venugopal Reddy and Duvvuri Subbarao. Other persons forming part of the central board of directors of the RBI are Dr. Nachiket Mor, Y C Deveshwar, Prof Damodar Acharya, Ajay Tyagi and Anjuly Duggal.Uma Shankar, chief general manager (CGM) in charge of the Reserve Bank of India's financial inclusion and development department has taken over as executive director (ED) in the central bank.[citation needed]Sudha Balakrishnan, a former vice president at National Securities Depository Limited, assumed charge as the first chief financial officer (CFO) of the Reserve Bank on 15 May 2018; she was given the rank of an executive director.[40]Branches and support bodiesRBI Headquarters in Mumbai[41]The Reserve Bank building as seen from the Chennai Suburban Railway linesThe RBI has four regional representations: North in New Delhi, South in Chennai, East in Kolkata and West in Mumbai. The representations are formed by five members, appointed for four years by the central government and with the advice of the central board of directors serve as a forum for regional banks and to deal with delegated tasks from the Central Board.[42]It has two training colleges for its officers, viz. Reserve Bank Staff College, Chennai and College of Agricultural Banking, Pune. There are three autonomous institutions run by RBI namely National Institute of Bank Management (NIBM), Indira Gandhi Institute of Development Research (IGIDR), Institute for Development and Research in Banking Technology (IDRBT).[43]There are also four Zonal Training Centres at Mumbai, Chennai, Kolkata and New Delhi.The Board of Financial Supervision (BFS), formed in November 1994, serves as a CCBD committee to control the financial institutions. It has four members, appointed for two years, and takes measures to strength the role of statutory auditors in the financial sector, external monitoring and internal controlling systems. The Tarapore committee was set up by the Reserve Bank of India under the chairmanship of former RBI deputy governor S. S. Tarapore to "lay the road map" to capital account convertibility. The five-member committee recommended a three-year time frame for complete convertibility by 1999–2000.On 8 December 2017, Surekha Marandi, Executive Director (ED) of Reserve Bank of India, said RBI will open an office in the north-eastern state of Arunachal Pradesh[44]FunctionsReserve Bank of India regional office, Delhi entrance with the Yakshini sculpture depicting "Prosperity through agriculture".[45]The regional office of RBI (right) in front of GPO (left) at Dalhousie Square, Kolkata.The central bank of any country executes many functions such as overseeing monetary policy, issuing currency, managing foreign exchange, working as a bank for government and as a banker of scheduled commercial banks. It also works for overall economic growth of the country. The preamble of the Reserve Bank of India describes its main functions 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.Financial SupervisionThe primary objective of RBI is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies.The Board is constituted by co-opting four Directors from the Central Board as members for a term of two years and is chaired by the governor. The deputy governors of the reserve bank are ex-officio members. One deputy governor, usually, the deputy governor in charge of banking regulation and supervision, is nominated as the vice-chairman of the board. The Board is required to meet normally once every month. It considers inspection reports and other supervisory issues placed before it by the supervisory departments.BFS through the Audit Sub-Committee also aims at upgrading the quality of the statutory audit and internal audit functions in banks and financial institutions. The audit sub-committee includes deputy governor as the chairman and two Directors of the Central Board as members. The BFS oversees the functioning of Department of Banking Supervision (DBS), Department of Non-Banking Supervision (DNBS) and Financial Institutions Division (FID) and gives directions on the regulatory and supervisory issues.Regulator and supervisor of the financial systemThe institution is also the regulator and supervisor of the financial system and prescribes broad parameters of banking operations within which the country's banking and financial system functions. Its objectives are to maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public. The Banking Ombudsman Scheme has been formulated by the Reserve Bank of India (RBI) for effective addressing of complaints by bank customers. The RBI controls the monetary supply, monitors economic indicators like the gross domestic product and has to decide the design of the rupee banknotes as well as coins.[46]Regulator and Supervisor of the Payment and Settlement SystemsPayment and settlement systems play an important role in improving overall economic efficiency. The Payment and Settlement Systems Act of 2007 (PSS Act)[47]gives the Reserve Bank oversight authority, including regulation and supervision, for the payment and settlement systems in the country. In this role, the RBI focuses on the development and functioning of safe, secure and efficient payment and settlement mechanisms. Two payment systems National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS) allow individuals, companies and firms to transfer funds from one bank to another. These facilities can only be used for transferring money within the country.NEFT operates on a deferred net settlement (DNS) basis and settles transactions in batches. The settlement takes place for all transactions received till a particular cut-off time. It operates in hourly batches — there are 12 settlements from 8 am to 7 pm on weekdays and SIX between 8 am and 1 pm on Saturdays.[48]Any transaction initiated after the designated time would have to wait till the next settlement time. In RTGS, transactions are processed continuously, all through the business hours. RBI's settlement time is 9 am to 4:30 pm on weekdays and 9 am to 2:00 pm on Saturdays.[49]Banker and Debt Manager to GovernmentJust like individuals need a bank to carry out their financial transactions effectively & efficiently, Governments also need a bank to carry out their financial transactions. RBI serves this purpose for the Government of India (GoI). As a banker to the GoI, RBI maintains its accounts, receive payments into & make payments out of these accounts. RBI also helps GoI to raise money from public via issuing bonds and government approved securities.Managing foreign exchangeThe central bank manages to reach different goals of the Foreign Exchange Management Act, 1999. Their objective is to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.With increasing integration of the Indian economy with the global economy arising from greater trade and capital flows, the foreign exchange market has evolved as a key segment of the Indian financial market and RBI has an important role to play in regulating & managing this segment. RBI manages forex and gold reserves of the nation.On a given day, the foreign exchange rate reflects the demand for and supply of foreign exchange arising from trade and capital transactions. The RBI's Financial Markets Department (FMD) participates in the foreign exchange market by undertaking sales / purchases of foreign currency to ease volatility in periods of excess demand for/supply of foreign currency.Issue of currencyReserve bank of India is the sole body who is authorized to issue currency in India. The bank also destroys the same when they are not fit for circulation. All the money issued by the central bank is its monetary liability, i.e., the central bank is obliged to back the currency with assets of equal value, to enhance public confidence in paper currency. The objectives are to issue bank notes and give public adequate supply of the same, to maintain the currency and credit system of the country to utilize it in its best advantage, and to maintain the reserves. RBI maintains the economic structure of the country so that it can achieve the objective of price stability as well as economic development because both objectives are diverse in themselves. For printing of notes, the Security Printing and Minting Corporation of India Limited (SPMCIL), a wholly owned company of the Government of India, has set up printing presses at Nashik, Maharashtra and Dewas, Madhya Pradesh. The Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), also has set up printing presses in Mysore in Karnataka and Salboni in West Bengal. In all, there are four printing presses.[50]And for the minting of coins, SPMCIL has four mints at Mumbai, Noida (UP), Kolkata and Hyderabad for coin production.[50]While coins and one rupee notes are minted by Government of India (GoI), the RBI works as an agent of GoI for distributing and handling of coins. RBI also works to prevent counterfeiting of currency by regularly upgrading security features of currency. For printing currency, RBI has four facilities at Dewas, Nasik, Mysore and Salboni. The RBI is authorized to issue notes up to value of Rupees ten thousands and coin up to one thousands. New notes of Rupees 500 and 2000 have been issued on 8 November 2016. The old series note of Rupees 1000 and 500 are considered illegal and just paper from midnight on 8 November 2016. Earlier 1000 notes have been discarded by RBI.Banker's bankNagpur branch holds most of India's gold deposits.[51][52][53][54]Reserve Bank of India also works as a central bank where commercial banks are account holders and can deposit money. RBI maintains banking accounts of all scheduled banks.[55]Commercial banks create credit. It is the duty of the RBI to control the credit through the CRR, bank rate and open market operations. As banker's bank, the RBI facilitates the clearing of cheques between the commercial banks and helps the inter-bank transfer of funds. It can grant financial accommodation to schedule banks. It acts as the lender of the last resort by providing emergency advances to the banks. It supervises the functioning of the commercial banks and takes action against it if the need arises. The RBI also advises the banks on various matters for example Corporate Social Responsibility.Regulator of the Banking SystemRBI has the responsibility of regulating the nation's financial system. As a regulator and supervisor of the Indian banking system it ensures financial stability & public confidence in the banking system. RBI uses methods like On-site inspections, off-site surveillance, scrutiny & periodic meetings to supervise new bank licenses, setting capital requirements and regulating interest rates in specific areas. RBI is currently focused on implementing norms.Detection of fake currencyIn order to curb the fake currency problem, RBI has launched a website to raise awareness among masses about fake notes in the market. www.paisaboltahai.rbi.org.in provides information about identifying fake currency.[56]On 22 January 2014; RBI gave a press release stating that after 31 March 2014, it will completely withdraw from circulation of all banknotes issued prior to 2005. From 1 April 2014, the public will be required to approach banks for exchanging these notes. Banks will provide exchange facility for these notes until further communication. The reserve bank has also clarified that the notes issued before 2005 will continue to be legal tender. This would mean that banks are required to exchange the notes for their customers as well as for non-customers. From 1 July 2014, however, to exchange more than 15 pieces of `500 and `1000 notes, non-customers will have to furnish proof of identity and residence as well as show aadhar to the bank branch in which she/he wants to exchange the notes.This move from the reserve bank is expected to unearth black money held in cash. As the new currency notes have added security features, they would help in curbing the menace of fake currency.[57]Developmental roleThe central bank has to perform a wide range of promotional functions to support national objectives and industries.[18]The RBI faces a lot of inter-sectoral and local inflation-related problems. Some of these problems are results of the dominant part of the public sector.[58]Key tools in this effort include Priority Sector Lending such as agriculture, micro and small enterprises (MSE), housing and education. RBI work towards strengthening and supporting small local banks and encourage banks to open branches in rural areas to include large section of society in banking net.Related functionsThe RBI is also a banker to the government and performs merchant banking function for the central and the state governments. It also acts as their banker. The National Housing Bank (NHB) was established in 1988 to promote private real estate acquisition.[59]The institution maintains banking accounts of all scheduled banks, too. RBI on 7 August 2012 said that Indian banking system is resilient enough to face the stress caused by the drought-like situation because of poor monsoon this year.[60]Custodian to foreign exchangeThe Reserve Bank has custody of the country's reserves of international currency, and this enables the Reserve Bank to deal with crisis connected with adverse balance of payments position.2016 DemonetisationPeople gathered at ATM of Axis Bank in Mehsana, Gujarat to withdraw cash following deposit of demonetised currency notes in bank on 15 November 2016.Main article: 2016 Indian banknote demonetisationOn 8 November 2016, the Government of India announced the demonetisation of all ₹500 (US$7.00) and ₹1,000 (US$14) banknotes of the Mahatma Gandhi Series on the recommendation of the Reserve Bank of India (RBI).[61]The government claimed that the action would curtail the shadow economy and crack down on the use of illicit and counterfeit cash to fund illegal activity and terrorism.[62][63]The Reserve Bank of India laid down a detailed procedure for the exchange of the demonetised banknotes with new ₹500 and ₹2,000 banknotes of the Mahatma Gandhi New Series and ₹100 banknotes of the preceding Mahatma Gandhi Series. Following are the key points:Long queue in front of SBI ATM at Paravur near the city of Kollam in Kerala, 19 November 2016.Citizens will have until 30 December 2016 to tender their old banknotes at any office of the RBI or any bank branch and credit the value into their respective bank accounts.Cash withdrawals from bank accounts were restricted to ₹10,000 per day and ₹20,000 per week per account from 10 to 13 November 2016. This limit was increased to ₹24,000 per week from 14 November.[64][65]For immediate cash needs, the old banknotes could be exchanged for the new ₹500 and ₹2,000 banknotes as well as ₹100 banknotes over the counter of bank branches by filling up a requisition form along with a valid ID proof. It was announced that this facility would be available until 30 December 2016. Initially, the limit was fixed at ₹4,000 per person from 8 to 13 November 2016. This limit was increased to ₹4,500 per person from 14 to 17 November 2016.[64][65] The limit was reduced to ₹2,000 per person from 18 November 2016.[66] All exchange of banknotes was abruptly stopped from 25 November 2016.[67]Initially, all ATMs were dispensing banknotes of only ₹50 and ₹100 denominations and cash withdrawals from ATMs were restricted to ₹2000 per day.[68] From 14 November onwards, ATMs recalibrated to dispense new ₹500 and ₹2000 notes will allow a maximum withdrawal of ₹2,500 per day, while other ATMs dispensing banknotes of only ₹50 and ₹100 denominations will allow a maximum withdrawal of ₹2000 per day.[64][65]However, exceptions were given to petrol, CNG and gas stations, government hospitals, railway and airline booking counters, state-government recognised dairies and ration stores, and crematoriums to accept the old ₹500 and ₹1,000 banknotes until 11 November 2016, which was later extended to 14 November 2016 and once again to 24 November 2016.[69][70]International airports were also instructed to facilitate an exchange of notes amounting to a total value of ₹5,000 for foreign tourists and out-bound passengers.[71]Under the revised guidelines issued on 17 November 2016, families were allowed to withdraw ₹250,000 for wedding expenses from one account provided it was KYC compliant. The rules were also changed for farmers who are permitted to withdraw ₹25,000 per week from their accounts against crop loan.[66][72]Cash crunch and effectsQueue at an ATM for ₹100 banknotes in Howrah, on 8 November 2016, 22:23 (IST)People queue outside a private bank to deposit and exchange old ₹500 and ₹1000 banknotes in Kolkata on 10 November 2016.The scarcity of cash due to demonetisation led to chaos, and most people holding old banknotes faced difficulties exchanging them due to endless lines outside banks and ATMs across India, which became a daily routine for millions of people waiting to deposit or exchange the ₹500 and ₹1000 banknotes since 9 November.[73][74][75][76]ATMs were running out of cash after a few hours of being functional, and around half the ATMs in the country were non-functional.[74]Sporadic violence was reported in New Delhi, but there were no reports of any grievous injury,[77]people attacked bank premises and ATMs,[78][79][80][81][82][83]and a ration shop was looted in Madhya Pradesh after the shop owner refused to accept ₹500 banknotes.[84][85][86][87]Policy Rates and Reserve RatiosRates as of 6th bi-monthly (7 February 2019) monetary policy meet of FY1819[88]Policy ratesPolicy Repo Rate6.25%Reverse Repo Rate6.00%Marginal Standing Facility Rate6.50%Bank Rate6.50%Reserve ratiosCash Reserve Ratio (CRR)4%Statutory Liquidity Ratio (SLR)19.50%Lending and deposit rates[89]Base Rate8.95%–9.45%MCLR (overnight)8.15%–8.45%Savings Deposit Rate3.50%–4.00%Term Deposit Rate for > 1year6.25%–7.50%Repo RateRepo (Repurchase) rate also known as the benchmark interest rate is the rate at which the RBI lends money to the commercial banks for a short-term (max. 90 days). When the repo rate increases, borrowing from RBI becomes more expensive. If RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate similarly, if it wants to make it cheaper for banks to borrow money it reduces the repo rate. If the repo rate is increased, banks can't carry out their business at a profit whereas the very opposite happens when the repo rate is cut down. Generally, repo rates are cut down whenever the country needs to progress in banking and economy.If banks want to borrow money (for short term, usually overnight) from RBI then banks have to charge this interest rate. Banks have to pledge government securities as collateral. This kind of deal happens through a re-purchase agreement. If a bank wants to borrow Rs. 100 crores, it has to provide government securities at least worth Rs. 100 crore (could be more because of margin requirement which is 5%–10% of loan amount) and agree to repurchase them at Rs. 106.5 crore at the end of borrowing period. So the bank has paid Rs. 6.5 crore as interest. This is the reason it is called repo rate. The government securities which are provided by banks as collateral can not come from SLR quota (otherwise the SLR will go below 19.5% of NDTL and attract penalty). Banks have to provide these securities additionally.To curb inflation, RBI increases Repo rate which will make borrowing costly for banks. Banks will pass this increased cost to their customers which make borrowing costly in whole economy. Fewer people will apply for loan and aggregate demand will get reduced. This will result in inflation coming down. RBI does the opposite to fight deflation. Although when RBI reduce Repo rate, banks are not legally required to reduce their base rate.The RBI increased the Repo rate from 6% to 6.25% in June 2018.[90]Reverse Repo Rate (RRR)As the name suggest, reverse repo rate is just the opposite of repo rate. Reverse Repo rate is the short term borrowing rate at which RBI borrows money from banks. The reserve bank uses this tool when it feels there is too much money floating in the banking system. An increase in the reverse repo rate means that the banks will get a higher rate of interest from RBI. As a result, banks prefer to lend their money to RBI which is always safe instead of lending it to others (people, companies etc.) which is always risky.Repo Rate signifies the rate at which liquidity is injected into the banking system by RBI, whereas Reverse Repo rate signifies the rate at which the central bank absorbs liquidity from the banks. Currently, Reverse Repo Rate is pegged to be 0.25% below Repo Rate.Statutory liquidity ratio (SLR)Apart from the CRR, banks are required to maintain liquid assets in the form of gold, cash and approved securities. Higher liquidity ratio forces commercial banks to maintain a larger proportion of their resources in liquid form and thus reduces their capacity to grant loans and advances, thus it is an anti-inflationary impact. A higher liquidity ratio diverts the bank funds from loans and advances to investment in government and approved securities. In well-developed economies, central banks use open market operations—buying and selling of eligible securities by the central bank in the money market—to influence the volume of cash reserves with commercial banks and thus influence the volume of loans and advances they can make to the commercial and industrial sectors. In the open money market, government securities are traded at market-related rates of interest. The RBI is resorting more to open market operations in the more recent years. Generally, RBI usesMinimum margins for lending against specific securities.Ceiling on the amounts of credit for certain purposes.The discriminatory rate of interest charged on certain types of advances.Direct credit controls in India are of three types:Part of the interest rate structure, i.e., on small savings and provident funds, are administratively set.Banks are mandatory required to keep 19.50% of their NDTL (Net Demand and Time Liabilities) in the form of liquid assets.Banks are required to lend to the priority sectors to the extent of 40% of their advances.The share of net demand and time liabilities that banks must maintain in safe and liquid assets, such as government securities, cash and gold. Here it would be pertinent to mention the gold swap of July 2014.[91][92][93]The present SLR is 19.5%.Bank RateIt is defined in Sec 49 of RBI Act of 1934 as the ‘standard rate at which RBI is prepared to buy or rediscount bills of exchange or other commercial papers eligible for purchase'. When banks want to borrow long term funds from RBI, it is the interest rate which RBI charges to them. It is currently set to 6.75%[94](Second Bi-monthly Monetary Policy Statement, 2018–19). The bank rate is not used to control money supply these days. Although penal rates are linked to bank rate. If a bank fails to keep SLR or CRR then RBI will impose penalty & it will be 300 basis points above bank rate.Liquidity Adjustment Facility (LAF)Liquidity Adjustment facility was introduced in 2000. LAF is a facility provided by the Reserve Bank of India to scheduled commercial banks to avail of liquidity in case of need or to park excess funds with the RBI on an overnight basis against the collateral of Government securities. RBI accept application for a minimum amount of Rs.5 crore and in multiples of Rs. 5 crore thereafter. LAF enables liquidity management on a day-to-day basis. The operations of LAF are conducted by way of repurchase agreements called Repos & Reverse Repos.Cash Reserve Ratio (CRR)CRR refers to the ratio of bank's cash reserve balances with RBI with reference to the bank's net demand & time liabilities to ensure the liquidity & solvency of the scheduled banks. The share of net demand and time liabilities that banks must maintain as cash with RBI. The RBI has set CRR at 4%. 1% change in it today affects the economy with Rs. 1000000 crores. An increase sucks this amount from the economy, while a decrease injects this amount into the economy.So - Crazy Domains if a bank has 200 Crore of NDTL then it has to keep Rs. 8 Crore in cash with RBI. RBI pays no interest on CRR.Let's assume economy is showing inflationary trends & RBI wants to control this situation by adjusting SLR & CRR. If RBI increases SLR to 50% and CRR to 20% then bank will be left only with Rs. 60 crore for operations. Now it will be very difficult for bank to maintain profitability with such small capital. Bank will be left with no choice but to raise interest rate which will make borrowing costly. This will in turn reduce the overall demand & hence price will come down eventually.Open Market Operation (OMO)Open market operation is the activity of buying and selling of government securities in open market to control the supply of money in banking system. When there is excess supply of money, central bank sells government securities thereby sucking out excess liquidity. Similarly, when liquidity is tight, RBI will buy government securities and thereby inject money supply into the economy.Marginal Standing Facility (MSF)This scheme was introduced in May 2011 and all the scheduled commercial bank can participate in this scheme. Banks can borrow up to 2.5%[95]percent of their respective Net Demand and Time Liabilities. RBI receive application under this facility for a minimum amount of Rs. One crore and in multiples of Rs. One crore thereafter. The important difference with repo rate is that bank can pledge government securities from SLR quota (up to one percent). So even if SLR goes below 20.5%(RBI/2014-15/445 DBR.Ret.BC.70/12.02.001/2014-15, dt. 16 October 2016) by pledging SLR quota securities under MSF, bank will not have to pay any penalty. The MSF rate is set to 100 basis point above bank rate and currently is at 6.50% as of 1.6.17.[96][better source needed]Qualitative ToolsMargin Requirements or LTVLoan to Value is the ratio of loan amount to the actual value of asset purchased. RBI regulates this ratio so as to control the amount bank can lend to its customers. For example, if an individual wants to buy a car from borrowed money and the car value is Rs. 10 Lac, he can only avail a loan amount of Rs. 7 Lac if the LTV is set to 70%. RBI can decrease or increase to curb inflation or deflation respectively.Selective credit controlUnder this measure, RBI can specifically instruct banks not to give loans to traders of certain commodities e.g. sugar, edible oil, etc. This prevents speculations/ hoarding of commodities using money borrowed from banks.Moral SuasionUnder this measure RBI try to persuade bank through meetings, conferences, media statements to do specific things under certain economic trends. For example, when RBI reduces repo rate, it asks banks to reduce their base rate as well. Another example of this measure is to ask banks to reduce their Non-performing assets (NPAs).Limitations of Monetary PolicyIn developing countries like India, Monetary Policy fails to show immediate or no results because of below factors:People do not employ alternative investment options. A large section of society still depends on saving accounts, fixed deposits, Public Provident Fund for investment. Commercial banks have large deposits. RBI is not the main or even prominent money supplier for these banks. So whatever monetary action central bank takes has little or late impact on the economy.Many people in rural areas are out of banking net and whatever RBI does has no impact on their financial activities.Monsoon uncertainty adversely affects food production and thereby cause food inflation. Monetary Policy has no impact on food inflation.

The Indian Railways is among the world’s 3rd largest rail networks. The Government of India has focused on investing on railway infrastructure by making investor-friendly policies.It has moved quickly to enable Foreign Direct Investment (FDI) in railways to improve infrastructure for freight and high-speed trains.At present, several domestic and foreign companies are also looking to invest in Indian rail projects.So far, the private sector’s participation in railways has been very less in India, compared to sectors like ports, telecom, electricity, airports and roads.Several attempts have been made in the past to involve the private sector in various arenas like wagon procurement and leasing, freight trains and container operations, terminals and warehousing facilities, catering services, and other rail infrastructure through schemes framed by the ministry.But problems like policy uncertainty, absence of a regulator to create a level playing field, the lack of incentives for investors and procedural or operational issues have significantly restricted private sector participation.There are some major factories like Chennai-based Integral Coach Factory (ICF), which is owned by government from which Indian Railways procures trains and coaches.It has also produced the coaches of luxury to high-speed trains including Rajdhani Express, Shatabdi Express and the recently-inducted Vande Bharat Express (Train 18).Reasons of Privatising Indian Railwaysa. The Indian Railways is one of the few government-owned enterprises which is incurring losses year-after-year.b. Indian Railways has not been able to keep pace with modernisation of its infrastructure and services and has not been able to expand at the pace and coverage that a country like India needs.c. Almost all arms of the railways require modernisation of equipment, processes and training, all of which are still continuing as they have been, through the decades. The result is that the railways continue to be a drain on the exchequer, while continuing to provide vital services inefficiently.d. Freight fares in railways are kept high to cross-subsidize the passenger segment. Rail Development Authority has been approved to determine rail fares to enhance affordability and utilize capacity in an efficient manner.e. The perception is that almost all customer facing services like ticketing, ticket checking, porter services, catering and coach maintenance are not meeting people’s expectations and standards as they should be and this is the main reason for public resentment and dissatisfaction with the railways.f. On the technical side, the railways lacks in providing proper services like track laying and maintenance, signal and transmission, engine & coach design and manufacture, engine and coach maintenance etc. All these services must all be given out to private companies that specialise in these.g. Railways owns large tracts of land along its tracks, in various parts of the country and this can be optimally monetised by inviting private players to invest, build and manage properties that may be developed on these lands.In this regard, Bibek Debroy Committee was constituted on September 22, 2014 to prepare a blueprint for reforming Indian Railways.Bibek Debroy CommitteeThe Railway Board had constituted a Committee for mobilization of resources for major railway projects and restructuring of Railway Ministry and Railway Board (Chair: Mr. Bibek Debroy).The Committee submitted its final report in June 2015, which has favoured privatisation of rolling stock: Wagons and Coaches.Committee has looked at the railway restructuring experiences from multiple countries, including Japan, the United Kingdom, Germany, Sweden, Australia and USA.It focussed on the British experiment to achieve two main aims: changing the institutional structure between the government and the Indian Railways and increasing competition.It has also recommended amending the Indian Railways Act to allow the private operators to levy tariff.Committee adds that in case the infrastructure becomes profitable, there is no bar on the government to have its own operator in the interest of competition.Improved InfrastructureA strong argument in favour of privatization is that it will lead to better infrastructure which in turn would lead to improved amenities for travellers.As opposed to mismanagement in form of stinking washrooms, lack of water supply and dirty platforms, it is expected that a private company will ensure better amenities.This would enable the Railways to procure the right global technology available.Balancing Quality of Service with High FaresProbably the most persistent complaint regarding Indian Railways is that the quality of services provided hardly matches up to the phenomenal charges paid by the travellers.Protagonists of privatisation feel that this problem will be solved when private players are allowed to enter the sector since the move would foster competition and hence lead to overall betterment in the quality of services.Lesser AccidentsAny train-related mishap is like a nightmare come true for travellers and authorities alike courtesy of the physical, mental and financial trauma that ensues.Because private ownership is synonymous with better maintenance, supporters of privatisation feel that it will reduce the number of accidents, thus resulting in safe travel and higher monetary savings in the long run.Improved efficiencyThe main argument for privatisation is that private companies have a profit incentive to cut costs and be more efficient. If you work for a government run industry, managers do not usually share in any profits.However, a private firm is interested in making a profit, and so it is more likely to cut costs and be efficient.ShareholdersIt is argued that a private firm has pressure from shareholders to perform efficiently. If the firm is inefficient then the firm could be subject to a takeover.A state-owned firm doesn’t have this pressure and so it is easier for them to be inefficient.Increased competitionOften privatisation of state-owned monopolies occurs alongside deregulation – i.e. policies to allow more firms to enter the industry and increase the competitiveness of the market.It is this increase in competition that can be the greatest spur to improvements in efficiency. For example, there is now more competition in telecoms and distribution of gas and electricity.However, privatisation doesn’t necessarily increase competition; it depends on the nature of the market. E.g. there is no competition in tap water because it is a natural monopoly. There is also very little competition within the rail industry.Coverage Limited to Lucrative SectorsAn advantage of Indian Railways being government- owned is that it provides nation-wide connectivity irrespective of profit.This would not be possible with privatisation since routes which are less popular will be eliminated, thus having a negative impact on connectivity.FaresGiven that a private enterprise runs on profit, it is but natural to assume that the easiest way of accruing profits in Indian Railways would be to hike fares, thus rendering the service out of reach for lower income groups.This will defeat the entire purpose of the system which is meant to serve the entire population of the country irrespective of the level of income.AccountabilityThe recent spat in the Tata boardroom is testimony to the fact that private companies are unpredictable in their dealings and do not share their governance secrets with the world at large.In such a scenario it would be difficult to pin the accountability on a particular entity, should there be a discrepancy.Concerns of a common manIn the long-run, privatisation of railways may no longer be a low-cost common man's mode of transport and will be more on the lines of privatised services.Challenges to privatisationThe debate on privatization of Indian Railway services pertains to two aspects. One is the need to bring in private capital and the other is to privatize certain aspects of operation and services.The government needs to take bold steps on both accounts and this call for serious and proactive engagement with trade unions and political parties, to come to a common agreement.The trade unions have been resisting privatisation of existing operations and are also suspicious of any attempt to involve private capital.While this could be a welcome step, a change in thinking by the unions is the need of the day, otherwise the railways will continue to continue to bleed funds.Over the years, no political party has shown the political will to address this issue. As a result, the Indian Railways continues to remain a large and inefficient organisation, executing one of the most important tasks for the nation.Way ForwardIn order to sustain growth, modernisation and efficiency, the Indian Railways must redefine its role and responsibility. It has to completely reposition its operating role from being a direct service provider to being a supervisor of servicesThere is only one flip side to the privatisation of railways in India – and probably the most important one i.e., subsidised fares.In order to keep Indian Railways affordable for the lower strata of the society (post privatisation), the government must offer subsidies and tax incentives to companies that would provide low cost services, similar to low cost airlines, to these very pocket of population.This in the long run would not only make IR the largest but also the most efficient railway network in the World along with materialising the very objective and essence of Indian Railways — 'Lifeline to the Nation'.Railways need to remain affordable as an infrastructure for daily commuters more than anything else. Instead of speed and privatization, efficiency and affordability should be the primary focus.UnemploymentThis move would render thousands of railway employees in production and ancillary units jobless in the long run.Problem of regulating private monopoliesPrivatisation creates private monopolies and thus, it needs regulations to prevent abuse of monopoly power.