What Reserve Bank of India means to the Common Person
What is RBI all about?
Let’s learn from the Governor, Dr. YV Reddy.
Reserve Bank, above all, is a public institution serving the public interest. Though the word 'bank' is associated with its name, profit is not its primary motive. Therefore, it is necessary for every common person to understand about its role and its functions in improving the welfare of the people at large.
The Reserve Bank is the 'central bank' of the country and uniquely placed to perform certain specific and challenging public responsibilities. It is the monetary authority of the country, and as you know 'Rupee' is our currency unit in this country. Reserve Bank broadly deals with the quantity of rupee resources that should ideally be available in the country to promote economic growth and smooth transactions in goods and services. Very large money supply could result in inflation or higher prices which affect the common person the most. On the other hand, inadequate monetary resources can affect the growth and disrupt the payments system. Reserve Bank tries to strike a proper balance through its policies.
Currency management is an important function, for example, the new currency notes are issued by the Reserve Bank, and old ones are withdrawn and destroyed. Their design, production and distribution are managed-to be spread over the entire country.
The Reserve Bank's currency note contains the words 'I promise to pay the bearer a sum of .... '. That is signed by the Governor. So, the Reserve Bank has to ensure that the value of rupee is maintained so that faith and trust of people is always present. To maintain the value of the rupee, the amount of goods and services that it can buy should not get eroded in a way that confidence in the currency is lost. So, the Reserve Bank's most important objective is to maintain price stability, contain inflation and anchor inflation expectations.
Incidentally, you may find in the currency note, the denomination is written in two Central Government official languages (English and Hindi) and fifteen national languages. It shows the diversity of our country and the Reserve Bank's commitment to reach out to one and all.
Speaking about the value of money, the Reserve Bank is concerned not only with the value of money in India, but the related issue of value of our rupee in relation to the currencies of other countries: that is maintaining the faith of people outside our country also, in our currency. This work relates to exchange rate management. Rupee cannot be directly used in settling transactions with other countries and international currencies like US dollar have to be used. To ensure smooth international transactions, it is necessary to maintain the external stability of the Rupee. Incidentally, confidence in Rupee outside our country also depends very much upon domestic price stability. Furthermore, Reserve Bank also maintains and manages foreign exchange reserves to sustain this confidence.
People would like to borrow and lend money to each other for consumption and production overall, the demand and supply for such resources, in aggregate terms, need to be balanced by an appropriate level of interest rates which provide incentives for savers and also adequate returns to investors in industry, agriculture, etc. Such a balance is struck by interest rate policies adopted by the Reserve Bank. I am over simplifying, but the idea is to strike broadly a balance - both within our country and in relation to other countries.
Reserve Bank also has been assigned with several other responsibilities. Thus, the Reserve Bank manages the public borrowings of the Central Government and all State Governments; is a banker to the Central and State Governments and keeps their accounts; regulates payments and settlements systems, and, of some direct concern to many of you, it is a regulator of the banking system.
Why do we explain in detail about our work and dilemmas? It is because Reserve is a public institution and we explain to you so that you can understand, appreciate, criticise and guide us. It is not a publicity drive but it is meant to enhance our efficiency and accountability to the common public.
For today, I will place before you some instances of how the Reserve , as a public institution, is answerable to the Government and indeed, to the people at large, and has taken steps to get closer to the common person in the recent years.
We have urged the banks to be sensitive to the banking and financial needs of the common person and adopt a policy of financial inclusion, that is, to bring possibly every family-rich and poor, rural and urban- into the banking fold. 'No frills' accounts with perhaps a small overdraft facility should be the easiest way for financial inclusion. We are also looking at how technology can increase the banking access to the people. General Credit Cards and Kisan Credit Cards can facilitate disbursal of small credits to farmers without much paper work each time they want to take loans or make transactions. We are also exploring alternatives, such as, satellite offices of banks, ATMs and use of post offices for extending banking facilities to rural areas. In urban areas, we are trying to give efficient and quick service to bank customers by extending to them facilities such as, mobile and internet banking, quick - almost minute by minute - and cost effective transfer of funds from one account to another through electronic funds transfer mechanism. We also encourage reliable, prompt and economical means of conducting day-to-day transactions, such as, bills payments, receipts of salaries, dividends and pensions directly into the beneficiaries' bank accounts, etc.
To ensure that you get good quality banking services at a reasonable cost, we have taken several measures. While the banks can decide for themselves what services they will offer to customers and at what cost, we have asked each bank to set for itself a measurable standard or benchmark for the quality of service it would give to its customers. An independent body set up by the Reserve Bank, called the Banking Codes and Standards Board of India (BCSBI), will then assess the quality of the services given by that bank against the promise it has made. Any adverse remark by the Board will give us a trigger for taking corrective steps. We have also asked the banks to ensure that account holders have detailed information on the availability and cost of various banking services offered to start a banking relationship. It is your right to demand the services promised by the bank.
And if you do not get the services promised by the bank, you can make a complaint against it - first to the higher authority of the bank concerned. If it does not get resolved there within a reasonable time or to your satisfaction, you can approach the Banking Ombudsman. The Banking Ombudsman is appointed by the Reserve Bank to provide an easy, hassle-free and less costly forum to the bank customers to resolve their banking disputes. There is one banking ombudsman in virtually each State, who can be approached through mail or even through internet for resolution of complaints against the banks.
The Reserve Bank is also in the process of improving its own processes so that its major direct customers, namely the Governments and the banks get good service from the central bank. Two departments of the Reserve Bank are already ISO certified which means that the processes in these departments are streamlined for rendering better and quicker customer service and are constantly updated. We are in the process of obtaining this certificate for the other departments of the RBI also, which deal with the public.
We have consciously adopted a policy of reaching out to people, common persons so that they know what to expect, what choices they have, what rights and obligations they have in relation to banking service, etc. We already have several publications through which we reach out to researchers, students and other technical audiences. Now our resolution for 2007-2008 is to reach out to the common person through a special drive. We have, therefore, undertaken a financial education and financial literacy drive for the common man. We are doing this through banks and also directly. My talking to you like this in regional mother tongue Telugu is a part of this initiative. Very soon, you will be able to read about us and our banking policies in our own Telugu language and other regions in their own mother tongue on a multi-lingual website. We will also make this information available by way of brochures, pamphlets, films, etc.
We in the Reserve Bank work as a family and Reserve Bank attracts best talents as an equal opportunity employer to perform the challenging tasks. We have offices in most State capitals and a Board of Directors representing expertise in diversified fields. Our family journal has won several awards. We constantly strive to keep up the morale and motivation spirits high amongst ourselves at all levels of people working with us to meet the challenges of serving the common person with all care and commitment.
Today, the common man is attracted to a lot of choices some times very risky, when he acquires some surplus money. Where to deposit the money and for what period and at what interest? How to decide between mutual fund, bank deposit, life-insurance, etc. against non-bank deposits, chit funds? How to sustain and improve the financial status of the family, to smoothen consumption even if incomes come in lump sum, etc.? So, people should be aware so that they do not lose by fake promises and propaganda by some greedy financial vultures. The Reserve Bank is in the process of preparing reading and visual material and will fund the cost of making such material. But, the literacy or education has to reach the masses and for this mass financial literacy drive, the State Government has assured its full support to the Reserve Bank.
A second area, which we want to attempt on a pilot basis and on a small-scale to start with, relates to credit counselling. Sometimes, people get into debt out of some ignorance or bad luck. They can be advised by some well-trained people how to get out of the problem with minimal distress, by renegotiating, rescheduling of liabilities.
From a speech delivered Dr. Y V. Reddy, Governor, Reserve Bank of India at Karamchedu Village, Ongole District, Andhra Pradesh. The speech was originally delivered in Telugu.