The RBI acts as the custodian of the country’s foreign exchange reserves, manages exchange control and acts as the agent of the government in respect of India’s membership of the IMF.
Who is the custodian of foreign exchange reserve?
The Reserve Bank of India, is the custodian of the country’s foreign exchange reserves and is vested with the responsibility of managing their investment. The legal provisions governing management of foreign exchange reserves are laid down in the Reserve Bank of India Act, 1934.
What is custodian of foreign balances?
Function 4 # Custodian of Foreign Balances:
It is the function of the central bank to maintain the exchange rate fixed by the government and manage exchange control and other restrictions imposed by the state. Thus, it becomes a custodian of nation’s reserves of international currency or foreign balances.
Who is the custodian of foreign exchange inventory in India?
Reserve Bank of India
Apart from maintaining the rate of exchange of the rupee, RBI has to act as the custodian of India’s reserve of international currencies.
What do you mean by custodian of foreign reserve function of central bank?
Custodian of foreign exchange reserves The Central Bank is the custodian of country’s stock of gold and international currencies. The Central Bank maintains the stability of exchange rate. All earnings in foreign exchange transactions are to be deposited with the Central Bank and are routed through it.
What is custodian of cash reserve?
The central bank act as a custodian of the cash reserves of the commercial bank as the commercial banks have to maintain a proportion of their total deposits as reserves in the form of cash with the central bank as a part of legal requirement.
Who is the custodian of monetary reserves in India *?
Reserve Bank of India ( RBI ) is the custodian of monetary reserve in India .
What are the supervisory functions of RBI?
The supervisory functions include giving license to banks along with their new branches, inspection of the assets and liabilities of the banks it regulates the financial position of the economy. It also issues directives and has the power to control Non- Bank Financial Institutions.
What is the difference between depository and custodian?
Custodian refers to the person in charge of the property, while Depository refers to the location where the funds are held. So your shares or holdings will be held by the custodian, but they will be legally held in a Depository’s safe-keeping account.
What is a custodial service?
A custodial service is when an entity or individual holds a client’s property or money on their behalf. The custodian is responsible for the safety of the financial products.
Which Act governs the foreign exchange management in India?
The Central Government of India formulated an act to encourage external payments and across the border trades in India known as the Foreign Exchange Management Act. FEMA (Foreign Exchange Management Act) was introduced in the year 1999 to replace an earlier act FERA (Foreign Exchange Regulation Act).
What is meant by convertibility of currency?
Currency convertibility is the ease with which a country’s currency can be converted into gold or another currency. Currency convertibility is important for international commerce as globally sourced goods must be paid for in an agreed-upon currency that may not be the buyer’s domestic currency.
What is importance of foreign exchange market?
Foreign Exchange Markets helps in determining the value of foreign savings. It is a marketplace where the foreign money is bought and sold and we can also say it is a type of institutional arrangement where the foreign currencies are bought and sold.
How central bank is custodian of foreign exchange?
The central bank controls both the receipts and payments of foreign exchange. 2. It tries to maintain stability of the exchange rate. For this purpose, it buys or sells foreign currencies in the market to minimise fluctuations in the foreign exchange rates.
What is repo rate?
Repo rate is the rate at which the central bank gives loans to commercial banks against government securities. Reverse repo rate is the interest that RBI pays to banks for the funds that the banks deposit with it. So, if the repo rate increases, it means banks are getting funds from RBI at a higher cost.
Which is main function of central bank?
However, the primary goal of central banks is to provide their countries’ currencies with price stability by controlling inflation. A central bank also acts as the regulatory authority of a country’s monetary policy and is the sole provider and printer of notes and coins in circulation.