Sage-Tips

How does RBI work?

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. Commercial banks create credit. It is the duty of the RBI to control the credit through the CRR, repo rate, and open market operations.

How sovereign gold bonds are issued by RBI?

They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.

How does a gold bond sovereign work?

Sovereign gold bonds or SBGs are gold bonds issued by the Reserve Bank of India (RBI) on behalf of the Government of India. The cost is calculated by taking an average of closing prices of gold for the latest three working days preceding the subscription period.

How does RBI maintain financial stability?

In the Indian context, the Reserve Bank has been able to maintain stability in the financial markets through a judicious use of instruments – both existing as well as by developing innovative instruments. The central bank acts as a shock absorber to ensure stability as it manages volatility in the system.

What is monetary policy of RBI?

The monetary policy states the use of financial instruments under the control of the Reserve Bank of India to standardise magnitudes such as availability of credit, interest rates, and money supply to achieve the ultimate objective of economic policy mentioned in the Reserve Bank of India Act, 1934.

How do I check my gold bond sovereign balance?

RBI has stopped issuing certificates for Sovereign Gold Bonds units purchased through the demat (online) mode since April 2020. You can check the SGBs in your Console holdings. Alternatively, you can check the SGBs using CDSL’s EASI portal.

Is gold Sovereign gold bond backed?

SGBs are government securities denominated in grams of gold and are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity.

How does the RBA promote financial stability?

The RBA is responsible for promoting overall financial system stability. It does this by managing and providing liquidity to institutions, regulating the payments system (including financial market infrastructures) and monitoring risks in the financial system.

What is meant by financial stability?

Financial stability is a condition in which an economy’s mechanisms for pricing, allocating, and managing financial risks (credit, liquidity, counterparty, market, etc.) are functioning well enough to contribute to the performance of the economy (as defined above).

How does RBI regulate the working of commercial banks?

Each commercial bank is required to maintain certain portion of their Net Demand and Time Liabilities (NDTL) in the form of cash with the Reserve Bank, called Cash Reserve Ratio (CRR) and in the form of investment in approved securities, called Statutory Liquidity Ratio (SLR). These are called statutory Pre-emptions.

Is the Reserve Bank of India liable for errors and omissions?

While every effort has been made to ensure that the information set out in this document is accurate, the Reserve Bank of India does not accept any liability for any action taken, or reliance placed on, any part, or all, of the information in this document or for any error in or omission from, this document.

Can BG /LC be issued to clients of Co-operative banks?

However, BG /LC may be issued by scheduled commercial banks to clients of co-operative banks against counter guarantee of the co-operative bank. In such cases, banks may be guided by the provisions of paragraph 2.3.9.2 of the Master Circular on Loans and Advances-Statutory and Other Restrictions dated July 2, 2012.

What is the rate of interest paid on SBI bonds?

The Bonds shall bear interest at the rate of 2.50 percent (fixed rate) per annum on the nominal value. Interest shall be paid in half-yearly rests and the last interest shall be payable on maturity along with the principal.

Can a bank issue a guarantee for more than 10 years?

While issuing such guarantees, banks are advised to take into account the impact of very long duration guarantees on their Asset Liability Management. Further, banks may evolve a policy on issuance of guarantees beyond 10 years as considered appropriate with the approval of their Board of Directors.