1. Manav Kaushik(11810044)Bhushan Supe (11810081)Sivaprasad Rao G V (11810088)

2. Money is a token or item which acts as a medium of exchange that has both legaland social acceptance with regards to making payment for buying commodities orreceiving services, as well as repayment of loans. Types of Money Commodity money, Representative money, Fiatmoney, Commercial Bank money. Functions Store of value Medium of exchange Standard of payments- Currency refers to physical objects generally accepted as a medium of exchange.These are usually the coins and banknotes of a particular government, whichcomprise the physical aspects of a nations money supply.- Currency has value only by government order. The government declares the fiat to belegal tender, making it unlawful to not accept the fiat currency as a means ofrepayment for all debts, public and private. 3. The Reserve Bank of India defines the monetary aggregates as Reserve Money (M0) : Currency in circulation + Bankers deposits withRBI + other deposits with RBI = Net RBI Credit to the Govt. + RBICredit to the commercial sector + RBIs claims on banks + RBIs net foreignassets + Govt.s currency liabilities to the public RBIs net non-monetaryliabilities. M1 : Currency with the public + Deposit money of the public (Demanddeposits with the banking system + Other deposits with the RBI) M2 : M1 + Savings deposits with post office savings banks M3 : M1 + Time deposits with the banking system = Net bank credit tothe Govt. + Bank credit to the commercial sector + Net foreign exchangeassets of the banking system + Govt.s currency liabilities to the public - Netnon-monetary liabilities of the banking sector (Other than time deposits). M4 : M3 + All deposits with savings bank post offices (excluding NSCs) 4. After the Discontinuation of 25 Paise coins on Jun 30, 2011. Bank notes areavailable in nominal values of 5, 10, 20, 50, 100, 500 and 1000 rupees and Coinsof the rupee are available in 1, 2, 5 and 10.As of January 2012, the new Indian rupee sign has been incorporated in thecurrency notes in the denomination of 10, 100, 500 and 1000. 5000 and 10,000 rupee notes introduced in 1949 but denominations higher than100 rupees were demonetized in 1978. In 1987, the 500 rupee note was introduced, followed by the 1000 rupees in 2000.1 Rupee and 2 rupees notes were discontinued in 1995 5. NotesCoinsChest BranchesChest Branches & RBI Offices PublicRBI OfficesMint linked officesPresses4 Mints 6. In India, RBI in Conjunction with finance ministry decides how much moneyshould be printed.Printing of Paper currency is the responsibility of RBI as per the Reserve Bank ofIndia Act, 1934.The responsibility for Coinage vests with Government of India on the basis of theCoinage Act, 1906Factors Affecting Printing of MoneyUsually RBI estimates the need for printing of money based on the below factors : Incremental needs Replacement needs Reserve needs Statistical Analysis and other Demand forecast techniques 7. Two methods are followed : I Method : Demand is estimated based on the below factors -- Income or its proxy -- Price levels -- Opportunity Cost of holding cash Here the problem is income levels are usually not available beyond quarterly frequency II Method : Univariate time series analysis Future demands in currency levels are estimated using historical growth rates ofcurrency demand. Statistical and other forecasting techniques are used.Though the method can be applied to any frequencies, the main problem with highfrequencies is the specification of intra-month variation in demand levels whichchange from month to month and hence is difficult to estimate with precision 8. I -Payment Habits of the economySignificant amount of wages and salaries in India is paid ( in cash ) at the beginningof every month. Therefore, currency in circulation increases at the beginning of amonth. As the public buys goods and services with them, the currency first flows tothe corporate sector and from there to the banking sector.II -Spending Habits of the public Currency demand in India typically follows a V-shape pattern. The demand forcurrency is high during AprilJune, bottoms out during JulySeptember and picksup again during OctoberMarch. The high currency demand during AprilJune emanates from the realization ofproceeds from the wheat harvest. The entire quantum of wheat procurement inIndia takes place during this period. On the other hand, the high transactionsdemand during OctoberMarch is because of festivals, rice procurement and pick-up in agro-based industrial activities. 9. The bank note printing in India started in 1928 with the establishment of IndiaSecurity Press at Nashik by Government of India. Until the commissioning of Nashik Press the Indian Currency Notes were gotprinted from Thomas De La Rue Giori of United Kingdom. The second bank note printing press was established in Dewas (Madhya Pradesh) in1975 by Government of India. With the growth in population and economic activity, the demand for bank noteshas been steadily increasing. To bridge the demand and supply gap, the Governmentof India decided to establish two new bank note printing presses one at Mysore(Karnataka) and the other at Salboni (West Bengal) Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) wasestablished by Reserve Bank of India (RBI) as its wholly owned subsidiary on 3rdFebruary 1995 with a view to augmenting the production of bank notes in India toenable the RBI to bridge the gap between the supply and demand for bank notes inthe country. The BRBNMPL has been registered as a Private Limited Company under theCompanies Act 1956 with its Registered and Corporate Office situated atBangalore. 10. The company manages 2 Presses one at Mysore in Karnataka and the other at Salboni in West Bengal. The present capacity for both the presses is 16 billion note pieces per year on a 2-shift basis.Printing CapacityNotes Total Annual capacity of the presses currently is 18 billion pieces Can produce up to 28 billion pieces in two shifts.CoinsTotal minting capacity is 4700 million. RBIs annual requirements are usually 12000 million notes and 5000 million coins. There is a gap in the demand supply of coins in the country since 1990s. 11. Initially Indian currency was based on silver. Later on, towards the end of the British Rule, India shifted to Gold standard. Currently the Reserve Bank decides upon the volume and value of bank notes to beprinted based on the annual increase in bank notes required for circulation purposes,replacement of soiled notes and reserve requirements. The Reserve Bank estimates the demand for bank notes on the basis of the growthrate of the economy, the replacement demand and reserve requirements by usingstatistical models. Also, contrary to public view, currency cannot be exchanged for Gold from RBI.The Reserve Bank will not pay gold in any circumstances in exchange for currency. Most of the economies in the world have done away with the Gold standard. 12. Monetary policy is the process by which the central bank of a country controls the supply of money in its economy by exercising its control over interest rates in order to maintain price stability and to achieve high economic growth. Functions Price stability Controlled expansion of credit Promotion of investment Desired distribution of credit Equitable distribution of credit Promoting Efficiency 13. Open Market OperationsAn open market operation is an instrument of monetary policy which involvesbuying or selling of government securities from or to the public and banksCash Reserve ratioCash Reserve Ratio is a certain percentage of bank deposits which banks are requiredto keep with RBI in the form of reserves or balancesStatutory liquidity ratioEvery financial institute have to maintain a certain amount of liquid assets from theirtime and demand liabilities with the RBI. These liquid assets can be cash, preciousmetals, approved securities like bonds etc. The ratio of the liquid assets to time anddemand liabilities is termed as Statutory Liquidity Ratio. 14. Bank rate policyBank rate is the rate of interest charged by the RBI for providing fundsor loans to the banking system.Credit ceilingRBI issues prior information or direction to the banking system thatloans should be given up to a certain limitRepo rateRepo rate is the rate at which RBI lends to commercial banks generallyagainst government securities.Reverse Repo rateIt is the rate which the RBI pays to the banks for depositing their surplus money. 15. Growth of an economy increases the standard of living and the income levels of thepublic. Hence the spending also increases. As there is more and more money in circulation, the price levels of commoditiesincrease and in turn, the value of the currency falls. This is because there is moreamount of money in the system than is demanded. This phenomenon is calledInflation. RBI will check this situation through its monetary policy by increasing the lendingrates and thus reducing the easy availability of money in the system. This will helpcheck the fall in value of the money. However ,this will reduce the credit availability and hence the industrial outputdecreases and as a result the economy slows down. GDP will fall. When the inflationary situation is under control, then RBI will reduce the interestrates, which in turn increases the credit availability and hence powers the economy. Hence Money supply, Inflation, Interest rates and the GDP form a critical sequenceof macro economic environment of a country. 16. SourceAllegations about involvement of ISI, Pakistan and otheranti social elements.RBI Estimates of Fake notes of about 3 to 6 pieces permillion.Channels Fake currency operators in Dubai search the laborers fromIndia who are in need of money to return to India and are madeto carry the packages with fake currency. Sending photo albums packed neatly with Indian fakecurrency and sealed with polythene bags. 17. The law enforcing agencies such as Customs, Immigrations andAirport Security Authorities help to keep check. Identifying and keeping watch on suspicious people frequentlyvisiting to countries such as UAE, Nepal etc. Installation of note sorting machine in phased manner at banks. As per the recommendations from RBI Committee, the promotionof use of electronic means and plastic cards is under consideration. Security features are constantly upgraded and educating public toidentify fake notes. 18. Main concepts1. Money is unreal, imaginary and intangible.2. Money must only represent the value of human labor (includingservices) and the natural resources.3. Currency is printed, not money.4. Currency is not money, but merely represents money.5. Money is created, not printed. 19. Exchange rateHow much one currency is worth in terms of another currency.India has Floating Exchange Rate System.Rupee Appreciation Currency gaining Strength.Rupee Depreciation Currency getting weaker.Factors causing fluctuation - Interest Rate - Inflation Rate - Export-Import imbalances - Trading in currencies in the Forex market 20. Economy : Economy strengthens with appreciation of rupee and vice versa.Foreign Investors : Foreign Investors earn profit on investments with appreciation of rupee and vice versa.Industry/Company : 21. Thanks Manav Kaushik (11810044) Bhushan Supe (11810081) Sivaprasad Rao G V (11810088)