Introduction :
For the smooth functioning of international monetary system, certain international institutions have been established with membership of majority of the globe for providing capital and advice for economic development. They obtain funds for their lending activities from two basic source :
a)Contribution of capital from each member country
b)Through borrowing
International Monetary Fund
Objective
IMF is an organization of 188 countries, working to foster global monetary co-operation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth and reduce poverty around the world.
To promote exchange stability for maintaining orderly exchange arrangement among member banks and to avoid competitive exchange depreciation.
Resources
the major source of funds for IMF is the quota of member’s countries. It can also borrow to supplement its resources.
Lending
IMF provides temporary assistance to members to tide over balance of payment deficits. IMF lending is temporary as well as conditional on policies.
Special Drawing Rights
SDRs are introduced in 1970. ¨SDRs are entitlement granted to member countries enabling them to draw from the IMF apart from their quotas. ¨Each member country is having Special Drawing Account with IMF which is credited with the amount of the allotment.
Allocation of SDRs is made to member countries in proportion to their quotas. ¨SDR is regarded as a ‘basket of national currencies’ comprising four major currencies of the world i.e. USD, EURO, GBP and JPY ¨SDR has gained importance both as a reserve asset and as means of settlement of international transactions.
The real strength of SDR lies in the undertaking by the member country to abide by the Article of Agreement of the IMF and exchange SDRs for currencies.
World Bank Group
The world Bank Group institutions have a distinct role to play in the mission to fight poverty and improve the living standards for people in the developing world by financing the projects. ¨ ¨
International Bank for Reconstruction and Development (IBRD) ¨
International Development Association (IDA) ¨
International Financial Corporation (IFC) ¨
Multilateral Investment Guarantee Agency (MIGA) ¨
International Centre for Settlement of Investment Disputes (ICSID) ¨
Asian Development Bank (ADB)
Offshore Banking Unit (OBUs)
Banks operating in India are eligible to set up OBUs in SEZ which would carry on banking operations only in foreign currency.
They are exempt from CRR requirement, however required to maintain SLR. ¨
The OBU would operate and maintain balance-sheet only in foreign currency. These branches are prohibited to participate in domestic treasury operations. ¨
OBU is required to maintain separate Nostro Account. ¨
Loans and advances of OBU would not be reckoned as net bank credit for commuting priority sector lending obligation. ¨
Deposit of OBU is not covered by deposit insurance.
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