Reserve Bank Of India (RBI)

The Reserve Bank of India (RBI) was established under the Reserve Bank of India Act, 1934 on 1 April 1935 and nationalised on 1 January 1949. The Bank is the sole authority for issue of currency in India other than one-rupee coins and subsidiary coins. As the agent of the Central Government, the Reserve Bank undertakes distribution of one-rupee coin as well as small coins issued by the Government of India. It acts as banker to the Central Government, and State Governments by virtue of agreements entered into with them. It also handles the borrowing programme of the Central and State Governments. It formulates and administers monetary policy with a view to ensuring price stability while promoting growth in the real sector through proper deployment of credit. It plays an important role in maintaining and managing the country's foreign exchange reserves and ensures orderly conditions in the foreign exchange market. It also acts as an agent of the Government of the India in respect of India's membership of International Monetary Fund. It regulates and supervises commercial banks, Urban Co-operative Banks, Non-banking Financial Companies (NBFCs) and select All India Financial Institutions. It also performs a variety of developmental and promotional functions. Recently, it has taken a lot of measures / initiatives in promoting financial stability, financial inclusion and financial literacy in the country as a whole.

Main Functions

Monetary Authority:

  • Formulates, implements and monitors the monetary policy.
  • Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.

Regulator and supervisor of the financial system:

  • Prescribes broad parameters of banking operations within which the country's banking and financial system functions.
  • Objective: maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange

  • Manages the Foreign Exchange Management Act, 1999.
  • Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Issuer of currency:

  • Issues and exchanges or destroys currency and coins not fit for circulation.
  • Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role

  • Performs a wide range of promotional functions to support national objectives.

Related Functions

  • Banker to the Government: performs merchant banking function for the central and the state governments;also acts as their banker.
  • Banker to banks: maintains banking accounts of all scheduled banks.

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