Reserve Bank of India
The Reserve Bank of India, mostly known as RBI, is the central bank of India. It is the regulatory body responsible for the regulation of the Indian banking system. It is the apex financial institution of our country’s financial system entrusted with the task of control, promotion, supervision, development and planning. It influences the commercial banks management in more than one way. The ownership of RBI vested in the hands of the Ministry of Finance, Government of India and It is a member of the international monetary fund (IMF).
- Dr. Ambedkar in his book named “The Problem of the Rupee – Its origin and its solution” formulated some strategies. Based on these strategies The concept of Reserve Bank of India was encouraged.
- The British Government established the Imperial Bank of India to perform as the Central Bank of India in 1921. But unfortunately it failed to show its performance and didn’t achieve any success as the Central Bank.
- The Hilton Young Commission recommended In 1926, the setting up of the Reserve Bank of India.
- Then, the British government enacted the Reserve Bank of India Act, 1934.
- RBI was established in April 1, 1935 under this Act in calcutta
- In 1937, Reserve Bank of India was permanently moved to Mumbai
- The Reserve Bank of India got nationalized In 1949,and became a member bank of the Asian Clearing Union.
- The original RBI Act of 1934 was amended In the year 2016 that provided the statutory basis for the implementation of the flexible inflation-targeting framework.
Objectives of the Reserve Bank of India
- Primary objectives: the objectives of the RBI according to the Preamble of RBI Act, 1934 as To regulate the issue of bank notes, To keep reserves for securing monetary stability in India and To operate the currency and credit system for the advantage of the nation.
- To remain free from political influence
- To be in successful operation for maintaining financial stability and credit.
- Fundamental objects: to discharge purely central banking functions in the Indian money market i.e. to act as Note-issuing authority, Bankers’ bank and Banker to government.
- To Promote the growth of the economy
- Development of Indian Economy
Central Board of Directors
The RBI or central bank of India has a central Board of directors, who are appointed by The Government of India for a four-year term. The Board of directors aref Official Directors and Non-Official Directors. Governor and Deputy Governors (not more than four) are included in the category of official directors and Non-Official Directors are Nominated by Government. Among them ten Directors are from various fields and two are government officials. Then other 4 directors are one each from four local boards
The present Governor of the Reserve Bank of India is Mr Shaktikanta Das.Osborne Smith was The first Governor of RBI and C D Deshmukh was The first Indian,who became the governor of the RBI.
Functions of RBI
The Issuer of Bank Notes
RBI issues currency notes and coins. But one rupee note is issued by the Ministry of Finance. Except one rupee note, All other notes are issued with the signature of the RBI Governor. RBI is The agency of distribution of all notes and coins issued by the Government of India.
Banker to the Government
The banking needs of the government are taken care of by RBI. The banking needs include operating and maintaining the deposit accounts of the government, collecting the receipts of funds, and making payments on behalf of the Government of India. It also represents the Indian Government
Custodian of Commercial Banks Cash Reserves
At a rate decided by the RBI in its monetary policy,Commercial banks are required to maintain the cash reserves
Custodian of Foreign Exchange Reserve
RBI Maintains a reserve of foreign currencies that enables the RBI to deal with any crisis situation.
Lender of the Last Resort
It acts as the lender of the last resort for all banks when they are in a crisis situation.
Controller of Credit
The credit created by the commercial banks in India is controlled by RBI, in accordance with the economic priorities of the government of India. Through quantitative and qualitative methods RBI controls and regulates the flow of money in the market. These are done by announcing monetary policies at regular intervals. The management of interest rates and money supply is involved in the monetary policy.
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Check your knowledge
RBI was established on April 1, 1935 under the Reserve Bank of India Act, 1934 in calcutta
Osborne Smith was the first Governor of RBI
1 The Issuer of Bank Notes.
2 Banker to the Government
3 Custodian of Commercial Banks Cash Reserves
4 Custodian of Foreign Exchange Reserve
5 Lender of the Last Resort
6 Controller of Credit
Primary objectives of the RBI according to the Preamble of RBI Act, 1934 is To regulate the issue of bank notes, To keep reserves for securing monetary stability in India and To operate the currency and credit system for the advantage of the nation