2. INTRODUCTION
• The Reserve Bank of India (RBI) is India's central bank, which
controls the issue and supply of the Indian rupee. RBI is the
regulator of entire Banking in India. RBI plays an important part
in the Development Strategy of the Government of India.
• It is the Central Bank of India Established in “1st April
1935” under the “RESERVE BANK OF INDIA ACT”. Its
head quarter is in Mumbai (Maharashtra).
• RBI has four zonal offices at:
o Chennai
o Delhi
o Kolkata
o Mumbai
• It has “22 Regional Offices”, most of them in State capitals.
3. PREAMBLE
The preamble of the Reserve Bank of India describes the basic functions
of the reserve bank as:
“to regulate the issue of Bank notes and keeping of reserves with a view
to securing monetary stability in India and generally to operate the
currency and credit system of the country to its advantage; to have a
modern monetary policy framework to meet the challenge of an
increasingly complex economy, to maintain price stability while keeping
in mind the objective of growth.”
4. ORGANIZATIONAL STRUCTURE OF
RBI
The Reserve Bank’s affairs are governed
by a Central Board of Directors. The
board is appointed by the GOI for a
period of four years.
Full-time officials : Governor and not
more than four Deputy Governors. The
current Governor of RBI is Mr.
Shaktikanta Das.
There are 4 deputy Governors, Mr. B.P
Kanungo, N.S. Vishwanathan, M.K. Jain.
Nominated by Government: ten
directors from various fields and two
government officials.
Others: four directors-one each from
four local boards.
6. Monetary Stability
• It decides how much money is needed to be supplied to the economy in order to
stabilize the exchange rate, maintaining good balance of payment, attain financial
stability, control inflation, strengthening the core banking system.
Banker And Debt Manager To Government
• RBI is the banker to the CG and SG by the virtue of agreements. Governments also
need a bank to carry out their financial transactions effectively and efficiently
• As a banker to the GoI, the RBI maintains its accounts, receive payments into and
make payments out of these accounts. The RBI also helps the GoI to raise money
from the public via issuing bonds and government-approved securities.
• Section 20 and 21.
Managing Foreign Exchange
• The central bank manages to reach different goals of the Foreign Exchange
Management Act, 1999. Their objective is to facilitate external trade and payment
and promote orderly development and maintenance of foreign exchange market in
India.
• The RBI manages forex and gold reserves of the nation.
• The RBI's Financial Markets Department (FMD) participates in the foreign exchange
market by undertaking sales/purchases of foreign currency to ease volatility in
periods of excess demand for/supply of foreign currency.
7. Issue Of Currency
• The Reserve Bank of India is the sole body authorised to issue banknotes in
India.
• Section 22 of the RBI act states that RBI shall have the sole power to issue
bank notes; section 24 mentions about the denomination of bank notes.
• The bank also destroys banknotes when they are not fit for circulation. The
objectives are to issue banknotes and give the public adequate supply of the
same, to maintain the currency and credit system of the country to utilise it in
its best advantage, and to maintain the reserves.
Regulator And Supervisor Of The Financial System And
Supervisor Of The Payment And Settlement Systems
• The institution is also the regulator and supervisor of the financial system and
objects to maintain public confidence in the system and also protect
depositors' interest and provide cost-effective banking services to the public.
• The Banking Ombudsman Scheme has been formulated by the (RBI) for
effective addressing of complaints by bank customers.
• The Payment and Settlement Systems Act of 2007 (PSS Act) gives the
Reserve Bank oversight authority, including regulation and supervision, for the
payment and settlement systems in the country.
8. Banker's Bank
• 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.
• It is the duty of the RBI to control the credit through the CRR,
bank rate and open market operations.
• As banker's bank, the RBI facilitates the clearing of cheques
between the commercial banks and helps the inter-bank transfer
of funds. It can grant financial accommodation to schedule banks.
• It acts as the lender of the last resort by providing emergency
advances to the banks.
Regulator Of The Banking System
• RBI has the responsibility of regulating the nation's financial
system.
• RBI uses methods like On-site inspections, off-site surveillance,
scrutiny & periodic meetings to supervise new bank licences,
setting capital requirements and regulating interest rates in
specific areas.
9. Detection Of Fake Currency
• To curb the counterfeit money problem in India, RBI has launched a website to
raise awareness among masses about fake banknotes in the market.
• www.paisaboltahai.rbi.org.in provides information about identifying fake
currency.
Developmental Role
• The central bank has to perform a wide range of promotional functions to
support national objectives and industries.
• The RBI faces a lot of inter-sectoral and local inflation-related problems. Some
of these problems are results of the dominant part of the public sector
• Key tools in this effort include Priority Sector Lending such as agriculture,
micro and small enterprises (MSE), housing and education.
• RBI work towards strengthening and supporting small local banks and
encourage banks to open branches in rural areas to include large section of
society in banking net.
Clearing House
• The RBI operates clearing houses to settle banking transactions. The RBI
manages 14 major clearing houses of the country situated in different major
cities. The State Bank of India and its associates look after clearing houses
function in other parts of the country as an agent of RBI.
