Reserve Bank of India (RBI) is India’s central banking institution, which controls the monetary policy of the Indian rupee. It commenced its operations on 1 April, 1935 during the British Rule in accordance with the provisions of the Reserve Bank of India Act, 1934. The original share capital was divided into shares of 100 each fully paid, which were initially owned entirely by private shareholders. Following India’s independence on 15 August, 1947, the RBI was nationalised on 1 January, 1949.
Functions Of RBI
- Monetary Authority: Formulates, implements and monitors the monetary policy for A) maintaining price stability, keeping inflation in check ; B) ensuring adequate flow of credit to productive sectors.
- Regulator and supervisor of the financial system: lays out parameters of banking operations within which the country”s banking and financial system functions for– A) maintaining public confidence in the system, B) protecting depositors’ interest ; C) providing cost-effective banking services to the general public
- Regulator and supervisor of the payment systems: A) Authorises setting up of payment systems; B) Lays down standards for working of the payment system; C)lays down policies for encouraging the movement from paper-based payment systems to electronic modes of payments. D) Setting up of the regulatory framework of newer payment methods. E) Enhancement of customer convenience in payment systems. F) Improving security and efficiency in modes of payment.
- Manager of Foreign Exchange: RBI manages forex under the FEMA- Foreign Exchange Management Act, 1999. in order to A) facilitate external trade and payment B) promote development of foreign exchange market in India.
- Issuer of currency: RBI issues and exchanges currency as well as destroys currency & coins not fit for circulation to ensure that the public has adequate quantity of supplies of currency notes and in good quality.
Developmental role :
RBI performs a wide range of promotional functions to support national objectives. Under this it setup institutions like NABARD, IDBI, SIDBI, NHB, etc.
- Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.
- Banker to banks: An important role and function of RBI is to maintain the banking accounts of all scheduled banks and acts as banker of last resort.
- Agent of Government of India in the IMF
Objectives Of RBI
* To manage the monetary and credit system of the country.
* Stabilize internal and external value of rupee.
*Establish monetary relations with other countries of the world and international financial institutions.
* To maintain balance between the demand and supply of currency.
The Preamble to the Reserve Bank of India Act, 1934 spells out the objectives of the Reserve Bank as: “to regulate the issue of Bank notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country advantage.
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