Reserve Bank of India or RBI as we know it is the statutory body which acts as the Apex or central bank of the country which handles the country’s growth and economic stability. It is responsible for managing the monetary policies of the government. One of the important objective of RBI is being the Bank of Banks or the Banker’s Bank.
RBI was established on 1 April 1935 by the Reserve bank of India Act, 1934. Basically there are three primary function of RBI which means controlling inflation, enhancing economic growth and maintaining financial stability
History of RBI:-
The RBI was established as the Central Bank of India on the recommendation of the Hilton Young Commission.
- The functioning of the bank began in April 1, 1935 by taking over the management of Government and Imperial Bank of India.
- The currency offices of Cawnpore (Kanpur), Lahore, Karachi, Rangoon, Madras, Bombay and Calcutta were converted into Department branches while new Banking departments were established in Rangoon, Delhi, Madras, Bombay and Calcutta.
After partition of the country, the Reserve Bank acted as the Central Bank of Pakistan upto 1948. The Bank was nationalised as the Reserve Bank of India, 1949.
Governor of Reserve Bank of India:-
The current governor of RBI is Shaktikant Das. He was the former secretary of Revenue Department and Department of Economic Affairs. He took charge on the December 12, 2018.
The tenure of governor of RBI is 3 years. For becoming the Governor of Reserve bank of India an individual shall fulfill the below mentioned criteria:-
- He/She must be a graduate of a recognized university.
- He/she must be not less than 35 years of age.
- He/she should not be a member of parliament or state legislature.
Functions of RBI:-
The Preamble provides the essential functions of RBI is ‘to regulate the issue of Bank Notes and to keep reserves for securing monetary stability in the India and in general to operate the currencies and the credit system of the country to its advantage’.
It is the central body which works as the Monetary Authority and manages the foreign exchange and issue of currency. The RBI regulates and administers the country’s financial system. The functions of the Reserve bank of India are below:-
1. Monetary Authority:
Being the monetary authority of India, RBI implements and monitors the monetary policies. It provides price stability in India concerning the country’s economic growth.
2. Managing Foreign Exchange:
FOREX reserve of India are governed by RBI. It is also responsible for providing help in Foreign Trade Payment and maintaining the Rupee valve outside the country.
3. Regulator and Administrator of the Financial System:
The RBI provides the detailed factors of banking operations. Methods such as branch expansion, bank mergers, liquidity of assets, issuance of license, etc. is responsible for maintaining and functioning the banking and financial system of the country.
4. The Issuer of Currency:
RBI is responsible to provide the public with adequate amount of currency notes and coins while maintaining their quality. Also, they are the incharge of issuing and exchanging coins and currency.
5. Banker to Banks:
For settling the interbank transactions is the responsibility of RBI. Thus, RBI serves as the bank’s standard banker.
6. Developmental Role:
The RBI provides support while enhancing the country’s developmental charges.
7. Banker and Debt Manager of the Government:
The charge of all banking transactions of the government is with RBI. The Reserve Bank of India is responsible for holding cash of the government. Also, the RBI manages public debts on behalf of the state and central government and offers new loans.
8. Overseeing Market Operations:
RBI regulates and develops repo markets, money markets and other market instruments. It implements money market operations, foreign exchange and government securities.
9. Lender of the last resort:
It helps banks in times of financial crisis.
Objective of RBI:-
The main objective of RBI is to maintain the public confidence in the monetary market, protecting the depositors interests and facilitate cost effective banking services like the co-operative banking and commercial banking to people. According to the RBI act of 1934 the objective of RBI are:-
- Maintaining the nation’s currency and credit system
- For maintaining reserves for securing monetary stability.
- Issuing bank notes is also one of the objective of RBI
- Maintaining the financial stability or credit while getting engaged in effective activities.
- Performing Central Banking Functions by acting as the Banker’s Bank, Banker to the government and note issuing authority.
- Promoting Economic growth and support with planned advancement of economy of the country
Powers of Reserve Bank of India:-
According to the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949 the RBI has following powers over the commercial banks
- Liquidity of their assets
- Licensing and establishment
- Management and methods of working
- Reconstruction and liquidation
- Amalgamation (merger)
- Branch expansion
Role of RBI in Indian Economy
RBI is an institution of national importance and pillar of the indian economy which draws its powers from Banking Regulation Act, 1949. It formulates, implements and monitors the monetary policy. Also acts as the apex bank and the exchequer of banking regulations and the laws related to it.
It would be best to say that in times where so many scams are happening it is the RBI who is preventing the Indian economy from collapsing and in dire situation it acts as the saviour for the people and their money.
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