Subject: History
Class: VII
Term: 2
Who governs
all the banks?
Role and
functions
of the RBI
Role and Functions of the RBI
In every country there is one organisation that works as the central
bank. The function of the central bank of a country is to regulate
and monitor the banking and financial system of the country. In
India, the Reserve Bank of India (RBI) is the central bank.
The RBI was established in 1935 and was nationalised in 1949.
The RBI plays the role of a regulator of the banking system in India.
The Banking Regulation Act 1949 and the RBI Act 1934 has given
the RBI the power to regulate the banking system. The RBI has
different functions in different roles. The main functions of the RBI
are :
l Monetary authority
l Issuer of currency
l Banker and debt manager to the government
l Banker to banks
l Regulator and supervisor of the financial institutions
l Manager of foreign exchange
l Regulator and Supervisor of the Payment and Settlement
Systems
l Maintaining financial stability
l Development role
The RBI is responsible for regulating the overall operations of all
banks in India. These banks may be:
l Public sector banks
l Private sector banks
l Foreign banks
l Co-operative banks,
l Regional rural banks
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As a regulator, the RBI helps maintain people's confidence in the banking system and also
provides forums for redressing customer's grievances. Along with supervising the banking
system in India, the RBI also issues currency notes. However, coins and one rupee notes
are supplied by the Government of India and the RBI only helps in its distribution. Have you
seen that all currency notes issued by the RBI have, “I promise to pay the bearer the sum or
Rupees…..”written on it? This is called the promissory clause and it refers to the Bank's
obligation to pay. While every bank note issued by the RBI also has signature of the RBI
Governor on it, one rupee notes have the signature of the Finance Secretary, Government
of India.
Exercise
1) What is the name of India's central bank?
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2) When was the RBI established?
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3) Who issues currency notes in India?
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4) Who is the present Governor of the RBI?
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Fill in the blanks
1) The function of the central bank is to ______________ and monitor the ______________
and ______________ system of the country.
2) The _________________________________________ is the central bank of India.
3) The ______________ and ______________ has given the RBI power to regulate the
banking system.
4) The ______________ issues currency notes.
5) “I promise to pay the bearer the sum” written on the currency notes is called the
______________
Match the following
1) 1935 a) The RBI Governor
2) 1949 b) The RBI
3) Banker to banks c) The RBI was nationalised
4) Chief executive of the RBI d) The RBI was established
Jumble
Time
Jumbled Words Clue Solution
Cralten Bnka Controls commercial banks
Rervese Bnka fo Iiand Apex bank of India
Pcilbu Srotce Bkna Bank where the majority stake is
held by the government.
Patevir Srotec Bkna Banks where greater parts of equity
are held by private shareholders
Fignore Bkna Bank with its headquarters in a
foreign country
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Fun Time
1) ______________________ is the central bank of India.
a) The Reserve Bank of India b) The State Bank of India
c) The Rupee Bank of India d) The Delhi Bank of India
2) The RBI was established in ____.
a) 1950 b) 1935
c) 1949 d) 1950
3) ________________ is responsible for controlling the overall operations
of all banks in India.
a) The RBI b) The SBI
c) The RPI d) The SPI
4) Banker and debt manager to the government is a function of_____________.
a) The SBI b) The BOI
c) The RBI d) The PNB
RBI regulates
all the banks
in India.