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Overview of Reserve Bank of India Functions

The Reserve Bank of India (RBI) was established on April 1, 1935, and serves as the central bank of India with key objectives including maintaining monetary stability, regulating the banking system, and promoting economic growth. It is governed by a central board and has various functions such as monetary authority, regulator of financial systems, and issuer of currency. The RBI is also responsible for managing foreign exchange and overseeing payment systems, while facing challenges like inflation control and cyber-fraud risks.

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12 views2 pages

Overview of Reserve Bank of India Functions

The Reserve Bank of India (RBI) was established on April 1, 1935, and serves as the central bank of India with key objectives including maintaining monetary stability, regulating the banking system, and promoting economic growth. It is governed by a central board and has various functions such as monetary authority, regulator of financial systems, and issuer of currency. The RBI is also responsible for managing foreign exchange and overseeing payment systems, while facing challenges like inflation control and cyber-fraud risks.

Uploaded by

diyathakur703
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

1

Reserve Bank of India (RBI) —

1️⃣ Historical Background


Established on 1 April 1935
Legal foundation: Reserve Bank of India Act, 1934
Nationalized in 1949
Headquarters: Mumbai (initially Kolkata)
Based on recommendations of the Hilton Young Commission (1926)
It functions as the Central Bank of India

2️⃣ Key Objectives of RBI


Maintain monetary and financial stability
Regulate currency and credit system
Promote economic growth
Supervise and regulate the banking system
Manage foreign exchange
Develop secure and efficient payment systems
Ensure depositors’ protection

Organizational Structure
Headed by 1 Governor
Assisted by 4 Deputy Governors
Central Board of Directors:
Governor + 4 Deputy Governors
10 Directors nominated by Government of India
2 Government officials
Appointed and overseen by the Government of India

Important Bodies in RBI & Their Roles

Monetary Policy Committee (MPC): Determines Repo Rate and monetary policy decisions

5️⃣ Functions of RBI


A) Monetary Authority
Controls inflation and money supply
Uses monetary policy tools such as:
Repo Rate
Reverse Repo Rate CRR SLR OMO MSF Bank Rate

B) Regulator of Financial System


Regulates and supervises:
2

Commercial banks
NBFCs
Payment banks & Small finance banks
Ensures banking stability and depositor safety

C) Bankers’ Bank
Holds reserves of banks (CRR & SLR)
Provides loans/assistance when needed
Lender of Last Resort

D) Government’s Banker
Manages banking needs of Central and State Governments
Handles public debt, government securities, treasury bills

E) Issuer of Currency
Sole authority to print banknotes in India
Coins and ₹1 note issued by Ministry of Finance, but managed by RBI
Ensures secure and adequate currency supply

F) Foreign Exchange Manager


Regulates forex market under FEMA, 1999
Manages India's Foreign Exchange Reserves

G) Developmental and Promotional Role


Promotes digital payments: UPI, IMPS, NEFT, RTGS
Financial inclusion initiatives like PMJDY
Support to rural credit system (RRBs, co-operatives)

6️⃣ Key Acts Governing RBI


Reserve Bank of India Act, 1934 — Establishment and powers of RBI
Banking Regulation Act, 1949 — Banking supervision authority
FEMA, 1999 — Foreign exchange management
Payment and Settlement Systems Act, 2007 — Regulates payment systems

7️⃣ Role in Payment & Settlement Systems


Oversees NPCI (UPI, RuPay, IMPS)
Maintains cyber-security framework in payments
Promotes cashless economy innovations

Controlling inflation vs. supporting growth


Stress in financial institutions (NPAs)
Managing fintech regulations
Cryptocurrency control concerns
Increasing cyber-fraud risks

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