Reserve bank of India

Introduction:
Reserve bank of India is the central bank of India and is owned and
operated by the government of India.
It regulates the commercial banks and non- banking finance companies
in India.
It is an independent apex monetary authority which regulates the
supply and credit in the country.
The RBI carries out India’s monetary policy and exercises supervision
and control over banks and non- banking finance companies in India.
A central bank is a vital financial apex institution of an economy.

• Headquarters : Mumbai, Maharashtra, India since 1937

• Established : 1st April 1935 under the Reserve Bank of India Act,
1934
• Nationalised : 1st January 1949
• Present Governor : Shaktikanta Das (25th governor) (27.11.2017)

Objectives of RBI:
The Preamble to the Reserve Bank of India Act, 1934 spells it 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 to its advantage.’’
Other objectives are :
 Supervise and undertake initiatives for the financial sector.
i. Restructuring bank inspections
ii. Fortifying the role of statutory auditors in the
banking system
 To discharge purely central banking functions in the Indian
Money market, such as acting as the note-issuing authority,
 bankers’ bank and banker to Government, and to promote the
growth of the economy.
 To assist the planned process of development of the Indian
economy.
ORGANISATIONAL STRUCTURE:
The operations of the RBI are governed by a central board of directors. The
board of directors consists of 20 members consisting of
1. one Governor ( who is appointed / nominated for q period of 4 years)
2. four Deputy directors (appointed along with the governor)
3. four directors
4. Ten executive directors
5. One govt official nominated by the central govt
FUNCTIONS OF RBI:
1. FINANCIAL SUPERVISION:

RBI performs this function under the guidance of the board for
financial supervision which was constituted in November1994 as a
committee of the central board of directors of the RBI.

Objective: is to undertake consolidated supervision of the financial

sector comprising of commercial banks, financial institutions and non-
banking finance companies.

The board is required to meet normally once every month

The board considers inspection reports and other supervisory issues
placed before it by the supervisory departments.
2. REGULATOR AND SUPERVISION OF THE FINANCIAL SYSTEM:

The RBI prescribes board parameters of banking operations within

which the country’s banking and financial system functions.
Objective is to maintain public confidence in the system, protect
depositors interest and provide a cost- effective banking services to the
public.
 The RBI controls the monetary supply, monitors economic indicators
like the GDP and has to decide the design of the rupee banknotes as
well as coins.

3. REGULATOR AND SUPERVISOR OF THE PAYMENT AND SETTLEMENT

SYSTEMS:
It plays an important role in improving the overall economic efficiency. The
Payment and settlement systems act of 2007 gives the RBI oversight
authority, regulation and supervision for the payment and settlement
systems in the country. The RBI focuses on the development and functioning
of safe, secure and efficient payments and settlements mechanisms.
The are 2 payment systems most widely used and are as follows:
NEFT: (national electronic fund transfer)
RTGS: (Real time gross settlement)
These payment systems allows the individuals, companies, firms to transfer
funds from one bank to another which can be used for transactions which are
made within the country.
4. BANKER AND DEBT MANAGER TO GOVERNMENT:
Just like how individuals need a bank to carry out their financial transactions,
similarly the govt also needs a bank to carry out their financial transactions.
RBI serves as a banker to the govt of india by maintaining the accounts,
receives payments and makes payments on behalf of govt.
It also helps the government to raise money from the public by issue of
bonds, govt approves securities, etc.
5. CUSTODIAN OF FOREIGN EXCHANGE:
Their main objective is to facilitate external trade and payment and promote
orderly development and maintenance of foreign exchange market in India.
With the increasing integration of the indian economy with the global
economy due to the increase in trade and capital flow by the way of foreign
investment, need for management of foreign exchange increased.
The RBI manages forex and gold reserves of the nation.
The foreign exchange rate reflects the demand and supply of foreign
exchange.
If there is lot of fluctuations in the foreign exchange, the foreign investors
will not be willing to invest in our country and which would decrease the
foreign cash inflow in our country and therefore, the management of foreign
exchange is very important.
6. ISSUER OF CURRENCY:
The RBI has the sole authority to issue currency along with the government
of India.
The RBI is responsible for the design, production and overall management of
the nation’s currency, with the goal of ensuring an adequate supply of clean
and genuine notes.
The government of India issues coins and it supplies coins to the RBI on
demand and these coins are put into circulation by the RBI on behalf of the
central government.
7. BANKER’S BANK:
RBI acts the banker to the commercial banks. It maintains all the accounts
of the commercial banks and the commercial banks are the account
holders in the RBI where the commercial banks deposit cash and reserves
with the RBI.
The RBI controls the credit through CRR, bank rates and open market
operations.
The RBI facilitates the clearing of cheques between the commercial banks
and helps the inter-bank transfer of funds.
It acts as the last lender of resort to the commercial banks by providing
advances to the commercial banks when the banks are in emergency.
8. REGULATOR OF THE BANKING SYSTEM:
RBI has the responsibility of regulating the nation’s financial system. As a
regulator and supervisor of the indian banking system, it ensures financial
stability and public confidence in the banking system.
It checks malpractices and protects interests of the investors.
RBI does inspections, off-site surveillance, security and periodic meetings
to supervise and new bank licences, capital requirements and regulating
interest rates in specific areas.
9. CONTROLLER OF CREDIT:
Credit forms the most important part of supply of money, and since the
supply of money has important implications for the economic stability,
the importance of control of credit becomes necessary. It acts as a
weapon in controlling the demand and supply of money in the economy.
Credit is controlled by the reserve bank in accordance with the economic
priorities of the government.
10.DETECTION OF FAKE CURRENCY:
In order to counterfeit the fake currencies in India, the RBI has
launched a website to raise awareness among masses about fake notes
in the market.
The website is www.paisaboltahai.rbi.org.in (provides information about how
to identify a fake note)
RBI is expected to unearth black money from the market which would
curb the menace of fake currency
11. DEVELOPMEMTAL ROLE:
The RBI Promotes and performs promotional functions to support
national banking and financial objectives.
Kisan credit card (KCC) Scheme
Lead bank scheme
Special agricultural credit plan