RBI AND ITS FUNCTIONS

Efforts By: Name Pooja Lilani Hrasha Teckchandani Roll No 27 58

Submitted To: Prof.Vasudevan

INTRODUCTION
Establishment
The RBI was established on April 1, 1935. in accordance with the provisions of the Reserve Bank Of India Act,1934.The Central Office of the RBI was initially established in Calcutta but was permanently moved to Mumbai in 1937.The Central office is where the Governer sits and where policies are formulated. Though originally privately Owned,since nationalisation in 1949,the RBI is fully owned by Government of India.

Central Board
The Reserve Bank Affairs are governed by a central board of directors .The board is appointed by the government of India in keeping with the RBI of India Act. Functions: General superintendence &direction of the bank affairs Appointed /Nominated for a period of four years Constitution Official Directors: Full time governer and not more than four deputy governers. Non-Official Directors: Nominated By Government, ten directors from various fields and one government official Others: four directors from 4 local boards

Local Boards
Functions: To advise the central board on local matters and to represent territorial and economic interests of local co-operative &indigenous banks;to perform such other functions as delegated by Central Board from time to time. One each for the four regions of the country in Mumbai, Calcutta, Chennai and New Delhi Membership: consist of five members each appointed by the Central Government for a term of four years

FUNCTIONS
The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as: "...to regulate the issue of Bank Notes and 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."

1) Monetary Authority:
RBI formulates, implement and monitor the monetary policy. The basic objective behind this is to maintain price stability and ensure adequate flow of credit to productive sectors. For e.g. Inflation in June stood at 9.44 per cent. The RBI has hiked its key policy rates 11 times since March 2010 to curb demand and tame inflation. RBI rate hikes have increased the cost of borrowing; they are intended to lower inflation, which would provide relief to the common man.

2) Regulator and supervisor of the financial system:

It prescribes broad parameters of banking operations within which the country's banking and financial system functions. This maintains public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public. For e.g. there have been several complaints, wherein an ATM fails to dispense cash but the amount is debited from the card holder's account. Besides, banks have been known to drag their feet over rectifying such errors. The RBI has directed the banks to resolve such issues within seven working days of a complaint being made, failing which the banks will have to pay a compensation of Rs 100 for each day of delay

3) Issuer of currency:
It Issues and exchanges or destroys currency and coins not fit for circulation. This helps to give the public adequate quantity of supplies of currency notes and coins and in good quality.

4) Developmental role:
It performs a wide range of promotional functions to support national objectives.

Development of Agriculture : In an agrarian economy like ours, the RBI has to provide special attention for the credit need of agriculture and allied activities. It has successfully rendered service in this direction by increasing the flow of credit to this sector. It has earlier the Agriculture Refinance and Development Corporation (ARDC) to look after the credit, National Bank for Agriculture and Rural Development (NABARD) and Regional Rural Banks (RRBs).

Provision of Industrial Finance : Rapid industrial growth is the key to faster economic development. In this regard, the adequate and timely availability of credit to small, medium and large industry is very significant. In this regard the RBI has always been instrumental in setting up special financial institutions such as ICICI Ltd. IDBI, SIDBI and EXIM BANK etc.

5) Banker to banks:
It maintains banking accounts of all scheduled banks. For e.g. every commercial bank has to maintain a part of their reserves with its parent's viz. the RBI. Similarly in need or in urgency these banks approach the RBI for fund. CRR Rate-6% 6) Banker to the Government: It performs merchant banking function for the central and the state governments; also acts as their banker. It performs various banking function such as to accept deposits, taxes and make payments on behalf of the government. It works as a representative of the government even at the international level. It maintains government accounts, provides financial advice to the government. It manages

government public debts and maintains foreign exchange reserves on behalf of the government.

7) Manager of Foreign Exchange :

It manages the Foreign Exchange Management Act, 1999. In order to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.