ROLE OF RBI IN INDIAN

ECONOMIC DEVELOPMENT

SUBMITTED BY- SUBMITTED TO-

KARNIKA GUPTA (24) DR. SHELLEKA GUPTA
 INTRODUCTION
• The Reserve Bank of India (RBI) is India's central
banking institution.

• It was established on 1 April 1935 during the

British Raj in accordance with the provisions of
the Reserve Bank of India Act, 1934 after the
recommendation from Hilton-Young commission.

• The Reserve Bank of India was nationalised in

1949 under the Reserve Bank (Transfer of Public
Ownership) Act, 1948.
• The headquarters of the Reserve Bank of India are
located in Mumbai. RBI has offices at 31 locations.

• It’s present governor is Shaktikanta Das.

• The basic functions of the Reserve Bank of India are

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.
 Main Functions of the Reserve Bank
• Monetary authority
• Issuer of currency
• Banker, Agent and Financial Advisor to the government
• Banker to the Banks
• Regulation and supervision of the banking and financial
system
• Management of Foreign Exchange
• Regulation and Supervision of the Payment and
Settlement Systems
• Developmental role
 Role of RBI in Indian Economic
Development
• Development of Banking System
• Development of Financial Institutions
• Development of Impoverished Regions
• Economic Stability
• Economic Growth
• Appropriate Interest rate structure
Development of Banking System
• Granting license to banks.
• Inspect and make enquiry or determine position in
respect of matters under various sections of RBI
and Banking Regulation Act.
• Periodical review of the work of commercial
banks.
• Giving directives to commercial banks.
• Control the NBFIs.
• Ensuring the health of financial system through
on- site and off-site verifications.
 Development of Financial
Institutions
• Reserve Bank of India’s role also includes
establishing institutions designed to build the
country’s financial infrastructure as well as
regulate them. Export - Import Bank of India
(Exim Bank); National Bank for Agriculture
and Rural Development (NABARD); Small
Industries Development Bank of India
(SIDBI); National Housing Bank (NHB) are
some of them.
 Development of Impoverished
Regions
• The RBI has proactively promoted the
initiative of establishing banking as well as
many financial schemes and infrastructure in
the otherwise ignored regions.

• Access to affordable financial services and

promoting financial education and literacy and
inculcating banking habits among the rural
mass.
 Economic Stability
• Reserve Bank of India is responsible for the
stability of the economy and combats issues
like Inflation, Recession, Currency
devaluation, through various Monetary
policies.

• RBI achieves this using various tools like

Bank rate, Rep Rate, Reverse Repo Rate,
CRR, SLR, etc
 Appropriate Interest rate structure
• The cost of borrowing is determined by where the
Reserve Bank of India sets its interest rates and
ultimately consumer behaviour will determine how the
overall demand in the economy is.

• So, both through direct channels on money supply as

well as through indirect channels through the interest
rate setting behaviour, the Reserve Bank of India
determines what should be the interest rate that a
commercial banks sets and therefore in that process
determine how consumers actually behave
 Economic Growth
• Traditionally, RBI’s monetary policy was focused
on controlling inflation through contraction of
money supply and credit. This resulted in poor
growth performance.

• Thus, RBI have now adopted the policy of

‘Growth with Stability’. This means sufficient
credit will be available for growing needs of
different sectors of economy and at the same
time, inflation will be controlled with in a certain
limit.