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What is Reserve Bank of India (RBI)
The Reserve Bank of India (RBI) is the central bank of India whose primary function is to manage and govern the financial system of the country. It is a statutory body established in the year 1935 under the Reserve Bank of India Act, 1934. The central bank regulates the issue and supply of the Indian rupee. It also looks after the central government’s money. The central bank plays the role of the bankers’ bank and regulates the banking sector. It also plays an important role in India’s development story by supporting the government in its developmental projects and policies.
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The head office of the RBI, in Kolkata when the bank was established, was shifted to Mumbai in 1937. Originally, the bank was privately owned. However, after Independence, it was nationalised in 1949 and is now fully owned by the Government of India.
What are the major functions of the RBI?
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The preamble of the RBI says... "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; to have a modern monetary policy framework to meet the challenge of an increasingly complex economy, to maintain price stability while keeping in mind the objective of growth."
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Some of the basic functions of the RBI are:
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1. Issuer of notes: The RBI is the only institution which has the control over printing of currency notes (except the one rupee note, which is printed by the finance ministry).
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2. Banker to the government: The RBI performs banking functions for the state and central governments. It advises the government on monetary policy issues and also manages the government’s public debt.
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3. Banker’s bank: The central bank is also known as the banker’s bank because it performs functions similar to what commercial banks do for their customers.
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4. Credit regulation: The RBI regulates the flow of money in the country’s financial system. It controls inflation in the economy and takes necessary policy decisions from time to time to address systemic concerns.
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5. Foreign reserves: The central bank buys and sells foreign currencies to keep the foreign exchange rates stable. It takes necessary steps as and when required.
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6. Role in development of the country: The RBI performs various functions and takes necessary decisions to support developmental agenda of the government.
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The RBI board
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The board of the RBI consists of a Governor, not more than four Deputy Governors and other members who are appointed by the central government. Currently, Shaktikanta Das is the Governor of the Reserve Bank of India. There are three Deputy Governors — B P Kanungo, Mahesh Kumar Jain, and M D Patra.
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