The Reserve Bank of India (RBI) is India’s central bank, also known as the banker’s bank.
The RBI controls the monetary and other banking policies of the Indian government. The Reserve Bank of India (RBI) was established on April 1, 1935, in accordance with the Reserve Bank of India Act, 1934. The Reserve Bank is permanently situated in Mumbai since 1937.
Establishment of Reserve Bank of India
The Reserve Bank is fully owned and operated by the Government of India. The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as;
1)Regulating the issue of Banknotes
2)Securing monetary stability in India
3)Modernising the monetary policy framework to meet economic challenges
The Reserve Bank’s operations are governed by a central board of directors, RBI is on the whole operated with a 21-member central board of directors appointed by the Government of India in accordance with the Reserve Bank of India Act.
The Central board of directors comprise of:
Official Directors – The governor who is appointed/nominated for a period of four years along with four Deputy Governors.
Non-Official Directors – Ten Directors from various fields and two government officials.
Functions of RBI
- The Issuer of the Currency: It has the sole authority to produce the currency. It also takes action to stop regulating the passage of fake money.
- Banker to the Government: It acts as a financer both to state and central government. It delivers short-term credit. It governs all new matters of government lands, maintaining the government debt unsettled, and taking care of the market for the government securities. It counsels the government on banking and monetary subjects.
- Banker’s Bank: It is the bank of all banks in the country as it delivers the loan to banks, rediscounts the invoice of banks and receives the payment of banks.
- Lender of Last Resort: All the other banks can borrow from the RBI by keeping qualified securities as a deposit at the time of crisis.
- Money Supply and Regulator of Credit: To manage demand and supply of cash in economy by Open Market Actions, Credit Ceiling and much more. It has to meet the credit necessities of the remaining banking system. It requires sustaining price stability and an elevated rate of economic growth.