RBI

R.B.I

Reserve Bank Of India

Project by:Jijo Mathew

Establishment• Established on 1st April 1935 in accordance

with the provisions of the RBI Act 1934 on the basis of recommendations of the Hilton Young Commission.

• RBI Central office was in Kolkata, until it was moved to Mumbai in 1937. RBI has 22

regional offices.• Originally privately owned, but after

nationalization in 1949, RBI is fully owned by GOI.

RBI : Governing Body• RBI’s affairs are governed by a Central

Board of Directors appointed by the GOI.Central Board of Directors

Official Directors Non-Official Directors

- Full time directors - 10 directors from

- Governor various fields- 4 Deputy governors - 1 govt. official

- 4 directors from local boards

Main Functions The Reserve Bank of India Act of

1934 entrust all the important functions of a central bank to the RBI.

Monitory Authority :• RBI formulates, implements &

supervises the monitory policy of the country to maintain price stability & ensure adequate flow of credit.

• RBI is the controller of credit i.e. it has the power to influence the volume of credit created by banks in India through various instruments.

Functions…Regulator & Supervisor of the financial

system :• Provides broad parameters for banking

operations within which the country’s banking & financial system functions.

• For supervising financial system, RBI formed the Board of Financial Supervision (BFS) in 1994.

• BFS mainly supervises commercial banks, FIs & NBFCs.

• BFS’s main concerns are…– Restructuring the system of bank

inspections.– Strengthening the role of statutory auditors.– Legal issues in bank frauds, etc.

Functions…Managing Foreign Exchange :• Manages the foreign exchange of

the country i.e. maintains the exchange rate of Rupee against other currencies.

• RBI also acts as the custodian of India’s reserve of international currencies.

• Aim is to facilitate external trade & payments and promote orderly development & maintenance of foreign exchange market in India.

Functions…Issuer of currency :• Under section 22 of the RBI Act, the

bank has the sole right to issue bank notes of all denominations.

• Issues & exchanges or destroys currency & coins not fit for circulation.

• RBI has a separate Issue Dept. which is entrusted with the issue of currency notes.

• Aims to give the public adequate supply of currency notes & coins of good quality.

Functions…Banker to government :• Acts as a government banker,

agent & adviser for the central bank as well as for all state govts. (except Jammu & Kashmir)

• RBI has to keep cash balances of the govt. as deposits, receive and make payments on behalf of the govt.

• It also provides loans and advances to state govts and local authorities.

Functions…Banker’s bank & lender of last

resorts :• All scheduled banks have to

maintain cash reserves i.e CRR equal to 3% of their aggregate deposit liabilities.

• The schedule banks can borrow money from RBI on the basis of the eligible securities in times of need & urgency.

Functions…Promotional functions :• RBI has directly or indirectly set

up financial institutions like Deposit Insurance Corporation, UTI, IDBI, Agricultural Refinance Corporation of India, Co-operative credit movements, etc.

• This was with a view of promoting saving habits, eliminating money lenders, mobilizing savings, providing industrial & agricultural loans.

Conclusion• All the functions of RBI, monitory, non

monitory, supervisory or promotional are equally significant in context of the Indian economy.

• Under the Banking Regulation Act, RBI has been given a wide range of powers.

• Under the supervision & inspection of RBI, the working of banks has greatly improved.

• RBI has been responsible for strong financial support to industrial & agricultural development in the country.

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