One of the most important financial institutions in India is “The Reserve Bank Of India ( RBI)” which is also known as the Central Bank of India. It is like a parent organization of all the commercial banks and controls everything related to money in our country from issuing money to circulation and control of money, you name it and RBI has the responsibility to handle it. The entire market works on the policies laid by the RBI. RBI makes sure that there is a sufficient supply of money without causing inflation. The bank’s works based on the guidelines of RBI and no bank can lay down its own rules and regulation. but How does RBI become so important? How it started and what was the need? These are some of the basic questions that may intrigue a banking aspirant who has just started. So, in this article, we will be covering everything related to RBI like RBI History, RBI Structure, Functions of RBI, etc.
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The Reserve Bank of India was founded in 1935, under RBI Act 1934 on the recommendations of John Hilton Young Commission in 1926 which was also called Royal Commission on Indian Currency & Finance), is the central bank of the country & was nationalized w.e.f 01st Jan 1949 and since then it is fully owned by Government Of India. Initially the Central Office of the Reserve Bank of India was established in Calcutta but later on it was permanently moved to Mumbai in 1937.
Functions Of RBI:
- Issuance of currency: RBI is the main and sole authority in India to issue currency notes under signatures of Governor of RBI. RBI distributes currency all across the nation with the help of currency chests.
- Banker to Government: RBI is also known as the banker to government because it provides loan and monetary help to government with the help of an instrument know as ways and means advances.
- Bankers’ bank: One of the important function that it does is to provide timely supply of credit to other banks whenever required by them through monetary instruments and thus acts as lender of last resort by providing financial assistance to banks. It also provides export credit refinance, Liquidity Adjustment Facility & MSF.
- Controller of Banks: One of the greatest need of central bank was to control other banks and regulated them on the basis of the set guidelines so that there is no monopoly and timely credit is available to all the sectors of an economy. RBI as a controller of banks issues directions, carries inspection (on-site as well as off-site) & exercises management control.
- Controller of credit: Liquidity in the market is maintained by RBI as it can fix interest rates (including Bank Rate) & exercise selective credit controls. There are various monetary tools such as change in cash reserve ratio, stipulation of margin on securities, directed credit guidelines etc. are used for this purpose.
- Maintenance of external value: RBI is also responsible for maintaining external value of Indian currency as well as the internal value. Maintaining Foreign exchange reserves are held by RBI & it also holds a wide power to regulate foreign exchange transactions under Foreign Exchange Management Act.
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- Shaktikanta Das (Governor)
- Shri Dr. M. D. Patra (Deputy Governor)
- Shri M. K. Jain (Deputy Governor)
- Shri B.P. Kanungo (Deputy Governor)
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Other Important facts related to RBI:
- RBI does not perform the function of accepting deposits from the general public.
- Prime lending rate is not decided by RBI of the individual banks.
- RBI holds the responsibility to decides the following rates namely; Bank rate, repo rate, reverse repo rate & cash reserve ratio.
- One of the instrument of RBI is quantitative instruments of RBI are – bank rate policy, cash reserve ratio & statutory liquidity ratio.
- The objective of monetary policy set by RBI is to control inflation; discourage hoarding of commodities & encourage flow of credit into neglected sector.
- RBI is lender of the last resort which means that RBI advances credit against eligible securities.
- Minting of coins quantity is decided by GOI.
- Currently in India to issue currency note the method which is used is minimum reserve system. For issuing notes, RBI is required to hold the minimum reserves of Rs. 200 crores of which note less than Rs. 115 crores is to be held in gold
- Emblem of RBI are Panther and Palm Tree.
- Chintaman Dwarkanath Deshmukh (C D Deshmukh) was the first Indian governor of RBI at the time of nationalization of RBI in 1949.
- K.J.Udeshi. was first women Deputy Governor of RBI.