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Reserve Bank of India (RBI)

The Reserve Bank of India (RBI) was established in 1935 as India's central bank. It regulates banking, manages currency and foreign exchange, and acts as a bank for the government and commercial banks. Key functions of RBI include formulating monetary policy, regulating and supervising financial institutions, managing foreign exchange, issuing currency, and performing a developmental role to support national objectives.

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192 views14 pages

Reserve Bank of India (RBI)

The Reserve Bank of India (RBI) was established in 1935 as India's central bank. It regulates banking, manages currency and foreign exchange, and acts as a bank for the government and commercial banks. Key functions of RBI include formulating monetary policy, regulating and supervising financial institutions, managing foreign exchange, issuing currency, and performing a developmental role to support national objectives.

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Marcus Aurelius
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Reserve Bank

of India (RBI)
Establishment
• The Reserve Bank of India was established
on April 1, 1935 in accordance with the
provisions of the Reserve Bank of India
Act, 1934.
• The Central Office of the Reserve Bank
was initially established in Calcutta but was
permanently moved to Mumbai in 1937. The
Central Office is where the Governor sits
and where policies are formulated.
• Though originally privately owned, since
nationalisation in 1949, the Reserve Bank is
fully owned by the Government of India.
The Bank was constituted to

• Regulate the issue of banknotes


• Maintain reserves with a view to securing monetary stability and
• To operate the credit and currency system of the country to its
advantage.
• The Bank began its operations by taking over from the
Government the functions so far being performed by the
Controller of Currency and from the Imperial Bank of India, the
management of Government accounts and public debt. The
existing currency offices at Calcutta, Bombay, Madras, Rangoon,
Karachi, Lahore and Cawnpore (Kanpur) became branches of the
Issue Department. Offices of the Banking Department were
established in Calcutta, Bombay, Madras, Delhi and Rangoon.
• Burma (Myanmar) seceded from the Indian Union in 1937 but
the Reserve Bank continued to act as the Central Bank for
Burma till Japanese Occupation of Burma and later upto April,
1947. After the partition of India, the Reserve Bank served as
the central bank of Pakistan upto June 1948 when the State
Bank of Pakistan commenced operations. The Bank, which was
originally set up as a shareholder's bank, was nationalised in
1949.
• With liberalisation, the Bank's
focus has shifted back to core
central banking functions like
Monetary Policy, Bank Supervision
and Regulation, and Overseeing the
Payments System and onto
developing the financial markets.
Organisation & Management
Central Board
• The Reserve Bank's affairs are governed by a
central board of directors. The board is
appointed by the Government of India in
keeping with the Reserve Bank of India Act.
• Appointed/nominated for a period of four years
Constitution:
– Official Directors
• Full-time : Governor and not more than four Deputy
Governors
– Non-Official Directors
• Nominated by Government: ten Directors from various
fields and two government Official
• Others: four Directors - one each from four local boards
Board & Management
Legal Framework of RBI

I.Acts administered by Reserve Bank of India


• Reserve Bank of India Act, 1934
• Public Debt Act, 1944/Government Securities Act, 2006
• Government Securities Regulations, 2007
• Banking Regulation Act, 1949
• Foreign Exchange Management Act, 1999
• Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (Chapter II)
• Credit Information Companies (Regulation) Act, 2005
• Payment and Settlement Systems Act, 2007
– Payment and Settlement Systems Regulations, 2008 and
Amended up to 2011 and BPSS Regulations, 2008
– The Payment and Settlement Systems (Amendment) Act,
2015 - No. 18 of 2015
Legal Framework of RBI
II. Other relevant Acts
• Negotiable Instruments Act, 1881
• Bankers' Books Evidence Act, 1891
• State Bank of India Act, 1955
• Companies Act, 1956/ Companies Act, 2013
• Securities Contract (Regulation) Act, 1956
• State Bank of India Subsidiary Banks) Act, 1959
• Deposit Insurance and Credit Guarantee Corporation Act, 1961
• Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
• Regional Rural Banks Act, 1976
• Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980
• National Bank for Agriculture and Rural Development Act, 1981
• National Housing Bank Act, 1987
• Recovery of Debts Due to Banks and Financial Institutions Act, 1993
• Competition Act, 2002
• Indian Coinage Act, 2011 : Governs currency and coins
• Banking Secrecy Act
• The Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003
• The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993
RBI functions

Monetary Authority:
• Formulates, implements and monitors
the monetary policy.
• Objective: maintaining price stability
while keeping in mind the objective of
growth.
RBI functions

Regulator and supervisor of the


financial system:
• Prescribes broad parameters of banking
operations within which the country's
banking and financial system functions.
• Objective: maintain public confidence in
the system, protect depositors'
interest and provide cost-effective
banking services to the public.
RBI functions

Manager of Foreign Exchange


• Manages the Foreign Exchange
Management Act, 1999.
• Objective: to facilitate external trade
and payment and promote orderly
development and maintenance of foreign
exchange market in India.
RBI functions

Issuer of currency:
• Issues and exchanges or destroys
currency and coins not fit for circulation.
• Objective: to give the public adequate
quantity of supplies of currency notes and
coins and in good quality.
Developmental role
• Performs a wide range of promotional
functions to support national objectives.
Related Functions

• Banker to the Government: performs


merchant banking function for the central and
the state governments; also acts as their
banker.
• Banker to banks: maintains banking accounts
of all scheduled banks.
Offices - Has 20 regional offices, most of them
in state capitals and 11 Sub-offices.
Offices

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