Reserve Bank of India is a Central Bank of India i.e. an apex Institution of Indian monetary system. According to the RBI act 1934, Reserve Bank of India established on April 1st, 1935. So, Reserve Bank of India was set up as the private shareholder’s bank with a paid capital of ₹ 5 crores.
On January 1st, 1949, It became a national bank (Nationalisation of RBI). The Reserve Bank of India follows an accounting year from July to June, which enables it to take into account the performance of banks, which follow an April- march financial year.
In the previous post, we have studied the Monetary Policy terms in India. Now, we will study Apex bank of India ie about RBI.
Head of Reserve Bank of India
The executive head of the bank is called Governor, who is assisted by Deputy Governor and other executive officers. For general direction, the Bank has a central board of directors, supplemented by four local boards in Delhi, Calcutta, Madras, and Bombay. The Head office of RBI is at Mumbai.
Functions of Reserve Bank of India
Bank of Issue
RBI has the sole right to issue banknotes of all denominations. The issuing and distribution of rupee one notes and coins and small coins all over the country are undertaken by the RBI as an agent of the Government.
Banker to Government
The RBI as an agent of central Government for all states in India except Jammu & Kashmir.** The RBI has the obligation to transact government business. Central and all state governments maintain an account with RBI.
Bankers Bank
All commercial banks maintain current accounts with the RBI. The RBI provides a central clearing home facility to the banks in order to settle their mutual claims on each other. It also provides financial assistant to the banks in a time of need so it is also called the lender of the last resort.
Controller of Money and Credits
The RBI regulates the supply of money and credit in the economy through various instruments of monetary policy like CRR, SLR, Bank Rate, etc. It controls financial institutions through the system of licensing, inspection and by providing guidance.
Exchange management and control
RBI manages the foreign exchange rate of rupee through regulating norms of convertibility in respect of various foreign exchange transactions.
Custodian of Foreign Exchange Reserves
RBI maintains the reserve of foreign exchange. It acts as an agent of the government in respect of Indian membership in the IMF.
Supervisory Functions
The RBI Act 1934 and Banking Regulation Act 1949 have given RBI wide powers of suspension and control of commercial and cooperative banks.
Promotional Functions
Reserve Bank of India promotes Banking habits, extend banking facilities to rural and semi-urban areas. So, RBI has helped in setting up various development finance institutions like IDBI, ICICI, IFCI, etc.
Publication of Monetary data
Reserve Bank of India collects a variety of statistical information and publishes the same periodically. So, its important report publications include ‘Report on currency and finance‘. It is an annual publication. And ‘RBI Bulletin’ is monthly magazine of RBI.
So, this was all about the RBI. In the upcoming post, we shall study Bank Rate, CRR, SLR etc terminology.
Thanks and Stay Wealthy. 🤑😊
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