RESERVE BANK OF INDIA

 

RESERVE BANK OF INDIA (RBI ):

• Reserve Bank of India (RBI) is the supreme monetary authority responsible for controlling the banking system in the country. 
• It was established on April 1, 1935, in accordance with the provisions of the Reserve Bank of India Act, 1934.
• Originally privately owned, RBI is fully owned by the Government of India since its nationalization in 1949.
• It was nationalized on the basis of the RBI (Transfer to Public Ownership) Act, 1948. 
• The Banking Regulation Act, 1949, provides the legal framework for regulation of the banking sector by the Reserve Bank of India. 

Main Functions of RBI:

Custodian of Monetary Policy:

• It implements the Monetary Policy and ensures price stability while keeping in mind the objective of growth.

Bankers’ Bank:

• The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible securities by rediscounting bills of exchange.

Controller of Credit:

• The Reserve Bank of India has the power to influence the volume of credit created by banks in India.
• It issues and exchanges / destroys currency and coins not fit for circulation.

The Reserve Bank has the obligation to transact Government business.

Mangement of Banks:

• Every bank has to get a license from the Reserve Bank of India to do banking business within India.
• It Prescribes broad parameters of banking operations such as issuing licenses, branch expansion, liquidity of assets, amalgamation of banks etc.
• Reserve Bank has selected a Bank Led Model for financial inclusion in India.
• The Reserve Bank has also the power to inspect the accounts of any commercial bank.
• The Reserve Bank of India is armed with many more powers to control the Indian money market.
• RBI Manages the Foreign Exchange reserves of India. 
• It facilitates external trade and payment and promotes orderly development and maintenance of foreign exchange market in India.