RBI Notes
The Reserve Bank of India is the central bank of the country. The Reserve Bank of India was set up on the basis of the recommendation of the Hilton Young Commission. The Reserve Bank of India Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank, which commenced operations on April 1, 1935. The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937.
Initially 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 to the country to its advantage.
After the partition of India, the Reserve Bank served as teh 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.
The Bank palyed a key role in institutional development and helped set up institutions like the Deposit Insurance and Credit Guarantee Corporation of India, the Unit Trust of India, the Industrial Development Bank of India, the National Bank of Agriculture and Rural Development the Discount and Finance House of India etc. to build the financial infrastructure of the country.
With liberalisation, the Bank's focus has shifted bank to core central banking functions like Monetary Policy, Bank Supervision and Regulation, and Overseeing the Payments System and onto developing the financial markets.
Central Board of RBI
The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of India Act. Appointed/nominated for a period of four years.
Hilton Young Commission
The Reserve Bank of India was set up on the basis of the recommendations of the Royal Commission on Indian Currency and Finance also known as the Hilton-Young Commission.
Also,
- Emblem of RBI: Panther and Palm Tree.
- RBI can issue currency notes as much as the country requires, provided it has to make a security deposit of Rs. 200 crores, out of which Rs. 115 crores must be in gold and Rs. 85 crores must be in Government Securities. This system is known as Minimum Reserve System.
List of Governors
Sir Osborne Smith: 1st Governor
Sir C D Deshmukh: 1st Indian Governor
Dr. Raghuram Rajan: Current Governor
The Current Deputy Governors:
Shri Harun R.Khan
Dr. Urjit R. Patel
Shri R. Gandhi
Shri S. S. Mundra
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Issuer of Currency
Under section 22 of RBI Act, the bank has the sole right to issue currency notes of all denominations except one rupee coins and notes. The one-rupee notes and coins and small coins are issued by Central Government and their distribution is undertaken by RBI as the agent of the government.
It act as the Banker to the Government
The RBI acts as a banker agent and adviser to the government. It has obliation to transact the banking business of Central Government as well as State Governments. RBI receives and makes all payments on behalf of government, remits its funds, buys and sells foreign currencies for it and gives it advice on all banking matters. The bank makes ways and meets advances of the government. On behalf of central government it sells treasury bills and thereby provides short-term finance.
It is the Lender Off Last Resort
RBI acts as a lender of last resort.It provides funds to bank when they fail to get it from other sources.
Controller of Credit
RBI has power to control the volume of credited by banks.The RBI through its various quantitative and qualitative techniques regulates total supply of money and bank credit in the interest of economy.
Exchange control and Custodian of Foreign Reserves
RBI functions as custodian of nations' foreign exchange reserves. It has to maintain external value of Rupee. It achieves this aim through appropriate monetary fiscal and trade policies and exchange control.
Regulatory and Supervisory Functions
The RBI has wide powers of supervision and control over commercial and co-operative banks, relating to licensing, establishment, branch expansion, liquidity of Assets, management and methods of working, amalgamation, re-construction and liquidation. The supervisory functions of RBI have helped a great in improving the standard of banking in India to develop on sound lines and to improve the methods of their operation.
Development And Promotional Functions:
The RBI has helped insetting up Industrial Finance Corporations of India (IFCI), State Financial Corporations (SFCs), Deposit Insurance Corporation, Agricultural Refinance and Development Corporation (ARDC), units Turst of India (UTI) etc.
These institutions were set up to mobilize savings, promote saving habits and to provide industrial and agricultural finance.
RBI has a special Agricultural Credit Department (ACD) which studies the problems of agricultural credit. For this Regional Rural banks, Co-Operative, NABARD etc. were established. The RBI has also taken measures to promote organized bill market to create elasticity in Indian Money Market in order to satisfy seasonal credit needs.
Thus RBI has contributed to economic growth by promoting rural credit, industrial financing , export trade etc.
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