Established on 1 April 1935 and nationalized on 1
January 1949, the Reserve Bank of India or RBI has since then been the
Central Bank of India governing all the major financial matters of the
state. The RBI is responsible for the adequate liquid flow of currency
in the country as well as maintaining requisite reserve in the state
treasury.
The Preamble prescribes the objective of the Reserve Bank of India in
the following lines:
"…to regulate the issue of Bank Notes and keeping of reserves
with a view to securing monetary stability in India and generally to
operate the currency and credit system of the country to its advantage."
Functions of RBI
Monetary Authority:
The RBI is responsible for implementing, formulating and monitoring the
monetary policy of India.
Objective: Keeping this authority in mind the RBI is required to
maintain price stability and ensure adequate flow of credit to
productive sectors.
Regulator and supervisor of the financial system:
The Supreme financial body sets down broad parameters of banking
operations within which the country's banking and financial system
operates.
Objective: This reasonably helps in maintaining public
confidence in the system. It in turn protects depositors' interest and
provides lucrative banking services to the public.
Manager of Exchange Control:
The RBI is responsible for managing the Foreign Exchange Management Act,
1999.
Objective: It is the nodal agency which facilitates external
trade and payment and promotes orderly development and maintenance of
foreign exchange market in India.
Issuer of currency:
It is the only supreme body which issues and exchanges or destroys
currency and coins not fit for circulation.
Objective: This facilitates in giving the public adequate
quantity of currency notes and coins and in good quality.
Developmental role
The RBI since its inception performs a wide range of promotional
functions to support national objectives and generate goodwill among the
citizens of the country.
Related Functions
Banker to the Government:The RBI performs merchant banking
function for the central and the state governments and also acts as
their banker. The RBI often advises the Government of the current
monetary condition in the state.
Banker to banks: maintains banking accounts of all scheduled
banks. The RBI looks after the functioning of the state banks and grants
them license and even cancels the same on account of fraud practice.
