The Reserve Bank of India (RBI) is India's central banking institution, which controls the monetary policy of the Indian rupee. It was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934. The share capital was divided into shares of ₹100 each fully paid which was entirely owned by private shareholders in the beginning. Following India's independence in 1947, the RBI was nationalised in the year 1949. The RBI plays an important part in the development strategy of the Government of India. It is a member bank of the Asian Clearing Union. The general superintendence and direction of the RBI is entrusted with the 21-member-strong Central Board of Directors—the Governor (currently Duvvuri Subbarao), four Deputy Governors, two Finance Ministry representative, ten Government-nominated Directors to represent important elements from India's economy, and four Directors to represent Local Boards headquartered at Mumbai, Kolkata, Chennai and New Delhi. Each of these Local Boards consist of five members who represent regional interests, as well as the interests of co-operative and indigenous banks. Objectives and Role of BFS
Primary objective of BFS is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies. The Board is required to meet normally once every month. It considers inspection reports and other supervisory issues placed before it by the supervisory departments. Focus of BFS is on:
a) supervision of financial institutions
b) consolidated accounting
c) legal issues in bank frauds
d) divergence in assessments of non-performing assets and
e) supervisory rating model for banks.
Main Objectives of RBI are the following:
Formulates implements and monitors the monetary policy
Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors
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. Manager of Exchange Control
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. 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 Owner and operator of the depository (SGL) and exchange (NDS) for government bonds Main objectives of RBI
* To manage the monetary and credit system of the country.
* To stabilizes internal and external value of rupee.
* For balanced and systematic development of banking in the country. * For the development of organized money market in the country. * For proper arrangement of agriculture finance.
* For proper arrangement of industrial finance.
* For proper management of public debts.
* To establish monetary relations with other countries of the world and international financial institutions. * For centralization of cash reserves of commercial banks.
* To maintain balance between the demand and supply of currency. 1935–1950
The old RBI Building in Nagpur
The Reserve Bank of India was founded on 1 April 1935 to respond to economic troubles after the First World War.. It came into picture according to the guidelines laid...
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