Reserve Bank of India: The highest Bank in India, the Reserve Bank of India (RBI), oversees the banking functions and workings. After their issuance, they kept the Indian rupees flowing in the Indian market. The RBI was established in 1935 based on the Reserve Bank of India Act, of 1934. Read the complete article to learn about its workings, responsibilities and other key aspects.
What is RBI?
The Reserve Bank of India is a central bank responsible for maintaining financial services in India. Every major bank comes under RBI and follows its guidelines and instructions. They are responsible for maintaining the flow of Indian currencies, ensuring the country’s availability and compliance with monetary policy.
RBI plays a crucial role in a country’s economy. It is based on the vision of Dr. Ambedkar, “The Problem and Solution of the Rupee: Origin and Solution”. It is a part of the International Monetary Fund (IMF). RBI maintains the citizens’ trust in India’s financial services.
It ensures effective banking and financial services in the country. It makes monetary policies and maintains the currency flow in the Indian market. The RBI ensures a financially stable and safer system.
Also Read: An overview of the Indian banking system and its evolution
Reserve Bank of India: History and Timeline
The RBI was enacted by the Reserve Bank of India Act in 1934 and formulated by Britishers. Calcutta hosted the founding of the Reserve Bank of India on April 1, 1935. In 1937, it was permanently settled in Mumbai. The Reserve Bank of India was nationalised following independence in 1949. The RBI plays an important role in maintaining trust and the value of Indian currency in the market. Their decisions highly influence the economy of the country.
Reserve Bank of India: Functioning and Responsibilities
The Reserve Bank of India is a central organisation of the country that strongly influences crucial decisions related to banking and financial organisations in India. Some important functions of RBI are mentioned below.
- The RBI is responsible for issuing currency in India and making sure the flow of Indian currency is ensured for citizens of India.
- They implement monetary policy to achieve the country’s stable and high economic growth. Ensuring money supply and managing key rates are crucial roles of RBI.
- They are the direct advisors of the Government of India and the state government for various financial services in the country. They manage the transactions of the government of India on their behalf.
- They supervise and regulate various banking and non-banking institutions in India. They maintain the stability and interest of their depositors by ensuring proper services and quick resolutions of their concerns.
- They are responsible for settlement of interbank transactions across various banks in India.
- They facilitate and support the development of various important organisations by supporting them through quick credit for infrastructure development.
- It ensures that every citizen of the country has access to banking services.
- They regulate the Indian foreign exchange market.
- They also manage trade securities of central and state governments in India.
- They are in charge of printing and administering national currency to maintain a sufficient currency flow in the country.
Also Read: Banking Fundamentals – Overview, How Banks Work, Types
Reserve Bank of India: Composition of RBI
The composition of RBI includes various components. The RBI is run by a central board of directors. They are appointed for a duration of four years under the Reserve Bank of India Act. Some of the crucial compositions of RBI are mentioned below.
- Governor: The governor of RBI is the head of the Reserve Bank of India and is responsible for the overall functioning of the organisation. They are chosen by the Indian government. They also act as the ex-officio chairman of the Central Board..
- Deputy Governor: There can be a maximum of four deputy governors in RBI. They are also appointed by the government of India.
- Central Board of Directors: They are a group of apex bodies of the RBI. They include official directors, such as governors and deputy governors, and unofficial directors, which the government of India appoints from different fields.
- Local/Regional Boards: These local boards are advisory components in RBI that are a bridge between the central bank and regional elements. There are four local boards or zonal offices from Northern(New Delhi), Eastern(Kolkata), Western(Mumbai), and Southern(Chennai). The RBI has 19 regional officers and a total of 11 sub-offices in India.
Also, the RBI executive head is the governor, who oversees the overall functioning of the organisation. The first governor of the RBI was Sir Osborne Smith. Also, the first Deputy governor of RBI was K J Udeshi. The only prime minister to hold the position of RBI governor is Manmohan Singh.
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Reserve Bank of India FAQs
What is the full form of RBI?
The Reserve Bank of India is the full form of RBI.
What is the role of the Reserve Bank in India?
The Reserve Bank of India is a central bank responsible for maintaining financial services in India. Every major bank comes under the RBI and follows its guidelines and instructions.
When was RBI established?
RBI was established on April 1, 1935, under the Reserve Bank of India Act. But in 1949, it became nationalised after independence.
Who owns the government of India?
The government of India is the owner of the Reserve Bank of India.
Where is the headquarter of the Reserve Bank of India?
The Reserve Bank of India headquarter is located in Mumbai. However, it is spread across 31 different locations in India. There are 19 regional and 4 zonal offices in India.
