Reserve Bank of India (RBI)

The Reserve Bank of India (RBI) was established on April 1, 1935, per the provisions of the Reserve Bank of India Act, of 1934. RBI is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of the Ministry of Finance, Government of India. The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act. The directors are appointed/nominated for a period of four years. 

The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as:

"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; to have a modern monetary policy framework to meet the challenge of an increasingly complex economy, to maintain price stability while keeping in mind the objective of growth."

Main Functions of RBI are: 

1. Monetary Authority

• Formulates, implements, and monitors the monetary policy.

• Objective: maintaining price stability while keeping in mind the objective of growth.

1. 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.

1. Manager of Foreign Exchange

• Manages the Foreign Exchange Management Act, 1999.

• Objective: to facilitate external trade and payment and promote orderly development and maintenance of the foreign exchange market in India.

1. Issuer of currency

• Issues, exchanges, and destroys currency notes as well as put into circulation coins minted by the Government of India.

• Objective: to give the public an adequate quantity of supplies of currency notes and coins in good quality.

1. Developmental role

• Performs a wide range of promotional functions to support national objectives.

1. Regulator and Supervisor of Payment and Settlement Systems

• Introduces and upgrades safe and efficient modes of payment systems in the country to meet the requirements of the public at large.

• Objective: maintain public confidence in the payment and settlement system.

1. 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.