Role and Functions of Reserve Bank of India

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Role and Functions of Reserve Bank of India
Role and Functions of Reserve Bank of India

The  functions and role of the Reserve Bank of India (RBI)  is an important  topic for various Banking and insurance exams as well as RRB NTPC,  SSC CGL,  and State PSC‘s etc. Here is the detailed notes on ‘about the RBI.  If you found anything wrong, please comment below, so that we can improve our notes on General studies.      


➧ The Reserve Bank of India (RBI) is the central bank of India.
➧ It works as a regulatory body under the jurisdiction of the Ministry of Finance, Government of India.

➧ It was continued to work as a Central Bank of the following countries.
◘ Burma ➥ till 1947.
◘ Pakistan ➥ till July 1948
◘ Kuwait ➥ till 1959

Establishment of Reserve Bank of India (RBI)

➧ The RBI was established on April 1, 1935.
➧ It was established under the provisions of the Reserve Bank of India Act, 1934.
➧ The RBI was nationalised on 1 January 1949.
➧ It was set up on the basis of the recommendations of Hilton Young Commission.

Headquarters of Reserve Bank of India (RBI)

➧ Initially the Central Office of the Reserve Bank was established in Kolkata.
➧ But in the year 1937 it was permanently moved to Mumbai.

Composition of Central Board of RBI

➧ The Reserve Bank’s operations are governed by a central board of directors.
➧ The Central Board of RBI consists of 21 members.
➧ This 21 member is appointed by the Government of India as per the Reserve Bank of India Act.

❖ The Central board of directors comprise of the following 21 members……
➠ Official Directors
◘ The governor
◘ And four Deputy Governors.

• The governor and deputy Governors is appointed/nominated for a period of four years.

➠ Non-Official Directors
◘ Ten government-nominated directors.
◘ Two finance ministry representatives.
◘ Four directors who represent local boards for Mumbai, Kolkata, Chennai, and Delhi.

Current Governor & Depty Governor

➧ Current Governor of RBI ➥ Shaktikanta Das (25th governor)
➧ The 4 deputy rof India are…
◘ 1. Shri Mahesh Kumar Jain
◘ 2. Dr. M. D. Patra
◘ 3. Shri M. Rajeshwar Rao
◘ 4. Shri T. Rabi Sankar

Governors and Deputy governor of RBI
Governors and Deputy governor of RBI (Image source –  RBI official Site )


Fact about the governor of Reserve Bank of India

➧ Current Governor of RBI ➥ Shaktikanta Das (25th governor)
➧ First governor of RBI ➥ Osborne Smith
➧ First Indian governor of RBI ➥ CD Deshmukh
➧ Longest serving governor of RBI (7- Years) ➥ Benegal Rama Rau
➧ Shortest serving (20 – days) governor of RBI ➥ Amitav Ghosh
➧ Manmohan Singh was the ➥ 15th Governor of RBI.
➧ Urjit Patel was the ➥ 24th Governor of RBI.
➧ Raghuram Rajan ➥ 23rd Governor of RBI.

Central Board of Directors
Central Board of Directors (Image source – RBI Official site)

Branches and support bodies of RBI

➧ The Reserve Bank of India has the following branches and supportive bodies.
4 zonal offices at Chennai, Delhi, Kolkata and Mumbai.
27 regional offices and 11 sub-offices throughout India.

❖ 3 training colleges for its officers_
◘ RBI Academy
◘ Reserve Bank Staff College, Chennai.
◘ College of Agricultural Banking, Pune.

❖ 3 autonomous institutions run by RBI namely_
◘ National Institute of Bank Management (NIBM)
◘ Indira Gandhi Institute of Development Research (IGIDR)
◘ Institute for Development and Research in Banking Technology (IDRBT).

Subsidiaries of the Reserve Bank of India

➧ There are 4 fully-owned subsidiaries of the RBI, namely—
◘ 1. Deposit Insurance and Credit Guarantee Corporation of India (DICGC),
◘ 2. Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
◘ ◘ 3. Reserve Bank Information Technology Private Limited (ReBIT)
◘ 4. Indian Financial Technology and Allied Services (IFTAS)

Role of RBI

➧The RBI is entrusted with a variety of roles, including _
◘ Regulation of Monetary Policy
◘ Maintaining of Forex reserves
◘ Supervision of the financial system
◘ Supervision of the payment systems.
◘ Issue of Currency
◘ Crediting Short term loans to the government.

The Preamble of RBI

➧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.”

♦ Source – Preamble of the Reserve Bank of India

Functions of RBI

➧ Issuer of Bank Note
◘ The Reserve Bank of India is the sole body authorised to issue banknotes in India.
◘ RBI issue all currency notes notes except the 1 rupee note.
◘ The 1 rupee note and the coins of all denominations are issued by the Government of India.
◘ All the currency notes and coins are circulated by RBI.
◘ RBI adopted the Minimum reserve system in the year 1956.

♦ What is Minimum Reserve System?
• It is a policy of issuing currency, followed by the RBI at present.
• It was adopted in 1956.
• According to this policy, RBI has to maintain a reserve of worth Rs. 200 crore, in the form of gold and foreign currencies.
• Out of the 200 crore reserves, 115 crore should be kept in gold. reserves of worth

➧ Bankers of the Government
◘ RBI buys and sells Government securities (G-Sec) on the behalf of the central government.
◘ RBI also act as a financial advisor and banking agent to the central and state government.

➧ Banker’s Bank
◘ All other banks under RBI kept a portion of there NDTL (Net Demand and Time Liabilities ) with the Reserve Bank of India.
◘ The RBI provide short term loans to all the Scheduled Commercial Banks (SCBs).

➧ Custodian of Foreign Exchange Reserve
◘ RBI functions as the custodian of forex reserves.
◘ To maintain and stabilized the external value of rupee’s, RBI maintains the reserves of foreign currencies.

➧ Regulation of Monetary Policy
◘ It is a policy tool used by RBI to maintain the supply of money or credit in the market
◘ In order to control the inflation RBI uses this policy instrument for increase or decrease the money supply.

➧ Regulator of the Banks
◘ RBI enjoys the regulatory power of the Indian banking systems as per the provisions of the Banking Regulation Act 1949.
◘ RBI has many regulatory powers, including licensing of banks,expansion of commercial banks, prescribing minimum requirements of paid-up capital and reserves etc.

Top One-liner about Role and Functions of Reserve Bank of India

➧ The reserve Bank of India established on ?
• Answer :- 1 April, 1935.

➧ Reserve bank of India was nationalised in the year?
• Answer :- January 1, 1949

➧ Who is the current governor of the reserve bank of India?
• Answer :- Shaktikanta Das (25th Governor)

➧ RBI issues currency notes on the basis of?
• Answer :- Minimum Reserve Systems

➧ First governor of reserve bank of India?
• Answer :- Osborne Smith

➧ First Indian governor of reserve bank of India?
• Answer :- CD Deshmukh

➧ Where is the headquarters of RBI ?
• Answer :- Mumbai, Maharashtra

➧ The headquarters of RBI shifted from Kolkata to Mumbai in the year?
• Answer :- 1937

➧The RBI is often referred by the name __?
• Answer :- Mint Street

➧ RBI was conceptualized as per the guidelines, working style and outlook presented by Dr. B. R. Ambedkar in his book named_?
• Answer :- The Problem of the Rupee – Its origin.

➧ Which bank known as the ‘Banker’s bank’?
• Answer :- Reserve Bank of India

➧ The Reserve Bank of India set up under the recommendations of_ ?
• Answer :- Hilton-Young Commission

➧ The emblem of Reserve Bank of India ?
• Answer :- Tiger (earlier Lion) and Palm tree

➧ The Central Board of Directors is  comprises of how many members?
• Answer :- 21 members

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