WHAT is RBI?
RBI stands for Reserve Bank of India,- India’s central banking institution which controls the issuance and supply of the Indian Rupee. It was established on 1st of April 1935 ,initially owned privately but following the nationalisation in 1949, it was then fully owned by the Government of India.
RBI and Its ESTABLISHMENT
RBI or Reserve Bank of India is a member bank of the Asian Clearing Union.The main reason behind the establishment of RBI was to respond to economic troubles after the First World War.The bank was set up based on the recommendations of the 1926 Royal Commission on Indian Currency and Finance, also known as the Hilton–Young Commission. The Reserve Bank of India was formulated on the basis of the guidelines presented by the Central Legislative Assembly which passed these guidelines in the form of RBI Act 1934.
It was enacted on 6th March 1934.
This act along with the ‘Companies Act’, which was amended in 1936, were meant to provide a framework for the supervision of banking firms in India.
CENTRE OF OPERATIONS & BRANCHES of RESERVE BANK OF INDIA
The Reserve Bank of India or commonly known as RBI is headquartered in Mumbai, India. It has four zonal offices at Chennai, Kolkata, Delhi and Mumbai.
It has 21 regional offices and 11 sub-offices throughout India. Regional offices are located in Ahmedabad, Bangalore, Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kochi, Kolkata, Dewas, Lucknow, Mumbai, Nagpur, Patna, Dehradun and Thiruvananthapuram and sub-offices are located in Agartala, Aizawal, Dehradun, Gangtok, Imphal, Panaji, Raipur, Ranchi, Shillong, Shimla and Srinagar.
HEADS of RESERVE BANK OF INDIA
The leadership and direction of the Reserve Bank of India, commonly known as RBI, is entrusted with the 21-member central board of directors: the governor; four deputy governors; two finance ministry representatives (usually the Economic Affairs Secretary and the Financial Services Secretary); ten government-nominated directors to represent important elements of India’s economy; and four directors to represent local boards headquartered at Mumbai, Kolkata, Chennai and the capital New Delhi. Each of these local boards consists of five members who represent regional interests, the interests of co-operative and indigenous banks.
FUNCTIONS OF RESERVE BANK OF INDIA
A ‘central bank’ regardless of whichever country, performs number of duties. Its functions are not only restricted to issuing currency but spreads over to a lot more areas.
The preamble of the Reserve Bank of India describes its main functions 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”.
Some of its major functions are :-
1. Financial Regulation – One of the important functions that RBI executes is to undertake a combined supervision of the financial sector that comprises of all the commercial banks, other financial institutions and the non-banking finance companies.
2. Banker and Debt Manager to the Government – RBI fulfils the Government’s need of a bank to carry out its financial transactions. As a banker to the GoI, RBI maintains its accounts, receives payments & makes payments out of these accounts. RBI also helps GoI to raise money from public via issuing bonds and government approved securities.
It has to-maintain and operate the government’s deposit accounts. It collects receipts of funds and makes payments on behalf of the government. It represents the Government of India as the member of the IMF and the World Bank.
3. Foreign Exchange Manager – One of the important objectives of RBI or Reserve Bank of India is to promote and facilitate external trade and payment and maintaining the foreign exchange market.
4. Issuing Currency – RBI or the Reserve Bank of India is the only organization which is authorized to issue currency. Currency notes issued by the Reserve Bank are declared unlimited legal tender throughout the country. While coins and one rupee notes are minted by Government of India (GoI), the RBI works as an agent of GoI for distributing and handling of coins. RBI also works to prevent counterfeiting of currency by regularly upgrading security features. For printing currency, RBI has four facilities at Dewas, Nasik, Mysore and Salboni. The RBI is authorized to issue notes up to value of Rupees ten thousand and coins up to one thousand.
POINTS TO BE NOTED:-
- Recently RBI issued new notes of Rs 500 and Rs 2000 on 8th November 2016.
- The old series of Rs 500 and Rs 1000 notes is now considered invalid and illegal.
This gave birth to the much – talked about topic of “DEMONETISATION”.
5. Caretaker of Cash Reserves of Commercial Banks- All the commercial banks hold their deposits in the Reserve Bank of India.
6. Custodian of Country’s Foreign Currency Reserves – The Reserve Bank of India has the custody of the country’s reserves of international currency, and this enables the Reserve Bank to deal with crisis that may arise due to adverse balance of payments position.
8. Lender of Last Resort – ‘‘Bankers’’ Bank’ as it is generally called,the commercial banks borrow money from the Reserve Bank in times of financial emergency, such as shortage of funds etc, at a certain rate which is called the ‘Repo Rate’ which keeps on changing.
The RBI also facilitates the clearing of cheques among the commercial banks and helps the inter-bank transfer of funds. It can also grant financial accommodation to schedule banks.
Besides all these major functions, RBI also plays a crucial role in detecting and curbing counterfeit currency and also acts as the regulator of the financial / banking system. As a regulator and supervisor of the Indian banking system it ensures financial stability & public confidence in the banking system.
Also read FULL FORM OF IBPS