Did you know that the central bank of our country came into existence only in 1935? The Reserve Bank of India was established on 1st April 1935 when the British were still ruling the country. Whenever any bank is in a crisis, RBI helps them by lending money at a higher Rate of Interest to manage their financial breakdown situation. Along with taking all the financial decisions across the country, RBI is responsible for managing the country’s payments and settlement systems.
That means RBI comes to rescue the banks that are solvent (facing temporary liquid problems) but have not gone bankrupt. RBI provides this facility to protect the interest of depositors and to prevent the possible failure of the bank. Banks open their current account with RBI to maintain SLR and CRR. Moreover, when RBI came into force it takes over the functions of Government so far being performed by the Controller of Currency and from the Imperial Bank of India. The Reserve Bank of India (RBI), is the Central Bank of the country which is responsible for the regulation and function of the Indian Banking System. Mostly all are in Capital cities, exceptions are the Nagpur Reserve Bank branch which is actually a Second capital of Maharashtra and the Ahmedabad Reserve Bank branch.
On a given day, the foreign exchange rate reflects the demand for and supply of foreign exchange arising from trade and capital transactions. The RBI’s Financial Markets Department (FMD) participates in the foreign exchange market by undertaking sales/purchases of foreign currency to ease volatility in periods of excess demand for/supply of foreign currency. The primary objective of RBI is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions, and non-banking finance companies. The BFS has four members who have a term of two years and the Deputy Governors of the RBI will act as ex-officio members of the board.
As bankers’ bank, the RBI holds a part of the cash reserves of commercial banks and lends them funds for short periods. All banks are required to maintain a certain percentage (lying between 3 per cent and 15 per cent) of their total liabilities. The main objective of changing this cash reserve ratio by the RBI is to control credit. The RBI was originally set up as a private entity, but it was nationalized in 1949. The reserve bank is governed by a central board of directors appointed by the national government.
Reserve Bank of India (RBI) is the Central Bank of the country and so its roles differ from other retail banks. The Reserve Bank of India was established in 1935 and was privately owned until 1949 post https://1investing.in/ which it was fully owned by the Government of India. The RBI takes on greater responsibilities like ensuring credit supply, managing payment systems with the aim of promoting economic development.
One deputy governor, usually the deputy governor in charge of banking regulation and supervision, is nominated as the vice-chairman of the board. It considers inspection reports and other supervisory issues placed before it by the supervisory departments. The credit features of rbi made by the primary commercial banks of India is being controlled by the RBI functions. Also, RBI is responsible for regulating the flow of money in the market. RBI adopts both quantitative and qualitative methods to regulate the cash flow in the market.
Also, RBI plays a crucial role as an advisor to the central government of India and assists the government in framing economic policies for the nation. All the banks operating in India are required to follow the regulations and policies set by the Reserve Bank of India (RBI) as it is the central bank. Furthermore, there are some banks that are listed as ‘Scheduled banks’ which are authorized to carry out banking activities in India under the RBI’s supervision. RBI, or the Reserve Bank of India, is the Central bank of India that acts as the regulatory and supervisory body of the financial system of the country.
So, here we will read in detail about these three types of functions. Now, let’s move towards the functions of the Reserve Bank of India. The fundamental functions of the RBI are to manage the money supply in the nation. Similarly, it has been coordinated to deal with agriculture, industry, and many more. The RBI is likewise answerable for the support of the external value of the rupee.
The RBI maintains the economic structure of the country so that it can achieve the objective of price stability as well as economic development because both objectives are diverse in themselves. The different affairs related to the Reserve Bank of India are handled by a central board of directors appointed by the Government of India in accordance with the Reserve Bank Of India Act. The prime objective of the RBI is to maintain the interests and confidence of the public in the system. It lays forth the objectives to safeguard the interests of the depositors, and facilitate effective banking services to the cooperative banking to the people.
The main functions of RBI are to manage foreign exchange, issue currency, control inflation, encourage growth, and achieve financial stability. The RBI acts as a banker to the government as well as the banks. This signifies the interest rate at which commercial banks and financial institutions, such as Tata Capital, can borrow funds from the central bank of India to conduct their banking activities. The economic condition of the country can lead to an increase in the repo rate. RBI, or the Reserve Bank of India, is the central Bank of India. It works to grant and operate the Indian currency, sustain monetary stability, and maintain India’s credit system.
British banker Osborn Smith was the first Governor of RBI, but C.D. At present, Shashikant Das is the Governor of the Reserve Bank of India. Since its establishment in 1935, by the British colonial government, 25 people have served as the Governor of the RBI so far. So, here we have provided you with the full list of all the Governors of the Reserve Bank of India. Initially, the ownership of almost all the share capital was in the hands of non-government shareholders.
This has resulted in curbing the activities of moneylenders in the rural economy. The RBI has the authority to enter into foreign exchange transactions both on its own account and on behalf of the Government. As the Government’s banker, the RBI provides short-term credit to the Government of India. This short-term credit is obtainable through the sale of treasury bills. Not only this, the RBI also provides ways and means of advances (repayable with 90- days) to State Government. It may be noted that the Central Government is empowered to borrow any amount it likes from the RBI.
The supervisory functions of the RBI have assisted a lot in expanding the standard of banking in India. Issue of Notes —The Reserve Bank has a monopoly for printing the currency notes in the country. It has the sole right to issue currency notes of various denominations except one rupee note (which is issued by the Ministry of Finance). RBI’s developmental role includes creating institutions to build financial infrastructure, ensuring credit to the productive sector of the economy, and expanding access to affordable financial systems.
RBI is the responsible agency for receiving and paying money on behalf of the various government departments. The RBI regulates this ratio so as to control the amount a bank can lend to its customers. For example, an individual wants to buy a car using borrowed money and the car’s value is ₹1 million.
