RBI-CENTRAL BANK OF INDIA

The Reserve Bank of India (RBI) is the central bank of India, which was established on Apr. 1, 1935, under the Reserve Bank of India Act. The Reserve Bank of India uses monetary policy to create financial stability in India, and it is charged with regulating the country’s currency and credit systems.

Government: Government of India

Jurisdiction: India

Date founded: Apr. 1, 1935

OBJECTIVES OF RBI

The Preamble to the Reserve Bank of India Act, 1934 tells about the objectives of the Reserve Bank as “to regulate the issue of Banknotes and the keeping of reserves to secure monetary stability in India and generally to operate the currency and credit system of the country to its advantage.”  

1) The Reserve Bank of India was set up with the primary maxim of managing all the banks in India. The goal was to hold under control the reserves as well as the issue of banknotes.

2)The essential objective for the Reserve Bank of India is to direct the different financial functions for India in the money market. Therefore, they concentrate especially on issuing new notes.

• Consequently, the RBI was set up with the point of being a banker’s bank and similarly the bank for the government. It aimed to expand the economic progress of the nation through different structures and economic policies of the government.

•  It’s RBI aim to make sure about the financial stability and in this way to work the credit system and currency of the nation for its potential benefit.

• The fundamental motive of RBI is to encourage the planned system of growth of the Indian economy.

FUNCTIONS OF RBI

According to the RBI Act 1934, it performs 3 kinds of functions as that of some other central bank. These three functions are explained below ->

1) Banking Functions –  

a) Bank of Issue- The Reserve Bank has a different Issue Department which is empowered with the issue of currency notes. Under section 22 of the RBI Act, it has the exclusive right to issue currency notes of numerous groups except one rupee note as it is issued by the Ministry of Finance

Banker to Government- Now, coming towards the second significant function of the Reserve Bank of India which is to work as a Government banker, agent, and adviser. It fulfils all the banking processes of the State and Central Government. It also tenders valuable suggestions to the government on topics related to economic and financial policy and even governs the public debt of the government.

Bankers’ Bank- The Reserve Bank of India acts as the banker’s bank and it lends money to all the commercial banks of the country

Controller of Credit- We can say that the RBI is the controller of credit as it can impact the volume of credit made by banks in India. It can do as such by changing the Bank rate or through open market tasks.

Custodian of Foreign Reserve- The Reserve bank must balance out the outer estimation of the public cash. The Reserve Bank keeps gold and foreign currencies as reserves against note issues and also meets the unfavourable offset of instalments with different regions. Also, it oversees foreign currencies by the controls forced by the administration.

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