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Reserve Bank of India (RBI)

Done By

Mr. Chandru Shree S.M

II Year B.Ed

Loyola College of Education

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Contents

  • Introduction
  • History of RBI
  • Origin of RBI
  • Emblem of RBI
  • Structure of RBI
  • Functions of RBI
  • Conclusion

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Introduction

  • Banking service is the nerve center of industry and commerce in a country.
  • It plays a vital role by providing the money required for their regular functioning and development.
  • The word Bank, normally refers to commercial bank.
  • There are many types of banks rendering different types of services. Central Bank is the most important one among them.
  • A Central bank is set up as an autonomous or quasi-autonomous body. Stability and growth of the country’s economy are the main goals of a Central bank. In India the Reserve Bank of India (RBI) is the central bank.

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History of RBI

  • Bank of Hindustan was the first bank in India established in 1770 and was closed in 1932.
  • The General Bank of India was established in 1786 and was also in 1791.
  • Bank of Calcutta was the first joint stock bank established in 1806. It was renamed as the Bank of Bengal in 1809. Bank of Bombay in 1840 and Bank of Madras in 1843 were established. “These banks are called Presidential Banks”(Bengal, Bombay and Madras only)
  • After Independence, an Act was passed in Parliament to take over the Imperial Bank of India by the Government and State Bank of India came into being on July 1, 1955.

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Definition of Bank

According to Banking Regulation Act 1949, “Banking means the accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, pay order or otherwise”.

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Origin of RBI

  • In 1926 the Hilton-Young Commission or the Royal Commission on Indian Currency and Finance (J. M. Keynes and Sir Ernest Cable were its members) made recommendation to create a central bank.
  • As a result, the RBI Act 1934 was passed and RBI launched in operations from April 1, 1935.
  • After independence, the Government of India passed Reserve Bank (Transfer to Public Ownership) Act, 1948 and took over RBI after paying appropriate compensation to the private shareholders.
  • From January 1, 1949, RBI started functioning as a government owned central bank of India.

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Emblem of RBI

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Structure of RBI

  • The head office of the RBI is situated in Mumbai. This central office has 33 departments in 2017. It has four zonal offices in Mumbai, Delhi, Calcutta and Chennai functioning under local boards with deputy governors as their heads. It also has 19 regional offices and 11 sub-offices (2017). The RBI is governed by a Central Board of Directors. The 21-member board is appointed by the Government of India. It consists of:
  • One governor and four deputy governors appointed for a period of four years,
  • Ten directors from various fields
  • Two Government officials
  • Four directors - one each from local boards.

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Functions of RBI

  • The functions of the RBI can be grouped under three heads.

A. Leadership and Supervisory Functions

  1. India’s Representative in World Financial Institutions
  2. Regulator and Supervisor of Indian Banking System
  3. Monetary Authority
  4. Closely Monitoring Economic Parameters
  5. Promptly Responding to New Challenges

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B. Traditional Functions

  1. Banker and Financial Advisor to the Government
  2. Monopoly of Note Issue
  3. Banker’s Bank
  4. Controller of Credit and Liquidity

5. Lender of the Last Resort

  1. Clearing House Services
  2. Custodian of Foreign Exchange Reserves
  3. Maintenance of Foreign Exchange Rate
  4. Collection and Publication of Authentic Data

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C. Promotional Functions.

  1. Nurturing Banking Habits among the Public
  2. Grievance Settlement Measures
  3. Agricultural Development
  4. Promotion of Small-Scale Industries
  5. Facilitates Foreign Trade
  6. Supports Cooperative Sector

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Conclusion

The Reserve Bank of India stands as a cornerstone of India's economic stability and growth. Through its key functions formulating monetary policy, regulating the banking sector, issuing currency, and managing foreign exchange it ensures the smooth functioning of the financial ecosystem. As the central bank, RBI adapts to dynamic economic challenges, promoting financial inclusion and innovation while safeguarding stability. Its proactive and visionary approach continues to position India as a resilient and progressive economy on the global stage.

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