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Current affairs is an important component of several competitive exams such as the UPSC Civil Services Examination, SSC CGL, Bank PO & PSU entrance tests, etc. Therefore, understanding the terms/concepts/events that make news is critical for aspirants. We at PaGaLGuY bring you series of articles explaining some of these important concepts/events. Read on to know in detail about the RBI’s role and functions.
The Reserve Bank of India is the country’s apex bank and was
established on April 1, 1935 according to the the provisions of the Reserve
Bank of India Act, 1934. While the Central Office of the RBI was initially
established in Calcutta, it was permanently moved to Mumbai in 1937. It has 19
regional offices (most of them in state capitals) and 9 sub-offices.
As per the RBI’s preamble its main function is “…to
regulate the issue of Bank Notes and keep 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.”
As the Reserve Bank is fully owned by the Government of
India, the central board of directors is appointed by the government according to
the RBI Act. At present Raguram Rajan is
the Governor of RBI while H.R Khan is the Dy. Governor.
RBI’s Functions
1.
Monetary Authority: RBI formulates, implements
and monitors the monetary policy. This is to ensure price stability and adequate
flow of credit to productive sectors of the economy.
2.
Regulator and supervisor of the financial
system: As the central bank, it establishes broad parameters of banking
operations for the smooth functioning of the country’s banking and financial
system. This is to maintain people’s confidence in the system, safeguard depositors’
interest and provide cost-effective banking services to the public.
3.
Manager of Foreign Exchange: RBI is the
custodian of the country’s foreign exchange as per the Foreign Exchange
Management Act, 1999. This enables to facilitate external trade and payment and
ensure orderly growth and maintenance of the foreign exchange market in India.
4.
Issuer of currency: The right to issues and exchange
currency notes and coins is vested with the RBI. It also destroys notes and
coins unfit for circulation. This will ensure uniformity in the legal tender
issued, adequate supply and proper quality of currency notes and coins for the
public.
5.
Developmental role: RBI performs a wide range of
promotional functions to support national objectives.
Related Functions
6.
Banker to the Government: It carried out the
government’s banking needs. This includes merchant banking functions for the
central and the state governments, maintaining the governments’ accounts, receive
funds and make payments on behalf of the government.
7.
Banker’s bank: The RBI maintains accounts of all
the commercial banks. The RBI is responsible for changing lending rates.
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