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RESERVE BANK OF INDIA

Vidur Ahuja Amardeep Shokeen

13BSP0911 13BSP1500

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Introduction

RBI is the Central Bank of India Established in 1934

under the RESERVE BANK OF INDIA ACT 1934.

RBI head quarter located in Mumbai (Maharashtra).

The present governor is Duvvuri Subbarao.

RBI has 26 offices out of which four are regional

offices located in metropolitan cities.

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Breif History RBI was set up on the recommendations of the Hilton

Young Commission .

It was started as share-holders bank with a paid up

capital of INR 5 crores.

Initially it was located in Kolkata. It moved to Mumbai

in 1937.

Earlier RBI was privately owned later on in 1949, the

bank was nationalised and is fully owned by the Govt.

of India.

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PreambleThe Preamble of the Reserve Bank of India describes

the basic objectives of the Reserve Bank 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."

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Organization of The RBI The Reserve Bank's affairs are governed by a central board of

directors and four local boards of directors.

The central board performs the functions of general

superintendence and direction of the banks affairs.

Central board: Appointed/nominated by the GOI for a time period of

four years. It includes the following

Official directors

A. Full-time : Governor and not more than four Deputy Governors

Non-official directors

A. Nominated by Government: Ten Directors from various fields

and two government officials

B. Others: Four directors - one each from four local boards

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Organization of The RBI

Local board

Functions : To advise the Central Board on local matters and

to represent territorial and economic interests of local

cooperative and indigenous banks.

One each for the four regions of the country in Mumbai,

Calcutta, Chennai and New Delhi

Membership:

A. consist of five members eachB. appointed by the Central Government

C. for a term of four years

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Functions of RBIMonetary Authority:

A. Formulates, implements and monitors the monetary policy.B. Objective: maintaining price stability and ensuring adequate

flow of credit to productive sectors.

Regulator and supervisor of the financial system:

A. Prescribes broad parameters of banking operations withinwhich the country's banking and financial system functions.

B. Objective: maintain public confidence in the system, protect

depositors' interest & provide cost-effective banking services.

Manager of Foreign Exchange

A. Manages the Foreign Exchange Management Act, 1999.

B. Objective: to facilitate external trade and payment and

promote orderly development and maintenance of foreign

exchange market in India.

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Functions of RBI Issuer of currency:

A. Issues and exchanges or destroys currency and coins not fit forcirculation.

B. Objective: to give the public adequate quantity of supplies ofcurrency notes and coins and in good quality.

Developmental role

A. Performs a wide range of promotional functions to supportnational objectives.

Related Functions

A. Banker to the Government: performs merchant bankingfunction for the central and the state governments; also actsas their banker.

B. Banker to banks: maintains banking accounts of all scheduledbanks.

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Conclusion RBI has done commendable job as a monetary authority and

regulator of the financial system.

It has adopted the best international practices in the dissemination

of information and rational of policies(i.e., the extent of information

disclosed helps market to make its own projections of interest

rates).

The bank intervened in markets where necessary and allowed the

market participation to build skills and gain maturity to accept the

new system.

It has adopted a consultative and participative approach to

introduce changes.

The RBI has managed foreign exchange resources effectively.

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