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RBI

Reserve Bank of India

Last Updated 01st Jul 2022

  • The Reserve Bank of India is a central bank of India that was primarily established as a private entity in 1935.
  • It is governed by the Central Board of Directors which are appointed by the government of India.
  • RBI controls Indian currency supply and determines Repo & Reverse Repo rate & Interest Rates on various other savings schemes.
  • It also acts as a banker to the state & central government and performs all the crucial banking operations.
  • RBI also carries out various promotional & development activities for the country's economic growth.
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Reserve Bank of India

The Reserve Bank of India is a Central Bank of India established on April 1, 1935, as a private entity under the Reserve Bank of India Act, 1934. Since the nationalisation in 1949, it is owned by India's government and is primarily responsible for regulating the monetary policy, including making critical decisions related to the supply of Indian currency. It also acts as a banker to the government & regulates all the commercial & public sector banks. Further, RBI also decides crucial rates such as repo rate, reverse repo rates, rates on schemes such as PPF, NPS, EPF etc.

Organisational Structure of RBI

RBI is governed by the Central Board of Directors, which are appointed by the government of India. There are 21 directors of the Central Board of RBI, comprising both official & non-official directors.

  • Official Directors: The governor who is appointed/nominated for four years and four Deputy Governors are known as official directors.
  • Non-Official Directors: Ten Directors from various fields and two government officials are non-official directors of RBI.
RBI

Functions of RBI

RBI carries out a diverse range of monetary, financial & regulatory activities. Below-mentioned is the main functions performed by Reserve Bank of India:

  • Issue of Currency: RBI has sole authority to print the currency notes for all the denominations except the one-rupee note printed by the Finance ministry. It maintains the demand & supply of money in the Indian economy.
  • Banker to the Government: The Reserve Bank of India also acts as a banker to the state & central government. It performs all the government's banking functions, including advising the government on critical economic & monetary decisions.
  • Banker's Bank: RBI regulates & supervises all banks’ banking operations, including lending money to all the commercial banks. All the commercial banks also need to maintain a minimum cash reserve with RBI as a statutory obligation.
  • Controller of the credit: This is one of RBI's crucial decisions under which it controls the flow of money supply in the economy using various measures. It oversees sufficient supply, and similarly, in case of inflation, it squeezes the credit supply.
  • Custodian of foreign reserves: The Reserve Bank buys & sells the foreign currencies to maintain the foreign reserve in the economy.

Development & Promotional Activities of RBI

Apart from the traditional financial, regulatory and monetary activities, Reserve Bank of India is involved in various promotional and developmental activities. These include:

  • Development of financial system: RBI develops an efficient financial system with various financial institutions, including financial markets, financial instruments and financial institutions. Along with that, it also ensures that adequate and timely credit is provided to the industries.
  • Development of Agriculture: RBI also pays special attention to provide credit and cash flow towards the agriculture sector.
  • Data collection and publication of Reports: RBI collects necessary data related to banking, finance, credit, currency, agricultural and industrial production. The concerned data is then processed and disseminated regularly to various economic sectors to aid them in research and policymaking.
  • RBI established the Deposit Insurance Corporation: With Deposit Insurance Corporation’s establishment, RBI develops its banking system by preventing bank failures.

Important Rates Determined by RBI

  • Repo Rate: The rate at which RBI lends money to commercial banks to meet regulatory or business requirements.
  • Reverse Repo Rate: It is the rate at which RBI borrows money from Commercial Banks.
  • Cash reserve ratio: CRR is the amount of funds that the banks have to keep with the RBI.
  • Statutory Liquidity Ratio: The ratio of liquid assets, which all Commercial Banks keep in cash, gold and unencumbered approved securities is known as SLR. It is not more than 40% of their demand and time deposits liabilities.
  • Marginal Standing Facility: The rate at which scheduled banks may borrow from funds overnight from RBI. Its rate is 1% higher than the Repo Rate.

Offices Associated with RBI

  • The head office of the Reserve Bank of India is located in Mumbai.
  • Presently, there are four zonal offices of Reserve Bank of India at Mumbai, Delhi, Kolkata, and Chennai.
  • RBI also has nineteen regional offices. These offices are located in various cities such as Thiruvananthapuram, Kanpur, Patna, Nagpur, Lucknow, Mumbai, Kochi, Kolkata, Jammu, Chennai, Delhi, Guwahati, Bhubaneshwar, Bhopal, Hyderabad, Ahmedabad, Chandigarh, Jaipur and Bangalore.

Subsidiaries of Reserve Bank of India

Below-mentioned is fully-owned subsidiaries of Reserve Bank of India:

  • National Housing Bank (NHB): NHB has been established to operate as a nodal agency to promote housing finance institutions at local and regional levels. It also provides financial and other support incidental to such institutions and for matters connected therewith.
  • Deposit Insurance and Credit Guarantee Corporation (DICGC) : DICGS was established in 1995 under the Deposit Insurance and Credit Guarantee Corporation Act, 1961 to provide insurance of deposits and guaranteeing credit facilities.
  • Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) : It is a wholly-owned subsidiary of RBI responsible for producing currency notes and was established in 1995 to address banknotes' demand.
  • National Bank of Agriculture and Rural Development (NABARD): NABARD or National Bank of Agriculture and Rural Development is a national financial institution responsible for meeting the agriculture & rural sector's credit needs. It provides short, medium and long term credits to various financial institutions including State Cooperative Banks and Regional Rural Banks to promote rural and agricultural development.

FAQs

Who owns RBI?

The Government of India wholly owns the Reserve Bank of India since its nationalization in 1949.

Which Bank is RBI?

RBI has been a central bank of India since 1949. However earlier, it was established as a private entity in 1935.

Who is the current governor of RBI?

Shri. Shaktikanta Das, the former secretary of the Department of Revenue and Economic Affairs, is the current RBI governor.

Is RBI safe?

Yes, RBI is a central bank of India that regulates all the commercial & public sector banks.


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  • 2022-04-20 : Reserve Bank of India Revises Bank Timings
    RBI has changed the timings for the trading hours of the market and banks. Now, banks will operate from 9 am. However, no change has been made to the closing time.
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