RBI (Reserve bank of India) - Establishment, Activities and Functions

RBI (Reserve bank of India) - Establishment, Activities and Functions

• Established on April 1, 1935 by the Reserve Bank of India Act, 1934.

• Based on the recommendations of the 1926 Royal Commission on Indian Currency and Finance, also known as the Hilton–Young Commission

Headquarter: Mumbai

• Nationalized in 1949 by the Banking Act and established as the Central Bank

First governor: Osborne Smith; First Indian governor: C.D. Deshmukh;

Current governor: Raghuram Rajan

• Central Board of Directors: Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government.

Basic Functions Of RBI

1. Issue of currency and agents of GoI for distributing and handling of coins

2. Regulating and monitoring functions- to maintain pricing stability, low & stable inflation as well as promoting economic growth of the country.

3. Banker to the government

4. Banker's bank- All the banks in India maintain accounts with the RBI which helps them in clearing & settling interbank transactions and customer transactions smoothly & swiftly. RBI also acts as the last resort lender for all the banks.

5. Regulator of Banking system- issuing new bank licenses, setting capital requirements and regulating interest rates

6. Manager of foreign exchange - to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

7. Regulator and supervisor of the payment and settlement system – monitors two payment systems- National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS).

8. Developmental role - Priority sector lending such as agriculture, micro and small enterprise (MSE), housing and education.

9. Determines bank rate, CRR, SLR, Repo rate, Reverse repo rate

10. Detection of fake currency.
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