Overview
• Reserve Bank of India (RBI) is the central bank of India
• Responsible for monetary policy, financial stability, and banking regulation
• Operates under the Reserve Bank of India Act, 1934
• Acts as the currency issuing authority of the country
Establishment
• Established on 1 April 1935
• Based on recommendations of the Hilton Young Commission (1926)
• Initially headquartered in Calcutta, shifted to Mumbai in 1937
• Nationalised in 1949 under the RBI (Transfer to Public Ownership) Act, 1948
Objectives of RBI
• Price stability through inflation control
• Financial system stability
• Orderly expansion of credit
• Currency management
• Financial inclusion and digital payment expansion
Functions of RBI
Monetary Authority
• Formulates and implements monetary policy
• Uses tools like repo rate, reverse repo, CRR, SLR, and Open Market Operations
• Operates under the flexible inflation targeting framework
Issuer of Currency
• Issues and manages Indian currency notes
• Ensures adequate supply and quality of notes
• Leads initiatives like Central Bank Digital Currency (e₹)
Regulator and Supervisor of Banks
• Regulates commercial banks, NBFCs, and financial institutions
• Protects depositors’ interests
• Maintains discipline and stability in the banking system
Manager of Foreign Exchange
• Administers Foreign Exchange Management Act (FEMA), 1999
• Manages foreign exchange reserves
• Ensures stability of the Indian rupee
Banker to Government
• Manages accounts of central and state governments
• Handles public debt and government securities
• Acts as financial advisor to the government
Banker’s Bank
• Maintains cash reserves of banks
• Acts as lender of last resort during liquidity crises
Organisational Structure
• Governed by the Central Board of Directors
• Headed by the RBI Governor and Deputy Governors
• Supported by Local Boards for regional representation
RBI Surplus Transfer
• Surplus generated when income exceeds expenditure
• Part retained as financial buffer
• Remaining surplus transferred to the Government of India
• Ongoing debate between fiscal needs and central bank autonomy
Significance of RBI
• Backbone of India’s monetary system
• Ensures macroeconomic stability
• Plays a key role during financial and banking crises
• Strengthens public confidence in the financial system
