RESERVE BANK OF INDIA

INTRODUCTION
The RBI was established by legislation in 1934

through the Reserve Bank of India Act, 1934. It started functioning from 1 April 1935.
Its central office is at Mumbai since inception.

Though originally privately owned, since nationalization in 1949, it is fully owned by the government of India.
RBI is the central bank of our country.

OBJECTIVES
Reserve Bank of India 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."
The preamble prescribes the objectives as: 1. To secure monetary stability within the country; 2. To operate the currency and credit system to the advantage of the country.

ORGNISATION OF THE RBI

The bank is managed by a central board of

directors and four local boards of directors.

o Central Board: It is appointed/nominated by the

central government for a period of four years. It consists of official directors and non-official directors. o Official Directors: The governor and not more than four deputy governors are full-time official directors. o Non-official Directors: They are fifteen in number. Ten directors from various fields and one government official are nominated by the government while four directors from four local boards are nominated as non-official directors.

SUBSIDIARIES
Fully owned
National Housing bank (NHB)
Deposit Insurance and Credit Guarantee Corporation of

India (DICGC) Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL).

Major stakes
National Bank For Agriculture and Rural Development

(NABARD) The reserve Bank of India has recently divested stake in State Bank of India to the government of India .

MAIN FUNCTIONS OF THE RBI

To formulate, implement and monitor the

monetary policy. To issue and exchange or destroy currency and coins not fit for circulation. To perform a wide range of promotional functions to support national objectives. To perform merchant banking function for the central and the state governments. To maintain banking accounts of all scheduled banks.

ROLE OF THE RBI

Monetary Authority:
Formulates, implements and monitors the monetary

policy. Objective: maintaining price stability and ensuring adequate flow of credit to

productive sectors. Regulator and supervisor of the financial system:

Objective: maintain public confidence in the system,

protect depositors interest and provide cost-effective banking services to the public. Prescribes broad parameters of banking operations within which the country's banking and financial system functions.

Contd.
Manager of Foreign Exchange
Manages the Foreign Exchange Management Act,

1999. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.
Issuer of Currency
Issues and exchanges or destroys currency and

coins not fit for circulation. Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Contd.
Developmental Role
Performs a wide range of promotional functions to

support national objectives.

Related Functions
Banker to the Government: performs merchant

banking function for the central and the state governments; also acts as their banker. Banker to banks: maintains banking accounts of all scheduled banks.

INSTRUMENT OF CREDIT CONTROL

Quantitative (General) Bank Rate Qualitative (Selective) Selective Credit Control

Open Market Operation (OMO)

Change in Cash Reserve Ratio (CRR)

Rationing of Credit
Moral Persuasion

Statutory Liquidity Ratio (SLR) Repo & Reverse Repo Ratio

Direct Action

Objective and Reasons for Establishment of RBI

The main objectives for establishment of RBI as the central bank of India were as follows :
To manage the Monetary and credit system of the

country To stabilize internal and external value of rupee For balanced and systematic development of banking in the country. For the development of organized money market in the country

Contd.
For proper arrangement of agriculture finance For proper arrangement of industrial finance

For proper management of public debt

To establish monetary relations with other

countries of the world and international financial institutions. For centralization of cash reserves of commercial banks. To maintain balance between demand and supply of currency