Indian Economy Reserve Bank of India


Indian Economy Reserve Bank of India

The establishment :

  • The Federal Reserve Bank of India-RBI was established on April 1, 1935 as per the provisions of the banking company of India Act, 1934.
  • Initially the business office of the Federal Reserve Bank was established in Kolkata which was permanently shifted to Mumbai within the year 1937. The home office is that the office where the RBI governor sits and where policies are set.
  • Although initially privately owned, since the nationalization of Reserve Bank of India within the year 1949, it's fully owned by the govt. of India.


Preface :

The basic functions of the bank are described within the Preamble of the depository financial institution of India as follows:

“With a view to achieving monetary stability in India, regulating the issue of banknotes and maintaining reserves and operating the currency and system within the interest of the country normally, modern monetary to fulfill the challenge of a highly complex economy Having a policy framework, keeping price stability in mind with the target of growth. ”

Central board :

The functioning of the bank is governed by the Central Board of Directors. per the bank of India Act of the govt. of India, this board is appointed / nominated for four years.


  • Government director
  • Completed: Period: Governor and maximum four Deputy Governors


Non: Official Director

  • Nominated by the government: ten directors and two governing body from different fields
  • Others: 4 directors - 1 each from four local boards


main work :

1. Monetary Authority

  • Prepares and monitors monetary policy.
  • Objective: to keep up price stability keeping in mind the target of development.


The depository financial institution does this in accordance with the rules of the Board for Financial Supervision-BFS. The board was established in November 1994 as a committee of the Central Board of Directors of the banking company of India.

What is Monetary Policy Committee?

  • The Monetary Policy Committee (MPC) constituted by the Central Government under Section 45ZB sets the policy rate of interest required to attain the inflation target. Earlier this work was done by the Governor of the banking company.
  • The bank's Monetary Policy Department assists this committee in monetary policy formulation and contributes to the decision-making process on the policy repo rate from the views of all stakeholders of the economy and therefore the analytical work of the Reserve Bank.

2. Regulator and Supervisor of the economic system

  • Defines the broad parameters for banking operations under which the country's banking and financial systems operate.
  • Objective: to take care of the boldness of the people within the system, protect the interests of depositors and supply affordable banking services to the overall public.


3. Manager of exchange

  • Manages the exchange Management Act, 1999.
  • Objective: To facilitate foreign trade and payments and to progress and maintain the exchange market in India.


Issuer of Currency :

  • It issues and exchanges currency or destroys currency and coins if it's not operational.
  • Objective: to supply sufficient quantity of fine quality currency notes and coins to the overall public.


Developmental role :

  • To do a large range of promotional work to support national objectives.


Related work :

  • Banker to the government: It plays the role of a bank for the central and state governments; Also is their banker.
  • Banker to Banks: Maintains bank accounts of all scheduled banks.


Annual report :

  • The annual report may be a statutory report of the Federal Reserve Bank and is released in August once a year.
  • It is a report back to be presented to the govt. of India by the Central Board of Directors of the banking company and includes;
  • Assessment and Prospects of the Indian Economy;
  • Review of the state of the economy;
  • Work of the Federal Reserve Bank during the year;
  • The vision and agenda of the banking concern for the approaching year; And
  • Annual Accounts of the banking company (July-June)


Report on the trend and progress India's banking :

  • It is also a statutory publication presented by the financial organization.
  • This document presented annually may be a review of monetary sector policies and performance for the previous year.
  • This publication covering the amount from April to March is sometimes released in November / December. Since December 2014, this publication is being published as part of the Financial Stability Report.


Reserve Bank Autonomy :

  • Under Section 7 (1) of the RBI Act , the Central Government may, in consultation with the Governor of the depository financial institution, give such directions to the bank as could also be necessary within the public interest.
  • After any such guidelines under section 7 (2) , the work of the bank are handed over to a central board of directors. This Board of Directors can exercise all the powers of the bank and perform all the functions performed by the depository financial institution.
  • In the absence of the Governor of the depository financial institution under Section 7 (3) and also the Deputy Governor nominated by him in his absence, the Central Board of Directors shall have powers of general superintendence and direction of general affairs and functioning of the Bank and He are ready to use all the powers that the bank has with him. However, there's no legal provision mandating RBI autonomy.
  • However, RBI is often seen as an autonomous body, which may be a composite body for all commercial banks - be it PSBs or private banks or foreign banks.
  • It not only has powers to organize monetary policy, but also has powers to observe the functioning of all banks.
  • For some time, there has been a conflict between the bank and also the central government over the difficulty of autonomy of the financial institution. the most reasons for this are: RBI's failure to test non-performing assets, the matter of liquidity crunch within the economy thanks to tight monetary policy, corrective measures taken by RBI to enhance the banking industry, which weren't considered very positive by the govt. Gaya, etc.

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