RESERVE BANK OF INDIA

Vidur Ahuja

Amardeep Shokeen

13BSP0911

13BSP1500

Introduction

RBI is the Central Bank of India Established in 1934 under the RESERVE BANK OF INDIA ACT 1934.

RBI head quarter located in Mumbai (Maharashtra).

The present governor is Duvvuri Subbarao.

RBI has 26 offices out of which four are regional offices located in metropolitan cities.

Breif History

RBI was set up on the recommendations of the Hilton Young Commission .

It was started as share-holders bank with a paid up capital of INR 5 crores.

Initially it was located in Kolkata. It moved to Mumbai in 1937. Earlier RBI was privately owned later on in 1949, the bank was nationalised and is fully owned by the Govt. of India.

Preamble
The Preamble of the Reserve Bank of India describes the basic objectives of the Reserve Bank as

"...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."

Organization of The RBI

The Reserve Bank's affairs are governed by a central board of directors and four local boards of directors. The central board performs the functions of general superintendence and direction of the banks affairs.

Central board: Appointed/nominated by the GOI for a time period of four years. It includes the following

Official directors A. Full-time : Governor and not more than four Deputy Governors

Non-official directors A. Nominated by Government: Ten Directors from various fields and two government officials B. Others: Four directors - one each from four local boards

Organization of The RBI

Local board

Functions : To advise the Central Board on local matters and to represent territorial and economic interests of local cooperative and indigenous banks. One each for the four regions of the country in Mumbai, Calcutta, Chennai and New Delhi Membership: A. consist of five members each B. appointed by the Central Government C. for a term of four years

Functions of RBI
Monetary Authority: A. Formulates, implements and monitors the monetary policy. B. Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors. Regulator and supervisor of the financial system: A. Prescribes broad parameters of banking operations within which the country's banking and financial system functions. B. Objective: maintain public confidence in the system, protect depositors' interest & provide cost-effective banking services. Manager of Foreign Exchange A. Manages the Foreign Exchange Management Act, 1999. B. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Functions of RBI

Issuer of currency: A. Issues and exchanges or destroys currency and coins not fit for circulation. B. Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role A. Performs a wide range of promotional functions to support national objectives.
Related Functions A. Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker. B. Banker to banks: maintains banking accounts of all scheduled banks.

Conclusion

RBI has done commendable job as a monetary authority and regulator of the financial system.
It has adopted the best international practices in the dissemination of information and rational of policies(i.e., the extent of information disclosed helps market to make its own projections of interest rates). The bank intervened in markets where necessary and allowed the market participation to build skills and gain maturity to accept the new system. It has adopted a consultative and participative approach to introduce changes.

The RBI has managed foreign exchange resources effectively.