2. The Reserve Bank of India (RBI) is India’s central banking institution,
which controls the monetary policy of the Indian rupee.
It is the apex bank in the Indian Banking System
It was established on 1 April 1935 in accordance with the provisions of the
Reserve Bank of India Act, 1934.
The Reserve Bank of India was nationalised in 1949 under the Reserve
Bank (Transfer of Public Ownership) Act, 1948.
3. Urjit Patel (RBI Governor) is the present and 24thGovernor of Reserve Bank of
India. He was appointed on 4th September 2016 after Dr. RaghuramGovinda
The basic functions of the Reserve Bank of India are to regulate the issue of
Bank notes and the 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.( From the Preamble of the Reserve Bank of India
The headquarters of the Reserve Bank of India are located in Mumbai. RBI has
19 regional offices most of them in state capitals and 9 sub-offices.
4. • The Central Boardof Directors is the maincommittee of the RBI.
The Governmentof India appoints the directors for a 4-year
• The Board consists of a Governor, and not more than 4 Deputy
Governors, 4 Directors to represent the regional boards, 2 from
theMinistry of Finance and 10 other directors fromvarious
• The bank is headedby the Governor and the post is currently
heldby Dr UrjitPatel.
6. For balanced and systematic development of banking in the country.
For the development of organized money market in the country.
For proper arrangement of agriculture finance.
For proper arrangement of industrial finance.
For proper management of public debts.
For centralization of cash reserves of commercial banks.
To maintain balance between the demand and supply of currency.
8. ROLE OF RBI IN INDIAN BANKING SYSTEM :
1. MONETARY AUTHORITY.
2. ISSUER OF CURRENCY.
3. ISSUER OF BANKING LICENSE.
4. BANKER’S BANK.
5. LENDER OF LAST RESORT.
6. BANKER & DEBT MANAGER OF GOVERNMENT.
7. CONTROLLER OF CREDIT.
8. ACTS AS CLEARING HOUSE.
9. MANAGER OF FOREX
9. RBI controls the supply of money in the economy by
its control over interest rates in order to maintain
price stability and achieve high economic growth
using Monetary Policy.
Main Aim of Monetary Policy is to:
1. Maintaining price stability.
2. Control on bank credit.
3. Interest rate control.
4. Control inflation
5. Strengthen Banking System
10. Quantitative Measures of Credit Control under
Monetary Policy :
Bank Rate : Rate at which RBI discounts bills of commercial
Cash Reserve Ratio (CRR) : Portion of Deposit which
commercial banks have to keep with RBI in the form of Cash
Statutory Liquidity Rate (SLR): Portion of Total Deposit which
commercial banks have to keep with RBI in the form of Liquid
Assets via – Gold, Cash or Approved Government securities.
Repo Rate : Rate at which Commercial Banks borrow money
Reverse Repo Rate : Rate at which RBI borrows money from
11. The bank issues and exchanges currency notes and coins
and destroys the same when they are not fit for
The objectives are to issue bank notes and giving public
adequate supply of the same, to maintain the currency
and credit system of the country to utilize it in its best
advantage, and to maintain the reserves.
It is the sole authority in India to issue Currency.
Every Note issued by RBI has it’s name imprinted on the
top along with signature of governor below promissory
12. Every Bank has to obtain a Banking License from RBI
to conduct banking business in India (As per Sec 22 of
Banking regulation Act)
Various Banks have been given the license like:
Small Finance Banks
IDFC Vodafone M-
Bandhan Bank Fino PayTech Utkarsh Micro
13. RBI is bank of all banks in India. As
a banker of banks, RBI: Enables
smooth and swift clearing and
settlements of inter-bank
Provides efficient means of funds
transfer for all banks Enables banks
to maintain their accounts with RBI
for statutory reserve requirements
and maintenance of transaction
Regulates opening of New ATMS &
Branches of Commercial Banks
Why RBI is called as banker's bank
1. Provides loan to banks/bankers.
2. Accept Deposits of Banks.
3. Rediscount the bills of Banks.
14. The banks can borrow from
the RBI by keeping eligible
securities as collateral or any
other arrangement and at the
time of need or crisis, they
approach RBI for financial
help. Thus RBI works
as Lender of the Last
Resort (LORL) for banks.
15. Keeps deposits of Governments (Centre & state) as deposit free of interest.
Receives & Makes Payment on behalf of Government.
Carrying out the Government’s exchange remittances & other Banking
Helping Both State & Central Government to float new loans and manage
Acts as an Advisor to Government on all monetary & Banking functions
16. Credit Control is a major weapon used by RBI to control
demand & Supply of Money in Economy.
Some of the Credit Control techniques are :
1. Open Market Operations (OMO) : An open market
operation is an instrument of monetary policy which
involves buying or selling of government securities from
or to the public and banks.
2. Credit Ceiling : In this operation RBI issues prior
information or direction that loans to the commercial
banks will be given up to a certain limit. In this case
commercial bank will be tight in advancing loans to the
17. Clearing Houses facilitate the exchange of instruments and processing of
payment instructions at a central point among the participating banks.
RBI acts as a Clearing House for settlement of Banking transactions.
It is a member bank of the Asian Clearing Union.
RBI manages 14 clearing houses of the country situated in different major
cities. The SBI & Associate Banks look after clearing house function as an
agent of RBI.
18. RBI is required to maintain external value of Rupee. For this purpose it acts as a
custodian of FOREX.
On a given day, the foreign exchange rate reflects the demand for and supply of
foreign exchange arising from trade and capital transactions. The RBI’s Financial
Markets Department (FMD) participates in the foreign exchange market by
undertaking sales / purchases of foreign currency to ease volatility in periods of
excess demand for/supply of foreign currency.
Administer and enforces the provision of Foreign Exchange Management Act
19. Development of banking system .
Development of financial institutions.
Development of backward areas.
Proper interest rate structure.