The Reserve Bank of India (RBI) is India's central banking
institution, which controls the monetary policy of the Indian rupee. It was
established on 1 April 1935 during the British Raj in accordance with the
provisions of the Reserve Bank of India Act, 1934.[2] The share capital was
divided into shares of 100 each fully paid which was entirely owned by private
shareholders in the beginning.[3] Following India's independence in 1947, the
RBI was nationalised in the year 1949.
The RBI plays an important part in the development strategy
of the Government of India. It is a member bank of the Asian Clearing Union.
The general superintendence and direction of the RBI is entrusted with the
21-member-strong Central Board of Directors—the Governor (currently Duvvuri
Subbarao), four Deputy Governors, two Finance Ministry representative, ten
Government-nominated Directors to represent important elements from India's
economy, and four Directors to represent Local Boards headquartered at Mumbai,
Kolkata, Chennai and New Delhi. Each of these Local Boards consist of five
members who represent regional interests, as well as the interests of co-operative
and indigenous banks.
Structure Of RBI
Central Board of
Directors
The
Central Board of Directors is the main committee of the central bank. The Government
of India appoints the directors for a four-year term. The Board consists of a
governor, four deputy governors, fifteen directors to represent the regional
boards, one from the Ministry of Finance and ten other directors from various
fields. The Government nominated Arvind Mayaram, as a director of the Central
Board of Directors with effect from August 7, 2012 and vice R Gopalan, RBI said
in a statement on August 8, 2012.
Governors
The
current Governor of RBI is Duumviri Subbarao. The RBI extended the period of
the present governor up to 2013. There are four deputy governors, Deputy
Governor K C Chakrabarty, Urjit Patel, Shri Anand Sinha,
and Shri H.R. Khan . Deputy Governor K C Chakrabarty's term has been
extended further by 2 years. Subir Gokarn was replaced by Mr. Urjit Patel in
january 2013.
Main
functions
Bank of Issue
Under Section 22 of the Reserve Bank of India Act, the Bank has the sole
right to issue bank notes of all denominations. The distribution of one rupee
notes and coins and small coins all over the country is undertaken by the
Reserve Bank as agent of the Government. The Reserve Bank has a separate Issue
Department which is entrusted with the issue of currency notes.
The Reserve Bank of India is the main monetary authority of the country and
beside that the central bank acts as the bank of the national and state
governments. It formulates, implements and monitors the monetary policy as well
as it has to ensure an adequate flow of credit to productive sectors.
Objectives are maintaining price stability and ensuring adequate flow of credit
to productive sectors. The national economy depends on the public sector and
the central bank promotes an expansive monetary policy to push the private
sector since the financial market reforms of the 1990s.
Regulator and supervisor of the financial system
The institution is also the regulator and supervisor of the financial system
and prescribes broad parameters of banking operations within which the
country's banking and financial system functions.Its objectives are to maintain
public confidence in the system, protect depositors' interest and provide
cost-effective banking services to the public. The Banking Ombudsman Scheme
has been formulated by the Reserve Bank of India (RBI) for effective addressing
of complaints by bank customers.
Managerial of exchange control
The central bank manages to reach the goals of 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
The bank issues and exchanges or destroys currency notes and coins that are
not fit for circulation. The objectives are giving the public adequate supply
of currency of good quality and to provide loans to commercial banks to
maintain or improve the GDP. The basic objectives of RBI are to issue bank
notes, to maintain the currency and credit system of the country to utilize it
in its best advantage, and to maintain the reserves. RBI maintains the economic
structure of the country so that it can achieve the objective of price
stability as well as economic development, because both objectives are diverse
in themselves.
Banker of Banks
RBI also works as a central bank where commercial banks are account holders
and can deposit money.RBI maintains banking accounts of all scheduled banks.[31]
Commercial banks create credit. It is the duty of the RBI to control the credit
through the CRR, bank rate and open market operations. As banker's bank, the
RBI facilitates the clearing of cheques between the commercial banks and helps
inter-bank transfer of funds. It can grant financial accommodation to schedule
banks. It acts as the lender of the last resort by providing emergency advances
to the banks. It supervises the functioning of the commercial banks and take
action against it if need arises