Role of Reserve Bank of India (RBI) as Central Bank

Reserve Bank of India (RBI) is the central bank of India. It came in to reality after challenging many difficulties. Initially, Imperial Bank of India founded in 1921 was considered as the leader of Indian banks. Later RBI came in to reality by the passing of Reserve Bank of India Act in 1934 and started its functions from 1935. At the beginning of the RBI, it was owned both by by private individuals and government. Finally by 1948, the central government become the whole owner of RBI. Now, financial matters are very important for any nation. So the presence of a regulator or controller will be better to balance the economy from the burdens like inflation, deflation, crisis etc. So far RBI had completed 80 years of its services and still continuing. Here this hub is about the major functions of of RBI in India as the apex body of financial institutions.

Reserve Bank of India performs many functions in India as an autonomous monetary authority. For simplicity Generally the whole functions of Reserve Bank of India can be categorized under three heads as given below.

i) Monetary functions

ii) Non- monetary functions and

iii) Miscellaneous functions

I - Monetary Functions

As a monetary authority, RBI performs the following monetary functions, which are highly correlated with the system and structure of the monetary system in the country.

a) Monopoly of Currency Notes

in India RBI enjoys the sole right to issue notes except coins. RBI has a department for money issue called “Issue Department”. When RBI supply money in to the economy, RBI do it based on certain conditions. For example, a portion of total money supply will be held with RBI in the form of assets such as gold, bullion etc.

b) Banker to Government

RBI act as the banker of the government by performing functions like collecting of taxes, making payments on behalf of central government, maintain debt of public union, provides loans to government with out securities (up to three months) etc.

C) Bankers' Bank and Lender of Last Resort

RBI is the bankers' bank, RBI can issue licenses and other permissions to new banks. Further, All the banks in India should follow the rules and regulations given by RBI including many policies related to reserve ratio, bank rate, ripo and rivers ripo rate etc. RBI is also act as a clearing houses. It is done by RBI by collecting precautionary deposits from commercial banks.

d) Credit Controller

It is a very important function performing by RBI. They can control the economy via adopting many policies incorporating other banks like changing interest rates, SLR, CRR etc. this function is mainly focuses on the quantity of money in the economy. By changing interest and other parameters, RBI regularly intervene in the economy to control the money supply.

e) Controller of Foreign Exchange Operations

RBI is the authorized dealer in foreign exchange, gold coin, bullion etc. on behalf of government. So, RBI is the authorized agent to control foreign exchange operations of the country. It is very essential to adjust the Balance of Trade and Balance of Payment Accounts.

II – Non- Monetary Functions

RBI performs the following non- monetary functions. Mainly it can classified in to two like supervisory functions and promotional functions.

a) Supervisory Functions

RBI is the bankers' bank and so they supervising all Indian banks. RBI can supervise banks by using of RBI Act and further issuing of rules and regulations. Now, RBI setup a department called “department of Supervision” to control the commercial banks.

B) Promotional functions

Since RBI is the central bank of India , it has the responsibility to boost the Indian rural area and to achieve balanced society. RBI provides many promotional schemes to promote rural area’s agriculture, small industries to create employment opportunity by establishing financial institutions, conducting surveys etc. Banks like NABARD, Regional Rural Banks (RRB) etc are dedicated to rural area. So, RBI promoting villages of India.

Further, RBI promoting industrial fields by establishing financial institutions like Unit Trust of India (UTI). Any way the motto behind RBI to promote rural area is for creating a good atmosphere for industries and employment. In fact, Reserve Bank of India aims to achieve a developed society.

III – Miscellaneous Functions

Apart from the above functions, RBI functioning many other things also. RBI collecting data related to Indian economy and publishing them via media. RBI offering its own specialized institutions to youngsters who are enthusiastic in banking field. Many innovative fields of studies are introduced by RBI. College of Agricultural Finance at Pune is one of them.

Reserve Bank of India is the apex body of Indian financial system. It has completed 80 years. Still it has to do a lot with the progress of the country. It is performing many function such as mentioned above.