RESERVE BANK OF INDIA (RBI)

25, Jun 2019

Prelims level : Polity Governance - Constitutional Bodies, Regulatory Bodies Mains level : GS2E - Structure, organization and functioning of the Executive and the Judiciary Ministries and Departments of the Government; Pressure Groups and Formal / Informal Associations and their role in the Polity.
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Context

  • Viral Acharya’s resignation as Deputy Governor of the Reserve Bank of India

About:

  • The  Reserve  Bank  of  India  was  established  on  April  1,  1935  in  accordance  with  the provisions of the Reserve Bank of India Act, 1934.
  • Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.

Composition:

Central Board

  • The Reserve Bank’s affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act.
  • Appointed/nominated for a period of four years

Constitution:

Official Directors

  • Full-Time: Governor and not more than four Deputy Governors

Non-Official Directors

  • Nominated by Government: ten Directors from various fields and two government Official
  • Others: four Directors – one each from four local boards

Functions:

Monetary Authority:

  • Formulates, implements and monitors the monetary policy.
  • Objective: maintaining price stability while keeping in mind the objective of growth.

Regulator and supervisor of the financial system:

  • Prescribes broad parameters of banking operations within which the country’s banking and financial system functions.
  • Objective: maintain public confidence in the system, protect depositors’ interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange

  • Manages 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:

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

Developmental Role:

  • Performs a wide range of promotional functions to support national objectives.

Regulator and Supervisor of Payment and Settlement Systems:

  • Introduces and upgrades safe and efficient modes of payment systems in the country to meet the requirements of the public at large.
  • Objective: maintain public confidence in payment and settlement system.

Related Functions

  • Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.
  • Banker to Banks: maintains banking accounts of all scheduled banks.
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