Central banks serve as the lender of last resort and money manager for countries. The Bank of England is the oldest central bank, established in 1694. There are nearly 150 central banks globally. The Reserve Bank of India (RBI) was established in 1935 by amalgamating three presidency banks. As the central bank of India, the RBI is charged with managing the country's money supply and credit levels to promote public welfare. It functions as the banker to the government and banks, and controls functions like currency issuance, foreign exchange reserves, and interest and exchange rates. The RBI was initially owned privately but was nationalized in 1949.

1. CENTRAL BANKS
 It stands as the lender of the money
 Bank of England is the oldest in the world
 Nearly 150 Central Banks are operating in the world
 RBI in India was started in 1935
 Three presidency banks were amalgamated to form
RBI

2. MEANING OF CENTRAL BANK
 It is an institution charged with the responsibility of
managing the expansion and contraction of the volume
of money in the interest of general public welfare.
 It is the bank which controls the credit
 Central bank is called bankers bank
 The need was proposed by Hilton Young commission in
20th Century

3. OWNERSHIP OF RBI
 RBI was constituted as a shareholder’s bank.
 Share Capital – 5 crores divided into 5 lakh shares
of Rs. 100 each
 Rs. 2,30,000 by RBI, remaining by Private
Shareholders.
 From 1st January 1949, RBI was nationalized

4. NEED / FUNCTIONS / OBJECTIVES FOR
CENTRAL BANKS
 Direction and Regulation
 Issue Currency Notes
 Foreign Exchange Reserve
 Banker to the Government
 Banker’s bank
 Control of Credit

5. NEED / FUNCTIONS / OBJECTIVES FOR
CENTRAL BANKS
 Monopoly Power of note-issue
 Maintain value of currency
 Maintain stable interest rate / Exchange Rate
 Advisor to the Government
 Promotional and developmental functions

6. UNSUCCESSFUL FUNCTIONS OF RBI
 No control over inflation
 No uniformity in interest rates
 No link with indigenous banking
 Banking problems
 Failure of Bill Market
 Failure in Agricultural Finance

7. FORBIDDEN FUNCTIONS OF RBI
 It cannot work in the field of trade and industry
 It cannot grant loans directly to the customers
 It cannot give interest on deposits
 It cannot purchase the shares of any company
 It can only buy the negotiable instruments from CB
 It cannot give loan on the security of any movable
property

8. ORGANIZATION STRUCTURE
 Total Members – 20
 1 Governor (Chairman) and 4 Deputy Governor
appointed by Central Government for 5 years
 4 Directors for 4 years
 10 other directors for 4 years
 1 Government official

9. DEPARTMENTS OF RESERVE BANK
 Issue Dept.
 Banking Dept.
 Exchange Control Dept.
 Dept. of Banking operations and Development
 Industrial Finance Dept.
 Research and statistics Dept.
 Legal Dept.
 Dept. of finance / Accounts
 Dept. of Administration
 Inspection Dept.
 Secretarial Dept.