2. INTRODUCTION
• It is central bank of India established in “1st
April 1935” under the “RESERVE BANK OF
INDIA ACT”.
• Its head quarter is in Mumbai.
• Its present Governor is “Dr. Raghuram Rajan”.
• It has 22 regional offices, which are mostly in
state capital.
• It was started as share holders bank with a
paid up capital of 5 cr.
3. Role of RBI
Issuer of currency :Except for issuing one rupee notes
and coins, RBI is the sole authority for the issue of
currency in India. The Indian government issues one
rupee notes and coins. Major currency is in the form of
RBI notes, such as notes in the denominations of two,
five, ten, twenty, fifty, one hundred, five hundred, and
one thousand.
RBI has two departments :-
1. Issue department: issue currency which is liability of
RBI and backed up by assets gold, foreign securities,
etc
2. Banking department: It takes care of the currency in
circulation and its withdrawal from circulation
4. Developmental role:
• To develop the quality of banking system in India.
• Perform wide range of promotional function to
support national objective.
• To establish financial institution of national
importance , for e.g.: NABARD, IDBI, etc.
Bankers to Bank:
• Maintains banking accounts of all scheduled
banks.
• RBI regulates the opening of branches by bank.
• It issues the guidelines and directives for the
commercial banks.
5. Banker to the Government:
• RBI acts as banker, both to the central
government and state governments.
• It manages all the banking transactions of the
government involving the receipt and payment of
money.
• RBI provides short-term credit to the central
government as well as to state government. RBI
advises the government on banking and financial
subjects, international finance, financing of five-
year plans, and banking legislation.
6. Role of RBI in inflation control:
• Inflation arise when the demand increases
and there is shortage of supply. There are two
policies in the hand of RBI.
Monetary Policy: it includes the interest rate
when bank increase the interest rate than
there is reduction in borrowers .
Fiscal Policy: it is related to direct taxes and
government spending. When direct taxes are
increased than the disposal income of people
reduces and hence demand reduces.
7. Regulation of Banking system:
The prime duty of reserve bank is to regulate the
banking system of our county in such a way that the
people of the country can trust in banking up to
perform its duty.
The reserve bank have following powers:
• Licensing: According to section 22 of Banking
Regulation Act, every bank has to obtain license from
the reserve bank. The reserve bank issue the license
only to those banks which fulfill the condition of the
bank.
• Management: According to section 10 of Banking
Regulation Act, can change manager or director of
any bank if it considers it necessary or desirable.
8. • Branch Expansion: According to section 23 of
Banking Regulation Act, every bank requires
prior permission from reserve bank to open
new places of business in India.
• Power of Inspection of Bank: According to
section 35 of Banking Regulation Act, the
reserve bank may inspect any bank and its
books and accounts either at its own
initiative or at the instance of the central
Government.
