Normally, people are not aware about how RBI is working. So Today, we are gives a details about the RBI. List of Functions of RBI.
The central bank in India is known as Reserve Bank of India (RBI).
Under the Reserve Bank of India Act of 1934, the Reserve Bank of India was established on April 1, 1935 with a private paid up capital of 5 crores. RBI was nationalized on January 1, 1949.
RBI is the Apex bank of India which supervises and regulates the entire banking sector as well as formulates the monetary policy of India.
As the Apex bank of India, the RBI performs functions as
- Monetary Functions (Monetary Responsibilities)
- Non-Monetary Functions of Reserve Bank of India
Reserve Bank of India has the sole right to issue notes of denominations starting from Rs.2 and above. Currency note of Rs.1 and all currency coins are issued by the finance ministry of Government of India but the distribution of one rupee notes and currency coins is done by the RBI as an agent of the Government of India.
Banker to the Government
The RBI is a banker, advisor and agent of the central government and of all state governments. It manages government bonds, government accounts, currency coins and notes of Rs.1 and also provides loans to the government.
Bankers’ Bank and Lender of Last Resort
The RBI is a banker and regulator of all the scheduled banks in the country. It manages the Cash Reserves of banks, determines the direction of credit as well as directs the credit policy and rate of interest for all banks. It is also the lender of last resort for the scheduled banks in case of emergency.
The RBI controls the process of credit creation and money supply in the economy with the help of various tools of monetary policy.
Custodian of Foreign Exchange Reserves
The RBI has the responsibility of maintaining the value of rupee vis-a-vis other currencies under the fixed exchange rate regime. Under free exchange rate system where exchange rate is determined by the market, RBI maintains the value of Indian currency by buying and selling foreign exchange in the open market as and when required.
The RBI is also the custodian of India’s reserves of foreign currencies. It also administers foreign exchange reserves by checking the inflow or outflow of foreign exchange.
Regulatory and Supervisory Functions
RBI supervises the functioning of the entire financial and money markets. which include branch expansion and methods of working of scheduled banks, working of non-banking finance companies and of co-operative banks.
Even today, there are many people in India who do not hold a bank account. Therefore, they depend on unorganized money market for their credit needs, make business related payments in cash rather than by cheques owing to which it is difficult to know the exact value of transactions taking place in the country and it becomes difficult to ascertain the exact value of money or arrive at the actual figure of national income. Hence, RBI tries to create banking awareness among people, encourages branch expansion in rural areas and promotes setting up of co-operative banks in the interest of the people. It makes efforts to get more and more people under the organized money market.
Financial Inclusion and Development
India is a country with huge degree of economic diversity and rural-urban divide and hence whenever major economic reforms and changes come about it is necessary that people and economic units of all segments receive benefits of such changes. For such inclusion, RBI continuously makes efforts in the banking sphere. It provides special credit facilities to priority sectors like agriculture, small scale industries, self-employed people, traditional and cottage industries etc.
It also makes efforts to increase information flow and enhance awareness regarding banking among the masses.
In the present times, RBI manages the Prime Minister’s ‘Jan Dhan Yojna’.
RBI also works towards protecting the interests and rights of customers.
It publishes all types of banking related information and statistics as well as experts’ articles in order to promote research related to banking and monetary improvement in the country. On the RBI website people can get free access to such information.
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