Reserve Bank of India

The RBI Regional Office in Mumbai

The Reserve Bank of India (RBI, Hindi: भारतीय िरजवर बैक) is the central bank of
India, and was established on April 1, 1935 in accordance with the provisions of
the Reserve Bank of India Act, 1934. The Central Office of the Reserve Bank was
initially established in Kolkata but was permanently moved to Mumbai in 1937.
Though originally privately owned, the RBI has been fully owned by the
Government of India since nationalization in 1949.

Duvvuri Subbarao who succeeded Yaga Venugopal Reddy on September 2, 2008

is the current Governor of RBI.

The Reserve Bank of India was set up on the recommendations of the Hilton
Young Commission. The commission submitted its report in the year 1926,
though the bank was not set up for nine years.

The Preamble of the Reserve Bank of India describes the basic functions of the
Reserve Bank as to regulate the issue of Bank Notes and keeping of reserves with
a view to securing monetary stability in India and generally to operate the
currency and credit system of the country to its advantage.

It has 22 regional offices, most of them in state capitals.

RBI was started with a paid up share capital of 5 crore. on established it took over
the function of management of currency from government of India and power of
credit control from Imperial Bank of India.
 Objective and Reasons for Establishment of RBI

The main objectives for establishment of rbi as the central bank of India were
as follows :

 To manage the Monetary and credit system of the country

 To stabilize internal and external value of rupee
 For balanced and systematic development of banking in the country.
 For the development of organized money market in the country
 For proper arrangement of agriculture finance
 For proper arrangement of industrial finance
 For proper management of public debt
 To establish monetary relations with other countries of the world and
international financial institutions.
 For centralization of cash reserves of commercial banks.
 To maintain balance between demand and supply of currency

Role of Reserve Bank of India

The central bank of any country is usually the driving force in the
development of the national payment system. The Reserve Bank of India
(RBI) as the central bank of the country has been playing this
developmental role and has taken several initiatives for a safe, secure,
sound and efficient payment system.

The Reserve Bank of India is the central bank of India, and was established on
April 1, 1935. The RBI is fully owned by the Government of India since
nationalization in 1949 .

The Key roles of the RBI are:

• Regulator and supervisor of the financial system

• Manager of exchange control
• Issuer of currency
• Banker to the Government
• Bank to banks: maintains banking accounts of all scheduled banks
Main Functions
Monetary Authority:

• Formulates, implements and monitors the monetary policy.

• Objective: maintaining price stability and ensuring adequate flow of credit
to productive sectors.

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.

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.
Credit Control
Credit control is a very important function of RBI as the Central Bank of India .
For smooth functioning of economy RBI control credit through Quantitative and
Qualitative methods. Thus the RBI exercise credit control over the credit granted
by the commercial bank.

The Reserve Bank is the most appropriate body to control the creation of
credit in view if its functions as the bank of note issue and custodian of cash
reserves of the members bank. Unwarranted fluctuations in the volume of credit
by causing wide fluctuations in the manner of money cause great Social &
Economic unrest in the country. Thus RBI control credit in such a manner, so as to
bring ‘ Economic Development with Stability’. It means bank will accelerate
economic growth on one side and on other side it will control inflationary trends in
the economy . It leads to increase in real national income of the country and
desirable stability in the economy.

Objectives of Credit Control:

 To obtain stability in internal price level.
 To attain stability in exchange rate.
 To stabilize money market of a country .
 To eliminate business cycle-inflation and depression-by controlling supply
of credit.
 To maximize income , employment and output in a country.
 To meet the financial requirement of an economy not only during norma
times but also during emergency or war.
 To help the economic growth of a country within specified period of time.
This objective has become particularly necessary for the less developed
countries of present day world.

Methods and instruments of Credit Control :

There are many methods of Credit Control. These methods can broadly divided
into two categories :

 Quantitative or General Methods

 Qualitative or Selective Methods

The quantitative methods of credit control aim at influencing the quantity of total
volume of credit in an economy during a particular period of time. The qualitative
methods of credit control aim at influencing the quality of use of credit with
respect to a particular area or field of activity.
Quantitative system of Credit Control includes following instruments :

1. Bank Rate
2. Open Market Operation (OMO)
3. Change in Cash Reserve Ratio (CRR)
4. Statutory Liquidity Ratio (SLR)
5. Repo and Reverse Repo ratio

Qualitative System consists of following instruments:

1. Selective Credit Control

2. Rationing of Credit
3. Moral Persuasion
4. Direct Action

Organization and Management of RBI

Board of directors
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.

On June 27, 2006, the Union Government of India reconstituted the Central Board of
Directors of the Reserve Bank of India (RBI) with 13 members, including Azim Premji
and Kumar Mangalam Birla.
 ORGANISATION STRUCTURE : CENTRAL BOARD OF DIRECTORS

Executive Directors
Shri V.K. Sharma Financial Markets Department of Rural Planning & Credit
Department Currency Department
Management (Shri B.P.Vijayendra,
(Shri R Gandhi, CGM)
CGM)
Urban Banks
Department
(Shri
A.K.Khound,CGM)

Shri. C. Krishnan Inspection

Central Vigilance Cell Department
(including Internal
Audit)
(Shri Karuna
Sagar
CGM-in-Charge)
Shri Anand Sinha Department of
Banking Operations
and Development
(Shri P. Vijaya
Bhaskar, CGM-in-
Charge)

Department of
 Banking Supervision
(Shri
S.Karuppasamy,
CGM-in-Charge)
Shri V.S. Das Secretary's Central Security Cell Department of
(Also Central Department (Major General Administration &
Public Information (Smt. Grace E. (Retd.) Personnel
Officer ) Koshie, Soli N. Pavri, Management
CGM & Secretary) Security Adviser ) (Shri Prabal Sen,
Principal CGM)
Department of
Communication Human Resources
(Alpana Killawala, Development
CGM) Department
(Shri Deepak
Singhal, CGM)

Rajbhasha Department
(Smt Roopam
Mishra,
General Manager)
Shri Department of Non- Premises Customer Service
G.Gopalakrishna Banking Supervision Department Department
(Shri A Narayana (Shri (Shri G. Jaganmohan
Rao, CGM) S.Venkatachalam, Rao,CGM)
CGM, Technical )
Foreign Exchange Department of
Department Information
(Shri Salim Technology
Gangadharan, (Dr.A.M.
CGM-in-Charge) Pedgaonkar, CGM)

Department of
Payment and
Settlement Systems
(Shri G.
Padmanabhan,CGM)
Shri H.R. Khan Department of
Expenditure
Department of & Budgetary Control
Government
& Bank Accounts (Smt Deepa
(Shri S.V.Raghavan, Srivastava
CGM-in-Charge)
CGM in - Charge)

Department of
External
Investments &
Operations
(Smt. M
Hemachandra,
CGM)

Internal Debt
Management
Department
(Dr.K.V.Rajan,CGM)
Shri D.K.Mohanty Monetary Policy
Department
(Dr.Janak Raj,
 Adviser-in-Charge)

Department of
Economic
Analysis & Policy

Department of
Statistics &
Information
Management
(Dr. A.K. Ray,
Officer-in-Charge)

Financial Stability
Unit
(Shri Chandan
Sinha,
Officer on Special
Duty)
Shri H.N.Prasad, Deposit Insurance
Chief Executive and Credit
Officer Guarantee
Corporation