Reserve Bank of India-General Information
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RBI-History-Important Point To Remember
1. When was Reserve Bank of India (RBI) Established?
The Reserve Bank of India was Established on 1st April 1935, in the act of Reserve Bank of India Act, 1934.
First this Reserve Bank of India was established in Calcutta, but in 1937 it was shifted to Mumbai.
It was established with the objective of ensuring monetary stability and operating the currency and credit system of the country to its advantage.
It was started its Operations on April 01, 1935.
Now this Central Office is Located in Mumbai. the policies are prepared in this central office only. All Reserve bank issues are decided by the Central board of directors.
2. Main Functions of RBI :
Foreign Exchange and Reserves Management
Government debt Management
Financial Regulation and Supervision
Agriculture and Rural sectors Management
3. Main Activities of RBI :
Issuer of Currency
Banker and Debt Manager to Government
Banker to Banks
Regulator of the Banking System
Manager of Foreign Exchange
Regulator and Supervisor of the Payment and Settlement Systems
Maintaining Financial Stability
Monetary Authority : Monetary policy refers to the use of instruments under the control of the central bank to regulate the availability, cost and use of money and credit.The goal achieving specific economic objectives, such as low and stable inflation and promoting growth.
Issuer of Currency : The Reserve bank of India is responsible for the design, production and overall management of the nation’s currency, with the goal of ensuring an adequate supply of clean and genuine notes. The Government of India is the issuing authority of coins and supplies coins to the Reserve Bank on demand. The Reserve Bank puts the coins into circulation on behalf of the Central Government.
Banker and Debt Manager to Government : Managing the government’s banking transactions is a key RBI role Like individuals, businesses and banks. Governments need a banker to carry out their financial transactions in an efficient and effective manner, including the raising of resources from the public. As a banker to the central government, the Reserve Bank maintains its accounts, receives money into and makes payments out of these accounts and facilitates the transfer of government funds. We also act as the banker to those state governments that have entered into an agreement with RBI.
Banker to Banks : Like individual consumers, businesses and organisations of all kinds, banks need their own mechanism to transfer funds and settle inter-bank transactions—such as borrowing from and lending to other banks—and customer transactions. As the banker to banks, the Reserve Bank fulfills this role. In effect, all banks operating in the country have accounts with the Reserve Bank, just as individuals and businesses have accounts with their banks.
Regulator of the Banking System : Banks are fundamental to the nation’s financial system. The central bank has a critical role to play in ensuring the safety and soundness of the banking system—and in maintaining financial stability and public confidence in this system. As the regulator and supervisor of the banking system, the Reserve Bank protects the interests of depositors, ensures a framework for orderly development and conduct of banking operations conducive to customer interests and maintains overall financial stability through preventive and corrective measures.
Manager of Foreign Exchange : With the transition to a market-based system for determining the external value of the Indian rupee, the foreign exchange market in India gained importance in the early reform period. In recent years, with increasing integration of the Indian economy with the global economy arising from greater trade and capital flows, the foreign exchange market has evolved as a key segment of the Indian financial market. In investing its foreign assets, the Reserve Bank is guided by three principles: safety, liquidity and return.
Regulator and Supervisor of the Payment and Settlement Systems : Payment and settlement systems play an important role in improving overall economic efficiency. They consist of all the diverse arrangements that we use to systematically transfer money—currency, paper instruments such as cheques, and various electronic channels.
Maintaining Financial Stability : Pursuit of financial stability has emerged as a key critical policy objective for the central banks in the wake of the recent global financial crisis. Central banks have a critical role to play in achieving this objective. Though financial stability is not an explicit objective of the Reserve Bank in terms of the Reserve Bank of India Act, 1935, it has been an explicit objective of the Reserve Bank since the early 2000s.
Developmental Role : This role is, perhaps, the most unheralded aspect of our activities, yet it remains among the most critical. This includes ensuring credit availability to the productive sectors of the economy, establishing institutions designed to build the country’s financial infrastructure, expanding access to affordable financial services and promoting financial education and literacy.
4. The Statement of Reserve Bank of India
The act of Reserve Bank of India Statement shows its purpose, aims and policies i.e “It is Convention to constitute a Reserve Bank for India to regulate the issue of Bank notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency any credit system of the country to its advantage”
5. RBI locations:
This RBI is located in 4 places i.e Calcutta, Chennai, Mumbai and New Delhi.
The directors consist of 5 members are appointed by the Central Government for the period of 4 years
4. In November 1994 the board for Financial Supervision (BFS) was established as a committee of the Central Board of Directors of the Reserve bank of India. The main motive of the BFS is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies.
Highlights of RBI :
1935 – Operations begin on April 1st.
1949 – Nationalization of the Reserve Bank, Banking Regulation Act enacted.
1950 – India embarks on planned economic development. The Reserve Bank becomes active agent and Participant.
1966 – Cooperative banks come under RBI regulation.
1969 – nationalization of 14 major commercial banks (six more were nationalized in 1980).
1973 – RBI strengthens exchange controls by amending Foreign Exchange Regulation Act (FERA).
1974 – Introduction of priority sector lending targets.
1975 – Regional Rural Banks set up
1985 – Finance market reforms begin with Sukhamoy Chakravarty and Vaghul Committee reports.
1991 – India faces balance of payment crisis, pledges gold to shore u reserves Rupee devalued.
1993 – Exchange rate becomes market determined.
1994 – Board for Financial Supervision et up.
1997 – Ad hoc treasury bills phased out ending automatic monetisation.
1997 – Regulation of Non-Banking Finance Companies strengthened.
1998 – Multiple indicator approach for monetary policy adopted.
2000 – Foreign Exchange Management Act replaces FERA.
2002 – Clearing corporation of India limited (CCIL) commences clearing and settlement in government securities
2003 – Fiscal Responsibility and Budget Management and Act enacted.
2004 – Transition to a full-fledged daily liquidity adjustment facility (LAF) completed. Market Stabilization Scheme (MSS) introduced to sterilize capital flows.
2004 – Real time Gross Settlement System commences.
2005 – Focus on financial inclusion and increasing the outreach of the banking sector.
2006 – RBI empowered to regulate money, forex, G-sec and gold related securities market.
2007 – RBI empowered to regulate payment System.
2008/9 – Pro-active efforts to minimize impact of global financial crisis.
2010 – Year-long Platinum Jubilee celebrations
2011 – Positioning RBI as a knowledge institution.
Indian currency Printing places :
The Indian currency was prinited by CNP and BNP.
The CNP is located in Nashik, Maharastra. and the BNP is located in Dewas, Madhyaradesh. Reserve bank of india is also priniting Indian Currency with 2 Presses owned by Bharatiya Reserve Bank Note Mudran Private Limited.
The RBI only Responsible for printing, minting, calculating interest rate and distributing currency.
It kees statistics on financial information like exchange rates with foreign currency, investment and savings.
How the RBI Circulates the Currency ?
After Printing the Currency the RBI delivered that to the 18 regional offices. Those offices are to the distribute the currency to the Commercial banks, these banks are distribute the currency to the other banks and ATMs.
Demand of Currency :
The demand of currency is depends up in people, how people used the Currency, ATMs, Credit cards and Debit cards, on the basis of people uses, economic growth rates, destroyed currency notes, and stock requirements.
The RBI replace the damaged, dirty, worn notes with the new notes and put back in circulation, and coins are melted down at the mint and replaced with new rupee coins.
Banking Acts :
1. To governs the Reserve Bank functions, Reserve Bank of India Act 1934.
2. To governs the financial Sector, Banking Regulation Act 1949.
3. To governs government debt market, Public Debt Act 1944.
4. To governs currency and coins, Indian coinage Act 2011.
5. To governs trade and foreign exchange market, foreign exchange management Act 1999.
6. To governs Payment systems in India , Payment and Settlement Act 2007.
Other Important Information about Reserve Bank of India (RBI)