Contents
Functions of Reserve bank Of India
The Reserve Bank of India is regulatory body. The RBI control the monetary policy for the growth. Also they maintain price stability and control inflation. The functions of Reserve Bank of India can be classified under 7 functions. The functions are mentioned in the official website of the RBI.
The preamble of RBI gives basic ideas about functions of RBI. The preamble of RBI stated below
“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; to have a modern monetary policy framework to meet the challenge of an increasingly complex economy, to maintain price stability while keeping in mind the objective of growth.”
The RBI regulate the Banking and non Banking financial institution’s credit management. The Reserve bank of India play important role in Indian economy. The role and functions of RBI directly affect Indian economy. The role and functions of RBI are so wide. The RBI play Traditional role, probationary role, promotional and developmental role, supervisory role and other important role.
The Role and functions of RBI include monetary management, foreign exchange and reserves management, government debt management, financial regulation and supervision, apart from currency management and acting as banker to the banks and to the Government. The Reserve Bank of India sole authorizer of issuer of Indian currency.
- Monetary Authority
- Regulator and supervisor of Financial system
- Manager of Foreign Exchange
- Issuer of Currency
- Development Role
- Regulator and supervisor of Payment and settlement system
- Other related functions
Functions of Reserve Bank Of India
Let’s discuss the official functions of RBI in details
Monetary Authority
The RBI’s main function is to work as monetary authority for the Indian Economy. The RBI form the monetary policy for Growth. Also RBI work for the implementation of the monetary policy. The RBI control the quantity of money available in Indian economy. The monetary policy regulation control the money flow in the economy.
The Reserve Bank of India also monitor the monetary policy. The RBI changes the interest rate to regulate money flow. The change in interest rate affect the Housing market and forex rates. The objectives of Monetary policies are control of inflation, controlling of unemployment rate and currency exchange rates.
Regulator and supervisor of Financial system
The RBI is regulator and supervisor of Indian Financial system. The RBI comes under jurisdiction of Ministry of Finance, India. The Regulator and supervisor of Financial system function’s objective is to maintain public confidence in the economic system. Also RBI protect money of Depositors. RBI provide cost effective banking service via certain regulation to the public.
The RBI look after banking system and work to strengthen Banking system. They prescribes broad parameters of banking operations. The uniform rules formed for the Bank’s working in India.
Manager of Foreign Exchange
RBI is manager of foreign Exchange in India. RBI manages the Foreign Exchange Management Act, 1999. The Foreign Exchange Management Act, 1999 is “An Act to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.”
They regulate the dealing & Holding of foreign exchange, Current and Capital account tractions (foreign currency). They facilitate the foreign transactions related to export and import of goods and service.
Issuer of currency
The Reserve Bank of India is sole note currency issuing authority in India. The currency coins are issued by Government of India. But the circulation of Coin done by Reserve Bank of India. The RBI issue notes of Rs 5, 10, 20, 100, 200, 500 and Rs 2000.
RBI is sole authority to destroys currency and coins not fit for circulation. They work for to give the public adequate quantity of supplies of currency notes and coins and in good quality.
Developmental role
RBI performance the performs a wide range of promotional functions. The RBI provide financial help for the agriculture activities. The RBI work for export credit to the traders. The priority sectors receive credit from the RBI. The RBI also provide the credit facilities to weaker sector to strengthen them.
Regulator and supervisor of Payment and settlement system
The development of Payment and settlement system done by RBI in India. The Reserve Bank of India provided safe and secure payment and settlement system in India. The payment modes in India regulated by RBI. They also introduce new mode of payment. They also look after up gradation of payment system to make it more advance and secure.
RBI work to maintain public confidence in Payment and settlement system. Example : RBI introduced UPI payment system in India. The rules and regulation laid down by RBI to protect customer’s interest. Not only payment related matter but fraud related matter handled with this rules and regulation. The payment gateway provider ensure customer’s payment settlement.
Related Functions
The Reserve bank of India also known as Banker’s Bank. They perform various duty related like providing credit to the government. The RBI work as Banker to the Government. The Bank performs merchant Banking function for Government of India and other State Governments. The RBI work as Banker’s banks. They maintains banking accounts of all scheduled banks operating in India
This 7 functions of RBI stated in official website. The reader can read further traditional functions of RBI, which may help you to understand more about Reserve Bank of India.
Also read : Definition, Meaning and Examples of Amalgamation
Traditional Functions of RBI
The traditional functions are known as major functions of RBI. Below are traditional function of RBI,
- Issue of Currency
- Banker to Government
- Banker’s Bank
- Exchange Management & Control
- Control of Credit
- Collection & Publication of Data & Reports
- Training facilities
Traditional functions of RBI
RBI – Reserve Bank of India
The Reserve Bank of India is regulatory body who regulate India’s Banking system. In another term, RBI is Central Bank. A central bank is an institution that manages the currency, money supply, and interest rates of a state or formal monetary union, and oversees their commercial banking system. The Reserve Bank of India was founded on 1 April 1935.
The current Governor of RBI is Mr. Shaktikanta Das. Mr Shaktikanta Das was appointed as 25th RBI Governer on December 11, 2018. After 3 Years of successful term he was again get extension for the 3 years again. He is first Non Economist RBI Governor of RBI. He holds degrees of graduation and post-graduation in History from Delhi University.
The Indian payment system is regulate by RBI. regulate the payment and settlement systems in India. RBI works for the financial development of the India. The official website of RBI is rbi.org.in.
After the world war 1, the Royal Commission on Indian Currency and Finance was set up to address the economic crisis in India. Based on the recommendation of Royal commission, The reserve Bank of India founded in 1 April 1935. The Reserve Bank of India Act was passed in 1934. Reserve Bank of India is autonomous body. Now we will discuss about functions of RBI.
Conclusion
The Reserve Bank of India is autonomous body. The functions of RBI gives broader idea of operation of Banking system. They provide rules and regulation for the money flow, banking operation, foreign exchange. It work for the economic development of India. RBI control the inflation rate.
RBI works as watchdog of Indian Banking system. RBI works as autonomous body but RBI Act, 1934 governing its operation gives the government power to direct it. Also the appointment of RBI Governor was done by Government of India.
If you have any queries related to functions of RBI then comment below. The information was updated on 18-01-2023.