Reserve Bank of India

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Reserve Bank of India

Reserve Bank of

The Reserve Bank of India is India's Central Banking Institution, which

India

controls the Monetary Policy of the Indian Rupee.

It is a member bank of the Asian Clearing Union.

Other name

Central bank.

Establishment

April 1, 1935. Established in accordance with the provisions of the

Reserve Bank of India Act, 1934.
The original share capital was divided into shares of 100 each fully paid,
which were initially owned entirely by private shareholders. Following
India's independence on 15 - August - 1947, the RBI was nationalised
in the year of 1 January 1949.

Head quarters

Shahid Bhagat Singh Marg, Mumbai.

The Central Office of the Reserve Bank was initially established in
Calcutta but was permanently moved to Mumbai in 1937.

Organization

The general superintendence and direction of the RBI is entrusted with

the 21-member Central Board of Directors:

1. Central board of directors:

Members

1. Official Directors(Full-time): Governor and

not more than four Deputy Governors.
2. Non-Official Directors(Nominated by
Government): Ten Directors from various fields
and 2 Finance Ministry representatives.
3. Others: Four Directors - one each from four
local boards headquartered at Mumbai, Kolkata,
Chennai and New Delhi.

Appointment

The board is appointed by the Government of India in

keeping with the Reserve Bank of India Act.

Term

Appointed/nominated for a period of four years.

Functions

General superintendence and direction of the

Bank's affairs.

2. Local Boards:

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One each for the four regions of the country in Mumbai, Calcutta,
Chennai and New Delhi .
Members

Five members

Appointment

Appointed by the Central Government.

Term

Four years

Functions

1. To advise the Central Board on local matters

and to represent territorial and economic
interests of local cooperative and indigenous
banks
2. To perform such other functions as delegated
by Central Board from time to time.

Meetings:
1. At the minimum of 6 meetings each year.
2. At the minimum of 1 meeting each quarter.
Offices
Subsidiaries

19 regional offices, most of them in state capitals and 9 Sub-offices.

Fully

1. Deposit Insurance and Credit Guarantee

owned

Corporation of India(DICGC).(to set up

printing presses at Mysore in Karnataka and
Salboni in West Bengal.)
2. Bharatiya Reserve Bank Note Mudran Private
Limited(BRBNMPL).(in February 1995 to
produce banknotes).
3. The National Housing Bank (NHB) was
established in 1988 to promote private real
estate acquisition.
The institution maintains banking accounts of all
scheduled banks, too.

Majority

NABARD

stake
Functions of RBI

Monetary

Formulates, implements and monitors the

Authority

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

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Regulator and

Prescribes broad parameters of banking

supervisor of the

operations within which the country's banking

financial system

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

Manages the Foreign Exchange Management

Foreign Exchange

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

Performs a wide range of promotional

role

functions to support national objectives.

Banker to the

Performs merchant banking function for the

Government

central and the state governments; also acts as

their banker.

Banker to banks

Maintains banking accounts of all scheduled

banks.

Board for

Board for

Financial

Financial

Supervision (BFS)

Supervision

To perform Financial Supervision.

(BFS)
Established

November 1994 as a committee of the Central

Board of Directors of the RBI.

Objective

To undertake consolidated supervision of the

financial sector comprising commercial banks,
financial institutions and non-banking finance

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companies.
Members

1. Four Directors from the Central Board as

members for a term of two years and is
chaired by the Governor.
2. The Deputy Governors of the Reserve Bank
are ex-officio members.
3. One Deputy Governor, usually, the Deputy
Governor in charge of banking regulation
and supervision, is nominated as the
Vice-Chairman of the Board.

Functions

The BFS oversees the functioning of Department of

Banking Supervision (DBS), Department of
Non-Banking Supervision (DNBS) and Financial
Institutions Division (FID) and gives directions on
the regulatory and supervisory issues.

BFS Meetings

Once in every month.

It considers inspection reports and other
supervisory issues placed before it by the
supervisory departments.

Initiatives taken
by BFS include:

1. restructuring of the system of bank

inspections
2. introduction of off-site surveillance,
3. strengthening of the role of statutory
auditors and
4. strengthening of the internal defences of
supervised institutions.

Audit

Objective

Sub-Committee

To upgrade the quality of the

statutory audit and internal audit
functions in banks and financial
institutions.

Members

The audit sub-committee includes

Deputy Governor as the chairman
and two Directors of the Central
Board as members.

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Chronology

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1935: Operations begin on April 1

1969: Nationalization of 14 major commercial banks (six more were
nationalised in 1980)
1985: Financial market reforms begin with Sukhamoy Chakravarty and
Vaghul Committee Reports
1993: Exchange rate becomes market determined
1949: Nationalisation of the Reserve Bank; Banking Regulation Act
enacted
1966: Cooperative banks come under RBI regulation
1973: RBI strengthens exchange controls by amending Foreign Exchange
Regulation Act (FERA)
1975: Regional Rural Banks set up
1991: India faces balance of payment crisis; pledges gold to shore up
reserves. Rupee devalued
1994: Board for Financial Supervision set up
1997: Regulation of Non-Banking Finance Companies strengthened
1998: Multiple indicator approach for monetary policy adopted
2000: Foreign Exchange Management Act replaces FERA
2003: Fiscal Responsibility and Budget Management Act enacted
2004: Real Time Gross Settlement System commences. Transition to a
full-fledged daily liquidity adjustment facility (LAF) completed. Market
Stabilisation. Scheme (MSS) introduced to sterilize capital flows
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.

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