INTRODUCTION

It is the apex bank of India. Started functioning from 1st April 1935. RBI plays an important part in the development strategy of the government. Its headquarter is in Mumbai. It has 22 branch offices at most state capitals and at a few major cities in India Present governor Duvvuri Subbarao.

HISTORY
It was set up on the recommendations of the Hilton Young Commission It was started as share-holders bank with a paid up capital of 5 crores.

Initially it was privately owned till Jan 1949 after which it became state-owed institution under RBI act Initially it was located in Kolkata. It moved to Mumbai in 1937.

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Main function of Reserve Bank of India

MONETARY AUTHORITY
It formulates, implements and monitors the monetary policy. To ensure an adequate flow of credit to productive sectors

ISSUER OF CURRENCY
Issues and exchanges or destroys currencies. The goal of ensuring an adequate supply of clean and genuine notes.

DEBT MANAGER TO GOVERNMENT

Managing the governments banking transactions. Maintains its accounts, receives money into and makes payments out of these accounts.

BANKER TO BANKS
Transfer funds and settle inter-bank transactions. All banks operating in the country have accounts with the Reserve Bank.

MANAGER OF FOREIGN EXCHANGE

Plays a key role in the regulation and development of the foreign exchange market Main 3 function Regulating transactions related to the external sector . Ensuring smooth conduct Managing the foreign currency assets and gold reserves of the country

DEVELOPMENTAL ROLE
To develop the quality of banking system in India. Performs a wide range of promotional functions to support national objectives. To establish financial institutions of national importance

Deposit Insurance and Credit Guarantee Corporation (1962) Unit Trust of India (1964)

Contd..
Industrial Development Bank of India (1964) NABARD (1982) National Housing Bank (1989)

HOW THEY FUNCTION

Central board- the reserve banks affairs are governed by a central board of directors. Constitution: Official Directors Non-Official Directors Local board-to represent territorial and economic interests of local cooperative and indigenous banks.

Currently members of central board

SUPERVISORY FUNCTIONS OF RBI

Granting license to banks & controlling the opening of new branches Bank Inspection Control over Non-Bank Financial Institutions: The Non-Bank Financial Institutions are not influenced by the working of a monitory policy. RBI has a right to issue directives to the NBFIs from time to time regarding their functioning. Implementation of the Deposit Insurance Scheme: In order to protect the deposits of small depositors, RBI work to implement the Deposit Insurance Scheme in case of a bank failure. (For bank deposits below 1 Lakh.)

ROLE OF RBI IN ECONOMIC DEVELOPMENT

Development of banking system Development of financial institutions Development of backward areas Economic stability Economic growth Proper interest rate structure Miscellaneous