Economic project

Name:Swetha

Class:11

Section:C1

Roll No:112005

Topic:Role of RBI currency

Introduction of role of
RBI currency

The RBI acts as a regulator and supervisor

of the overall financial system. This injects
public confidence into the national financial
system, protects interest rates, and provides
positive banking alternatives to the public.
What Is the Reserve Bank of
India (RBI)?
The Reserve Bank of India (RBI) is
the central bank of India, which began
operations on Apr. 1, 1935, under the
Reserve Bank of India Act. The Reserve
Bank of India uses monetary policy to
create financial stability in India, and it is
charged with regulating the country’s
currency and credit systems.1
 The Reserve Bank of India (RBI) is the
central bank of India,
 The RBI was originally set up as a private
entity in 1935, but it was nationalized in
1949.2
 The main purpose of the RBI is to
conduct consolidated supervision of the
financial sector in India, which is made
up of commercial banks, financial
 institutions, and non-banking finance
firms.
Understanding the Reserve
Bank of India (RBI)
Located in Mumbai, the RBI serves
the financial market in many ways. The
bank sets the overnight interbank lending
rate. The Mumbai Interbank Offer
Rate (MIBOR) serves as a benchmark for
interest rate–related financial instruments in
India.
The main purpose of the RBI is to conduct
consolidated supervision of the financial
sector in India, which is made up of
commercial banks, financial institutions, and
non-banking finance firms. Initiatives
adopted by the RBI include restructuring
bank inspections, introducing off-site
surveillance of banks and financial
institutions, and strengthening the role of
auditors
First and foremost, the RBI formulates,
implements, and monitors India’s monetary
policy. The bank’s management objective is
to maintain price stability and ensure that
credit is flowing to productive economic
sectors. The RBI also manages all foreign
exchange under the Foreign Exchange
Management Act of 1999. This act allows
the RBI to facilitate external trade and
payments to promote the development and
health of the foreign exchange market in
India.3
The RBI acts as a regulator and supervisor
of the overall financial system. This injects
public confidence into the national financial
system, protects interest rates, and provides
positive banking alternatives to the public.
Finally, the RBI acts as the issuer of national
currency. For India, this means that currency
is either issued or destroyed depending on
its fit for current circulation. This provides
the Indian public with a supply of currency
in the form of dependable notes and coins, a
lingering issue in India.
Special Considerations
The RBI was originally set up as a private
entity, but it was nationalized in 1949. The
reserve bank is governed by a central board
of directors appointed by the national
government. The government has always
appointed the RBI’s directors, and this has
been the case since the bank became fully
owned by the government of India as
outlined by the Reserve Bank of India Act.
Directors are appointed for a period of four
years.4
According to its website, the current focus
of the RBI is to continue its increased
supervision of financial institutions, while
dealing with legal issues related to bank
fraud and consolidated accounting and
attempting to create a supervisory rating
model for its banks.4

What is RBI and its role?

The Reserve Bank of India (RBI) is India's
central bank. It controls the monetary policy
concerning the national currency, the Indian
rupee. The basic functions of the RBI are the
issuance of currency, sustaining monetary
stability in India, operating the currency, and
maintaining the country's credit system.
Reserve Bank of India
The Reserve Bank of India (RBI) is
India’s central bank and regulatory
organisation in charge of banking
regulation. It belongs to the Indian
government’s Ministry of Finance. The
Indian rupee is issued and distributed by
it. It also oversees the country’s major
payment networks and aims to further
the country’s economic growth. The
RBI’s Bharatiya Reserve Bank Note
Mudran division prints and mints Indian
banknotes and coins. To regulate India’s
payment and settlement systems, the
RBI formed the National Payments
Corporation of India as one of its
specialised divisions. The Reserve Bank
of India formed the Deposit Insurance
and Credit Guarantee Corporation as a
specialised division to provide deposit
insurance and credit guarantee to all
Indian banks.
It also had full control of monetary policy
until the Monetary Policy Committee
was constituted in 2016. According to
the Reserve Bank of India Act, 1934, it
began operations on 1 April 1935. The
capital was divided into 100 fully paid
shares at the outset. On 1 January
1949, the RBI was nationalised following
India’s independence on 15 August
1947.

The Role of RBI in The

Indian Economy
Are you willing to know about the role of
RBI in the Indian economy? If yes, then
you have come across the right article
as this will provide you with all the
necessary details that you need to
know.
TABLE OF CONTENT
Reserve Bank of India


Role of Reserve Bank of India RBI



Conclusion


Reserve Bank of India

The Reserve Bank of India (RBI) is India’s central bank and regulatory organisation in charge of

banking regulation. It belongs to the

Indian government’s Ministry of Finance.
The Indian rupee is issued and
distributed by it. It also oversees the
country’s major payment networks and
aims to further the country’s economic
growth. The RBI’s Bharatiya Reserve
Bank Note Mudran division prints and
mints Indian banknotes and coins. To
regulate India’s payment and settlement
systems, the RBI formed the National
Payments Corporation of India as one of
its specialised divisions. The Reserve
Bank of India formed the Deposit
Insurance and Credit Guarantee
Corporation as a specialised division to
provide deposit insurance and credit
guarantee to all Indian banks.
It also had full control of monetary policy
until the Monetary Policy Committee
was constituted in 2016. According to
the Reserve Bank of India Act, 1934, it
began operations on 1 April 1935. The
capital was divided into 100 fully paid
shares at the outset. On 1 January
1949, the RBI was nationalised following
India’s independence on 15 August
1947.
Role of Reserve Bank of
India (RBI)
It is in charge of deciding on the
country’s monetary policy. The Reserve
Bank of India’s (RBI) primary
responsibility is to preserve financial
stability and appropriate liquidity in the
economy.
Some of the significant functions of the
Reserve Bank of India are mentioned
and explained below:
1. Monetary Management –
The formulation and seamless
execution of monetary policy are one
of the Reserve Bank of India’s main
responsibilities. Various policy
instruments are used by monetary
policy to impact the cost and
availability of money in the economy.
The goal remains to encourage
economic growth while maintaining
price stability. It assures a steady
supply of credit to the economy’s
productive sectors.
2. The issuer of Currency –
Currency management and issuance
are critical central banking functions.
The Reserve Bank of India (RBI) is in
charge of the country’s currency
design, manufacture, distribution,
and overall management. It aims to
ensure that the state has a sufficient
supply of clean and legitimate notes.
Its goal is to lower the risk of
counterfeiting. Counterfeit notes are
frequently used for terrorist financing,
which has a variety of negative
consequences.

[Link] and debt manager

of the Government – The
Reserve Bank of India (RBI) is in
charge of the government’s banking
transactions. The Reserve Bank of
India also holds the cash holdings of
the Indian government. It can also
serve as a lender to state
governments. It appoints other banks
to act as its agents in carrying out the
government’s transactions. On behalf
of the federal and state governments,
it also manages public debt and offers
new loans.
[Link] to Banks – The RBI is
also responsible for the settlement of
interbank transactions. This is normally
accomplished through the employment
of a “clearing house,” which allows
banks to present cheques and other
similar instruments for clearing. The
central bank serves as a common
banker for all of the banks.
[Link]
Regulation and
Supervision- The regulatory and
supervisory powers of the RBI are
extensive. Through a variety of policy
initiatives, it aims to ensure general
financial stability. Its goal is to ensure
the orderly development and conduct
of banking activities, as well as bank
liquidity and solvency.
[Link] Role – The
Reserve Bank of India (RBI) actively
supports and enhances development
efforts in the country. It guarantees that
the productive sectors of the economy
have access to sufficient credit and
establishes organisations to support
the development of financial
infrastructure. It also tries to ensure
that everyone has access to banking
services.
[Link] Market
Operations – The Central Bank
implements its monetary policy
through government securities, foreign
exchange, and money market
operations. It also regulates and
develops market instruments such as
the term money market, repo market,
and others.
[Link]
Exchange
Management – The foreign
exchange market is regulated by the
Reserve Bank of India (RBI). It has
also opened practically all areas to
international investment.
 RBI History - Brief History
The Reserve Bank of India is the central
bank of the country. Central banks are a
relatively recent innovation and most central
banks, as we know them today, were
established around the early twentieth
century.
The Reserve Bank of India was set up on the
basis of the recommendations of the Hilton
Young Commission. The Reserve Bank of
India Act, 1934 (II of 1934) provides the
statutory basis of the functioning of the
Bank, which commenced operations on
April 1, 1935.
The Bank was constituted to
* Regulate the issue of banknotes
* Maintain reserves with a view to securing
monetary stability and
* To operate the credit and currency
system of the country to its advantage.
The Bank began its operations by taking
over from the Government the functions so
far being performed by the Controller of
Currency and from the Imperial Bank of
India, the management of Government
accounts and public debt. The existing
currency offices at Calcutta, Bombay,
Madras, Rangoon, Karachi, Lahore and
Cawnpore (Kanpur) became branches of the
Issue Department. Offices of the Banking
Department were established in Calcutta,
Bombay, Madras, Delhi and Rangoon.
Burma (Myanmar) seceded from the Indian
Union in 1937 but the Reserve Bank
continued to act as the Central Bank for
Burma till Japanese Occupation of Burma
and later upto April, 1947. After the
partition of India, the Reserve Bank served
as the central bank of Pakistan upto June
1948 when the State Bank of Pakistan
commenced operations. The Bank, which
was originally set up as a shareholder's
bank, was nationalised in 1949.
An interesting feature of the Reserve Bank
of India was that at its very inception, the
Bank was seen as playing a special role in
the context of development, especially
Agriculture. When India commenced its
plan endeavours, the development role of
the Bank came into focus, especially in the
sixties when the Reserve Bank, in many
ways, pioneered the concept and practise of
using finance to catalyse development. The
Bank was also instrumental in institutional
development and helped set up institutions
like the Deposit Insurance and Credit
Guarantee Corporation of India, the Unit
Trust of India, the Industrial Development
Bank of India, the National Bank of
Agriculture and Rural Development, the
Discount and Finance House of India etc. to
build the financial infrastructure of the
country.
With liberalisation, the Bank's focus has
shifted back to core central banking
functions like Monetary Policy, Bank
Supervision and Regulation, and Overseeing
the Payments System and onto developing
the financial markets.

What are the functions of RBI?

RBI acts as a banker to the government. RBI
is the responsible agency for receiving and
paying money on behalf of the various
government departments. RBI is also
authorized to appoint other banks to act as
its agent and undertake banking business on
the behalf of the government.06-Oct-2023
Objective of RBI
RBI was nationalized in 1949 and since
come under the full ambit of the Ministry of
Finance, Government of India.
The purpose of the RBI is to regulate the
issuance of banknotes and the maintenance
of reserves in order to ensure monetary
stability in India and, more generally, to
operate the nation’s currency and credit
system to its advantage.
The organization also aims to maintain
macroeconomic stability, financial stability,
and a modern monetary policy framework in
order to address the challenges posed by an
increasingly complex economy.
Structure of RBI
The affairs of RBI are governed by a central
board of directors.
There could be a maximum of 21 members
on the central board of directors including
the governor and four deputy governors who
are appointed by the Government of India in
keeping with the RBI Act, 1934 for a period
of 4 years.

Functions of RBI
The RBI performs the following functions:

1)Monetary
Management/Authority
One of the most important functions of RBI
is the formulation and execution
of Monetary Policy and securing monetary
stability in India It functions the currency
and credit system to its advantage.

2) Supervision and Regulation of

Banking and Non-Banking
Financial Institutions
RBI functions to protect the Interest of
depositors through an effective regulatory
framework. Keeping a keen eye over the
conduct of banking operations and solvency
of the banks along with maintaining the
overall financial stability through various
policy measures.
These powers of RBI come from RBI ACt
1934 and Banking Regulation Act 1949.
This regulatory and supervisory function of
the RBI extends to Indian Banking System
as well as Non-Banking Financial
Institutions.

3) Regulationof Foreign
Exchange Market, Government
Securities Market, and Money
Market
Foreign Exchange Market: The Foreign
Exchange Management Act 1999 came into
light after the liberalization measures
introduced in 1991. FEMA 1991 replaced
the FERA 1973 and came into effect in June
2022.
So now, the RBI is responsible to oversee
the foreign exchange market in India. RBI
supervises and regulates the Foreign
Exchange Market through the provision of
the FEMA Act 1999.
Government Securities
Market: RBI regulates the trade
securities issued by the Central and State
governments. For regulation of this, RBI
derives its power from the RBI Act of 1934.

Money Market: Short-term and

highly liquid debt securities are also
regulated by RBI and for this RBI derives its
powers from the RBI Act 1934.

4) Foreign
Exchange Reserve
Management
Foreign exchange reserve includes-

 Foreign Currency Assets (FRAs)

 Special Drawing Rights (SDRs)
 Gold
RBI is the custodian of India’s foreign
exchange reserves. The legal provision
regarding the management of foreign
exchange reserves is mentioned in RBI Act
1934.
The RBI Act of 1934 permits the RBI to
invest these foreign exchange reserves in the
following instruments-

 Deposit with Banks for

International Settlement
 Deposit with foreign Commercial
Banks
 Debt Instruments
 Other instruments with approval of
the Central Banks of RBI
5) Bankers
to Central and State
Government
RBI acts as a banker to the government. RBI
is the responsible agency for receiving and
paying money on behalf of the various
government departments.
RBI is also authorized to appoint other
banks to act as its agent and undertake
banking business on the behalf of the
government.
RBI maintains Central and State
Government funds like Consolidated Funds,
Contingency Funds, and Public Account.
RBI also provides loans to the
central/State/UT Government as a banker to
the government.
Conclusion.
RBI plays a crucial role in maintaining
monetary stability in India. It regulates
the money supply, controls inflation,
maintain exchange ratestability, and
supervises the banking sector.
Thank you