UNIT-1
RESERVE BANK OF INDIA
By:
Bhumit A. Shah ( Assistant Professor)
( B.Com, M.Com, GSET, M.B.A, ICCC (Level-1), Ph.D
Pursuing)
Department of Banking and Insurance,
Faculty of Commerce,
The Maharaja Sayajirao University of Baroda.
HISTORY OF RBI
• The need for a central bank in India was felt as
early as in 1773 when Warren Hastings, the
Governor of Bengal recommended the
establishment of a “Central Bank of Bengal and
Bihar”. It was set up then but could survive for a
brief period.
• Several other suggestions were also made but, the
proposal assumed a definite shape during the
twenties of this century. In 1921, three Presidency
Banks were amalgamated to form the Imperial
Bank of India.
• In the year 1926, “The Commission on Indian
Currency and Finance” which is also known as
“Hilton Young Commission” suggested the
establishment of Reserve Bank of India. In
pursuance of its recommendations, a bill was
introduced in the Indian Legislative Assembly in
1927 and the bill was dropped on constitutional
grounds.
• Again, the question assumed importance when the
Central Banking Enquiry Committee recommended
the immediate creation of a central bank.
• Reserve Bank of India Act was passed in
September 1934. The Reserve Bank of India
started functioning from 1st April, 1935.
NATIONALISATION OF RBI
• After Independence, the public opinion was
strongly in favor of nationalization of the Reserve
Bank. A decision was taken in this regard in 1947.
Consequently, the Reserve Bank of India (Transfer
to Public Ownership) Act, was passed in 1948. The
entire share capital of the bank was acquired by
the Central Government against compensation to
shareholders at Rs. 118.10 per share.
• From 1st January, 1949, it began to function as a
government owned institution.
MANAGEMENT OF RESERVE BANK OF INDIA
• The management of Reserve Bank of India is vested
with the Central Board of Directors comprising 20
members. The Board consists of the following
members:
i. One Governor and Four Deputy Governors
appointed by the Central Government.
ii. Four Directors nominated by the Central
Government one from each of the Local Board.
iii. Ten directors nominated by the Central
Government.
iv. One Government Official nominated by the Central
Government.
• The Governor and Deputy Governors hold office for five
years and are eligible for appointment. They are full-time
officers of the bank. The 10 directors nominated by the
Central Government hold office for four years. The term of
four directors appointed from Local Boards is related to
their membership in the Local Board.
• The Governor is the Chief Executive of the Bank and the
Chairman of the Board of Directors. He has the powers of
general superintendent to direct the affairs and business of
the bank, subject to the regulations made by the Central
Board. In the absence of the Governor, the Deputy
Governor nominated by him would exercise his powers. The
Central Board must meet at least six times in a year and not
less than once in a quarter.
LOCAL BOARD
• For each of the regional areas of the country, viz, Western,
Eastern, Northern, and Southern area, there is a Local
Board with headquarters at Mumbai, Kolkata, Chennai and
New Delhi. The Local Boards Consist of five members
appointed by the Central Government. The members
should represent, as far as possible, territorial and
economic interest of cooperative and indigenous banks.
They are appointed for a term of four years and eligible for
reappointment.
• The functions of the board are two-fold:
i. Advising the Central Board on such matters as may be
referred to them.
ii. Performing other duties delegated by the Central Board
from time to time.
• The Board has delegated some of its
functions to a committee called Committee
of the Central Board. It Consists of the
Governor, the Deputy Governors and the
Directors representing or resident of the area
in which the meeting is held. The Committee
meets once in a week at the office of the
Bank.
FUNCTIONS OF RBI
• Monopoly of Note Issue
• Banker to Government
• Adviser to the Government
• Controller of Credit
• Custodian of Foreign Exchange Reserve
• Banker’s Bank
• Bank of settlement and clearance
• Information and Research Function
Information and Research Functions
• The RBI undertakes collection and dissemination
of information and conducts research in this field.
The bank issues several periodical publications,
which attempt to explain and assess the
significance of economic and fiscal developments
in the country.
• The RBI research departments, Department of
Economic Analysis and Policy and Department of
Statistical Analysis provide research on various
aspects of Indian economy in the conduct and
formulation of policies by the RBI.
THANK YOU
