Constitution, Management & Functions OF R.B.I

Constitution, Management & Functions OF R.B.I

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  Reserve Bank ofIndia (Constitution, Management & Functions) Submitted to- Mr. Vibha Srivastava (Assistant Professor) Submitted by- Tejinder Singh LL.B 5th semester
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  Introduction  The ReserveBank 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.
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  RBI commencement- NewspaperClipping
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  Constitution  The bankwas established as a shareholder`s bank with an authorized and paid-up capital of Rs. 5 crores divided into shares of Rs. 100 each. After independence, under the Reserve Bank Act, 1948, the bank was nationalized, after paying compensation to the shareholders at the market price of the share.
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  Management:  The affairsif the RBI are managed by the Central Board of Directors consisting of:  Governor and not more than 4 Deputy Governors appointed for a period not more than 5 years.  Four Directors, one from each of the four local boards.  The other Directors.  One Government Official.  All the Directors and the officials are nominated for 4 years each by the Central Government. To look after the affairs there are 4 local Boards, one at each of the cities of Bombay, Calcutta, Delhi and Madras, each Board consisting of 5 members appointed for 4 years by the Central Government.  Urijit Patel is currently serving as 24th Governor of Reserve Bank of India (RBI) since September 2016.
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  First Central Boardof Directors
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  Functions 1) Regulator OfCurrency: The Reserve Bank of India is the bank of issue. It has the monopoly of note issue. Notes issued by it circulate as legal money. It has its separate department which issue notes and coins to commercial banks.
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  2) Banker, FiscalAgent and Advisor To The Government: RBI everywhere acts as bankers, fiscal agent and advisor to their respective governments. As banker to the government, the central bank keeps the deposits of the central and state governments and makes payments on behalf of the governments. But it does not pay interest on government deposits.
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  3) Custodian OfCash Reserves Of Commercial Banks: Commercial banks are required by law to keep reserves equal to a certain percentage of both time and demand deposits liabilities with the RBI. It is on the basis of these reserves that the RBI transfers funds from one bank to another to facilitate the clearing of cheques. Thus the RBI acts as the custodian of the cash reserves of commercial banks and helps in facilitating their transactions.
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  4) Custody AndManagement Of Foreign Exchange Reserves: The RBI keeps and manages the foreign exchange reserves of the country. It sells gold at fixed prices to the authorities of other countries. It also buys and sells foreign currencies at international prices.
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  5) Lender OfThe Last Resort: By granting accommodation in the form of re-discounts and collateral advances to commercial banks, bill brokers and dealers, or other financial institutions, the RBI acts as the lender of the last resort.
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  6) Clearing HouseFor Transfer And Settlement: As bankers bank, the RBI acts as a clearing house for transfer and settlement of mutual claims of commercial banks. Since the RBI holds reserves of commercial banks, it transfers funds from one bank to other banks to facilitate clearing of cheques.
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  7) Controller OfCredit: The most important function of RBI is to control the credit creation power of commercial bank in order to control inflation and deflation pressures within this economy. These involve selective credit control and direct action.