The Reserve Bank of India is the India’s apex monetary authority, the central banking institution of the country, which controls all the monetary policies. It came into existence in Kolkata on April 01, 1935 as per the Reserve Bank of India Act, 1934 as an answer to the economic troubles that the country was facing as a result of the First World War. Originally, all the shareholders of RBI were private shareholders, with a share capital of INR 100 paid fully. Later in 1949, post India achieving its independent status, the Reserve Bank of India was nationalised and the Central Office was moved to Mumbai.
In the conceptualising of RBI, there is a big hand of Dr. Babasaheb Ambedkar since his book called The Problem of the Rupee – its origin and its solution’ was a reference base for its guidelines, working style and outlook.
The Preamble of RBI describes its basic functions as “…to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.”
Thus, it makes it very clear that the regulation of the currency notes and ensuring that the reserves are maintained to ascertain stability of the country’s economy and its credit system is their rudimentary functionality.
Additionally, the Reserve Bank of India has the following functions:
One of the basic functions is to undertake consolidated supervision of the financial sector which comprises of all the Commercial Banks, Financial Institutions (FIs) and the Non-Banking Finance Companies (NBFCs).
Development of the Economy
The Reserve Bank of India has to perform a wide range of functions to support the nation’s objectives with regards to economic growth and development. It has to face the inter-sectoral and inflation-related issues along with it to manage the present for a better tomorrow.
Regulation and Supervision of the Financial System
The financial system needs continuous regulation and supervision to ensure that the banking operations work within the broad parameters as set by itself. Its major objectives are to maintain the confidence of the common man in the banking system, to protect the interests of the depositors in the banks and ensure that the services provided by the financial sector are cost-effective to the common man.
Additionally, RBI started the Banking Ombudsman Scheme wherein common people can complain regarding any bank or banking authorities which is directly looked into by the RBI appointed Banking Ombudsman.
Management of Exchange Control
As per the Foreign Exchange Act, 1999, RBI is responsible to facilitate and develop and ensure the orderly running of the foreign trade of the country.
RBI issues new currency notes and coins to give adequate supply of the same to the people of India, to maintain the currency and credit system of India and to maintain the reserves. Additionally, it also is responsible for destroying the currency notes and coins that are in a state unfit for circulation and usage.
Currency notes are printed at four locations in India – Nashik in Maharashtra, Dewas in Madhya Pradesh, Mysore in Karnataka and Salboni in West Bengal. And for the minting of coins, the four locations are in Mumbai in Maharashtra, Noida in Uttar Pradesh, Kolkata in West Bengal and Hyderabad in Andhra Pradesh.
Detection of Fake Currency
Fake currency is a menace that has caught our country more than once in a whirlwind. In 2014, currency notes issued before 2005 were announced to be withdrawn. Though they continued to be legal tender, public were urged to exchange these notes from Banks to get new notes that had added security features to help curb the fake currency menace.
Banker’s & Government’s Bank
And last but not the least, just like you and me hold accounts in banks, the commercial banks and scheduled banks of the country and the Central and State Government hold their accounts in the Reserve Bank of India for deposits, withdrawals and other credit facilities.