Recommended by Hilton-Young Commission in 1926. Though it was recommended in 1926, but the Reserve Bank of India Act was passed in the parliament in 1934. The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated. Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.
Preamble
The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank 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.”
Central Board
The Reserve Bank’s affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act. Appointed/nominated for a period of four years.
Official Directors
Full-time: Governor Dr. Urjit R. Patel
Not more than four Deputy Governor
Non-Official Directors
Nominated by Government: ten Directors from various fields and two government Official
Others: four Directors – one each from four local boards
Local Boards
One each for the four regions of the country in Mumbai, Calcutta, Chennai and New Delhi consist of five members each appointed by the Central Government for a term of four years.
Functions:
To advise the Central Board on local matters and to represent territorial and economic interests of local cooperative and indigenous banks; to perform such other functions as delegated by Central Board from time to time.
Monetary Authority: Formulates, implements and monitors the monetary policy.
Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.
Regulator and supervisor of the financial system: Prescribes broad parameters of banking operations within which the country’s banking and financial system functions.
Objective: maintain public confidence in the system, protect depositors’ interest and provide cost-effective banking services to the public.
Manager of Foreign Exchange: Manages Foreign Exchange through Foreign Exchange Management Act, 1999.
Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.
Issuer of currency: Issues and exchanges or destroys currency and coins not fit for circulation.
Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.
Developmental role: Performs a wide range of promotional functions to support national objectives.
Related Functions: Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.
Banker to Banks: Maintains banking accounts of all scheduled banks.
OFFICES: RBI has 19 regional offices, most of them in state capitals and 9 Sub-offices. It also has five training establishments.
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