Banking and Marketing Awareness

Top Careers & You™ The Reserve Bank of India

1

THE RESERVE BANK OF INDIA

Every country has its on central bank that acts as the overall regulatory authority. Reserve Bank of India (RBI) is
the central bank of the country and is different from Central Bank of India, which is only one of the scheduled
commercial banks.
RBI 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. 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. The general superintendence and
direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy
Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to
give representation to important elements in the economic life of the country, and four nominated Directors by the
Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and
New Delhi.
The Bank was constituted for the following purposes:
• To regulate the issue of banknotes
• To maintain reserves with a view to securing monetary stability.
• To operate the credit and currency system of the country to its advantage.

Functions of RBI
General superintendence and direction of the Bank's affairs
Financial Supervision
The Reserve Bank of India performs this function under the guidance of the Board for Financial Supervision
(BFS). The Board was constituted in November 1994 as a committee of the Central Board of Directors of the
Reserve Bank of India. Primary objective of BFS is to undertake consolidated supervision of the financial
sector comprising commercial banks, financial institutions and non-banking finance companies.

RBI as Monetary Authority

Formulates, implements and monitors the monetary policy
Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.

RBI as 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.

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RBI as Manager of Foreign Exchange

• Manages the Foreign Exchange Management Act, 1999.
• Objective: to facilitate external trade and payment and promote orderly development and maintenance of
foreign exchange market in India.

RBI as 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.

RBI’s 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.
It has 22 regional offices, most of them in state capitals.

Role of RBI as Banker & Debt Manager to the Government

Reserve Bank of India is the Debt Manager to the Government. The Central Government entrusts the
Reserve Bank with all its money, remittance, exchange and banking transactions in India and the
management of its public debt. The Government also deposits its cash balances with the Reserve
Bank. However, Reserve Bank may also act as the banker to a State Governments. This is by an
Agreement. Currently, the Reserve Bank acts as banker to all the State Governments in India, except Jammu
& Kashmir and Sikkim. It has limited agreements for the management of the public debt of these two State
Governments.

RBI as Banker of Banks

RBI is bank of all banks in India. As per the Banking Regulations Act 1949, Banks have to keep a portion of
their demand and time liabilities as cash reserves with the Reserve Bank, thus necessitating a need for
maintaining accounts with the Bank.

How RBI regulates Commercial Banks

● Licensing requirement:
To do a business of commercial banking in India, whether it is India or Foreign, a license from RBI is
required.
● Corporate Governance:
RBI policy ensures high quality corporate governance in banks.

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 Banking and Marketing Awareness
Top Careers & You™ The Reserve Bank of India
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● CRR and SLR

● Interest Rates
● Prudential Norms
● Annual Onsite Inspection
● OSMOS (Off Site Surveillance and Monitoring System)

Structure of RBI
The Reserve Bank of India is wholly owned by the Government of India. Its structure is simply represented by
the following:
1. Central Board of Directors
2. Committee of the Central Board
3. Board for Financial Supervision
4. Board for Payment and Settlement Systems
5. Subcommittees of the Central Board
6. Local Boards

Subsidiaries of RBI
• Deposit Insurance and Credit Guarantee Corporation (DICGC)
• National Housing Bank
• Bhartiya Reserve Bank Note Mudran Private Ltd.
• NABARD

Deposit Insurance and Credit Guarantee Corporation (DICGC)

With a view to integrating the functions of deposit insurance and credit guarantee, the Deposit Insurance
Corporation and Credit Guarantee Corporation of India were merged and the present Deposit Insurance and
Credit Guarantee Corporation (DICGC) came into existence on July 15, 1978. Deposit Insurance and Credit
Guarantee Corporation (DICGC), established under the DICGC Act 1961, is one of the wholly owned
subsidiaries of the Reserve Bank. The DICGC insures all deposits (such as savings, fixed, current, and
recurring deposits) with eligible banks except the following:
1. Deposits of foreign Governments;
2. Deposits of Central/State Governments;
3. Inter-bank deposits;
4. Deposits of the State Land Development Banks with the State cooperative bank;
5. Any amount due on account of any deposit received outside India;
6. Any amount, which has been specifically exempted by the corporation with the previous approval of
Reserve Bank of India.

Every eligible bank depositor is insured up to a maximum of `1,00,000 (Rupees One Lakh) for both principal
and interest amount held by him.

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Important Facts about Reserve Bank of India

• RBI is not a Commercial Bank.
• The Executive head of RBI is known as Governor.
• RBI is a member of IMF (International Monetary Fund).
• Emblem of RBI: Panther and Palm Tree
• RBI is the sole authority in India to issue Bank notes in India.
• RBI can issue currency notes as much as the country requires, provided it has to make a security deposit
of Rs. 200 crores, out of which Rs. 115 crores must be in gold and Rs. 85 crores must be FOREX
Reserves.
• RBI prints currency in 15 Languages.
• C D Deshmukh was the governor of RBI at the Time of nationalization of RBI in 1949.
•
st
1 woman Governor of RBI - K.J. Udeshi

Governors (Reserve Bank of India)

1. Sir O.A. Smith : 1935 - 30.06.1937

2. Sir J.B. Tailor : 01.07.1937 - 17.02.1943

3. C.D. Deshmukh : 11.08.1943 - 30.06.1949

4. Sir B.R. Rao : 31. 06. 1949 - 14.01.1957

5. K.G. Ambeygaonkar : 14.01.1957 - 28.02.1957

6. H.B.R. Ayengar : 01.03.1957 - 28.02.1962

7. P.C. Bhattacharya 01.03.1962 - 30.06.1967

8. L. K. Jha : 01.07-1967 - 03.05.1970

9. B.N. Agarkar : 04.05.1970-15.05.1970

10. S. Jaganathan 16.05.1970 - 19.05.1975

11. N.C. Sengupta : 19.05.1975 - 19.08.1975

12. R. Puri : 20.08.1975 - 02.05.1977

13. N. Narasimhan : 02.05.1977 - 30.11.1977

14. Patel : 01.12.1977 - 15.09.1982

15. Dr. Manmonhan Singh : 16.09.1982 - 14.01.1985

16. A. Ghosh : 15.01.1985 - 04.02.1985

17. R.N. Malhotra : 04.02.1985 - 22.12.1990

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18. S. Venkataraman : 22.12.1990 - 21.12.1992

19. C. Rangarajan :22.12.1992-22.11.1997

20. Dr. Bimal Jalan : 22.11.1997-05.09.2003

21. Y.B. Reddy : 05.09.2003 - 05.09.2008

22. D. Subba Rao : 05.09.2008 - Till date

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