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Q) Examine the evolution of the Reserve Bank of India (RBI)

and elaborate on its primary functions.
(10M, 150 words) [GS-3: Indian Economy]
Introduction

The Reserve Bank of India (RBI), established on April 1, 1935, plays a crucial role in
ensuring monetary stability, managing currency, targeting inflation, regulating the banking
system, and setting interest rates in India.

The RBI was created following the enactment of the Reserve Bank of India Act in March
1934, with its central and local boards becoming operational on January 1, 1935.

The first Governor of the RBI was Sir Osborne Arkell Smith, an Australian who was one
of the managing governors of the Imperial Bank of India. Sir C.D. Deshmukh was the first
Indian to hold the position of Governor.

Body

Main Functions of RBI

Monetary Authority

The RBI formulates, implements, and monitors monetary policy to maintain price stability
while fostering economic growth.
Example: Adjusting the repo rate to control inflation and stimulate economic activity.

Regulator and Supervisor of the Financial System

The RBI sets broad parameters for banking operations, ensuring the stability and
soundness of the country's financial system.
Example: Implementing Basel III norms to enhance banking resilience.

Manager of Foreign Exchange

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The RBI manages the Foreign Exchange Management Act (FEMA) of 1999, facilitating
external trade and payments while promoting a stable foreign exchange market.
Example: Intervening in the forex market to curb excessive volatility in the rupee.

Issuer of Currency

The RBI issues, exchanges, and destroys currency notes, and circulates coins minted by the
Government of India.
Example: Issuing new series of banknotes with enhanced security features.

Developmental Role

The RBI undertakes various promotional functions to support national economic

objectives.
Example: Launching initiatives to promote financial inclusion and literacy.

Regulator and Supervisor of Payment and Settlement Systems

The RBI introduces and upgrades safe, efficient payment systems to ensure public
confidence in these systems.
Example: Launching the Unified Payments Interface (UPI) for seamless digital
transactions.

Related Functions

The RBI serves as a banker to the government, managing the accounts of central and state
governments and scheduled banks.
Example: Acting as the government's debt manager by issuing government securities.

Conclusion

During the economic reforms of 1991, the RBI played a pivotal role by transferring over
46 tonnes of gold to the Bank of England to secure foreign exchange and manage liquidity
crises, leading to significant devaluation of the rupee.
In recent times, the RBI has facilitated the digital revolution in payments, exemplified by
the successful implementation of UPI, which has transformed the banking and payments
landscape in India.
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Jayanagar 4th ‘T’ Block, Bangalore- 560041.

The Deccan region of India is experiencing a severe water

shortage. Analyze the factors contributing to this water
scarcity.
(10M, 150 words) [GS-3: Environment & Ecology]
Introduction

Water scarcity is a significant global issue with especially catastrophic consequences for a
water-rich country like India. As population growth, urbanisation, and industrialisation
drive up demand for water, the quantity of freshwater sources remains limited.

This water deficit is not confined to Bengaluru; it affects the entire state of Karnataka as
well as neighboring states like Telangana and Maharashtra.

Body
Reasons Behind Water Scarcity

Low Rainfall
Bengaluru’s crisis stems from scanty rainfall in the Cauvery basin, which supplies 60% of
the city’s water, along with the depletion of its groundwater reserves.

Falling Reservoir Levels

Water levels in reservoirs have dropped to critically low levels, exacerbating the shortage.

Urbanisation
Rapid and unplanned urbanisation has significantly contributed to the water crisis,
increasing demand and reducing natural recharge areas.

Increased Pollution of Water Bodies

Pollution from industrial, agricultural, and domestic sources has contaminated many water
bodies, rendering them unusable.

Inefficient Agricultural Practices

Traditional agricultural methods often waste water, further straining resources.

Excessive Groundwater Extraction

Over-extraction of groundwater has led to a severe drop in water tables.
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Poor Recharge of Rivers and Aquifers
Encroachment on water bodies and lack of conservation efforts have hampered the natural
recharge of rivers and aquifers.

Conclusion

Long-term structural issues, such as unregulated construction, systematic destruction of

lakes, disruption of natural underground water flows, and climate change, severely impact
water availability in Bengaluru.

Water scarcity has significantly affected the daily lives of citizens.

To combat this, the Bengaluru Water Supply and Sewerage Board (BWSSB) has
implemented regulations banning the use of potable water for non-essential activities such
as washing cars, gardening, filling swimming pools, construction, and entertainment.
Violators face a penalty of Rs 5,000.

By addressing these factors with a comprehensive and sustainable approach, India can
mitigate the severe impacts of water scarcity on its population and economy.