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The Reserve Bank of India, though only thirty-five years old, is one of the oldest central banks in the developing countries. Its formative years. Read about the Functions of Reserve Bank of India. Get details on Organisational Structure, Supervisory & other roles. Find GK notes in PDF. The Reserve Bank of India is the central Bank of India entrusted with the multidimensional role. It performs important monetary functions from issue of currency.

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CHAPTER Reserve Bank of India— 3 Structure and Functions IMPORTANT POINTS TO REMEMBER Every country has its own central bank which controls and. The Reserve Bank of India (RBI) is India's central banking institution, which controls the (PDF); Cecil Kisch: Review "The Monetary Policy of the Reserve Bank of India" by K. N. Raj. In: The Economic Journal. Vol. 59, No. (Sep. ), pp. The Reserve Bank of India, the nation's central bank, began operations on April The origins of the Reserve Bank of India can be traced to , when the.

Disha's sole purpose is to encourage a student to get the best out of preparation. Disha Publication offers an online bookstore to help students download exam books online with ease. We, at Disha provide a wide array of Bank Exam books to help all those aspirants who wish to crack their respective different levels of bank exams. At Disha Publication, we strive to bring out the best guidebooks that students would find to be the most useful for Bank Probationary exams. It started as a private bank with private shareholding as was in vogue in most foreign central banks of the world operating at that point of time.

Though originally privately owned, since nationalisation in , the Reserve Bank is fully owned by the Government of India. Fiscal Policy: It is related to direct taxes and government spending. When direct taxes increased and government spending increased than the disposable Income of the people reduces and hence the demand reduces. Solve Free Practice Questions on Testbook.

Reserve Bank of India (RBI)

Want to share your doubts? If yes, then start a discussion on our active Discussion Platform! Go To Testbook Discuss! Login Advisor Login Newsletters. The main functions of the RBI include: Monetary authority: The main objectives of which are maintaining price stability, ensuring adequate flow of credit to productive sectors, and financial stability.

Issuer of currency: Determines how best to raise money in debt markets to help the government finance its requirements.

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Banker to banks: Regulator and supervisor of payment and settlement systems Maintaining financial stability: Compare Popular Online Brokers. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Related Articles. The RBI being an apex monitory institution has obligatory powers to guide, help and direct other commercial banks in the country.

The RBI can control the volumes of banks reserves and allow other banks to create credit in that proportion. Every commercial bank has to maintain a part of their reserves with its parent's viz.

Similarly in need or in urgency these Page 5. Thus it is called as the lender of the last resort. Banker to the Government: The RBI being the apex monitory body has to work as an agent of the central and state governments. It performs various banking function such as to accept deposits, taxes and make payments on behalf of the government. It works as a representative of the government even at the international level.

It maintains government accounts, provides financial advice to the government. It manages government public debts and maintains foreign exchange reserves on behalf of the government. It provides overdraft facility to the government when it faces financial crunch. Exchange Rate Management: It is an essential function of the RBI. In order to maintain stability in the external value of rupee, it has to prepare domestic policies in that direction. Also it needs to prepare and implement the foreign exchange rate policy which will help in attaining the exchange rate stability.

In order to maintain the exchange rate stability it has to bring demand and supply of the foreign currency U. S Dollar close to each other. Credit Control Function: Commercial bank in the country creates credit according to the demand in the economy. But if this credit creation is unchecked or unregulated then it leads the economy into inflationary cycles. On the other credit creation is below the required limit then it harms the growth of the economy.

Powers of Reserve Bank of India (RBI)

As a central bank of the nation the RBI has to look for growth with price stability. Thus it regulates the credit creation capacity of commercial banks by using various credit control tools. Supervisory Function: The RBI has been endowed with vast powers for supervising the banking system in the country.

It has powers to issue license for setting up new banks, to open new branches, to decide minimum reserves, to inspect functioning of commercial banks in India and abroad, and to guide and direct the commercial banks in India.

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It can have periodical inspections an audit of the commercial banks in India. Page 6. Developmental or Promotional Functions: Along with the routine traditional functions, central banks especially in the developing country like India have to perform numerous functions. These functions are country specific functions and can change according to the requirements of that country. The RBI has been performing as a promoter of the financial system since its inception.

Some of the major development functions of the RBI are maintained below. Development of the Financial System: The financial system comprises the financial institutions, financial markets and financial instruments. The sound and efficient financial system is a precondition of the rapid economic development of the nation. The RBI has encouraged establishment of main banking and nonbanking institutions to cater to the credit requirements of diverse sectors of the economy.

Development of Agriculture: In an agrarian economy like ours, the RBI has to provide special attention for the credit need of agriculture and allied activities. It has successfully rendered service in this direction by increasing the flow of credit to this sector.

Provision of Industrial Finance: Rapid industrial growth is the key to faster economic development. In this regard, the adequate and timely availability of credit to small, medium and large industry is very significant. Provisions of Training: The RBI has always tried to provide essential training to the staff of the banking industry.

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The RBI has set up the bankers' training colleges at several places. National Page 7. Institute of Bank Management i. CAB is few to mention. Collection of Data: Being the apex monetary authority of the country, the RBI collects process and disseminates statistical data on several topics.

It includes interest rate, inflation, savings and investments etc.

The Increasing Importance of the Reserve Bank of India

This data proves to be quite useful for researchers and policy makers. Publication of the Reports: The Reserve Bank has its separate publication division. This division collects and publishes data on several sectors of the economy. The reports and bulletins are regularly published by the RBI.

This information is made available to the public also at cheaper rates. Promotion of Banking Habits: As an apex organization, the RBI always tries to promote the banking habits in the country. It institutionalizes savings and takes measures for an expansion of the banking network. These organizations develop and promote banking habits among the people.

During economic reforms it has taken many initiatives for encouraging and promoting banking in India. Promotion of Export through Refinance: The RBI always tries to encourage the facilities for providing finance for foreign trade especially exports from India.

Supervisory Functions: The reserve bank also performs many supervisory functions.