Banking Awareness: About the Reserve Bank of India

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Banking Awareness forms an important part of Bank exams. Study our Banking Awareness topics to excel in Bank exams. About Reserve Bank of India

Introduction

  • 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 Headquarters of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937.
  • RBI was nationalised in 1949 and the Reserve Bank is fully owned by the Government of India.
  • The capital of the Reserve Bank of India is Rs 5 Crore.

Central Board of the RBI

The Reserve Bank’s affairs are governed by a central board of directors. The board is appointed by the Government of India in accordance with the RBI Act 1934.

Composition of the Central Board and their term

  1. Official Director- Governor and Deputy Governors
  • Governor- One Governor appointed by the central government. Maximum term- 5 years
    (Appointed under Section 8 (1) (a) of the RBI Act, 1934)
  • Deputy Governor- Maximum four Deputy Governors. Maximum term- 5 years
    (Appointed under Section 8 (1) (a) of the RBI Act, 1934)
  1. Non-Official Directors-
  • Nominated by Government (10)- ten Directors from various fields and two government Official. Maximum Term- 4 years (Appointed under Section 8 (1) (c) of the RBI Act, 1934)
  • Others: four Directors – one each from four local boards i.e Mumbai,Kolkata,New Delhi and Chennai. Maximum terms- 4 years (Appointed under Section 8 (1) (b) of the RBI Act, 1934)
  • Two Government official to be nominated by the Central Government. (Appointed under Section 8 (1) (d) of the RBI Act, 1934)

In total there can be maximum 21 members of the central board of the RBI.

  • Governor- Shri Shaktikanta Das
  • Deputy Governors-
    • Shri Mahesh Kumar Jain
    • Dr. M. D. Patra
    • Shri. M. Rajeshwar Rao
    • Shri. T. Rabi Sankar

Local Boards of the RBI

Apart from the central board, there are local boards for four regional areas of the country was mentioned below:

  • The Western Area- Headquarters- Mumbai
  • The Eastern Area- Headquarters- Kolkata
  • The Northern Area- Headquarters-New Delhi
  • The Southern Area- Headquarters-Chennai

Each of the four areas has one Local board each. Each local boards have five members each appointed by the Central Government for a period of 4 years.

Functions of the Local Board: 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.

Functions of the Reserve Bank of India

S.No Role Description
1. Framing the Monetary Policy The primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. Price stability is a necessary precondition to sustainable growth.

The Reserve Bank of India (RBI) is vested with the responsibility of conducting monetary policy.
2. Issuer Of Currency RBI is responsible for the design, production and overall management of the nation’s currency, with the goal of ensuring an adequate supply of clean and genuine notes.

The Government of India is the issuing authority of coins and supplies coins to the Reserve Bank on demand. The Reserve Bank puts the coins into circulation on behalf of the Central Government.
3. Regulator of Banks Banks are fundamental to the nation’s financial system. The central bank has a critical role to play in ensuring the safety and soundness of the banking system-and in maintaining financial stability and public confidence in this system.
4. Regulator of Money Market Well-functioning, liquid and resilient financial markets help monetary policy transmission as well as in allocation and absorption of risks entailed in financing India’s growth.
5. Banker And Debt Manager To Government Managing the government’s banking transactions is a key RBI role. Like individuals, businesses and banks, governments need a banker to carry out their financial transactions in an efficient and effective manner, including the raising of resources from the public.
6. Banker To Banks Like individual consumers, businesses and organisation of all kinds, banks need their own mechanism to transfer funds and settle inter-bank transaction-such as borrowing from and lending to other banks-and customer transactions. As the banker to banks, the Reserve Bank fulfills this role.
7. Foreign Exchange Management The Reserve Bank issues licences to banks and other institutions to act as Authorised Dealers in the foreign exchange market.
8. Payment And Settlement Systems The Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), a sub-committee of the Central Board of the Reserve Bank of India is the highest policy making body on payment systems in the country. The BPSS is empowered for authorising, prescribing policies and setting standards for regulating and supervising all the payment and settlement systems in the country.
9. Consumer Education And Protection In order to strengthen the institutional mechanism for dispute resolution, the Reserve Bank in the year 1995 introduced the Banking Ombudsman (BO) scheme.
10. Financial Inclusion And Development To promote financial education and literacy and making credit available to productive sectors of the economy including the rural and MSME sector.

 

Monetary Policy Committee– Section 45ZB of the amended RBI Act, 1934 also provides for an empowered six-member monetary policy committee (MPC). Of these six, there are 3 external members in the MPC and 3 internal members (employees of RBI). The external members are appointed for a term of 4 years. The Central Government first constituted the MPC in September 2016. New members were appointed in 2020.

  1. Governor of the Reserve Bank of India – Chairperson, ex officio; (Shri Shaktikanta Das)
  2. Deputy Governor of the Reserve Bank of India, in charge of Monetary Policy – Member, ex officio; (Dr. Michael Debabrata Patra)
  3. One officer of the Reserve Bank of India to be nominated by the Central Board – Member, ex officio; (Dr. Mridul K. Saggar, Executive Director)
  4. Dr. Shashanka Bhide, Senior Advisor, National Council of Applied Economic Research, Delhi – External Member.
  5. Dr. Ashima Goyal, Professor, Indira Gandhi Institute of Development Research, Mumbai – External Member.
  6. Prof. Jayanth R. Varma, Professor, Indian Institute of Management, Ahmedabad – External Member.

Offices of RBI– RBI has 31 offices in India.

Banking Ombudsman– There are 22 Offices

Fully owned subsidiaries of RBI :

  1. Deposit Insurance and Credit Guarantee Corporation of India(DICGC)
  2. Bharatiya Reserve Bank Note Mudran Private Limited(BRBNMPL)
  3. Reserve Bank Information Technology Private Limited (ReBIT)
  4. Indian Financial Technology and Allied Services (IFTAS)

RBI has one associate named National Centre for Financial Education (NCFE) in which RBI holds 30% stake.

One Liners based on the Post

  1. In which year RBI was nationalized?- 1949
  2. What is the capital of RBI?- Rs 5 crore
  3. Names of Governor and DGs?
  4. Maximum how many Deputy Governors can RBI have?- 4
  5. The RBI has how many Local Board?-4
  6. Each Local Board has how many members?-5
  7. The Monetary Policy Committee of RBI has how many members?- 6
  8. Who is the Chairperson of the MPC?- Governor RBI
  9. RBI has how many Banking Ombudsman Offices?- 21
  10. RBI has how many fully owned subsidiary?- 4

 

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