Full Form Of Rbi Reserve Bank Of India List Of Functions

Full Form of RBI – Reserve Bank of India

The full form of RBI is the Reserve Bank of India. The RBI is the country’s Central Bank, established in 1935 under the Reserve Bank (Transfer to Public Ownership) Act, 1948. It is responsible for regulating the currency supply in the economy and its credit system and creating financial stability in the country through its monetary policies.

History of RBI

The Reserve Bank of India was established in 1935 and is also called the nation’s Central bank. The Imperial Bank of India, established in 1921, performed all the functions of the country’s Central Bank before establishing the Reserve Bank of India.In 1926, the royal commission on Indian currency and finance recommended creating the Central Bank for India to separate control of the currency and augment the credit from the government and banking facilities in the country.After this recommendation and its effect, introduced a bill in the legislative assembly. Still, the same was withdrawn after some time as there was disagreement among different persons. However, in 1933, the new bill was introduced after a recommendation through the white paper on the Indian constitutional reforms. It then passed this bill in 1934 after receiving the governor-general’s permission. The Reserve Bank began its operation on April 01, 1935.After a few years, the Reserve Bank was nationalized by India’s government under the Reserve Bank Act 1948. Then, it took over the RBI from the private shareholders by paying them appropriate compensation. Thus, India’s nationalization of the Reserve Bank took place in 1949, which started working as a government-owned bank on January 1, 1949. The Reserve Bank of India’s head office is in Mumbai, Maharashtra.

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Objectives of RBI

The following are the objectives of the Reserve Bank of India:

Supervise and undertake various financial sector initiatives consisting of financial institutionsFinancial InstitutionsFinancial institutions refer to those organizations which provide business services and products related to financial or monetary transactions to their clients. Some of these are banks, NBFCs, investment companies, brokerage firms, insurance companies and trust corporations. read more, commercial banksCommercial BanksA commercial bank refers to a financial institution that provides various financial solutions to the individual customers or small business clients. It facilitates bank deposits, locker service, loans, checking accounts, and different financial products like savings accounts, bank overdrafts, and certificates of deposits.read more, and non-banking financial companies.Regulation of the issue of the currency in the economy. It is an important objective of the RBI because if there is no effective regulation of the currency, it can negatively affect the country’s economy.Maintenance of the reserve aims to secure the country’s monetary stability, economic growth, and exchange rate stability.Operating the country’s currency and credit system to its full advantage.Remain unbiased and free from the country’s politics so they could take all the decisions unbiasedly.Assisting in the planned development process of the economy of the country.Meeting the challenges in the economy by way of modernization of the monetary policy framework.

Functions of RBI

The following are the main functions of the Reserve Bank of India:

Supervision and regulation of banking and non-banking financial institutions where the RBI sets the different parameters within which these institutions have to function and issues policy and guidelines to protect the interest of the investors along with providing the banking services to the public efficiently and cost-effectively.Management of the foreign exchange of the country by managing foreign exchange reserve, capital accountCapital AccountThe capital account refers to the general ledger that records the transactions related to owners funds, i.e. their contributions earnings earned by the business till date after reduction of any distributions such as dividends. It is reported in the balance sheet under the equity side as “shareholders’ equity.”read more, and current account and facilitating the development of the foreign exchange market.It is responsible for formulating and implementing monetary policiesMonetary PoliciesMonetary policy refers to the steps taken by a country’s central bank to control the money supply for economic stability. For example, policymakers manipulate money circulation for increasing employment, GDP, price stability by using tools such as interest rates, reserves, bonds, etc.read more in the country and maintaining financial stability among the economy’s sectors.It is the currency issuer in the country as it issues the currency and coins in the market. It also destroys or exchanges currencies that it finds unfit for circulation in the economy.It develops the economy by promoting national banking and financial objectives and ensuring that a sufficient amount of credit is available for productive economic sectors.It acts as the banker of the state and central government as it performs merchant bankingMerchant BankingMerchant Bank is a company that provides services like fundraising activities like IPOs, FPOs, loans, underwriting. They only deal with companies and businesses.read more for them and helps determine the best way to raise money from the debt markets when the government requires finance.It maintains the banking accounts for all scheduled banks, enables settlement of the inter-bank transactions, and acts as the lender of the last resortLender Of The Last ResortA lender of last resort (LoLR) refers to an institution that provides liquidity or emergency credit to banks experiencing financial difficulties.read more. Thereby, it is the chief banker for all banks.It regulates and supervises the system of payment and its settlement.

Structure of RBI

The Central Board of Directors manages the Reserve Bank of India, comprising the official and non-official directors. The government of India appoints the Central Board of Directors for the term of four years. The official director includes the governor and the deputy governors. Also, appointed four other directors in the RBI from the local boards. Apart from the post of the governor and the deputy governor, other posts in the RBI include the Principal Chief General Manager, the Chief General Managers, the General Managers, the Deputy General Managers, the Assistant General Managers, the Managers, the Assistant Managers, and the other support staff.

Conclusion

RBI is the abbreviation used for the Reserve Bank of India. As the name implies, India’s Central Bank began its operation on April 01, 1935. The primary objective of the Reserve bank of India is to top-regulate the different banking functions in the country, focusing on regulating the currency flow and credit system in the economy and conducting consolidated supervision of the country’s financial sector. The Central Board of Directors manages it, comprising the official and non-official directors.