What the is the functionality of RBI?

Banking & FinanceEconomicsFinanceGeneral Topics

The Reserve Bank of India is considered as India's main bank, which controls the financial strategy of the Indian currency. It initiated its operations in 1935 amid the British Rule. The RBI has an essential impact on the Development Strategy of the Government of India.

A Central Bank is an independent powerful banking authority which controls inflation, makes financial policy report and responsible for depositing foreign exchange reserves etc. The RBI needs to play out an extensive range of duties to reach out to the national objectives and industrial objectives.

The general superintendence and course of the RBI is ensemble of 21-member Central Board of Directors: the Governor, 4 Deputy Governors, 2 Finance Ministry agents, 10 finance minister's executives to represent imperative components of India's economy, and 4 chiefs to represent local boards which represent regional elements and is a 5 member board to perform the following functions:

The issue of Bank Notes

  • The Reserve Bank of India has the sole power to issue money notes aside from one rupee notes which are given by the Ministry of Finance.

  • Currency Notes issued by the Reserve Bank are announced boundless legal tender in the country. This grouping of notes issue work with the Reserve Bank has various preferences: (i) effective state supervision is obtained; (ii) it makes conceivable successful state supervision; (iii) it helps to regulate credit with respect to the requirements of the economy thus having an easy control and (iv) it keeps confidence of general public in the currency.

Financier to Government

  • As financier to the government, the RBI deals with managing the banking needs of the government. It needs to keep up and work the administration's deposit accounts.

  • It gathers receipts of assets and pays on behalf of the government. It portrays the Government of India as the individual of IMF and the World Bank.

Curator of Cash Reserves of Commercial Banks

  • The private banks hold stores in the Reserve Bank and the RBI has the guardianship of the money deposits of these respective banks.

Curator of Country's Foreign Currency Reserves

  • The Reserve Bank has the authority of the nation's deposits of global currency, and this empowers the Reserve Bank to manage emergency associated with the adverse balance of payments position.

Lender of Last Resort

  • The private or commercial banks go to the RBI in the midst of a crisis to hold over budgetary challenges, and the Reserve bank acts the hero. However, it may charge a higher rate of interest.

Accounts Settlement and central Clearance

  • As the private banks have their surplus cash reserves stored out in the Reserve Bank, it is simple to manage each other and settle the claim of each on the other through accounting sections in the books of the RBI.

  • The clearing of records has now turned into a fundamental function of the Reserve Bank.

The controller of Credit

  • Credit is controlled by the Reserve Bank as per the financial needs of the government. Credit money, which is the most vital part of the supply of cash, and as the supply of cash has implications for economic stability, the significance of control of credit is given to the Reserve Bank of India.

raja
Published on 08-Jan-2019 15:00:00
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