he Reserve Bank of India (RBI) is the central banking institution of India which upholds the whole sole responsibility of regulating the monetary policy of the country, governing the supply of money and controlling interest rates. It manages the currency and regulates the commercial banking sector.
Branches, Offices and Institutions associated with RBI
- Zonal Offices: Located at Mumbai, Kolkata, Delhi and Chennai. Zonal training centres are also located in these states.
- Regional Offices: Located at Thiruvananthapuram, Patna, Nagpur, Lucknow, Mumbai, Kochi, Kolkata, Jammu, Kanpur, Chennai, Delhi, Guwahati, Bhubaneshwar, Bhopal, Hyderabad, Ahmedabad, Chandigarh, Jaipur and Bangalore.
- Regional Representations of RBI-New Delhi (North region), Mumbai (West region), Kolkata (East region) and Chennai (South region).
- Sub-offices: Located at Agartala, Aizawl, Shillong, Dehradun, Gangtok, Imphal, Panaji, Srinagar, Raipur, Shimla and Ranchi.
- Reserve Bank of India Staff College in Chennai and College of Agricultural Banking, in Pune, are the two training establishments under the aegis of RBI.
- Autonomous institutions run by RBI are Indira Gandhi Institute of Development Research (IGIDR) at Goregaon, Mumbai; Institute for Development and Research in Banking Technology (IDRBT) at Hyderabad and National Institute of Bank Management (NIBM) located at Pune.
- Subsidiaries fully or partially owned by the RBI include:
- Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
- National Housing Bank (NHB)
- Deposit Insurance and Credit Guarantee Corporation (DICGC)
- National Bank for Agriculture and Rural Development (NABARD)
- There are 33 departments in RBI which are responsible for strategising, managing and regulating policy issues, internal operations and other functional aspects of RBI.
Organizational Structure of Reserve Bank of India
1. Central Board — Central Board of Directors governs all the activities of RBI in accordance with the Reserve Bank of India Act. It has 21 members responsible for the superintendence of the general affairs of the bank. The structure of the Central Board includes:
- One Governor and Four Deputy Governors – Central board is headed by the Governor. In his absence, he can nominate any one of the four Deputy Governors as the Chairman.
- Four Directors to represent Local Boards – Central government appoints non-official directors for Delhi, Mumbai, Kolkata and Chennai Local Boards.
- Ten directors– Central government also appoints ten non-official directors which act as experts in different spheres like Business, Finance and cooperation, Industry etc.
- Two government officials – Central government nominates two officials from the Finance Ministry or Secretary position.
Central Board conducts a minimum of six meetings throughout the year with one in each quarter. Weekly meetings are usually done on Wednesdays.
2. Assistive Board – There are two assistive entities for Central Board of Directors in RBI and both have the Governor of RBI as the chairperson.
- Board of Financial Supervision (BFS) — Its main functions include supervision of financial institutions like commercial banks, non-banking financial companies (NBFCs) and other financial institutions. They assist RBI on supervisory and regulatory issues.
- Board for Payment and Settlement System (BPSS) – Its main aim is to supervise and regulate the payment and settlement systems.
3. Local Board – There are four Local boards of RBI which are responsible for representing the regional economic matters to the Central Board. These boards are located in Mumbai, Chennai, Kolkata and New Delhi.
Functions of RBI
As the Central Bank of India, RBI shoulders many financial, regulatory and monetary responsibilities.
1) Issue of Currency – RBI is the authorised and legal tender for issuance of banknotes and coins (except for one rupee notes and coins which are issued by the Ministry of Finance of the Government of India). It also has the power to withdraw notes and coins from the market. It ensures optimum liquidity of cash in the country. The note printing presses are located at Nasik, Mysore, Dewas and Salboni. And the coin minting facilities are located at Mumbai, Kolkata, Noida, and Hyderabad.
2) Monetary functions – Reserve Bank of India formulates the monetary policy of the country which is designed to control inflation, stabilize commodity pricing, manage consumption, monitor credit flow in various sectors and increase the economic status of the nation. It is implemented in the open market with the help of some important instruments like Bank Rates (Repo rate and Reverse Repo Rate), Cash Reserve Ratio, Open Market Operations, Credit Ceiling and Statutory Liquidity Ratio.
3) Banker of the banks – RBI is responsible for maintaining a robust financial system of the nation by supervising and regulating different parameters of banking operations. RBI is a bank to various commercial banks in the country and supports them by providing financial aids through advances and loans.
RBI is solely responsible for controlling and supervising the banking sector (including banks and Non-Bank Financial Institutions (NBFIs)). It upholds the regulatory functions, offering bank licenses, managing working of banks, the opening of new branches of banks, monitoring the liquidity of bank assets, regular inspection of banks etc.
4) Credit Control – RBI is responsible for maintaining a sturdy economic system of the country. To regulate the liquidity in the market and controlling internal control of prices, RBI takes care of credit control. It also takes care of inflation/deflation by stabilising the market pricing. It also looks into the bank credits to various sectors of economy thereby ensuring sustainable growth of the economic system of the country.
5) Foreign Exchange Control – RBI is also responsible for foreign exchanges reserves of the country. It manages foreign exchange and promotes foreign trade by regulating foreign investments, trading, commercial and industrial activities to and from India. RBI undertakes foreign exchange control through authorised foreign exchange departments of commercial banks. Non-resident accounts are also governed by the RBI and approvals are needed for transferring money outside the country from these overseas accounts which are held by Indians.
6) Banker for Government of India – Reserve Bank of India is the official banking agent and advisor for the Central and State Governments of India. It provides many banking and financial services to the government like:
- Operation and maintaining of deposits of Central and State Governments
- Issuing new loans, treasury bills and manage public debt
- Making and collecting payments for Governments
- Advising governments on exchange policies, foreign trade and international finance and trade.
- Representing the Government to the International Monetary Fund and the World Bank.
- Helping in the formulation of 5 years plans
- Acting as the financial advisor for Central and State Governments
- Advising for mobilisation of resources, financial planning and banking issues.
7) Detecting fake currency – RBI has launched a website: www.paisaboltahai.rbi.org.in to combat and detect fake currency. The website provides information about how one can identify fake currency.
Promotional functions and developmental activities of RBI
Reserve Bank of India is also responsible for many development activities and promotional functions like:
- Development of Financial System – To achieve all-round economic growth, RBI aids in the development of a robust financial system which encompasses financial institutions, instruments and markets.
- Establishment of Industrial Finance – Financial institutions helps industries by giving sufficient and timely credit so that economic growth prospers.
- Development of Agriculture – Special efforts have been made by the RBI to direct the cash and credit flow towards this sector.
- Data collection and publication of Reports – RBI aids in policy making by charting out important stats with regard to financing, credit, banking, agriculture, industrial production and drafting reports for different economic sectors.
- Promoting the banking habit – By expanding banking network to remote areas, RBI promotes the habit of banking among the masses.
- Establishment of Deposit Insurance Corporation to develop the banking sector of India.