BY

ANIL KUMAR SINHA

Background Royal Commission in the year 1926 recommended to establish Central Bank in India to perfect its credit and currency organization. A Bill was introduced in Legislative Assembly in Sept. 1933. It was enacted and became Law on 6th March,1934. RBI Started Functioning in April 1935.

RBI was constituted as share holder Bank with share capital of 5 crore divided in to 5 lacs shares of 100 rupees each. The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated.

In order to have a close integration between the policies of the RBI and those of the Government, the reserve Bank of India was nationalized in terms of Reserve Bank of India (Transfer to public ownership) Act 1948. The entire share capital of the Bank was acquired by the central Government. From 1st January 1949 the RBI began functioning as a state owned and state controlled Central Bank.

For successful operation of the Bank country was divided into five regions where RBI offices were opened. 1. Bombay 2. Delhi 3. Madras 4. Calcutta 5. Yangoon it was closed in 1947. As on date RBI has 19 regional offices, most of them in state capitals and 9 Sub-offices.

The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as: "...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.

Banker to the Government: Performs banking function for the central and the state governments.

RBI transacts Government business& manages debt U/S 20 of RBI for central govt and u/s 21A for state government. Advices Government on monetary policy matters. Provides ways and means advance u/s 17(5) to Govt. for meeting temporary mismatch /shortfall in revenue.

Banker to banks: Maintains banking accounts of all scheduled banks. Provides adjustment facilities i.e injection of liquidity through repo auction & absorption of liquidity through reverse repo auctions. Issuance of Currency (Section 22 of RBI Act)
RBI is the sole authority India to issue Bank notes of various denominations under signature of Governor.

Monetary Authority: Formulates, implements and monitors the monetary policy.

Regulator and supervisor of the financial system: Prescribes broad parameters of banking operations within which the country's banking and financial system functions. Manager of Foreign Exchange : Manages the Foreign Exchange Management Act, 1999. Developmental role : Performs a wide range of promotional functions to support national objectives Controller of credit

Selective credit policy, change in CRR / SLR, Directed credit guidelines,

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Rural Planning and Credit Department. Foreign Exchange department. Financial supervision department. Department of Banking Supervision.
On sight supervision. 2. off sight supervision Department of Banking Operations and Development Department of non Banking Supervision Department of information technology Legal Department
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Monetary policy department. Debt Management department Department of Government and Bank Accounts. Department of External investment. Department of Economic Analysis and Policy. Department of Statistical Analysis. Department of Payment Settlement.