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Established in April 1935 under the RESERVE BANK OF INDIAN ACT Head Quarters MUMBAI (Maharashtra). The Reserve Bank of India is the central banking institution of India and controls the monetary policy of the rupee as well as US$300.21 billion (2010) of currency reserves. Present Governor Duvvuri Subbarao.
It was set up on the recommendations of Hilton Young Commission It was started as share-holders bank with a paid up capital of 5 crores Initially it was located in Kolkata It moved to Mumbai in 1937 Initially it was privately owned
Since 1949, the RBI is fully owned by the Government of India. Its First governor was Sir Osborne A.Smith The First Indian Governor was Sir Chintaman D.Deshmukh
Monetary authority
Manager of exchange control Issuer of currency
Monetary authority
Main monetary authority of the country. It formulates, implements and monitors the monetary policy as well as it has to ensure an adequate flow of credit to productive sectors. Objectives are maintaining price stability and ensuring adequate flow of credit to productive sectors. The RBI controls the monetary supply, monitors economic indicators like the gross domestic product and has to decide the design of the rupee banknotes as well as coins
Issuer of currency The bank issues and exchanges or destroys currency and coins not fit for circulation. The objectives are giving the public adequate supply of currency of good quality and to provide loans to commercial banks to maintain or improve the GDP. The basic objectives of RBI are to issue bank notes, to maintain the currency and credit system of the country to utilize it in its best advantage, and to maintain the reserves.
Developmental role
The central bank has to perform a wide range of promotional functions to support national objectives and industries. The RBI faces a lot of inter-sectoral and local inflation-related problems. Some of this problems are results of the dominant part of the public sector.
Related functions
The RBI is also a banker to the government and performs merchant banking function for the central and the state governments. acts as their banker. There is now an international consensus about the need to focus the tasks of a central bank upon central banking. RBI is far out of touch with such a principle, owing to the sprawling mandate described above.
Development of banking system Development of financial institutions Development of backward areas Economic stability Economic growth Proper interest rate structure
The most important function of the central bank is to control credit by commercial banks. Money and credit represent a powerful force for good evil in the economy. Money cannot manage itself. So it is the duty of the central bank to ensure that money and credit is properly managed so that inflation and deflationary pressures can be controlled in the economy. In modern times bank credit has become the important source of money and commercial have unlimited power to expand or contract credit.
Qualitative or selective credit control methods:The qualitative controls are direct which consist of regulation of consumer credit, margin requirements, rationing of credit, direct action, moral suasion and publicity.