Reserve Bank of India (RBI).
The central bank of the country is the Reserve Bank of India (RBI). It was established in April1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the HiltonYoung Commission. The share capital was divided into shares of Rs. 100 each fully paid whichwas entirely owned by private shareholders in the beginning. The Government held shares of nominal value of Rs. 2, 20,000.Reserve Bank of India was nationalised in the year 1949. The general superintendence anddirection of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, tennominated Directors by the Government to give representation to important elements in theeconomic life of the country, and four nominated Directors by the Central Government torepresent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and NewDelhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative andindigenous banks.The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank.The Bank was constituted for the need of following:
To regulate the issue of banknotes
To maintain reserves with a view to securing monetary stability and
To operate the credit and currency system of the country to its advantage.
Functions of Reserve Bank of India
To maintain monetary stability so that the business and economic life can deliver welfare gainsof a properly functioning mixed economy.· To maintain financial stability and ensure sound financial institution so that monetary stabilitycan be safely pursued and economic units can conduct their business with confidence.· To maintain stable payments system so that financial transactions can be safely and efficientlyexecuted.· To promote the development of financial infrastructure of markets and systems, and to enable itto operate efficiently i.e., to play a leading role in developing a sound financial system so that itcan discharge its regulatory function efficiently.· To ensure that credit allocation by the financial system broadly reflects the national economic priorities and societal concerns.