ROLE OF RBI IN FOREIGN EXCHANGE

The central bank of India, RBI has allotted a specific department to take care of
concerns regarding foreign exchange which is called the Foreign Exchange
Department and which primarily follows the regulations that are stated under the
Foreign Exchange Management Act (FEMA) of 1999.
The functions of this department under the RBI are as follows:
The major objective is to facilitate external trade and payments and to
promote development of foreign exchange market in India.
To impose reasonable restrictions on current account transactions
To simplify and to provide transparency on capital account transactions
Balancing the external economy represented by the exchange rate and the
internal economy represented by interest rates, inflation, money supply, etc.

RBIs function involves purchase of foreign currency from market or

release (sale) of foreign currency in the market, to bring stability in
exchange rates.
The RBI has the responsibility of fixing the exchange value of home
currency in terms of other currencies. This rate is known as official rate of
exchange. All authorised dealers and money lenders are required to follow
this rate strictly in all their foreign exchange transactions.
To observe submission of returns on the transactions made by authorized
dealers.