Reserve Bank of India

• Established in April 1935 with a share capital

of Rs. 5 crores
• Nationalised in the year 1949
Functions of Reserve Bank of India
• Bank of Issue
• Banker to Government
• Bankers' Bank and Lender of the Last Resort
• Controller of Credit
• Foreign Exchange management and control
• Developmental functions
• Promotional functions
 Monetary Policy
• It is the policy statement, traditionally
announced twice a year, through which the
Reserve Bank of India seeks to ensure price
stability for the economy
• It covers money supply, interest rates and the
inflation.
• RBI also announces norms for the banking and
financial sector and the institutions which are
governed by it
• The Monetary Policy regulates the supply of money
and the cost and availability of credit in the economy
• It deals with both the lending and borrowing rates of
interest for commercial banks.
• It aims to maintain price stability, full employment and
economic growth
• RBI is responsible for formulating and implementing
Monetary Policy.
• It can increase or decrease the supply of currency as
well as interest rate
 Difference between monetary policy and
fiscal policy
• Fiscal Policy is a broader tool with the government.
• It can be used to overcome recession and control inflation
• It may be defined as a deliberate change in government
revenue and expenditure to influence the level of national
output and prices.
• At the time of recession the government can increase
expenditures or cut taxes in order to generate demand
• Govt can reduce its expenditures or raise taxes during
inflationary times.
• It aims at changing aggregate demand by suitable changes in
government spending and taxes.